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Wednesday, April 4, 2018

Theory of Transactional Clusters and Economic Growth-San Diego as an Example

The following represents a theoretical work of progress. The goal is to apply it beyond one city and start to close the loop to wrap the entire theory into a "bow" that is cohesive. It will take a lot of pruning, rewrites, and adjustments. You can kind of get a generic and chaotic conception of the general idea based on Schumpterian and Keynes Economics.

Clusters and Environment 

Hubs can be 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.

Clusters often form organically based on the characteristics of region and the resources available and it can also be sparked through government and industry action (Dmitry, et. al, 2018). The ability of clusters to move from their early formation to self-sustaining development will depend on the environment in which it exists.

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.

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.


City centers act concentrate the economic activity into a dense locations where economic "actors" better 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.


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, informational, environmental and personal development that when matched with appropriate investment leads to change. 


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. 

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 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

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 encourage 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 through proper data analytics. 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).

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.
6. Hubs can create interaction of the economic elements that lead to growth.


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 to enhance society. 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.


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 or discourages the uniqueness of thought. If the environment is toxic and not lush, less invention will occur and society will smother itself from growth. 

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). 

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. 

At times we forget the need to raise the skill capacity of the workers and the equity of labor and income runs afoul. New economic models take into account a highly developed labor force that creates and invents in new ways. 

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 Innovator(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.

The environment in this process of inventive spirit cannot be ignored. Cultural openness is necessary for people to take the risks and generate non-conforming ideas that lead to personal financial gain which benefits spill into other areas of the economy and make their way through the societal chain.

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).

Innovation creates changes in society that force the rest of society to catch up. A general period of political, economic, and social instability will occur that is chaotic. Once the new technologies are implemented within the system there will be new periods of equilibrium. The greater the invention and its value the more chaos and change that is created. 

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.

Adjusting skills to market need can come from higher education, the individual, or training. Failing to reform higher education and accept new higher education models will weaken the nations ability to accept new technology and gain the labor skills needed to employ that technology fully. A mismatch between higher education and industry leads to retarded growth for the entire system and lost investment capital.

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.

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. Labor equilibrium where skills and jobs are in balance are needed to build exportable products.
10. 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 in their ability to expand and grow. 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).

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 industries such as automotive, technology, aerospace, rubber, and transportation.

Each city actively manages these clusters with varying degrees of success based on their ability to target growth sectors for development. Those that are successful, regularly find greater advantages of upswings 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.


Hubs attract talent because they offer wage and lifestyle advantages for professionals. As revenue rises so does the wages of the workers who become in higher demand. Paralleling wage growth are lifestyle improvements in educational and cultural organizations arise to support the interests of workers.


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 infrastructure.
-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 further define successful cluster characteristics (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 on operations;
(5) economic impact;
(6) sociopolitical impact;
(7) impacts on competitiveness.

Clusters offer opportunities for greater competitiveness because its semi-contained environment that speeds up activities in its sphere that would occur at a much slower pace in the natural economy. As a mini-economy the goal is to create an environment where the highest innovation and efficiency is fostered 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 faster economic adjustments.

The Methods Used by Government to Spur Innovation:

Governments are increasingly seeking out opportunities to create innovative markets that compete on a global scale. Government action can take a host of different forms but at the root of their strategy is the power of innovation. The wisdom is innovation leads to economic growth and in turn higher employability of people in higher paying occupations. An article in the International Journal of Innovation Science discusses how some governments seek to influence the market using the principle of innovation as a cornerstone (Jacknis, 2011).

Government strategies are often 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 wider variability in production processes. 

For example, new ideas and new products favor smaller batch production and constant innovative change. The production capacity will need to produce small and large orders based on customization and market preference. They may serve multiple types of customers through a greater capacity to adjust developmental processes.

Short-sighted and misaligned strategies are limited in global impact. It is doubtful they will have a full impact without businesses taking a longer term approach and "owning" the innovation process themselves. There will need to be a partnership between business and government to ensure that the greatest amount of innovation is possible. 

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.

Moving Clusters into Synergy Communities

Clusters are formed through a collaborative community that shares knowledge and ideas through formal and informal networks. There are advantages in pushing clusters to fully develop so costs, risks, product development speed, flexibility, and economies of scale advantages are realized in the shortest amount of time.


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 guide their development pattern. This model 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.

Economic "actors" eventually formulate cognitive, social, geographical, and institutional similarities. As these companies exist in close proximity to each other they often share characteristics that make them more likely to work together. A sense of purpose encourages action and commitment. Competition with collaboration is possible when business interest focus on long-term outcomes.

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 provides support. 

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 if they are managed properly. 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 that constantly adjusts to its environment. The entire cluster can die when there is not enough economic principles, such as knowledge, social and policy, are not in sufficient supply.

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.



Clusters life spans are like businesses in the sense that they 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 rely on the other businesses that support it. If the industries are continuously changing and adapting they will also push their suppliers and the rest of the cluster to also adapt.

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, Encouraging 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 potential economic success.  When determining whether to invest in a particular company or in the city itself the investor will seek out relevant information to assess risk and rewards. Transparent and open information has an effect of improving chances for investment funds by financial interlopers that make economic decisions based on available information. To do this well will require understanding the market through mapping the cities industries and businesses.

The Capitalist system is based on the use of information. Perfect information makes perfect financial decisions. Since this is not possible the second best approach is to highlight publicly the investors need to make sound decisions.  That doesn't mean skew information as this leads to lower trust and more risk for investors. They want the gaps in their analysis filled and providing accurate economic data makes the difference.

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 and businesses 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.

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. Resources often starts the spark but it is the investment energy of the region that makes the transformation possible. They will continue to build on previous investments through hopefulness and profit earning. 

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 to support their ideas are going to be of more investment value than markets that have unknown information. 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 to encourage investment in other localities. 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.  

The advent of the Information Age will change the process of collecting and analyzing data and how that will move from physical economic assumptions to more virtual ones. 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 that lead them to success or failure in an economic sense. 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 growth and 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 rest of entire hub.

The Hub and Spoke Model (HAS)  describes how larger firms work as hubs while smaller firms spreading out like spokes (Markusen, 1996). 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 to 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. 

For example, 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 competitiveness. 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. As the market changes there will be adjustements in the strengths and weaknesses of these industries through investment and employment.

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 when competing 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 their core competencies and their competitive stance have a much better chance of fostering the right environment for growth.

 Defining 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.

Transactions can be seen as the small interactions that occur within any office, bank transaction, and even activities like the movement of information. It is the bedrock elements of the smallest kind that when added together create economic impact. The more these elements move throughout the organization, the more efficient the system becomes. 

The same can be said of blocks or bottleneck in the networks that hinder these transactions. As roadblocks occur it will disrupt and slow down the pact of growth within the firm. As the firm create additional layers of complexity it will sometimes become more expensive inside the organization than to create products outside the organization. Such a firm becomes non-competitive and dies.

As a way of formation, firms have very close connections that allow it to compete on the market. Within each firm is departments and groups that have even tighter connections that move information, ideas, resources, and goods. The supply chain will have looser connections than what is within the firm but much tighter than what is found within the market. As the connections tighten, the supply chain becomes stronger. 

Clusters share suppliers, resources, and intellectual capital. By putting them within proximity of each other they can better form tightly bound connections that give them an advantage over other businesses. The very success of the cluster will depend on how well these connections and transactions occur through the response to each others needs. They create their own pseudo-economy.

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. 

The improved costs and speed of transactions leads to long-term development. 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 on common goals.

As markets encourage clusters the transaction costs decrease and profitability rises. Things change and adjust at a faster pace.  The cluster is a collaborative environment that offers benefits for members who rely on similar resources and knowledge to conduct business. The cluster's benefits are in part based on its ability to keep internal transaction costs lower and ensure that resources make it where needed quickly.

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. There is a continuous process of obtaining information, making decisions, and enforcing expectations.

Improvement in Information and Data Analysis Technologies

Information will become the next catalyst of growth. As infrastructure and its processing systems improve, information will become the basis of new economic assumptions. Companies will rely more on a barrage of information to make investment decisions and determine the course of innovative product development. Information now changes the way we think, how we act, the purchasing decisions we make, and how we choose to live our lives. Most of us live in it like fish in a bowl and a few of us can use it to chart new courses. 

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. We are limited by the ability to use information effectively.

New technologies and the adapting human brain will make a difference in the future. Information will be processed more efficiently, people will move more into technology based jobs, and some will have the capacity to master the new data driven technologies. The will still be limited by the structure and algorithms by this data but they will continue to process it better. 

Clusters are collections of people and how they make decisions using data. The essence of all business is based in human abilities. Technology enhances that ability but doesn't yet surpass it. As algorithms continuously develop to understand and manage higher streams of data they will inherently lead people down certain paths of thinking. 

It is this path of thinking that creates a cluster that shares similar characteristics and abilities. This is one reason why a single industry is often at the center of a regions development. Yet as more industries enter the area that need local skills and resources they will create new ways of processing information and thinking. 

Creativity will increase because it will allow people to see beyond the data to fine new paths of development. It is the process of re-evaluating data streams and making unique connections of other ways of managing information and therefore developing new streams of development. Companies that can hire employees that are creative, use technology well, and continuously learn from their environment will succeed and thus such employees will be in higher demand.  

Data Binding of Clusters

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 in new ways. Clusters are bundles of tightly woven resource sharing networks that limit costs to members through regional economies of scale and improving upon the adaptive capacity of organizations. 

Even when firms think they are in competition they are sharing outwardly the information they use inward. “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.


The ability to transfer skills and capacities is driven by psychological motivation through what Herbert Simon considered "aspirations" to act on changes. These aspirations are the goals and desires people hold 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 . 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). 

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 for personal gain. Entrepreneurs move toward value creation opportunities inside clusters because they hold the following qualities (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 in a Butterfly Effect manner. These clusters become primary innovative catalysts to world markets. They interact and change by sending new innovations outward that are quickly adapted.

Increased information exchange and social connections among cluster members will inevitably also impact how they clusters function. Successful methods become adopted and used among a variety of firms changing the social and mental networks within the area.

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, nautical research and spill over into other industries such as telecommunication. New revenue in one area impacts the entire supply chain of clusters that share resources forcing all of them to adapt. 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 and relies on the other functional aspects of the cluster. 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. 

Success to market problems also encourages further investment and in turn sparks more growth. Development builds on other development making the region alive in its effort to adapt to world shits. 

Much of this happens automatically and members may not even know they are encouraging industry innovation (Cox, 2012). Unwittingly they may be unaware they are responding internal and external market pressures together (Yankey & Willen, 2005). It is within their best interest and follows sound logic to move toward 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 developing personal, professional and business connections in clusters to create energy in the market that expands in strength through the generation of innovative products and services.  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. Synergy is a force of connecting, disconnecting and reconnecting in new places to develop a region through active investment. The more times the product/service development, market revenue and reinvestment process occurs the higher local growth is realized.


Developing through a synergistic fashion is not a 1+1=2 affair and looks much more like 1+1=3 process. As resources are investing into the region and they begin to look for efficiencies and profitable enterprises they create more value than simple addition of its parts. New methodologies develop future methodologies that improve the entire development and production process. 

On its simplest form you can think of how a hammer and nails is not just a piece of wood with some metal but have utility beyond its parts. These tools can then be used for other processes. As people use these tools they will develop and work on them adapting them to new situations creating innovation. 

Synergy works in much of the same way but through a much more large process where new strategies and interactions of business generate higher values for companies. This value creation occurs when companies copy strategies and further them to meet market challenges. Instead of a simple tool, this occurs through financial products, distribution, personnel, product development, improved production, and attracting future investments.

An example of synergy can be found in Asia and their high annual economic 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 performance.

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.

Businesses 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.  Sometimes this doesn't work as well. When companies are suffering from new ideas they can gather a group of scientists and creative people to generate new ways of doing things. Clusters can further their innovative juices by putting together incubation opportunities where new businesses are formed that solve collective business problems. 

Where gaps between industries exist there is a need to develop connecting service industries that help anchor businesses function better by focusing on their core value. 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. 

Without the generation of new businesses and expanding current corporations the growth potential will be muted. If this occurs for too long and businesses are not generating (i.e. steel industry) they will eventually fail. In the world of global business, companies that fail to adapt eventually decline sucking with it the entire industry and the region. To stay competitive means rejuvenation of the entity every time the market demands it. 

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 need to 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 Qd=D(P,Y)
Qd=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 & Keah2010). 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 t
hat 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)K1-βLβ

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.

 Theory of Transactional Clusters (The National Advantage Section 3)

Any system that seeks perpetual renewal must find a way in which to regenerate itself by using existing resources and converting them into useful capital. Each level of development will be better than the previous platform of existence bringing with it new ways of looking at the world and the commercial opportunities that lie within. Systems that continue to grow will need to also become more innovative and better stewards of the resources they have. As investors seek to obtain returns on these pockets of innovation they also fuel the mechanisms of change that encourage greater sophistication and additional returns. When these systems gain international interest and resources they attract a wider pool of interlopers. 

Revitalizing American Towns
Revitalizing Small Towns Through Stakeholder Analysis and Strategy:

Revitalization downtown areas is an important public policy initiative based on the declining Midwestern towns displaced by globalization and migrations to metropolitan areas. The study entitled How to Revitalize a Small Rural Town? An Empirical Study of Factors for Success. University-Community Collaboration with a Small Historic Rural Tourism Town in the Journal of Rural and Community Development offers valuable information on how university-community collaboration can impact the revitalization of small towns (Grunwell & Ha, 2014).

Public officials of Dillsboro, NC reached out to local university staff to help it with staggering declines in economic activity as a result of the tourist train no longer stopping at their station. Local employment consisted of education, healthcare, social assistance, entertainment, art, recreation, food services, and public administration. With limited business attractions and an average household income of $33,500, 8% unemployment rate, and many of its shops closed it needed help in sparking new growth. 

To understand what stakeholders needed and wanted university staff to put together three questionnaires to help gauge the fundamentals of decline. The questions were directed toward:

 (1) town business owners, 
(2) university faculty/staff and students,
(3) visitors to the town.

By cross-examining the similarities of the three different survey results, it was found that people wanted the return of the tourist train, consistent business hours, occasional extended hours during events, stronger marketing campaigns, additional entertainment, a variety of businesses, visible town signage, and enhanced attractions.

Based on these results and university analysis it was determined that the town needed a more robust marketing strategy, business plans that spurred local growth, and many more activities that attract visitors. The marketing strategies that seemed to attract the most people were signage, regional magazines, newspapers, signage, and word-of-mouth. 

Creating small towns of interest relied heavily on the community business owners collaborating under a formal plan and agreeing that each should move in the same direction so that all members can reach higher levels of growth and wealth. They bought into the marketing plans and pushed for greater awareness. Different types of shops that offer were encouraged to join the area, and a partnership with the train company was created to bring it back to town. 

Functional Downtown Spaces: Culture and Functionality as a Branding Opportunity:

The downtown for small and medium towns are an important center of commercial activity but are ill-prepared to take on the challenges of a more modern global environment.  As city leaders decide the fate of the future of their towns by considering the benefits of downtown revitalization projects, it is helpful to move beyond just commerce and services to see how a downtown can also be a cultural center that creates new opportunities in business, values, and branding.

Research on medium sized towns found that it is beneficial to include cultural space in the overall efforts of revitalizing downtown districts (Pazder, 2011). Business districts should be seen through a lens of commerce and culture to help ensure they are vibrant and functional. Cultural identity becomes part of the town's heritage and can make it attractive to new businesses.

Small and medium towns should seek ways to differentiate themselves from larger cities that attract their own demographic. Small town success is rooted in its ability to offer something unique that can't be easily copied by competing areas. Connecting the business district with its historical past blends the new and the old in a way which creates a sense of deep value for residents.

The world is changing through acculturation and globalization. When towns can formulate a sense of identity and a functionality that is attractive to new business and residents, will have an easier time rejuvenating. Skill professionals are often attracted to cultural based cities that provide a valuable lifestyle and business are more likely to invest when the commercial district offers the best chances for success.


Across the country, the old downtown that has sustained commerce for hundreds of years must change to meet modern demands. Transforming the city center into a cultural and functional space offers new opportunities for branding and investment. In turn, that branding can be used to market the town to regional, national and international stakeholders that can put dollars in where common sense city management prevails.


Coming Digitization and Manufacturing Shifts:

Think Tank Scholars at McKinsey Global Institute believe that we may soon experience a boom in worker productivity and increased advanced digitization that will transform society. Their hypothesis is that as the labor market becomes tighter companies will be forced to adapt new technologies that will improve labor productivity and innovation. It is believed that a productivity boom will improve overall output of the country and its subsequent wealth (McKinsey & Company, 2018). You can Read the Research Here

They argue that there has been limited labor productivity growth since the 1960s. There was a brief productivity growth boom between 2000 and 2004 and it was followed by productivity slowdowns. Their argument is that another productivity boom is likely in the near future based on technological advancements.

Digitization will transform many companies because the tight labor market will force them to invest in digitization that is hitting the market. The end result is a boost in productivity that could impact the labor market as we know it. The needed skills and infrastructure may not be available. 

Self-driving cars, greater connectivity, kiosks, and mobile technology are just some of the new technologies that have not yet made their way into full integration. They will likely do so within the next 10 years thereby revolutionizing the economy. Capital investments and experimentation are also likely to rise during this period.

There will be a evolution and revolution to an advanced economy paradigm where companies invest heavily in digitization that improve productivity in order to not be restricted by a tight labor market. This will displace workers without high demand skills and education. It is possible there will be more wealth but that wealth will be concentrated again in fewer hands contributing to income disparity. The positive side is that new innovation leads to greater corporate profits and also results in improved investment and job growth.

While the authors content this is from the labor market there is also the need of corporations in the U.S. to compete. The technology is available and becoming more practical as time continues. There will be a point where it will make business sense to implement it. 

The change to digitization will put new stresses on our current infrastructure that was designed more for the movement of large industrial products from the Industrial Age. Now the infrastructure will need to be improved to include data high way, small production, as well as the ability to move people and large production outputs into the international market. Preparing for these changes allows the U.S. to move into a new level of output potential that can supersede other nations development capacity as well as improve on general productivity and price. 

Influence of Globalization:

Globalization is a trend that has been fully embraced by some and treated as an unwelcome guest by others. The concept of globalization entails the need for change and further development in order to meet its widespread market pressures. Understanding globalization creates a stronger framework for understanding how it impacts international business and underlying perceptions of human capital. Through the development of a greater understanding there is the possibility of better management of global alignment.

Globalization was first mentioned in 1983 when Theodore Levitt explained how technology would drive the world into a single conversational platform that would result in global markets and brands (Govil & Rashmi, 2013). Markets begin to consolidate and new forms of business develop in order to compete in and traverse those markets. Those businesses that do not factor in the changing market and its globalizing effects may be end losers in the international game. 

There are many different ways in which to view the concept of globalization. Globalization can be seen as moving a national state into a global state (Stojanov, 2012). During such transition local workers align skills to the needs of the international community and are capable of working within firms that have international products and services. Companies seek out such local candidates when considering choices of expansion and international investment. 

Globalization is a concept of free trade that fits within a Capitalistic structure (van Meerhaeghe, 2012). Such free trade comes with the movement of products, money, labor, and businesses from one part of the globe to the next. Countries are no longer defined simply by their country of origin but become defined by a more transient global business environment.  More competitive structures create more business interest and investment.

As these products, business, labor, and investment shift from one place to the next there will be locations that naturally lose out on the benefits globalization has to offer. For example, income equality can result in places like South-East Europe or the Commonwealth of Independent States (Elmawazini, 2013). This is due to the loss of investment, poor governmental structures, tax structure, human capital, infrastructure and other factors that make such places more difficult to conduct business and therefore less lucrative for investment. 

As a by-product of greater global awareness human rights and worker rights also become more globalized. For example, globalization of law, legal accountability, human rights, conflict resolution, and doctrines of equal standings become more common (Brysk & Jimenez, 2012). Economics and value systems exist together and as economics become porous across borders the concepts of ethics and human rights also become defined by those new economic assumptions. 

At present, there is no single way to measure globalization. Some indexes measure investment, some economic output, some educational attainment, and others human capital earning power. Each of these indexes has advantages and disadvantages but is limited in scope and effectiveness. Using multiple indexes of important key indicators is more accurate than relying exclusively on a few single benchmarks.

Globalization has both positive and negative effects on economic strength. Those countries that are more capable of aligning their systems to the new global structure are more likely to succeed in the long run. As this transition occurs there will be challenges of basic assumptions, adjustments of wealth, needs for new skills, and times of political upheaval.  What we believe today may not be what we believe a few decades down the road. Times are changing and with this come new opportunities for success or failure.


Developing Hubs with Global Value and Appeal:

Economic hubs provide new opportunities for international significance. Unique products and innovations provides some of the greatest advantages to national growth. Ha and Swales (2012) found in Scotland  that an increase in efficient value-laden products for exportation can help improve the economic development of the region and nation. When products are exported, and profits are realized there is an increase in both the GNP and labor employment levels. The benefits reach into government coffers, corporate profits, investment capital, labor income and national saving rates. Hubs have the power to create collective action through mutual self-interest. 

Many economic theories have come and gone but most recognize the activity of trust and interaction of economic elements. Using hubs steps outside static theory to focus the microscope on a single engine within the economy. The boundaries of the hub may be within a geographic region of a state(s) but it has implications for sales and development much beyond its overall locality. When the hub becomes the central location for the development and investment in similar products and services internationally it has reached maturity. 

Competitive countries can create products that solve customer problems and sell on the international market. When products are sold resources are drawn back to the developers  profits. It is often a circular affair of development and income which furthers future development. The success of the local economy can be summed by the totality of its ability to generate relevant products and services for profit. As the frequency of profit rises and the volume of that profit rises a manufacturing area grows in wealth and takes on higher levels of significance for international investors. 

Those hubs that are more focused on market relevance through developing advanced economies will find themselves growing and employing people faster than other locations. According to the Brooking Institute the nation's 50 most advanced industries employed 9% of the labor force, 17% of GDP ($2.7 Trillion), 85% of patents, 90% of private sector R&D, 30% growth rates, 65% of new jobs, clustered in cities, and account for 60% of trade exports (Brooking Institute, 2015).  

Advanced economies understand where their central focuses should be and design their policies to encourage maximum economic impact. For example, manufacturing is a solid start but manufacturing products no one else can produce creates greater competitive advantages. It is these advantages that lead to reinvestment and growth that eventually come to have global relevance.

Such global hubs have scientific and the entrepreneurial capacities that continue to seek advantage and benefit. It is this type of leading edge industries and employers that will continually earn higher profits because they are the first to capitalize on new ideas and information. Hubs that have an abundance of industries that attract people with forward thinking ideas can quickly grow when markets shift and new opportunities present themselves. 

Economic hubs are developed in part by fostering innovation through higher education, creating more efficient governmental over-site,  and fostering the skills needed to maintain the industry (The Global Competitiveness Report, 2013-2014). Even though they have a financial outcome the process that leads to this development includes human motivation that invests the money, starts businesses, attend jobs, and learn new skills.

Hubs are made of varying components but the human being (i.e. the fisherman) is the main entity within the system. If the person is in an environment that rewards motivation, provide resources for development, and capitalizes on entrepreneurial spirit the hub will grow. Like-minded people sharing similarities of knowledge and working in proxy with each other and learning from each other create a cluster of business activity. These clusters become the internal mechanisms of the hub it self just like cells are part of a body, and cells contain components that have specific functions. Strong cells will grow and develop while dysfunctional cells will decline. 

Bottom-Up Cluster Management Style:

Each country managers their clusters in different ways depending on their cultural and economic backgrounds. A study in the Administrative Sciences analyzes six biotech clusters in Japan, Germany, and France helped to determine which approaches each uses (Okamuro & Nishimura,2015). What they found was that clusters typically take a bottom-up versus top-down approach to management that leads to different costs and benefits.

Bottom-up driven clusters are initiated, driven, and financed mainly by local firms that seek self gain within the system. Top-down clusters are publicly funded and pushed by policy makers.  Cluster management can run the whole range between these two approaches.

Bottom-up clusters appear to be more cost effective for countries that seek to develop homegrown skills based on previous businesses within the region. It doesn't require high amounts of excess capital to "force" these clusters to emerge but instead uses policies that seek to set in place the right conditions that lead to organic growth.

1. Government incentives in terms of tax breaks and research funding support are positively associated to private-driven clusters.

2. Private-driven clusters tend to support private-driven bottom-up management styles.

3. High-incentive cluster policies is consistent with private-drive bottom-up cluster management.

The study helps us understand that the development of clusters doesn't need to be an expensive proposition but that government should put in place appropriate incentives to create the right environment that supports cluster growth. Government has a significant place in passing pro-cluster policies and supporting research that comes out of such clusters. They should pave the way through tax breaks and better city management that leads to attracting and locating businesses in close proximity to each other based on shared similarities.

America's Need for a Pro Business Environment:

Successful environments foster small, medium, and large businesses to provide both growth and stability. Small businesses offer innovation, medium size businesses flexibility with their resources, and larger business offer greater resources to fuel higher global penetration. The economic system should ensure a pro-business environment that sponsors the development of different sized businesses for maximum stability and expansion.

Fostering the innovative development of small business with hubs fosters national innovation. Even though there is a delayThe activities of entrepreneurs become pitry dishes for new mixes of ideas, knowledge, skill, financial capital, and physical resources.

The effects of this constant experimentation and growth is realized on a national stage. As new businesses generate and grow they encourage stronger in-state and regional economies (Donald, et. al., 2009). When states build the right business environment they begin to create larger synergy among proximal states much like an expanded version of businesses development within a particular hub.  

We can see this occur in regional manufacturing centers that may revolve around a particular city but stretch into neighboring states and cities. The automotive industry being a perfect example how how core competencies and success in one area stretched to suppliers, colleges, and politics throughout the region. Hubs are designed to foster this synergistic growth and raise the wealth and wealfare of an area.

A report by the European Commission (2011) found that 50% of job growth can from 4% of high growth SME businesses. These same small businesses also contributed to 50% of the innovation. Small businesses have the ability to be nimble and adaptable in the market which fosters their growth. Taken together these businesses can be a catalyst to ensure economic growth and development when larger organization have become fossilized.

Small business supports the economy and larger businesses by providing job opportunities to obtain new skills. Goldman Sachs estimates that nearly 64% of all new jobs over the past 15 years were from small and entrepreneurial businesses (Shepardson, Nov. 22nd 2013).  Small businesses hired the most new employees, 40% of all high technology workers, and produce 13X the patents of other employees.

Likewise, according to the Small Business Administration 66% of all new jobs since the 1970’s and 8 million jobs (big business eliminated 4 million jobs) since the 1990s were generated from small business (United States Small Business Administration, 2014).  Small business not only employs many Americans but also further develops skills that make their way into other businesses as workers seek out new opportunities and move to other regional companies.

Small business act as a point of investment and innovative development. Chang and Cui (2013) found that national innovation has three common factors that include direct foreign investment, international trade, and R&D development. Hubs are created through developing the intellectual, social, and economic capital to export products on a global basis. As more products are sold on the international market the economic system continues to expand through reinvestment. 

This level of development is difficult unless new skills are being developed. The entreprenuerial mindset tries, fails, and continues to develop. Knowledge can be learned through studying through universities or through actual practice. Strong universities and a pro-business environment offer the entreprenure greater opportunities to develop new ideas and products. 

A report by the UK Department of Business and Innovation Skills (2013) states that higher education brought forward 20% of economic growth between 1982 and 2005. Likewise, it brought 1/3rd of labor productivity increases between 1994 and 2005 as well as lowered costs related to crime and increased societal cohesion. A strong university system matched with an entreprenurial spirit and an SME medium is most beneficial for economic development.

  Knowledge, entreprenurial mindset and business all convert resources to higher value products/services. The development of technology and improvement of the productivity of labor can turn lower value natural resources into higher level exports that raise the financial sustainability of a nation (Brestschger & Valente, 2011). A probusiness environment must have an essential framework, as envisioned within a hub, to continue to develop to higher systematic existence.

Stronger nations are produced by drawing in all of the economic components in synergistic development. Each person enters the market with their own needs, desires and wishes. Engaging in the economic market means that the development of a system is partly psychological (Raines and Leathers, 2011). Without development oriented micro-decisions made by entreprenuers the macro system will not develop. Small business and individual employees are just as much a part of development as large corporations and the political environment should foster a pro-business environment for sustainable economic development.

Creating National Advantages:

Over the centuries societal development transformed our way of life in ways we were not aware would happen. We move societies that were agriculture (resource based), to urban centers (production), to a mix of production and services (post-industrial society) (Tvaronaviciene & Lankauskiene, 2013). Technology keeps changing and with it the social structure adjusts in ways that create new economic patterns and platforms. Governments who are rigid often find themselves unable to adjust and keep up with market forces. 

 Trying to thwart societal change and development has never worked and perverts national competitiveness in a way that leads to difficult adjustment problems later. Legislation should seek to make the changing process easy and fluid in order to keep the nation innovative and on top of the market. 

The strongest nations are willing to change their policies based on environment developments creating just enough stickiness in decision making to maintain social stability and encourage  integration of economic adaptation. The process of change and adaptation should continue moving forward as a national imperative or future economic lethargy is likely. 

Three Useful Economic Theories for Integration: 

Three useful theories for understanding changing economic development include Adam Smith's invisible market forces as outlined in his book An Inquiry into the Nature and Causes of Wealth of Nations (1776), Joseph Schumpeter's concept of Creative Destruction as discussed in Theory of Economic Development (1911) and Keynes ideas on infrastructure improvements as postulated in his work General Theory of Employment, Interest and Money (1936) (Willis, 2005).  Each theory acts as a pool of knowledge in the academic community but can be bridged with appropriate economic research and development where ideological 'truths' have positive contribution to understanding.

Successful use of economic theory rests on the ability to enact solid policies and actions that lead to beneficial results. Science has been pushing for integration of fields and more depth in theory that can comprehensively explain phenomenon in our environment.  Long standing discussions and disputes related to theories developed by Adam Smith, Joseph Schumpter and Keynes have led to political encampment and limited perspective on how these theories represent a more unified explanation in the greater economic discussion.

While John Maynard Keynes brought forward the notion that government should spend money during downswings to boost the economy his theories have been somewhat discredited while many governments still use these theories to justify poor fiscal policies. Theories by economists like Milton Friedman moved forward in the field as their explanations held more true to market events. Despite this, some of Keynes concepts still maintain their validity when discussing infrastructure but should be used in appropriate relation with other successful explanations.

It isn't that his theories are all wrong it is that they only represent the economic phenomenon under limited conditions where it isn't used as a justification to operate continuously in "crisis" mode. For example, government investment in projects that don't produce a return contribute to national debt by arguing more spending stimulates the economy. The argument is truly dependent on the cost and return of projects. All theories are only possible explanations that are adjusted as new knowledge and information are created. Combined with entrepreneurship and the free market models it can be beneficial in explaining the need for future infrastructure investments in ways that lead to national growth.

Theories As Applied to Clusters and Infrastructure:


Businesses that are profit oriented will do what they need to earn revenue. However, they are not always collaborative beyond short-term projects and interests. Large scale investments and development are created by government to enhance quality of life and economic growth. Roads, Internet, sewers, sidewalks, etc... have an impact on multiple stakeholders at one time and contribute to both quality of life and business development.

These expenditures should be based on long-term market and business trends that have the best chance of improving the economy and jobs. Infrastructure becomes a platform by which human ingenuity and ability create new products. Adam Smith understood the powerful effect of the free market and intellectual/human capital contribution to global competitiveness.

As the invisible hand exerts pressure on existing companies, it is intellectual/human capital that helps these companies adapt and regain their position in the market. This becomes increasingly difficult without appropriate infrastructure to share knowledge and resources in a way that allows for socially additive construction of new ideas and products. Businesses that desire to lead the market will need information rich environments for fast pace adaptations.

Market changes offer opportunities for companies to hedge skilled workers to create competitive advantages that lead to additional revenue and jobs. A change in market forces changes everything around it and how people approach the market. Maximizing opportunities to receive and share knowledge and innovation leads to higher levels of adaptation. Efficient infrastructure encourages the millions of transactions that result in growth.

Businesses function best within clusters that help them capitalize on infrastructure and work within socio-economic system that further cross feeds industries. People share knowledge and resources in their cycles of growth and further business interests. Joseph Schumpter believed these states of stagnated growth and entrepreneurial regeneration became a cyclical method of creative destruction whereby the old die and the new are created in a way that advances the entire system.

Solid infrastructure that speeds transactions helps businesses move faster through these cycles of growth and development . Wile some will develop and some will fail when they don't meet market needs the process will be faster. The right environment helps companies to develop faster and bring their products to market through greater rejuvenation and innovation. Infrastructure speeds up transactions and in turn catalyses the natural cycles that lead to significant national advancement.

Keynes theory helps us understand the importance of infrastructure investment that leads to socio-economic development that supports the quality of communities.  When local entrepreneurs start businesses using the existing infrastructure they create core competencies and societal improvement much like the Invisible Hand Adam Smith proposed.   Schumpeter helps us understand that self-interest leads to innovative boom and bust cycles that keeps the economy growing. This innovation comes from sharing ideas and resources within efficient clusters that maximize the interactions of economic elements. Business can only be as strong as the socio-economic networks in which they exist that encourage the millions of transactions that lead to growth.

The next level of economic development is not well defined and may rest in the Information Age where the inter-connectivity of business, government, education and entrepreneurial citizenship coordinate to hedge  new technologies that create national competitive advantages. A new theoretical system will require capitalizing on the knowledge of the past, successful integration of leading models, and real life information that ensure national decisions are most likely to achieve their targets and protect America's future economic interests.

Emerging technologies offer greater opportunities for product and service development on a global scale that contributes to economic expansion. Information moves freely across borders creating new economic connections (vines) and reordering economic structures in a way that most people today are not familiar with. Creating models of how businesses act and react with the global market helps government develop stronger fiscal policies. 

We are no longer isolated nations where decisions in one country only impact that country. Ideas travel from one side of the globe to the other within minutes and this will have a significant effect on how we work, learn, and live. Finding ways to navigate that world in a way that creates a solid framework for making economic policy that maximizes the country's ability to increase jobs and opportunities for its people should be an important consideration for national leaders. 

This is not the first time major economic transitions occurred in ways that changed economic fundamentals. Movements including the Renaissance, Age of Enlightenment, Industrial Revolution, Post Industrial Society and.....(an undefined era of the near future). The development of virtual technologies will shift our fundamental economic trajectories creating periods of chaotic adjustments and then economic homeostasis. New winners and losers will be created based on their competitiveness on new economic factors. Obtaining a grasp of that change and learning how to capitalize on it will determine which countries will win and which will loose in the global arena.

Economic Growth Influencers
Market forces will ultimately determine the success of any national system. If restrictive policies damage entrepreneurship and business growth it will leave the nation less competitive over the long run. Government has the responsibility to ensure that all of its people engage the economic system and that infrastructure improvements have the greatest impact for national development. When market forces, infrastructure and entrepreneurial development come into alignment the system grows rapidly and dominates the market.

Market Forces: All forces that impact local, national, and international activity. Market trends and consumer demands that impact purchasing behavior.

Entrepreneurship: All activities that are designed to turn a profit or improve current products. Research, innovation, business, investment, micro-business, stock market, etc. are part of the same profit-seeking behavior that motivates people to improve their financial position. Free markets are generally better at promoting financial gain.

Infrastructure: All large scale and institutional aspects of a society that create a competitive playing field. This includes roads, highways, electricity, universities, tax systems, quality of government, democratic structures, information, education, Internet, etc. Investing in infrastructure has an impact on the entire grid and the businesses connected to it.

When each of these components are in balance there will be significant growth. For example market forces will push nations to adjust their products and services to meet those market needs. This can only happen if the entrepreneurial spirit is strong and fostered within the system. The right infrastructure investment and development is needed to lower total transaction costs among a wide variety of competing businesses.

When countries cannot adjust their infrastructure in a way that leads to greater entrepreneurial activity or the entrepreneurs within the country don't speed up profit-seeking behaviors to meet market needs then decline will occur. Nations can be locked out when other nations fill these market needs and make market entry more difficult.

Likewise, inefficient and/or corrupt government takes away needed resources from infrastructure development. Instead of putting the money where it makes the biggest impact the money is spent on unrelated pet projects and programs that produce little return for the nation.

There are a number of ways a balanced economic system can produce more value and contribute to national development. Labor and entrepreneurship are similar in this discussion. According to John Kenneth Gabraith in his book The Affluent Society (1958) the output of the economic system can be improved in five different ways:

1. More engagement of productive resources such as labor and capital (including materials) by eliminating idleness. 
2.  Labor and capital can be combined in a way that can better meet consumer tastes in products and services. 
3. Increasing the supply of labor. 
4. Increasing the supply of capital. 
5. Technological innovation can be better used to improve labor and capital. 

Growing systems will use their technology and intellectual capital to enhance labor and capital through higher development in education, innovation, technology, efficient use of resources, and greater development of international market competencies. New theoretical models are needed to ensure policies lead to lasting development and change that improves upon labor and capital utilization in a way that maximizes wealth and opportunities. 

In alignment with the ideas brought forward in The Affluence Society highly skilled labor is better able to thrive in the new economy than those of the past and will are able to adapt new tools of trade. Labor skill is enhanced through increasing technology and the efficient improvement in supply of necessary resources. When the factors combine with increased investment and market relevant production the economic system begins to grow in strength. 

Local economic hubs are a beneficial focus for theory application and analysis. It is possible to better vision how the entrepreneur, market, and government influence on a city and its surrounding communities. It creates a "chewable" system of management that allows investors and stakeholders to formulate a clear understanding of how their actions contribute to and influence the entire system. The American democratic system is based on the layers of social, political, and economic influence that start at the local level but contribute to national competitiveness. Raising the stature of local hubs through ground up initiatives helps to create sustainable economic systems that dominate the market.

Hubs as Experimental Designs: 

One of the best places to enact change is within the definable transactional borders of regional hubs. Economists have begun to realize that by focusing on regional economic development they are able to create greater competitiveness and integration with world markets on a manageable scale (Flynn, 2014). This development has an impact on the immediate geographic area and can be used to foster national growth based on the measurements of equitable income distribution, GNP increases, GDP increases, productivity enhancement, and international competition (Kim & Kim, 2002).

Each region has its own strengths and weaknesses that can be used as a foundation for developing stronger economic hubs. Customizable economics means that we can adjust local development to the actual needs of local citizens to enhance their particular strengths while still working within a national economic framework. Hubs offer local adaptability with national influence that leads to better management.  

Hubs are small enough to measure, understand and develop while still being large enough to impact the livelihoods of residents. Successful models will become emulated in other places as their utility is validated. A generic but customizable model allows for maximum utility based upon the uniqueness of each area. The very nature of science and experimentation allows for the development of a model, implementation of ideas, and then readjusting that model to greater performance. Building off of existing successful models allows for customization with a basic adaptable methodology.

Before developing a working model it is necessary to understand related existing frameworks. It is possible view this complex system through the kite model which postulates that the internal clusters and workings of a country lead to their competitive position within the marketplace. The Kite model is based on a combination of the Flying Geese Theory and The Diamond Model. 

The Flying Geese Theory shows that countries compete with each other for market position (Kaname, 1962) while the Diamond Model helps to show how internal clusters and the elements of Factor Conditions, Demand Conditions, Related/Supporting Industries, Firm Development, Government and Chance come together to help economies grow (Porter, 1990). 

Globally focused hubs are based upon the internal abilities of companies and their connections to the outside world. Selling products internationally is difficult if companies are not developing properly for international competition or if they don't have sufficient network clusters to create innovative outputs. The Kite Model helps to explain how each of the international and environmental aspects operates together to create the right mix for national development (Yu-Jen & Hsiao-Fong, 2012).

Hubs should be built on local human capital and physical resources that ensure competitive production. Ricardo’s theory of comparative advantage shows how companies that manufacturer products cheaper in one country can trade with other countries that have different competencies to create higher value (Ricardo, 1817).  In the international world these hubs may draw resources and information from across the globe and sell those products internationally.

Hubs are magnets for investment and experimentation. They have internal working clusters and parts that function together to continuously realize new ideas and productions. The hub needs investment dollars and the proper internal resources to put those dollars to more productive use. The catalyst within the hub model is the entrepreneur who uses the financial capital to better connect resources to create new forms of innovation.  Governments that foster hubs will find increased market efficiency and alignment of resources, labor, intellectual knowledge, and investment interest.

Placing Countries within the International Supply Chain:

The world economy consists of millions of large and small networks that span from one country to the next. Ports-of entry and exit are key determinants of product flow and economic strength. The same process works in reverse for ports-of-exit. The strength of a nation's supply networks, and its position within the global supply chain, helps determine its ability to growth economically through the movement of products and goods.

Ports, railroads, airports, and highways influence economic growth potential as products find their way in and out of the country through the most efficient and cost effective pathways they can. Connectivity in the world-system increases spatial polarization toward global cities in a way their favors economic activities (Friedmann, 1986). Better connections attract more traffic that in turn increases business opportunities.

Cities that have placed themselves strategically, or by good fortune were geographically located in an advantageous locations such as rivers and trade routes, have historically found themselves more wealthy and more cosmopolitan centers of innovation and development. The principles that have applied in the past continue to apply today in a way that influences the wealth and viability of nations.

Globally oriented cities think of their ports, airports, highways and railroads as an important pieces of the puzzle of becoming a global shipping center. Investment in these areas leads to greater economic growth when significant internal industrial and business networks have been fully developed. Networks reach to other major shipping networks and centers that connect international economies together.

Supplies and products come in, are converted to higher value goods, and shipped throughout the country. In reverse, raw goods and parts come from the region, are converted into a higher value products and shipped to overseas markets. The business ability of each city will determine what type and how much value they can create.

China found that after they invested in the development of their ports they also realized significant economic growth throughout the region (Song & Geenhuizen, 2014). These infrastructure investments had spill-had effects that reached into various areas of the country. Increased import and export activity opened new opportunities for regional businesses that further justified increased investments.

Think of the world as a round sphere of railroads, highways, shipping lanes, and air traffic routes.

Connecting a city to global networks does take some analysis. Such cities should have a solid manufacturing and technology base to improve and convert incoming and outgoing products. Investments in shipping infrastructure should be based on the needs of the international market and the capacity of the cities current position within existing global supply networks. Likewise, constant development of internal networks is necessary for value building for distribution to markets.


Trade Agreements and  Government Strategy: 
Growth is not possible if government doesn't foster the right trade agreements to draw new resources and capital. To enhance economic hubs it is sometimes necessary to strategically align free trade agreements to ensure that lower value resources are being brought to the hub for higher level conversions. Growth requires cheap imports of raw materials, technology, and knowledge. 

Not all agreements are the same. Those that favor the necessary resource attainment needed by the business community and allow for product redistribution overseas are more important than simply important cheaper products that could competitively be produced in the U.S.

Trade agreements fit within the hub and spoke model. When properly aligned each spoke has access to the hub but the hub has beneficial market access to all of the spokes (Chong and Hur, 2008). The more the hub is connected to the market channels of other nations the greater wealth it can generate.

The central hub has many more advantages than being in a secondary market. As a centralized hub most products and services are filtered through its system thereby offering higher advantages of resource attainment and sales. Market reach is longer and spreads like economic vines back through the resource chain.

Fostering growth will require economic hubs to integrate into global markets whereby they can both draw the most resources as well as sell the most products. This integration can come through Free Trade Agreements, Customs Unions, Common Markets, and Economic Unions (Holden, 2003). They are not permanent agreements but can be used at varying times to ensure the hub is integrated into the market at the right places to foster growth.

Treaties and trade agreements improve on the development of a nation's growth opportunities. Even though political instability increases the long-term growth of the nation continues upward (Chaudhry, 2011).  The political structure should encourage growth, flexibility, and accurate information to change and adjust to ensure maximum potential. 

As a world Super Power the U.S. has the ability to leverage its economic might to create economic hubs based around industrial skills to respark manufacuturing and innovation in the country. Treaties are general leveraged in the favor of the more economically powerful member as emerging economies seek to obtain new investements (Chikere Azubuike, 2013). Using our reemergence to create a stronger system is beneficial for future generations. 

As treaties are made and developed they naturally come with additional benefits of promoting American values like free markets and human rights (Choudhury, 2009). These values being congruent with the American economic system that encourages other nations to engage in the development proces. The hub being the central position where all participating spokes connect thereby allowing for economic and moral transferrence. 

Open markets are more likely to develop than closed markets. We see this occur throughout history closed off societies that become poorer over time. When tariffs are enacted it often lowers knowledge and increases the skirting of national laws (Rotunno & Vezina, 2012). Laws must help encourage and foster business and opportunities. Nations should want to invest in local clusters and the policy should be as easy as possible. 

Lower tariffs means products and services move more quickly. Products may be physical or virtual by nature but are often restricted and hampered by improperly designed tariffs.
An analysis byDrzeniek-Hanouz & Doherty (2013) found that if countries moved half-way to best practice there would be a 4.7% GDP increase, a moderate reduction of restrictions would improve GDP 2.6%, and a removal of tariffs would result in a .7% increase in GDP. Improper tariffs are hampering national growth.  

When hubs produce the right type of FTA agreements that foster growth they are able to recognize economic benefits while reducing global risks of economic loss (Chong & Hur, 2006). Developing a stronger hub will ensure that an area (or nation) is at the center of economic activity and product/service exportation. Those at the center of the hubs create greater opportunities and investment due to duty-free access of all participating members (Wonnacott, 1996). Super hubs are able to hedge their trading interest with other hubs and associated supply nations by creating greater access for sales/exportation while finding sources for cheaper input materials.

The plan should be draw in those resources and capabilities that can enhance the system. According to a study by Kanter (2003) it is beneficial for hubs to use thinkers, makers, and traders to be successful in innovating the market. Thinkers are your researchers, creators, and developers that bring forward new ways to compete. Makers are the skilled labor, businesses, and other entities that ensure the products are generated. The traders are those who distribute and sell products to the local, national, and international market.

 Before an area can be successful the following  factors should come into play:
  • 1 -Visionary leaders who have a clear economic strategy and recruit international companies.
  • 2-A hospitable business climate and positive work ethic that attracts innovative companies to make long-term investments.
  • 3-Strong training and upgrading of worker skills.
  • 4-Collaborations between businesses as well as business and government. 
Free Trade Agreements can make a big different in expanding economies. San Diego Asian-Pacific trading partners include Mexico, Japan, Canada, Australia, Chile, New Zealand, Singapore and more which represents over 500 million consumers with a GDP of 12 trillion (Sanders, 2015). Exporters are often smaller but do have the ability to produce more and sell more with the right international game plan that leads to stronger free trade agreements that help ensure the region and nation stay international innovation leaders. 

According to EL Namiki (2013), organizations (i.e. entity) should consider the concentration, competencies, focus and end game within its market approaches. The same process applies to economic hubs and national development. Regions should understand where they want to go and how  they fit within the national development context. You can visual this in the California San Diego hub:

Concentration: Worldwide markets mixed with large and small industries. Growing international demand for seafood products, new technologies and micro manufacturing. Room for market entry.

Competencies: Local history and human capital knowledge in fishing, tourism, education, environmentalism, military, ship building, pharmaceuticals, technology, and micro manufacturing. 

Focus: The development of an economic hub around the Blue Economy. Implementation of industry knowledge transfer, technology infusion, product development, and national/international marketing. 

End Game: Blue Economy maximization that connects to other hubs with their own unique contributions to national development.

Encouraging International Trade While Still Fighting Intellectual Theft:

Intellectual property theft, hacking and lack of regard for other ideas is becoming a concern. Even more alarming is the amount of theft that occurs across international borders as some nations have developed cultures of stealing where the rights of the producers are not respected. Precisely why some countries, and the companies within, engage in intentional acts of intellectual theft is discussed in Trade Liberalization, Corruption and Software Piracy published in the Journal of Business Ethics.

Culture of Corruption:
Cultures that have more corrupt governments also engage in more theft. They have little oversight and lack a healthy respect for the rights of their citizens as well as the rights of those from other countries. Within develops a culture of corruption where theft is part of everyday business and there are few ethical qualms about it.

Economic Freedom:
Countries that have more restrictions on economic activities also have more corruption. Free trade countries seem to have less corruption while those that have more governmental barriers to movement of goods and money have more. Part of the reason could be associated with a lack of competitiveness within isolated nations.

Countries can be highly innovative by seeking new solutions and products to compete within the global economy. Some countries may suffer from a lack of competitiveness and therefore seek to copy others work as a cheaper alternative to making money. When new products hit the market, they are willing to steal their information in an effort to create profits.

This makes trade more difficult when international intellectual rights and laws are not appreciated. Most international companies engage in a level of risk management that determines approximately how much of their products will be stolen. Ensuring copy write and intellectual protection guarantees and potential damage compensation when passing treaties is helpful in combating these activities. Another option is to shun and isolate high theft countries leaving their economies weaker until their government enforces international standards.

Government and International Investments: 

Governments can influence the rate of domestic and foreign direct investment (FDI) to improve their local economies. FDI that seeks lasting interest and resources from international entities creates opportunities through transference of resource allocation from another economy to a local one (UNCTAD 2007, 245). Governments become deal makers and marketers that keep investment interest alive.

New revenue and investment helps to rejuvenate businesses and keep interest and focus on a regional hub. Lucrative environments attract foreign investment through the potential for higher profit returns. Investors seek to invest in those areas that have the right kind of businesses that fit within changing market trends and are likely to offer the highest rates of return over the longest period possible. 

Governments seek to spur this investment but are often unable to do so adequately. A concept called principle-agent can help explain how the government seeks an area of development and the agent is willing to engage in such activities (Eisenhardt, 1996). Governments are the agents of the needs of the people and should encourage greater international investment to ensure they are fulfilling their responsibilities.

 Through proper management hubs should have access to more investment money than the spokes or smaller regional hubs (Wonnacott, 1996). Maintaining the investment activities for an area means government is the producer of information. That information comes in the form of understanding their hubs and knowing how to manage the areas in ways that produce the greatest opportunities. 

Once such information is available it becomes imperative for the government entity to share it with the public and potential investors that would be receptive to new opportunities. Governments are agents for their people through the creation of knowledge and opportunities through drawing in stakeholder opportunities to their markets. Government is an influencer in the investment process.

Government market mapping should maintain and track projects, their investment draw, and areas where further investment is likely to be beneficial for the investment community, government, and the local population. The information must be based on accurate and transparent data that help others connect to those very same conclusions.

International organizations seek out locations that have assets, proper organizational/institutional structures, and information to create growth markets (Paniccia, 2002). Information is used as a catalyst to improve upon the development of the region through spill over effects of organizational growth and profits. Information between companies, societal sectors, and government guidance can encourage the development of marketable products which further encourages investments.

We can see an example where San Diego has partnered with five other locations through a new program by the Brookings Institution to draw in foreign investment (Horn, 2014). The goal is to pilot San Diego, Seattle, Columbus, Minneapolis, Portland and San Antonio to encourage collaborative efforts with foreign investors to encourage growth and employment development. According to San Diego Mayor Kevin Faulconer “San Diego’s strong ties to international markets, high-growth industries and culture of innovation mean we have the necessary ingredients to attract foreign direct investment to the region.

When foreign direct investment, as well as personal and business savings, are used to invest in local businesses the economy continues to expand  (Todaro & Smith, 2011). The encouragement of an investment environment through multiple business ventures that hedge investment risk through adequate information can be beneficial. Investors should feel that through multiple opportunities as presented in greater regional platforms that money is better spent in direct investment opportunities for growth. The business communities money provides a major engine and catalyst to expansion but the knowledge of where to put that money is of tantamount importance.


How Applying the Right Tax and Investment Incentives Leads to Economic Growth


Governments are always looking for new ways of enhancing the economy and putting it on a competitive stance. Throughout the years there have plenty of ideas that came and went. Ideas are often as plentiful as the politicians that bring them forward and the business investor class that seeks to make profit off of change. The opportunities to grow the economy why creating a strong return on investment from investment opportunities makes the fundamental difference between those cities that can grow and change and those that will die.

The entire cluster acts as a organism with lots of working parts. It is always adjusting, moving, creating, destroying, and working to fulfill its ultimate purpose. For the businesses in the area the purpose is return on income while for residents that may lay with quality of life and opportunity. Because collective organisms grow and change they have different needs to fulfill their existence. As they decline and change new money and ideas is needed to grow them again. If investment opportunities meet growth cycles the entire system can grow quickly.

Cluster stages of development have different needs at different times to help them grow healthy. Similar to company stages such as introduction, growth, maturity and decline a cluster will also grow and decline through different stages. In the beginning it will need entrepreneurs and angel capital. When it is in the growth stage it will need an influx of capital and supplier businesses. Eventually, when the companies within the cluster no longer produce meaningful products they will decline without reinvestment and rejuvenation of purpose.

Each stage needs its own type of investment at a particular time. As these stages grow and change investment in the infrastructure of the system, as well as investment in the companies within the cluster, will be needed to create the biggest impact. Investment in companies that exist within a growing sector will help the entire network of companies grow while investment in the infrastructure will allow the entire system to grow.

Infrastructure investment improves the overall growth prospects of all companies within the system. For example, providing investment in entrepreneurial creative spaces may help launch ideas but investment in education leads to long-term growth once these business have developed to a point where news skills are needed. The same can be said for high speed Internet, roadways, social places like bars and restaurants, housing, parking and just about everything else the clusters need to grow. Different times, have different, needs as the company moves through the different stages. While a random market hand may work government can apply the right pressures at the right time to speed up this growth.

Providing tax incentives and other incentives relevant to the stage of growth based on the needs of industry clusters encourages a coordinated boost to economic growth. Government should seek to maximize on existing trends and do so in a way that the return on investment is greater than any cost to public resources. Through strategic and scientific approaches government can continuously grow their coffers to catalyze additional growth into the future. As the investment pays off in terms of new money, employment taxes, and generated commerce it can reinvest this money through additional incentives and infrastructure improvement.

Coordinated institutional investors can create a big impact on the potential success of the companies. Their profits are derived from the ability to return greater value. In clusters, that value is created when multiple interrelated businesses attract new profitable business.  Pack investing can put the needed capital at important places within the cluster network that have the greatest return. They can "light up" the cluster network with injections of cash and liquidity to ensure that the growth stages are well lubricated and have what they need when they need it. Investing in groups of clustered businesses enhances all of their performance because they work in the market in collaboration as much as they do in competition.


Industry and government can work together to create something new that profits business, people and government. Yet they need to think about proper coordination of their efforts. When clusters move through different stages government can catalyze growth by providing the right incentives to attract growth and investment that later leads to "profit" through economic growth and tax revenues for government and greater returns on investment for investors. Research and awareness into how economic systems work opens the door to new possibilities of economic rejuvenation.

How Reducing Taxes Leads to Head Quarter Movement and Investment

Being the intellectual center of the world has advantages for economic growth. As headquarters move to the U.S., or any other nation, they bring with them their intellectual capital and significant investment in facilities within their location. To encourage companies to move their headquarters and their manufacturing centers to the U.S. it is necessary to create an investment rich environment by lowering corporate taxes.

High tax rates adversely impacts foreign and domestic investment (Abbas & Klemm, 2013). As the tax rate increases, companies seek to put their money into other markets as each % of tax increase has a direct impact on the bottom line. We have experienced the effects of this phenomenon when U.S. companies invest heavily overseas by moving their administrative offices and manufacturing centers overseas to avoid tax liabilities.

We have to think of this issue from a corporate investment standpoint. When the cost of taxes is significantly lower in countries and the amount of dollars being taxed is in the billions it would be wise to move headquarters overseas if there is no major impact on management or company health. While one could make moral and patriotic arguments, the end result is simply the same...the dollar return on investments makes the difference.

As the tax rate increases it has also has a significant impact on the value of the parent firm and its affiliates in foreign markets. Multinational firms are interconnected to the point where a 10% increase in the tax rate at a company's home country reduces capital stock value at foreign locations by 6.5% (Becker & Reidel, 2012). Firms therefore have big incentives to avoid corporate taxes at their head quarters and all of their subsidiaries.

It can be difficult to calculate such a impact throughout the entire corporate network. Yet it determines whether or not a company should invest or move their head quarters to another country. If the U.S. wants to encourage companies to move their intellectual centers to the U.S. then they will need to offer lower tax incentives. Once these centers are attracted and moved to the U.S. there are often other investments opportunities throughout these companies' supply networks as they also move to be near the parent company.

Can Innovative Clusters Protect the Economy from Recession?

Recessions can be brutal and countries often suffer from the magnitude of global changes and shifts that can impact their economic well-being. While they search for solutions to strengthen their economic position among lower cost emerging nations they should consider the benefits of developing clusters. According to a study entitled Coping with Economic Crisis-The Role of Clusters published in European Planning Studies, clusters offer a ray of hope in fortifying an economy from recession.

When the global economy adjusts there will be winners and losers. Some nations will pick up additional manufacturing while others will lose manufacturing. When times are good more people will be employed, while when times are bad people will be unemployed.  Europe and the U.S. has lost jobs over the past few decades due to the cheaper cost of manufacturing in places like China, Asia and India.

The only true competitive position that Western countries can make is to be more innovative and development oriented than emerging nations. They must lead the market with new products and services in order to ensure their offers gain the most market attention and interest. Clusters offer an opportunity to capitalize on Western ingenuity in a way that keeps manufacturing and jobs at home; even when the global economy shifts.

The study looked at Norwegian clusters and used surveys and data from four cluster organizations to determine how they acted under economic pressure (Skalholt & Thune, 2014). The economic time-frame use for the study was a recession from 2009 to 2010. They looked for innovative strategies, roles and activities of the clusters during the crisis, and the differences in behaviors of mature clusters.

The study found that mature clusters adapted to economic recessions by putting forward new innovative strategies, increasing collaboration with other businesses, and engaging in developing their workforce. A big concern was that lenders slowed down available investment capital and this choked off innovation. The study highlights that when monies were available, clusters were able to overcome challenges by developing new innovative products/services even while the global market was slowing. 


Adam Smith and Limited Government:

Adam Smith, the father of economics taught us in his book The Wealth of Nations, that laissez-faire approaches to the market encourage the highest levels of growth. Government is limited in its role and provide the greatest freedom to business without unnecessary restriction. As we experienced during the advent of globalization, companies regularly choose nations with lower input costs and fewer restrictions. Newly formed clusters will need to offer something more than simply "cheap" costs and instead push for maximum growth opportunities through cultivating environments that supersede advantages of low cost manufacturing localities.

The market system will determine where companies will invest in operations, where they will hire employees, and how they will contribute to the global economy. Low cost copycats will be drawn to cheaper locations, while innovators will be attracted to places that spark the greatest opportunities for the development of new services and products.

One seeks to to focus on a low cost strategy that uses available technology. The other seeks to dominate the market by leading it through transitions with new products and services. Companies that seek innovative strategies will inherently look for locations that have the right elements that foster knowledge accumulation and intellectual capital.

A cluster exists within a local economy with inherent benefits that allowed these clusters to form in a one location over another. Governments create market conditions by attracting or deterring business investments through government policy making. Business-minded global companies do not invest locally out of patronage or loyalty but because they believe they can achieve the greatest advantages by doing so.

Adam Smith states, "Its not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from the regard to their own self-interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages (Smith, 1776)."

As a profit oriented enterprises, governments should move beyond traditional approaches to economics by thinking from the perspective of would be corporate interlopers. What are they looking for, what type of environment are we providing and how do we provide it are essential questions to strong cluster management.

Of course we have choices, and one of them is to not change or adjust our governance to a global marketplace. We can use the same methods, continue to lose corporations, and watch our national debt rise and incomes decline. The role of government is to create polices that are in the best interest of their citizen stakeholders and thus have a responsibility to adjust their thinking when necessary.

Proper cluster management offers opportunities for government to be an environment creator but not seek to fight against the forces that allow are swirling through the global economy. Fighting these forces leads to greater decline. However, they can create local advantages by rethinking some policies that are hurting the ability of business to flourish while at the same time still protecting the needs of citizens.

Nationalism and loyalty are powerful motivators for local businesses but international companies have options where countries are often seen more as tax and cost incentives than believing in a particular national causes. While it is difficult to calculate the amount gained or lost due to corporations moving operations overseas, the amount is likely in the trillions of dollars in tax revenue. Creating strong market driven clusters helps to draw these businesses back to the U.S. because it is their best interest to do so to maintain their profit margins.

Individual Rights and Government Influence Help to Start Economic Clusters:

Government administrators often wonder how to foster business within their cities and improve overall economic development. The debate between more or less government influence has been raging since the beginning of the country. A study of socio-economic clusters in the Applied Economics Letters helps us understand the government influence in the beginning of cluster development is helpful while it may not be as helpful later on (Huskinson & Lawson, 2014).

Capitalistic societies desire to have a "hands off" approach to government while socialist societies want more government influence. Using K-means clustering helps us identify that the free market capitalistic system along with social policies can help get clusters going. At least in the short run, social-democratic systems outperform liberal systems. The reasons might be based in the need to set the "right" conditions for economic growth.

They used a K-means cluster analysis to determine their results. The method is to take observations (data points) and then associate them to the nearest cluster mean. Each new piece of data is added to the closest cluster and helps recalculate the mean. The method can be done by hand but often uses statistical software.

They used an EFW index, with data for five areas:
(1) size of government,
(2) legal system and property rights,
(3) sound money,
(4) freedom to trade internationally and
(5) regulation.

What they found was that the most free nations earned higher incomes, had larger GDP, and life expectencies. However, social based nations had higher civil rights and civil liberties. The essential mix seemed to focus on how those nations where government protects individual rights and the freedoms of individuals had higher cluster development.

This would make sense if we consider a cluster a mini-economy. One doesn't need to adapt a socialist system but simply protect individual rights within the cluster and ensure the right elements are available when a cluster begins. As clusters are innovative by nature it is beneficial to protect and allow for maximum freedoms for individuals to be entrepreneurial within the system.



Thus the study found that the free market system along with protections of individual rights have a significant impact on cluster growth. It doesn't elaborate on why. However, one could put forward the idea that setting the right elements in place based on taxes, development zones, recruiting businesses, etc.. require a collaborative effort to get clusters going in the beginning but may not be as important later on as the cluster businesses find "footing" and their own efficiency. Still, protecting individual rights continues to allow for the maximum freedom of individuals to maintain their entrepreneurial activities.


Keynesian Model:

 The Keynesian model is one method of measuring economic development. Each of the sections theoretically work together to create the economic system. Investments can improve exports which in turn impacts consumer spending and government revenues. Some levels of government spending can encourage growth when they have the widest impact on the business environment. 

The key is to create something of greater value than investment dollars such as greater economic information, more efficient infrastructure, a stronger labor force, or collaborative projects. Direct investments into programs without a significant impact on society does not use resources wisely. Government has a responsibility to ensure that all money is used in a manner consistent with the highest levels of growth. 

In the Keynesian Model  consumer spending, investments, government spending, and exports/imports make up the growth of a nation. When times are tough government typically tries to spur growth through government spending. However, this also raises the debt ration making it more difficult for the nation to borrow and service that money in the future. Eventually government, and those benefiting from government spending, consistently borrow to feed their own needs versus that of the populace. 

Instead of relying heavily on debt it is better for government to get into the numbers and data game by seeking places where the investment by the business community will raise the standards of both business and the populace. Government provides a stronger catalyst by growth by helping companies find places where the greatest advantages may occur for multiple stakeholders. 

The Keynesian Model is written into the following formula: 

AD=C+I+G+(X-M)

C=Consumer Spending
I=Investment
G=Government Spending
X-M=Exports minus Imports. 

X-M Improvement: Economic hubs can increase the Export-Import values as lower priced import resources produce higher value product exports. Factors of Improvement: Innovation, Synergy, Business Collaboration, labor skill, science, information infrastructure, etc.

I Investment:  Economic hubs can increase investment in the area as investors seek to be centralized in the highest value markets (i.e. a global hub). Factors of Improvement: Industry Information, FTAs that Enhance the Hub, Lower Taxes/Costs, Govt. & Business Collaboration, Synergy Opportunities, Business and Personal Investment Opportunities, R&D, science, etc.

C Consumer Spending: As the investment environment improves, products develop, and income rises so does the income and opportunities of residents. These opportunities create higher levels of personal income and consumer spending that support the development of the economic hub. Factors of Improvement: Higher income, Higher Education, Positive Psychological Outlook, Marketing, Housing, Technology Purchases, Social Development, etc.

G Government Spending: Government spending that attempts to encourage economic growth in the  most cost effective manner. Factors of Improvement: Industry Information/Collaboration, Business Districts, Education, Infrastructure, Open Data/Transparency, Government Efficiency, Education, Economic Metrics (GNP, GDP, Income Equity, Competitive Stance, etc.), etc.

Instead of pushing (G) government debt with additional debt, government should spur international investment into American economic hubs thereby raising (I) investment.  Proper investment should lead to profits with international appeal that eventually improves (X-M) the export import ratio. This in turn leads to higher levels of employment which raises (C) consumer spending. If done well the end result will be greater sustainable development of (G) government spending that fosters better data governance, improved infrastructure, and more responsive government. The cycle should continue over and over generating higher levels of improvement for each generation.

Unfortunately, we know that people do not always look long-term to solve problems. It is much easier to borrow and spend today than it is to fix the mechanics that help a nation grow and develop for the future. Deciding where short-term investments will have the biggest bang for the buck can be highly political and create all types of in-fighting based upon which group/special interest is likely to reap the highest rewards from such spending/decisions. The pressure to feed one's appetite now at the expense of others has been studied in varying situations that include children and cookies all the way to political decision making. 

 To help in this problem government should use long-term strategic directionality with short-term financial returns. In projection there is divergence between short term Keneysian models and longer-term neoclassical models that have not been matched well in the literature (Kwok, 2007). This is representative of the fundamental difference between short and long-term thinking in the economic fields. Short-term stimulus is beneficial for immediate crisis stability but it is the long-term savings and reinvestment that helps to create more sustainable systems. It is possible to balance short and long-term needs when decisions are made that create the greatest economic return to the hub and nation. 

Combining Keynesian and Schumpeterian Models

The two models of Keynesian and Schumpeterian models have been at the forefront of modern economic debate often split along party lines. While each of these models have some advantages they are not the whole story in and of themselves. Research by Giovannie, et. al. (2017) helps us understand that these models can work together to encourage proper government policy and economic adaptation and integration. When discussing economic growth models that can help the U.S. it is more intuitive to see innovation as fostered not only by the ability of companies to create and adapt technology but also how government can better ensure that happens.

The K+S model combines Keynesian (demand-driven) mechanisms with Schumpeterian (innovation-driven mechanisms. Using this combined model we find a) search capabilities of firms, b) the pool of technological opportunities available for innovation, c) the degree and breadth of patent protection, d) the strength of market selection and competition.

The Schumpeterian growth model is used to understand innovation and growth within the economy. It rests on growth as a result of innovation and imitation and the diffusion and new products/ideas that lead to more efficient production processes. Innovation is motivated by financial returns and new technologies often replace older ones in a chaotic manner.

Keynesian economics is more based on demand economics which basically says that if people are working then the economy will be good. In this model, government has an important role in ensuring that jobs are growing and government influences the ability of the economy to grow. Sometimes, this is going to require significant investment.

What the researchers found was that an increase in technological opportunities and entrant-carried search have a positive effect on the long-run performance of the economy. Likewise, too much patent protection can damage sharing of information and thus deters growth. There is likely a happy medium of protection and adaptation by other firms but the study doesn't say where this was. There is some positive indication that stronger market competition impacts long-run economic growth. They also found that fiscal policies have an positive impact on unemployment, output stabilization and long run growth.

Neither of these models is true or not true but only useful based on gradation. Combining the models does mean that we can foster creative destruction and innovation by the proper use of government administration. The study helps us understand that government does have a role in encourage stronger policies that raise internal competition and foster greater economic growth. Patents and innovation are important but have their widest use when other firms within a cluster can eventually immitate those advantages raising the economy in the long run. Thus, by creating stronger government policies, pin pointing investment in key areas that improve the business environment, and helping companies to invent and imitate can raise the overall advantages of local economies.
Conclusions

Factors the Influence Hub Strength:
1.     Lowering Transaction Costs: Improving economic development requires the lowering of transactional costs of commerce. Any reduction in repetitive costs such as taxes, banking, or expenditures that impact all commerce in a hub helps to improve profits and encourage investments.  
2.     Clustering Businesses: Business should work in tandem with each other by sharing resources and knowledge to compete on international markets. Areas should develop core competencies that draw international investment and opportunities. 
3.     Attracting Investments: Investments should be focused on either improving hub infrastructure, which increases transaction speed and lowers transaction costs, and/or push development into improving the functioning of clusters within the hub for the creation of employment opportunities.
4.     Government Effectiveness and Efficiency: Government uses resources and a large percentage of those resources are wasted on stakeholders who receive material benefit from taxpayer money. Government should always seek to improve efficiency and effectiveness by reducing waste and improving operations to create a lower drag on society.
5.     Government as an Information Generator: Government has the capacity to generate large amounts of information and data to create policies. Modern technology affords a stronger ability to connect and share information with citizens, suppliers, community groups, and business entitities. 
6.     Government and Project Collaboration: Government is only as effective as those who believe and participate in the process. When government, business, philanthropic, and community groups work together the process of development is enhanced.
7.     International Market as a Guide: Understanding the market and aligning the economic hub through education, economic policies, training, and organizational practices helps in ensuring maximum resource allocation. The hub should continually adjust to meet market challenges and align its internal elements for better competitive positions.
8.     Human Capital Development: Improving access to training and education increases human capital development that employers used to further their business.   Universities, trade schools, community colleges, Internet, public education and corporate training improves opportunities to maximize business investment.
9.     Research,Science and Innovation: Research and science are important institutional building blocks to a stronger economy. Improving technology in an area increases the wealth of an area by creating more efficiency, productivity, and opportunities.
10. Natural Resources to Informational Resources: Moving from heavy reliance on natural resources to intellectual resources based in information raises the long-term sustainability of a hub. Hubs slow their own natural resource usage and important cheaper resources when necessary. 
11. Social Systems and Norm Development: Developing strong social networks among various races, religions, ethnic origins and backgrounds encourages a more stable society that develops shared norms and values. 
12. Functional Police and Fire Service: Investment should be adequately protected against unnecessary loss through functional and effective police and fire service.
13. Balanced Budgets: Systems should maintain balanced budgets to lower costs, minimize unnecessary borrowing, and encourage investments in infrastructure projects.
14.  Reinvestment: Government should be reinvesting revenue in government operations and infrastructure to reduce the cost of government and improve economic platforms. Business should be reinvesting innovation, operations and marketing to stay ahead of competition and keep their businesses growing.
15.  Export Economy:  The economy should be broadly focused on advanced industries and exportable products creating income, investments, and jobs.
16. Egalitarian Society: Society should recognize the inherent value of each person to the nation and seek to maximize human capital through effective policies that do not hinder growth.
17. Systematic Justice: A system that respects the rights of all individuals. Stability cannot be found in aggressive, short-sighted, discriminatory, or ineffective policies. Each member should trust the capacity of justice. 
18. Harnessing the Internet:  The Internet offers opportunities for collecting information, analyzing that information, polling opinions, and sharing information. Information can influence resources and opinions to better ends.
19. Ecological Environment: Environments that retain people should be clean, aesthetically pleasing, connected to nature, and provide an inviting environment where people live and raise healthy families.
20. Corporate Collaboration: Companies will need to use existing business networks to collaborate on projects both vertically and horizontally. The better these organizations share their competencies the faster they develop. 
Five Economic Elements:

Linkages (People, Finance, Resources, and Information): The speed and ability of various sectors of society to connect determines the speed and potential of economic growth. Whether scientists are creating a new theory, businesses building new products, or a the financing for a new facility it is the ability to connect and transfer resources is important. Infrastructure such as Internet, roads, and payment systems makes economic activity possible. The more dense these connections, such as that found in a cluster, the higher the economic activity.

Intellectual and Human Capital: The intelligence and skills need to connect information and resources for financial gain. Technology is an enhancement to human capacity and increases in technology often produce noticeable gains in productivity and profits. Ensuring the population has the knowledge, skills and abilities to overcome challenges is fundamental.

National Structure: The governmental system that encourages profit seeking behavior, protections of assets, trade & commerce, efficient use of taxes, and social stability. Trustworthy governments that use resources wisely and in the best interest of all its people are going to create better environments for full economic engagement.

Culture: How people interpret environmental information and act on that information in culturally accepted ways. The cultural underpinnings will influence economic behavior of the people which leads to national strength. Cultures that are open-minded and progressive will encourage greater adaptation and use of resources while ensuring social bonds are maintained.

Leadership:  Leadership is the capacity to make decisions and lead social networks to overcome immediate market challenges and concerns. Leadership in business, government, education and other institutions helps to ensure the nation maximizes its opportunities by using all the other elements.

The Human Element in All Societies



If we combine a few theories together we can start to see the motivations behind how and why each of us engages in the economy. Literature supports the idea that people make economic decisions each day and nearly all of these decisions rely on their psychological, social, and biological needs. As they navigate both their inner experiences and their outer perceptions they will weigh and balance how to make money, which activities to engage in and where to spend their money. Many of these decisions are in the neuroeconomic choices people make on a very subconscious level.

Nations and economies are built through the the millions, billions, and trillions of economic choices people make that are added up to create a country. Social construction and the way in which cultures define these actions will determine where most people spend their energies in time to strengthen the larger social networks they live within. As economies develop and feed people's core needs and motivations they are able to grow and promote their way of life to others.

The idea of economics starts with the individual in a group setting. These group settings could revolve around ones family but also can be evaluated through cities, states and nations. As a country we are a collective of smaller economic decisions that lead to the success and failure of a nation. The entire field of economics is at its center a study of human behavior and how that relates to profit and loss.

Therefore the success of a nation can be evaluated based on the entrepreneurial activities of its people. When people are making positive decisions that are helpful to their fellow countrymen and contribute to profitable actions the entire nation can grow. When these actions detract from their fellow countryman then the trust and glue that holds a nation together begins to decline and the nation declines with it.

Ensuring the best environment to ensure that entrepreneurial activity is rewarded at all levels of society is beneficial for positively reinforcing growth oriented behavior. Those rewards should be even more lucrative when they help society as a whole. As a person develop and grow their perspective will change leading to wider knowledge schema. Those who can foster growth among people through collaborative efforts and personal entrepreneurship are leaders that can encourage a country's economic and political system to expand through the actions of pro-social goal-directed behavior.
The Possibilities 

America was founded on basic principles of equality and the opportunity to succeed financially, socially and psychologically. Over the past few decades we have experienced a rise in debt, stagnating wages, a number of wars, and the Great Recession that has led to economic difficulties impacting at least two generations. In addition Americas dominance as a land of opportunity and the strongest economy has been challenged by China and emerging nations. America can still capitalize on its innovative spirit and strong labor skills to develop a more sustainable and stable system that continues to grow through reinvestment and redevelopment. 

Development of a stronger nation is more feasible once all hands on deck to fully engage the economic system for mutual growth.  International investment must meet developing labor skills to ensure new products are built that have international market appeal. The side effects of this development is a stronger nation that has better practices and a more responsive government to the needs of its people through earned income obtainment and access to better opportunities. 

Successful redevelopment should revisit the fundamentals of economic and social life to understand how people act and interact with each other to create growth in multiple spheres of economic life. Financial growth is a by-product of growth in our personal development and social connections that allows people to share and encourage ideas that solve market problems. Each person is hitched wittingly, or unwittingly, to society in some way, shape or form and has important contributions to make through their instinctual need to grow. 

Theorists have argued that the very core of society is based in the instincts of man to better himself and the people around him (/her). According to Veblen (1914) Man instinctively pushes himself to learn, innovate and create more efficient methods of ensuring survival. It is necessary for society to give man the proper pathways to find opportunities for development. Those methods may be improved or impeded through lack of education, training, employment, social engagement, and governance. Governments ultimate responsibility is to enhance their system grow for the benefit of its members.

To ensure that many can succeed and develop government must also renew itself to ensure it is meeting the needs of society while not hindering the natural instinctual growth needs of people. Democracy is at present the highest form of governance but still needs further evolution to create economic opportunities/incentives, access to influencing governmental decisions, and ensuring laws enhance human nature and performance (versus restriction/punishment). Democracy in its current form is not the end path of development.

Proper economic theories must include governance and human psychology within its ranks to be encompassing enough  to handle the human affairs that make up core foundation of all economic systems. Therefore, economic solutions must take into consideration human life beyond accounting matrices and financial data. The human and its spirit is the generative source of all economic life that produces innovative developments in society and must be given adequate pathways to flourish.

Innovation and technology are the natural outcomes of an innovative people that are free to develop themselves and others around them (Ayres 1958). As people are better able to fully function within the context of society they will become more innovative resulting in new artifacts of progress. Lower innovative countries are focused more on rules and control while higher innovative countries are focused more on human enhancement and development that lessens the need for control.

The difference between control oriented and growth oriented societies is essential. Growth oriented societies seek to develop laws, cultural norms, and governmental methods that push to free the human spirit to achieve its psychological and biological destinies in ways that have the most positive benefit to society. Control oriented societies are less stable and seek to maintain laws,  norms, and governmental methods that restrict the pathways for psychological and biological goal achievement. Growth comes from effort and restricting that effort for control based purposed reduces psychological motivation.

Because these two societies are fundamentally pushing for different tracks you will find that they are marked by different outcomes. Free societies generally have higher growth rates based upon the innovative and commercial activities of people who can find rewards through hard work and the entrepreneurial spirit. Restrictive societies are marked by lower growth rates and higher levels of corruption because official pathways are limited for only a few thereby stifling the human spirit.

Sustainability societies exist by ensuring the social structures create growth on an economic level. For example, learning new skills not only improves the human mind but also the skill by which people can obtain their daily sustenance. Allowing for skill development across the widest possible sector of society creates impact full changes. The social structure of society will determine who and when people obtain these resources based upon past traditions and present necessities. Developing a stronger and more practical social structure based upon actual skill, knowledge, and abilities will help ensure a brighter and more sustainable system for future generations.

Sustainable Growth Systems: 


Sustainable systems are based in synergy whereby the sum of the parts are greater than the whole. As investors put their savings into the system they are able to generate return on investment. The realization of profit and effective use of data draws additional investors who also want to capitalize on available resources. To spark growth requires the engagement of the multiple sectors of the system such as labor development, technology enhancement, governmental effectiveness/efficiency and access to resources to work together to generate new economic activity. The elements are put to advantageous use through creativity and innovation to develop higher value products/services that are uniquely tied to the characteristics of the hub and not easily copied in other places. As profits are realized they are further invested into the system to develop a higher form of economic existence.The creative process of destruction and re-investment maintains a growing system with better adaptation to present market realities.

Properly run systems focus beyond short-term labor gains and into developing the entire system. A 2014 World Economic Forum Report states that policy makers should focus on infrastructure development that encourages long term growth and lowers carbon emissions (WEF, 2014). The report highlights the idea that sustainable systems continually reinvest in those infrastructure improvements that create stronger platforms for businesses that reduce overall waste (i.e. pollution, fraud, etc.) within the system.Lower waste means lower transaction costs and higher returns on investment.

Business and cities exist together and follow similar stages of growth and decline. Each invests back into itself to foster higher levels of economic interaction and revenue development. When this doesn't happen governments begin to decline and develop unsustainable structures that eventually collapse. Governments seek to create a net return on tax investments while businesses seek revenue returns on new product/service lines. They are not mutually exclusive.  Without constant reinvestment and growth, the system eventually declines and resources are used in other localities.

Sustainability can be seen as a positive return on investment money that allows for reinvestment back into the system for future growth. It is a perpetual cycle of growth. Governments may reinvest resources in schools, roads, police, WI-FI, fiber optic cables, etc. to realize greater levels of income generating interactivity. Well run systems will realize a net positive outcome for all involved parties that leads to higher tax revenue and better use of resources.

Economic hubs must expend resources to fuel future growth. Resources may come in the form of new business start-ups or existing corporate reinvestment. Private investment increase local revenue streams that raise tax revenue (not tax rate) and create more tax paying employment opportunities (not tax rate). Growth can be seen as the total increase in economic activity and revenue development throughout the hub that further contributes to tax collection and efficient resource allocation.

The developmental level of a nation and its people will determine what resources it will rely on. Lower developed nations will rely heavily on natural resource production and sell that production to other nations. Medium developed nations will use their labor forces to manufacture basic products for consumer consumption or supplies. Highly developed countries move further from natural resources and more into technological developments that conserve natural resources and develop leading edge products that change the market in their favor.

Young governments and business entities may grow quickly but will eventually move into a mature stage where they reach homeostasis with the market. During this mature stage, a consistent percentage of revenue should be reinvested back into their systems to maintain future growth. This reinvestment ensures that the system continues to develop, improve the lives of its residents, lower transactional costs, and attract new investments.With proper development a nation can move into a highly developed Information Age nation that uses the power of information to expand opportunities.

 When a system is not sustainable, or fails to reinvest back into itself, it declines to a point of no return. History is full of examples ranging from Rome to Caliphates. It becomes unattractive for investors and they abandoned the system creating economic stagnation and starvation. The system may also begin to lose residents, raise taxes, fail to attract businesses, take unnecessary debt or fall behind on needed infrastructure improvements. Eventually the system may need to painfully revamp itself, seek outside assistance, or perish into history as resources de-invest and make their way into better-managed systems that can reduce the uncertainty of risk.



Pro-Investment Tax Rates and Corporate Reinvestment: 

Its great when corporations believe America has a competitive tax rate and are interested in further investment. Even better that investors receive higher returns on their investment and create more financial capital.  To make these benefits widespread corporations and their stock owners must reinvest this capital in American businesses to ensure that new jobs are created and the economic foundation expands. The profit and reinvestment cycle creates a whole host of  other"trickle" benefits through society.

There are a few things the expanding economic based can do for the economy. First, it can increase the amount of business and transaction volumes between businesses; secondly, it can create additional demand for skilled labor which in turn improves job expansion; third, it improves tax revenue through the amount of business and people paying taxes; and, fourth it pushes universities and trade schools to teach relevant skills thereby improving the potential for greater investment and innovation later on.

-Business Volume: The improvement in the amount of business within the system generating revenue. As the density increases so do the volume of transactions that lead to added value on products and services.

-Job Market: As businesses reinvest in U.S. businesses they hire more people and put demand on wages. The labor market gets better and more people are employed through demand and supply mechanics.

-Tax Revenue: More businesses and labor force participation rates equates to a higher volume of taxes. While the rate can be important it is more important to have higher profit companies and higher wage employees paying taxes to create tax revenue surpluses that can be reinvested into infrastructure. This in turn improves the functioning of current businesses and raise the attractiveness to investors.

Universities and Skills: Universities and skilled trade schools will offer students relevant opportunities to update their skills and obtain the education they need to fill current labor market gaps. As these skills become available, more companies are willing to move into the area due to a ready labor market with labor and intellectual capital.


This process doesn't function well if companies take their high profits and reinvest them overseas. It becomes a net outflow to the economy and we are not able to reap the benefits of profits. Likely, one of the criticisms of globalization and movement out of the U.S. market. Creating an attractive business environment would help ensure that businesses find the U.S. market as one of the most attractive investment locations when compared to other options.


New Economic Platforms:


Economic platforms are the basic structure by which national development is generated. The platform will determine how efficient the system is run and whether or not the country (society) can turn a profit on the market. Those systems which are more developed will have less transaction costs and higher capabilities for growth that make investment more attractive. As society develops it generates more interaction and connections between the various economic sectors based upon profit seeking behaviors. The infrastructure will develop based upon these needs.

Consider how Romans used the roads to transport products and military equipment throughout their territories. Combined with economic growth and enlightened government their society flourished. However, over time their governmental structure began to collapse, a more efficient methods of moving products was not realized, and infrastructure began to decline. The system failed to adapt to the natural profit seeking behavior of society. Competition and internal conflict allowed the nation to be bested by Germanic Barbarians. 

All nations must continually develop and re-invest in themselves or face future risks of decline and eventual dissolution. The U.S. is not immune to the same laws of nature as other historical entities. To continue to develop means that society will need to come to new forms of understanding that generate higher levels of economic activity and growth. Failure is the failure of a nation to adapt to changing circumstances and realities that have presented themselves now and in the future. 

Developing strong infrastructure based upon the needs of societal member and the economic behavior of profit seeking individuals helps in building that infrastructure. Since developing a large national redevelopment program is very difficult local hubs can be used to study, understand the patterns of human behavior, and the creation of stronger platforms that reduce cost and improve productivity.

An example of this can be seen in the Detroit Michigan area and design. According to a February 2nd, 2015 article in the Michigan Daily entitled 
Detroit's layout continues to shape transportation, growth the development and roadways of the city started with Native American trails that eventually became roads and modern highways (Pfleger & Moehlman, 2015). Modern development is connected to the economic platforms of the past.

Economic platforms could be made by better usage of information networks, roads, bridges, waterways, and the incorporation of new technology. Each significant public works project should be studied to determine its economic impact on society and how such expenditures will return capital spent through new economic activity. For example, a bridge or redevelopment of a train station may generate over a short period of time a return on investment of public expenditures through new tax payers, greater investment, attracting new talent or generating new business activity. 

The Interactivity within Economic Hubs Produces Financial Value: 


The value of an economic hub is its ability to draw in new resources and convert them to higher value products for profitable exportation. The economic value of a system can be seen as the total value of exports minus the total value of imports. In other words, the cost of materials and production input should be of lower value than the export of higher end value products. Effective hubs create value by using their connections and resources in an effective manner to generate sustainable financial resources.

Markets have large, medium and small businesses that contribute to the development of strong hubs through the interaction of resources, communication (business and social), and innovation that turns lower value inputs into greater value exports. The ability of the social and business environment to create progressive environments with economic outlines will determine the developmental success of a hub.


Glazer in his book Smart vs. Dumb Service Strategies: A Framework for Ebusiness Intensity discusses the importance of information flow in developing an entity for higher levels of performance (2001). He makes three distinctions where information integration can be beneficial: 

Downward flow: The flow of information between companies and customers (i.e. the in and outflow of information). 

Upward Flow: The flow of information between suppliers and the company (i.e. efficient operations by integration of networked operations). 

Internal Flow: The flow of information held internally by a company (i.e. collaboration of internal elements).  
Information is money and it doesn't matter if we are discussing governments or business. The easy by which information flows throughout the entire economic hub will determine its effectiveness. The same can be said for the internal workings of government and the investment community that seeks to find places to investment. The government is in the business of information whether or not they realize it.  


In the diagram these transactions are noted in blue and may be larger or smaller based upon the value of the business relationships and the value of their transactions. When government runs efficiently and transparently the transaction costs of conducting business within a particular hub decreases thereby encouraging greater economic activity. Where demographic and market information is easily accessible, and transaction costs are low,businesses will naturally be inclined to invest further in these lower risk markets.

Large corporations regularly rely on medium and small business to supply their needs as well as improve upon their capacities by developing innovative products/services. For example, some small businesses may take over functions outside of the core competencies of the organization (i.e. maintenance) to help ensure strategic focus. Other businesses may provide new innovative concepts that corporations adopt, develop and export on a larger scale. Still others export in the niche market.  Each relies on the other for success.

Investment in proper infrastructure reduces costs by lowering taxes, increasing the speed of information transference, and furthering the interaction of business entities for development. Each infrastructure project should have goals and objectives to improve upon the social and business platform to spur greater economic activity. As investment increases so will the opportunities to improve upon the habitability of a place. Investment often improves services, employment opportunities, and greater options for personal advancement.

Imports of materials, information, and knowledge denoted in red should be of lower value than the export of finished products and services denoted in purple. The value creation of the hub is based upon on how businesses and individuals use these resources to develop higher value products for exportation. Individuals invest their time and energy and companies invest their financial resources to develop better products and future opportunities.  Labor, companies, and Investors have an inherent stake to produce value for their stakeholders by using market gains more wisely.

Cities are generally the center of suburbs and are part of the same hub. In the global economy it is the larger macroeconomics of an area that takes precedence over any individual entity. The business, civic, and social connections will determine how effectively they can work together to solve problems and become economic viable. Some businesses will be located within the suburbs and others within the city but each is connected together through social and business connections that help ensure mutual self-interest in development. When they do not produce value or cannot create synergy they are considered dysfunctional.  Constructive connections and financial interaction often leads to higher levels of economic activity for members. 

Network Development and Economic Growth:


Companies exist within a wider context of information, finances, resources, and sociological networks that impact their long-term health. Successful companies understand the environment in which they exist and how they contribute to their success. Companies should understand the elements of the market and encourage entrepreneurial actions that can capitalize on the elements in new ways. They should be semi-open systems that can take in information, transform it into something new, and contribute to their environment while ensuring they are retaining healthy profit margins. 

Hubs are made of clusters of competencies and abilities that make up the back bone of local human capital. They form when businesses with similarities work in tandem. We can see how clusters are formed around competencies in science, entrepreneurship, art, manufacturing, or just about any other industry. These clusters attract new interest and investment that desire to tap into unique skill sets and knowledge competencies.

Clusters have socialites who foster and push network creation. Socialites pass out cards, attend meetings, make phone calls, and connect resources and finances to create new things. They are the entrepreneurs and pro-social developers that use these networks to solve unique problems. When lower power-distance and low risk-avoidance behaviors encourage entrepreneurial interaction within a hub, according to Hofstede's Cultural Dimension Model, innovation rate rise and improves GNP growth (Overbaugh, 2013). 

Companies are inherently something called bounded rationality. This is where people band together to form an entity that produces products or services. They share similarities in knowledge, culture, and competencies bounded into a single business for financial gain. All companies have a level of bounded rationality where members think and act alike. When two companies, or bounded rationalities, share their knowledge they can create an additive process.

Hubs exist within a regional, national, and global marketplace. They are places where resources are converted into innovative products. A hub is defined by the types of clusters/competencies it has within in ranks and the abilities of these companies/bounded rationalities to work together and develop off of each other. Clusters work together to create a type of synergy that is unique to that particular hub and all the elements that come define it. 

The ease by which people act and interact with each other determines the success of hubs. This interaction can be defined by financial, knowledge, and social based goal directed behavior. Development of hubs requires a level of improvement in the ease and speed of transference. This is one reason why new technology can be a game changer. Strong hubs continually develop new knowledge, financial efficiencies, and production outputs through the activities of socialites/entrepreneurs that connect resources together in new ways.

Collaborative Investing in Local Clusters Leads to Economic Development

Group investment is not a novel idea but can be significant in developing stronger local growth models. A “hot” market is one that draws substantial investment interest that encourages growth among market relevant businesses. Pack investing offers opportunities to create multiple points of capital infusion that lead to the growth of a battery of related companies.

Companies do not work in a vacuum and rely on different local stakeholders to feed the building of their business. They need resources, human capital, science, facilities, suppliers, partners, and customers to develop momentum. If they lack the right environment, their business is doomed to failure before it gets started.

Pack investing offers the opportunity to take a local core competency with a solid industry base and infuse large amounts of capital at various points to encourage mutual growth. Multiple investors may work together to invest in complementary businesses that have market relevance but are not operating at peak performance.

The potential for quick growth and higher market returns is greater for companies that work together. Network relationships and alliance capitalism can create higher growth records among businesses (Eng, 2007). Sharing resources and knowledge during the growth stages with peer companies seems to make a difference.

Pack investing, and allied companies develop a stronger competitive stance. Industry alliances, even when money is not transferring between them, earned abnormally high local returns (Wang & Der-Jin, 2005). Getting businesses to support each other’s growth trajectories with shared services lead to stronger intra-firm alliances.

Collaborating on an investment level and working on a firm level creates two forms of potential synergy. Infusion of cash allows individual companies to expand their operations. Sharing knowledge and resources with other businesses helps them learn and adapt. Together investment and development create clusters of competitive firms that lead to jobs and economic wealth.

Investing in a pack and encouraging mutual growth is different than standard competitive strategies and requires a new way of thinking. Competitiveness is in the American blood, but collaboration can sometimes supersede this instinct to create greater value. Persuading investing institutions and company CEO’s to work together is a challenging game.

Pack investing relies on transparent city data that allows investors to find underperforming clusters and explore them. Seeing the opportunities and sharing those opportunities with like-minded investors may be against culture but can be lucrative, in the long run, when investment returns rises. Greater revenue is followed by new investment, tax income and jobs that can raise living standards of residents.


Large Institutional Investment in Cluster Life-Cycle:

There are key times when large institutional investors can swoop in a make radical change that leads to cluster growth. The key point is when companies within the cluster have moved beyond their initial inception, or entrepreneurial stage, and into their growth modes. When strategically approached large scale investment in multiple connected businesses will have their greatest impact.

Clusters are often based in market trends and budding new ideas. Whether these ideas are a new widget or a new service doesn't make much of a difference. They grow together, suppliers and producers, that lead to multiple businesses relying on each other for success. Investing in different strategic companies can ultimately lead to higher growth for entire industries.

Industries are like companies and formulate around an idea and entrepreneurship. If the business becomes sustainable it attracts investment capital that seeks to improve upon the product/service and create higher profit margins. As one business grows so does the other businesses within the cluster that connect and relate to it. They all feed off of each other in that growth process and encourage growth of each other.

Therefore, it make sense for large institutional investors to consider the different places within the cluster to invest to ensure that the entire cluster develops together. Injecting needed funds into a manufacturer and the supplier to that manufacturer makes sense in the same way as investing into the supply chain and telecommunications of the cluster leads to increased performance of multiple businesses that use those systems.

When coordinated properly large institutional investors can grow those areas and regions necessary for maximum growth of the entire local economic system. In essence, they can build the system with their investment choices and maximize profits by knowing when and where to invest within the cluster. Watching the life-cycles of multiple businesses within the region can make a big difference in striking while the iron is hot.

That requires the ability to understand the cluster from a micro and macro level. It takes considerable analysis and willing information sharing to allow this to happen. Instead of hiding information companies will need to share information so they can attract investment capital at just the right time within their life-cycle stage to maximize their growth.

Businesses within clusters often develop around new and innovative technology. Offering accurate information and institutional investing in the right places can lead to the growth of multiple businesses at one time. As these businesses grow they create synergy that leads to higher levels of investment return and stronger business outcomes that move initial business entrepreneurship into a growth stage. It is precisely this growth stage, or target return on investment, that institutional investment should seek when considering pack investment into innovative industries.


Economic Growth through Societal Motivation:


Hubs cannot develop without the proper maintenance of human motivation and the necessary rewards that are implied in any economic methodology. The economic system should encourage exploratory entrepreneurial behavior that leads to tangible rewards for societal members to ensure momentum thrusts forward. The same mechanics that apply to organizational motivation also apply to national motivation as each member determines whether it is beneficial or not to engage the market with their skills and abilities. 

We can see where a lack of motivation may not only damage the social structure but also the future financial system. The book Capital in the Twenty-First Century by Thomas Piketty outlines how wealth is being accumulated into fewer and fewer hands thereby retarding the financial growth of the middle class. Wealth distribution tied directly to performance helps to encourage greater levels of motivation and innovative ideation.  Higher performance should be encouraged throughout the layers of society to have the highest development of the economic system as members seek to move upward. 

It is important to understand that success should be reasonably incremental to have societal motivation. As an example think of a staircase and how a significant level of effort is needed to move a little upwards. That effort can be in the form of something like extra effort at work, starting a business, or obtaining more education. A person must put forward that effort and would expect to be on a new platform. 

Now imagine if the first few steps are obtainable but the next step was nearly impossible to traverse in any situation. No one can even see the top let alone step on it. At this point effort would cease and people would start looking for alternative strategies. They may also be angry and frustrated and trying to tear the staircase down as it no longer suits their needs. 

The staircase with lots of steps to the top is preferrable as it keeps everyone moving in the right direction. If the middle class and the upper class are separated by an impossible barrier motivation would stop at some point. Societal satisfaction will decline and people may seek alternative paths to obtain their needs. 

People should be able to reach the next step because it is in their best interest to do so. The system should be difficult and challenging so that most people will not be able to reach the top. Most won't be able to work that hard or smart to get there. Self-interest should always be pointed toward stepping up versus finding alternative paths. 

Economic systems require the elements to be working toward their own self-interest while still pushing for higher societal growth. Countries that can rally their people toward particular trajectories can change the culture and mindset. The system itself must be prepared to reward citizens that improve themselves through allowing the natural value and worth of workers to rise along with their compensation. 

Expectancy-Value Theory:  People will determine how much effort they are going to put forward to obtain goals. If the system doesn’t offer these rewards or if people are effectively blocked due to issues such as racism, religious bigotry, sexism, nepotism, corruption, or improper wealth allocation national motivation will decline. 

Path-Goal Theory: It is not enough to offer the rewards without offering the right rewards for the right kinds of activities. Employees that work hard, develop new products, and create better ways of conducting business have a right to increased income. The rewards must match the path to ensure societal development moves toward advantageous goals. 

Cultural Reward Systems: Each culture has their own embedded reward systems that encourage higher levels of motivation within a particular cultural context (Rosenblatt, 2010). Once the culture is set it will change the vantage points of societal members and influence what actions will lead to effective rewards that adjusts social intelligence and thinking. 

Skill Set Creation: To think, build, and produce requires the motivation to learn and develop. The system must reward employees who successfully complete training, obtain certificates, graduate with degrees, and improve their earning potential in some way. The closer learning is associated to current societal needs the higher the alignment of effort and skill. 

Ideation to Production: When good ideas are ignored only because they didn’t come from the “right” person with the “right” social connections the system suffers as less people learn to open their ideas to unjust criticism. Development of a nation requires the ability to explore various types of ideas from multiple sectors of society. 

Treaties and Agreements: Opportunities are based on the ability to sell products on the global market that obtain rewards for societal members. The types of agreements developed for trade and information sharing will determine the potential opportunities generated. 

Wealth allocation should impact all segments of society to be most effective in creating motivational effort. Developing a stronger society requires all-hands-on-deck through offering appropriate rewards, effective paths that help the greatest amount of people, the skill-set to product, open-minded enough to accept new ideas, and having the international agreements in place to develop new opportunities.

The way the system operates and develops has a natural impact on the methodologies people use to make decisions. Every person makes judgments to determine whether or not additional effort will lead to increased rewards or other valued benefits. A lifetime of rewards, punishments, successes, and failures will determine the overall way in which a people think and becomes embedded into a nation’s culture. The more people engaged in the economic system the higher the potential growth.

It is the entire system and its impact on the population that will have influence on whether or not a nation will succeed or decline and suffer the fate of history. Each member is surrounded by the factors of their environment and the way in which other people think that creates social perception as encased in culture. It is this cultural perception matched with appropriately pathways to success and tangible rewards that will determine if the system has the capacity to continue to grow in the future.


The Economic System as an Avenue of Biological, Sociological, and Psychological Needs Fulfillment:

The economic system permeates our entire existence from cradle to grave. From our socialized beginning to our elder years we are constantly making choices that impact our social and financial positions in society. Our very first experiences in life help us internalize certain cultural traits that become the foundation for our viewpoints and our ability to compete on the market. Economic hubs and nations are collective traits of our economic values that maintain patterns across society. All systems start with very personal biological, sociological, and psychological choices we may not be fully aware of and make their way throughout society to determine the success or failure of a nation in the global market.

Our economic system starts in our biological, psychological, and sociological core. Neuroeconomics is a concept that tries to explain how we make subconscious choices to purchase products, trust one another, or engage in certain activities beyond the simple mathematical equations of present day economists. It is a deep process that connects to our biology but also takes into account our psychological and social needs.We may not be aware of its influence but it still impacts nearly every decision we make.

Culture influences our viewpoint of the world and our ability to compete in it. As we internalize the values of our society and behavior we ultimately set upon an acceptable way of viewing the world and viewing ourselves within the world. This defines what behaviors are acceptable and what behaviors are not acceptable within society. We may not be aware of these cultural underpinnings but we are ultimately influenced by them.

On a conscious level we compare and contrast our limited resources to determine where we are most likely to compete. We use our limited experience and known skills to compare against the potential acceptance in our social networks to choose our occupational paths. Some will go to college and others will move into trade schools. Each offers opportunities to redefine ourselves and obtain needed skills to adequately fulfill our psychological, sociological, and biological needs.

If we were to add up all of the choices people make, and the culture vantage point  they use to make those choices, we will have the economic indicators for a state, city, or regional hub. Indicators will include the economic choices of education, occupation, expended effort, skill development, innovative ability, employment opportunities, social outlets, recreational pursuits, etc…(i.e. demographic trends) When certain economic similarities in choice, sociological behavior patterns, and psychological streams of conscious begin to define an area you have found the segmented borders of a hub and market.

Diversity of perspective that maintain shared goals can improve upon the abilities of participants within an economic hub. As all understanding is socially negotiated it is important to connect those with diverse opinions to each other to develop a more accurate understanding of the world, market, product, lifestyle, etc… When diversity, knowledge, and experience are used to enhance decision-making and find new and more accurate solutions to problems you have maximized human capital  development.  Maximization of human capital can be seen as the motivational  pressures and available pathways to achieving biological, sociological, and psychological fulfillment within a particular system.

Economics is the added sum of all of our choices and opportunities. Those nations with greater choices and opportunities have stronger economies than those that restrict human freedom. Each economic system is based upon hundreds of thousands of choices that include education, occupation, purchasing behavior, social relationships, and recreational activities. Each choice made by members of an economic system is a result of how they see themselves within their environment and their internal subconscious pressures that result from their biological, psychological, and sociological needs. No one can escape the market as much as no one can escape their own needs. To improve the market means to improve the choices and the factors that lead to those choices. The greatest freedom in society is the lawful maximization of available opportunities to achieve fulfillment based upon one's own skills and abilities.

Encouraging Businesses to Foster Better Legislation:

Government spends a lot of time researching and understanding which legislation is beneficial for stakeholders. They don't always get it right and sometimes they get it so wrong that doors close and jobs move overseas. While these are hotly contested issues that make Republican and Democrats burn with anger and spill-out seething rebukes it is an ongoing problem that must be faced!

We can impose regulations from the top or we can partner with industry to create regulations. The top down system is beneficial when industry cannot propose workable legislation. The hammer shall come down and it should be on the side of the people. At least in theory in societies that are "for the people". But....it doesn't need to come down when there are alternatives.

Industry are the masters of their environment and will have much more knowledge than any legislator will gain. They know their business, what will help them grow and what will screech their business to a stop! Industry leaders have something to say about how they can get things done and we are better off giving them our ear.

It makes sense to encourage them to be stakeholders and propose solutions that can meet the needs of the people and help them maintain their competitive stance. When we look at the issue of pollution it is natural and right to limit our carbon foot print. We all live in this environment and one generation does not have the right to doom the next only for profit.

Industry can put forward and invest in research and proposals that meet societies expectations. We move them from unwilling receivers of legislation to the sculptor that can develop something workable for a larger pool of stakeholders. It is they that have a lot to lose, often ranging into the multi-millions of dollars, and it is they who can propose some of the best solutions.

You might expect industry to be selfish and make propositions that are completely self-seeking in a way that ignores rights of society. This isn't often the case. They have concerns over the environment as well as their competitive position. Government has the ultimate authority to review, adjust and eventually vote on such legislation proposals.

Precisely how industry would come up with this solution is entirely up to them. One could foresee the use of not-for-profit, or research associations, that work on the behalf of the entire industry and not on the behalf of any one donor. They research ideas, investigate options, and create solutions for everyone involved. If they can't get it passed there is no reason to make a proposal.

Under this system science will be boosted. Where there is no available data, or open questions, the proposals will need to find an answer. That requires the use of scientific procedure, either research already conducted or new research, that fills the "gaps" in the proposal. An incomplete proposal is likely to result in a resounding "no" and requests for additional information.

Instead of demonizing corporations we can push them to find a better way of doing things. It would dumbfound the modern mind if they would prefer arbitrary decisions over those that can also meet their needs. More likely self-interest would push them to jump at the chance to remove what doesn't work with something that does.

The long-term impact can have a profound effect on the economy and society. Millions of jobs may be saved by ensuring legislation is practical and not an undue hindrance to industry. Pulling companies into the solution is better than have a cat-and-mouse game of big money donations that influence political votes or legal "hocus pocus" that side-steps justified legislation. As a nation, we are either finding better ways of creating alignment around societal norms through engagement or we continue to bleed organizations that could not save themselves.

Reducing Ineffective Legislation and Improving "Honest" Government:

If all politicians were narrowly focused on what is in the benefit of the nation we would not have a problem with misaligned values and inappropriate legislation. The problem is that it isn't always like this and other factors sometimes take precedence. Perhaps it never was meant to be that way. Politicians and the money that moves to them can create huge incentives to make decisions in favor of corporations in ways that can damage the needs of citizens. While these are unfortunate facts of government, it is possible to give business greater say in legislation while limiting their influence in the oversight of such legislation.

Business supporting of industry based research institutes that analyze common industry problems (i.e. pollution, mining, transportation, etc..) can improve legislative effectiveness. Industry gains increased power to propose beneficial legislation that meets government limits, restrictions, and quotas. They have a free hand in proposing legislation in an effort to curb regulations that also meet their needs.

To counter this increased legislative presence it is necessary to limit the amount of money that moves from the hands of big corporations to the political elite. The flow of money should not impact whether or not proposed legislation will pass. Campaign finance reform is a necessity for a more honest government that seeks to make decisions for the benefit of its citizenry.

In addition, concerns over increased corporate tax, and how this improves the attractiveness of the U.S. as a place of business had led to discussion on reducing corporate tax rates. Tax deductible donations to industry research centers provides opportunities to reduce corporate tax rate but improve innovation and research that has a long-term impact on national performance.

The goals of such changes are:

1.) Effective legislation that allows companies to expand and grow.
2.) Reduction of the influence of large corporate donations on legislative decisions.
3.) Improvement in innovation and research.
4.) Reduction of corporate taxes with longer term growth prospects.

Changes is a necessarily catalyst to growth. While we have experienced some low level growth over the past few decades the U.S. has not kept up with those of emerging markets. Mature economies are bleeding businesses and opportunity. Change becomes a catalyst for growth but that will require a new way of thinking about political compromise and legislation.

New ideas almost always come with resistance. Over time they can be accepted and improved upon. Of course these ideas must have practical utility. Republicans are very interest in protecting the business interest while Democrats often push the case of campaign finance reform to fight corruption. Legislation that makes sense is that which can create effective compromise. Republicans may accept tax breaks for money donated to industry research institutions that solve industry problems and promote streamlined and more effective national legislation while Democrats may accept controls on the influence of money in politics that lead to corruption. 

The Importance to the Economy of Independent Law Enforcement:

America has laws and these laws are voted on and passed by the people for the benefit of all. While we may not agree with all laws, and sometimes law enforcement may not apply these laws fairly or with the best wisdom, it nevertheless has an important duty to protecting citizens from crime, corruption, and predatory commerce. At the essential root of all economic systems is trust and law enforcement helps to ensure that people trust the system.

Independence means that law enforcement should not be at the whim of any politician or entity that could potentially skew the protections its affords its citizens. While judges have an obligation to interpret the will of the people, and often times hit a butterfly with a hammer, it is ultimately the people who have passed these laws that should have the final say.

While we may not see this at first look, law enforcement protects the value of the dollar and the economy. Each economic system is based in trust of trade and trust in the value of the dollar. When countries become corrupt it has a detrimental effect on the value of lawful commerce and causes wider devaluation of currency. The end result is the disintegration of values, economic activity, and beneficial citizen behaviors.

With skewed application of laws people lose a sense of belief in the overall American principle that if someone works hard they will receive rewards through entrepreneurial and personal initiative in the market. The system will look "rigged" and people will have less qualms about violating the law themselves in order to give themselves opportunities. The rich, poor, and popular should all be subject to the same laws.


Law enforcement has a sacred duty to protect the entire economic and political system through a balanced, independent, and thoughtful approach to the application of law. While there are many good reasons to reform law enforcement to ensure that justice is not blind to its own misapplication it should nevertheless be partially insulated from interference. Enough protections to keep it fair and unbiased while at the same time ensuring it doesn't run wild without accountability.
Enhancing Solutions through Developing Social Capital:

There is value in our social networks beyond that which serves our immediate needs. Social capital is the ability to use social networks to accomplish something that cannot be done alone. Business social networks are commonly used in areas ranging from product development to supply-chain management. On a wider scale, social capital can be matched with open innovation through appropriate Internet and physical channel expansions to develop something new for economic development. 

We must only think of how each person enters an economic system through their own particular way of viewing the world to understand the power of shared perspective. They are defined by their background, education, skill set, cultures, experiences and social networks to view topics from a particular vantage point. Problems are defined based upon how they understand them through historically perceived practical solutions. National cultures should find the rudimentary values of its societal members to better manage growth.

Having similar culture underpinnings is important for developing a nation. Within the U.S. our basic constitutions and Bill of Rights are an understanding that each member of society, regardless of religious or ethnic background, can agree with. Beyond the basic beliefs of society each person, group of people, carry with them an opinion on the nature of problems and their potential solutions. 

Social capital occurs when leaders can connect together these varying elements to focus on the solutions to specific problems that are acceptable to the widest possible stakeholders. Building social capital requires connecting people together in a way that allows them to react and develop off of each other in a manner that comes to a stronger solution. Interaction occurs through physical/virtual proximity, open dialogue, public discussion, and civility.

As these elements begin to act and interact with each other they create new definitions on how to see problems and potential solutions. The longer they interact solving a significant problem the more likely they will share mutual definitions and perspectives. It is a process of social learning and thought construction based in social construction mechanisms of elemental interaction. 

Few relevant solutions come from a single vantage point. All sustainable solutions are socially negotiated to develop new premises and conclusions. It is the changing of perspective, a focus on the solution, and the enactment of a plan that changes the reality of network members. Philosophical reality can be defined as a perspective of communicated why and why nots that enhance shared explanations.

With open-mindedness and active listening people begin to adjust their perspective and understand the factors in new and unique ways. This adjustment often leads to new solutions for complex problems and greater heights of awareness for involved members. It becomes something bigger than themselves that leads to enlightenment about the nature of life and best paths forward for a people, organization, city or nation. 

Mathews and Marzec (2012) studied social capital from varying industry perspectives and developed a model that fits well with operational management. One can see the similarities on how it applies to wider platforms and networks that improve upon social innovation and economic development. Using relational, cognitive, and structural capital it is possible to enhance HR practices to turn initial social capital into resulting social capital that produces meaningful solutions for a wider group of stakeholders. 


Streets of Gold or Pathways of Poverty: America's Next Choice:

Streets of gold look a little more like pathways of poverty. American cities have been on the decline for decades as investments diverted from urban areas to emerging countries that rolled out the red carpet. The infrastructure that was built when American cities were at the height of their economic might is still mostly intact waiting for visionary investors. Getting investment interest and better city governance can lead to mutual growth for business and job-hungry residents if the two can come to a mutual understanding.

Pick any major city in the country and follow its historic rise and fall. You may notice that as people moved to the city, built homes, and invested their resources these collections of people grew in wealth and influence. The collective action of investors created a synergy of growth that pushedprofit margins to higher levels. Money, government, and people had a mutual self-interest in growth.

As international competition rose, technology changed, and poor government policy stagnated these cities; they became ghost lands that are a pale comparison to their previous glory. Where opportunity flourished a few decades ago, some cities have grown dilapidated virtual prisons. The poorer a family was, the more likely they were stuck in a cycle of poverty.

Bleakness doesn’t need to be the norm. Cities that still retain their basic infrastructure are ripe for renewed development that not only produces higher returns on investment (ROI) but offers new opportunities for residents. When opportunity grows, hope also grows, and new economic life is born with it. Getting investors and government married into pro-growth policies can the nursing of opportunity.

Consider the mass investment draws in places like Eastern Europe, India, China, and emerging countries where investment restrictions are little but returns are high. American cities offer many of these same opportunities as the low cost of buildings, motivated workers, and reliable infrastructure found in combinations that will grow once the right capital is applied.

Stakeholders will need to look at the global market and existing local competencies to determine where the best investment growth potential can be realized. When capitalists engage in pack investments and create spawning clusters of business activities to capitalize on existing competencies and infrastructure growth is not far beyond the horizon. Economic wastelands can become investment wonderlands with a little spit shine.

Many proposals such as new recreation centers, additional funding, tax allocations, etc...have been tried at one time or another. They were short-lived because they were not profitable and often came with long-term commitments without measurable results. Building investment cities fixes the foundations of poverty that lead to higher housing, additional tax bases, and more community support.

The problem isn’t so much that investors are not willing to invest in these cities but that awareness is lacking, and local government is often short-sighted in their policy development that inadvertently restricts future opportunities. Revamping the way we think about investments, government, and education/training helps to ensure that struggling cities look more like diamonds in the rough. Enlightened government starts where partisan politics ends.

Major Class Conflict Likely Unless More Opportunities are Created

A report by Credit Suisse indicates that more and more of the world's wealth is concentrating in fewer hands.  This trend appears to be more dire over time with people on the bottom part becoming poorer and the people on the top becoming wealthier. The risks associated with this divergence is political instability and rapid change. Yet there are things legislators can do to change the troublesome trend.

Credit Suisse expects to see 22% rise in millionaires by 2022 increasing from 36 million people to 44 million people. While there will be some moving to the top there is less growth on the bottom leaving 70% of the worlds population with less than $10K.

While 3.6 billion poor might seem like a remote problem for people in poor countries to deal with the problems are very much at home in the U.S. It is expected that Millennials will not have the same access to wealth, homes, pensions, and other items that were so common to the Baby Boomers.

A highly educated generation mixed with few to no opportunities creates a disaster decades down the road as frustration grows. Without opportunity that generation will impact the way their children think and influence the opportunities of the generation behind them.

One must wonder what the impact of a declining impact of American financial strength mixed with declining opportunities both within the U.S. and across the globe. Such situations have fostered class struggles seen in major societal upheavals throughout history.

The very premise of the U.S. is that people have opportunity to change and grow to their maximum potential. That is becoming increasingly unlikely as large concentrations of wealth and political influence seek to ensure the "deck is stacked".


However, not all is lost. The American system is adaptable and the core principles of the nation rest on the inherent freedoms of the individual. Legislative changes that include increasing opportunities as well as supporting the development of small business can help ensure that income is distributed more evenly among those who are working hard and acting like entrepreneurs to achieve financial freedom. The economy can improve its innovative capacity through small business while creating enough variability in the system to keep it fluid and changing.

American Principles as a Catalyst for International Investment:

America was founded on a mere idea of opportunity that enticed thousands of people across the soapy seas to nail down new entrepreneurial stakes in the fragile colonies. Blacksmiths, carpenters and farmers spread out to start new businesses to feed their needy families. Even in a global economy the entrepreneurial spirit embedded within our American values has market appeal that can be converted to investment value.

Life, liberty and pursuit of happiness are based on trust. People believe that when they put a dollar in the bank it will be there a few days later, they are charged the price posted for products, hard work still results in increases in wealth, and education opens new doors. Trust glues societal fabric between people, employees-employer, investor-executive, citizen-government, and civilian-law enforcement.

When the fundamentals of trust break down so does the economy. The microeconomic transactions that occur throughout the nation are founded on simple ideas of value and confidence in the future. The dollar is the measure of that trust and is exchanged in good faith among economic elements to complete transactions.

Trust applies to foreign investment as much as it does to domestic commerce. Multinational companies spend a lot of time trying to understand the political and economic nature of nations to make investment decisions. Political instability and mistrust raise the risks of investments that ultimately result in sparser economic wealth generation.

Companies invest in places where the political, cultural, and economic spheres show enough stability to help ensure that their investments will have value in the foreseeable future. Increasing investment and heightened economic activity is one sign of increasing levels of trust. Investors believe that their opportunities are safe and growing.

Laws and values come to define the health of the system. Where laws encourage entrepreneurial activity and protect the rights of people socio-economic assumptions form. It is those assumptions that filter throughout the decision-making lenses that lead people to engage the market at higher levels.

In countries where there are political instability and inconsistent application of laws, you find that economic activity declines. Not only do companies under perform the market, but the countries find themselves in competitively weaker positions as people either disengage from the market or move into the black market.

America is changing and opportunities to build a better society abound if we ensure that trust is created in society. Founding principles applied consistently across our country prompts engagement and stability in the market that is attractive to international investors. Nation building has entered a new era of exploring the power of the human mind and funneling that through our American lens to create greater investment and economic activity. 

The Working Economic Hub System


Economic hubs have many components that make them successful. The most important aspect is they work like a system where the proper elements must be drawn into that environment to make it work properly. When one of these components is missing the entire system will lag much like we are seeing in the overall U.S. competitive environment.

Government is one component that is not included in the above diagram because they are the "brains" behind the system that ensures, in conjunction with local stakeholders, proper direction to ensure the elements are present. Such governments help ensure the proper tax structure, fair laws, and infrastructure are available.

We see that as a system we have inputs and outputs. As resources come into the system they are used, evaluated, changed, and improved into finished products. This happens through the interactions between suppliers and the supply chain. There must be adequate interchange of financial, material, network development and information to create innovation.

Of course the system won't work very well without needed capital. The intellectual and physical skills and abilities developed from universities and training are important in ensuring that the right kinds of skills are available for global competition. The system will also need access to investment capital as drawn from loans and outside investors that speed up the transactions between organizations in a way that returns investment.

You may also notice that it will be hard to draw in appropriate skills and abilities without an attractive lifestyle and social interactions that not only improve the quality of life but also the spill over information. A positive lifestyle will also contribute to political stability and retention of top talent.

The overall infrastructure of the area is vitally important to the full functioning of the system. An export oriented infrastructure with ports, railways, roads, high speed Internet, and utilities will encourage the drawing of investment but also the overall success of the business within the hub.


Finally, you will notice that it isn't enough to have a great system in place without advertising it appropriately. The government, organizations and businesses have a stake in ensuring that their product and place are well known to both customers and potential investors. To be successful they will continually need to have feedback loops that improve the functioning of their business through alignment to market needs.

The Individual within the Economic System

Individuals exist within a larger context that encourages or detracts from efforts to develop for greater economic sustainability. It is possible to adjust the governmental, regulatory, environmental, economic, and social aspects of the environment to encourage higher economic and social growth while still improving the sustainability of a system.

As humans we are responsive to our environment and very few actions are solely our own. People will see opportunities to develop based upon the benefits inherent within any one system. Those systems that provide appropriate pathways for development will reap the greatest amount of awards based upon their ability to keep large groups of people working toward similar goals and objectives. 
Leaders are the catalysts to change that often define and vocalize people's needs and find appropriate pathways to fulfilling those needs. The system should always be developing and creating to ensure that it will retain a top position in global markets. Focusing those collective efforts toward the most competitive long-term solutions should take precedence in our efforts.

The environment should continually align itself to the market needs in order to foster constant development and maximize opportunities. Organizations should seek to align their needs to that of the global environment (Bhattacharya & Gibbons, 1996). As the elements move toward global relevance they will also become healthier and more competitive.

Applying this to the example of the California Bight it is possible to see how aligning each of the parts to global needs can create higher levels of performance. To do this well requires having key strategies (goals), aligning areas (components),  putting together processes, and encouraging social development. Creating the right environment whereby following proper practices can lead to greater reward and can help in encouraging higher individual performance that results in collective gains. 

Collective gains can only come through collective knowledge sharing and ensuring the environment allows for higher levels of social intelligence and economic activity where everyone wins. It can be scary for people to find and try new ways of doing things or relinquishing the rightness of their opinions to others who may also have equally valued perspectives. The system grows by understanding, learning and adapting that results in improvement. 

All societies must learn and develop through new ideas that project the inner realities to the outer worlds. What we learn from our senses and experiences and the inner worlds can be projected to the outside world (Fullerton, 1906). We judge new theoretical propositions based on the comparison of our own internal experiences with that which is shared by others. When accepted they create a shared reality and perspective that becomes real for a greater amount of people.

Consider Plato's Allegory of the Cave. In it he describes the prison of the mind through a concept called Theory of Forms that impacts the ability of people to understand knowledge to free them to be creative contributors. In the example, prisoners are chained together in a dark cave where a fire reflects images on the wall in front of them. To the prisoners these images are their reality and is the only thing they know. The definition in their mind is complete and cannot be questioned without threatening their identity. 

On a rare occasion a prisoner may start to understand that "truth" is something beyond what is perceived in our environment. That which we see on the wall is only a form of something more true. The only value being the way in which we interpret it in our heads-our historical definitions based on perceptions. That which is gained from our perceptions and senses is not knowledge but only an opinion that reflects personal experience. 

The truth of economic development is that it provides an effective outlet for human needs. The fulfillment of human needs requires appropriate pathways to success. Those pathways are based in the way in which people judge and gauge their environment. The paths to understanding and development should match the cultural values of a nation. If there is a disconnect between the two concepts more people will be left in chains and unable to fulfill their true contributions.

When one decides to turn around they see a new truth it cannot be easily shared with others who are still locked in chains and still see reality as shadows on a wall. The example provided in the Allegory of the Cave is prisoners who see a book in shadow form on the wall and could very well be a reflection of our laws, regulations, and opinions. The concept of justice is a higher order form beyond the image of the book that is much clearer and more substantial than that which is represented in laws and regulations. 

The same can be said for the assumptions people use to describe the economic system. Each culture sees the pathways to success differently based upon how they were reared and the economic assumptions they learned from their families and communities. When people begin to understand the vantage points of others, whether of the same or different culture, they can come to conclusions about the potential success of economic systems and how they are manifestations of people's needs, dreams, and desires.

Once someone has been freed from their chains they will have a difficult time trying to explain what is on the outside of the cave, across the bridge, or on the other island because it is a far off place not seen as relevant to the prisoner's current understanding or daily needs. The prisoners have no clue of the higher order concept and will be so adamant about their opinions that they may injure, kill, or caste out the free person. Yet the  freed prisoner goes back to try and teach them anyway out of a sense of obligation despite the abuse they have and will receive.

Truth has a deeper meaning that is discovered only by those who question their environment. In the constructionist image you will find either an old woman or a young woman but a few may see a bunch of colors that don't make any sense to them. If we sit and gaze for long enough, questioning their nature, these random colors may form a picture as defined in this work on clusters, hubs, and sociological economic systems designed to enhance the inter-connectivity of societal members to greater forms of existence and living. To provide the underpinnings of one method on how to raise collective action to the benefit of the greatest amount of people. As John Donne said when he discussed how interconnected we all are to each other and the inherent value of each person.  It is fitting because a great part of our economic existence is seen through our eyes and the eyes of our social networks. 

No man is an island,
Entire of itself.
Each is a piece of the continent,
A part of the main.
If a clod be washed away by the sea,
Europe is the less.
As well as if a promontory were.
As well as if a manor of thine own
Or of thine friend's were.
Each man's death diminishes me,
For I am involved in mankind.
Therefore, send not to know
For whom the bell tolls,
It tolls for thee.

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