San Diego Fishing Industry and the Theory of Transactional Clusters (Clusters and Environment Section 2)

San Diego Hub/Clusters and Environment 

Hubs are the foundation of the American economy and in one way or another are part of the historical foundation of the people.  An economic hub can be defined as, “socio- territorial entity which is characterized by the presence of both a community of people and a population of firms’ and he adds that ‘in the district, unlike in other environments . . . community and firms tend to merge” (Becattini, 1990, p. 38). It is an entity where the components work together and interact on a formal and social level that creates economic growth in ways that fulfill each others needs to create a perpetual self-sustaining economic system. It develops into a self-adjusting organism adapting toward greater mastery of its environment.

The design of the city and its access to starter resources determine its long-term success decades into the future. Economic development rests on many different factors that include investment, infrastructure, business environment and even people's motivation. The study of economics is the study of human behavior to come to conclusions about how and why people invest, invent, create, take risks, pay for products and ultimately improve the economy.

While it can be difficult to analyze large groups from a social perspective, down into the intricate details of their lives, we cannot ignore the sociological aspects of how ideas are shared built upon to construct new and innovative ideas. We should also not ignore the financial and personal motivations of the entrepreneur and investors that spark growth in a region. If nothing else, economics is as much a study of people's behaviors as it is the study of money. 

People live and are embedded into an environment and if that environment is designed for growth there will be an organic enhancement of people, ideas, and business. That isn't likely to happen if the landscape only fosters a rudimentary and politically skewed sense of improvement. Failure to develop a more prosperous future often depends on the political process itself and how attract the growth factors at their most rudimentary level and that takes a new way of thinking and leadership.

All hubs foster linkages of people, ideas, firms, resources, and investments that create geographically anchored innovation that supports stronger global economic prosperity. The manner in which business and people interact, openly innovate and provide feedback to each other creates the national innovation approach (Lundvall, 1998). This development is uniquely based on cultural background, social structure, and the vantage points of stakeholders that constitute the atmosphere of motivation, learning, sharing and exploring that foster growth. 

Hubs attract entrepreneurs and investors who seek lucrative opportunities that grow their personal wealth through market investment.  Entrepreneurs focus on value creation, development of new products/services, sparking ventures, and encourage market innovations (Brush, et. al., 2003). It is theses renewals of intellectual and financial resources that develops stronger economic systems that breath life into stale economic structures. Drucker (1985) describes entrepreneurial opportunities as:

1. The creation of new and unique information

2. Exploitation of market inefficiencies as a result of information asymmetry

3. Acting upon the costs and benefits of alternative resource allocations

Cities center the economic activity into a dense location where economic "actors" interplay on each other.  Innovative companies cluster together and draw talent in a manner that changes the character of the metro environment. Young professionals are likely to flock to growing cities and will flourish if we are prepared  to "set the table". With influx of new intellectual talent comes faster innovative and idea generation that leads to greater wealth that transforms and revitalizes decaying cities. The long-term impact in creating modern economic centers can change the prosperity of a nation for generations.

Hubs are built around the economic and social activities of cities and their surrounding communities in a way that makes cities attractive again. In modern times, cities are experiencing a renaissance of growth and development while helping to spark larger regional changes. A study by IHS Global Insight indicates that 95% of U.S. cities will see economic growth (Jean, 2014). Their regional director believes that "The economic prosperity of the U.S. economy is directly linked with the economic prosperity of metro economies".

Cities would be wise to prepare for growth to maintain global competitiveness. Emerging nations in Asia will begin to outstrip American producers based on their constant investment in their infrastructure and production capacities. The U.S., and its European Allies, are at a place where they can arrest this trend and pull themselves up from their bootstraps so they can develop cities that are capable of drawing international investment and producing world class products.

Because cities are growing in popularity and size it also affords Americans an opportunity to enhance economic activities in hubs in a way that leaps ahead of economic curves. Now is the time for the U.S. to consider its overall strategy to economic development and the market in order to ensure that they are not left behind in the advent of the "Age of Asia". 

Metro cities are attracting a younger generation of workers drawn to communities that offer new opportunities and this could be a catalyst for change. This generation are entrepreneurial by nature and seek to make an impact on society. Less oriented toward money than previous generations, but seeking career opportunities, they dream of being business owners and trend setters that blaze their own rules. It is a generation that seeks to create, innovate, start, and re-build.

Regional hubs also offer a chance to expand opportunities across this entrepreneurial generation and impact different sectors of society. Young people are seeking to develop their own opportunities and this could raise America's innovative development. For example, Three sociologists from the University of Southern California conducted a study that associates San Diego’s future with creating opportunities that reduce inequality through employing more people based on 1.) high-tech and high-need, 2. Innovation and inclusion, and 3. Places (Pastor, Sanches-Lopez, and Ito, 2015).

Many metro cities are built off of Industrial Age platforms and could potentially be developed further to help raise innovation and output through new capital growth. That growth would come through greater industrial, environmental and personal development that when matched with appropriate investment leads to change. 

As investment and research match each other new revenue streams are found and exploited for greater regional benefit. Investments are a key fuel in economic growth. It offers organizations that opportunity to expand their their entrepreneurial activities by allocating resources to great ideas. It is these innovative ideas that lead to new product that often result in product/service creation and greater growth. Without needed funds new ideas are left on the side and industry begins to decline.

Principles:

1. Cities will continue to become draws for the next generations.

2. Cities will become commercial centers of innovation and development.

3. Entrepreneurs will find their greatest opportunities within cities.

4. Each city will develop their own socio-cultural method of approaching the market.

5. The success of the city will be associated with its quality of life.

Schumpeter's Creative Destruction:

A model of economic decline and growth of hubs can be seen through Schumpeter's concept of entrepreneurship and creative destruction as outlined in his book Theory of Economic Development (1911). Development occurs through the connecting of new concepts to enhance business to higher levels of development. This development has a natural impact of the economic health of a region, business community, future opportunities, and lives of residents. Areas grow when entrepreneurs create systems of perpetual renewal through the process of reinvestment and development. As Schumpeter believes growth is a result of the "perennial gales of creative destruction". 

Entrepreneurs create new products and find investment capital to scale up those products and sell them on the open market. They are the thinkers and creative individuals that connect resources together in unique ways. Combinations and entrepreneurial activity is present in a way that impacts the economic landscape when the following occurs (Schumpeter, 1911, pg. 66):

1) The introduction of a new good, not yet familiar –or of a new quality of good.

2) The introduction of a new method of production.

3) The opening of a new market.

4) The conquest of a new source of supply of raw materials.

5) The carrying out of a new organization of any industry, like the creation of a monopoly position or the breaking up of a monopoly position.

Entrepreneurs find opportunities and have a strong sense of their environment and can see where new profits are realized so they can earn a higher return on investment (ROI). Changes in the market lead to new opportunities and adjustments in the standard methods of business. These "value creators" see new opportunities where others see nothing.  When implemented changes are successful, other companies begin to adopt the advantages and a butterfly effect occurs throughout the economic system. 

An entrepreneur's strength depends on coming up with new ideas established on a mountain of existing research and science. With their market knowledge entrepreneurs encourage business to raise long-term economic development through higher rates of applied research and development (Acs and Plummer, 2005). They convert existing processes, create new products, challenge old assumptions and continue to push systems upward in ways that were not possible in previous generations.

Innovation is founded on invention and creates increasingly efficient resource exploitation. These resources are often physical in nature such as waterways, trees, and metals but do not have to be confined to old resource methods. The process of exploitation is fully functional when resources are put to their best use creating wealth. The inventor, or more accurately the entrepreneur, who finds practical use for products, creates a return on investment that builds profitable industries. A simple formula helps understand the generative process (Roberts, 2007):

-Innovation = Invention + Exploitation. 

This invention and exploitation process has been ongoing since the advent of the modern man and is responsible for the growth and development of society into its modern era. Planes now buzz over our heads at mach speeds and we communicate through thin air on our cell phones because as a species we continue to invent improvements to existing products and then exploit available resources to generate societal innovation. Open mindedness and entrepreneurial innovation creates distinct advantages for organizations and society at large. 

Within this model there is nothing wrong with exploitation as long as that exploitation is used in the truest sense of the word  to use resources in new ways. Innovation is a collective process of building off of existing information and continuing to create and develop small incremental changes to our body of knowledge. In some radical forms (i.e. Edison and the bulb) some changes can transform all of society into new eras.   Our present day was built from billions of thoughts and acts of forward thinking people who invented new ways of doing things.

-Innovation is built from the thoughts and actions of the past.

On a grand scale societal innovation is founded on the "collective intelligence" and "collective knowledge" of the times. Inventors live within a community that rewards and supports their ideas. If the environment is toxic and not lush, less invention will occur. Innovation is a social affair. The Renaissance would not have been possible at any other time of history because the environment was lush.  It is best to view long-lasting development and transformation  as part of the biological, psychological, and social health of community members (Canadas & Alejandro, 2010). 

-The environment must be right to create innovation.

While inventors will come up with great ideas it will be the workers who will create and build these products. Ensuring that the workforce has the proper skills to compete in their production capacities makes a difference in what grows (Arundel, et. al., 2007). Human capital development raises "collective intelligence" that puts skills where they are needed when the creative products are needed and the economy moves back toward an upswing of development. 

Consider a study in The Journal of International Trade & Economic Development Journal that helps us understand the landscape of the export oriented environment according to the Creative Destruction approach (Hansen, et. al. 2015). Such environments have:

Market Equilibrium: To gain financial foot hold and be an established company often requires three product innovations. Once these are gained and finances meet production needs a company can consider moving to supplying the needs of the global economy.

Labor Equilibrium: When there is sufficient skill available in the market to build new products and feed production. Highly developed industries need an educated and skilled labor force that fill open positions and compete on a global scale.

Big and Little Innovators (Diversified Clusters): Some companies will invest heavily into product innovations that lead to global exports and some companies will be focused on smaller innovations that are within their financial and personal expertise that contribute to overall knowledge.

 Within such a system labor skills and their inventive abilities are vitally important in the creative development process but so is putting those skills to maximum use within networks of functional businesses (labor equilibrium); hence the environment is significant here. The balance of skills and demand for those skills feeds economic stability (Ando, 2010).

-Adequate skills and "know how" must be available in the market to build innovative products.

Because there is constant change there will naturally be pressure to continuously re-educate and retrain workers to meet evolving work demands that come from technology changes. As innovators seek to challenge, establish, and defend their market positions (Schumpeter, 1942, p105) they will create constant adjustments. Workers will need to update their skills so they can handle these changes and maintain high levels of employability.

Adjusting skills to market need can come from higher education, the individual, or training. Because individuals may not always be aware or have the motivations to improve on their skills they will retard growth without help. Nations will need companies that are willing to train and universities that increase access and quality to ensure the market adjusts to fill labor market gaps.

-Higher education, training, and individual effort will need to constantly adjust skills to market needs.

As this change occurs growth and adjustment is most likely to occur within networks, or clusters, of businesses. Hubs are regional environments where government policies and business activities are socially woven into the fabric of society creating an atmosphere where the most growth is likely to occur. It is a type of spider web of industry and social connections. In these hubs worker skills and industry adjust together in quick-paced fashion to maximize growth because the right motivations, pressures, and opportunities are available.

The regeneration stage can't exist without these industry connections. Employee skills build the products but the fruits of their labor must sell in the world despite their abilities.   For example in Qingdoa China region it was discovered that the growth stage was more likely when higher quality connections to the global marketplace were present (Kim and Le-Yin, 2008). The pathways of global knowledge, investment, and product make the regeneration stage much more likely. 

-Knowledge, resources, information, skills, and abilities are transferred from industry connections.


As a matter of argument, it can be said with relative certainty that the fundamental difference between cities that are most likely to regenerate are those with inventors, builders, and a proper growth environment that leads to a global output. When these issues are not present regions may go "down for the count" when industry shocks occur and new technologies supplant older ones. They have no ability to regenerate their products and services and have allowed themselves to become irrelevant through isolation and neglect of their populace. They are separate from the global body and industries are so highly protective they no longer share their knowledge or capital to overcome challenges. With no gas for renewal, industries close, cities decline and entire countries lose their positions as regeneration dissipates. 

Creative Destruction Take Principles:
1. Creative destruction is the process of decline and regeneration. 
2. Entrepreneurs and the creative class foster regeneration.
3. Innovation = Invention + Exploitation 
4. Innovation is built from the thoughts and actions of the past.
5. The environment must be right to create innovation.
6. Adequate skills and "know how" must be available in the market to build innovative products.
7. Higher education, training, and individual effort will need to constantly adjust skills to market needs.
8. Knowledge, resources, information, skills, and abilities are transferred from industry connections.
9. Market equilibrium with at least three product innovations are necessary. 
10. Labor equilibrium where skills and jobs are in balance are needed to build exportable products. 
11. Large and small innovators must be within the market (diversified clusters). 

The Traits of Economic Hubs from the Seventh District's Largest Cities:

Successful hubs share similarities of growth factors that make them a class of their own. Investors gravitate toward these lucrative locations because of their higher return on investment (ROI).  A study within the Economic Perspectives Journal offers insight into the traits of hubs that experience growth and investment potential within the U.S.'s seventh districts largest cities (Matton & Wange, 2014).

-Hubs offer higher investment returns.

Wages, patents, and economic growth existing within cities that support the development of strong industry clusters. Each of the regions in the study has their own market driven competencies in market driven industries such as automotive, technology, aerospace, rubber, and transportation.

-Each successful city has a concentration of market driven businesses in high growth industries.

Each city actively manages these clusters with varying degrees of success based on their ability to target growth sectors. Those that are successful, regularly find greater advantages of upswing in wages, patent creation and ultimately economic growth. Such cities become known for their investment opportunities and products based on their capacity to produce quality products and services.

-Focusing city management on high growth sectors improves wages and growth.

Hubs offer wage and lifestyle advantages for professionals who work within clusters. As revenue rises so does the wages of the workers. Paralleling wage growth are life style improvements in educational and cultural organizations arise to support the interests of the skilled and professional classes.

-Wages, education, cultural outlets and lifestyle rise in successful hubs.

The study indicates that when clusters are successfully managed the following five aspects seem to be present:

1. Lower Tax Rates

2. Strong Transportation Structure

3. Well trained workforce

4. Global investment appeal

5. Educational and cultural organizations

Clusters function best when products and services move quickly through fast paced transactions. Knowledge development appears to be a main criteria for success as skill levels and wages arise. Development is catalyzed when costs, such as taxes are lower, and investments improve to keep these industries expanding. Educational and cultural organizations foster growth of new innovation and support the education of the skilled workforce.

District Principles:

-Hubs offer higher investment returns.
-Each successful city has a concentration of market driven businesses in high growth industries.
-Wages, education, cultural outlets and lifestyle rise in successful hubs.
-Strong Transportation Structure.
-Pro-business environment with lower tax rates.

The Seven Elements of Economic Cluster Impact:

Economic clusters have unique characteristics that separate them from other cities. A study of entrepreneurial clusters in China and Mexico help define cluster characteristics that make them successful (Hernandez-Rodriguez & Montalvo-Corzo, 2012). The elements can be simplified to the following seven principles:

(1) agglomeration economies;
(2) knowledge spillovers;
(3) increases in productivity and efficiency;
(4) positive impact in the operation;
(5) economic impact;
(6) sociopolitical impact; and, last but not least,
(7) impacts on competitiveness.

Clusters offer opportunities for greater competitiveness because it creates a contained environment that speeds up activities that would occur on a much slower level in a natural family. As a mini-economy the goal is to create an environment where the highest innovation and efficiency is created without the natural distortions to interaction that occur in the outside world.

Principle: Successful clusters are a collection of companies where knowledge transfers, productivity/efficiency, operational improvements, and sociological factors come together to create economic impact.

The Methods Used by Government to Spur Innovation:

Governments seek to create innovation as a primary method of developing a more robust economies that thrives in a global market. The process of government action may take a host of different forms but at the root of their strategy is the power of innovation. It is believed that innovation leads to economic growth and the employment of more people in higher paying occupations. An article in the International Journal of Innovation Science helps us understand how some governments seek to influence the market (Jacknis, 2011).

Many of the strategies governments use were based in the Industrialization Age where hard products were created through mammoth factories that sought precision and efficient mass production. The modern age is more technological and service oriented with more variability in production processes. New ideas and new products favor smaller batch production and constant innovative change.

There are some government strategies that seem to help foster innovation on a short scale. It is doubtful they will have a full impact without businesses taking a longer term approach and engaging in change themselves. Yet government programs do help create the "right" environment that pushes business to innovate, align, and adjust.

The methods in use service specific functions such as either sparking, transferring, or rewarding innovation. The author cites the following approaches:

Copy-write and Patent Protection: Legally protecting new developments to reward the inventor. While not cited in the article it is beneficial to reign in infringements in nations like China.

High speed Internet: Local governments are creating high speed Internet infrastructure that encourage increasing information transference.

Tax Credits: Property for relocation, sales and research tax credits.

Investments: Encouragement of investment into regional research centers, new technology and investment loans. There are some governments which invest public pension funds.

Prizes and Rewards: Offer prizes and rewards for entrepreneurs, innovators and inventors that work for the government or contract through them.

Knowledge Transfer: Universities that received federal funds will transfer their new technology to the private sector to encourage greater innovation.

Principles:

-Governments can help spur innovation through tax adjustments and other incentives.

A Model That Moves Business Clusters to Collaborative Communities

Clusters are formed through a collaborative community that shares knowledge and ideas through mutual interest. There are advantages in pushing clusters to keep developing so that include cost, risk, speed of products to market, flexibility, and economies of scale advantages. According to an article studying mining companies in Greenland published in the Journal of Organization Design it is possible to create these collaborative communities in a way that provides economic advantages to all members (Kadenic, 2017). Working closer together fashions an additional advanced step in the development of economic life as we know it.

According to the study, there is a model clusters can use to foster greater collaboration. This includes ensuring that there are common resources, solid communication infrastructure, and appropriate protocol/rules among members.

Commons: The shared knowledge and resources that all of the actors of a cluster can use. You may think of human capital, natural resources, government grants, etc...

Infrastructure: While infrastructure may take other forms in this case it relies heavily on communication infrastructure such as networks, file sharing, and other forms of close communication.

Protocol: The overall development of rules and agreements that help to create a collaborative environment through the reduction of opportunism in the relationships.

Before "actors" can truly collaborate the right mindset must formulate cognitive, social, geographical, and institutional similarities. As these companies exist in close proximity to each other they share characteristics that make them more likely to work together. When radically different business models and mindsets are at play in the same arena they won't collaborate as much unless they come to mutual understandings of the appropriate course of business.

This model helps us understand that collaboration is possible even among businesses that were previously highly competitive. It will take time and effort for companies to see how collaboration will create a stronger sub-system of businesses that act with unified purpose. In international market competition having a wider network of businesses that have greater capabilities and capacities based on a centralized system of communication and collaboration can push them develop networks and adapt.

Principle: Commons (shared knowledge and resources), infrastructure (communication and networks) and protocols (shared understanding) need to be present for clusters to move from clusters to collaborative business communities.

Rejuvenating Clusters:

Clusters are not one time creations that grow and then burn out after a few decades but when properly managed they can go on and on growing and transforming in ways that help them rejuvenate. According to research in Competitiveness Review those clusters that have strong knowledge based, social capital and strong public policies can continue to grow and adjust through various life-cycles (Valdalio, Elola, & Franco, 2016).

While some aspects of the cluster may phase out there are often others that grow at the same time. A few die and a few grow making the cluster a living and vibrant organism. The entire cluster can die when there is not enough economic principles, such as knowledge, social and policy, are not in sufficient supply.

-Clusters are living organisms where some industries adjust, die or are overtaken by new industries.

Knowledge: The innovative and skill level of organizations and employees.

Social Engagement: The social interaction that leads to shared knowledge and innovation.

Policy Management: The fiscal policies on a local, state, and national level.

-Knowledge, social engagement and policy management influence the healthy, decline and transformation of clusters.

Clusters life spans are like businesses in that emerge, grow, sustain and eventually decline. With innovation and change they can continuously renew themselves so that they produce market relevant products. Schumpeter's creative destruction theory postulates that companies will generally decline and then adjust to the market. When they fail to do this they die.

The cluster, however, has an additional advantage in that it works within a network of businesses and therefore can hedge growth and decline. Larger market trends can impact cluster health when say no one needs automotive from Detroit anymore. However, with new products like self-driving cars, off road vehicles, or robotics clusters can adjust and renew themselves.

-Clusters hedge the strength of many businesses and are able to weather market shifts better than businesses working outside of cluster networks. 

-Clusters can rejuvenate with new products that rely on similar knowledge and capacities as previous products/services.

If we can understand the growth cycles of clusters we can start to understand how to manage them and sustain them over time. Attracting and training employees for greater knowledge, getting them to socialize in ways that share knowledge and spark opportunities, as well as providing proper policy development can go a long way. The environment and its management must meet the market demands to provide opportunities for growth.

Principles:

-Clusters are living organisms where some industries adjust, die or are overtaken by new industries.

-Knowledge, social engagement and policy management influence the healthy, decline and transformation of clusters.

-Clusters hedge the strength of many businesses and are able to weather market shifts better than businesses working outside of cluster networks. 

-Clusters can rejuvenate with new products that rely on similar knowledge and capacities as previous products/services.

Hub Mapping

Understanding each of the businesses within the hub and how they form into a fluid work group is helpful for strategic understanding of how local economics works. It is possible to create a map of local market connections and how it will influence the potential economic success of areas. As we collect additional information we are better able to use these hubs as a research focal point. The relevant information available to the public about a cities outlay and network structure will have a significant impact on whether or not investors will be attracted to the city and can find a place to start new businesses or invest in existing entities. The ability of the internal structure of the hub to match the external environment will determine its ability to succeed.

Effective market development is easier when an informational map of the labor, economic/industrial, governmental, financial and natural resource capabilities of the area are available. Allowing investors and entrepreneurs access to relevant information helps create a pro-investment and business development environment where people are capable of making appropriate investment decisions.   Useful information reduces risks and encourages greater international interest for business that rely on information for strategic development. Available information should be useful allowing for the formation of a mental picture of a hub as a system of development that is ripe for investment infusion.

It is the ability to formulate an mental map of a city and complementary clusters that helps investors evaluate the soundness of potential investment decisions. For example, a pharmaceutical company is unlikely to launch an operation within a hub if they cannot find a sources of labor, complementary industry competencies, or support services that allow them to focus on their core business.

The entire existence of a hub is based on how well its elements are connected and whether or not individuals can use those connections to create new opportunities. Mapping the hub will afford and opportunity to understand how well it is designed, where new clusters can be formed, and how businesses can be better connected to resources to create new opportunities. 

Hubs bring together technology developers, science generators and economic prospectors to create higher levels of innovative growth (Zheng, 2006). Scientific knowledge is matched with production knowledge (Wang & Zhang, 2002) It is a process of connecting those who think, with those who build and supporting them with investment capital.  Relevant information allows interested stakeholders to find the information they seek to make advantageous investment decisions that improve the entire hub.

Mapping the market pool offers new opportunities to understand and create a economic map that helps companies determine their appropriate place for maximum investment returns. An influx of investment and collaboration through personal and business connections is called synergy  (Chandler,  1990). When synergy develops, the area will begin to grow without governmental influence or major outside interference. Information starts the spark but it is the investment energy of the region that makes the transformation possible.

Sometimes it is beneficial to see such activities in terms of a market pool. Analyzing a market pool requires the 1.) defining of the pool, 2.) estimating its market size/value, 3.) determining transactional value-chain sizes, and 4.) reconciling any differences (Gadiesh & Gilbert, 1998). Understanding where profits has the potential to be realized is beneficial for strategic planning. Where there are potential profits, but under-served market areas, interested parties seek additional investments from foreign/national companies to help their companies grow. They encourage development of businesses clusters that have not been fully realized.

Mapping allows investors to conceptualize the market and make determinations of its individual elements. Those things the investor understands and can find data on are going to be of more investment value than markets that have unknown values. Providing proper data helps investors fill gaps in their investment strategies to make sound decisions. 

Market mapping is also helpful to governments that should be making decisions on available data versus political wishful thinking. When decisions are strategically aligned to the actual marketplace there is likely to be a higher congruence between market need and economic activity. Stronger government requires proper strategic planning and better management of data for critical thinking. 

The idea of market mapping helps government administrators determine which projects are likely to have the biggest economic impact and how that impacts other sections. For example, a new parking lot could impact multiple businesses within a specific region or the creation of new social places near existing businesses. The same process can apply to export facilities and data highways. 

Decisions are not in a vacuum and should be exclusively focused on what is most likely to create a multi-fold return on investment. Appropriately mapped markets create transparency for decisions and helps stakeholders trust that decisions have some economic foundation versus being based on political factors. It will help stakeholders like businesses see the advantages of projects and how best to capitalize on new opportunities thereby encouraging a long-tail of public investment.

Smaller scale marketing mapping projects have worked well in other areas. For example, Virginia Beach used a slogan and information to foster additional projects (Lombard & Morris, 2012). Projects may have started from initial public investment but the advertisement and direction provided to potential investors made a large difference in revitalizing the downtown of the city.

The example helps highlight how public projects can spark wider private investment when information is available and transparent for public consumption. The same process occurs in cities like Detroit where public and private investment from a few large entities created additional interest and investment into the city. The revitalization of the city is based on its ability to draw these investments and put them to business and job generation purposes.  

Maps can be in significant depth through the tracking of people, contracts and investments. The depth of that information may be limited only by what data is legally available for consumption. For a city, information may be more macro in orientation but also focused more on showing how industries relate to each other and the international market. Individual investors may want to know more about how specific contracts and connections impact the likelihood of a return.  

In the Information Age the process of collecting and analyzing data on a mass scale is becoming easier. There are multiple analysis, reports, tax records and economic data points that can be used for analysis. Furthermore, technology is leaving a long-tail of data that will be better developed and used for stronger economic analysis. As city administration embraces the global world they will adjust their process toward open and useful information.

The San Diego's Rules and Economic Development Committee announced in 2013 an open data program for the city (Hoffman, 2013). This is one of the first steps in hub market mapping. Companies seek available data to make larger investments in local economies. When useful information is available, it naturally reduces projected risks. Companies are more likely to invest in areas where a receptive business environment and information are available. Publicly available information acts a beacon  and marketing tool to help industries find places to investment.

San Diego Market Competencies:

Hubs are a collective of clusters that follow unique developmental trajectories. San Diego is a hub that can be mapped in a way that highlights its specific market competencies and its most successful competitive strategies. The city has clusters that are tied together and feed off of each other in a way that create economic sustainability. The Hub and Spoke Model (HAS) and the Flagship Five Partner Model are methods of understanding and formalizing how clusters are connected to suppliers and the entire hub.

The Hub and Spoke Model (HAS)  describes how larger firms work as hubs while smaller firms spreading out like spokes (Markusen, 1996). A similar approach called the Flagship and Five Partner Model shows how these firms interconnect to create growth within a geographic area (Rugman and D’Cruze, 2000).   Models help us to visualize and explain growth in multiple sectors such as labor, economic contribution of industries, available natural and intellectual resources, and stronger local infrastructure (Cumber and Mackinnon, 2004):

According to Bailey, et. al. (2010), regional hubs use existing culture, human capital, knowledge, and industry knowledge develop new products and services that match market needs. Finding value within the market, encourage greater collaboration among clusters, and find opportunities within the global supply chain that can be capitalized for future growth. Impact in one sector can impact other sectors.

Based on a 2013 Traded Industries Clusters in the San Diego Region a higher percentage local employment opportunities derive from the following industries:

1. Entertainment & Hospitality, 

2. Aerospace, Navigation, and Maritime Technology, 

3. Communications, 

4. Bio Technology and Pharmaceuticals, 

5. Biotechnology Devices, 

6. Publishing and Marketing, 

7. Horticulture, 

8. Precision Manufacturing, 

9. Agriculture, 

10. Publishing, 

11. Sports Manufacturing, 

12. Apparel Manufacturing, 

13. Specialty Foods.  

Each of these industries create clusters that have their own supply chain networks and share resources in ways that improve their competitvness. As the market shifts some may become more successful than others. The shift in industry strength will mean a shift in San Diego's economic make up. You can see this when natural economic cycles impact employment and investment within the region.

Calculating employment, wages, investments, exports, growth, etc... can create another visual representation of economic activity in San Diego and the economic strength of each of the clusters. Having a full understanding of the market and how they interact with each other can lead to better management of the region and encouraging investment in high growth areas. Consider a visual map of employment and wages by SANDAG (HERE):

Permission to use granted from SANDAG

Each city has their own unique economic mix that creates success or failure on the market. This mix is often based in how clusters act and interact to create competencies that can be used for achieving parity with the global market. Cities that understand what their core competencies are and their competitive stance have a much better chance of fostering the right environment for growth than those who are based more on theoretical and political understanding without sufficient insight found through data.

 Competitive Clusters:

Clusters form when organizations with similar competencies and products operate in a community of interconnected businesses. Clusters can be defined as“a geographically proximate group of interconnected companies and associated institutions in a particular field, linked by commonalities and complementarities (Porter, 1998, p. 4). A cluster can be thought of as a proximal group of interconnected and industry associated companies that include end-product manufacturers, suppliers, and support businesses (Porter, 1998). When clusters of businesses and individuals collaborate and share knowledge they create collective intelligence that develops new products and services.  

Professor Michael Porter, a faculty member at Business School at the University of California-Berkeley, championed the idea of clusters. According to him companies that exist within a cluster seed and fertilize other businesses. They were able to create better ties to industry and government. These clusters had participant such as entrepreneurs, mature corporations, universities, research centers, venture capitalists, service providers, management specialists, and government (Engle, 2014).

The firms within these clusters are more competitive and have greater access to the things they need to succeed. Their individual transactions with other firms and companies help them develop new products and services faster than what is realized in other areas. The cluster becomes an incubator of ideas and services.

Firms should also exist in an environment where their costs are lower when compared to other cities. According to The Theory of the Firm, as outlined in Ronald Coase's 1937 paper entitled The Nature of the Firm, he believed that firm's success are based on the costs of transactions. When costs are low and profits are high companies earn the most money.

Costs exist both within and outside firms. Close proximity and increased communication reduce this overall cost. Geographic businesses offer advantages for those businesses that exist closely together and continue to engage in business-to-business sales and collaboration. Walking across the street with a set of plans is more convenient and time effective than shipping them across the globe.

While the transactions within the firm are hugely important these firms exist in a environment where suppliers actively sell their products to the firm. There are costs associated with purchasing these services and supplies. Suppliers that are in close proximity typically realize greater advantages than those who are farther away. 

As markets encourage clusters the transaction costs decrease and profitability rises.  The cluster is a collaborative environment that offers benefits for members who rely on similar resources and knowledge to do business. The cluster's benefits are in part based on its ability to keep internal transaction costs lower than other places.

Assuming that Coase's ideas are accurate we also can believe that clusters offer similar opportunities to reduce firm transaction costs related to 1. Search and information, 2. Bargaining and decision costs, and 3. Policing and enforcement costs. Clusters of similar businesses share information and interact in a way the further lends itself to mutual development.

While having convenience and frugal suppliers is one advantage there are also proximinal advantages related to knowledge. Glaeser et al. states that, “intellectual breakthroughs must cross hallways and streets more easily than oceans and continents”(1992, p. 1126).  Information and decisions occur better when firms work closely together.

Consider Nobel-laureate economist Herbert Simon discussion of bounded rationality in his book Models of Bounded Rationality and Other Topics in Economics on how decisions are constrained by three factors that included information, capacity, and time (Simon, 1982). Human beings have limited information to make decisions, shortness in processing power and limited time to make decisions. 

Clusters bind together based on core characteristics that improve the capacity to meet market demands by increasing flows of information, collective processing power, and the ability to meet market challenges. They are bundles of tightly woven resource sharing networks that limit costs of members and improve upon the adaptive capacity of organizations.

The differences between the firm and the inter-firm collaboration networks fit witin the grey area and have a significant impact on firm success. “Economists now recognize that such a sharp distinction does not exist and that it is useful to consider also transactions occurring within the firm as representing market (contractual) relationships.”(Klein, 1983). Internal transactions live within and are influenced by the cluster environment of inter-collaborating firms.

Actors within the cluster are psychologically motivated by what Herbert Simon considered "aspirations" to act on changes. These aspirations are the goals and desires of people that encourages them to be entrepreneurial toward new ideas and technology. They are driven to succeed by maximizing the opportunities their environments offer through the sharing of information and access to resources that create mutual development.

When people work within a larger social network they improve collective intelligence through information and resource sharing among cluster actors. Collective intelligence is, “A social network is a specific set of linkages among a defined set of persons, with the additional property that the characteristics of these linkages as a whole may be used to interpret the social behavior of the persons involved” (Mitchell, 1969, p. 2). People in a cluster are grow together as a unit by sharing knowledge.

Clusters improve upon the decision-making abilities of members creating more optimal choices that lead to market mastery. Each participate in a cluster uses their networks to gain information and make more optimal decisions that lead to better outcomes. Information increases their cognitive capacity, offers greater data to draw on, and speeds up the time needed to synthesize this information. 

Because clusters offer significant growth and development opportunities profit seeking actors are naturally drawn to these networks. Entrepreneurs move toward value creation opportunities inside clusters because of the following (Wu, et. al. 2010):

-developed processes due to job specialization;

-high availability and lower prices for resources such as labor force and loan services;

-updated technology and a culture of development;

-lower cost of manufacturing and distribution of products/services due to risk pooling and economies of scale;

-stable demand for products and services;

-strong social networks around core competencies.

The shared resources and knowledge help develop advantages for all members of the cluster. Successful changes in one member are quickly adapted by the rest of the members creating collective adaptations. These clusters become primary innovative catalysts.

Through market collaboration, companies hedge their skills and abilities while reducing risks by working together (Agranoff & McGuire, 2003). Organizations that work together in clusters create a level of market trust, collective problem solving, and enforcement of rules on others within the network (Putnam, 1995). They form into a more uniform market cluster that shares resources and reacts to environmental changes together.

Consider an example of new military spending in San Diego. Based on market (security needs) the U.S. government decides to invest in military spending and development. Infusion of investment into a military cluster, could impact ship building/design, and further improve telecommunication clusters. New revenue in one area impacts the entire supply chain of clusters that relate to each other. As the cluster grows it will find new ways to create revenue streams that lead to higher levels of employment and regional competitiveness.

This development doesn't happen in a vacuum. Individual actors and entrepreneurs have opportunities to take action in profit-seeking methods. This includes having access to information and resources. The transactional costs both in organizations and among cluster members is low making working within the cluster more beneficial. As the actors align their environment for profit the industry receives the rewards of more innovative products. 

The bonus is that military spending also impacted ship building and telecommunications which have their own market relevance and spark new industry development. These growing clusters could take on a life of their own and create new jobs and resources as the demand for their new products becomes apparent. New investments could be forthcoming as market needs are met and their supply chains are also enacted.  

The members of clusters work together to create industry innovation (Cox, 2012) and respond to internal and external market pressures together (Yankey & Willen, 2005). The level of interconnections includes collaboration, alliances, and integrations. 

 The more willing companies are in working toward shared market objectives the better the growth opportunities. Through collaboration and project partnerships companies can speed up information transference and promote wider reaching development (Rodriguez & Nieto, 2012).  

As these networks grow and develop they draw in other areas, counties, and cities to create an interrelated marketplace (i.e. economic hub) that expands well beyond their locality (Lee and Fejock, 2012). Multiple growing clusters can lead to regional economic growths. 

As information and knowledge spreads and interacts within these markets new ideas develop and resources are found. As social networks rise the amount of information contained within those networks also rises raising the level of development for people involved. Where impermeable borders between companies and people exist based upon bias, poor city design, or improper perceptions the fewer opportunities for growth are realized. It is not as much a matter of value system as it is physics. Elements must act and react to each other to create energy, adaptation, and development.

Economic Synergy:

Economic synergy is a process of using personal and professional connections to create energy in the market that expands in strength through the generation of innovative products and services that creates investment revenue. Synergy can be seen as a process of using two or more economic elements to create a sum that is greater than its individual parts. When synergy starts to develop and profits realized it can continue its expansion as revenue is reinvested for greater wealth generation. The more times the product/service development, market revenue and reinvestment process occurs the higher local growth is realized.

An example of synergy can be found in Asia and their high annual growth rates. Singapore and Malaysia business connections and collaboration have been successful in creating higher levels of synergy (Yeung, 1998). This synergy changes countries from net importers to net exporters thereby developing stronger economies (Dunning, 1998). As business connections collaborate they build and develop off of each other to higher states of development.

We can see this occur when different industries within a hub work together to raise mutual development beyond the value of their individual contributions. For example, when a successful e-commerce company works with a successful worldwide distributor their collaborative value expands multi-fold (Kuo-pin & Graham, 2011). Synergy is about connecting wealth generating concepts together for maximum effectiveness and mutual benefit.

Clusters working in isolation have a relative value on the market that is limited by the services or products they provide. When clusters work together they not only draw in additional revenue from their existing products and services but also begin to create new lines of services. The innovative process helps them find new revenue streams that grow and develop over time. This generative process can transform mediocre performing firms to higher performing streams that create exportable products. 

Becoming a net exporter requires the ability to produce new products and services that draw new investments to create multiple revenue streams. For example, San Diego has a strong micro-manufacturing industry and this has international market appeal. To fully develop an industry's market potential it will require new ideas, connecting those ideas to sufficient resources and penetrating markets to raise local wealth. This can only occur if companies create proper connections and collaborative efforts that produce the following results (Yeung, 1998): 

• -       Long-term relationships that reduce business uncertainty.

• -       Shared resources and information that offer “first mover” advantages.

• -       Increased credit worthiness that improves financial flow.

• -       Once established the system protects itself.   

Business Incubation, Investment and Acceleration:

 Clusters need a constant infusion of new ideas and information that comes from the entrepreneurial spirit.  Where gaps between industries exist there is a need to develop connecting service industries. The process of new business generation occurs in the natural cycle of economic rejuvenation where outdated businesses collapse and new businesses start to fill market need. Incubators and accelerators seek to augment organic methods of new business development that occur naturally in the market by creating the right mix of environment, resources, and knowledge to start those businesses with the highest potential economic impact. 

Business incubation puts clusters of start-ups together so  they can feed off of each others knowledge,  develop their operational models, and obtain access to investment capital. These clusters often spur development, new business, new jobs and greater regional economic development (Al-Mubaraki & Busler, 2013). New incubated businesses are weaned into supporting clusters that help protect it as the cluster works together for market relevance.

Incubators are made of inventors and entrepreneurs. Inventors may not be seeking to develop new businesses but have ideas for new products that could be lucrative to either the new businesses or established manufacturers. According to Afridi (2009), inventors can work together to find the best ideas and patent them.  Incubators give them a focal point to view potential market busting break-out operations.

Start-ups create value their their patents and sell the manufacturing rights to larger companies or integrate their operations into a larger producer. Depending on whether the start-up is a stand alone company or part of a group of businesses proceeds are returned either to the entrepreneur or divided among the inventor, the inventor pool (association), and the pool manager. 

During the incubation process executives at small and medium enterprises (SMEs) seek to develop their business strategies by matching their internal environment with their external environment (Pop and Borza, 2013).  Once the business moves out of its incubation unit it will be subject to market forces. To avert potential disaster the owner develops their model to profitability or sells that model to willing investors who want higher returns on investment.

Small businesses must generate wealth and capital to be successful. As many small businesses rely on their personal credit to finance their growth they are limited in their abilities (Lahm, et. a., 2011). Connecting emerging businesses with investors helps to promote potential growth that results in hiring booms impacting associated sectors. New technology affords an opportunity to find and invest in market holes to enhance marketing opportunities.   

It takes time for new businesses to have an impact on the local/regional economy (Holtz-Eakin & Kao, 2003). Businesses that recently enter the market can take years if not a decade to develop to a pro-growth strategy. However, once they are able to reach that status the hiring of new workers, contribution to local knowledge, and higher levels of investment is difficult to match in other economic growth policies.

Incubators offer a chance to develop businesses while accelerators helped reach certain milestones through financing viable ideas. They also encourage connections between entrepreneurs, resources, investors and scientific knowledge in a small and highly interactive location with common goals. It is this process of development and fostering that ensures a steady pipeline of revenue and job creation in the area. Not all of these businesses will make it out of incubation but those that do will contribute to economic growth; a few may come to define future industries in the area.

Fostering businesses through incubators and enhancers are designed to ensure that viable ideas get off the ground and have a sufficient level of development before competing on the market. When strong enough these new businesses can be released into supporting clusters that compete together and share knowledge. Small business entrepreneurs are capable of filling important needs in the market and provide a level of innovation that is attractive for larger investments. Without the development of small business the economic system can become stagnant and fail to move through the cycles of creative destruction and growth.  

Stages of Company and Product Development:

Change and transformation are pathways to success. Benjamin Franklin, a founding father of the nation and a successful businessman said, "When you're finished changing, you're finished." The need for change encourages innovation development that occurs in incubation must also occur in some form within companies. The development of new products and services will help ensure that money making ideas are adapting for greater revenue and new ideas are making their way to the market for greater profitability.   

Businesses that leave an incubator or make their way into a break out path onto the market will need to ensure they can take their ideas to market fruition. Ideas will only be ideas unless they are put through a rigorous process that ensures they can realize some tangible results. That process of development becomes an conduit for innovative ideas and revenue growth. 

Growth relies on finding new innovative improvements and then matching that improvement with resources that can convert it to profitable production. According to Pradham et. al. (2013) the financial resources and social development work in tandem to create market relevance. New ideas have a history of previous development and work within a body of knowledge. Applying financial investment to well researched ideas encourages success.

Each new line of products offers opportunities to develop a new revenue streams. For example, Apple was on its way to bankruptcy when it rejuvenated itself through innovative new products that launched the company into a tech leading era. It was the process of taking new ideas, researching their feasibility, developing a marketable product and releasing them to the public in a creative way that made the difference between a market leader and market casualty.   

Companies that desire to lead the market like apple follow a growth strategy that pushes market adaptation.. They challenge themselves to take on new responsibilities and overcome problems. (Ashworth, et. al., 2013). Modern businesses match their physical businesses and virtual abilities to become relevant and provide a guide for adaptation. For example, E-commerce and E-retailers move through stages that include:

Stage 1-E-retail Launch: The launch of the business, inclusion of high demand lines, and organizational learning to meet immediate needs. 

Stage 2-Competence and Development: The website is improved, functionality and control are matched and search engines begin to crawl the site.

Stage 3-Market Development and Value Integration: Customer feedback, creative adjustments, customization, improved product reach, and market development.

Stage 4-Integration Intensification:  Intensified strategic planning that enhances internal operations and external relationships.

Stage 5-Experience Leveraging: Using gained experience to create add-ons, improve customer service, and fine tune the business.

Stage 6-Sustainability: The maintenance of multiple revenue streams, regular business adjustments, and maximum sustainable performance.

Developing sustainable market presence requires companies to rejuvenate themselves through the constant development of new products and services (Cao and Zha, 2010). As companies move through the chaotic patterns of innovation that include stages such as  prototype, emerging, maturing, established and outmoded stages they will seek sources of new products/services (Baker 1989). 

When companies begin to decline they need to redevelop themselves and their products/services  to maintain market position. Not only will they need to offer new products/services that have greater impact but also revamp their processes. The company will need to adjust throughout to create a more innovative and profit-driven environment.

When changes is needed it is helpful to create the right environment for change. Kotter's Model of Transformation helps describe how companies move through a process of adjustment and eventual solidification of that adjustment to create lasting change. The steps required for meaningful change include increasing urgency, building guiding teams, developing a vision, communicating, enabling action, develop short-term wins, continue pressure/urgency, and making the changes permanent (Tanguay, Waltman& Defebaugh, 2011). 

The problem many companies face is that they fail to foresee when change is necessary and continue to operate their businesses as though the environment has stayed the same. They have difficulty adjusting their internal structure to meet new challenges in a way that draws effort toward a positive market end. They continue to decline instead of transform because ideas are stifled and negative cultural patterns develop. Stagnation in business eventually leads to decline as the internal mechanisms fall further and further behind the required adaptation to meet market challenges. Destroying internal artificial barriers to change and encouraging an innovative environment will lead to new growth opportunities. 

"Interconnectedness" of Successful Clusters

Business within a cluster are connected by people, information, resources and finance. The more connections we can develop and the closer the proximity, typically the more advantage companies receive as they share important components of doing business. They become a supportive network that continues to develop and build off and support each others development to fill business needs.

The Internet and IT networks have become a big part of this model. As people, businesses, and administrators move online there is a substantial increase in GDP of the area. There is a reason why greater movement of data and information leads to economic growth. The data is used for innovation purposes but must be widely dispersed to stakeholders.

As investment in communications infrastructure rises there are also more opportunities to receive outside investment into local businesses and increased chances of expanding into global markets. Investment improves the overall capital needed to move companies out of their domestic markets and into a more competitive world. As the information about the cluster improves, investors awareness also improves and this can lead higher investments that create an upward cycle.

It should similarly be stated that as people move online and share information they also share their ideas. Increased information becomes breeding grounds for collaborative improvement of products and open sourcing options. Ideas spread quickly and companies can research and compile this information for general improvement of their business. In turn, the output of the economy increases.

Developing of networks for private and public collaboration can increase the speed of cluster development as ideas spread quickly and are adapted into existing operations. Governments and business leaders should support the sharing of knowledge and information for profit gain to spur local economic development. They can invest in closed, open and infrastructure improvements that have a systemic impact on the overall speed of information and the connectivity of people.

Clusters as a Function of Engagement and Interaction:

Clusters are an interconnected network of businesses that share ideas, work on projects and compete against the market. They are clusters of innovation that require constant engagement to achieve their mutual goals. According to a study in the International Review of Management and Marketing, a cluster is effectively formed when there is coordination of interaction with the environment, coordination of financial-economic policy, coordination of production-economic activity of members (Basyuk, et. al. 2016).

Coordination with the Environment: Companies within a cluster don't act on their own and are part of a larger network of co-creators. While they may engage in some competitive activities they ultimately work together to create synergy that benefits all members that are actively engaged. Helping them to actively engage in cluster management is helpful. 

Coordination of Financial-Economic Policies: The cluster survives because city, state, and national policies are designed to help it survive by creating a pro-business environment. When policies are reviewed and form an advantageous environment, businesses are more likely to flourish and grow in a way that contributes to national development. 

Coordination of Production-Economic Activity:  It is not enough to invent products but also to create them in physical form and to do so in a cost effective manner. Connecting inventors with builders is important for realizing something in tangible form so that it can be sold on the global market. The clusters advantages reside in the creation-production process. 

Economic clusters need to work together to compete against the wider market through hedging of each others skills and creating economies of scales for resource use and access. When ideas are shared, government policies in pro-business form, and inventors are connected with manufacturers businesses have the ability to achieve more than they can on their own. Successful customer management encourage interaction of all the cluster elements to create a collaborative environment.

Detecting and Measuring Economic Clusters on a Regional Level:

Detecting and measuring economic clusters on a national scale is possible with a little statistical analysis. Researchers in Germany were able to evaluate macro-data and determine which industries and geographic locations experienced vertical and horizontal linkages (Titze, Brachert & Kubis, 2011).  Understanding where these clusters are formed can impact public policy in ways that improve production and export.

The researchers used input-out analysis and then further pinpointed locations of industries with concentration measures. The end result was that they were able to determine concentrations of linkages in specific regions within German. These concentrations were one of the reasons why companies were able to innovate together.

Governments can use information like this to determine where clusters are forming and what industries are thriving. Based on economic need, they can further promote policies for the national good will. Specifically, they can encourage linking and interacting among the different businesses within the cluster.

To understand specifically how these firms are connected and how they interact means we would have to move from a macro analysis to something more intimate. This intimacy could be in the form of specific transactions and inter-company exchanges that highlight how they are acting.  Other research indicates that social, network, spill over, geographic location, and supply chain can impact the tightness of these connections.

Governments should consider supporting and enhancing research in economic clusters because of their large potential on the economy. Recent decades have sparked more interest but not enough to truly push for active engagement on a national level. The development of economic policy could be based on data, such as found in this study, and followed up with supportive detail grabbing research. The connecting of businesses into clusters would require different types of government policies.

Investments in Communication Infrastructure Leads to GDP Growth:

The internet's information exchange has led to economic growth within the country and will continue to do so if investment in data infrastructure is made. According to a study conducted in the International Economics & Economic Policy Journal, the expansion of the internet leads directly to increased goods and services a country produces (Welfens & Perret, 2014). The greater the integration of the internet and its networking capabilities, the higher the growth of national production leaving one to conclude that focusing on developing stronger information and data sharing systems can have significant benefits for regional development.

The study found that the amount of time people spent on the internet in meaningful searches led to an increase in gross domestic product (GDP). A 10% relevant share of time budget use of the internet led to 2k-5% increase in gross domestic product. At 20% usage this would increase GDP to 4.7-10.4%.

Meaningful searches and web based activities leads to greater knowledge, job exploration, purchasing products, or interacting in a way that produces a meaningful output for society. As people spend more time engaging in these useful activities, they also increase their knowledge and commerce in a way that improves national output.

Governments should consider the benefits of increasing their data infrastructure investments to ensure products, information, and resources are moving quickly throughout local regions. For businesses and professionals that rely heavily on information and financial transactions, an increase in communication abilities has significant influence on their firms performance.

From a GDP demand side perspective, investment in data infrastructure has an impact on companies production capacity. A formula helps us understand this relationship. Y real output = C consumption + I Investment + G Government Consumption + Xnet Current Account.

Y=C+I+G+Xnet

As private and public resources are allocated to network creation, the economy begins to expand as more people use that system to accumulate new knowledge. This change becomes more apparent in educational opportunities, research, business networking, and purchasing behavior. It also has tertiary benefits for society based on idea sharing and household productivity.

Increases in communications infrastructure, like the internet and business networks, creates advantages for personal and commercial activities that lead to economic growth. Development of data infrastructure will also have a significant impact on the growth and development of clusters within a region that rely heavily on personal and business information sharing. Restructuring and enhancing local telecommunications infrastructure can be an important component for expanding future business development opportunities

Linkages (People, Information, Resources and Finance):

In the Information Age companies can link together in ways that were not possible a few generations ago to generate new innovations in their environment. Linkages among businesses helps them grow and develop where people, information, resources and finance interact in ways that encourage idea generation and product/service outputs. Clusters help companies connect to other entities like related businesses, universities, organizations, governments, etc.. so that they can feed each others development and close the loop on resources and ideas.  Understanding how and why these connections occur and where they link is important to grasp the fundamentals of economic growth that results from a learning industry environment.  

Different types of networks create business interactions that have varying levels of effectiveness. Networks can be random, small world, or clustered. Random networks form to handle the information needs of knowledge intensive industries.  Small world networks form around intensive projects where there is high pace and high quality information transference. Clustered networks are common in organizations where people form knowledge sharing cliques based around core competencies that borrow and share from each in their developmental trajectories.  

People relying on this information change and develop based on new information. It is the interaction of the human with new information that generates new ideas that lead to financial growth. Networks help foster cluster growth among participating companies by willfully sharing ideas and information. It can be said that growth is a function of the connections and interactivity among many different elements that integrate for economic expansion.

Companies work together because they use and share the same resources that result in profitable ventures. Where resources are found, entrepreneurs will seek to exploit it through business and will eventually begin to share knowledge, resources, information, and people to enhance their competitiveness. Business development is primarily information based and secondly based in the ability to exploit resources.

Consider a groundbreaking technology developed in one company that increased revenue from new products and services. Those discoveries are based in a wider network of knowledge and information. It won't be long before other companies used their own intellectual capital and resources to copy successful products. This profit seeking sharing is a natural cycle of business development of integration and adaptation.

Clusters are in essence bundles of micro-transactions among related businesses linked together into a successful pattern where the economic pieces for growth come together in a way that leads to development. These patterns spread out among cities, regions, countries, and internationally to foster information transference.  Successful cities are nothing more or less than successful patterns of interactions within a wider economic system that come together to create efficiency of idea sharing and resource allocation.

As businesses begin to work in collaboration with each other they create regional competencies that contribute to further economic expansion for not only their businesses but ones that are attracted to invest in the area. The more connections with density (virtual or physical), the more likely advantage oriented competencies develop. These competencies are then used to help create other products using the same knowledge and resources in associated industries that leads to economic adaptation. 

Open clusters that take in new information are more adaptable as their knowledge is expansive and capable of integrating new ideas into their existing knowledge presets. Open systems of develop are capable of overcoming new problems and adjusting their methods by being more accepting of new information. Successful linkages actively seek out new information and participants to ensure that are developing and growing by adding to their competitive cluster.

Developing industries need larger random networks to obtain enough information to develop products for market consumption. Clustering creates small focused groups within a larger network. Small world networks are used in inter or intra-organizational development projects. Knowledge sharing platforms are used to develop inter-corporate for co-collaboration projects, intra-corporate for inner-organizational usage, or open public networks for idea generation.

Linking information, people, resources, and finance in a way that speeds change can foster greater development within clusters as entities build and develop off of each other. The closer companies work together and share their information through proper networking the more likely they will continue to adapt and develop. The modern economy will need companies to hedge and share information in order to develop regional competencies that can compete effectively on the global market. 

Proximity Advantages:

Companies that are located in similar geographic areas are more likely to share information with each other. It is these connections of vertical and horizontal businesses that help to develop increasing innovation. Research on property led approaches to cluster management found that linkages were formed when physical proximity to businesses in the supply chain and the artistic class were located near each other (Zheng & Chan, 2013). 

Relocating business near each other helps to create denser connections. Businesses need help making vertical linkages to different levels of the production chain as well as horizontal connections to businesses at their same level to encourage growth. When they need support and resources it should be there.

A high percentage of these connections occur because of the proximity of the supportive businesses to the parent company.  It is natural for people to walk across the hall, see each other in the parking lot, and eat in the same restaurants to become familiar with each other and engage in business related endeavors.  

It was also found that in many industries the interaction between innovative industries and the artistic community was lacking. Strengthening artistic-business relationships often leads to new ideas and products. One brings forward unique ideas while the other sifts through them for practicality. 

The development of cluster success for specific industries can be enhanced through offering rents and proximity benefits with other vertical and horizontal partners. Making sure that an artistic class is close and has open lines of communication are helpful in the process. As the environment develops with needed suppliers and relationships the cluster has more ability to feed its growth.  

-Large companies that rent spaces within close proximity can encourage greater cluster formation. 

- There should be a mix of vertical and horizontal companies within the cluster.
-Keeping a creative and artistic class within reach helps spur innovation.

Attracting Foreign R&D Investment For Cross Firm Innovation:

Foreign research and development investments in businesses within the same area improve knowledge spill overs. According to a study of intra-industry knowledge spillovers in the Review of Development Economics, the R&D stock of foreign-owned firms had a positive impact on the productivity of domestic firms within the same industry creating significant knowledge spillovers that led to  faster adaptation (Todo, Zhang, & Peking, 2011). Encouraging foreign R&D investment can improve local growth through the creation of a greater product knowledge.

The study used firm-level panel data from a Chinese science park, known locally as China's "Silicon Valley". What they found was that R&D activities of foreign investment had a significant impact on the innovative abilities of domestic firms through knowledge sharing. Local firms quickly adjusted and changed after introduction to new technologies and information.

The process is similar among domestic firms, but doesn't create as much adaptation as compared to when highly developed companies invest in the area. It is a little like playing "catch up" after a student has fallen behind. The new international knowledge drastically changes the playing field for local firms that strive on new ideas and information to compete.

Firms don't operate in isolation but share information through the hiring and movement of employees, working with suppliers, and obtaining needed resources. Knowledge transferred from more advanced firms, to less advanced firms, in a way that increased productivity through innovative development.

When administrators foster cluster creation, it is helpful to consider attracting foreign firms, specifically firms with advanced technologies, into the cluster to keep local firms growing and changing. While it is helpful to attract firms in the same industry, it is also beneficial to attract firms in similar industries that share related products and knowledge.

The study originated in China but does highlight the need to encourage foreign investment as an important catalyst for local cluster growth. Attracting national and international firms into a cluster with varying degrees of sophistication can lead to growth for related industries that share similarities. There is an inherent value for firms to move their operations into a cluster in order to maintain their competitive offerings, while those that do not, may be limited by a lack of knowledge sharing.

How the Internet and Advanced Networks Improve International Trade Growth:

The Internet has led to remarkable growth in global commerce in ways that are slowly shifting society toward a highly competitive environment. The way in which companies connect to each other has fundamentally changed as information moves from one to other parts of the world quickly. According to a study in the  International Economics and Economic Policy, the Internet matched with Openness leads to higher levels of economic growth (Meijers, 2014). 

The Internet is an important mechanism by which open cultures connect with the world, share ideas, engage in commercial activities and develop economic momentum. When cultures are open to new ideas, concepts, sciences, cultures, religions and engagement they can use the Internet to enhance their outcomes.

Economic growth without openness to new ideas is stunted. While it may allow for transfer of information, the use of that information to develop new opportunities is limited. Having the right mindset supported by the information gathering abilities of the Internet can lead to significant economic expansion for countries.

The study found that the internet lent to international trade and economic growth. The internet allowed for more connections with other companies that resulted in the development of new ideas. International trade ushered in economic growth and the Internet further influenced the volume of that international trade.

"The internet facilitates the generation and spread of knowledge and new ideas tremendously which allows for an increased productivity of the research process and an increased diffusion of its products and outcomes"

The researcher reviewed data from 213 countries, collected from the World Bank in 2010, on World Development Indicators from 1990 to 2008. They also included information from the International Telecommunication Union. They two sources of data helped to create a more comprehensive review.

The more countries became "connected", the more they grew. A 10% increase in per capital Internet led to a 3.9% increase in openness ration that in turn led to a .17% increase in economic growth. There was a direct relation between the growth of the Internet and the economic strength of a country.

The study helps us understand that while economic booms slowed when internet expansion reached saturation in wealthier nations, it is still a catalyst for improving international growth. Saturation is based on internet use but further network development can lead to new spurts of growth. Having faster internet and stronger networking raises opportunities to engage in international trade.

In developed countries, growth from the Internet will increase as the speed and capacity of the data and the software to use it increases. Companies will be able to use this information to enhance their product offers and engage in mutual activities that can improve the entire cluster. 

Clusters offer the ability to reduce transaction costs and increase connectivity among people and businesses. Moving to higher developed methods of clustering businesses through electronic means could lead to a new level of economic growth. Matched with openness and the right resources, the possibilities of using the Internet and its growing network capabilities to push economic growth within local economic clusters increases.

How Information Changes Markets and Enhances the Entrepreneurial Mind:

New information changes how we think and thus changes our perception commerce, people and nations. Sources of new information can lead to market reforming products and services. The Internet is reducing borders and spreading new technologies that is creating shifts in global structure (Kemeny, 2011). The very way we think about our economy, its products and almost all activities are based off of information and how that influences our thoughts and actions.

Once we learning useful information through discovery and sharing we can't unknown it and it inevitably leaves a lasting mark on society.  What has been done is difficult to undo.The economy is a collection of knowledge and resulting transactions that lead to larger economic outputs. The hallways of information have been opened and the way in which people live and conduct business will change as culture shifts toward more global collective intelligence.

As information spreads more freely across boarders in global markets, the entrepreneur will be flooded with new opportunities through the transference of ideas. What was once restricted through a lack of information, and legal access, will be opened to the free market making innovation a more global phenomenon. A nations ability to capitalize on this information is based in our intellectual and creative capital.

Information won't be passive but an active market agent that changes the markets themselves. Once an idea has come forward and works as a successful model people adapt it quickly. This fast paced development will transform institutions, nations and businesses. Adapting organizations and international socialization will create new market transactions leaving learning organizations stronger and showing others to be irrelevant.

Jackson, 2014

New ideas can change our most basic assumptions of commercial life and new economic theories will develop to better explain societal actions. A single  business or scientific breakthrough can transform the very way in which markets operate and force a shift in developmental trajectory. Those nations that can foster the highest levels of innovative development can also lead the market in economic growth. Ideas have tangible value when converted to useful products.

The new mediums of information transform multiple sectors through spill over of information and knowledge.  Development in IT has led to more efficient manufacturing while contributing to other areas such as research, communications, and other fundamental aspects of modern life. Development creates spill over from one sector to the next create broader growth. 

Information transfers because humans are social species that have interaction and information sharing patterns that shape their behaviors and ways of collectively viewing changes. According to a study in the Journal of Economic Perspectives the spreading of information and subsequent human behavior that influences economic activity is based on the density of social clusters, how information is spread/received, and the actions/activities of others within those networks (Jackson, 2014). 

Information from one sector spills into the next based on a range of channels that include media, journals, word-of-mouth, social media, social clubs, business groups, meetings, news, and the interaction of interested parties. The likelihood of that interaction can be created and put in a formula that shows how probability of engagement in certain behaviors is based on the personal characteristics of the individuals and their "closeness" to other members in the industry. 

Positive pro-social behavior that leads to economic gain spreads quickly as people seek out this information for personal advantage. It is this social economic behavior that changes the markets and creates better understanding of how the market functions that can be used to foster entrepreneurial behavior that feeds the national economic engine.

This national competitiveness is influenced by how information from economic sectors of society influence each other.According to Schramm (2004) entrepreneurship, mature businesses, government and education interact with each other to create national economic development. Entrepreneurs provide innovative ideas, government manages resource flow to the right high potential locations, education improves on human capital and mature businesses have the economic power to penetrate global markets. 

Information creates cycles in our development that range from new business to bankrupt old businesses. The faster that information carries the more quick the process of change. Entrepreneurship is a catalyst of change through the development of new ideas and sharing those ideas with others. These ideas spread quicker than ever into other sectors creating even more levels of entrepreneurial activities.  

Society must continue to integrate information and change or they will become stagnant and decline. Massive change causes in part creative destruction where industries and countries collapse and redevelop in new ways (Schumpeter, 1911). This destruction and growth process occurs due to the inability to adjust with the market as market changes unfold leaving a lag between the need to change and the activity of change (i.e. stagnation and sticky economics). By constantly changing and reinvesting profits in product and service knowledge gaps of economic growth, large swings in market development need not occur on the scale experienced in previous generations. 

Think in terms of how a large pendulum swings to its furthest point and then wildly swings back again rushing in radical change.  New information brings new ideas and new development which forces previous market assumptions to change. The process occurs over and over enhancing growth, decline and regrowth in a pulsating market that has wide ripples throughout the economic system. Companies and economic systems that innovate regularly reduce those wide swings and encourage free commerce of development are able to better manage change in smaller adjustments.  

We must throw out old ways of thinking to embrace change in the speed of information and development. It is the American way to question our world and come to new insights. We are an entrepreneurial nation based on free commerce. As Thomas Jefferson stated, "God forbid we should ever be twenty years without such a rebellion..." Change can be as simple as rethinking the way we do things by ensuring we have solid policies allows the system to continually adjust and change to higher forms of existence.  Getting everyone on board a system of constant development can impact the success of future generations.

Open Information and Knowledge Sharing Networks:

The world is becoming a very connected place and new levels of processing information are needed to create stronger economic hubs. Information exchanged between businesses, within clusters, governments and people will change our fundamental economic understandings. Networks won't be seen within a single business entity but will also include collaborative networks with wider stakeholders. Economic development will be determined in part by how quickly and efficiently information is used within the market through the use of stronger network models. 

A fundamental component of the concept of efficient markets is that information travels freely and easily among interested parties.  As information breaks down inefficiencies and  bottle necks improvements as predicted by the Theory of Constraints is realized (Goldratt, 1984) which improves all companies that utilize information to maximize their performance. 

Bottlenecks slow down organizations and the fundamental advantages of working within clusters can be improved when information, products, and services move more freely within the system. To do this effectively means there will need to be better data platforms that connect many companies of a cluster together when they share similarities in operation and need. 

Hubs and clusters form by the way information networks develop to generate value among interested stakeholders. Open innovation is used as a network conduit that creates market solutions for specific shared problems among stakeholders. It can be used for firms that are working collaboratively or working on parallel projects. On an economic level they foster the sharing of knowledge and resources that lead to mass development.

Today's economy is full of data and information and can hedge the use of networks to help ensure that businesses have the best chance of success. Companies will need to do a better job of connecting with each other, their suppliers, the public, their customers and other stakeholders if they want to maximize their efficiency. New knowledge sharing networks will develop to meet the greater processing needs of companies. 

Open innovation helps encourages local innovation by catalyzing the way companies share, collect and use information.  As businesses move into a new economy they will be increasing influenced by ideas from open innovation, sharing economy, open sourcing,  and other knowledge based networks that process data to a greater level. Developmental capacity will increase as people begin to use this information appropriately. 

Open innovation can be defined as, "a model that assumes that companies can improve their business to use external and internal ideas, and the internal and external paths to market, which will contribute to their development” (Chesbrough, 2003, pg. 12). Speeding up the acquisition of information and the ability to process that information will improve their development. 

As companies take in new information to create better operating models, and turn those into products with utility, they are staying ahead of future market irrelevance. Entities that fail to take in new information, or adjust, eventually find themselves loosing marketing share. Those companies that can take in and analyze greater amounts of information can find higher levels development potential.

Open innovation operates between two different broadly defined stakeholders such as a group of customers, suppliers, or other businesses. Open innovation is a methodology that encourages faster information exchange between entities for firm development. Participating entities share and evaluate information that lead to better corporate decision-making related to marketing and product development.

Information is a fundamental component of economic growth and those companies that have a high need for information thrive with such systems. When information transference is fostered for local development it has an impact on the amount of exports and related employment growth (McPhee, 2012). Relevant product and service creation commands greater market performance.

Four different types of companies  use regularly open innovation as part of their business strategy: 1. e-commerce companies that market goods through the Internet; 2. content experts who gather and display information from multiple sources; 3. market makers who develop places to sell products; and, 4. those who provide Internet services (Afuah & Tucci, 2000). They require higher levels of information collection and usage to create meaningful services for their clients. 

But they are not the only ones. We are in a knowledge economy and almost all companies have a regular use of lots of information.  Nearly all companies rely heavily on new information to outperform their competitors. America is leaning toward high value creators that rely on information and the maximization of human capital.  

Companies that are developing and growing quickly also need enhanced information collection pathways.  Research by Rasheed (2009) found that Internet based  and companies that rely heavily on information are more likely to use open innovation. The compelling need to collect and transform information pushes them to incorporate new strategic models that further adaptation.

Open innovation is an important method of hedging collaborative knowledge to understand and solve problems from multiple perspectives. For example, open innovation has already been used in the hotel industry to improve customer satisfaction and customer retention through customer driven feedback (Artic, 2013). Internet and effective software allows for analytical analysis of customer needs by allowing them a chance to share their ideas in an effective way. 

Collaborative development increases economic opportunities, improves efficiency, raises innovation, and lowers the amount of time it takes to generate relevant products/services on the market (Sloane, 2011). Developing new products takes information from the market and creating feedback loops is helpful in generating value.

How they create this development is based on open innovation process through the additive nature of collective intelligence. With the proper networks companies can work with a large group of customers as they could with suppliers to create better products that have higher market value. As these networks develop so does the capacity to exploit that information.

Industrial innovation through product/service development is a process that involves the search for information and interaction with market actors such as customers, competitors, and suppliers or research institutions to achieve their objectives (Salter and Martin, 2001).  The process of exchanging information and making constructive meaning out of that information is the bread and butter of firm growth and development. 

Open innovation provides a platform that reduces the cost of information attainment. It creates platforms of collaborative space (virtual or physical) that distributes problem-solving tools, capacities, and responsibilities to the end user to create greater innovation (van der Valt et. al., 2009). As platforms for developing greater collaboration between interested stakeholders rises so does the overall cost of information attainment. 

The co-creator platforms inherent in open innovation should be easy to use to create the greatest impact so that people of different backgrounds can function (Franke & von Hippel, 2003) and allow for easy communication (Mallapragada, et. al, 2012). Practical systems focused on viable products and services will develop interest from related parties. Value products related to higher sales, profit, investment and jobs.

Competent users aligned with appropriate information networks leads to organizational development (Dong, et. al. 2011). These systems help connect information from multiple sources. They can be seen as,“value co-creation configurations of people, technology, value propositions connecting internal and external service systems, and shared information” (Maglio & Spohrer, 2008, pp. 18). 

Once new products/services have been developed motivated collaborators can find similar goals to test them within the market through the experimentation processes (Bergyall-Karaborn, et. al., 2009). Collective development will naturally impact and influence the local economy. Organizations that collaborate progressively with others and test products sufficiently improve their financial well-being as well as the well-being of those in the local economy by enhancing their clusters (Dhakal, et. al., 2011).

Knowledge sharing between industry stakeholders, company-customers, and universities-industry enhances development. Brestow, et. al. (2011), found that universities have been known to contribute to local human capital development and retention that fosters a stronger business environment. Furthermore, Howells, et. al. (2012) concluded that both informal and formal networks can increase local innovation by speeding thought processes.  

A study by the National Bureau of Economic Research further found that organizations that partner with universities find significant developmental benefit (Kantor & Whalley, 2009). Technological closeness and sharing labor markets seem to have positive benefits for these companies. Open innovation provides an opportunity to collaborate with multiple networks on an open platform. 

Firms in different genres will seek out those formal and informal networks that are most advantageous to their needs (Freitas, et. al., 2012). Helping them to connect together and reduce cost of information transference makes decision-making easier and speeds up the process of development (Clemmons, et. al, 1993). Open-innovation can be used with customers, suppliers, product developers, and other entities to obtain and partner in development.

It is also possible to enhance this power and build collaborative databases among businesses that scour the international market for their own needs and then upload that information for other business (Anastasiou, 2012). This information can then be used by stakeholders (i.e. businesses, universities, marketers) to develop products, adjust processes, and compete more effectively.

Open innovation offers the change to find new ways of sharing and spreading information to work collaboratively with stakeholders. As data highways continue to grow and change the opportunities to work virtually among companies as well as collect important consumer input will grow. The change in technology offers opportunities to move from older collaboration models to new ones that have much higher ways of obtaining and making sense out of information. As companies improve their information processing abilities they also improve their innovative competitiveness.

Development of an Export Economy

Export cities have distinctive characteristics that set them apart from poorer cities. To move products out of an area and to allow for manufacturing resources to come in requires infrastructure that moves resources as efficiently as possible. Infrastructure reduces costs for companies and helps to attract more manufacturing as clusters develops. The proper infrastructure, attracting new industries to create cluster growth, encouraging companies that develop products, and distributing them throughout the world.

Export Infrastructure: Roads, Internet, ports, rails, highways, and electrical grid all contribute to export capacity. Products must move quickly and efficiently to distribution locations to be sent world markets. Any delays or bottlenecks in these systems reduce capacity. 

Attracting Industries into Clusters: Cities need to aggressively search out investment by international and domestic companies that contribute to economic health. Some of this cluster growth is through brand awareness of the city's benefits, infrastructure improvements and environmental/tax structures.

Export Oriented Manufacturing: Industries will need to be export oriented to dominate the global market. American businesses should generate products with higher quality and progressive pricing 

Enhancing value through Global Service: Service guarantees are part of the enhancement of value. They create long term values in B2B transactions and additional loyalty among consumers.

Expanding San Diego’s Economy through Investing in “Break Out” Exporters

Venture capitalists are on the continual search for higher returns on investment.  Buying into a company just before it breaks out is one of the most lucrative investment positions. Within a short span of 6-months to 4-years the value could double or triple. Awareness of how these start-ups contribute to the economy and further cluster value is beneficial.

Economies continue to grow when new firms develop and make their way to the market. Large industries set the standard based on local core competencies but it is the emerging entrepreneurial businesses that continue to push the local economy in new directions. When they go global they can expand the local market.

According to a study on 345 non-exporting manufacturers those with the highest potential for market expansion include a variety of distribution channels, variety of product lines, firm competitiveness, and an abundance of resources (Yang, Leaone, & Alden, 1992). Each of the factors contributes to the company’s investment worthiness.

Distribution channels help ensure they can reach customers and exchange commercial activity. This can also apply to customer service and overall ability to communicate internationally. Treaties with countries and relationships with vendors will help determine their ability to flourish in an international market.

Firm competitiveness refers to how the firm is managed and whether or not it has the internal and intellectual capacity to go global. If the management team or the employees are not prepared to go global this will limit their sustaining power. At times the firm may need to be reformed before trying to tackle a bigger market.

Some companies are big hits overnight but soon fizzle out when competitors move into benefit from their success. Without multiple product investment firms take the risk of investing in a company that in a few years may be out of business once their product has been beaten or copied by the competition. Multiple competitive products reduce this liability.

All companies must have resources. Depending on the type of business those resources might be physical such as iron and coal or intellectual such as researchers and programmers. Cities like San Diego will have an abundance of resources built around existing industries that can be used in feeding new business ventures.

Companies grow within a context based upon their relationship with other businesses and government. If their environment promotes and rewards entrepreneurial effort with capital investments and lucrative opportunities a local economy will grow. If the environment is not business and employment friendly it will limit future investments and job opportunities. Developing sustainable opportunities means finding generative businesses that expand present market opportunities.

Service and Manufacturing Support Each Other:

The development of strong businesses within urban settings is supported by the mutual development of multiple type of industries to create complementary links and interests. According to a study in Chinese Geographical Science, service and manufacturing industries support each other in a way that encourages further economic growth (Yang, Liang & Cai, 2014). A type of synergy between the strengths of two different industries fuse together to foster new opportunities.

The study looked at data from 1987, 1992, 1997, 2002 and 2007 and found that as clusters developed they moved from manufacturing to a more service orientation. Manufacturing was still a key and central part of the cluster but that the cluster took on a more dynamic service approach.

As service industry developed, they created connections with manufacturing that not only enhanced product offerings but also spun off new products. The example used in the study was how metals and safety clothing grew around a "fire" cluster. From this cluster, new types of businesses and products were formed that hedged multiple strengths.

Industry commentaries occurred because service and manufacturing spur greater linkages and competition that leads to the development of new products. The local capacity grows when two different types of industries find they have available "know how" and resources to launch new products.

We can also consider the benefits of pairing service industries with manufacturing industries to offer new revenue streams. For example, the development of a new network equipment that increases the need for IT services is warranted.

As these industries develop and create connections, we find that the local industries are led by a larger anchor business. In the study cluster 20-30% of manufacturing industries accounted for 75-79% of total manufacturing output while 50% of service industry contributed to 85% of total service output.

These large businesses seem to spearhead new connections between businesses. Smaller companies were used as support to fill in needed knowledge and service gaps.

This study helps us understand that service and manufacturing industries complement and enhance each other. There are larger companies that support smaller companies within the cluster. As the cluster develops it begins to take a higher service orientation as support services develop in a way that supports manufacturing. Commentaries between these industries often spark new types of products and businesses.

Economic Branding 

The goal of improving marketing and economic brand is to raise exports and investment. Raising international brand recognition and the desire to purchase American products leads to improve trade export balances.  This can happen through improving global reach of the superior quality and inherent value message of American products in consumer’s minds.

Model demand of supply and demand Q^d=D(P,Y)

Q^d=Consumer Demand

D=Demand Function

P=Price

Y=Aggregate Income

Likewise, more sales internationally leads to greater investment in regions based on the need to maintain an appropriate supply and have a positive return to investors. As products are in higher demand, better known, more sales are generated there will be improved need for more investment to fulfill growing demand. 

It is important to note that we do not live in a closed economy and therefore increased investment will need to inflow back into the economy by drawing back foreign investment to raise both consumption and investment at the same time.

GDP=Y=C+I+G+NX

Y=Output

C=Consumption

I=Investment

G=Government Spending

NX=Exports/Imports

The American economy continues to integrate globally and local businesses are under increasing pressure to improve and adapt their marketing strategies to reach new international populations to stay competitive. Enhancing international brand recognition leads to net gains for both the local economy and local businesses. The location where a product is manufactured integrally ties with the producers brand image. Accurate assessment of market needs through proper forecasting, product development and marketing penetration helps the economy grow through improved product demand and better recognition.

While companies continue to explore new marketing methods that raise their market positions, local governments don't often think about how their cities help or hinder local businesses in their marketing efforts. Marketing is seen as something left to the private sector and is not part of public concern. This is a mistake as the brand of the company and the locality enhance or detract from each other in ways that influence exports and future investments.

Thriving areas are known international for exceptional products and create international investment interest. For example, an investor seeking to invest capital into self-driving cars would first think of Detroit or an investor thinking of putting money into biotechnology would recall an image of San Diego. Brands have value in the eyes of large investment firms which makes them an attractive focal point for investment among the many different alternatives.

Likewise, raising the brand image helps create greater exposure for local businesses in a way that improves sales. While this may not seem important, it can have an exponential effect on local investment as well as the end consumer's purchase choices. Improved product demand often leads to greater investment interest which helps fuel economic growth.

Enhanced international brands are known for their products/services that improves its global appeal and opens new markets. While governments and companies might focus on slightly different strategies they are fused into a single image of the product in consumer's minds. The consumer sees the product and its location as a signal for its total value.

Marketing on a governmental scale rests on the ability to discover trends and create their brand images around market needs. Government becomes a collector of information and can likewise engage in data analysis in a way that furthers long-term development decisions. Where businesses focus on 5-year plans, governments she think a couple decades to some point in the future.

Brand and Economic Development: The brand of each area should be focused on those key attributes that lead to economic growth. Brands are defined by the skills and the abilities of the companies in the area in a way that creates a brand image that enhances the market position of local businesses.

International Marketing: We no longer live in a domestic world and advertising location branding as well as advertising of products/services should adapt to new market realities. There will need be more sophistication in reaching different peoples, cultures and countries..

Macro Trending and Big Data: Marketing in multiple international locations also means that companies need to crunch data. Sophistication of market analysis techniques and technology will grow to find both individual and large market trends that help companies improve their current marketing practices.

Online Marketing: Because international marketing is difficult, expensive and clunky in traditional formats online marketing will continue to grow to meet emerging growth in mobile technology and Internet access. Newer methods of expanding channels and reach will make the world seem like a seamless market but with cultural and legal variations.

 Branding Contributes to Economic Development:

International marketing raises the output and GDP of nations through the development of internationally competitive companies (Low and Dang, 2012). As firms develop products with the greatest market appeal, they naturally generate more wealth for local stakeholders. International market relies on understanding the needs of consumers and promote their products/services for the highest level of market penetration. 

Market penetration comes through using consumers as a guide in a way that frames needed development that pushes the local economy to fit within gaps of market demand. Market branding uses the market as a guide, focusing on international markets during development, branding around core abilities, and using data to make accurate market projections. 

The alignment of corporate development to market needs is a complex but important aspect of developing successful businesses. Macro-marketing is related to marking systems, marketing systems impact on society, and society's influence on marketing systems (Hunt, 1977). It is not possible to effectively sell products unless companies are willing to interact and learn from high levels of consumer analysis.

Companies in partnership with governments mutually create the brand of the area and its impact across the spectrum. A strong brand is, “distinctive by its positioning relative to the competition, and by its personality, which comprises a unique combination of functional attributes and symbolic values” (Kavarvztiz, 2004, p. 65). The brand image sums up the region in the consumers mind as a place of business and lifestyle that serves to attract investment, increase purchases, and improved labor.

Economic branding is important for drawing new investment and development. Exposure creates market exposure that attracts international interest in investment and development. The name of the city must be known globally as a place of quality outputs and solid returns on investment. Cities with brand recognition are recalled as places to visit and conduct business. 

When brand associations (images and symbols) are connected together into a seamless brand image customers are more willing to pay for products and services (Sonnier & Ainslie, 2011). Raising value is associated with connecting together the various images, symbols, impressions, and meanings to develop a conception of the whole product, service, or area can improve overall sales through higher value orientation.

On the flip side, investors seeking lucrative investment opportunities often recall in memory known for their ability to produce the products they want to invest in. As they seek out potential companies it helps them narrow down their search to a specific locality. This is where a strong online presence becomes important as it draws interest from interested parties and gives them a focal point. 

A simple brand has many facets that create brand equity. Brand equity is the value of the brand in terms of customer perceptions of loyalty, quality, association, image and awareness (Yoo,  et. al., 2000). Consumers that mentally recall a specific brand are more motivated to purchase than those that lack a mental framework often associated with generic products. 

Brand equity relies heavily on the activities of the company and their coordination with regional stakeholders and governments to create global strategies. Global marketing activities need a solid strategy to help them reach global customers through standardization and integration (Cavusgil, et. al 2004). Success in this arena means understanding corporate internal processes and capabilities and developing a way to reflect the new strategy. 

Teece et. al. (1997) defines these internal capabilities as the firm’s ability to integrate, build, and reconfigure competencies (internal and external) to address an ever adjusting market. Companies within clusters interact while adjusting to new processes against the information they obtain from their competitors in the form of a feedback loop. The more successfully they can meet market needs and follow an appropriate strategy the faster they adapt. 

Market analysis provides opportunities to understand what products companies should manufacture. To know which products are likely to have the widest market appeal and higher rates of profits that translates into higher wages requires market forecast. Market forecast is a method of analysis that tries to predict market trends for current decisions (Pilinkienų, 2008). 

Successful entrepreneurial activities and organizational success is fostered through better market understanding.  This includes the internal abilities of the company, the task environment, and the global market (Murphy, 2008). A proper environmental scan can encourage futures thinking, systems practice, scenario narratives and risk assessment that help companies meet their environmental challenges (Clemens, 2009).

Strategy can than be analyzed, balanced and drawn from a proper scan. For example, the hotel industry scans their environment to a greater extent when they experience change, a dynamic environment, and complexity in the task allocation (Jorgaratnam & Wong, 2009). Market scanning leads to better services for their customers and in turn leads to better experiences and repeat business. The value and profitability of the organization then rises.

The more companies focus on the needs of the international market the better they will be in the long run. Research by Zhou et. al. (2012) found that businesses that focus their effort on international marketing grew faster and reduced risks. "What an organization knows at its birth will determine what it searches for, what it experiences, and how it interprets what it encounters” (Huber, 1991, p. 91). Setting the right vantage point from inception can impact how the firm adapts to larger markets and the paths  of decisions. 

Innovation and Forecasting:

Clustered companies have the advantage of constantly adjusting to each other to create higher levels of innovation that lead to growth. A study of 154 Thailand Jewelry exporters discovered that effectiveness was based on the factors of executive global vision, entrepreneurial culture, technology advancement and competitive relationship and these were moderated by technology adaptation and international experience (Akkrawimut, et. al., 2011). 

Companies should create a proper vision of the market need comparing internal and external research and align their culture and technology to achieve those goals. Developing a proper approach to satisfying their customers in a genuine manner will provide a sense of direction that often leads to greater fruitful activities.

Furthermore, research by Ozsomer and Altaras (2008) shows that the global marketplace requires more complex theoretical lenses to understand the development of brand identity in a way that will sell internationally. Products and services must be designed with global consumers preferences in mind. As a global culture develops so must the products to match its needs.

New products transgress through a series of steps to ensure they are financially viable. The idea is generated, they are screened to find the best ones, analyzed for potential, developed, tested, and then finally sold (Finch, 2012). Yet all of these states rely on understanding the market and their customers. Greater use of the Internet is creating new stores of data that tells stories of consumer needs.

Forecasting can be conducted by the businesses themselves, business associations or government entities. The information is then used to determine where further investment is needed or new products would be advantageous. Bails and Peppers (1993), believe that steps to accurate forecasting should include a level of picking the right analytic methods to ensure that assessments are accurate. 

Data on such a wide scale requires greater analytic ability not adequately reflected in the skills market.  Research on the data at Dow Chemical shows that it can better project the market, give earlier warning signs of problems for correction, better purchasing of cost-effective materials, and better staffing (Philinkiene, 2008). Big data that collects the right kind of information affords opportunities that discovers new trends for better alignment. 

A deficiency in market research and technological capabilities to collect and analyze data can lead to risks of failure (Craig and Douglas, 2001).  Firms will need to understand how to collect data, analyze it and put it to strong use for growth. At times it is fostered through the use of open information, clustered databases, and better software analysis tools. Using a combination of tools is beneficial for associations, local governments, large business entities.

 A survey of over 200 firms discovered that relevant data based upon breadth, strategy fit, and cause & effect helped firms reach higher performance (Homburg, et. al., 2012). Proper data offered opportunities to find targets for differentiated markets in highly complex and versatile markets. Data should be useful to management and encourage higher strategic thinking. The depth of the data obtained is based upon the depth of the market. Slow moving firms in stable markets need less market analysis to make proper choices.

Useful information trumps having a mountain of information. Having lots of information is useless unless it is funneled into something with practical utility. According to Setia, et. al. (2013) the type of useful information should be pertinent and useful to match services to the local and global markets. They indicate that useful information has the following characteristics:

1.) Completeness that provides enough useful information for decision making

2.) Accuracy of the information.

3.) Format that presents the information for useful purposes.

4.) Currency of the information.

People naturally make result conclusions and use information to better their company's financial situation. When marketing and export managers have cultural intelligence with the localities in which they are exporting it can have an impact on internal strategy (Magnusson, et. al., 2013). Export driving companies have the proper skills to ensure that marketing strategies are interpreting the data with the proper cultural abilities to enhance the effectiveness of efforts. 

Innovation using data is about thinking in new ways. A far majority of managers base their marketing channels on previous experience and personal preference but do not analyze which methods are likely to produce the most customer sales (Karamehmedovic & Bredmar, 2013). Knowing when to use a single ground based marketing method that puts products in front of customers, other channels such as virtual marketing, or a combination of methods can be advantageous for higher sales (Porter, 2001). Each product will have methods that are unique to them but can be displayed for public consumption. 

Using the market as a guide requires more than simply understanding basic trends. Those regions that can tie together businesses of shared competencies and base competency development on large market trends are likely to be more successful than those that can not. Helping companies focus on international markets and putting pressure on political powers to make decisions based upon the actual needs of their local populations requires a level of forecasting. Forecasting requires the proper analysis and use of data to draw meaningful conclusions. Regions may provide basic competencies and welcome environments for business development but each individual business will need to develop their own market based products/services. The better business (on a regional level) can fulfill market needs the greater the expansion and growth of the area. 

Local Brands Encourage International Investment

Quality brands can raise awareness of local investment opportunities. Consumers responded to location of origin perceptions positively with increased purchases that led to increased economic growth in these areas.  A study of 30 source and 34 host countries between 2005 and 2006 discovered that an increase of 27% in foreign direct investment occurred as a result of a 1% increase in quality perception of intangibles (Kalamova & Konrad, 2010).

If governments want to improve their economic position by attracting new investments into the region they will need to move beyond thinking exclusively about price and include the need to create quality brands. When brands are strong they move beyond their specific purpose and become tied to locations and the overall manufacturing process that sparks investment interest.

The knowledge-capital model sheds light on the ideas that local production is often based in the skills that develop around employment opportunities. According to the study, the most relevant factors that encourage investment are perceptions of products, social and economic environments and culture. As areas became known positively for such attributes they improved their sales prospects.

One of the reasons why this happens is that consumers use heuristics when making decisions about whether or not to purchase particular products. Once they start down a certain path of thinking or have a specific impression it can be difficult for them to think critically. Some locations have the impression that their products are superior. Selection rates are likely to increase as consumers weigh and balance price and quality.

For business managers this makes quality perceptions an important part of the business plan. While quality and price improve based on the quality producers within the same area there are additional benefits for actively promoting quality outputs. As quality rises so does the value and potential profitability of the company through increase market trust.

Branding also leads to future investment as potential investors ponder where and how to invest within certain high growth markets that offer the highest potential for investment return. They will naturally select regions that have existing businesses successfully competing within the market because risks are lower. Improved investment portfolios come with the added advantage of economic growth and prosperity within the region. This investment also leads to robust innovation, production and cluster.

Global Reach and Online Marketing:

Understanding market demand and how this can be woven into marketing strategies that effectively reach target customers is beneficial for future growth. The process of communicating and connecting with potential customers is so important that businesses cannot survive long without a constant influx of customer driven revenue. The marketing process should focus on those demographics that are most likely to purchase while providing positive communication messages that raise the global appeal of the products/services.

Creating global reach requires moving beyond traditional marketing techniques and into the virtual world that has the ability to communicate and conduct commerce across the globe. Online marketing techniques are constantly adapting and gaining strength as a significant avenue of improving both the quality and quantity of customers ready to purchase products. It is one of the only mediums that can effectively function in a 24/7 integrated world.

Online marketing is growing at a rapid pace. It is believed that online advertising revenue will increase from $15 billion to $24 billion by 2016 (eMarketing, 2012). The trend is based in necessity as more and more of the general population obtains access to the Internet and becomes more comfortable with online purchases. Where companies are located will be less of a factor than the offering and time table for delivery.

Online marketing is one of the most cost effective methods for reaching domestic and international customers. Enhancing effective Internet tools that accurately reach interested customers and market directly to them without the large marketing waste of the Industrial Age mass marketing is important.  Search terms, page rank, channels, distribution, mix, SEO, websites, etc... are matched with theory to create effective campaigns that continue to push the theoretical envelop.

According to World Internet Stats in 2012 there was approximately 2.4 billion Internet users with a market penetration of 34.3% (Internet Users in the World, 2012). Growth between 2000 and 2012 was 566% showing the online market is still developing at lightning speed. The marketing potential and reach will continue to grow and American companies will need to master if if the next few decades of prosperity are to be sought.

At some point in the future markets will be integrated across global networks where nearly every person has access to e-commerce and a mountain of information. When this occurs companies will be able to create brand recognition even with small operations as long as they have effective marketing campaigns to harness their markets.

Online marketing is quickly becoming the dominant form of revenue and sales creating shifts in traditional business structure. The trend doesn't appear to be slowing and business will need to start with the basics and make adjustments toward more effective marketing methodologies. This can only come from the fostering of academic, business, and social knowledge to take internet marketing to new levels.

American businesses have opportunities to create a much larger reach for their products and services by embracing global marketing utilizing the newest marketing methods. Matched with distribution systems and effective government the marketing messages can be converted to tangible sales that lead to economic expansion. 

There will be significant effort in trying to bridge cultural gaps in the process of reaching customers. A single marketing message may not work and different approaches tied to the culture of the people in the market are important. As technology improves the ability to adjust marketing to different countries and localities will make a difference. 

Marketing has become more of a science with significant artistic skill embedded within it. Behavioral marketing that taps consumers online behavior and choices is providing advertisers better focus for their marketing messages. Small businesses are able to better reach their niche customers through behavioral marketing while larger companies find advantages with mass marketing based on broader customer profiles (Chen and Stallaert, 2014).

One of the biggest advantage large corporations will have will be the use of leading edge marketing methods and economies of scale when negotiating marketing tactics. The important act of effective marketing and converting willing customers into paying customers will not be exclusive to large businesses alone in the virtual world.

Online marketing challenges the assumptions of the marketing industry. Media and new technologies force companies to look at marketing through an engineering methodology that relies on database research methods (Peltier, et. al. 2006). The database becomes a collection of information used to formulate and enhance marketing strategies.

These databases should continue to collect information as it becomes available through organic methods or through active loading. When information becomes pooled in various places throughout the net, institutions, and businesses it contains within it information for business improvement. Using such databases and big data to make alignment to customer needs is beneficial for corporate growth.

The shifting nature of marketing has forced executives to change their strategies to focus closely on methods that utilize proper media mix to reach niche groups of motivated customers (Valos, et. al., 2010). This will require research into behavioral and attitudinal data of core consumers. Understanding how marketing knowledge can be hedged to create greater reach saves on expenditures while raising effectiveness.

The future of marketing is online and American companies can learn to master and capitalize on virtual marketing in a way that enhances total image of the region and their company in a way that improves spill over effects. Just a few methods have been provided here to give you a glimpse of how how the process works. Global reach requires businesses to understand the nature of international culture, the method of reaching potential customers, and ensure that their products are able to navigate cultural lenses. The process of developing global brands will need a more sophisticated approach to developing marketing campaigns that work seamlessly across multiple borders. 

The International Marketing Process:

International marketing is becoming increasing important and will likely be the main way in which people engage in commerce over the next thirty years. The world will choose between greater connection or protecting their sovereignty. Despite this choice, there will be more coordination because money is to be made in the international market.

As with each new market comes new cultures and those cultures also create different ways of looking at products and services. Any company that wants to succeed in the global market must have global awareness and be able to interact with those cultures in a way that resonates with their core customer.

Before moving into a new market all companies should utilize at least a basic process of determining the best methods of reaching their target market. Failure to not do so could cost corporations a lot of investment money.

1. Conduct marketing research.

2. Determine the goals of communication.

3. Determine effective messages for the target market.

4. Determine the best media.

5. Evaluate and allocate necessary resources.

6. Complete the campaign.

7. Evaluate the campaigns success or failures.

Macro Trending and Big Data: 

In Alan Greenspan's book The Map and the Territory he discussed the need to make better projections of the business market to maximize strategic development. His arguments are that big data is here to stay, the understanding of human nature is closer, and that debt will need reduction to spur future growth. To further his arguments, the cheapest product government can offer is guidance and data to reduce economic uncertainty. Investments in the economy will need to come primarily through business and individual performance to encourage maximum sustainable gains. Transformational changes are needed to encourage a higher interconnected platform that draws stakeholders into a shared vision of economic participation. 

Analysis of market trends are necessary for local business leaders and government agencies to ensure that they are investing money in the right places that foster the highest regional growth. Analysis methods can be quite complex and rely on larger amounts of data than in the past. A study found that the use of multiple Bayesian models with time-varying data produced higher levels of accuracy (Hoogerheide, et. al., 2010). As new data and information becomes available the Bayesian model can incorporate that knowledge to make a better predictions.  

The point being that while specific methods can be helpful and these can be found through a little resources it is the relevance of the measurements and the accuracy of those methods either in singular usage or in multiple usage. Methods of projection and change will come and go but the idea of using data to analyze trends will not likely change. At times it is better to use a single measure while at other times it makes more sense to use a battery of methods. 

A battery of methods affords the opportunity to see problems from various perspectives and analysis. However, as the complexity rises so does the amount of data and increasing complexity making such predictions difficult for government and business administrators. Despite these flaws the general approach of using a battery of measurements helps when a single measurement may be inaccurate or misleading. 

Data relies heavily on the way in which we interpret and use it. Developing measures based upon the varying stakeholders within a hub or within a nation will help in rounding out the information and lowering the probability that numbers become an illusion that leads to improper strategic decisions. Just because a government official or entity says the numbers are improving doesn't mean it is so unless there are enough corresponding measurements to create the trend. 

It is possible to gather large amounts of data and use sophisticated tools to analyse trends for greater market growth. The Internet use on a global scale as led to so much data that many companies are not using them to their fullest extent. Governments are data generators, collectors and providers. Helping the government to be better at data collection and analysis provides greater direction to their administrative activities. Big data will provide the best chance of getting on top of market trends and making choices that lead to greater economic gain within their regions. 

Measures of Successful Economic Branding:

Proper use of big data, market trends and expanded channels creates a successful economic brand. The "made in" image creates a stereotype between consumers and business that creates a picture of the products and its value to consumers on the global market (Ali & Rehman, 2015). This image is created from multiple aspects of the economy that incorporates a variety of different aspects that reflect the local environment.

Countries are engaging more and more in branding opportunities because it can often draw additional investment that leads to economic growth (Anhold & Simon, 2003). As nations move into an integrated global, market stakeholders must think more about collaboration and working together to measure performance using macro-data and putting together better brands.

It is possible to use six dimensions of the local economy in measuring the quality of a brand image (Anholt-GfK Nation Brands Index, 2017).

-Exports: Products and services that allow consumers to buy or avoid local production.
-Governance: Belief and trust in government related to poverty, justice, democracy, and environment.

-Culture and Heritage: The global image of the locations heritage including arts, crafts, literature, sports, music, drama and film.

-People: The image of the people and their education, competence, friendliness and openness.

-Tourism: The local natural and man-made attractions that draw people to the area.

-Investment and Immigration: Through the lens of investors it is the value of the location for people to invest, get educated, spend money, start businesses, and live in the area.

Expanding Global Marketing Reach with Shared Business-Government Messages:

The international business environment is competitive and Americans are not doing as well as we once thought as they continue to lose against growing economies like China. Cities push to encourage companies invest in their regions through tax and other incentives but sometimes don't maximize the benefits of raising exposure to their area through better marketing strategies. Governments that focus on the infrastructure, lifestyles, and benefits of investing in their economies can help businesses understand that they have a significant stake in ensuring their economy is growing and the right type of investment and skills are available. By working in a collaborative manner businesses can further expand the reach and depth of their marketing messages in ways that help them and their environment be more competitive.

Economic Marketing by Governments and Organizations

Governments and organizations like Downtown Development Authorities, and other business organizations, often engage in general marketing campaigns to raise tourism, lifestyle, and business development. Local businesses find these methods beneficial for pooling the advantages of marketing for all businesses in the area. Focusing on infrastructure, lifestyle, and other benefits of living and working within the region can draw future business and needed skilled labor that help existing businesses thrive.

Economic Marketing by Companies

Companies engage in marketing to raise the demand for their products and encourage sales. Their advertising campaigns contain, not only messages about the product, but also its value. In a cluster, some of these messages have shared meaning among the many different suppliers and companies that them. Companies often focus on the utility, feelings and benefits of their particular products and the overall value of the company itself.

Shared Marketing Messages

The brand and its place are often integrally tied together in a value proposition. Market messages from of participating entities (government and business) can share similarities in location and values. For example, an advertisement highlighting steel gates can also include images of the location in which these gates are made and their overall value to consumer. It is the shared information of where the product is produced and the environment in which it is made that strengthens the overall message.

Expanded Reach and Benefits of Coordinated Marketing

Coordinated branding  relies on having similar messages repeated in multiple ways and channels until a lasting image is formed in the customer's minds. Each company promoting its products should contain some information about the location in which the product is built. The government, or business entity (i.e. business organizations) should furthermore drive home the messages about the value of the business environment, types of infrastructure, lifestyle and the type of skills the area seeks to attract. Together, these shared and separate messages create greater reach of marketing for both the companies as well as the economic hub as a whole.

Expanding international reach of marketing occurs when we expand the channels through shared marketing messages. While companies focus on specific brand values they can include elements that raise awareness of the entire cluster and area. The advantages of greater exposure impact their suppliers and other businesses within the cluster together. There is incentive for governments, businesses, and local stakeholders to engaged in shared marketing messages that impact the development and access to skilled labor in the area.

Conclusion:

The world economy is increasing connected and integrated. New methods of reaching and understanding those populations is important. Governments and businesses have a stake in ensure they can continue to manufacture their products and raise their global reach in a way that improves both the business's bottom line and the local economy.

While there may be essential differences between government and business marketing they do relate together. Government may market its job opportunities, infrastructure, lifestyles, universities, public transportation,and pro-entrepreneurship environment. Business is more focused on their perceived product quality and value. However, government attracts the main building blocks needed by the economy while businesses use those blocks to improve their businesses.

In the mind of the consumer, there is a connection between the products of an area and the area itself. The area and its products integrate into a single mental concept that leads to greater sales and product conversion rates. Furthermore, investors are increasingly likely to recall and place their money into places with solid brand reputations. Consumers buy products based on the way they see both the product and the area in which they represent.

To understand appropriate government focus researchers will need to collect lots of data and be able to project the future of the market. Governments should focus on long term trends such as the use of a particular commodity over the next 20+ years while business focus may be a much smaller production based on the need for a product.

One of the most effective ways to reach people across the globe in a way that is cost effective is to build better online brand recognition. The creation of stronger partnerships between government and business in developing a coordinated brand strategy is helpful. The integration of key regional benefits into the actual brand images themselves also helps tie them to the area while improving the overall investment and level of skilled capital in the area.

Service and Supply Chain

New Paradigms of Supply Chain Development

The Supply Chain Economy determines the extent companies can feasibly create new products that lead to greater innovation and output. This source of innovation is often ignored in traditional innovation measurements that are based on patent filings. According to a paper in a working paper by Mercedes Delgado and Karen G. Mills from MIT and the Harvard School of Business by changing the framework that focuses on the suppliers of goods and services that support business and government we can realize new levels of innovation by providing access to labor, buyers and capital (Mills & Delgado, 2018).

Re-categorizing the economy to supply chain from business-to-consumers a different picture of innovation emerges. Supply chain industries are unique form of development that results in economic competitiveness and high paying job growth in a sector that employees 37% of the labor market (Delgado & Mills, 2016).

Why might this be important? Government numbers are often outdated and overlook important sources of new development. When thinking of economic clusters, the supply chain becomes an essential part of how these industries share services and resources. Categorizing them appropriately leads to new ways of seeing and enhancing real value that turns into economic growth.

Appropriately measuring the supply chain leads to policy improvements that includes giving them greater access to labor, buyers and capital:

-Labor: Supply chain traded services earn more income and rely more heavily on STEM knowledge than business-to-consumer traded services. As companies work together they lead to greater development of a stronger talent pool.

-Access to Buyers: Clustering businesses together creates strong buyer-supplier networks that can lead to mutual development. Creating collaboration between industries, government and supportive institutions (i.e. higher education) can transform into regional development.

-Access to Capital: Ensuring that companies have access to financial capital to reduce shocks and speed up development can lead to growth. The same methodology may be applied to other forms of capital needed by other industries within the cluster.

The authors indicated that partnerships with government, business, and other stakeholders leads to greater innovation, growth, and higher paying jobs. The changing of the metrics opens up a new paradigm to see the benefits of developing the supply chain network for advance manufacturing and growth. Continuous adjustment and development creates a more competitive environment where cutting edge products and services penetrate global markets.

What the authors did not specifically state is that by creating a more competitive environment that improves the innovative capacity of many businesses, it will make a difference in profit margins and manufacturing capacity within the U.S. While low-cost labor input countries are limited on technology, the U.S. may be able to draw back manufacturing with better manufacturing environment that makes new manufacturing industries profitable again. Such viewpoints should be part of the government tools to regenerate a leading production economy.

Managing the Complex Web of Global Subsidiaries

Global firms often work with a number or partners in order to move their products into multiple markets. Global firms use subsidiaries to help them promote and distribute their products. Research by Homburg, et. al. (2012) seeks to categorize the varying types of firms available on the market to help multinational organizations do a better job at managing across countries, cultures, and markets.  Their research finds five different types of firms that have their own benefits and detractors.

Global firms attempt to maintain competitiveness by using subsidiaries to create effective international reach. These firms are more aligned with regional and local differences in market characteristics. Problems result when global marketing loses a level of efficiency and effectiveness in the development of methods of managing these multiple distribution fingers. 

Drawing from configuration theory of organizations it is possible to use subsidiary archetypes to understand the varying nature of firms.  The majority of marketing researchers have advocated for additional customization but this can create difficulties in global management and in turn impact sales.  Global marketing requires a different way of viewing subsidiary management. 

It is possible that moving beyond subsidiary characteristics to find value-added functions helps to create efficient archetypes. These archetypes enhance the effectiveness of decision-makers to make strategic considerations due to their ability to conceptualize complex information. Knowing how each type of firm can help in the branding and distribution of products is helpful in developing efficiencies.

The research used three steps to categorize firms:

-Conceptual Domains: Value-added scope, influence, and competence are common.

-Core Domain Constructions: Structure, subsidiary size, value-added scope, strategy, strategic influence, strategic competence, strategic importance, etc…

-Cluster Descriptive Variables: Performance, environment, communication, coordination, etc…

In this study they used surveys and random samples of multinational companies across various service sectors. They were able to categorize a variety of different market clusters to help define each type of company. Knowing cluster characteristics should encourage managers to think more strategically about which types of firms they are using and why they are using them for global and regional marketing. They are as follows:

Saturated Administrators:  These are the larger firms that have done well in the beginning of the globalization process. They are moderately effective but maintain name brand and strong purchasing power. They have difficulty effectively making their way into local markets and are relied on by a majority of companies seeking a global presence. 

Universal Champs: These are high performing firms that focus on certain industries in which they can maximize profits. They are seen as effective and seem to do well with high value added products/services.  Due to the nature of the customers they seek wealthier nations where the economic system is stable and maintain purchasing power. 

Important Dependents:  They are strategically important but small. They exist in a number of Asian countries and are relatively passive but have high value-added services. They provide local access to markets other firms may have a hard time reaching. 

Promising Aspirants:  These are small firms that are self-sufficient and work out of an entrepreneurial approach. They are beneficial in terms of their ability to work in fast growing markets that require cognitive flexibility. They offer generally low value-added services but work well in risky markets.

Flexible Implementers:  Small and young clusters. Very few value added activities with low influence and low competence. They move products and services along to local markets with high standardization.

Service Management and Customer Loyalty:

Retention in a global world where endless possible alternatives are present makes all the difference in long-term success. Marketing raises interest and expectations but it is up to the company to deliver on those implied marketing promises to retain customers for future purchases. Sivakumar, et. al. (2014) found that when companies effectively raise the positive experiences of customers they improve upon their service delivery results. This improvement raises retention thereby reducing the cost associated with re-marketing to customers. 

Business have value propositions and those value propositions are weighed against customer perspectives to create the service concept (Johnston & Clark, 2008). To develop their customer retention rates and marketing concepts organizations should understand their root value propositions that lead into the marketing concept. Through working with stakeholders companies can focus on these propositions and raise their perceptual value (Anderson, et. al. 2006). When value is high customers feel more satisfied with their purchases and are easier to retain for future business opportunities. 

There is often great value in retaining customers. Companies spend nearly double the amount of their budgets on new customer acquisition while spending half that amount retaining existing customers (Forrester Research, 2008). As a general rule, the cost of gaining new customers is about five times the cost of retaining current customers (Strauss, et. al. 2006).  The existing customers have long tail value and should receive greater emphasis in future strategic considerations. 

Keeping customers buying products can make or break a business. Customers come in contact with a an army of products and services on any given day. Converting one time purchases into life-long customers will define those companies that will be around and those that will be casualties of globalization.

The value of future business can be described by the concept called customer equity. Customer equity is the total impressions of products, services, the company, its employees, etc... that raise the value of a future purchasing decision. Those companies that can invest and raise the customer equity perception also find that their revenue and shareholder value also rises (Srinivasan & Hanssens, 2009). 

Customer perception can be worth a lot. A review of 2,000 companies over ten years it was found that an increase of 10% in customer equity also raised shareholder value 15.5% (1.55 ratio) (Shultze, et. al., 2012). Positive impressions of a business and its products becomes increasingly important in international businesses where customers are calculating their options.

One way to understand satisfaction is through Prospect Theory that explains how customers use a mental accounting system or reference point to determine the value of the service to them (Kahneman and Tversky, 1979). When they receive more then their expectations they will be satisfied. When they receive less than their expectations they will be disappointed. 

 Customers often follow a physical and mental path to a purchase decision that include searches, click ads, banners, email, news media, television, etc. A final purchase decision occurs based upon the previous choices the customer made that led them to the company's website. 

As people browse the internet they are actively searching information for needs fulfillment. Customers will be provided many different options with each click and action. Customers that visit a webpage are motivated and understanding these motivations and what led to the purchase decision will have parrells to the implied service agreements the customer has for retention.

There is a natural bridge between the physical and virtual worlds. Customers are most likely to make purchases when both effort and cognitive costs are low. Effort costs are related to the amount of effort it takes for a person to find and purchase a product (Shugan, 1980). Cognitive costs are the amount of mental effort they must expend to find, understand, and make a purchase

(Johnson, et. al., 2003).

When customers have a convenient experience, are able to get products they want and find some level of social value in their interactions within online companies they can create satisfaction (Christodoulides & Michaelidou, 2011). This satisfaction in turn contributes to e-loyalty. That e-loyalty can be most effective in retaining customers for future life-time purchases creating more revenue and a stronger customer base. It is these customers that encourage others to make purchases and contribute to social reviews that raise public perception.

The needs of the customers should be a central focal point of organizational efforts. Service helps raise customer perception and retention which lowers costs of future marketing activities. Companies that integrate portions of customer service with sales skills can develop higher revenue streams and greater customer satisfaction even after calculating for efficiency (Jasmand, et. al. 2012). Customers want products that help solve problems or create an identity. Sales can encourage a purchase, customer service can maintain satisfaction, but using both can increase profits and lower customer loss to competitors. Companies should seek to sell the product but also retain the customer for future sales in a highly competitive global environment.

When higher levels of marketing activity occur improvements in the economic activity of an area can be realized (Sirgy, et. al., 2012). Marketing activity can be defined as the totality of marketing expenditures throughout society that increase awareness of products and services that speed up economic activity (Wilkie and Moore, 2007). In hubs it is the collective effort of many small, medium, and large businesses that speed up economic activity within an area. Each firm has the responsibility to help society and themselves by using marketing effectively and efficiently to inform society of their offerings. This in turn creates employment and economic opportunities within an area.

Supply Chain and Product/Service Delivery:

International supply chain management is an important system that has a direct impact on customer satisfaction and the ability of a company to expand. With strong global management practices organizations find themselves penetrating new markets, lowering distribution costs, and capitalizing on new revenue streams. A company's competitive position is directly related to its ability to developing  quality supply chain networks (Yeung, 2008). Strong supply chains are adaptable, quick, global, and cost efficient.

A distribution channel is defined as, “an organized network (system) of agencies and insti­tutions which, in combination, perform all the functions required to link produc­ers with end customers to accomplish the marketing task” (American Marketing Association, 2013). While supply chain management can be defined as “cross functional integration within the firm and across the network of firms that comprise the supply chain” (Lambert, 2004). 

The internet affords the opportunity to conduct commerce world wide in ways that were not possible 20 years ago.  Global supply chains allow products to move quickly from one continent to another. As virtual business models develop and supply chains adjust for these businesses it will be important to continually develop adaptable and efficient product distribution for both bulk and small shipments. 

Up until modern times most shipments were large distribution processes where products entered a country in bulk and then were shipped to various stores. Larger companies could penetrate markets while smaller companies had a difficult time finding distribution networks. As online businesses develop and grow there will be increasing need for small batch shipments. 

Smaller shipments mean businesses will have direct access to their customers. The customer will purchase online and the product will be shipped along the supply chain their home. This ability to ship products without having to marry with a larger business will fundamentally transform innovation in regional economies. 

Direct access will allow small innovative businesses to develop products and compete against larger companies. What is lost in economies of scale in the distribution process is gained in newer and higher value products customers are willing to pay more for. Innovation will be more rewarded in the market where small business can gain access to new regions.

Successful innovative products will eventually move from small batch production to large manufacturing processes that have economies of scale. The supply chain will determine available resources to mass produce those products. Businesses that effective use the veins of distribution to their advantage will find themselves growing through competitive market positions.

Market position can be enhanced to be more effective based upon their ability to distribute products that offer both horizontal and vertical expansion (Wu, et. al. 2010). Products developed through increased market innovation found within clusters must be sold on the market to realize new capital. Supply chains can be improved to allow for efficiencies in distributing smaller or large batch productions to multiple intercontinental locations.

Supply chains should not only be efficient but also adaptive. They should change and evolve to continue to meet customers needs and create greater versatility in the global market. According to Ivanov (2009) efficient and adaptable networks have the following characteristics: 

1. Collaboration along the value chain to acquire raw materials, convert materials to new products, and deliver final products. 

2.  Application of modern concepts and technologies to create responsive, flexible, cost-effective, sustainable, agile, and competitive networks that raise customer satisfaction and improve profitability. 

Supply chain improvement means creating better up streams and down streams in manufacturing and product distribution. Up steams generally move supplies to manufacturers while down streams deliver the products to customers. Individual companies and components of the supply chain can engage in opportunistic behaviors that reduce effective and efficient networks through asymmetry (Brown et al. 2000). 

By improving on the connections of elements and engaging in quality management, companies can develop higher performing systems that influence the success of the company (Soltani, et. al., 2011). Quality management is an important aspect of ensuring the system is running at the most efficient method possible. This often requires a systems thinking manager that can overview the system to improve efficiencies and ensure element collaboration for supply chain integration. 

Supply chain integration is a main source of competitive advantages based upon effective networked relationships (Gereffi, 1999). Each supply chain is a connection of different hubs, companies, and services. Enhancing the supply chain requires better collaboration, cooperation and understanding of different partners within the network (Kandemir, et. al, 2006).  This cooperation can occur through similarities in goals and technological enhancements.

When a company successful integrates Internet technology they often find higher pay offs than those who can't (Cagliano, et. al., 2005). According to a study conducted by Fatorachian, et. al. (2013) of 67 companies that integrated Internet technology discovered that the use of Internet technology improved upon supply chain integration, logistics and returns processes, order processes, procurement, planning synchronization, inventory control, overall production, and customer relationship management. 

Technology and proper management techniques can lead to wider supply chain integration that has an impact on the success of the business. Integrating beyond first tier suppliers offers faster productive development times, higher sales and strengthened quality (Kannan & Keah, 2010). Wider integration helps put first tier supplier information into appropriate context for more accurate decision making.

Improvement should be focused specifically on company goals and strategic advantages. The supply chain and its improvements should fit within the strategic goals and contain measurable units to help ensure that such goals are achieved (Kreipl & Pinedo, 2004). Change should further strategic objectives that are important to the organization such as cost, reach, delivery speed, or redundancy. This depends on the type of organization, its product, and its environment.

Companies are often limited by existing infrastructure of an area. Companies can create as many internal efficiencies as they can but are still limited by the quality of the ports, rails, planes, drones, etc... in an an area.  Business friendly cities enhance the reach of local businesses by ensuring their infrastructure and legal frameworks are enhancers to business needs. Cities that maintain strong import export corridors that shave costs for local businesses find themselves growing faster than other cities over time. Companies can improve upon their distribution by ensuring they integrate and create adaptable networks to distribution infrastructure.

Intellectual and Human Capital for Global Competitiveness

One of the goals of improving overall output that leads to greater GDP is to improve the productivity of labor. The firms productivity can often be defined as Y=F(K,L). Y is output, F is technology, K is capital, and L is labor. Improving the ability of labor to work productively in a global market leads to greater output by firms. 

To value labor we can use something called the Cobb-Douglas production function.

Thus improvements in labors capacity to produce products improves overall output and potentially profits of industries.

As a company we will want to create profit.

Profit=Revenue-Labor Cost - Capital Cost
 =PY-WL-RK

Investing in improving labor's international competitiveness based on the skills and knowledge needed to compete in a global world leads to reduced overall labor costs through increased productivity and innovation. 

Global Managers Foster Successful International Competitiveness:

Companies that desire to compete on a global scale must learn to develop intellectual abilities beyond the capacities of most domestic companies. Managers with global knowledge are a highly sought after commodity during this expansion process. American employees often lack international exposure due to limited travel and overseas assignments. Without this knowledge recruiting managers sometimes find that they must rely on immigrants and new comers to society to support their international operations. Consider research on what pressures are likely to push companies to expand internationally in the Journal of International Business Studies (Dastidar, 2009):

1. Companies with high technology and/or marketing based resources.

2. Small home markets with higher production capacity.

3. Managers with global knowledge and experience that can accelerate the process.

Global awareness and knowledge are necessary components to competitiveness and if businesses forgo learning or recruiting this knowledge they may not be aware of international opportunities or how to capitalize on them appropriately. Poor attempts to further overseas expansion investments could waste precious resources.

While businesses need technology, marketing, and higher production capacity to expand overseas they won't be able to effectively do it without proper guidance. Having the necessary resources and capacities is one thing but knowing how to do it is another. However, the major intellectual capital component is employees and managers with international business knowledge. They are the workers that experienced global operations, understand different market segments, and have a systematic way of handling far reaching operations.

Human Resource Practices that Promote Innovative Clusters

It has been said that people are the center of success for any organization. They build things, invent things, and sell things. Leaders rely on their highly skilled workers to keep their business growing in the right direction. Clusters are sources of innovation and it is necessary to recruit and attract the right kind of people for success. According to an article in the International Review of Management and Marketing Journal, Human resource practices can have a big impact on corporate success within a cluster setting (Doronina, et. al., 2016).

Human resource practices are important for innovative clusters as the essential soul of such systems is their high quality talent and technical "know how". Management of people within a cluster have two important aspects such as...

1. Defining and enacting business objectives.

2. Managing people within the cluster.

The first aspect applies to all types of businesses regardless of where they are located. The second aspect takes on considerable importance as we consider the nature of creativity and innovation needed to lead the market.

Human resource management entails hiring the right people and preparing them for the highest performance possible. Cluster oriented employees are high performers and typically have attained a significant amount of skill and knowledge. According to the study 85% of people have gained higher education degrees and 10% specialized skills.

Because skills are advanced, managers will often spend a considerable amount of time training and retraining employees to ensure they are up-to-date on job requirements. Advanced clusters that offer leading edge products, need specialized skills that can make those products. Higher education and training are a part of that process of product development and manufacturing.

Companies will also need to develop creative environments that offer opportunities to maximize idea generation and exploration. They may consider the use of new management techniques, environmental design, and corporate culture to encourage employee's creative juices to start flowing. High technology and innovative companies often seek to create stimulation rich environments that foster the mind as the greatest asset.

While many of the principles of strong human resource tactics make their way into clusters there is an increased need to attract and foster highly educated and innovative employees. High innovation employers will emphasize the recruitment of highly educated/skilled employees, continuously train them to work on leading edge products, and develop environments that enhance their thinking abilities. Creative and innovative environments use human resource practices designed to feed and enhance these environments that leads to greater intellectual capital within the company.

Creative Team Oriented Synergy Through Human Intellect:

Synergistic systems are based upon the innovative abilities of individuals to use resources to build off of each other to create economic growth. In the right environment good ideas develop and make their way to market positions. There is a symbiotic match between human intellect and the resources of the environment. Economic synergy exists where ideas generate marketing lead products and services that earn enough revenue to reinvest back into the local businesses.

People who are able to free think solutions to problems, experiment with new ideas, and use their critical thinking skills are more likely to have ground breaking ideas. Environments that require strict adherents to localized norms may not reach a critical threshold that allows innovation to make its way into the system. Ensuring the environment fosters the human intellect and its exploration of looming questions is important for growth. 

Each company has their own organizational and human resources strategies to develop intellectual capital. The fostering of better intellectual performance is beneficial in companies that rely heavily on mental muscle. Strategies should be oriented toward market solutions that result in overall organizational improvement. The developmental process should be catered to the unique attributes of the organization. 

Companies that want to foster can use inter or intra-organizational teams to explore ideas for analysis and development. The brainstorming process rooted in collaborative communication  leads to market breakthroughs (Parnes & Meadow, 1959). It is a process of making connections within one's mind and sharing those connections with others that eventually develops higher levels of problem solving.

When the process works well and something unique and beneficial is invented, such as a scientific breakthrough, that leads to market growth. Breakthroughs help capitalize on markets by reorienting interest to the discovery. Breakthroughs can be in any industry and help adjust activities toward market alignment. Invention is a process of pondering questions and seeking answers to those questions that create breakthroughs. 

Innovative changes include proposing new questions, developing new skills, creating technological advantages, or finding new ways of resolving problems (Comison-Zornoza, et. al., 2004). It comes through the way we think, adapt, build and implement viable options for higher levels of achievement. Innovation can be enhanced by developing inclusive and free thinking environments that respect individual opinions. 

Organizations can develop proper innovative teams to help put together individual employee contributions to the overall process of develop. Teams can be hybrid or nominal. Hybrid teams allow for focused nominal work while interacting with stakeholders (i.e. cluster partners) to develop new innovative approaches (Dew & Hearn, 2009.) These ideas are then analyzed and explored for mutually beneficial products and services among collaborating partners.   

Groups of small and diverse members use their vantage points and expertize to develop new products that solve problems  solve consumer problems (Nemeth, 1997). They use a process of ideation (brain storming) to develop new ideas and then evaluate those ideas for feasible success (Paletz and Schunn, 2010). These groups regular use an evaluation centered approach where a small number of ideas are brought forward, evaluated, and then used as a framework for comparing other ideas (Harvey & Kou, 2013).

Ideas should a.) be focused on quantity versus quality, b) seek unusual ideas, c) combination and improvement of ideas, d) not incorporate criticism of any idea (Osborn, 1953).  It is a process of free flowing connections among members. Initial ideas should not be rejected during the brain storming stage and members should be encouraged to bring forward as many as possible. This helps ensure that at a minimum the best paths are at least uncovered.

This is one of the reasons why the environment and the culture is so important in determining the innovative abilities of a company and the environment in which it exists. Top down control mechanisms destroy innovative spirit and create rigid structures that limit exploration. Flatter structures encourage interaction among the many members of the company to propose and implement solutions to existing problems. 

Teams are subject to both positive idea generation and information stifling behaviors (Nijstad & Stroebe, 2006). These behaviors are based on the environment and how the members of the team relate in order to generate solutions based upon members experiences and expertise. Companies working together should be mindful of the egalitarian approach to idea and solution generation. Companies should avoid developing corrosive cultures based in power structure that may damage the innovative process.

In the idea generation stage members scan their associated memories (SAM) to find new connections of information to solve problems (Raaijmaker & Shiffrin’s, 1981). This works through a scanning of long-term memory based in education, experience, and thoughts to find relevant information among categories and nodes of information (Collins & Loftus, 1975).  A single cue or problem can influence the semantic network activated and the type of information recalled (Brown et. al. 1998). The more semantic networks activated the more novel the ideas.

The long-term memory search is filtered through member's working memory. This working memory operates like a sketch pad that allows members to adjust and work with the information to highlight potential solutions (Baddeley, 1996).  The process of solution generation takes the long-term loop and moves it through the working-memory loop to adjust that information based upon learned problem-solve matrices. The strength of that working memory will determine how deeply concepts are analyzed.

The process of idea generation can be enhanced by putting together the ideas of more than one head and connecting them together into teams. Effective teams of innovative people can offer a wider idea generation and evaluation process based within a spectrum of knowledgeable histories. The formation of these teams will determine their capacity to develop consumable ideas through collective sharing and evaluation of ideas. 

Teams formed with cognitive variety creates high levels of innovation and development (Miron-Spektor, et. al., 2012). A study of 41 innovation groups within a military contractor found that the best recipe was 20-30% creative types, 10% detail-oriented types, 10-20% conformists. How their cognitive models and problem solving matrix work together changes the nature in which problems are solved. Holistic problem solving comes through multiple vantage points.

Finding solutions to difficult problems is often a result of the inability to formulate an understanding of that problem (Quinn, 1980). Discovering solutions to complex problems is the catalyst to synergistic development. The more difficult problems solved the more growth experienced. Some problems are small and related to products while others are large and related to the economic system itself. 

A problem is complex when it has lots of varying variables, a high degree of connectivity among the elements, and dynamic actions that regularly adjust the situation over time (Watson, 1976). People and teams are often limited by their bounded rationality (institutionalized vantage ponits), cognitive capacity and can rely on others to help break free of these limitations (Simon 1957). Framing the problem through its symptoms, understanding its core cause, and then seeking solutions helps in breaking down limitations and increase group decision making (Baer et. al, 2013).

The process of solving complex problems requires creative and critical thinking. A complex problem has to be broken down into its components while keeping the larger problem in mind. The process of critical thinking requires the necessity of recognition, analysis, evaluation, and finding alternatives (White, 2010). It an understanding of the issue by looking at the key components, comparing explanations, and reforming that problem with new information.  

Group decision making can lower the risk of bias but never completely remove that risk.

The types of risks investment managers make are related to strategy selection, social risks, policy risks, credit risks, economic risks, technology risks, interest rate fluctuation, operational risks, and contract risks (Shen, 2009; Zavadskas, et. al., 2010). Business decisions should try and minimize these risks as much as possible through developing proper team management and decision-making processes. 

Teams can enhance investment choices on selected new products, services or strategies. This includes problem recognition, information search, evaluation of alternatives and finally investment decisions (Shyng et. al, 2010). Mistakes in decision-making happen when their is (Kim & Ahan 1997):

1. Lack of time, knowledge and data.

2. Difficult to quantify attributes.

3. A single decision maker that has limited knowledge, expertise, information processing ability, and an uncertain environment.

4. Limited expertise among group decision makers.

It is possible to use proper groups and then a decision-making model to help reduce the chances of major investment and strategic blunders. Research by Wu , et. al. (2012) creates an analytical hierarchy process-group decision making model (IAHP-GDM) that works to complement group decision making for more accurate investment decisions. Their analysis found that decision making models can encourage more accurate decision making and thinking that lowers risks by systematically and methodologically moving through problems to evaluate their merits.

Me-conomics: Socialized Economic sustainability is one way to view synergy as a driver of growth within an organizational micro-economic system. The study delves into the economic development of organizations and how elements can interact through freedom of thought (innovation), employee motivation (effort), and employee satisfaction (stability) to develop higher levels of economic activity through perspective sharing within the workplace. The workplace is adjusted to market factors and continues to develop by drawing in employee effort. The more organizations develop their internal structures and collaborate with other firms the more development realized.   You may want to view the potential internal measurements HERE.

Synergy describes a process of creative energy where businesses enhance collective intelligence and continue to reach to higher levels of performance. It is the energy behind developing collective intelligence and projecting that intelligence into the market. Personal connections foster synergy only when those connections create new ideas and appropriate investment in viable options. The more groups, government, and the business community are drawn into the market generation and creation process the higher the level of synergy. Synergy can create energy that keeps a market moving toward global significance through the mutual self-interest of hub members. It is beneficial to think of synergy as a small group expanding to draw in wider and wider circles of elements while creating new products, opportunities and wealth.

Developing Human Capital for Global Competitiveness: 

It is important to fuel hubs with people who have the skills necessary to compete on the international market. An adequate supply of local human capital that feeds employer labor needs through their growth periods can spark spurts of economic expansion. Each economic hub should develop a battery of employee skills that strengthen their core competencies by helping local industries gain a competitive advantage. Highly skilled employees matched with technology placed ina  receptive market are unbeatable.

Education and skill development opportunities help to ensure that proper competencies are available to fill vacant positions that keep companies expanding and the economic engines moving forward. Without the availability of necessary employees skills, organizations will turn to find more costly alternatives, move operations to lower cost locations, outsource operations overseas, or recruit foreign workers. Aligning education and training to the needs of the market will help ensure an ample supply of qualified workers are in supply.

 According to Harvey (1999) higher education fulfills these essential goals by:

-Establishing links to employers that assist with developing strategies to overcome lack of qualifications.

-Contribute to solutions for education and training in highly-skilled areas with a lack of qualified workers. 

-Prepare graduates with effective skills ensuring that employability requirements are explicit within courses of study. 

The closer education and training is aligned to market/emplyer needs the higher the level of employability and potential immediate economic contribution. Market supply and demand will help keep people working while still raising the value of wages through constant adjustment to emerging opportunities. Maintaining contact with employers while providing educational and training opportunities ensures that skills are enhanced that lead to sustainable performance. Companies moving into a global market will need to rely on their human capital to penetrate and build future markets. 

It should be noted that market aligned skills are beneficial for the majority of the population but don't always create new forms of development. There are contributions to society that must step outside rigid focus on employability that lead to large scale adaptations that push society forward. A market focused education with enough flexibility for experimentation and breadth to incorporate esoteric interests are needed for a fully functioning educational system.

Beyond just filling open positions, highly skilled and educated employees are also entreprenuerial.  Packed with ideas and earning power they raise the competitive capacity of cities by using their intellectual capital to create new opportunities through entreprenuerial start-ups. The more people wtih market leading ideas and resources move into cities like San Diego the faster the hub will realize its full potential in developing high wage job opportunities through spending, business development, and economic expansion.

Ensuring that skills are enhanced through technology investments reduces costs and increases productivity. Employment is shifting to greater levels of complexity where higher skilled and educated employees use technology to their advantage while lower skilled workers move into the service industry (Autor & David, 2013). Those who use technology to complement their creative, abstract, problem-solving, and coordination skills were more successful than those who didn't and relied less on technology.

Technology becomes an enhancement for the human ability. Innate intellectual and physical skills are used as a basic platform where technology enhances these abilities to a greater extent. Whether one is talking about robotic suits, 3 D printers, computers, inventory or CRM technology increases human produtivity to create higher levels of performance. 

Human capital utilization is complex and hosts ideas such as biological capital, educational capital, social skills, and health capital (Neagu, 2010). The whole human being and their ability to be productive in their evironment creates important oppertunities for personal and economic development. Laroche et. al. (1999) believes that human capital has some generalizations:

-Non-tradable good embodied in humans.

-Individuals are subject to human capital decisions made by parents, society, and government. 

-Individuals who make their own choices to internalize those choices.

-Human capital is qualitative and quantitative.

-Human capital can be used for multiple purposes and is transferable among businesses. 

Human capital is a foundational input into the local economy and constitutes the backbone of the economic expansion. Developing a base of highly skilled employees supports the growth of clusters that rely on the transfer of this knowledge. Education and training can raise global competiveness through exportable products/services developed through enhanced human capital. 

A model can help understand how technology, education/skills and high GDP per capita are associated with higher value exportation of products (Osomu, et. al. 2010).  The studies information was based on a five year analysis of 86 countries to determine global competitiveness. Raising skills through training and education not only raised the standard of living but also the volume of investments. The association between skill development and education with higher levels of exportation is strongly rooted in literature.

As hubs develop the individual clusters will need the right mix of technology, education/skills, and investment to create new business growth. Individual business expansion leads to hub development, regional development and national development in that order. Developing clusters and hubs through business and human capital enhancement is an organic approach that raises abilities from the bottom where the actual work is being conducted.  That business growth now exists in a global world where international knowledge and skills is of high market value. To push people to develop skills that can earn a high wage and have international market value will need the redevelopment of education to focus more on a competitive stance that raises business and human capital abilities. Companies will also need to further development to develo global knowledge and raise collective intelligence that leads to the organic creation of of new opportunities and economic expansion. 

Global Intellectual Capital Development:

Global Intellectual capital development is a higher form of knowledge that creates a stronger framework for understanding global business and affairs. Where education and skilled trades lead to an adequate supply of human capital, global knowledge leads to the application of knowledge to create international companies through local competitiveness. Global managers are better able to understand the complex interacting factors needed to turn local businesses into international powerhouses.

Global knowledge comes from the development of a greater understanding of the world. As skills are enhanced and new knowledge are enhanced eventually the person has the ability to see beyond local concerns to determine their general impact on global affairs. Visa versa such managers understand how global affairs impact local commerce. In essence, managers with global knowledge can forsee the trends and make better long-term decisions.

Intellectual capital is an asset capable of yielding profits, a competitive asset, a process and knowledge, and a level of skill (Vlasenko & Vasylenko, 2015). Global intellectual capital is based in those skill sets that have the highest values on the international market and therefore can create the most lucrative markets. It is the ability to think and profit by having the ability to act on a global market.

Global skill development applies across a wide range of industries and includes communication, team work, rotation, quality, problem-solving, health and safety, and performance-pay linkages (Low, 1998). Broad themes in development enhances the cognitive, analytical and behavior aspects that lead to greater productivity and open-mindedness in adopting new technologies that improves productivity (Lall, 2000).

General abilities learned in higher education include problem solving, planning, decision-making, and willingness to learn (Silva, et. al. 2013). Many of the ideas are cognitive functions that are based in the ability of people to think about and solve complex problems. Today's market has moved from physical labor, which has a low value proposition, to intellectual capital that has higher market value.

You can see some of the very same skills mirror employers identified as most important for business growth.  These include Interpersonal skills, Time management (100%); Speaking/oral communications (98%); Ethical Understanding (98%); and, Adapting to change/being flexible (96%) (Holtzman, & Kraft, 2011). Soft skills that tie together effective functional skills with broader knowledge is beneficial.

All of the skills selected are related to adjusting in the workplace and working with others in an ever changing market. These skills led to higher awareness and functionality in the workplace. The study further found that export oriented companies were more interested in college students that have a global conception that encourages productive relationships with other cultures and strategies. 

According to Rhinesmith, the global conception is, “the ability to scan the world from a broad perspective always looking for unexpected trends and opportunities that may constitute a threat or an opportunity to achieve personal, professional or organizational objectives” (1993, p. 24). When such skills are well developed it can provide organizations with the benefits of forecasting trends in the market, gaining sophistication in analysis from diversity of perspective, integrate best practice knowledge, and coordinate across functional activities and borders (Gupta and Govindarajan, 2004). 

Understanding cultural viewpoints creates a better perspective on business.Those with a global mindset can use multiple strategic reference points when transitioning into culturally, economically, and politically foreign environments (Fiegenbaum, et. al. 1996). The employee can then work within multiple cultures to  effectively produce, sell, and distribute products while understanding new ideas on a grander scale (Moeller and Harvey, 2011) . 

 Managers will need a broader perspective when working in international markets. Failure to understand how their strategic decisions make their way throughout different cultures can cause a host of problems. Poor decision-making and haphazard strategic implementation can backfire when their global implications are not understood. 

This means strategic formation and the intelligence to understand how that strategy makes its way across the global economic chain is important. For example, in the interconnected and integrated world something that happens in China also impacts the U.S. and visa versa. A business decision in a local economy must still fit within the competitive needs of the global economy to have long-term sustainability. 

Gaining a global understanding is improved on cultural intelligence and a global identity beyond the specific industry knowledge the manager/worker has. Cultural intelligence is the ability to function within culturally diverse settings (Ang & Van Dyne, 2008). Global identity is the ability to see the self within a global culture (Shokef & Erez, 2006).  One must be be able to stand above their own culture to ensure decisions are filtered through multiple perspectives.

As a person develops they are able to switch their vantage point to various cultural lenses to interpret events from different vantage points. Perspective switching allows strategy to be better designed to manage a greater amount of people across different national borders. It requires the understanding that one's own background and viewpoint is only one perspective among the many perspectives available. 

Using their intimate knowledge of other cultures helps the predict and perceive the success of choices. They understand the cultural vantage points and internalize these perspectives to develop a better way to evaluate new information. Their own background and identity become a complement versus a detractor to their decision making without the bias that the background holds. 

A model is developed that is capable of synthesizing information, evaluating it from various perspectives, and seeing the strategic implications of implementation. They can see the micro and macro aspects of information and can work in  complex globally diverse market. Without integration of cultural and industry knowledge the person will be limited in perspective and short-sighted in decision making.

Consider the alternative to a global perspective based in one's ethno-centric perspective. They are only capable of interpreting information from a single perspective and filter information inappropriately to justify their conclusions. Decisions become limited by that background and often damage global growth through strategic implementation through a skewed lens that doesn't have a long lasting impact. 

The knowledge gained from progressive learning about  business and human nature allows those with a global perception to back out problems and have a "birds eye" view of international business systems. The power of perception is a fundamental difference between standing in a forest and only being able to see the canopy of the trees and a few yards into the foliage versus standing above the trees and seeing how the whole forest works. 

The Need for Systems Thinking:

Flat Earth Example of Early Systems Thinking

Systems thinking is becoming an increasingly important part of managing larger international firms. From supply chain management all the way down to the marketing and design of products systems thinking offers a set of skills that American business professionals will need to learn. The availability of this skill among managers will make a difference in the ability of companies to function at their best across large global networks.

Systems thinking is a conception of the whole by understanding each of its parts. While we may understand these parts individually a person who has a systems thinking mentality can also see how the parts created something more. A "sum is more than its parts" mentality.

It is often seen as the ability to be in three different perceptions at once and apply systemological concepts in everyday life (Lobanove, 2009). The person can break down and put back together complex systems through appropriate analysis.

How does systems thinking apply in the workplace?

Think of the international supply chain and how each of the manufacturing components work together. From a systems thinking aspect people who can understand these complex chains are able to produce real value through management decisions that leads to better outcomes. (Seong-Am & Dong-Jin, 2005).

Principle: Systems thinking allows workers to global networks from macro and micro perspectives.

To be true masters of systems thinking we shouldn't just see and analyze components but also be able to think beyond these components to possibility. This isn't possible unless we have mastered the ability to "see" the systems from a "birds eye" view. 

Improving on the system will require thinking shifts that allow for more flexibility (Pathak, 2005). We must see beyond the system to higher levels of performance and influence.


Systems thinking is about understanding complex global systems that will be needed to keep American businesses moving forward. Business professionals should be able to move beyond understanding and creating efficiency within the system to redesigning aspects of the system to achieve higher levels of performance. With consistent improvement our business managers can improve corporate global performance and reach.

Principle: Systems thinking allows workers to global networks from macro and micro perspectives.

Systemic  Thinking in Business:

Companies have input and output departments and these are often seen as cost centers. They don't make money and are instead allocated a budget based on the total sales of the company. However, at their core, businesses are seen as bundles of efficient transactions that allow them to create value by being more than the sum of their parts. According to an article published in the Business Management Dynamics Journal thinking systemically it is possible to turn cost centers into efficient profit centers in that it allows them to learn from their environment (Roth, 2014). In turn, they would also be able to create additional cross corporate collaboration by selling their services.

Consider the nature of an organization that is based on a number of departments such as design departments, production departments, advertising departments, etc... Each has a value to the organization but often become non-competitive due to the captive nature of their internal customers. Such departments can lose their efficiency, and when this occurs across an entire organization, it could mean bankruptcy.

According to the article, if we were to allow them to bill internal customers for their budgets and take on additional work outside of the firm it is possible to raise their performance level by keeping them connected to the needs of the market. If internal departments become non-competitive they should be adjusted and changed or closed down so the function can be outsourced.

While the article doesn't address this question, the selling of services to the outside market creates greater cross-corporate collaboration by encouraging transferring of new ideas through corporate collaboration. The greater connection among businesses within a cluster, the more likely they will transfer new knowledge, reduce costs, and innovate. Selling services allows companies to borrow competencies for projects.

One one hand, we have the benefit of improved internal performance, efficiency, and costs while on the other hand we have greater collaboration with other companies that can lead to cluster collaboration and innovation.

Internal Benefits:

1. Improved performance

2. Improved Efficiency

3. Reduction of Internal Costs

4. Increased revenue sources.

External Benefits:

1. Improved collaboration.

2. Stronger transference of knowledge.

3. Development of more efficient clusters.

4. Creation of new industries.

The systemic approach to billable services and outside customers can work for some departments. For example, product design, labor competencies, marketing, product knowledge, and many others have formulated specific competencies based on their unique approaches to the market. Cluster members may want to contract those abilities to help them launch or service a new product. As these companies buy and sell their unique abilities they increase the performance of the entire cluster and create new cluster efficiencies that may be difficult to match in other areas.

Global Culture and Global Mindset:

As nations and cultures interact and conduct commerce they will form an identity based upon their mutual self interest, interactions and commerce. The international culture will have certain norms related to openness toward other cultures, manners of acting, and ways of looking at the world.  These norms lead to new ways of thinking that help foster smooth transactions of people, information, products and money. 

Those who are not able to foster open-minded to others and a global perspective of the world will continue to be left out of the global market as their ideologies and beliefs rail against better global commerce. The personalities that work best in this environment are able to see the inherent value in all business partners and come to understand and respect individual differences. 

Each person comes from a unique background that forms their identity. At lower levels of development one has difficulty seeing beyond their own culture and traditions. Their manner and methodology and business is based within their local backgrounds and they are unable to rise above those cultures. As they become more aware and integrate their knowledge they will be able to use a more complex way of understanding the world around them. 

It is possible to open that skewed ethno-centric lens through education and cultural exposure. In higher education, international online students are sometimes able to understand the similarities of culture, work with multiple cultures, and could identify with the similarities of these cultures creating a broader framework for solving problems using the knowledge from multiple backgrounds.  

One can think of the global mindset as the development of the “software of the mind” (Hoftstead, 1991). The global framework provides the psychological mechanisms to understand large data points from a unique perspective that helps in creating more accurate decision-making across geographical and geopolitical arenas. This learning is often unintentional and can be fostered but is difficult to teach (Masakowski, et. al., 2013). The factors that influence those who learn it are: 

Metacognitive/cognitive: The cognitive strategies that a person uses to understand other cultures and the strategies to understand specific cultures (learning how to learn).

Affective/Motivational: People must be motivated to learn about other cultures to develop cultural intelligence.

Behavioral: The ability of a person to adjust their behavior to fit within a particular culture. 

The Global mindset also comes with the ability to see larger systems and be able to decipher how they operate. Though systems thinking we can understand how large systems operate across multiple continents and people. Systems thinking is an understanding of how the whole entity may be different than the sum of its parts (Metz, 2012). Such thinking allows managers to overview an entire network of interrelated components and events in order to develop an understanding of how to manage the entire system. 

Systems thinking and cultural understanding create a way in which to design strategy and implement that strategy among a diverse group of people. Knowing how policies & procedures, corporate operations, and product design/development work within different cultures makes international success more likely. 

Preparing the next generation of managers to understand the cultural and systematic thinking processes that lead to strong international organizational performance is not easy. Research by Erez, et. al. (2013) found that international online education raised the global mindset while not removing local self-identity. People who engage in online (or physical) interactions within the learning process are better prepared to handle subtle and complexity of global business management.

Globalization Comes with New Organizational Cultures

Organizational culture adapts to the difficult but necessary transformation to a global economy. The process of changing the rooted domestic culture is difficult when time tested processes are embedded with deep beliefs of ones identity. Organizations change based on necessity but workers are often dragged behind these changes.

Globalization has an impact on the culture of all organizations that play in that arena. Change often occurs because previous work patterns become ineffective and new processes are created to meet those challenges. As processes change, the way people think changes and new cultures are formed (Rizescu &Tileague, 2017).

Developing a global culture within an organization means the organization is exposed to global pressures and traversing through growing pains to meet those new challenges. New mentalities, new ideas, and different perspectives must arise to ensure the company can compete in a bigger "ball park". 

Naturally, there will be those who will fight the process all the way and there will be those willing to learn but have no idea how to work in a global environment. Having a vision and plan for restructuring and training is necessary. If there are employees and executives fight "tooth and nail" to keep the Status Que there may need to be some personnel changes.

While it may seem like change will never come it eventually will. It is not easy to change peoples minds and have them view their roles in new ways. Yet with new ideas, processes and expectations there will eventually be solidification of acceptance. That acceptance puts the organizations on a higher level of functioning. When people are thinking beyond domestic production and acting according to a bigger vision you know that change is thorough.

Global Skill Development Through Organizational Learning: 

Learning organizations prepare for global competitiveness by developing knowledge from science and industry experience  to create greater innovation and development (Jensen, et. al, 2007). They understand how different kinds of employee knowledge contributes to the overall organizational process. Global management practices ties all these pieces together to create a solid organization that understands the contribution of each knowledge type. 

Each person has a specific skills battery that is recruited for industry knowledge and display of skills seen in performance. A global manager can see beyond ethno-centrism to see those skills and abilities and find the best place for full human capitalization. The can see the bigger picture and can hedge the differences among people to create stronger organizations. Where skills are missing the company will need to fill spots through recruitment and training.

Specific skill formation can develop from different sources. It is most often raised in vocational training, formal education, in-house training, outsourced training and on-the-job training (Lall, 2000).  Companies invest in human capital development through supporting higher education and training programs. This investment raises the cognitive abilities of nations and in turn impacts GNP (Hanushek & Woessmann, 2012). When such skills are globally oriented they have an even greater market impact on national growth.

Skills learned at one point in life are added to new skills and push the collective intelligence up as they are shared. This can be stated as “skill begets skill through a multiplier process” (Cunha et. al. 2006, p. 698). The return of investment on skill and educational development is beyond the simple calculations based on the individual. Human capital increases the stream of new ideas that produce a higher rate of technological development (Romer, 1990). 

Organizations that desire to foster skill within their oranization should lobby to reform education to ensure employability and performance in the future. The U.S. is suffering from poor education and lack of global knowledge that limits full growth potention.  According to the 2012 PISA study on Creative Problem Solving American 15-year-olds are ranked against 34 OECD countries and has the mediocre results of 26 in math, 17 in reading and 21 in science (PISA, 2012). An inability to foster high levels of learning across all socio-economic demographics will continue to limit competitive knowledge attainment that makes its way into the market decades later. 

Education is a formal method of gaining skills while the work environment and its expectations are another way to encourage greater flexibility and skill development. All learning requires motivation to make it through the mastery process. Managers who model motivation, have charisma of personality, and can create similarities with employees are able to encourage greater employee motivation (Coget, 2011; Wieseke, et. al. 2011). This motivation can translate into accepting new processes, new technology, or new skills that can equate to organizational learning and greater individual and collective productivity.

Unfortunately, organizations will need to pick up the pieces where formal education has failed. Rigorous training and development programs can take the basic foundations of formal education and enhance them into industry value. Fostering the right mix of education, training, and personality has a large impact on the sustainable longevity of organizations. 

For example innovation generates from entrepreneurship that relies on formal education, personality, and industry knowledge.  Entrepreneurs can push organizations to higher levels through enacting organizational change (Scales, 2014). Innovators use traits such as the desire to achieve, internal locus of control, need for independence, risk-taking behavior, creativity, drive to success, problem solving, goal direction, willingness to take responsibility, performance oriented, and ambition that makes them assets to companies and local economies.

Higher organizational performance relies on the ability of employees to use their skills to complete work with high market value. In order for organizations to be competitive they will need the right mix of skills that help them penetrate market needs. These skills are developed starting in public education and higher education to make their way into the market. Where certain skills and values are missing companies will need to implement training programs. Through developing the right learning environments and supporting learning through training companies can create internal entreprenuership through compounding collective knowledge.

Higher Educations Responsibility to Create Global Managers in the U.S. 

Colleges have a responsibility to prepare students to think globally and learn how to manage in an international environment. The trend toward internationalism will not abate and as supply chain integration and international treaties increases the need for competitive managers in the U.S.. Our local economies will be part of the global marketplace and cannot escape it and therefore must master the skills needed to maintain competitive companies.

If American schools do not produce enough managers that can think on a global scale and understand complex business systems at play across multiple continents these positions are likely to go to foreigners. While this may be unavoidable, and even desirable in many cases, we should not be forced out of necessity willingly hand over our competitive edge.

Higher education has a responsibility to ensure that we produce globally aware graduates that understand modern business practices at micro and macro levels. Business colleges should consider integrating more international business concepts within their programs.

According to the AACSB's Financial Officer Dan LeClair today's business programs should have global elements such as (Henderson, 2014, pg. 3):

-International management
-Integration of international management across curriculum.
-High quality faculty with practical experience.
-International learning and multi-cultural opportunities.
-Cultural context of information. 

Weaving the concepts throughout the business higher education experience helps students make greater connections between their chosen business fields and its global application. Whether one is working in a small business using existing networks such as Amazon or UPS, or a multinational corporations with their own supply chains, it is beneficial for them to understand how these larger processes operate.

Take away: College should focus on global skills to ensure U.S. management dominance.

Narrowing U.S. Skills Gap:

American jobs are partially filled by domestic hands as employers increasingly rely on immigrant labor and foreign operations to patch shortfalls and maintain  profit margins. The skills gap at U.S. businesses may become a hefty problem if not tackled prudently. Experts predict that by 2018 there will be an expected 46.8 million open jobs with 30 million of these jobs requiring post secondary education. The problem has become so pervasive there is a projected 3 million person deficit whereby 60% of employees won't have the necessary skills to function fully in those positions (Achieve, 2012).

Not having the proper skills limits the capacity of U.S. businesses to keep up with production and technological advancement. Markets that have excess capital of labor are more appealing for investment and growth. Importing these skills can help fill this gap but doesn't solve the problem developing homegrown skills through more robust higher education and training programs.

A study of available literature argues that three things must happen to improve the skills issue  (Elkins, Bell & Hartgrove, 2016):

-Easy access to education and training.

-Investments in science and technology.

-Spur investments in American industries.

A larger group of students must reach into the halls of higher education and this will be difficult under our current system. Online education and certificates will help keep working professionals in the labor market as new skills are developed. Students without the capital to stay in dorms or enter elitist schools can find affordable education opportunities that make a dent in this gap.

Further investments in science and technology requires a solid commitment to creating a business environment through thoughtful legislation and tax reform as well as better partnerships between universities and industry. As intellectual capital grows the opportunities for new start-ups and industry cluster development also rises.

Broad investments into national growth are based on the international competitiveness of our cities and hubs.  Large fund money comes through long-term stability of the market and the projected value of companies within a larger network of competitive companies that indicate the market will need those products and services in the future. Macro-economic solutions to cluster functioning encourages attraction of profit seeking ventures.

The development of the labor force relies heavily on national policies. Industry and labor grow together and separating them is acceptance of a limited perspective. Workforce development is only possible when jobs are available and jobs are only available when companies invest in markets with educated employees willing to meet the challenges of modern society. They must rise together in a way that leap frog over each other. Filling serious educational gaps moves beyond political arguments and into the actual activities that raise brighter minds for better tomorrows.

Addressing Global Skill Gaps Through Higher Education:

The world will experience significant skill shortfalls in the future as companies struggle with hiring and training new talent. The burden will rest more heavily on government and higher education to meet these skills in a way that leads to greater growth, income, and innovation in the marketplace. According to a survey conducted by IBM Institute for Business Value, in cooperation with Oxford Economics, responses from 5,600 global executives representing 18 industries and 48 countries found the following:

-60% of executives have difficulties keeping workforce skills current with changing technologies. 

-55% believe that the current educational system foster lifelong learning and skill attainment. 

-55% believe their is inadequate investment from private industry to develop skills. 

-80% believe government should be responsible for skill development. 

-55% believe that higher education updates curricula enough to keep pace with industry changes.

The study suggests that skill shortages will continue in certain fields and that companies are not doing enough to fix these problems through training. Unfortunately, many of these skills rest on a broader and deeper understanding of the context of such understandings and this is necessary to obtain through the longer higher education process.

Colleges will need to continue to update their curriculum using as relevant information as possible. That often means collaborating with business and government stakeholders to determine precisely what type of skills are lacking. There is also benefit in continuously updating such course offerings through chronic study of industry needs. 

The report also suggests building a global talent pool through industry, education, government and public sector collaboration to create 1. regional ecosystems, innovative solutions, encourage greater individual responsibility for education. Their suggestions indicate that greater collaboration of stakeholders in fulfilling these educational gaps is needed. More innovation in higher education and reduction of undo restrictions on new educational models seems appropriate. As students move through their educational process they should be taught the values of individual responsibility and carry that through to a life-long learning approach.

The Stress of Innovation and the Need for Educational Change According to Schumpeter:

People must continually update their skills or a large percentage of society will find themselves unemployed. Schumpeter believed that as innovation increase people's lives would be impacted by creating stresses that test our skills and abilities. Some will move to higher standards of living and some will lose their jobs and opportunities. He called these unpleasant actions vicissitudes as they inherently disrupted society and create chaos that eventually leads to a better life but can be a painful transition experience.

Sometimes people will be alienated and pushed to the side while at other times they will move to the center and be more connected.  Those who do not have the necessary skills to compete will feel angry and upset as their income and opportunities dwindle. They will begin to question the legitimacy of some institutions and demand change.

Schumpeter believed that government should encourage entrepreneurial activity to enhance their economies and arrest decline. While change occurs government also has the responsibility to push for greater education and training to meet market needs.  Without continuous change there is a slow decline in society. He so eloquently expresses the decline of people as....

"A] process of degeneration, of degradation of large circles (of society) accompanies the upward
movement … Large circles see their economic basis being pulled away. This does not happen
abruptly, but gradually. Through generations, the people affected live a deprived existence full of
hopelessness. Their moral and intellectual powers dwindle, the more so the more the economic
atmosphere they find themselves in is darkening. (Schumpeter, 1912 [2006], p. 503)"

As the pace of change increases so will the need to retrain and educated people. Global competitive skills will be sought through reformation of the higher education system and public school systems. Long-time educational institutions will need to adjust to meet market demands and needs or otherwise the nation will loose competitiveness and large swaths of society that doesn't have access to higher levels of education will be forced into poverty.

A system that continuously changes requires constant innovation based on opportunities full of individual choices and actions. Entrepreneurs will seek to push and adjust society and will succeed in materializing change when they challenge, establish, and defend their market power (Schumpeter, 1942, p. 105). The perpetual need to personal mastery of the market leads to constant risk taking and turmoil.

In the "Shumpeterian" approach it is necessary to help people catch up to the market by encouraging them to find new ways of competing in the market. While entrepreneurs will start new businesses it is the people and their skills that are needed to fill available positions. Markets that have high growth potential also have a skilled and educated work population that can take positions. Revamping our educational system from primary school all the way through college will help ensure that the classes most likely to be impacted by change can adjust to new market realities. Adults will need access to physical and online education in order to ensure continually training.

Collective Productivity:

Collective productivity turns into the Gross Domestic Product (GDP) of a nation and can be broken down to the GDP of the individual. The cost of education is important in determining the effective value of that human capital. Judson (2002) expanded on previous calculations to create measurements of human capital per worker (h) based upon cost of education:

During the product and service development process different types of knowledge, skills and abilities will be used. When working well together they create an effective chain-link model of development

(Kline and Rosenberg, 1986).  Products are developed based upon market need and local competencies that continually use complex feed-back loops to improve upon the development process. Human capital in the form of knowledge, skills, and abilities is an essential part of that process. 

Skill development is not necessarily cheap. According to research by Bersin and Associates, employers should foster new skills through social learning to lower costs and reward employees for gained improvements in productivity (O’Leonard, 2012). Organizations will need to use virtual and face-to-face training to foster knowledge skill acquisition in ways that are both cost effective and developmentally progressive.  

We can see how a short version of community skill enhancement can have an impact on local communities. A Hispanic community improved upon a lack of skills through fostering entrepreneurship and social learning through the hub & spoke model (Fisher, 2008). They used local skills and culture as a base and then provided enhanced skill training to generate greater marketability for the community. The author attributes success to the following:

-Invest in people and empower them to do the work they love.

-Utilizing and sustaining the natural and cultural resources of the area.

-Change the economic structure to reduce dependency and increase opportunity.

-Provide financial support for research, marketing, businesses, and development. 

Learning and development is not an easy process and requires a significant amount of individual and collective engagement. Educational institutions will need to adjust to the emerging market realities and ensure that they are not only fostering appropriate skills but also encourage the love of learning that provides a pathway for graduates to master new problems. New forms of education development will help encourage greater use of learning as a pathway for national labor growth by integrating learning into the lives of workers. 

1.) Childhood/Cultural expectations

2.) Public/Private schooling

3.) College/Trade School

4.) Corporate Training

5.) Corporate Innovative Culture

Labor Enhancements and Employment Prospects:

According to von Hayek, “economic activity provides the material means for all our needs” (von Hayek, 1962, 49). People naturally seek to earn resources off of economic activity and spend that money for their needs. Each person within the system should engage in the developmental process through new expectations and hopes if gross domestic product is expected to rise. Ensuring that the right skills are available makes fertile ground for future investment. 

The problem of a lack of skills has become such an issue that a 2013 report by the International Labor Organization indicates that global unemployment will rise to 208 million people in the next few years. The issues are caused by softness in macroeconomic approaches and labor skill development. Labor development and opportunity will need to be on par if they are to employ large amounts of people.  As follows...

“The labour market and income situation is uneven but can be improved by consolidating the rebalancing process in emerging countries and finding the right balance between employment and macroeconomic goals in advanced economies. Progress towards reducing economic and social inequalities would pave the way for a lasting recovery (International Labor Organization, 2013).”

Those who do not increase their skills are likely to contribute to the growing income disparity between the low-skilled and under employed to the highly-skill fully employed labor that is often marked by educational attainment. Between 1980 and 2005 people who have not updated their skills have been increasingly sidelined into lower earning categories (Autor & David, 2013). 

Two types of societies will emerge. One in which higher education and higher skills leads to strong employment opportunities and the other where people cannot afford education and have little access. Some will work in menial jobs while others will have many an abundance of opportunities. The "haves" and "have nots" will be defined by wages and education.

Improving human capital has a number of advantages beyond lifestyle that also includes raising technology exports, encouraging investment and developing GDP (Osomu, et. al, 2010). Education and training are an important part of the process of ensuring skill levels meet product and service development needs. You can see this difference in national differences between those who have invested in skills and those who have not. 

Investment in education and productive output has created the highest market value of human capital in nations like the U.S., Austria, and Australia while low values in Mexico, Czech Republic and Hungary (Neagu, 2012).  U.S. Competitive advantages in technology, education, and human capital lowered the overall inequality of society and raised the U.S. to a leading competitive nation throughout the 20th Century (Goldin and Katz, 2008). 

High value investment hubs will need certain skills to enhance their markets and feed overall business expansion. These skills may be in the local skilled trades market or in high technology development. Generally, enhancements in applied knowledge as seen in skilled technology workers have some of the highest rates of return. 

The impact education and skill development is powerful and has a profound impact on national financial outcomes. An analysis by Hanushek & Woessman, (2011) found through simulation that raising employee education and skill can also raise national GNP by as much as 6.2% over 80 years impacting a number of generations at once. Likewise, Standard and Poor's reported that social immobility from a lack of education and skill development costs the economy 2.5% GNP per year.

Labor development rests on human motivation and encouraging higher individual development helps to ensure the nation is progressing. Each worker should find financial and personal benefit in development. As their education and skill rises so should their financial position and their future opportunities. When they do not rise because of income disparity or poor policy then lower motivation can cause slower national growth. 

Labor is more transient and attracting skilled labor encourages value creation across multiples spectrum of society (Bjelic, 2013). Successful countries can raise their labor skill and attract labor that matches market needs. Those nations that gain highly skilled labor also improve on GDP per capita, innovation, and technological process (Son and Noja, 2013). A lack of employment opportunities occurs when jobs are not plentiful to meet the needs of people and labor's skills are not properly matched to current job openings. Constant updating of skills helps to meet employer needs that further development. Those nations that cannot provide opportunities will have net losses in intellectual capital.

Entrepreneurship and Resource Allocation:

Economic growth is fed through constant profits. The profitability of a nation is determined by how they use resources. The same process exists whether one is in a simple society or a more complex society. Tribes may work in collective action but find synergy off of their efforts. Barter-and-trade with other tribes also found profit from learning specialization and maximizing their effort. Modern society uses complex knowledge and technology to maximize resource allocation and use.

It is possible to understand how resource use contributes to growth through the necoclassical static-equilibrium growth theory (Solow, 1966) and resource-advantage theory (Hunt, 2000). Neoclassical theory maintains that growth comes from investment and the effective use of resources.  The more effective society is in finding, exploiting, and conserving resources the more growth propensity found.

The resource-advantage theory postulates that growth comes from competitive innovations brought about by institutions/individuals that foster economic freedom. The entreprenuer is a vital active agent that puts together resources and ideas in a generative process that leads to new products and sales. Without the entrepreneur, the system stagnates and shows periods of deep decline and economic weakness.

Entrepreneurs are risk oriented innovators that can earn a premium by connecting together newer elements. They are the connectors, movers and shakers that realign the system for global competitiveness.  Their unique ideas are turned to mass production that further readjusts the resources of the area to more efficient ends that churns out profit, production and employment. Efficiency breeds greater competitive advantage and international success.

Action action or activity that leads to a profit is thought of and enacted by an entrepreneur. Whether this is financing a trip to the "Americas" or building a new mine it is those with new ideas and incentives to enact them that make all the difference. The capitalistic system itself is based on foster individual risk and profit taking through the adequate use of resources that leads to fuller economic growth.

As entrepreneurs scour the market for opportunities that have greater market appeal the entrepreneur is rewarded for his/her work through gainful profit. Profit in one area creates psychological incentives to reapply the process in another area. Incentives are inherent in a properly run system and the entrepreneur becomes an important catalyst of economic growth as ideas bubble into profitable products.

All growth requires entrepreneurial investment and the effective use of that investment to continually develop new products. The neo-classical theory and Resource-Advantage Theory only works when financial resources are matched with local resources (i.e. knowledge, skill, industry, natural, etc.) to produce efficient and effective new wealth. That wealth can be used to for reinvestment purposes to create higher forms of market oriented productions.  

It is possible to calculate this  financial growth from investment and resource allocation information. As entreprenuers invent new products and companies mass market these new products they begin to beat market odds on a long-term and macro level. Even if they fail in the short-run the collective entreprenuerial action creates long-term growth. Technology, human capital and production increase to create greater outputs that increase the financial wealth of the area over periods of time. The calculations are often made in a Cobb-Douglass formula like the following:

Y=A(t)K^1-βL^β

Y is the net national product, A is the level of technology, K is the stock of capital, L is the stock of Labor and β relates to the output of labor. Therefore, net national output is a function of technological development, capital available for growth, personal abilities of labor, and labors total output.

In resource-advantage theory, growth is derived from societal resources and institutions. Resources are things like comparative advantages/disadvantages and parity. These resources lead into a market position that includes competitive advantages/disadvantage and parity. Public policy can foster or damage that growth creating a system of constant disequilibrium that seeks to develop to find an elusive homeostasis of entrepreneurship and legislation. Properly developed systems encourage growth through sustainable improvements in the ecological (environment), social (equity), and financial (economic) arenas (Savitz & Weber, 2006)

Responsiveness to Citizen Needs Breeds Growth:

Profit seeking citizens are more important than the numbers we subscribe to them. We often rely on finance as the greatest metric in competitive improvements while ignoring other aspects of growth. All numbers are only representations of a unit and not all things can be easily summed in the metrics of dollars and cents. Economic development can also be seen as an enhancement of the entire system that fulfills  human physical and psychological needs. Most modern metrics are not able to measure with accuracy all of the components of a powerful economic system poised for growth and therefore solid policies, critical thinking, and good judgement is necessary.

John Galbraith stated “it can be said with some assurance that in economic, social and political matters, if the controlling circumstances are the same or similar, then so will be at least some of the consequences” (1988, p.xi; see also 1987, p.62). Markets must have the right social environment, economic components, and governmental structure to develop to their full potential. If any of these components is not functioning well the entire system will suffer even though it may not show up on readily available metrics.

Economics tries to employ models to understand how components work together to create a stronger system.  Developing the economic hubs is one aspect but the doors must be opened through proper market awareness that draws interested stakeholders to multiple aspects of the hubs existence. Information brings to investor awareness the multiple benefits of investing and settling in a particular hub through greater marketing of benefits, processes, products, lifestyles, and recreation. Different investors and stakeholders may focus on certain aspects but together they create the appeal of the whole hub.

As a location builds its brand and has sufficient government capacity to manage people properly an area can become known as a "hot spot" for living and recruitment. The amount of marketing activity and economic efficiency creates higher levels of wealth and societal standards (Sirgy, et. al., 2012). As areas become successful, so do the people who live within that area. Literacy rates increase, mortality rates decrease, incomes rise, business flourishes, government size matches spending, education improves, etc... Improvement in the fundamentals of the system improves upon the lives of those who live within that system.

The benefits of developing an area and its image moves beyond simple calculations and into the very nature of resident's lives. Government should be a supporter of development versus a hindering factor based in poor community relations, wasted taxpayer dollars, distrust of government decision-making, ineffective policies, poor policing and self-seeking behavior that lowers trust in the entire system. Positive and progressive government is open to the needs of the people and changes quickly to ensure its relevancy in the 21st Century.

Policies should be well thought out and take into consideration the needs of the people, business stakeholders, the international market, and the overall health of the entire system. Governments should have feedback loops and focus on being responsive to the needs of the people and their ability to contribute to the building of national relevancy. Poor politics, policies, and government excess can lead to distrust which can create gaps of contribution and spark major economic declines and recessions. 

When governments run their systems well they have a higher brand image. That brand image has tangible value in attracting investment and new skills to the area. Those cities that are doing well in serving their people through opportunity and hope also grow in wealth and stature. The entire informational process and perception of the system get wrapped into its image and creates a positive marketing tool to interested stakeholders.

Increases in marketing within an area is moderated by the economic efficiency of an area when improving societal well-being. Increased activity with inefficient, outdated, or corrupt government oversight will damage the ability of people to grow and develop. Their economic, social, health, and subjective well-being suffers. We can see this phenomenon occurring in economically depressed areas where poor governance has caused a lowering of livelihoods for city residents. On a national scale we can see where trends of health and wealth have reversed course. The development of economic hubs helps give a focal point to larger national problems. It makes the problem more manageable on a measurable scale that highlights the possibilities for national problem-solving and growth.

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