New research into the power of industry clusters to drive regional economic development has led to the term “industrial identity.”
The concept refers to a region’s identity to external parties about which industries thrive there. Importantly, according to the research, a region’s industrial identity is not driven by Chamber of Commerce slogans or glossy promotional brochures, but rather by what actually is happening in the region.
Having a focused industrial identity can catalyze a region’s capacity for economic growth. Resources tend to flow to regions that have a focused identity, including capital and human talent.
As capital and talent flow into a region, the identified industry cluster grows and takes on a life of its own. Talented individuals that have relocated to the region to participate as employees in the region’s growing businesses grow restless and seek to start their own ventures. As is the case for many successful entrepreneurs, they leave their large employers to launch new ventures in the same or nearly related industry. These startups, in turn, create more jobs and are able to attract additional talent and capital from outside the region.
Industrial identity is normally derived from one or more dominant industry clusters that characterize a region. The concept of an industry cluster is not difficult to understand. Think about the electronics cluster in Silicon Valley, the automobile cluster in Detroit, or the country music cluster in Branson, Mo. While the concept of an industry cluster is not difficult to understand, the research into how clusters are formed is highly ambiguous. At this stage of research, there are some hints, but few direct prescriptions, about how to go about developing a dominant industry cluster from scratch.
One of the prescriptions for cluster development is to build upon existing natural, human and industrial capacities.
There are three useful concepts to help policymakers and regional economic development experts think about these capacities.
The first concept is “competitive advantage,” which refers to the capacities, skills and other advantages a region has developed that help it compete with other regions for resources, jobs and talented people. In today’s global economy, competitive advantage comes more from an ability constantly to innovate than from protection of intellectual property advances.
“Comparative advantage” refers to the assets a region possesses by dint of nature or geography. For example, Saudi Arabia could attempt to develop a thriving software industry, but that would be foolish given that it is perched on top of the world’s largest preserve of oil.
Saudi Arabia’s comparative advantage is to develop its petroleum industry. When one considers the Southern Colorado region, there are no such patently obvious comparative advantages. Nonetheless, one could argue that the natural beauty and amenities of the region provide a comparative advantage in outdoor- and sports-related activities.
Finally, “constructed advantage” is the more recently understood phenomenon of advantages that are developed with strategic intent. One cautionary note on this type of advantage is that it is inherently derivative of the other two types of advantages already mentioned. That is to say, constructed advantage is developed by building on the competitive and comparative advantages that already characterize a region.
Here in Southern Colorado we have a number of competitive and comparative advantages upon which to build constructed advantage. Nearly any reasonable analysis of the region would have to begin with its natural amenities and lived environment. There is just no match for the unparalleled beauty and accessibility of the region. The lived environment is known from coast to coast, and it is an attractor for youthful and talented individuals who want to take advantage of our year-round outdoor opportunities.
Another major pre-existing advantage centers on the region’s status as headquarters for the U.S. Olympic committee and various governing bodies. This is unique not only in the country, but the world. Any constructed advantage that fails to leverage this is missing a big opportunity.
Developing a constructed advantage must begin by leveraging existing assets. I have argued that the region is reasonably conceived to be part of the “lifestyle belt” of America. I am convinced that Americans are increasingly drawn to the “Intermountain West” for lower taxes, inexpensive land, fresh air and natural beauty.
I am equally convinced that our future prosperity can be optimized by leadership that recognizes and leverages our pre-existing comparative and competitive advantages to create a robust and lasting constructed advantage.
Duening is director of the Center for Entrepreneurship in the College of Business and Administration at UCCS. He can be reached at email@example.com.