Entrepreneurship and Public Policy: Growth Strategies for the 21 st Century Economy

Transcription

1 Entrepreneurship and Public Policy: Growth Strategies for the 21 st Century Economy Professor Michael E. Porter Harvard Business School Conference on Entrepreneurship and Public Policy Kennedy School of Government, Harvard University April 10, 2001 This presentation draws on ideas from Professor Porter s articles and books, in particular, The Competitive Advantage of Nations (The Free Press, 1990), The Microeconomic Foundations of Economic Development, in The Global Competitiveness Report 1998, (World Economic Forum, 1998), Clusters and the New Competitive Agenda for Companies and Governments in On Competition (Harvard Business School Press, 1998) and ongoing statistical study of clusters, Competing for Prosperity: The Microeconomic Foundations of Development, forthcoming, and What is Strategy? (Harvard Business Review, Nov/Dec 1996). No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means - electronic, mechanical, photocopying, recording, or otherwise - without the permission of Michael E. Porter.

2 Increases in Labor, Capital Investment and Multifactor Productivity (MFP) Fueled Economic Resurgence * Percent Contribution to GDP Growth 4.3 % GDP Growth by Component Labor Capital MFP Year Average * Multifactor Productivity measures the effect of various influences on productivity growth that are not captured by increases in the size of the labor force or in the quantity of capital investment. These influences include technology, the level of experience and quality of workers, increasing competition and more efficient management techniques. Source: Michael E. Porter; Council on Competitiveness, US Competitiveness 2001: Strengths, Vulnerabilities, and Innovation Priorities Report. 2

3 Rising Information Technology Investment IT Share of U.S. Real Private Non-residential Investment 60 % of Real Private Non-residential Investment IT Equipment and Software Other Equipment Business Structures Source: Michael E. Porter; Council on Competitiveness, US Competitiveness 2001: Strengths, Vulnerabilities, and Innovation Priorities Report. 3

4 Wage Disparities Grew by Level of Education Weekly Earnings for Workers 25 and Older, by Level of Education, 1998 Dollars 900 Weekly Worker Income (Dollars) Less than a High School Diploma HS Diploma Some College College Graduate Source: Michael E. Porter; Council on Competitiveness, US Competitiveness 2001: Strengths, Vulnerabilities, and Innovation Priorities Report. 4

5 The Share of National Resources Committed to R&D Was Lower in 1999 Than in 1985 U.S. R&D as a Percent of GDP Level R&D as % of GDP Source: Michael E. Porter; Council on Competitiveness, US Competitiveness 2001: Strengths, Vulnerabilities, and Innovation Priorities Report. 5

6 Private Industry Depends on Public Science to Fuel Innovation Percent of U.S. Industry Patents Citing Publicly-Funded Research Papers, % of Patents Citing Publicly-Funded Research All Patents Drugs and Medicine Chemicals Electronic Components Source: Michael E. Porter; Council on Competitiveness, US Competitiveness 2001: Strengths, Vulnerabilities, and Innovation Priorities Report. 6

7 The Proportion of Science and Engineering Degrees Grew Abroad While Declining in the U.S. Change in Science and Engineering Degrees as a Percent of First University Degrees, % Change Sweden Germany Italy U.K. Australia Japan Canada U.S.A. Science Engineering -4-6 Source: Michael E. Porter; Council on Competitiveness, US Competitiveness 2001: Strengths, Vulnerabilities, and Innovation Priorities Report. 7

8 The Average Annual Increase in the Workforce Could Fall to Near Zero Growth Levels Annual Growth in the Workforce, and Projected to % Annual Growth in Workforce Source: Michael E. Porter; Council on Competitiveness, US Competitiveness 2001: Strengths, Vulnerabilities, and Innovation Priorities Report. 8

9 Workforce Participation by Men Over 55 Years Old Has Declined Sharply Percent of Men and 65 and Older in the Workforce % of Participation in Workforce Source: Michael E. Porter; Council on Competitiveness, US Competitiveness 2001: Strengths, Vulnerabilities, and Innovation Priorities Report. 9

10 Economic Performance Across Economic Areas Patents per Capita, Patents per 100,000 Inhabitants Map U.S. Average = Note: There are 172 Economic Areas in the United States Source: Cluster Mapping Project, Harvard Business School Economic Areas 10

11 The California Wine Cluster Winemaking Equipment Grapestock Fertilizer, Pesticides, Herbicides State Government Agencies (e.g., Select Committee on Wine Production and Economy) Barrels Bottles Grape Harvesting Equipment Caps and Corks Irrigation Technology Growers // Vineyards Wineries // Processing Facilities Labels Public Relations and Advertising Specialized Publications (e.g., Wine Spectator, Trade Journal) California Agricultural Cluster Educational, Research, & Trade Organizations (e.g. Wine Institute, UC Davis, Culinary Institutes) Tourism Cluster Sources: California Wine Institute, Internet search, California State Legislature. Based on research by MBA 1997 students R. Alexander, R. Arney, N. Black, E. Frost, and A. Shivananda. 11 Food Cluster

12 Specialization of Regional Economies 12

13 The Process of Cluster Development History of the San Diego Biotech / Pharma Cluster Salk Institute Founded Scripps Research Institute founded Burnham Institute founded UCSD Connect founded Biomedical Nanogen Industry Council founded founded Novartis Agricultural Discovery Institute founded UCSD founded Hybritech founded Hybritech sold to Eli Lilly Biocom founded Source: Clusters of Innovation Project 13

14 The Process of Cluster Development The Role of Anchor Companies Hybritech San Diego Gensia 1986 Cortex 1986 Immune Response 1986 Gen-Probe 1983 IDEC 1985 Clonetics 1985 Biovest 1986 Pac Rim Bioscience 1985 Viagene 1987 Lipotech 1987 Ligand 1987 Corvas 1987 Amylin 1987 Cytel 1987 Pyxis 1987 Vical 1987 Biosite 1988 Medmetric 1989 Kimmel Cancer Inst Dura 1990 Columbia HCA 1990 Birndorf Biotechnology 1990 Forward Ventures 1990 Genesys 1990 Nanogen 1991 Urogen 1996 Cypros 1992 Novadex 1992 Chomagen 1994 Kingsbury Partners 1993 DigiRad 1994 Novatrix 1994 Combi-Chem 1994 Coxixa 1994 Sequana 1992 Applied Genetics 1994 Somafix 1992 Triangle Pharmaceuticals 1995 Gyphen 1993 GenQuest 1995 Cyphergen 1993 First Dental Health 1995 Source: CONNECT, University of California, San Diego 14

15 Economic Development in Inner Cities Premises of the New Model Inner-city distress is as much an economic as a social problem A healthy business and jobs base must be created in or near inner-city communities, rather than depending on jobs in the suburbs Economic development in inner cities must be approached from a competitiveness perspective, and be based on business opportunities in the inner city that are genuinely profitable There are existing and potential competitive advantages of inner cities that can support viable businesses and jobs The inner city can only prosper if it is integrated into the regional and national economy The paradigm must shift from: reducing poverty to creating income, jobs, and wealth community deficiencies to market opportunities 15

16 Appendix 16

17 Michigan Leading Clusters By Employment, 1997 Cluster 2. Business Services 3. Metal Manufacturing 121, Financial Services 5. Plastics 66, Heavy Construction Services 7. Production Technology 52, Hospitality and Tourism 46, Education and Knowledge 10. Transportation and Logistics 1997 Employment Nat l Rank* 1. Automotive 308, ,048 89,315 59,875 41,259 39, Note: Rank by share of national cluster employment Source: Cluster Mapping Project, Harvard Business School 17

18 Automotive Cluster Ranking By State, 1997 State 1. Michigan 2. Ohio 3. Indiana 4. Tennessee 5. California 6. Illinois 7. Missouri 8. Wisconsin 9. Kentucky 10. North Carolina 1997 Employment 308, , ,238 61,826 60,797 54,752 45,441 43,598 42,340 40,221 Source: Cluster Mapping Project, Harvard Business School 18

19 Metal Manufacturing Cluster Ranking By State, 1997 State 1. Ohio 2. Michigan 3. Illinois 4. Pennsylvania 5. California 6. Indiana 7. Texas 8. Wisconsin 9. New York 10. Tennessee 1997 Employment 152, , , , ,619 94,366 70,837 60,723 43,842 37,017 Source: Cluster Mapping Project, Harvard Business School 19

20 Plastics Ranking By State, 1997 State 1. California 2. Michigan 3. Ohio 4. Texas 5. Illinois 6. Indiana 7. Pennsylvania 8. New York 9. New Jersey 10. North Carolina 1997 Employment 67,935 66,452 66,258 58,689 52,974 41,271 40,773 32,686 27,562 27,411 Source: Cluster Mapping Project, Harvard Business School 20

21 Production Technology Cluster Ranking By State, 1997 State 1. Ohio 2. Illinois 3. Michigan 4. California 5. Wisconsin 6. New York 7. Pennsylvania 8. Texas 9. Minnesota 10. North Carolina 1997 Employment 70,902 61,116 52,806 46,342 41,130 35,272 32,990 29,396 23,876 23,042 Source: Cluster Mapping Project, Harvard Business School 21

22 Concentration of Employment Per State Employment Share of Ten Largest Clusters, % 40% 35% 30% 25% 20% U.S. = 20.7% 15% 10% 5% 0% States Source: Cluster Mapping Project, Harvard Business School 22

23 Concentration of Employment Per Cluster Employment Share of Top Ten States, % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Cluster Source: Cluster Mapping Project, Harvard Business School 23

24 Concentration of Employment Per Economic Area Employment Share of Ten Largest Clusters, % 40% 35% 30% 25% 20% U.S. = 20.7% 15% 10% 5% 0% Note: There are 172 Economic Areas in the United States Source: Cluster Mapping Project, Harvard Business School Economic Areas 24

25 Concentration of Employment Per Cluster Employment Share of Top Ten Economic Areas, % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Note: There are 172 Economic Areas in the United States Source: Cluster Mapping Project, Harvard Business School Cluster 25