June 20, 2018
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Cluster together to expand Maine’s economy

By James Shaffer, Special to the BDN

In his “The Deans of Business” column from March 4, Dean Ivan Manev of the University of Maine wrote about how Maine could best position itself to compete in a global economy. One of his suggested action steps was: “Target sectors in which Maine has good positions … and develop economic policies to … build a high-tech cluster around them.”

I’d like to expand on that idea. As Gov. Paul LePage considers how to make Maine more business-

friendly, it would be helpful to consider which businesses offer the greatest promise for economic development.

The concept of industry clusters was popularized by Harvard Business School Professor Michael Porter in his book The Competitive Advantage of Nations (1990). Clusters are about more than geographic adjacency. They are about relationships.

Relationships foster regional collective learning and concentrated knowledge. In some cases this includes specialized research institutions. Clusters also spawn and benefit from a cadre of specialty service businesses that exist by providing competitive advantages to firms within the clustered industry.

Often, this includes specialized financial institutions because lenders and investors perceive less risk where there is more knowledge, including their own. The result is not just a concentration of competition, but a situation where all competitors have a competitive advantage compared to nonclustered firms. There are economies of scale of not just production, but knowledge and innovation. This is a classic example of a rising tide lifting all boats.

Cluster examples would include the garment industry in New York, the cut flower industry in Holland, and the lobster industry in Maine. These clusters do not particularly depend on cutting-edge technology. Clusters defined by technological frontiers would include Silicon Valley in California, the Route 128 corridor in Massachusetts, and potentially the advanced materials industry in Maine.

The idea of targeting clusters for economic development in Maine is also not new. In June 2002, the now-defunct Maine Science and Technology Foundation released the report “Assessing Maine’s Technology Clusters.” This report was conducted by the Center for Business and Economic Research at the University of Southern Maine and led by professor Charles S. Colgan of USM’s Muskie School of Public Service. This study has since been expanded and enhanced by Colgan’s team, but more recently under the auspices of the Maine Technology Institute. The most recent version of the report is available at http://tinyurl.com/6fs3ps3.

The Colgan reports identify and assess the potential of seven Maine technology clusters:

  1. Biotechnology
  2. Composites and advanced materials
  3. Environmental technologies
  4. Forest products and agriculture
  5. Information technology
  6. Marine technology and aquaculture
  7. Precision manufacturing.

While none of these yet rate superstar status in Maine, it is clear that encouragement of these specialized industries is more likely to produce Maine businesses that have a global competitive advantage.

While the Colgan reports are about technology clusters in Maine, the potential also exists for developing competitive advantages around lower tech, but still highly knowledge-intensive industries. An example would be the disability insurance industry in the Portland area, which contains a number of firms, currently estimated at 21, that resulted largely from the intellectual capital base (former employees) of Unum.

So, what can we do to stimulate cluster development? It would be great if state government created a clearinghouse and cluster policy coordinator for each potential cluster. However, I wouldn’t wait for government to initiate. Industry groups can take this initiative, self-organize, and propose cluster friendly policies to which the state government can respond. State help is more likely to be offered if state officials can build upon a pre-existing base of relationships, infrastructure and … opportunity.

James Shaffer is dean of the University of Southern Maine’s College of Management and Human Service. He is a former media executive who served as the chief financial officer of the Los Angeles Times before coming to Maine in 1991 to be CEO of Guy Gannett Communications, which was based in Portland and had TV, newspaper, and other media properties in seven states.

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