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Monday, July 13, 2020

Multi-Clusters In Delta County Can Create New Innovative Industries

The Theory of Transactional Clusters seeks to develop a working approach to raising economic activity in Delta County and the country in general. It is a work in progress theory that seeks to use a practical example for application. There is a continued push to increase manufacturing and economic activity but older methodologies have come and went seeing declining returns on economic activities and national rejuvenation. This theory is interactive in the sense that when the proper anchor industries are present to create clusters that interact within a wider environment in a way that creates spill overs of knowledge, resources, and activities much higher innovative economic growth can be found.

Ties, Proximity and Equivalence

Spill overs from one industry impact another industry. For example, in Delta County a shipping industry and resource extraction mixed with SME manufacturing could lead to shared knowledge. The same could be said for micro-manufacturing, tourism and shipping. As industry clusters borrow from others in terms of employees, resources, finance, etc... they can grow much more than they can in isolation.

According to interorganizational networks that utilize spill over reduce performance differentials by the following (Pallotti, Tubaro, & Lomi, 2015):

1. Strength of ties: How these clusters share resources and interact (Can also be virtual).

2.Social proximity: How close companies are (Can also be virtual).

3. Structural equivalence: Individual cluster growth based in an industry.

Anchor Industries

Organic clusters often form through these natural system of growing industries. Sometimes the market desires something new and the resources are there but no one put them together in a way that fosters higher growth. We can build these clusters but that would require the development, or working from, anchor industries that help enhance the supplier networks and in turn the spill over effects that can reach multiple clusters at one time.  

So we will need to add a 4th factor to clusters.....

4. Anchor industries: Where there is at least a cluster and an anchor industry incomes are higher, educational attainment improves,  which leads to a greater benefit for local inhabitants (Spencer, 2014). Such industries support other industries and push people to earn higher wages and go back to school to gain new knowledge. One of the reasons why Bay De Noc Community College and other schools within the area can become a support for growing industries.

Multi-Cluster Environmental Interactions

That leads to growth based in previous economic literature but doesn't necessary create the type of growth we need as a nation that springs forward through fast innovative development and enhance multiple industries at one time. To think beyond an industry cluster we can add anchor industries (i.e. Navy, Higher Edu., Tourism, SME Manufacturing, etc...) that are likely to work together and feed each other into greater strength and growth.

According to an article entitled The Discipline of Innovation in Harvard Business Review innovation comes from, "Drucker argues that most innovative business ideas come from methodically analyzing seven areas of opportunity, some of which lie within particular companies or industries and some of which lie in broader social or demographic trends (Drucker, 2002)."

Thus, there is a wider context to innovation. In the Theory of Transactonal Clusters we are seeking to take small clusters and build a pro growth environment where innovation allows the entrepreneurial mind to "connect the dots" of multiple industry needs to develop economically sustainable pro growth systems. When properly created the systems increase the resources, investment, and intellectual components that lead to innovation We are trying to take Capitalism to a new level!

 Connecting different entities often occur within the same industries based on the connections each has to the other through shared resources (i.e. labor, science, natural resources, etc...). However, to fully develop a more vibrant system that can move and adjust with changing economic times one will need to find a way of taking this cluster concept (individual clusters with similar firms in the same industry) and connecting them across industries (i.e. tourism, manufacturing, higher education, etc...) to create explosive growth.

5.  Multi-Cluster Environment Interactions: Building multiple industries through anchor businesses in a way that leads to higher levels of innovation through shared industry development.

New Unknown Innovative Industries

From the development of and interaction of multiple clusters within the same environment we begin to see opening possibilities of whole new industry developing that would become possible when clusters interact and develop to develop markets in new ways. Those leaps in development typically don't develop within the cluster themselves because of the training and limited scope of those industries. However, when they begin to develop off of other industries whole new products, technologies and industries can develop.

We as a nation need to start thinking more about long-term development and the creation of opportunities that are not currently in full swing but are still ripe for creation. The Internet has changed many of our economic assumptions and now that we are moving more industries online we have the capacity to develop advanced technologies and take a more scientific approach to the development of our environment. If we are able to spark innovation through proper management we have a chance to corner the market and make the U.S. the center of investment and development. Of course that comes with its own benefits through the quality of our lives and influence on a global scale.

Drucker, P. (2002).The Discipline of Innovation. Harvard Business Review  https://hbr.org/2002/08/the-discipline-of-innovation

Spencer, G. (2014). Anchor Firms and Clusters. Local Indicator Database for Economic Analysis. Retrieved


Pallotti, F., Tubaro, P., & Lomi, A. (2015). How Far do Network Effects Spill Over? Evidence from an Empirical Study of Performance Differentials in Interorganizational Networks. European Management Review, 12(3), 189–208. https://doi.org/10.1111/emre.12052

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