Catalyzing clusters

The U.S. Small Business Administration announced on July 7 its first lead role in support of existing regional innovation clusters.SBA’s Regional Clusters Initiative ( will provide $600,000 in one-year contracts to as many as 15 cluster systems throughout the U.S. that support small businesses. Applications were due Aug. 16.

(For the record, I’m a partner and project manager for two applicants to this program — a clean energy cluster and a defense technology initiative, both based in New England.)

As I’ve noted in “Clusters: a direction for the new SBA Administrator” (March 27-April 9, 2009), SBA Administrator Karen Mills is a longtime advocate for the cluster economic development theory. While serving as the jobs and innovation czar for Maine Gov. John Baldacci prior to joining the Obama administration, Mills, of Brunswick, co-authored a 2006 Brookings Institute report advocating a federal role in catalyzing and expanding this sector-based economic approach to growth.

She also played an integral role in helping establish a boat-building cluster that resulted in a $15 million Department of Labor grant as well as participated in an event that eventually resulted in the development of the Maine Food Producers Alliance.

There’s reason to believe that Mills’ knowledge and network in cluster development have resulted in the slew of other agency programs focused on regional innovation clusters, or RICs.

No fewer than four agencies (the Economic Development Administration, Department of Agriculture, Department of Labor and National Science Foundation) have program line items for regional innovation ecosystems/clusters in their fiscal year 2011 budgets.

Cluster development

Since February, five FY 2010 initiatives were announced, ranging from a $129 million multi-agency energy-efficiency RIC program led by the Department of Energy to a $12 million innovation ecosystem initiative led by the EDA.

In the midst of a federal spending freeze and a challenging economic environment, multiple federal agencies have announced these regional innovation initiatives in the current fiscal year. This suggests a number of things. RICs are indeed a federal priority for regional economic development and innovation. Never before have so many federal agencies shown this sort of concurrent commitment to a single economic development strategy.

The speed with which new programs have emerged may also indicate a desire by the federal government to commit to programs prior to the September fiscal year-end due to concerns about the mid-term election and the administration’s FY 2011 budget priorities, which include continued and increased multi-agency support for cluster development.

Like any economic development strategy, cluster development requires a long-term commitment. For clusters to succeed, several things will need to happen:

1. The federal government will need to show sustained support over its present and potential future terms of office to give clusters the proper policy and funding support.

2. As clusters are self-organizing, with private sector-led groups of players (e.g. companies, equity funders, universities, incubators, etc.), the private sector must carry the ball on cluster development, albeit with formative funding and policy support from the government.

3. Private capital markets (individual and professionally managed venture capital) are critical to clusters’ success and must remain robust.

Though clusters embrace large and small companies within target sectors, cluster researchers and the federal government recognize the critical role of high-growth “gazelles” in driving innovation and economic growth. These industries have a long history of funding from private equity markets.

Without strong private capital markets, knowledge industry clusters will be significantly hampered in their ability to form and grow.

The federal government seems to be doing its part to catalyze, expand and sustain cluster development.

It’s also critical that the private market not miss this opportunity to align with and leverage the government’s broad-based initiative. We must all see ourselves as cluster catalysts.

Michael Gurau is president of Clear Innovation Partners, a Maine-based firm formed to catalyze and sustain innovation and entrepreneurship in rural and urban economies. He can be reached<