25 September 2014

By Kimberly Zeuli, Senior Vice President, ICIC

At ICIC, a nonprofit founded by Michael Porter in 1994, we have spent the past two decades studying how clusters create economic opportunities for residents of inner cities, the most economically distressed urban areas. In order to create an urban economic development plan that benefits all urban residents, city leaders need to make sure that their cluster strategy is designed to directly impact their inner city. In new research, supported by the JPMorgan Chase Foundation, we analyze traded clusters, small business development strategies and economic growth in America’s ten largest cities.


In the ten metro areas that we analyzed, we identified six traded clusters that seem to have a greater impact on inner cities than other clusters: Apparel, Education and Knowledge Creation, Environmental Services, Footwear, Recreational and Small Electronic Goods, and Water Transportation. Los Angeles’s inner city as a whole, for example, represents eight percent of the metro area’s employment and eight percent of its total establishments. For the Apparel cluster specifically, however, Los Angeles’s inner city represents 44 percent of the metro area’s employment and 54 percent of its total establishments in that cluster.


These six clusters may benefit from the competitive advantages of inner cities. For example, the Apparel, Footwear, and Recreational and Small Electronic Goods clusters include manufacturing, a sector which typically has a strong presence in inner cities. This is due in part to the proximity of many inner cities to a variety of transportation options, including water ports, intermodal facilities and airports. Per square mile, the average inner city has roughly 100 times as many of these assets as the rest of the U.S. ICIC research shows that manufacturing and other industrial jobs, in turn, are particularly important to inner cities because they offer livable wages with relatively low educational barriers.


The Education and Knowledge Creation cluster includes Colleges, Universities and Junior Colleges, which also are concentrated in the inner cities. For example, in New York City, 29 Colleges, Universities and Junior Colleges are located in its inner city. ICIC research shows that some 925 colleges and universities, or roughly one in eight, are based in the 100 largest inner cities.


To maximize the impact of small business growth and job creation in inner cities, regional cluster strategies must incorporate an inclusive approach. An inclusive regional cluster strategy supports traded clusters that both leverage inner city assets and complement the growth of strong local clusters. Such a strategy also would create strong connections to inner city anchor institutions, such as universities and hospitals, and minority-owned business enterprises.


Please visit icic.org to access the complete report, The Missing Link: Clusters, Small Business Growth and Vibrant Urban Economies.