ICIC Summit Live: Practitioners - Why Solar Isn't the Answer to Inner City Economic Development

After going in to detail about what exactly an inner city is, Professor Porter began to apply his cluster-based theory to inner city economies. Familiar to ICIC, but perhaps not to the general audience, he explains that a cluster is a critical mass of related firms in an industry (think, food cluster – which is the topic of a panel later today).

Why do clusters matter?

Clusters increase growth and productivity. Increased suppliers make it easier to start new companies, and new products are brought to markets faster because in a cluster-based economy, products are easier to commercialize.

Perhaps one of the most important comments of the keynote speech comes when Porter points out:

Cluster policy is not about picking winners. All clusters are good. Any cluster you have, you should latch on to and try to grow.  He says clusters is about building on what you have, not trying generate entire new clusters in your city from scratch.

Note to policymakers: this means that in most cities, you won’t be the “solar capital” of the United States—so stop trying, and focus instead on building upon your current strengths and assets.

So, how can policymakers grow their existing clusters? First, Porter explains that job training programs must not be designed for the training of workers at one company. Instead, job training should be focused on training workers in all levels of positions throughout the entire cluster.

Clusters in Inner Cities 

Porter begins by describing the distinction among two types of clusters: (1) Traded and (2) Local.

• Traded clusters are goods and services traded across cities, across the nation, and even across the world. Example: biotech. Among the traded clusters in inner cities are hospitality and tourism, transportation and logistics, processed food, and knowledge creation and education.
• Local clusters almost exclusively serve the local market. Examples include retail and health services.

Although traded clusters have higher patent rates, greater innovation and higher wages for employees, local clusters account for 70% of all inner city jobs. Over the last decade, most inner city jobs have been created in local clusters, which Porter calls a “frightening” finding. If we want grow the economies in our inner cities, we should be aligning workers with positions in traded clusters.

Porter goes on to make a further distinction in local inner city clusters: B2B (business to business) and B2C (business to companies) (I promise, these nuances will become important soon…)

Some facts about B2B vs. B2C  local clusters:

• Local clusters in inner cities have been doing very well in B2C; practitioners should be very proud of this resultbecause inner city job growth in these areas has been robust.
• Inner cities have lost ground in B to B local clusters; this erodes the business environment for traded clusters (fewer local commercial services, logistic companies, etc.)

PRACTITIONERS, MOVING FORWARD:

Porter goes in to the details of B2B vs. B2C to explain that our economic development practitioners need to continue promoting growth in B2C, but we need a new focus on B2B in our inner cities.

By making the distinction between B2B, B2C and traded clusters, it allows cities to identify where they are strong and where there is room for improvement.

Want to learn more? Follow the Inner City Economic Summit live at www.icic.org/live or on Twitter by following @icicorg and #ICICSummit.

BY Alex Rodriguez on October 4th, 2011

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