The Economic Development Administration is in. So is the Agriculture Department. Now, the U.S. Small Business Administration (SBA) has entered the clusters game too. Last week, the agency begun accepting applications for two new grant programs focused on accelerating small business growth and job creation through existing regional industry clusters. The SBA’s initiative is yet another example of the current administration adopting the clusters paradigm as a general organizing principle for economic development and innovation investments, and follows on such efforts as the multiple-agency effort to spur a regional building energy efficiency cluster and the explicit prioritization of “collaborative regional innovation” in EDA grantmaking.
As we have noted in past posts, there is good reason for a focus on clusters, as a body of economic evidence shows that regional industry clusters enhance job growth, entrepreneurship, and productivity. In fact, a new paper (reg. req'd) by Harvard Business School competitiveness guru Michael Porter has just reinforced the point. There, Porter and his co-authors Mercedes Delgado and Scott Stern conclude that strong clusters produce "higher growth in new business formation and start-up employment" and "contribute to start-up firm survival." And so it so it is exactly right that SBA Administrator Karen Mills announced her agency's new programs by stressing that “clusters bring together many businesses and organizations in a region to maximize the economic strengths of that region, enhancing its ability to compete on a national and global scale.”
Both of the new SBA programs are a part of the agency's Regional Cluster Initiative. The first, the Regional Innovation Cluster program, encourages applicants to identify in a “bottom-up” fashion their particular regional industry cluster focus and demonstrate the partnerships, technical capacity, and local and regional assets they have available to support its growth. The second, the Advanced Defense Technologies program, jointly seeks with the Department of Defense to identify and support regional innovation clusters that can specifically help meet critical defense needs in areas like advanced robotics, cyber-security, and applied lightweight materials. Both programs will award winning projects up to $600,000 for one year to provide the sort of business training, tech transfer, and mentoring services that could help support the growth and development of small businesses within the industry cluster. A total of 15 winners will be selected across the nation.
It’s good to see the SBA strategically targeting limited federal investment dollars around regional industry clusters to maximize potential economic impact. It would be even better to see even more federal agencies taking similar steps toward smarter investments in regional innovation.