2000 Harvard C I T Cluster Study

The Microeconomic Foundations of Competitiveness and
the Role of Clusters

Professor Michael E. Porter
Harvard Business School

Mississippi
May, 2000

This presentation draws on ideas from Professor Porter’s articles and books, in particular, The Competitive Advantage of Nations (The Free
Press, 1990), “The Microeconomic Foundations of Economic Development,” in The Global Competitiveness Report 1998, (World Economic
Forum, 1998), “Clusters and the New Competitive Agenda for Companies and Governments” in On Competition (Harvard Business School
Press, 1998) and ongoing statistical study of clusters, and “What is Strategy?” (Harvard Business Review, Nov/Dec 1996). No part of this
publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means - electronic, mechanical, photocopying,
recording, or otherwise - without the permission of Michael E. Porter.

The Shifting Economic Policy Agenda

• Macro • Micro

• Current Productivity • Innovation

• Economy Wide • Clusters

• Cross-national
• National

• Regional / local

• Economic • Economic integrated
with social

Mississippi - Micro - 05-00.ppt 2 Copyright © 2000 Professor Michael E. Porter

Sources of Rising Prosperity
• A nation or region’s standard of living (wealth) is determined by the productivity
with which it uses its human, capital, and natural resources. The appropriate
definition of competitiveness is productivity.
– Productivity depends both on the value of products and services (e.g.
uniqueness, quality) as well as the efficiency with which they are produced.
Productivity should be measured in terms of the value (revenue) produced per
unit of labor or capital, not just the volume.
– It is not what industries a nation or region competes in that matters for
prosperity, but how firms compete in those industries
– Productivity in a nation or region is a reflection of what both domestic and
foreign firms choose to do in that location. The location of ownership is
secondary for national prosperity.
– The productivity of “local” industries is of fundamental importance to
competitiveness, not just that of traded industries

• Nations and regions compete in offering the most productive environment for
business


Shifting Sources of Prosperity

Comparative Competitive
Advantage Advantage

Wealth is set by Wealth is created by a
endowments nation or region’s
choices


Determinants of Productivity and Productivity Growth

Macroeconomic, Political, and Legal Context
Macroeconomic, Political, and Legal Context

Microeconomic Foundations

Internal External

Sophistication of Quality of the
Company Operations Microeconomic Business
and Strategy Environment


The Relationship Between Microeconomic
Foundations and GDP Per Capita
$40,000
(Current Dollars Adjusted for Purchasing Power Parity)

United States
$30,000
1998 GDP per Capita

Singapore Switzerland

Norway
Iceland Belgium
Austria Denmark
Hong Kong Canada
Japan France Netherlands
Australia Germany
Italy United Kingdom Finland
Taiwan Sweden
$20,000 Ireland
Israel
Spain New Zealand

Portugal
Greece
Korea Chile
Czech Republic
Argentina Malaysia
Mauritius
$10,000 Venezuela
Slovakia Mexico
Hungary
Colombia Costa Rica Poland Turkey South Africa
Thailand
Ecuador Brazil
Bulgaria Peru
Russia China Philippines Jordan
Bolivia Indonesia Egypt
El Salvador Zimbabwe
Ukraine India
Vietnam
$0
-2 -1 0 1 2
Microeconomic Competitiveness Factor (MICI)
Source: M. Porter, “Microeconomic Competitiveness: Findings from the 1999 Executive Survey ,” Global Competitiveness Report, Geneva: World Economic
Mississippi - Micro - 05-00.ppt
Forum, 1999. Refer also to 1998 report. 6 Copyright © 2000 Professor Michael E. Porter

Sources of Superior Performance

Operational Strategic
Strategic
Effectiveness Positioning
Positioning

• Assimilating, attaining, and • Creating a unique and
extending best practice sustainable competitive
position


Productivity and the Microeconomic Business Environment
Context for
Context for
Firm
Firm
Strategy
Strategy
and Rivalry
and Rivalry

• A local context that
encourages investment
and sustained upgrading
Factor
Factor • Vigorous competition Demand
Demand
(Input)
(Input) among locally-based Conditions
Conditions
Conditions
Conditions rivals

• Factor (input) quantity • Sophisticated and
and cost demanding local customer(s)
• Unusual local demand in
Related and
Related and specialized segments that can
• Factor quality Supporting
Supporting be served globally
• Factor specialization Industries
Industries • Customer needs that
anticipate those elsewhere
• Presence of capable, locally-
based suppliers and firms in
related fields
• Presence of clusters instead
Mississippi - Micro - 05-00.ppt of isolated industries
8 Copyright © 2000 Professor Michael E. Porter

The California Wine Cluster Winemaking Equipment
Winemaking Equipment

Grapestock
Grapestock Barrels
Barrels
State Government Agencies
(e.g., Select Committee on Wine
Production and Economy)
Fertilizer, Pesticides,
Fertilizer, Pesticides, Bottles
Bottles
Herbicides
Herbicides

Grape Harvesting Caps and Corks
Caps and Corks
Grape Harvesting
Equipment
Equipment

Labels
Labels
Irrigation Technology
Irrigation Technology Wineries/Processing
Wineries/Processing
Growers/Vineyards
Growers/Vineyards Facilities
Facilities Public Relations and
Public Relations and
Advertising
Advertising

Specialized Publications
Specialized Publications
(e.g., Wine Spectator, Trade
(e.g., Wine Spectator, Trade
Journal)
Journal)

California
California Educational, Research, & Trade
Educational, Research, & Trade Tourism Cluster
Tourism Cluster
Agricultural Cluster
Agricultural Cluster Organizations (e.g. Wine Institute,
Organizations (e.g. Wine Institute,
UC Davis, Culinary Institutes)
UC Davis, Culinary Institutes)

Food Cluster
Food Cluster
Sources: California Wine Institute, Internet search, California State Legislature. Based on research by MBA 1997 students R.
Alexander, R. Arney , N. Black, E. Frost, and A. Shivananda.

What is a Cluster?
A cluster is a geographically proximate group of interconnected
companies and associated institutions in a particular field, linked by
commonalities and complementarities
• End-product or service companies
• Suppliers of specialized inputs, components, machinery, financing, and
services
• Firms in related and downstream industries (i.e., channels or customers)
• Producers of complementary products
• Specialized infrastructure providers
• Government and other institutions providing specialized training, education,
information, research, and technical support (e.g. universities, think tanks,
vocational training providers)
• Standards-setting and influential government agencies
• Trade associations and other collective private sector bodies

Clusters go beyond a single industry

The Norwegian Maritime Cluster
Fisheries
Fisheries
and
and
Fishing
Fishing
Ship owners
Ship owners Equipment
Equipment Shipyards
Shipyards

Ship brokers
Ship brokers
and agents
and agents
Boat builders
Boat builders
Banking and
Banking and Maritime
Maritime
Maritime
Maritime Equipment
Finance
Finance
Services
Shipping
Shipping Equipment
Services Suppliers
Suppliers
Ship equipment
Ship equipment
Maritime lawyers
Maritime lawyers

Underwriters and
Underwriters and Maritime
Maritime
maritime insurance
maritime insurance authorities
authorities
Offshore
Offshore
Exploration
Exploration
Maritime
Maritime and Oil
and Oil
R&D Production Classification
Classification
R&D Production societies
societies
Maritime
Maritime
consultants
consultants Maritime
Maritime
education
education
Processing
Processing
Fixed platforms
Fixed platforms Pipelines
Pipelines equipment
equipment

• Norway has 0.1% of the world’s population, represents 1.0% of the world’s
economy, yet accounts for 10% of world seaborne transportation
Source: Sven Ullring, presented to M.I.T.

The Houston Oil and Gas Cluster
Upstream Downstream

Oil Oil Oil
Oil Oil Oil
Trans- Wholesale Retail
Oil & Natural Gas Oil & Natural Gas Trading Refining Distribution Marketing
portation Marketing
Exploration & Completion &
Development Production Gas
Gas Gas Gas Gas Gas
Transmis-
Gathering Processing Trading Distribution Marketing
sion

Oilfield Services/Engineering & Contracting Firms

Equipment Specialized Subcontractors Business
Suppliers Technology Services
Services (e.g. Surveying,
(e.g. Oil Field Mud Logging, (e.g. MIS Services,
Chemicals, (e.g. Drilling Maintenance Technology
Drilling Rigs, Consultants, Services) Licenses,
Drill Tools) Reservoir Services, Risk Management)
Laboratory Analysis)

Specialized Institutions
(e.g. Academic Institutions, Training Centers, Industry Associations)


Clusters and Competitive Advantage
Productivity
• Efficient access to information, specialized inputs and employees,
institutions, and “public goods”
• Achieving complementarities across businesses
• Better incentives and performance measurement

Innovation
• Ability to perceive and respond to innovation opportunities
• Rapid diffusion of improvements

New Business Formation
• Perceiving opportunities for new businesses
• Lowering barriers to entry (including perceived risk)

• Competition is fundamentally affected by externalities / linkages
across firms, industries, and associated institutions


The Influence of Clusters on the Nature of Local
Competition

Operational
Operational Strategic
Strategic
Effectiveness
Effectiveness Positioning
Positioning

• Clusters facilitate rapid • Clusters foster strategic
operational improvement competition instead of imitation
and extending the and price cutting
productivity frontier – OE differences within
– Rapid dissemination of Clusters clusters are hard to sustain
Clusters
best practices – Proximity discourages
– Opportunities for imitation vs. the pursuit of
experimentation with different strategies
new activity – Clusters can provide a better
configurations and environment in which to
approaches perceive new needs and
segments
– The presence of local
suppliers, related firms, and
supporting institutions
enables strategic differences

Why Innovation Matters

• Advanced nations cannot support high wages and profits through producing
standard products or services made with standard methods
– High wages can only be justified by productivity differences
– Developing economies have far lower wages and improving skills and
infrastructure
– Developing nations can access existing technology via outsourcing
and technology acquisition
– A broader array of nations are building innovative capability
– Multinational companies can choose to locate activities anywhere,
including innovation-related activities

• The prosperity of advanced nations depends on innovation
• A faster rate of innovation is also fundamental to coping with slow
workforce growth and to expanding the world economic pie
• Innovation holds the key to solving many of the world’s most pressing social
challenges (e.g., health care and the environment)


Innovation and the Standard of Living

Prosperity

Competitiveness
(Productivity)

Innovative Capacity


Massachusetts Clusters

Biotechnology
Biotechnology
Financial
Financial
Healthcare
Healthcare Services
Services
Information
Information
Technology
Technology Tourism &
Tourism &
• Services Leisure
Leisure
• Hardware

Defense Knowledge
Knowledge Environmental
Environmental
Defense
Creation Products &
Products &
Creation Services
Services
•• Advanced Education
Advanced Education
•• Innovation Services
Innovation Services
Metal
Metal
Fabrication //
Fabrication Specialty
Specialty
Processing
Processing Paper
Paper

Photonics
Photonics Polymers
Polymers
Marine
Marine Textiles,
Textiles,
Equipment
Equipment Apparel &
Apparel &
& Services
& Services Footwear
Footwear

Selected Regional Clusters of Competitive U.S. Industries
Boise Wisconsin / Iowa / Illinois
Sawmills Agricultural Equipment Minneapolis West Michigan Boston
Western Massachusetts
Farm Machinery Cardio-vascular Office and Institutional Mutual Funds
Polymers
Omaha Equipment Furniture Biotechnology
Seattle Telemarketing and Services Rochester Software and
Aircraft Equipment and Design Hotel Reservations Imaging
Michigan Networking
Boat and Ship Building Credit Card Processing Equipment
Warsaw, Indiana Clocks Venture Capital
Metal Fabrication Detroit
Orthopedic Devices
Auto Equipment Hartford
Oregon and Parts Insurance
Electrical Measuring Providence
Equipment Jewelry
Woodworking Equipment Marine Equipment
Logging / Lumber Supplies
New York City
Financial Services
Silicon Valley Advertising
Microelectronics Publishing
Biotechnology Multimedia
Venture Capital Pennsylvania / New Jersey
Pharmaceuticals
Las Vegas Pittsburgh
Amusement / Advanced Materials
Casinos Energy
Small Airlines
North Carolina
Los Angeles Area Household Furniture
Defense Aerospace Synthetic Fibers
Entertainment Hosiery
Wichita
Carlsbad Light Aircraft Cleveland / Louisville
Golf Equipment Farm Equipment Paints & Coatings
Baton Rouge /
Phoenix New Orleans Dalton, Georgia
Helicopters Dallas Specialty Foods Carpets
Semiconductors Real Estate
Development Southeast Texas /
Electronic Testing Labs Nashville / Louisville
Colorado Louisiana
Optics Hospital Management South Florida
Computer Integrated Systems / Programming Chemicals
Health Technology
Engineering Services Computers
Mining / Oil and Gas Exploration 18 Copyright © 2000 Professor Michael E. Porter

The Composition of Regional Economies

50 “Traded” Clusters (35.7% of Total Employment)
50 “Traded” Clusters (35.7% of Total Employment) Natural
Natural
Resource
Resource
e.g. • Aerospace Engines
Driven
Driven
• Aerospace Vehicles and Defense Industries
Industries
• Analytical Instruments
• Apparel...

19 Local Clusters (64.2% of Total Employment)
e.g. • Local Agriculture
• Local Commercial Services
• Local Community and Civic Organizations
• Local Construction Services...


The Information Technology Cluster
Services Hardware
Software and Programmer Services Computers Peripherals Telecommunications Equipment
Computer programming services Electronic Computers Computer storage devices Telephone and telegraph aparatus
Prepackaged software Computer terminals Radio and TV communications equipment
Computer integrated systems design Computer peripheral equipment Communications equipment N.E.C.

Computer and Information Services
Information Retrieval Services
Data processing and preparation
Computer facilities management
Computer rental and leasing Components
Computer maintenance and repair
Computer related services N.E.C. Semiconductors Optical Devices Electrical components, parts
and processes
Electron tubes Magnetic and optical recording media Electronic connectors
Semiconductors and related Optical instruments and lenses Electronic Components N.E.C.
Plating and polishing
Electrical industrial apparatus N.E.C.
Printed circuit boards
Electronic resistors
Electronic coils and transformers

Research Organizations Instruments
Commercial physical research Instruments to measure electricity
Noncommercial research organizations Analytical instruments
Measuring and controlling devices


Computer
Rental and Computer
Leasing Integrated
Information
Systems
0.310** Retrieval
Design
Services
Computer 0..505**
0.554** Related
Services nec
Computer
Data 0.610** Programming
Processing Services
and
Preparation 0.613** Noncom-
Computer mercial
Facilities
0.579** Research
Management Computer Commercial
Prepackaged Orgs.
Maintenance Physical
Software
0.681** and Repair Research 0.416**

0.699** 0.725** 0.667**

Radio and TV Communi- Calculating /
Telephone & Electronic Computer Storage Computer
Communi- cations Accounting
Telegraph Terminals Devices Peripherals
cation Equip. Equipment
Apparatus Computers Machines
nec nec
0.534** 0.536** 0.773** 1.000 0.642** 0.595** 0.498** 0.328**

Magnetic and
Measuring Analytical Optical Electronic Semicon-
and Instruments Recording Components ductors and
Controlling Media Related
Optical
Devices Devices Plating and
Instruments 0.684** 0.777** 0.860** Polishing
Instruments and Lenses 0.669** Electronic
0.765**
to Measure Coils &
Printed
Electricity 0.651** 0.569** Transformers
Circuit
Boards
0.645** Electronic 0.353**
Connectors
0.695** Electronic
Resistors
Electrical 0.752** Electron
Note: **Locational correlation of employment with the core industry Industrial Tubes
0.416**
across U.S. states. Correlations are statistically significant at the Apparatus
95% level. nec
0.342**
Source: Professor Michael E. Porter, Cluster Mapping Project, 1999.
Mississippi - Micro - 05-00.ppt 0.573**

SF-OaklandBay Area-
Silicon Valley, CA
Knoxville, TN

BoiseCity.ID-OR
Denver-Boulder, CO
Boston, MA

Raleigh-
Durham NC
,
San Diego, CA Location Quotient*

2to 3
Austin, TX
*Measure of a cluster’s concentration in a
Albuquerque, NM-AZ 1to 2
region relative to a cluster’s concentration
in the nation
Huntsville, AL
0to 1
Source: Cluster Mapping Project

Software and Programmer Services

Washington-
Baltimore, DC-MD
Seattle, WA Salt Lake City, UT
Minneapolis-
Denver-Boulder, CO
Portland, OR St. Paul, MN Boston, MA

Raleigh-
Durham-NC
San Diego, CA
Location Quotient*
SF-Oakland Bay Area Tucson, AZ Huntsville-
Silicon Valley, CA Atlanta, AL-GA 1.51 to 3.5
Austin, TX 1 to 1.50
*Measure of a cluster’s concentration in a region relative to
a cluster’s concentration in the nation 0 to 1

The Automotive Cluster

Detroit-AnnArbor-
Cleveland-Akron-
Traverse City-Columbus, MI-OH
Grand Forks, ND
Buffalo Falls, NY

Greenville-
Spartanburg, NC-SC

Location Quotient*
Fort Smith, AR-OK
2to 4
Jonesboro, AR
1to 2
Tupelo, MS
Western
*Measure of a cluster’s concentration in a region relative Tennesee
to a cluster’s concentration in the nation
0to 1


Level of Aggregation and Competitiveness

Company Industry Cluster Sector Economy

e.g., services,
manufacturing,
“high-tech”


Appropriate Roles of Government in Economic Development

1. Establish a stable and predictable macroeconomic and political
environment

2. Improve the availability, quality, and efficiency of general purpose
inputs, infrastructure and institutions

3. Establish overall rules and incentives governing competition that
encourage productivity growth

4. Facilitate cluster development and upgrading

5. Develop and implement a positive and long-term process for
economic upgrading which mobilizes national government, local
government, business, institutions, and citizens


Cluster Policy versus Industrial Policy

Industrial Cluster-based
Policy Policy

• Target desirable industries / • All clusters can contribute to prosperity
sectors
• Domestic and foreign companies both
• Focus on domestic companies enhance productivity
• Intervene in competition (e.g., • Relax impediments and constraints to
protection, industry promotion, productivity
subsidies)
• Emphasize cross-industry linkages /
complementarities

• Encourages initiative at the state and local
• Centralizes decisions at the
level
national level

Distort competition Enhance competition

Illustrative Government Influences on Cluster Upgrading
Context for
Context for
Firm
Firm
Strategy
Strategy
and Rivalry
and Rivalry

l Eliminate barriers to local
competition
l Focus efforts to attract
foreign investment around
Factor
Factor clusters Demand
Demand
(Input)
(Input) l Focus export promotion Conditions
Conditions
Conditions
Conditions around clusters
l Organize relevant
government departments
around clusters l Create streamlined, pro-
l Create specialized education innovation regulatory
and training programs standards affecting the cluster
l Establish local university to
research efforts in cluster- l reduce regulatory uncertainty
related technologies l stimulate early adoption
Related and
Related and l encourage innovation or new
l Support cluster-specific
information gathering and Supporting
Supporting products and processes
l Sponsor independent
compilation Industries
Industries testing, product
l Improve specialized
certification, and rating
transportation,
services for cluster
communications, and other l Sponsor forums to bring together cluster participants
products/services
infrastructure required by l Cluster-specific efforts to attract suppliers and service
l Act as sophisticated buyer
cluster providers from other locations
of the cluster’s products /
l Establish cluster-oriented free trade zones, industrial
services
Mississippi - Micro - 05-00.ppt parks, or supplier parks 28 Copyright © 2000 Professor Michael E. Porter

Government and Cluster Development
Principles

• Cluster policy does not substitute for the need to improve the
general business environment

• Clusters offer a different way to view and understand the economy

• Clusters offer a mechanism to bring together government and the
private sector

• Cluster policy seeks to upgrade all existing and emerging clusters,
not choose amongst them

• Cluster policy is focused on removing impediments and obstacles
to cluster development. It is not the same as “industrial policy”


Government Roles in Cluster Development

• Convening cluster participants

– Involve institutions and multiple levels of government
• Acting on government induced / influenced weaknesses or
obstacles to productivity

• Aligning government organizational structure, and other data
collection, with clusters

• Encouraging other institutions to develop cluster-based strategies

– e.g. universities, training providers


Public / Private Cooperation in Cluster Upgrading
Minnesota’s Medical Device Cluster
Firm
Firm
Strategy,
Strategy,
Structure
Structure
and Rivalry
and Rivalry

l Aggressive trade associations (Medical
Alley Association, High Tech Council)
l Effective global marketing of the cluster
Factor and of Minnesota as the “The Great Demand
Factor State of Health” Demand
Conditions
Conditions l Full-time “Health Care Industry Conditions
Conditions
Specialist” in the department of Trade
and Economic Development

l Joint development of vocational- l State sanctioned
technical college curricula with the reimbursement policies to
medical device industry enable easier adoption
l Minnesota Project Outreach exposes and reimbursement for
businesses to resources available at innovative products
university and state government Related and
Related and
agencies Supporting
Supporting
l Active medical technology licensing Industries
through University of Minnesota
Industries
l State-formed Greater Minnesota Corp.
to finance applied research, invest in
new products, and assist in technology
transfer

Company Attitudes Towards Clusters

First Reaction Upon Reflection

• Create more competition • Increase efficiency

• Lose employees to spin-offs • Expand the availability of inputs

• Drive up local costs • Increase flexibility

• Increase information

• Facilitate marketing

• Speed innovation

• Most cluster participants are not
direct competitors


Illustrative Private Sector Influences on Cluster Upgrading
Context for
Context for
Firm
Firm
Strategy
Strategy
and Rivalry
and Rivalry

l Market jointly through trade
fairs and delegations
l Collaborate with
Factor
Factor government export Demand
Demand
(Input)
(Input) promotion efforts Conditions
Conditions
Conditions
Conditions l Create directories of
cluster participants
l Jointly develop specialized
vocational, technical, college l Work with government
and university curricula to streamline
l Sponsor specialized university regulations and modify
research centers Related and
Related and them to encourage
l Collect cluster information Supporting innovation
Supporting
through trade associations Industries l Establish local testing
l Maintain close liaison with
Industries
and standards
infrastructure providers to organizations
address specialized cluster l Establish a cluster-based trade
needs (e.g., data association
communications, logistics) l Encourage local supplier formation
l Develop courses for managers and attract local investments by
on regulatory, quality, and suppliers based elsewhere through
managerial issues
individual and collective efforts

Guidelines for Organizing and Implementing
a Successful Cluster Initiative

• Shared understanding of competitiveness and the role of clusters
• Private-sector led with active government participation, rather than
organized and controlled by government
• Focus on removing obstacles and easing constraints to cluster
upgrading rather than seeking subsidies or limiting competition
• Encompass (over time) all clusters in a region or nation
• Appropriate cluster boundaries
• Wide involvement of cluster participants as well as associated
institutions
• Attention to personal relationships to facilitate linkages, foster open
communications, and build trust
• A bias towards action
• Clusters are institutionalized by the private sector


Common Pitfalls in Cluster Initiatives

•• Prioritizing or “picking” clusters
Prioritizing or “picking” clusters

•• Government-driven
Government-driven

•• Overly broad or overly narrow cluster definitions
Overly broad or overly narrow cluster definitions

•• Using the cluster concept as aacover for industrial policy
Using the cluster concept as cover for industrial policy

•• Orientation toward subsidies or limiting competition
Orientation toward subsidies or limiting competition

•• Ignoring small or emerging clusters
Ignoring small or emerging clusters

•• Attempting to create clusters from “scratch”
Attempting to create clusters from “scratch”



• Macro • Micro



• Cross-national
• National


with social


• Macro • Micro



• Cross-national
• National


•• Economic
Economic •• Economic integrated
Economic integrated
with social
with social

• From market intervention to help the poor to equipping
disadvantaged citizens to succeed in the market
• From inequality as a failure of the market to inequality as a failure
of government
• From inflicting environmental standards on business to fostering
corporate environmental innovation
• From cutting health care cost to finding innovative health solutions

Integrating Economic and Social Policy

There is no inherent conflict between capitalism and social needs

Economic Social
Policy Policy

• A productive and growing economy requires:
– Rising skill levels
– Safe working conditions
– Healthy workers who live in decent housing in safe neighborhoods
– A sense of opportunity
– Assimilation of underemployed citizens into the productive workforce
– Low levels of pollution (pollution is a sign of unproductive use of
physical resources)
• “Social” policies must be aligned with productivity in the economy and
prepare and motivate citizens to succeed in the market system


Economic Development in Inner Cities
Premises of the New Model
• Inner-city distress is as much an economic as a social problem
– Without viable jobs, social investments will be insufficient
• Economic development in inner cities must be approached from a business
strategy perspective - businesses must be genuinely profitable, and the
private sector must play the leading role
• There are existing and potential competitive advantages of inner cities that
can support viable businesses and jobs
• The disadvantages of inner cities as business locations must be addressed
directly, not offset by subsidies
• The inner city can only prosper if it is integrated into the regional and
national economy
• The paradigm must shift from:
– reducing poverty to creating income, jobs, and wealth
– community deficiencies to market opportunities

Widen prosperity to all of our citizens


• Macro • Micro



• Cross-national
• National


with social


Selected References
Michael E. Porter

• “Microeconomic Competitiveness: Findings from the 1999 Executive Survey” in The Global
Competitiveness Report 1999, (World Economic Forum, 1999)

• “The Determinants of National Innovative Capacity”, with Scott Stern and Jeffrey Furman,
(Harvard Business School Working Paper, 1999)

• “The Microeconomic Foundations of Economic Development,” in The Global Competitiveness
Report 1998, (World Economic Forum, 1998)

• “Clusters and the New Competitive Agenda for Companies and Governments” in On Competition
(Harvard Business School Press, 1998)

• “What is Strategy?” (Harvard Business Review, Nov-Dec 1996)

• “The Competitive Advantage of the Inner City,” (Harvard Business Review, May-June 1995)

• "Toward a New Conception of the Environment-Competitiveness Relationship," with Claas van
der Linde (The Journal of Economic Perspectives, Fall 1995).

• "Making Competition in Health Care Work,” with Elizabeth O. Teisberg and Gregory B. Brown
(Harvard Business Review, July-Aug 1994)

• The Competitive Advantage of Nations (The Free Press, 1990)


2000 Harvard C I T Cluster Study

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