Talent & Education

Fostering innovation-led clusters

December 13, 2011

Middle East

December 13, 2011

Middle East
Aviva Freudmann

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Aviva has nearly 40 years of experience as a journalist, researcher and editor covering a variety of industries, including healthcare, financial services, insurance and risk management, transport, logistics, energy and environmental protection.

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Key Findings

  • Government has a crucial role to play; so does the market.
    Although many advocate a wholly “bottom-up” approach to cluster development, it is clear that many clusters have succeeded on the back of government intervention. What is difficult to get right is the scale and type of support: a heavy hand can stifle progress, while too little intervention can lead to a lack of vital support. But while some clusters might work without government backing, none will work without market forces. 
  • Clusters are about collaboration, not just locating firms in the same place.
    Although innovation networks are increasingly globalised, nearly all experts agree that ideas flow fastest in a local community.  As such, a key part of cluster development is fostering such collaboration, especially in countries where this has not been part of the local
    business culture. As Navi Radjou of the University of Cambridge’s Judge Business School puts it: “It’s important to take a humanistic, rather than mechanistic, approach to building clusters.”
  • Talent is the single most important factor in developing successful clusters.
    A government’s overarching aim should be to develop a continuous supply of workers with world-class skills. Singapore’s cluster success is largely owing to its long-term efforts to develop the quality of its workforce. A related focus should be on encouraging the inward migration of talent from around the world. Attracting a star name in a given field can be a crucial catalyst.
  • Governments need to work to promote a culture of innovation and entrepreneurship.
    This is especially vital in countries where either the state or state-owned firms are seen as the primary pathways to success. South Korea’s cluster success is in part owing to its efforts in promoting entrepreneurship as an alternative to a typical career with its local conglomerates. It is also important to create a culture that tolerates different opinions, creativity and risk-taking. “Culture matters. This is the secret ingredient,” argues Oded Cohn, head of research at IBM Israel.
  • Clusters work best when they are focused and can compete.
    Many successful clusters are highly specialised: Tainan Science Park in southern Taiwan, for example, developed on the back of liquid crystal technology. Bristol’s so-called ‘Silicon Gorge’ in the UK evolved around microchips. Once a specific focus emerges, governments need to identify it, and then work to remove any barriers to competition.
  • Governments can do much to create an attractive business environment—and a good place to live.
    Easing planning rules, tweaking the tax code, removing penalties for failure, smoothing visa and immigration processes, ensuring intellectual property (IP) protection—there is much a government can and must do to support cluster development. Some take extreme measures: Russia’s new Skolkovo cluster is developing its own legal framework, distinct from the state, to encourage its development. What shouldn’t be forgotten is the importance of also ensuring a good quality of life for prospective employees, to support efforts to attract and retain talent. 
  • A strong local market will help attract R&D investment, but is not crucial for global success.
    Some clusters, such as Israel’s, have succeeded in spite of the absence of a significant local market, as firms are forced to think globally from the outset. But from an R&D perspective, the relative sophistication of local demand is more important than the quantity.

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