The European Union is seeking to promote clusters of large companies, SMEs, researchers, and other economic actors to help foster innovation, bring together a critical mass of commercial and R&D expertise and get maximum value from investment.
Europe invests billions of euros in knowledge-based industries, but there is concern that links between industry and research are weak, and that market fragmentation is causing investment to leak out of the research infrastructure.
At present, there are the 2,000 or so European competitiveness clusters in existence, but the European Commission wants to transform these into world-class innovation centres.
The EU executive defines a 'cluster' as "a group of firms, related economic actors and institutions that are located near each other and have reached a sufficient scale to develop specialised expertise, services, resources, suppliers and skills".
The Commission highlighted strengthening competitive clusters as a priority for promoting innovation in a 2006 communication. In October 2008, the European Cluster Policy Group was established as part of this effort. This could lead to the establishment of a self-sustainable, not-for-profit European Cluster Manager Association, which would help to raise the profile of clusters and attract funding (EurActiv 20/10/08).
Clusters are primarily viewed as a market-driven phenomenon, rather than something designed and propped up by governments. However, public policy in several member states since the end of the 1990s has sought to encourage universities and research institutes to play a role in the emergence of strong clusters.
Some observers warn against too much state intervention in supporting clusters, fearing that 'manufactured' clusters would be less dynamic.
Europe INNOVA, a Commission-funded initiative to support innovation, has identified a range of industries where competitive clusters exist across Europe. These include the automobile sector and the biotechnology, e-health, energy, ICT/optics, food/drink, space, textiles and maritime industries.
It provides overviews of each sector, with links to relevant cluster organisations. The InJection project, for example, looks at how SMEs and investors can be provided with networking opportunities in the medical devices sector.
Impact of clusters
The European Cluster Observatory estimates there are 2,000 "statistically significant" clusters group of co-located industries and services, suggesting that 38% of the European workforce is employed by companies working in clusters. However, the definition of what precisely constitutes a 'cluster' can vary.
Indeed, cluster policy approaches differ across the EU. In its 2008 Communication on clusters, the European Commission acknowledges that "one size does not fit all". Despite different approaches to supporting cluster development, clusters are fast becoming a popular means of organising industries and can be a useful tool in revitalising flagging sectors, as well as offering a framework for policy developments in research and regional policy.
According to the European Commission, Europe does not lack clusters, but market fragmentation, weak industry-research linkages and insufficient cooperation within the EU mean that clusters do not always have the necessary critical mass and innovation capacity to be world class.
Striving for excellence has become the focus of cluster policy and may result in a more business-like approach to providing aid to existing clusters. Policymakers have come to accept that not all networks of businesses and researchers are equally worthy of support. The EU has indicated that it will allow market forces to kill off ineffective clusters, and that new, dynamic clusters will be best placed to survive. "Clusters which are not working should not be kept artificially alive," according to the European Commission. Such clusters should not become a channel for subsidies which would undermine competition and even the emergence of new competitive clusters.
Excellence should be at the centre of policymaking when new cluster initiatives are being designed, and clusters must be based on knowledge hubs of international excellence and market foresight. "The challenge is to avoid a proliferation of cluster initiatives with little chance of long-term success," the Commission said in its 2008 communication on the matter.
Competitive clusters fit into a range of existing European policies, including the Small Business Act, the Lisbon Agenda, the European Research Area, and Framework Programme 7 (FP7).
Clusters are in line with the knowledge-based economy outlined in the Lisbon Partnership for Growth and Jobs, and with the mobility of researchers and investment in innovation envisaged for the European Research Area. The European Grouping on Territorial Cooperation, Lead Markets Initiative and Enterprise Europe Network are also compatible with cluster policy.
Small and medium-sized enterprises are seen as a major source of future job creation in Europe and will be central to how member states emerge from the ongoing financial crisis. However, small companies face major challenges when attempting to tap into EU funding programmes, given the time and financial resources required to apply. They can also lack the means to transform their innovations into marketable products.
Competitive clusters can provide a fertile environment in which SMEs can access research infrastructure available within universities. Small companies can also form partnerships with larger companies. This can, for example, enable a niche technology company to team up with multinational firms capable of integrating new software into existing platforms.
In addition, it also allows research institutes to tap into the dynamism offered by small firms and start-ups. Dr Bruno Sportisse, director of technology transfer and innovation at French research institute INRIA, said SMEs offer a 'quick path to market' for research institutes (EurActiv 16/4/09).
Creating awareness among of the opportunities available to the SME community can be a challenge. The European Enterprise Network is to organise an Innovation Awareness Campaign to encourage greater participation by SMEs in competitive clusters.
Another major benefit of joining clusters for SMEs is the support services that they provide. Some clusters are merely organic groups of co-located industries and research organisations which have grown up together in a particular area, often due to a specific regional advantage. However, others are 'managed' clusters, which have a central coordinating officer to ensure links are strengthened and to maximise the competitive advantage to all members of the cluster.
The European Commission and others have noted that the skills of cluster managers are not recognised and there have been calls for recognition of a professional qualification in university-industry-government relations. For SMEs and universities alike, cluster managers can offer assistance in promoting technology transfer and protecting intellectual property.
Several think-tanks have been broadly supportive of the theory behind co-locating researchers and innovators, but there has been some concern that clusters which are manufactured by governments do not respond as well to change. The Lisbon Council says clusters need to be able to adjust organically to changes in market demand: thus a biotech cluster may evolve to become a pharma or green chemicals cluster, for example.
Creating competitive clusters alone is not seen as a simple answer to all the challenges facing Europe in competing with hugely successful high-tech clusters such as Silicon Valley in the United States – which has led technological revolutions and is now turning its attention to sustainable energy.
Factors such as the size and nature of a potential market, the location of existing multinational companies, concentration of like-minded innovators, access to venture capital, and other elements of the 'innovation ecosystem' are seen as more important than a political decision to establish a cluster in a particular area. Author Richard Florida, an authority on creativity, says creative people want to be surrounded by other innovative thinkers.
It might be unwise to expect clusters to deliver solutions to all of Europe's problems, according to the Lisbon Council. Healthcare, education and business processes are seen as likely sources of future innovation, but may not be as well-suited to the product-driven model of clusters which has grown up around high-tech inventions like computer software and medical devices.
There have also been concerns that member states tend to support clusters of indigenous companies at the expense of fostering cross-border clusters, because governments have a natural preference for seeing public funds spent on home-grown industries.
European Commission Vice-President Günter Verheugen, responsible for enterprise and industry policy, said competitive clusters are essential for employment in Europe. "We need more world-class clusters in the EU. Clusters play a vital role in the much needed innovation of our businesses. They are powerhouses of job creation. Therefore we suggest that cluster policy efforts at all levels should aim at raise excellence and openness for cooperation, while respecting the competitive market-driven nature of clusters."
Bruno Sportisse, director of technology transfer and innovation at French research institute INRIA, said France has thousands of innovative companies, and arranging these in clusters helps maximise their impact. "We have tried to organise a network of innovative companies through competitiveness clusters, of which there are 71 in France. These clusters are located in a given area and focused on a particular research domain, such as security and communication or aerospace. They organise networks of SMEs, and it is a great opportunity for us to meet SMEs and identify innovative companies," he said.
The European Clusters Policy Group says the wealth of EU member states and regions is increasingly dependent on the development of appropriate framework conditions to promote entrepreneurship, innovation and industrial development.
A briefing note for Confindustria published by lobby group BusinessEurope says clusters are at the core of this strategy, and "can be a powerful stimulus for growth by generating synergies for companies, knowledge infrastructures and skills development". It recommends that cluster development should follow a bottom-up approach and be market-driven. It also calls for policies to support cluster development and promote entrepreneurship.
The importance of clusters in innovation is stressed in the report by the High Level Group on the Chemicals Industry. "More innovation and research and strengthening of networks and clusters are keys to securing competitiveness and sustainability. Innovation needs greater private commitment and a favourable policy framework," according to the expert group of political, industry and NGO stakeholders.
EU heads of state and government have said that the facilitation of increased participation of innovative SMEs in clusters will help small companies operate more effectively in the single market. The European Commission has also highlighted the central role played by clusters in bringing SMEs into wider industrial and research networks.
"Sustainable growth and job creation in the EU increasingly depends on excellence and innovation as the main drivers of European competitiveness. Recognising this fact, the EU adopted in 2006 a broad-based innovation strategy and identified strengthening clusters in Europe as one of the nine strategic priorities for successfully promoting innovation," the Commission said.
The High-Level Advisory Group on Clusters, chaired by French Senator Pierre Laffitte, emphasised "innovation clusters" in its 2007 report, the European Cluster Memorandum.
"Innovation is heavily concentrated geographically, much more so than high prosperity or productivity. Clusters - regional concentrations of specialised companies and institutions linked through multiple linkages and spill-overs - provide an environment conducive to innovation. They enable 'open innovation': the creation of refinement of new ideas in networks of cooperation companies and institutions. And they lower the barriers for transforming new ideas into businesses and capturing the benefits of globalisation. In modern competition, all clusters need to be innovation clusters."
A leading academic author on clusters, Örjan Sölvell, professor of international business at the Stockholm School of Economics, believes clusters provide an environment that is conducive to innovation and knowledge creation. In a January 2009 paper, he explains how gloablisation has amplified the importance of cluster development for regions.
"Regions with strong cluster portfolios are innovative leaders, while regions with no clusters or isolated research facilities fall behind. Globalisation has increased the benefits of strong clusters and raised the costs for regions which fail to develop some level of clustering. Strong clusters emerge in open markets where intense rivalry and cooperation within and between clusters coexist," Prof. Sölvell said.
Ann Mettler, executive director of Brussels-based think-tank the Lisbon Council, said clusters have a role to play but it would be a mistake to view them as the only answer to all of Europe's innovation issues. "If you're an entrepreneur a number of things are important: the size of the market, whether that market is growing and the issue of financing – access to venture capital – are all extremely important," she said.
She also warned that clusters may not be capable of delivering solutions in every area where creativity and innovation are needed.
"A lot of the innovation in clusters focuses on inventions and developing new products, but you also have to think about process innovation and business model innovation. Two areas where innovation will be needed are healthcare and education. I'm not sure clusters can address that adequately. Clusters focus on new products and private sector activity. They cannot do everything," Mettler said.
In terms of public policy, Mettler believes some of the most nimble clusters are those which develop organically and have the capacity to adjust to new market demand. "Governments need to do more than just put money into a cluster. They need to look at the innovation ecosystem from a holistic perspective," he added.
Richard Florida, author of The Rise of The Creative Class, has stressed the value of bringing innovative industries together as it helps attract inventive people. "Geographic concentration encourages innovation because ideas flow more freely, are honed more sharply and can be put into practice more quickly when innovators, implementers, and financial backers are in constant contact," Florida said.
"Creative people cluster not simply because they like to be around one another or prefer cosmopolitan centres with lots of amenities (though both things tend to be true). They cluster because density brings such powerful productivity advantages, economies of scale, and knowledge spillovers," he added.
13 Sept. 2006: European Commission communication on innovation strategy called for strengthening of clusters.
Sept. 2006: European Cluster Alliance established.
4 Dec. 2006: European Competitiveness Council backed support initiatives for innovative clusters.
Dec. 2006: High Level Advisory Group on clusters established under the European Innova initiative.
Jan. 2008: Launch of EU Cluster Memorandum.
20 May 2008: European Council called for greater effort in improving science-industry linkages and "world-class innovation clusters and the development of regional clusters".
25 June 2008: Small Business Act proposed greater cooperation on transnational cooperation.
17 Oct. 2008: European Commission communication published entitled 'Towards world-class clusters in the EU'.
2 Apr. 2009: European Institute of Innovation and Technology launched call for proposals for 'Knowledge and Innovation Communities'.
Apr. 2009: European Commission established 'European Cluster Policy Group'.
May 2009: Publication of the 'Cluster Organisation Directory', a database of more than 1,000 cluster organisations.