The Geography of Prosperity

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The Geography of Prosperity

It's no coincidence that many of an industry's most innovative companies are headquartered in the same ZIP code, and sometimes across the street from each other.  Why would companies that fiercely compete for the same customers and the same talented employees choose locations in close proximity to each other? 

The answer is that they've discovered the power of geographic clusters.  As Harvard professor and business strategy guru Michael Porter has explained, clusters stimulate innovation at a rapid pace.

According to the Economic Development Administration,1 clusters are "geographic concentrations of competing, complementary, or interdependent firms and industries that do business with each other and/or have common needs for talent, technology, and infrastructure.  The firms included in the cluster may be both competitive and cooperative.  They may compete directly with some members of the cluster, purchase inputs from other cluster members, and rely on the services of other cluster firms in the operation of their business."

Within the United States, geographic clusters include Silicon Valley's concentration of high-tech firms in the southern part of the San Francisco bay area of California.  Silicon Valley is the biggest high-tech manufacturing center in the U.S.  According to The Wall Street Journal,2 it includes 10 of the 20 most inventive towns in America, including San Jose with 3,867 utility patents filed in 2005, and Sunnyvale, with 1,881 utility patents.  The region has America's highest concentration of high-tech workers, with 286 out of every 1,000 private-sector workers.  Among the thousands of high-tech firms headquartered in the Valley are countless startups as well as Fortune 1000 companies, including Adobe Systems, AMD, Agilent Technologies, Apple, Cisco Systems, eBay, Google, Hewlett-Packard, Intel, Intuit, Oracle, Sun Microsystems, Symantec, and Yahoo.

Another key geographic cluster is North Carolina's research triangle, encompassing the cities of Raleigh, Durham, and Chapel Hill, which include the research universities of the University of North Carolina at Chapel Hill, Duke University, and North Carolina State University.  Among the high-tech companies with facilities in the triangle are IBM, SAS, Cisco Systems, Nortel Networks, and NetApp.  The region also boasts several life science companies, including GlaxoSmithKline, Biogen Idec, Merck, Novo Nordisk, Novozymes, and Wyeth.

Other geographic clusters in the U...

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