to invent new approaches. These strengths can be used to stimulate positive external benefits, he said, which is how some people define a cluster. Federal agencies can act as effective conveners, form networks, and provide experienced leadership for certain functions.

As a first step, he suggested that the Economic Development Administration (EDA) be more explicitly involved with cluster development. “To me,” he said, “it’s an opportunity to focus EDA and the Department of Commerce on renewal in comprehensive fashion. There’s a fair amount of skepticism in the way EDA has operated. No doubt, it has spent money in ways that members of Congress see as beneficial to local economies. But other people have characterized it as ad hoc, unconnected sometimes to what is happening on the ground, not fully integrated into any strategy, state or federal.” He said that putting cluster initiatives at the heart of EDA could be an advantage both to the initiative and to the EDA.

EDA involvement with regional clusters, he said, would not require any new institutions. Because the EDA is in the Department of Commerce, it is already well positioned to connect to programs of overlapping expertise, including the Technology Innovation Program, Manufacturing Extension Partnership, export assistance from the International Trade Administration, and infrastructure funding from National Telecommunications and Information Administration and NOAA.

He suggested that the program should have three key features: competitive grants, a program of information exchange, and coordinated delivery of expert assistance.

The Value of a Small Grants Program

The grants program would have a relatively small amount of money, so it is important that it be competition-based and flexible for two reasons: (1) to maximize efficiency, and (2) because of the fundamental premise that federal officials do not have all the answers. A competitive approach calls on the regions themselves to take the first step, which is to define the structure and objective of the initiative. Also, a flexible grants program can respond to the reality that economic and political boundaries are not always coterminous. The grants should be matched by industry contributions, he said—perhaps one to one from the beginning or increased gradually to that level as the economy recovers. Grants could be used for business incubators, training programs at universities, and technology transfer for small and medium-sized firms. States have little or no money available for such programs now.

Among the criteria for grant applicants is that proposers have a proven track record, strategies created with the private sector, and that efforts can move fast with impact. An important requirement, he said, is that the programs show how they will integrate smaller areas into larger



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