By Joe Cortright, Impresa, USA, presented at the 16th TCI Global Conference, Kolding 2013.

1. The Athletic and Outdoor cluster in Portland
Joe Cortright
Business Summit: Stretegic Innovation Partnerships
4 September

3. Oregon’s Athletic &
Outdoor Cluster
September 2013
Project funded by Portland Development Commission, Oregon Business
Development Department, Oregon Business Council
Joe Cortright, Impresa, Inc.

4. Roadmap
Definition
Metrics
Value Chain
Industry Structure & Rivalry
Evolution
Implications

5. Definition
Athletic & Outdoor Cluster
Firms that design, produce and market
apparel, footwear and related equipment for
sports, recreational and casual use

6. Core NAICS Codes for
Athletic & Outdoor Cluster
NAICS Code Sector Name
315 Apparel Manufacturing
3162 Footwear Manufacturing
33992 Sporting and Athletic Goods Manufacturing
42391 Sporting and Recreational Goods and Supplies Merchant
Wholesalers
4243 Apparel, Piece Goods and Notions Merchant Wholesalers
5414 Specialized Design Services
3322 Cutlery and Handtool Manufacturing
33699 Motorcycle, Bicycle, and Parts Manufacturing
Note: Not an exclusive list of firms that are included in the cluster; firms in other NAICS categories, for
example, professional services, are part of the cluster, but not the “core.”

7. Footwear

8. Apparel

9. Gear and Tools
Most US Knives are
designed or
manufactured in
Portland
Leatherman, Gerber,
Kershaw and Others

10. Related Industries

11. Supporting Industries
Marketing/Advertising/ Branding
IP Attorneys
IT
Logistics/Inventory Management
Packaging Design
Marketing
Distribution
Product Design
Sustainability
Industry analysts

12. Orientation

13. Methodology
Statistical Analysis
Focus Groups and Interviews
On-Line Survey

14. Survey Methodology
Online business survey
80 responses
Response rate: 21.7%
Response rate, core firms: 19.6%
Response rate, service firms: 29.3%
Questions
Firm history: founding & entrepreneurial
background
Geography of business partners
Interactions with local customers/users
14

15. Key Metrics
14,000 Employees
700 firms with a payroll
3,200 “non-employer” firms
Average wage: $82,700

16. High Wages
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
$90,000
1st Qtr
Metro AverageIndustry Average

17. Industry
Characteristics
•Non-Durable
•Fashion and Performance
•Globalized, Outsourced Manufacturing
•Some Technical Differentiation
•High Marketing Component
•Dominant Brands, Niche Players

18. A Global Marketplace
Sales by Market Area
Company U.S. Rest of World
Nike 34.1% 65.9%
Adidas 23.3% 76.7%
Columbia 55.2% 44.8%
LaCrosse 94.8% 5.2%
Note: For Adidas U.S. data covers is N. America.
Source: Company Annual Reports

19. Advertising Expense
Company Amount Percent of Sales
Nike 2,351.0 12.3%
Adidas 2,000.6 13.2%
Columbia 65.2 4.9%
LaCrosse 3.1 2.2%
Nike: includes endorsement contracts.
Amounts for Adidas converted from Euros to Dollars at
1.40 dollars/euro

20. Patent Analysis
Patents by Firm
Market Share of Patents in Key Classifications
Time Series data on patents
Relative contribution to Oregon patenting

22. Footwear Patents
Footwear Patents (Class 36), by State, 1990 to 2010
1 Oregon 274
2 California 239
3 Massachusetts 182
4 Washington 72
5 Florida 54
6 Michigan 54
7 North Carolina 49
8 New York 48
9 Ohio 44
10 Vermont 44

23. Athletic & Outdoor
Cluster Characteristics
and Value Chain

24. Athletic & Outdoor
value chain
Source: adidas 2009 Annual Report, page 88

25. Portland: high value
functions
Source: adidas 2009 Annual Report, page 88
Portland specializes in these
steps in the value chain

26. Interactions with local customers
29
completely
unimportant
somewhat
unimportan
t
neither
unimportant
nor
important
somewhat
important
extremely
important
Valid N
Material development 17.7% 9.7% 17.7% 33.9% 21.0% 62
Material improvement 12.9% 11.3% 19.4% 37.1% 19.4% 62
Visual design & styling 4.8% 3.2% 12.7% 25.4% 54.0% 63
Feedback on product concept &
prototype
7.9% 4.8% 11.1% 25.4% 50.8% 63
Testing products 7.9% 7.9% 11.1% 25.4% 47.6% 63
Brand image 4.8% 3.2% 14.3% 27.0% 50.8% 63
Suggestions & ideas for
new applications
8.1% 4.8% 17.7% 38.7% 30.6% 62
How important are each of the following interactions with local users/consumers to your
company`s development of products (Please choose one rating in each row)?

27. Trade Flows
Donguan
Los Angeles
Memphis
Container to LA
Rail to Memphis
Portland

28. Athletic & Outdoor
Value Chain
Function Location Wage
Production China $2 to $3/hour
Distribution Midwest $12-14/hour
Design, Finance
Marketing, Mgt. Portland $40/hour

29. Firm Structure,
Strategy and Rivalry

30. Portland’s Big
Three
Firm Portland Worldwide
Nike 5,700 34,300
Columbia 1,500 3,100
Adidas 800 38,982

31. Rivals

32. Interfirm Labor Mobility
Workers at incumbent firms, 2008 8,490
Workers moving to other Oregon firms
1,767 (20.8%)
To other Athletic & Outdoor cluster firms 295
To other incumbents 133
To startups 162

33. Competitive
Advantage
Design with fashion and performance
Highly talented workers
The local innovative milieu
Worker/Users
Active Living
“The Hybrid Lifestyle”

34. Self-Reinforcing
Lifestyle Talent
Culture
Cluster

35. U. S. Competitor Regions
Principal Athletic & Outdoor Competitor Regions,
Employment and Location Quotients, 2008
NAICS 315 3162 4243 43434
Industry Apparel Footwear Apparel
Wholesaling.
Footware
Wholesaling
Portland 500 (0.32) 345 (2.77) 6,017 (5.17) 5,246 (24.87)
Los Angeles 63,010 (7.31) 786 (1.14) 23,309 (3.6) 3,557 (3.04)
New York 28,634 (2.32)
Boston 1,551 (0.42) 929 (3.13) 3,916 (1.41) 866 (4.99)
Seattle 1,621 (0.63) 503 (1.44)
San Francisco 3,148 (1.02) 2,051 (0.89) 419 (1)
Boulder 71 (0.63) 866 (1.44)
Memphis 295 (0.32) 1,851 (2.69)

36. Evolution

37. Physical Activity
Compared to the average for the US,
Portlanders are:
Twice as likely to go camping
60% more likely to go hiking or backpacking
40% more likely to golf or hunt
Region ranks last in theme park attendance
Oregonians rank lowest in sedentary life styles
and 2nd highest of vigorous physical activity

38. How it started
• In the late 60s the
jogging craze takes off
in many towns led by
Eugene Oregon
• A guy starts selling
Japanese running
shoes out of the back
of his station wagon

39. Emergence of firms
in Portland, Oregon
Source: Portland Athletic & Outdoor Industry Research Project 42
Nike Inc.
Columbia
Sportswear
adidas America
Sports Inc.
Moved to PDX:
Yakima Racks (2004)
Keen (2006)
Icebreaker, Li Ning (2007)

40. 1980s:
Nike`s trans-
formation into a
global brand
1990s:
Competitors
move to PDX,
esp. adidas
America
2000s:
Expansion &
diversification of
industry
through
spinoffs
& new
firms
moving to
region
Three Phases
Source: Portland Athletic & Outdoor Industry Research Project 43
Nike Inc.

41. Athletic
and
Outdoor
Cluster

42. Micro-foundations of
Clusters
•Labor Market Pooling
•Supplier Specialization
•Knowledge Spillovers
•Entrepreneurship
•Path Dependence and Lock-In
•Culture
•Local Demand

43. Creation
•Labor Market Pooling
•Supplier Specialization
•Knowledge Spillovers
•Entrepreneurship
•Path Dependence and Lock-In
•Culture
•Local Demand

44. Growth
•Labor Market Pooling
•Supplier Specialization
•Knowledge Spillovers
•Entrepreneurship
•Path Dependence and Lock-In
•Culture
•Local Demand

45. Today’s
Competitiveness
•Labor Market Pooling
•Supplier Specialization
•Knowledge Spillovers
•Entrepreneurship
•Path Dependence and Lock-In
•Culture
•Local Demand

46. Implications

47. Co-Evolution of
industry and attitudes
Phase I: growth of recreation and fitness as a
socially valued and acceptable idea
Phase II: growing informality in social and
business relations (jeans, ties)
Phase III: creation of new forms of recreation
(windsurf, kiteboard, cyclocross, dragon-boat,
etc.
Phase IV: Hybrid lifestyle, blurring boundaries
between work and social life.

48. Path dependence and
selection
Social interaction—the big sort
More fun to be in a place where others share
your values
Externalities in consumption—need people
with similar interests to maximize utility
associated with consumption
Cities are selection environments for new
lifestyles

49. Example:
Bike Culture(s)
Spandex
Fixies
Cyclocross
City Bikes
Art Bikes

50. Bike Gallery
Manifesto
Live to Bike
Eat to Live
Work to Eat
Bike to Work

51. Compensation is
multi-faceted; more
than money
Direct compensation
Future value (skills, reputation and contacts
acquired)
“Know how” and “know who”
Consumption externalities

52. Cluster Drivers
Duranton & Puga: Functional Specialization
Von Hippel: User-Innovation
Porter: Local Demand
Saxenian: Business Culture
Schoales: Alpha Cluster

53. Implications
Economic & social innovation are
complements
Changes in values and lifestyles create market
niches
Portland’s culture is ahead of the curve in
generating social innovations, and giving local
firms insight into future market niches