timber and lumber jobs, into new industries and products such as bio-fuel pellets that can regenerate the region.

The aviation industry in Kansas also illustrates the economic benefits of clusters, she said. The industry employs 17.8 percent of all Kansas manufacturing workers. People employed in the aviation cluster earned annual average wages of $63,000 in 2006, more than 50 percent above the average of all industries in the United States. “They are generating jobs at a formidable rate,” Ms. Lew noted. The cluster is expected to add 4,450 net employees from 2004 to 2014 and 10,000 new jobs when retirement and turnover is factored in.4 Most jobs require advanced education. State incentives reward companies for creating high-skill jobs, whether they require technical training at a community college or bachelor’s degrees.

Such activities around the United States stimulated discussion in the Obama Administration about policies that promote regional innovation clusters, Ms. Lew said. Thought leaders such as Michael Porter and the Center for American Progress5 urged the federal government to be more active in regional efforts. Ms. Lew also noted that Karen Mills had written about the federal role in regional innovation strategies before she was appointed SBA administrator.6 “All of this activity generated an ‘ah ha’ moment for the Obama Administration,” she said. “But another key motivation, quite frankly, was the huge economic challenges the Obama Administration inherited when it came to office.”

As an illustration of how difficult it can be to wade through federal bureaucracy, Ms. Lew recalled a meeting in 2009 with a group of business, academic, and community leaders from the Pacific Northwest. They discussed efforts to pursue energy-efficiency grant money. “They showed a mindboggling diagram of 23 program offices they had to apply to, respond to, coordinate with, and manage,” Ms. Lew said. “They talked about how they were in the second year of this particular journey to get access to federal dollars, all related to this particular topic and this same issue.” The challenge for Washington, she said, is to make the process less cumbersome and to coordinate federal and state funding.

The new Energy Regional Innovation Cluster led by the DoE is an important experiment in a regional approach, Ms. Lew said. It aims to identify and align federal programs that can work together. “By linking these federal programs, we hope we can have a more impactful outcome, and support a regional ecosystem that leverages not only federal dollars, but also state, regional, and private dollars,” Ms. Lew said.

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4 Data from “Kansas Aviation Manufacturing,” Center for Economic Development and Business Research, W. Frank Barton School of Business, Wichita State University, September 2008.

5 Jonathan Sallet, Ed Paisley, and R. Masterman, “The Geography of Innovation,” Science Progress, September 1, 2009.

6 Karen G. Mills, Elisabeth B. Reynolds, and Andrew Reamer, Clusters and Competitiveness: A New Federal Role for Stimulating Regional Economies, Washington, DC: The Brookings Institution Metropolitan Policy Program, April 2008.



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