Intellectual property to the formation of new industries
Experts have long theorized that having a cluster of firms within a given industry helps a region's economy grow. Now a study co-authored by an MIT professor shows empirically that clusters of almost all kinds help drive overall economic growth in multiple ways, from job creation and development of intellectual property to the formation of new industries.
The study, based on a unique long-term project collecting data on regional economies, has important implications for policymakers: It suggests that a region can improve its economic performance by improving its existing assets, rather than attempting a transformation by chasing industries situated elsewhere.
After all, most U.S. cities will probably not lure many high-tech businesses away from Silicon Valley, financial firms away from New York, or entertainment companies away from southern California. However, as the study implies, these would-be suitors don't have to pursue complete makeovers.
'Very often, regions are given advice that they should become the next Silicon Valley, or be like some other region,' says Scott Stern, the David Sarnoff Professor of Management at the MIT Sloan School of Management, and co-author of a new paper detailing the study. 'They're told that they're in a global war for talent, or they should try to put out very expensive incentives to attract a single plant. What our research suggests is that regions succeed by investing in and extending their comparative advantage.'
Stern is a co-author of the paper with corresponding author Mercedes Delgado, a professor at Temple University's Fox School of Business, and Michael Porter, a professor at Harvard Business School.