Will Clusters Survive Concerns About Terrorism Threats?

As the War in Iraq appears to be pulling to a close--at least the initial phases of our involvement, site locators are thinking long and hard about how to minimize the threat posed by future terrorist attacks on business facilities. A recent article in Bizsites.com raises some serious concerns about returning to old business-as-usual location strategies of clustering business operations in densely populated areas. The article points to evidence that the relocation of business offices out of Manhattan's central business district may not be a short-term course correction. Other site location experts are weighing in with the view that it pays to be cautious about locating too much in one place. Many of their clients are showing a preference to be outside the urban core for security reasons.

So, where does this leave industry clusters, which is the buzz in economic development across America and worldwide? The Bizsites article says that economic development officials are moving ahead with their cluster strategies, even with the apparent business concerns out there. What's our view? At this moment in time, we do not see a major threat to cluster efforts posed by terrorism and related security concerns. However, it is entirely possible that some big cities will lose some office deals in the future if security concerns remain out there. Also, we are not ignoring corporate security concerns that are out there.

Yesterday, I heard Joel Kotkin speak at the California Association on Local Economic Development (CALED) conference in Monterey. Kotkin has been harping for sometime that clustering is dead and instead we will see a major trend towards "de-clustering" across America. Kotkin's prediction was formulated pre-9/11. One conference attendee jokingly referred to Kotkin as the "cluster-buster."

Kotkin contends that people and businesses will be driven to places that offer greater affordability and high-quality of life--neither of which are found in his opinion in the congested big cities. He was asked yesterday about his view of the future success of industry cluster initiatives. His outlook was not very hopeful. Instead, he foresees more businesses locating in smaller towns and cities, where life is more manageable. Go here to read about Kotkin's new book, The New Geography.

In research for a new international study of industry clusters, I have uncovered several academic studies that point to some challenging problems with the industry cluster approach to economic development. One study, done by the London School of Economics, found that the majority of manufacturing location projects in the U.K. over a 7-year time period had no positive correlation to industry cluster theory. Instead, these locations were random. Because of the amount of attention clusters is receiving, more research is being conducted to assess whether economic development's latest craze is well-grounded and will be able to deliver on its promise of economic revitalization.

In my judgement, expectations are too high about the prospects of cluster-based growth, but I think people tend to expect miracles from economic development in most cases.

I hope to shed some new light on the future of clusters in my new study, which should be available sometime this summer. In the short term, economic developers remain committed to the cluster course. We do foresee a time of deeper questioning of clusters ahead. This questioning will continue until cluster advocates can show the hard economic results that most communities are hungry to see. My advice is to allow knowledge to prevail and economic developers should be willing to listen to the new research focused on these important issues. The worst thing to do is to stick your head in the sand at this time.