Local Knowledge Key to Rural Cluster Strategy

Cluster-based economic development has grown in popularity, but this has not always translated well for rural regions. Many rural areas do not possess the infrastructure necessary for many high-technology industries, and most areas face two major disadvantages — an inability to achieve economies of scale and possess or create a specialized division of labor; and the relocation of the labor force away from rural areas.

Emphasizing local knowledge is a key in developing rural clusters, posits Rural Knowledge Clusters: The Challenge of Rural Economic Prosperity, a report released by the Hubert H. Humphrey Institute of Public Affairs at the University of Minnesota. The report explores rural knowledge clusters as a model for rural economies, and while the idea of rural clusters may seem a bit inconsistent, there is evidence that these clusters do exist.

Rural clusters differ from industry clusters in that they focus on knowledge, according to the report. The metropolitan industry cluster concept includes knowledge but also focuses on agglomeration, scale economies and interindustry relationships. These final three are not prevalent in rural economies, the report contends.

The report hypothesizes that three ingredients are critical to rural knowledge clusters. First, a rural knowledge cluster must enjoy some sort of competitive advantage. This can be a rich base of skilled workers, access to markets or a local entrepreneurial culture. Second, the historical development and progression of the local knowledge base is crucial. Knowledge very rarely appears out of thin air. It can arise from two essential companies, unique conditions or other dynamics that allow local residents to be knowledgeable about market prospects for a particular product or technology. And third, relationships with both formal and informal institutions are fundamental. These institutions foster the creation, diffusion, and renewal of the local knowledge base. Universities and community colleges play a critical role, but informal institutions are important as well.

Four approaches to rural knowledge clusters are provided:

• Understand your local knowledge base.  Analyze your economic base and understand what specialized knowledge drives your most innovative and successful firms.
• Foster linkages between firms and the local institutions that support them.  Active feedback loops between industry and local institutions are an important mechanism for promoting economic development.
• Develop strategies for promoting innovation around rural knowledge clusters.  Innovation is the most important element of rural knowledge clusters. R&D and tech transfer needs to be stimulated through manufacturing extension programs and applied research centers at local universities and technical colleges.
• Don’t try to go it alone, promote a regional vision to guide local strategies.  A regional vision must be established to help guide local activity. This is essential in a rural setting as firms, labor and governments can be spread out over a large area and must understand the benefits of working together.

Rural Knowledge Clusters concludes clusters are not right for every place, since all rural communities are not in an equal position to adopt cluster-based development strategies. Trying to start a cluster from scratch is almost always a formula for failure. The evidence suggests to not view cluster strategies as a universal means toward rural development. The report, prepared under an award from the U.S. Economic Development Administration, can be downloaded at: http://www.osec.doc.gov/eda/pdf/U.Minn.Lit.Rev3.pdf