By Kim Zeuli, ICIC, presented at the 17th TCI Global Conference, Monterrey 2014.

1. Inner City Clusters
Kim Zeuli
New Cluster Approaches
12 November 2014

2. NEW CLUSTER APPROACHES: INNER
CITY CLUSTERS
KIM ZEULI
SENIOR VICE PRESIDENT AND DIRECTOR OF RESEARCH
INITIATIVE FOR A COMPETITIVE INNER CITY (ICIC)

3. What is an inner city?
 ICIC defines an inner city as an economically
distressed urban area that has high poverty and
unemployment rates.
Bronx
Queens
Harlem
Lower East
Side
Brooklyn
Staten
Island
Inner City Areas in New York City
There are 328 inner cities
in the U.S., representing
 15% of unemployment
 21% of poverty and
 34% of minority poverty
Source: State of the Inner City Economies (SICE) database; ICIC analysis.

4. Inner city advantages for traded clusters
>2 LQ in Inner Cities
>1 LQ in Inner Cities
Furniture
Prefabricated
Enclosures
Building
Fixtures,
Equipment &
Services
Fishing &
Fishing
Products
Hospitality
& Tourism
Agricultural
Products
Transportation
& Logistics
Information
Tech.
Education & Instruments
Knowledge
Creation
Medical
Devices
Biopharma-ceuticals
Chemical
Products
Plastics
Distribution
Services
Publishing
& Printing
Oil &
Gas
Power
Entertainment
Lightning &
Electrical
Equipment
Generation &
Transmission
Aerospace
Vehicles &
Defense
Jewelry &
Precious
Metals
Financial
Services
Analytical
Communi-cations
Equipment
Textiles
Construction
Services
Heavy
Machinery
Motor Driven
Products
Aerospace
Engines
Processed
Food
Business
Services
Construction
Materials
Forest
Products
Heavy
Production
Technology
Metal
Manufacturing
Sporting
& Recreation
Goods
Automotive
Apparel
Leather &
Related
Products
Footwear
0.8-1 LQ in Inner Cities
<0.8 LQ in Inner Cities
Note: Clusters with overlapping borders or identical shading have at least 20% overlap (by number of industries) in both directions.
Source: State of the Inner City Economies (SICE) Database, 2011; ICIC analysis.

5. Local vs. traded clusters
Local Clusters Traded Clusters
Definition Serve almost exclusively the local
market. Not directly exposed to
cross-regional competition
Source: State of the Inner City Economies (SICE) Database, 2003-2012; ICIC analysis; Porter (2010)
Compete to serve national and
international markets
Representative Clusters – Local health services
– Local retail
– Life sciences
– Transportation and logistics
– Maximum job creation
– Jobs that match resident skills
– High wage jobs
– Higher productivity and innovation
potential
Relative Productivity 79.3 144.1
National Annual Wage (2012) $37,000 $66,500
National Wage Growth (2003 – 2012) 3.3% 11.9%
Patents (per 10,000 employees) 0.4 23.0
Share of National Employment (2012) 72% 28%
Share of Inner City Employment (2012) 76% 24%
National Employment Growth (2003-2012) +1.1% -2.4%
Inner City Employment Growth (2003-2012) -0.7% -12.4%

6. Creating inclusive cluster growth
$56
$55
$47
$46
$40
$34
$33
$32
$28
$28
$22
$20
Local Utilities
Local Financial Services
Local Industrial Products and…
Local Commercial Services
Local Real Estate, Construction,…
Local Health Services
Average Wage, National
Average Local Cluster Wage
Local Logistical Services
Local Motor Vehicle Products and…
Local Household Goods and…
Local Entertainment and Media
Local Food and Beverage…
Local Education and Training
Local Community and Civic…
Local Personal Services (Non-…
Local Retail Clothing and…
Source: State of the Inner City Economies (SICE) Database; BLS; ICIC Analysis.
National Educational Requirements
by Cluster Type
23%
32%
29%
30%
45% 41%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
College or Higher
Some College
Local Clusters Traded Clusters
% of Workers
National Local Cluster Average Wages
High School or Less
$15
$25
$38
$50
$60
$71
$0 $20 $40 $60 $80
Local Hospitality Establishments
Average Annual Wage, 2011 ($k)

7. Local cluster performance in the inner city
Local Health Services
Local Hospitality
Establishments
Local Commercial
Services
Local Real Estate,
Construction, and
Development
Local Community and
Civic Organizations
Local Food and Beverage
Processing and
Distrbiution
Local Retailing of
Clothing and General
Merchandise
Local Financial Services
Local Motor Vehicle
Products and Services
Local Logistical Services
Local Education and
Training
Local Utilities
Local Personal Services
(Non-Medical)
Local Entertainment
and Media
Local Household Goods
and Services
4%
3%
2%
1%
0%
-1%
-2%
-3%
-4%
-4% -3% -2% -1% 0% 1% 2% 3% 4%
100K 250K 500K 1M 2M
Source: State of the Inner City Economies (SICE) Database, 2003-2012; ICIC analysis.
Employees
U.S. Employment Growth, 2003-2012
CAGR
Inner City Employment Growth, 2003-2012
CAGR
Inner cities growing
slower than US
Inner cities growing faster
than US

8. Business-to-Consumer
(B2C)
Types of local clusters
Business-to-Business (B2B)
and
Hybrid (B2B/B2C)
Definition – Serve local consumers
– Serve both local consumers and
local businesses
Representative Clusters – Local health services
– Local hospitality establishments
– Local commercial services
– Local logistical services
– Local utilities
– Local real estate
– Offers important entry-level jobs
– Promotes availability of goods and
services
– Offers middle-wage jobs
– Strengthens business environment
Share of National
Employment (2012) 38% 26%
Share of Inner City
Employment (2012) 42% 27%
National Employment
Growth (2003-2012) +5.5% -2.9%
Inner City Employment
Growth (2003-2012) +4.9% -8.2%
Average
Annual Wage (2012) $34,800 $40,00
Source: State of the Inner City Economies (SICE) Database 2003-2012; BLS; ICIC analysis.

9. New Orleans case study
New Orleans, LA
Business Services
Distribution and Electronic Commerce
Water Transportation
Hospitality and Tourism
Oil and Gas Production and Transportation
Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; ICIC

10. Priority clusters for new economic growth plan 2.11
Foundational Clusters:
Cluster Sub-Clusters
Advanced Manufacturing Aerospace Parts Manufacturing; Chemical
Manufacturing; Ship and Boat Building;
Other Advanced Manufacturing
Transportation, Trade and Logistics Freight; Freight Supplier; Freight Support;
Freight Wholesale
Cluster Sub-Clusters
BioInnovation and Health Services Health Manufacturing; Hospitals; Health
Services Support; Other Health Services;
Health Care Providers
Creative Digital Media Advertising and Marketing; Film, TV, and
Radio; Graphic Design; etc.
Sustainable Industries Building/Efficiency; Environmental
Administration; Water/Waste
Emerging Clusters:

11. Job accessibility: criteria for cluster choice
15%
21%
19%
24%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
Higher than
Bachelor’s Degree
Bachelor’s Degree
Associate’s degree
Some college,
no degree
12%
10%
8%
6%
4%
2%
• Hospitals provide more jobs in inner cities than any other
sector. Hospitals are top employers in 77/100 largest inner cities
• Two thirds of healthcare jobs are accessible to jobseekers with
an associate’s degree or less.
21%
0%
Healthcare Occupations
Share of Employment (2012)
High school diploma
or less
Generally Less
Accessible
Generally more
Accessible
0%
Percentage of Jobs
Inner Cities
USA

12. Cluster performance: BioInnovation &
Health Services employment growth
New Orleans inner city employment vs. region
(2006-2012)
2003- 2012
Net Job Growth
C A G R Number
Inner City
BioInnovation
& H.S. Cluster
1.4% 705
New Orleans
BioInnovation
& H.S. Cluster
7.5% 8,418
New Orleans MSA
BioInnovation
& H.S. Cluster
1.8% 6,565
100
109 108 108
111
154
109
100
99
103
105 106
111
160
150
140
130
120
110
100
90
2006 2007 2008 2009 2010 2011 2012
Indexed Employment Growth, 2006=100
New Orleans IC New Orleans CC New Orleans MSA

13. BioInnovation & Health Services cluster:
Business profile
2.11
Annual Revenue
Number of
BioInnovation
Business
Establishments
< $0.5M 533
$.5 - 1M 1,704
$1-2.5M 288
$2.5-5M 91
$5-10M 57
$10-20M 28
$20-50M 14
$50-100M 4
$100-500M 5
$500M - $1B 0
> $1B 0
No Data 129
Total 2,853
38%
21%
19% 18%
12%
5% 3% 2% 1% 0% 0% 0% 0%
60%
5%
12%
70%
60%
50%
40%
30%
20%
10%
0%
Percentage of Total Businesses
New Orleans Total BioInnovation

14. 2.11 Connecting cluster & small business growth
• Clusters can stimulate start-ups
and have a significant
impact on the survival and
growth of small businesses.
Small business growth
impacts strength of clusters.
• Positive impact is increased
by aligning small business
development with cluster
growth strategies
• Incubators are a leading
strategy for alignment
“the aerospace
industry is a highly
concentrated industry,
dominated by a small
number of large firms
that are supported by a
large number of small
firms.”

15. Cluster & small business growth strategies 2.11
• Direct support to small businesses within clusters:
• Management education
• Supplier networks
• Export promotion
• Access to capital
• Affordable space
• Visibility
• Networking
• Contract opportunities
• R&D
• Workforce
(revitalization
opportunities)
• Align city’s economic development policies with
cluster-based strategies for small businesses
• Base support on shifting needs of businesses

16. 2.11 New Orleans BioInnovation Center
• Incubator for health and biosciences start-ups
• State-of-the-art facilities with office and lab space
(34 tenants)
• Direct, subsidized business assistance, educational
events
• New Orleans BioFund – low-interest, flexible term
loans to startups
Impact:
• Fostered the formation of 66 companies
• Creation of more than 220 high-wage jobs
• Clients raised more than $28M in funding
• Launch of 14 new products

17. Inclusive cluster strategies: key takeaways 2.11
• Identify the right mix of clusters that drive growth in
region and inner city
• Focus on traded clusters where the inner city has
potential competitive advantages
• Support local clusters that offer mid-wage
employment accessible to a wide range of workers
(B2C and B2B)
• Leverage anchor institutions to drive B2B cluster
growth
• Connect and align cluster and small business growth
strategies
• Access to minority and women-owned businesses
• Connections to inner city economy: employment,
revitalization with incubator, start-up location

18. Questions?
@icicorg
www.icic.org
Kim Zeuli
Senior Vice President and
Director of Research, ICIC
kzeuli@icic.org
17 TH TCI GLOBAL CONFERENCE | CREATING SHARED VALUE THROUGH CLUSTERS FOR A SUSTAINABLE
FUTURE