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Reshaping Clusters COMPETES

Yesterday, we welcomed the arrival of a clusters-based regional innovation program in H.R. 5116, the America COMPETES Reauthorization Act. This development is great news--America’s signal piece of innovation legislation has now been made to recognize the essential role of regional networks in maximizing U.S. competitiveness. Following the proposals of our 2008 clusters policy paper, the act may soon gain a two-pronged cluster effort--grants to local cluster initiatives and a cluster research and information program. The latter will particularly valuable--a low-cost, high-impact resource that would enable clusters efforts around the U.S. to make more informed, intelligent strategic decisions.

With that said, I do want to note a troublesome aspect of the draft grants program language that could well undercut the value of the contemplated policy. Fortunately, it could quite easily be addressed tomorrow when the House Science and Technology Committee meets to mark up the bill.

Here’s the problem: The legislation directs the Commerce Department to fund individual regional clusters rather than regional programs that have the flexibility to support multiple clusters, shifting resources across these clusters as strategy and circumstances warrant.

Here’s why that’s a problem: First, rather than encouraging regional collaboration and consensus-building to determine priority clusters, H.R. 5116 would allow a free-for-all competition for scarce federal funds among regional actors with industry-specific interests, such as industry trade associations. A program that picks regional winners and losers has the potential to set off hard feelings and reduce intraregional cooperation and trust, quite the opposite of the bill’s intention.

Second, the Commerce Department, not the state and regional development community, would select which local clusters are worthy of federal support. Regions, then, would lose the opportunity to cooperatively set priorities and strategy. Moreover, as the legislation does not require an applicant to justify why its cluster should be a regional priority, Commerce will be flying blind as it tries to judge among competing applications within and across regions.

Third, by not explicitly inviting applications that cover multiple clusters, the bill would diminish, not enhance, regions’ abilities to address its economic challenges. Most regional economies rely on more than one cluster; it’d be highly valuable for a regional applicant to be able to use funds to aid several cluster initiatives and have flexibility to reorder cluster priorities as circumstances change. Further, that flexibility would allow the regional applicant to build its capacity for reflective, adaptable development.

However, the bill’s problematic orientation could be easily changed, greatly strengthening an otherwise very good program. The House Science and Technology Committee should rewrite the bill to require that applicants have state or regionwide (not industry-specific) economic development responsibilities; allow, even encourage, applicants to request support for more than one cluster initiative; and require applicants to make the economic case for the proposed use of funds, including the fit with existing regional economic strategies.

With those changes, America COMPETES would deliver on a promising regional approach to addressing competitiveness issues the U.S. has struggled with for 30 years.