Growing Together: Spotlight on Clusters by Tim Richards

Growing Together: Spotlight on Clusters by Tim Richards
April 09, 2013 at 03:04pm

Tim Richards
Managing Director
GE Government Affairs & Policy

A great thing about working for GE is the opportunity to look at new subjects and arrive at surprising discoveries. A few weeks ago, I participated on a panel at the World Investment Conference in Marrakech, North Africa.

One topic of this discussion was clusters. A “cluster” is a location where a number of firms operate in the same line of business. Oftentimes these are educational institutions, providing a qualified workforce and performing basic research. Governments increasingly see clusters as an important economic development strategy; many are jumpstarting their creation through special programs and incentives. Silicon Valley, Dubai Media City and Masdar City are three such examples – the former emerged largely organically; the latter a government-funded initiative.

In preparing for this panel, I found that clusters are an essential part of GE’s story and future. GE’s own experience today reveals that clusters can be extremely effective and even self-replicating. They could help to enable North African nations to address innovation, job creation, opportunities for youth and other sustainability goals.

The best clusters involve the private sector, educational and research institutions, and government. Each performs its own essential tasks yet may work cooperatively as well. It’s debatable how large a role there is for government in planning clusters. However, under any model, it’s crucial for government to provide legal and regulatory structures that give clarity and security to business and encourage entrepreneurship.

Clusters also offer an opportunity to experiment with new concepts, including legal and regulatory frameworks that a country may not be ready to enact nationally. This approach aligns with trade-related legal and regulatory structures in Free Trade Zones. A cluster can offer the opportunity to enhance a country’s business environment on a manageable scale.

GE’s presence catalyzed the development of many industry-specific clusters across the world. In most cases, the clusters emerged organically rather than through a specific plan, but the end result was definitely a cluster. One example is Belfort, France, where the business that is now GE Energy Products Europe was part of Alstom. This gas turbine business, along with Alstom’s steam turbine and locomotive businesses formed a core industrial capability in Belfort that attracted a vibrant community of suppliers and educational institutions focused on those heavy industries.

Similarly, from the earliest stage of its development, GE’s power generation headquarters and manufacturing hub was in Schenectady, New York. GE also built its flagship Global Research Center in neighboring Niskayuna. Together with world-class technical universities, such as Rensselaer Polytechnic Institute, the State University of New York system, and Union College, GE’s presence led to the development of a broad and deep supply chain, technology development capability, and a sophisticated work force in the region. For its part, New York State offered an established and generally pro-entrepreneurial legal and regulatory framework. In other words, GE’s presence along with other crucial factors led directly to a power generation “cluster” in the New York Capital District, which includes Schenectady, long before the concept was recognized by academics and development experts.

There is a compelling corollary to this history. Along with many cities of the U.S. industrial northeast, Schenectady declined as a manufacturing center in the 1970s and 1980s. Yet key elements of the original cluster remained and people with deep energy expertise stayed in the Capital Region despite the industrial decline. Those institutions and people then formed the basis for a related but refreshed industrial cluster to emerge – this time in the area of green technology. According to a study two years ago by The Brookings Institute, the Capital District of New York now has the highest concentration of green jobs in the United States. GE is drawing on the corps of energy and technical expertise in the area to build new manufacturing and commercial capabilities in businesses such as batteries and wind turbines. Even the original steam turbine factory, which is still operating, is seeing an increase in production for applications in combined heat and power, combined cycle, and solar energy.

Here in the MENAT region, GE is similarly investing in clusters. Our Innovation Center in Saudi Arabia is in the Dammam Techno-Valley, and we are building a new “Ecomagination center” in Masdar City in Abu Dhabi. GE is also a partner in a joint venture that manufactures semiconductors for electrical equipment in the Tangiers Free Zone. In all of these cases, we will benefit from the presence of great educational and training institutions, major customers, and even a few competitors.

In North Africa, we are hoping to see substantial growth in some of the sectors where we are active. As we grow in that environment, we hope to build manufacturing joint ventures, develop local product and service suppliers, and hire trained energy service personnel. If this can be accomplished through the creative use of clustering to promote sustained private and public investment, GE and companies like GE will be there to take advantage of that capability.

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