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Industry Clusters and Innovation

Industry Clusters are “geographic concentrations of interconnected companies, specialized suppliers, service providers, and associated institutions in a particular field that are present in a nation or region."[i] Examples of industry clusters in California include Hollywood, Napa Valley, and California’s most well-known technology cluster, the Silicon Valley.[ii]

Other areas of the state also have important technology-based industry clusters, including those that are dedicated to biotechnologies and life sciences, such as the "Golden Triangle" within the San Diego region where Scripps Research Institute, Salk Institute, Scripps Institute of Oceanography, Burnham Institute’s General Atomics, UC San Diego, and California State University San Diego are all located within a ten mile radius.[iii]  Other biotechnology clusters include Oakland, San Francisco, San Jose, Los Angeles, and Orange County. Collectively, bioscience related firms employ 65,000 workers in California.

Six California metropolitan areas ranked in the top twenty of Milken Institute’s North American High Tech Economies of 2007,[iv] with the San Jose, Sunnyvale, and Santa Clara regions (located in the Silicon Valley) ranking first. Tech companies founded and headquartered in the Silicon Valley include Hewlett-Packard, Apple, Intel, Cisco Systems, Oracle, Google, Applied Materials, Synnex, and eBay.[v] The Milken Institute ranked Stanford University, located in the Silicon Valley in the city of Palo Alto, among the top ten in its University Tech Transfer and Commercialization Index.[vi]

The Silicon Valley is the center of California's software industry, which employs more than 41,000 Californians and totals over $5 billion in wages. California is also the largest employer of computer and video game personnel in the nation, accounting for approximately 40% of total industry employment nationwide. The industry grew nearly three times faster than the state's overall growth in 2008.[vii]

The Bay Area Science and Innovation Consortium is a research and development collaboration of Bay Area Universities with industries. The Silicon Valley region’s major research universities like Stanford and UC Berkeley have joined together with businesses like IBM, Genencor, and Hewlett-Packard and national labs like Lawrence Livermore, NASA Ames, and Sandia to create a network of innovative research and information sharing.[viii]

The San Francisco Bay Area region has over 120 electronic manufacturing firms, a jump from around 90 between 1995-1999.[ix] Using Culpepper High-Tech Compensation Surveys and Financial Benchmark's “Top 30 Fastest Growing Public High-Tech companies” list of 2003 and the PriceWaterHouseCooper's “MoneyTree Survey of Venture Capital Investment Activity in the U.S.” (2000) as indicators, the Milken Institute ranked the Bay Area first among other high tech U.S. regions (Austin, Los Angeles, and Boston) in high-technology economic development, regional research university excellence, and regional economic development.[x]

Examples of Public Policies and Programs that Support Industry Clusters

Universities often influence the location of innovation-based industry clusters. Surveys show that the presence of a leading research university can be a key factor in where firms locate their operations.  While the trend is shifting with globalization, significant entrepreneurial activity is generally found within 25 miles of a major research university.

Industry cluster enhancement programs have been created on many University of California (UC) campuses and the UC President's Office includes a specialized Office of Technology Transfer to assist in collaborations among and outside the UC campuses.  Examples of campus programs include the Berkeley Corporate Relations, Davis CONNECT, Irvine Partnerships for Business and Industry, Irvine Information and Computer Science Corporate Partners, San Diego CONNECT, San Diego Center for Wireless Communications, and San Diego Center for Magnetic Recording Research.[xi]

The Innovation Hub Initiative (iHub) is an effort of the Governor's Office of Business and Economic Development to "harness and enhance California's innovative spirit." The three year old initiative aims to improve the state's national and global competitiveness by stimulating partnerships, economic development, and job creation around specific research clusters through state designated iHubs.

The iHubs will leverage assets such as research parks, technology incubators, universities, and federal laboratories to provide an innovation platform for startup companies, economic development organizations, business groups, and venture capitalists.[xii]

Evolving Ideas about Innovation Corridors

The California Innovation Corridor extends from Alameda to San Diego and west to the Inland Empire and Antelope Valley representing 13 counties and over 60 participating organizations.[xiii]

The purpose of the Corridor is to strengthen innovation-related activities in business, schools, laboratories, workforce agencies and government. To accomplish this, the Corridor tries to further entrepreneurial development, the competitiveness of California in the global manufacturing and supply chain, and to foster a new generation of innovators and aerospace technicians.[xiv]



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