Previous understanding of clusters as hubs for enabling companies to increase productivity has evolved. Recasting the modern city as a type of cluster could be key to unlocking the potential of the global economy.
Sian Morgan, Editor, RICS
25 March 2020
While being in a cluster does not automatically guarantee success, clusters have proven capable of helping companies to raise their global competitiveness, while also driving gains in local economic performance.
In Romania, Bianca Muntean, Cluster Manager for Transilvania IT Cluster and CEO of Aries Transilvania, feels that clusters can play a huge role in orchestrating the creation of regional innovation ecosystems. In north west Romania, for example, clusters include the creative industries, furniture, agriculture, new materials, and tourism. Muntean feels that openness to cross-sectoral collaboration in new innovation projects has helped her city, Cluj, to become known as the Romanian city of clusters. It is, she says, part of the city’s brand.
“We are trying to obtain an endorsement to convince the authorities to allow us to use some of the solutions from innovative cross-sectoral projects,” she says.
Ketels adds: “National policymakers often think about clusters as nice but small scale, regional or local things. We need to find better ways to transfer the learnings from individual clusters and cluster efforts into changing policy at national level.”
One of the key concerns about clusters is that overspecialisation makes them vulnerable to external shocks. But in past economic crises, clusters have tended to weather the storm, because as a grouping of constituent businesses, they are able to be more flexible than any individual company.
Innovation is inclusive: How clusters continue to work
Previous understanding of clusters as hubs for enabling companies to increase productivity has evolved. Recasting the modern city as a type of cluster could be key to unlocking the potential of the global economy.
Successful clusters
Daniel Gonzalez, Director General of Smart City Cluster in Spain, notes that: “Clusters can play a huge role in supporting economic ecosystems by providing knowledge and support, as well as by connecting members – and that can save businesses.”
According to Gonzalez, successful clusters need a diverse range of players, from big companies to start-ups that are agile and quick to innovate.
“You also need research in the mix, whether that’s from a company or a university, and contact with policymaking. Whether or not they are members of the cluster, you need public administration, because at some point you will rely on a regulated environment. You need to be aligned with the authorities and with the public administration because there will be public funding available, which connects to the next ingredient, which is financing. You need funds, or banks, or investors who are willing to put money into projects to move them forward.”
Clusters need to be financially sustainable. Gonzalez believes that this can best be achieved through inclusivity: “We (Smart City Cluster) have learnt how to make all of our products, services and projects inclusive, which has helped us to design cities that are more open to everyone. I think it's crucial to take that into consideration when we design or manage our cluster policies.”
Christian Ketels believes that it may be time to adapt the traditional approach of clusters focusing on activities, individuals and firms that are already performing quite well: “To focus more on sustainability and inclusion, we need to rethink the selection of clusters we work with. Perhaps we need to bring in more tourism and food processing, not just biotech and events business services.
“Within the clusters we need to recognise that it's not just about making the top performers better, where the returns might be the highest, but about helping everyone to improve their performance. Then you can fully leverage the potential of your location. Many challenges we face in terms of social economy or environmental transition require systemic solutions, which clusters are well placed to do, because those solutions often require more than one company or one technology.”
Many challenges we face in terms of social economy or environmental transition require systemic solutions, which clusters are well placed to do, because those solutions often require more than one company or one technology.
Christian Ketels
Chair, TCI Advisory Board
And Bianca Muntean highlights how corporate social responsibility programmes are giving back to the community. As Europe wrestles with a public health emergency unprecedented in modern times, such approaches take on new and vital significance: “One programme is dedicated to older people in our city who are taught by our clusters to use digital tools,” she says. “For example, we are enabling them to interact with banks or with public administration – something which is ideal in the current crisis.”
In his seminal 1990 work, The Competitive Advantage of Nations, Michael Porter made the case that competition and collaboration are complementary rather than contradictory economic impulses. Clusters are, in many ways, the proverbial “broad church”; they are by their very nature, inclusive entities. Co-location has proven to be an enduringly effective catalyst for innovation. When the current, urgent need for social distancing and self-isolation passes, the value of proximity ought not be forgotten.
