A Map for Economic Renewal Begins in Maine
A Map for Economic Renewal Begins in Maine

The Maine Food Cluster Project, and a new case study about it, show how reimagining the way we consider local economies can have huge effects on a state’s (and the country’s) future. Senior fellow Karen Mills discusses her work investigating how to use cluster initiatives to chart a new course for growth and innovation in the Pine Tree State and beyond.

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31 Mar 2016   Christian Camerota

From 2010 to 2013, Maine had the worst state economy in the country. So why might a roadmap to economic renewal, one that could be effectively used anywhere in the U.S., begin there?

The key can be found in Karen Mills’ new case, “The Maine Food Cluster Project.” Mills, a senior fellow at Harvard Business School (HBS) and Harvard Kennedy School (HKS), was the 23rd Administrator of the U.S. Small Business Administration (SBA) from 2009 to 2013. In that cabinet-level position, Mills advocated for Congressional approval to fund several dozen cluster initiatives, which she believed were an effective means of identifying hubs of regional economic activity and building on them to the benefit of state economies.

“There has been a lot of discussion in the run-up to the 2016 presidential election of how to create jobs and pathways to the middle class and the American dream,” Mills said. “Cluster initiatives are a very powerful tool for doing that. I know because I’ve seen it work.”

Mills recalled the story of Maine’s ship builders, a group of fiercely independent small business owners who, despite their long history of quality workmanship, faced a crisis in the early 2000s. As their industry moved away from more traditional materials and methods toward new composites and technologies, the ship builders were at risk of losing business to better-trained workforces elsewhere. Mills stepped in to help rally the builders and public officials to apply for federal funding in 2005. The result was a $14.4 million WIRED grant that spurred a cutting-edge composite materials training program in Maine’s community college and university system, training for thousands of local workers, and several hundred new area jobs in the boat-building and related manufacturing industries.

“That skills training program has been successful now for a number of years, but it never would have happened without two things: the builders’ willingness to get together, and federal support,” Mills said. “I found out that it doesn’t take a lot of money, but you often need that kind of catalyst to create the energy to gather people together. Once they’re together, they find their way to valuable activities.”

That success strengthened Mills’ belief in the power of cluster initiatives, which help business owners and policy makers alike see the full range of potential for regionalized cooperation. In the past, Mills said economic growth has often consisted of state officials calling up large companies and offering them tax breaks in exchange for building a new plant and bringing new jobs to an area. Today, larger companies have more globalized visions, mandates, and opportunities, which has shifted the burden of job creation. Instead of relying on sizeable corporate investments, the locus of productive action now centers on regions, where collaboration between small businesses and local officials is the name of the game.

“I think I was early in pointing out that two out of every three net new jobs are driven by small businesses,” Mills said. “To that end, clusters are a very high-potential toolset. They give small business the powers and the visibility that used to be the purview only of larger companies. It helps them be seen as a force in the local and regional economy, earns them more legislative and budgetary priority, and overall helps their voice be better heard.”

“CLUSTERS ARE A VERY HIGH-POTENTIAL TOOLSET. THEY GIVE SMALL BUSINESS THE POWERS AND THE VISIBILITY THAT USED TO BE THE PURVIEW ONLY OF LARGER COMPANIES.”

Following her time with the SBA, Mills helped to launch the Maine Food Cluster Project, a joint HBS and HKS initiative aimed at investigating the state’s agricultural, seafood, and food and beverage processing sectors. Maine has abundant natural resources and a rich tradition of harvesting them to supply local, regional, and global markets. The Cluster Project used employment data from the U.S. Census, combined with the collective expertise of a project team and faculty advisors, to highlight how the state could build on the strengths of these industries as a springboard for business growth and job creation in the future.

“Maine is a state that has traditionally ranked low in economic growth over the last 50 years, but that doesn’t reflect its potential,” Mills said. “When you look deeper into the numbers, you find these little commercial gems—like Maine’s strength in the food business with lobsters, and blueberries, and potatoes. The question arose: how can we capture all these smaller strengths, and the new energy around the farming and restaurant sectors, and make it part of the economic strategy of the state?”

The project had a unique funding structure, a primary focus of Mills’ case study, in that it utilized the “catalytic philanthropy” of the Libra Foundation, which made an endowment grant to HKS in 2000 to support projects that specifically benefited Maine. The project also benefited from the use of the Cluster Mapping tool developed by HBS professor Michael Porter and the Institute for Strategy & Competitiveness. Porter’s team took the important step of bringing the original employment dataset up to speed to account for all of Maine’s self-employed and agricultural workers, which were not originally included. As Mills pointed out, no comprehensive discussion about or plan for Maine’s economy could be fully transformative until it accounted for those jobs, which represent a much higher portion of the state’s economy in niche industries like fish and fishing products than elsewhere in the country.

The Project ultimately produced four key pieces of information: (1) cluster data; (2) results from a survey of Maine’s food and beverage companies; (3) an analysis of organizations working to improve Maine’s food industries; and (4) profiles of several existing food cluster initiatives in other U.S. states and abroad. From these, the Project was able to make specific recommendations for the state moving forward that would make use of its strong food-based supercluster, grouped under slightly broader headings:

Add more value to Maine food by supporting the starting up and scaling up of Maine’s food processors

Expand the production and sale of Maine food in Maine and the Northeast

Expand the production and sale of sustainably-harvested protein

“What I’ve seen and part of what we found is that crops or market segments you might think have a small impact, like blueberries for example, are not small stuff in the end,” Mills said. “You can’t underestimate the impact on a region and a state like Maine of doing one or two things really well. This is really a case about the important role of small businesses in economic development, and how a tool like a cluster initiative can aid that.”

“YOU CAN'T UNDERESTIMATE THE IMPACT ON A REGION AND A STATE LIKE MAINE OF DOING ONE OR TWO THINGS REALLY WELL.”

The Project team also put forward a vision of how Maine should pursue these strategies. Based on successful agriculture and food industry initiatives in regions like Vermont, Oregon and Denmark, the Project team recommended that farming and food business leaders come together in support of this action agenda. With business leadership and a laser-like focus on growing companies that supply larger markets outside of Maine, the chances of success would be more promising.

Which, ultimately, is what makes the Maine Food Cluster Project and case so compelling. If the state with one of the slowest economies in the country can use cluster initiatives as a blueprint for economic success, there are 49 other states that could use them to find their own way to maximizing what they do best, as well. That’s a chief reason why the Project was able to garner such strong support in such a short timeframe, and why Mills believes cluster initiatives will be a transformative force moving forward.

“This very much fits into the U.S. Competitiveness Project and to the Growth and Shared Prosperity Convening,” Mills said. “The work that Michael Porter has done to those ends and around cluster initiatives has put this kind of activity on the map and demonstrated its importance. Now we’re working to make it part of every mayor’s and governor’s and even the federal economic development playbook. We have the knowledge and the evidence to show the vital role these tools can play in driving the American economy.”

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