Economic Development Recovery and Resiliency Playbook - Flipbook - Page 49
A more in-depth examination of the business relationships within a region can provide a greater understanding of how these
connections can help strengthen resiliency or potentially create challenges if a downturn in a business or industry group afects
multiple sectors. Analyzing these relationships can also identify potential opportunities for economic diversification, as the
support sectors for one cluster can also help to support activities in other sectors as well. This analysis can be done using a
combination of supply chain information, input-output modeling, stakeholder and organizational engagement, and/or surveys.
The industry concentrations and relationships provide a good snapshot of how a geographic area’s specializations reinforce and
support groupings of businesses, how these relationships create expansion opportunities, and how overreliance on a particular
grouping can create vulnerabilities. This analysis is ofen done by consultants with expertise in cluster analysis. EDA-funded
university centers can also provide data analysis and tools for conducting a wide variety of economic base, cluster, and related
economic studies.56
Foundational Components
Another component of an industry cluster includes the foundational supports, such as colleges and universities, job training
organizations, nonprofit organizations, research groups, business and administrative service providers, and local/regional
governments providing infrastructure, etc. The human capital of a region is also foundational to clusters. Many of these
foundational components of a regional cluster can also support other types of industries and clusters, helping to diversify the
economy and provide resiliency by reducing dependence on a singular group of highly concentrated industries; for example,
businesses and organizations that help to enable an industry cluster or group of clusters can potentially also support other
clusters. Further examining the organizational composition of a locality or region can help identify the support roles that they
have for business activity and cluster networks.
Analyzing Supply Chain Data
Supply chains consist of buyer-supplier relationships that businesses rely on to operate. Analyzing the composition of a local
industry’s supply chain highlights how it impacts other businesses and creates interdependencies. While most ofen associated
with manufacturing activity, supply chains can include a variety of diferent inputs for all industry sectors.
Input-output models are commonly used data tools for evaluating a regional economy and can serve multiple functions.
The data that they use can eficiently answer questions about which supplier purchases a specific industry needs to make in
order to operate, and to what extent local industries meet their supplier needs by purchasing from other local businesses, as
opposed to importing goods and services from outside the region. During more stabilized economic conditions, the supply
chain information identifies potential areas of strength and opportunities for diversification. This information can also identify
vulnerabilities that afect the local economy when industries that rely on imported goods and services experience supply chain
disruptions. These models use geographically specific data, and individual businesses can difer significantly from what a model
might show, so locally derived information is also important to understanding how supply chains afect a community. Market
research reports and site selection publications can also include information about the supply chain for specific industries.
Figure 4.2 (on page 42) shows an example of the typical supplier purchase pattern for hospitals in California.57
The predictive functions of input-output models can answer “what if” questions about what happens in the economy when a
certain economic event occurs by estimating the multiplier efect. These multiplier efects take a direct impact, such as job or
income change, and estimate how those direct changes create indirect impacts on other sectors. For example, if a business
downsizes, that event also results in reduced purchases from suppliers that impact those businesses. Furthermore, such
downsizing also means household income losses, which reduce spending at local retail stores and service providers as well.
The predictive functions of input-output models can answer “what if” questions
about what happens in the economy when a certain economic event occurs by
estimating the multiplier efect.
56
https://www.eda.gov/programs/university-centers/
The figure includes both the gross purchase total for California hospitals and the estimated percentage of those purchases that were made with
suppliers in California.
57
Understanding Your Economic Base Through Cluster Analysis, Business Size, and Supply Chain
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