Industry Clusters Far From Certain Success

When state-backed industry clusters first gained recognition in Connecticut 10 years ago, business leaders praised their arrival as an important economic tool to strategically boost the state’s economy. But a decade later, history shows a mixed bag of results – with some clusters realizing their full potential and others, after barely getting off the ground, now defunct.

The economic cluster theory, championed by a Harvard business professor, promotes the geographic concentration of interconnected businesses, suppliers and associated institutions as a way to focus regional economic development. In 1998, the life science cluster was the first to gain state recognition, and since then, eight more were created by the Department of Economic and Community Development.

And as business leaders in the region now explore the feasibility of creating a health care cluster, there are some cluster-related cautionary tales worth review.

Even though the Web site for the Department of Economic and Community Development, which provides some financial backing, still lists plastics and metal manufacturing as state-supported clusters, their cluster activities were abandoned years ago.

At one point, the Connecticut Plastics Council boasted 45 member companies. But around 2004, the nonprofit formed to head up the plastics cluster activity disbanded shortly after its second executive director left since starting in 2001.

During its short tenure, it was backed by nearly $400,000, about one-third of which came from state funding toward work force development and lean manufacturing programs. Since then, another effort to start up a plastics cluster, this time by the Quinebaug Valley Plastics Institute, was unsuccessful.

The QVPI — a small group of volunteers from plastics companies working with local schools to support the industry — submitted their application to the DECD two years ago, but the institute’s director said there were concerns about how a cluster would be structured, given the diversity of plastics manufacturing. Still, the group felt the dissolution of the plastics cluster years earlier left the industry without the proper representation in the state.

“We felt that we’ve got a huge cluster here and wanted to take advantage of some of the funding,” said QVPI President Jeanne Zesut.

And just as the plastics cluster quietly fizzled out, so did the metal manufacturing cluster.

Michael J. McCarthy, former managing director of the Metal Manufacturers’ Education and Training Alliance, said cluster activities “for all intents and purposes” ended a few years ago. During its lifetime, the metal cluster secured more than $2 million in public and private funds and trained more than 1,000 workers in lean manufacturing programs.

Jerry Clupper, executive director of the New Haven Manufacturers Association, said state funding for the cluster was cut off shortly after a state-sponsored report found its activities were duplicated by already existing entities in the state, including a number of manufacturing associations.

Since then, some of the metal manufacturing cluster’s activities have been rolled into a consortium of manufacturing associations, and Clupper is hopeful that one of the main features of the metal cluster’s activities, an interactive Web site with information about all the state’s manufacturers, will eventually be completed.

Though Clupper still faults the state for not backing the cluster, the existing manufacturing associations have taken on more joint responsibilities.

“What has happened since then is that many of the people involved in the metal cluster have become much more collaborative with the consortium as a result,” Clupper said.

In the cases of both plastics and metal manufacturing, DECD Commissioner Joan McDonald said it isn’t necessarily a bad thing the official clusters are no longer active.

“The whole cluster philosophy is it’s private sector driven, and in some instances, it’s about where the leaders want to take it,” said McDonald, who took over as commissioner two years ago.

Meanwhile, the MetroHartford Alliance is accelerating plans to study the possibility of creating a new industry cluster based on the region’s vast health care resources, which include hospitals, universities and life science and medical device companies.

Possible areas of focus include how to maximize federal stimulus dollars for health care — especially for information technology systems — promoting wellness and how to become a hot spot for research and clinical trials, which proponents say would be a major economic driver for the region.

Citing the need for economic recovery, MetroHartford president and CEO R. Nelson “Oz” Griebel said a health care economy could be the driver that helps Connecticut climb out of the recession, given the heavy layoffs in the state’s manufacturing and financial sectors over the past year.

Still, as Alliance members pursue exploratory discussions, McDonald said it is too early to talk about a new health care cluster.

“I’m not convinced a cluster is the way to go because I think there needs to be so much public dialogue and public-private discussion that it’s not relevant at this time,” she said.

The state has given $3 million to the industry clusters over the past three years toward studies or programs to support their activities. Cluster leaders said the economic development initiative has proved useful over the past 10 years.

The clusters have been particularly visible over the past few months to fight against tax proposals in the state legislature that industry leaders say will cripple their members. Connecticut United for Research Excellence, the state’s life science cluster, has been vocal in its opposition of a proposed repeal of the research and development tax incentives, while the information technology cluster has lobbied against proposals to eliminate the sales tax exemption on certain IT services.

The insurance and financial services cluster was formed in 2002 after insurance jobs in the Hartford region had fallen by nearly 20,000, to 65,000, over the previous decade. Since the formation of the cluster, the level of insurance employment stabilized before the recession kicked in.

The IFS cluster, which received $100,000 in start-up funding from the state, is indicative of the potential federal benefits for forming recognized clusters. In 2006, it received a three-year $2.7 million U.S. Department of Labor grant, which is coming to a close next month, toward work force development programs.

The aerospace components manufacturers cluster differs from the other clusters because it solely focuses on the supply chain to large original equipment manufacturers. Still, executive director Allen Samuel can point to obvious successes from cluster activity, including a focus on lean manufacturing and company-sponsored scholarships for local engineering students, as well as regularly held no-holds-barred, off-the-record member meetings to hash out company-specific issues.

“You have competitors helping other competitors,” said Samuel, whose organization has grown from six members to almost 60. “They’ve developed a trust among each other.”