Group Analysis

Geographic clusters of interconnected research institutions, businesses and suppliers — think Boston and the biotechnology industry — play a key role in fostering innovation. But not all of these regional systems are created equal. The best ones generate a greater number of jobs, attract more start-ups, and create more new products and services. So what do the most successful clusters have in common?

We studied more than 15 on three continents over the past four years. These networks are often anchored by an academic center or research institution, and nurtured by private or government-sponsored development agencies. The academic centers generate a constant stream of ideas and graduates, attracting companies looking for products and services to develop. The companies, in turn, pay royalties to the institutions, creating a virtuous circle of innovation and commercialization.

While good science is at the core, we found three other factors to be especially powerful in determining a cluster's competitiveness and growth potential.

New-Venture Oriented

The most-successful clusters are marked by research centers and companies that value innovation and risk-taking. They aren't afraid to venture outside established areas and into new markets.

This type of thinking can be actively encouraged within a cluster. Technology-transfer offices, often funded by universities and sometimes by governments, bridge the gap between scientists and businesspeople by identifying academic research that has commercial potential and pitching it to potential developers.

The best tech-transfer offices are large enough to tailor their efforts to specific industries. An office with the scale to employ a physicist to evaluate physics research and a biologist to evaluate biology research, for example, will be more effective than a smaller one staffed by generalists.

Service Oriented

The best clusters have a network of service providers to perform noncore tasks or provide members with access to equipment, personnel or other resources they don't have internally. By farming out jobs such as computer maintenance, smaller ventures can focus on what they do best: commercializing new ideas. That results in a higher rate of product and service introductions. Within clusters in Shanghai, a growing number of midsize manufacturers have become providers of consulting and outsourcing services, helping former rivals become more competitive. Some use their knowledge of doing business in China to help international clients find local partners for ventures, spawning more opportunities for Shanghai companies and helping speed products to market.

Willingness to Compete/Collaborate

The best clusters encourage competition and collaboration, both locally and globally. For example, Sunnybrook & Women's Hospital, part of a biotechnology cluster in Toronto, actively encourages its researchers to compete with one another as well as with the best and brightest in the world.

Local competition forces cluster members to pay attention to what the companies and researchers next door are doing. That helps rivals spot opportunities to work together, which in turn cuts down on duplication of effort within a cluster.

International collaboration, meanwhile, keeps clusters from becoming too inwardly focused. Cluster developers can encourage such partnerships by forging ties with the international community and using those connections to match up local firms or researchers with international counterparts performing complementary work.

China has declared the biomedical sector an area of strategic importance, increasing grants and recruiting scientists aggressively. We say China's ambition in this sector is good news for clusters in North America and Europe because it may force them to look beyond local markets for talent and opportunities.