In December 2001, The Washington State Department of Community, Trade and Economic Development commissioned the University of Washington (UW) to do a study of Industry Clusters called Cluster Strategies for Washington (see: CTED Cluster Strategies for Washington).
The UW chose six clusters based on the relative density of cluster firms in a region of the state as compared to the nation. The clusters chosen include:
The regions of Washington as defined by UW for use in the study can be seen in the map below.
Washington Industry Cluster Regions (2001)
Agriculture/Food Processing
The Agriculture and Food Processing cluster earns $7.5 billion in gross revenues annually, employing nearly 50,000 workers. This state has a rich endowment of land and water resources to support a diverse agricultural sector with major products including wheat, apples, and a wide variety of other field, dairy, and meat crops.
Foreign competition and increasingly stringent environmental regulation have constrained or in some cases eliminated profitability for many growers and processors. Labor issues are also affecting the profitability of firms in this cluster; concerns include the indexing of the state minimum wage, record-keeping required for the minimum wage in the context of a price work compensation tradition, housing requirements for migratory workers, alien worker documentation problems, and increasing skill requirements due to technological changes both on the farms and in the processing plants. Energy and water issues have made the situation especially difficult in the last year.
Forest Products
While the Forest Products cluster has contracted in the past decade in response to harvest restrictions, it still produces nearly 6.4 billion in annual gross revenue and is a significant source of employment in several forested regions of the state. Second and third growth forests are reaching maturity and will produce a "wall of wood" available for harvest in the decades ahead, assuming that the industry can navigate the increasingly complex and stringent regulations that have been enacted to protect streams, forests and the habitats of various endangered or threatened species.
Some companies in this cluster are exploring the role of environmental management certification as a way of convincing consumers to buy their products. Other cluster members feel that they will be forced to adopt this strategy as industry leaders do so, and would like the state to explore certification of all state-regulated forest lands based on the state's Forest Practices Act. Other cluster members feel that the public does not understand their current practices or the scientific basis for those practices and suggest steps to improve public awareness of these issues. The cluster is also coping with foreign competition both from Canada and a variety of Pacific Rim countries, and slow market conditions due to Japan's slump and slower household formation rates in the United States. Additional challenges are posed by last winter's energy crisis and the introduction of engineered wood products.
Electronics: Semiconductors and Measuring Instruments
Following the focus group discussions in these two clusters, UW decided to group them together under the heading of "Electronics" based on a prior cluster analysis and similarity in the issues these clusters face. Both of these clusters are producing digital electronic technology products, and both function in a global marketplace. Neither local customers nor local suppliers are sufficient to sustain these clusters; they search the globe for customers and suppliers. They have chosen to locate in Washington for historical reasons that may or may not still apply. While the semiconductor cluster is spilling north from the Portland metropolitan area in Oregon into Clark and Cowlitz Counties in Washington, discussions with representatives of the cluster suggest a fragility of these citing decisions depending on resolution of energy, water, and labor issues, as well as the availability of incentives to elicit further private investments.
In the measuring instruments cluster in the North Puget Sound, growing technical university programs in Asia are resulting in opportunities to out-source not just production of components but also design and engineering. Wage differentials between China and the United States compel these firms to reconsider the entire basis for their presence in Washington. In addition, traffic congestion issues both of these regions of the state are leading some firms, particularly at relatively remote Puget Sound sites, to rethink their location choices. The quality of life in the state is a major factor supporting these clusters, albeit downgraded by traffic congestion, but historical advantages with respect to electric power costs and water quality and availability combine with international trends to pose serious competitiveness challenges.
Biotech
Biotechnology is a difficult cluster to define since firms identifying with the cluster are classified in several industries, including research laboratories, pharmaceutical product manufacturing, and several other manufacturing sectors providing specialized equipment and instrumentation. Supporting institutions include research institutes and universities, as well as lawyers, accountants, venture capitalists, and other service providers who specialize in serving biotechnology and biomedical product companies. Attempts to define the size of the cluster based on sector employment suggest that about 14,000 workers may be employed in the cluster, nearly a 60 percent increase from 1990. However, the Washington Biotechnology and Biomedical Products Association suggests that its membership list may more accurately characterize the cluster due to the diversity of firms that identify themselves with this cluster.
Firms and institutions in this cluster are relatively young, often supported by venture capital, and staffed by a very high proportion of scientists with advanced degrees. Some companies hope to achieve profitability by eventually manufacturing products while others are pursuing a strategy based on research, garnering revenues from royalty and licensing arrangements, or by seeking equity investments from large pharmaceutical companies.
Major issues raised by representatives of this cluster include support for high quality education emphasizing science and mathematics, research funding from public institutions at the federal and state level, strengthening technology transfer programs at universities and research institutes, access to laboratory space for startup companies, and regional diversification of the industry within the state.
Measuring Devices
Measuring instruments are primarily used in industrial settings diagnosing process conditions. Companies in this cluster make many distict products for relatively low volume, specialized markets worldwide. In King and Snohomish counties, the cluster includes between 10 and 15 companies, including an important supplier of surface mount components, as well as firms manufacturing and distributing end products to consumers.
Health Care
Health Care is a massive cluster employing nearly 217,000 workers and producing $13.2 billion in annual revenues. Washington has several significant regional health care clusters, including the Seattle area, Tacoma and Spokane. Aging of the population seems to guarantee continued growth of this sector, although there is also significant concern among a wide variety of employers including government agencies about curtailing the increase in health care costs. The tension between demand for health care services and the need to control costs have resulted in severe national and state attempts at "health care reform," but it is safe to predict that these issues will be contentious public policy matters for some time to come.
Reimbursement policies, industry reorganization, nursing and other staff shortages are some of the major challenges facing the cluster. Opportunities for further growth are also present, based on advanced informatics systems, expanded collaboration among health care providers, and linkages between health care and emerging biotechnology and biomedical device companies.