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Industry Clusters: A Rural Boon?

With a House-Senate “conference” committee soon to decide whether to create a truly valuable regional industry clusters initiative, misconceptions linger. Some rurally oriented conferees fear that cluster strategies pertain exclusively to urban development and leave rural America out. Others fret that cluster initiatives point exclusively toward high technology growth. However, none of the doubters need worry. As it happens, the sort of cluster program being entertained by the Commerce-Justice-Science (CJS) conference would be completely agnostic about geography and equally friendly to all sectors, so long as they promised growth.  What is more, it turns out that rural thinkers and doers are actually out front in recognizing the importance of regional cluster initiatives and federal programs for advancing them.

It’s true that cluster discussions--with their focus on spatial concentrations of related industry activity--have a cosmopolitan, high-tech feel. The Silicon Valley technology industry, after all, remains perhaps the most famous example of a cluster and clusters have naturally been equated with cities as cities are by nature agglomerations of economic activity. Likewise, the concept’s original author, Harvard Business School professor Michael Porter, has frequently discussed the powerful dynamism of such big-metro innovation communities as Boston’s biotech cluster, Hollywood’s movie cluster, New York’s finance center, and Milan’s fashion concentration.

And yet, as it happens, the cluster concept has strong rural and low-tech groundings. Porter himself has dwelt on the cluster structure of northern California’s wine cluster, which is populated by hundreds of wineries, thousands of independent grape growers, and myriad suppliers of grape stock, manufacturers of irrigation and harvesting equipment, producers of barrels, designers of bottle labels, and specialist marketers as well as the viticulture program of the University of California at Davis. Likewise, rurally oriented scholars like Stuart Rosenfeld have for more than two decades been producing authoritative reports on rural industry clusters, ranging from auto manufacturing in Northern Alabama to artisan cheesemaking in Vermont, log home production in the Bitterroot Valley of Montana, and wind energy in the Texas Panhandle. And for that matter economists at the Department of Agriculture (USDA) have conducted research important for the whole field suggesting that rural manufacturing clusters raise workers’ earnings substantially, and as much as do metropolitan clusters. In this regard, the vision of heightened economic collaboration and cooperation within distinct lines of work and industry has long appealed to rural thinkers.

But beyond the lineage of the idea, those who will deliberate on whether a modest $50 million of the Economic Development Administration’s budget should be set aside for competitive grants and data strategies to assist clusters should note that probably the strongest U.S. policy precursor of the proposed program resides on the rural side. That precursor is the Rural Collaborative Investment Program, run out of the USDA and funded through Title VI of the 2008 Farm Bill, which has been allocated $135 million through fiscal year 2012 and provides a model of how a federal clusters promotion program could be set up. Through this program, USDA would set up a new rural investment board that would establish a national institute on rural competitiveness, provide technical assistance, and make grants to regional investment boards to develop smart, regionally focused rural investment strategies. In doing so the new rural program (which has not yet received funds) would favor--as a new industry cluster program will--cross-sector collaboration, public-private partnerships, or the provision of interim financing or seed capital for program implementation and an emphasis on collaborative innovation and entrepreneurship.

In short, rurally-oriented or agriculturally-oriented members need not be suspicious of the EDA program requested in President Obama’s budget and now up for final adjudication. Instead, they should be reassured that rural leaders on the ground and in Congress have already reached the conclusion that this sort of federal program is crucial for advancing regional economic development, and won its implementation on the rural side. In that spirit, they should join with others to test with a federal clusters program an important new strategy for stimulating regional innovation and job-creation region by region.