Industrial cluster Development and Innovation in S

**Draftversiononly**FinalversionforthcomingasabookchapterinFromAgglomerationtoInnovation,tobepublishedbyPalgraveMacmillanIndustrialClusterDevelopmentandInnovationinSingaporePoh-KamWongYuen-PingHoAnnetteSinghThispaperexaminesthedynamicsofformationoftwoinnovation-drivenindustrialclustersinSingapore:thebiomedicalsciences(BMS)cluster;andtheoffshoremarineengineeringcluster.Thefirstrepresentsanemergingtechnologyclusterintheearlystageofformation;thesecondrepresentsamorematureclusterthathasevolvedfromanearliershipbuildingandrepairindustry-base.Bycomparingandcontrastingthesetwoclusters,wehighlightkeychallengesandrelevantpolicyimplicationsforpromotingindustrialclustersatdifferentstagesofformation.Thecasestudiesshowthatitispossibletoacceleratethedevelopmentofknowledge-basedindustrialclustersthroughpublicpolicy.Sincekeyprocessesforclusterdevelopmentarecommontobothnewandexistingclusters,therearecommonelementsinthestrategiesusedintheirdevelopment.However,therearealsodistinctdifferencesinthespecificrolesandtimingofstateinvolvementdependingonthematurityandnatureoftheindustrialclustersinvolved.1.BriefOverviewofSingaporeEconomyAmongdevelopingeconomies,Singaporehasachievedoneofthemostimpressiveeconomicgrowthrecordsinthelastfourdecadessinceherpoliticalindependencein1965,averaging7percentGDPgrowthperannumoverthe1960-2006period.Despiteaneconomicslow-downin2001-03(withastrongrecoveryin2004),Singapore’spercapitaGDPofUS$29,474in2006stillstandsasthesecond-highestinAsia,at67%oftheUSlevel(IMD,2006).TherapideconomicgrowthofSingaporehasbeenachievedthroughcontinuousindustrialre-structuringandtechnologicalupgrading.Inthefirstdecadeafterindependence,growthwasledlargelybylabour-intensivemanufacturing.Inthetwosubsequentdecades,itwaspropelledbythegrowthofincreasinglytechnology-intensivemanufacturingactivitiesbyforeignMNCs,withhigh-technologyproductscontributinganincreasingshareoftotalvalueadded.ThedevelopmentofSingaporeintoanincreasinglyimportantbusiness,financial,**Draftversiononly**FinalversionforthcomingasabookchapterinFromAgglomerationtoInnovation,tobepublishedbyPalgraveMacmillan2transport,andcommunicationsserviceshubintheAsia-Pacificregionhasprovidedadditionalenginesofgrowthsincethe1980s.Nevertheless,manufacturinghasremainedimportanttotheeconomy,withitsshareofGDPremainingabove25percentformostyearsinthelasttwodecades.Thusin200627.7%ofSingapore’sGDPwascontributedbythemanufacturingsector,andanother26.5%byICTandfinancial/businessservices.Withinthemanufacturingsector,thekeyindustriesofelectronics,chemicals,engineeringandthebiomedicalsciencestogetheraccountedfor$219billion(93%)oftotalmanufacturingoutput.Alongwithitsrapideconomicgrowth,Singaporeachievedsignificanttechnologicalcapabilitydevelopment.R&Dwasminimaluntilthelate1980s,withaGrossExpenditureofR&D(GERD)toGDPratioofonly0.86%in1987,significantlybelowthenormofadvancedcountries.Sincethen,however,R&DinvestmentintensityinSingaporehasincreasedsignificantly,withGERDexperiencingathirteen-foldincreasebetween1987and2006,andtheGERD/GDPratiomorethandoubledtoreach2.4percentin2006,atparitywiththeOECDaverage.2.ConceptualFrameworkforanalyzingthelinkbetweeninnovationandknowledge-basedindustrialclusterdevelopment2.1Knowledge-basedindustrialclustersAknowledge-basedindustrialclusterisonethatderivessignificantvaluecreationfromadvancedknowledgecreationandutilization.Bothoftheseaspectsareimportant,requiringboththecreationofknowledge-intensiveoutputaswellastheuseofknowledge-intensiveprocessesinthegeneratingthisoutput.Suchaclusterwillbecharacterizedbyknowledge-intensityineverycomponentofthecluster.Firstly,therewillbesourcesofknowledgecreationthatgenerateintellectualproperty(asembodiedinpatents,copyrights,trademarks,etc)andtacitknow-how(suchasskills,tacitknowledgeandcreativity).Thecreationofbothtangibleand**Draftversiononly**FinalversionforthcomingasabookchapterinFromAgglomerationtoInnovation,tobepublishedbyPalgraveMacmillan3intangibleknow-howtakesplaceineverycomponentofthecluster.Forexample,thedevelopmentoftechnicalskillstakesplacewithinformaleducationandtraininginstitutionsbutalsowithinfirmsandR&Dinstitutionsthroughlearningbyusingandlearningbydoing.Knowledgecreationisnotinitselfsufficienthowever,sinceiftheknowledgeisnoteffectivelyutilized,thesystemwillbeleftwithmuchunder-utilized(ormis-utilized)technologicalresources,resultinginlowreturnstotheeffortsexpendedinthecreationprocess.Knowledgeutilizationprocessestherefore,areequallyimportantinthecluster,embodiedinfirms’operatingcapabilitiesandinnovationcapabilities.Eventhisonitsownisinsufficient;thereisalsoaneedforknowledgetransactionsbetweenfirmstostimulatethecreationandutilizationofinnovations,suchascloseinteractionbetweensuppliersandbuyersorusers,orstrategictechnologyalliancebetweenfirms.Aknowledge-basedclusterhasanumberofdifferentcomponents.Firstly,aknowledgeinfrastructureisrequired.ThiscomprisespublicR&Dinstitutes(PRIs)anduniversitiesastheleadgeneratorsofknowledge,particularlyforfieldsinbasicresearch,aswellasfortrainingmanpowerthatwilleventuallyworkinotherpartsof