"Why the interest in clusters? Because they work..."

Clusters are ‘in.’ From Stockholm to Sydney, governments are writing up new cluster-development policies. Companies factor them into their plans to site labs or factories. Universities are desperate to make their clusters the best. 

That’s all to the good – but it also means that international competition among clusters is greater than ever. Consider a few headlines:

-Last year, the state of Maryland announced a $1.3 billion plan through 2020 to beef up the life sciences sector, including the cluster around Johns Hopkins University (1). 

-The governor of Massachusetts announced a $1 billion, ten-year Life Sciences Initiative around its already-strong Boston hub (2). 

In this context, the $7 billion pricetag for expansion of several facilities in the Stockholm-Uppsala Life Sciences region, of which a new university hospital and a city block for life science companies account for a substantial part,  is big and bold. 

Certainly, it’s a welcome relief from the typical, underweight cluster scene around Europe. The European Union’s Cluster Observatory (3)  counts more than 2,000 clusters throughout Europe. They include a few big ones in life sciences like Stockholm-Uppsala, Basel and Paris. But most of the others are tiny, local and under-funded.

Why the interest in clusters? Because they work – for multinationals, small companies, universities, cities and national economies. The EU estimates (4)  38% of all employees work in cluster companies. Economic research shows a clear and strong correlation between economic growth and cluster strength – indeed, one study estimated that a third of the difference in GDP per capita between the US and Europe is attributable to clusters.

Clusters matter because they concentrate resources for critical mass – whether venture capital, scientific talent or state investment. They permit cross-fertilization of people and disciplines – begetting innovations that might otherwise not occur to anyone. They focus attention, at home and abroad, on a region. 

They are also a way to humanize technology. Consider this view, from outside the life science sector: Andrew Herbert, Microsoft’s European research boss (and based in the Cambridge, UK, cluster):

“Clusters tend to spring up around new technologies and therefore have early-stage companies - and that’s an environment that’s full of risk. Clusters help manage the risk. For instance, if the message to a prospective worker is, ‘come and join my start-up in some place you never heard of,’ - you’re going to think twice about it. If the message is, ‘come and join my start-up in Cambridge, and if it all goes pear-shaped there are 20 other companies hiring,’ – that’s a less-risky proposition. With clusters, there’s a de-risking. And there’s a mutual support that allows companies to grow faster than they could do on their own.”

Microsoft Futures Magazine, June 2008 (5).

The same logic applies in Stockholm-Uppsala, of course.

It may seem contradictory that, in the age of globalization, geographical location still matters – but it certainly does matter. In a global market, mobile people and capital ‘stick’ faster to the biggest magnets. Successful clusters, in the chaotic world of modern technology markets, are ‘great attractors.’

They are also closely studied by academic economists - and a growing body of literature point up a few clear conclusions. They include:

1) Clusters cannot be willed. Generally speaking, clusters grow gradually over many decades – often around strong universities, in major urban regions. One of the few exceptions is French, Sophia Antipolis, built from 1969 in a place without (at the time) any major university and not much industry – a pure act of political will that has cost the state millions (though it now professes to be self-sustaining.) But this is not the norm: Generally, the research shows, the best clusters have long, natural evolutions – drawing on gradually expanded universities, hospitals, companies and infrastructures. 

2) The overall environment of a cluster matters. While infrastructure is important (yes, you need a good airport, healthcare and schools), the overall economic and cultural environment of a cluster is vital. For instance, what’s the legal and administrative culture? An EU survey of cluster companies found their No. 1 request to government is simplified administration. Another example: How easy is it for an academic researcher to move to a company temporarily, without loss of tenure, pension or prestige? How big is the angel community – rich people willing to take a chance on a crazy new idea? How willing are people to take a risk with their own careers or livelihoods? These are all hard to quantify, but readily visible in a successful cluster.

3) Money matters. Public money is often both catalyst and fuel for growth. The life science labs of Boston and San Francisco have thrived on NIH money. The British pharma industry, despite its grumbles, benefits from proximity to one of the world’s biggest employers and procurement agencies: The UK National Health Service. ‘Innovative’ procurement is a proven spur to growth of an emerging technology sector. If just 2% of government procurements include ‘innovative’ in their specifications, the capital unleashed for new technologies and growth can be enormous. A positive spill-over: It endows the cluster.

And finally, image and communications matter. It does no good to spend billions on a new cluster without telling the world about it. The Stockholm-Uppsala cluster is beginning that process now.

There is much more – indeed, our Science|Business Innovation Board, a panel of European innovation leaders that includes a prominent member of the Stockholm-Uppsala cluster (Karlinska Institutet President Harriet Wallberg-Henriksson), last year published in newspapers across Europe a recipe for cluster development. It includes a proposal that governments go beyond simply encouraging clusters, and select a very few of them on which to focus resources and liberalize regulations – for labour, mobility, administration, immigration and other forms of red tape that stop high-tech start-ups from growing. The name for the idea: SIZE, for Special Innovation Zones in Europe. 

But whatever the proposal, the aim of the new fascination with clusters is clear: Through focused, well-managed endeavours like the Stockholm-Uppsala Life Sciences initiative, the local economy and global health can benefit alike.