Downtowns as Economic Clusters

By Dace Koenigsknecht
Economic Restructuring Specialist
Michigan Main Street Center
Michigan State Housing Development Authority

Clusters, as defined in a March 2006 report from the Brookings Institution, are “a group of firms and related economic actors and institutions located near one another and that draw productive advantage from their mutual proximity and connections.”

The idea of clusters has been recognized and studied for over a century, and people inherently understand the basic concept of mutual advantage. As an example from my previous life, General Motors constructs a new, state-of-the-art assembly plant on the west end of Lansing, in Delta Township. As a result, dozens of suppliers – big and small – construct facilities within a couple of miles, buying-in to GM’s philosophy of just-in-time delivery. This hub-and-spoke cluster concept benefits from close proximity; short distances keep shipping costs down, all firms benefit from local labor talent, and specialization reaffirms quality and innovation. As today’s economy shows, however, a single-industry cluster can have its down sides too.

In contrast to the highbrow definition of a cluster above, I offer a simplified version in a layman’s term: Downtown. Historically, downtowns were founded on the cluster model, be it a lumber mill or rail-side grain elevator, and grew to serve the local market demands. Through the decades, however, the complementary scene of a customer-focused downtown was supplanted by the mall and mass production. Much market research has been conducted over the past decade or two regarding the shift from sterile ‘Fordism’ to niche markets of high-quality, custom products. As anyone involved with the Michigan Main Street Program can attest, this harkens loudly to our position on authenticity. People are seeking the unique and different, whether they are customers or entrepreneurs, and downtowns should be the place to find just that.

Each downtown is unique in its physical environment, that’s well known, but how does your downtown (cluster) fare in the social aspect of community? Are your downtown interests competing with one another, rarely engaging in transactions, and intentionally not cooperating? OR, do they compete only to innovate and improve, and seek out cooperation due to a long list of mutual interests and benefits? I argue that the latter is the firmly-packed soil upon which creatives (people and ideas) can sprout. Our historic downtowns developed as centers of commerce due to proximity of creatives, one bouncing off the other until the result was cooperatively better than the original.

An example I heard recently illustrates my point: Niles’ Downtown Wedding Walk to be held in March. A local bridal shop initiated the idea of hosting a retail event focused on weddings, what I see as a themed cluster. Clusters are not static and rigidly confined, but rather dynamic and overlapping in scope and content. In this case, someone took an objective look at downtown Niles and saw all the components of a great wedding in the spaces surrounding them. Will Niles forever be known as the wedding capital? No, but I’m sure this creative approach will result in cash registers ringing – and not just for those businesses directly involved.

I leave you with an additional quote from the Brookings report I mentioned earlier. It describes an alternative method of defining a cluster that I find particularly applicable:
“…practitioners compose industry clusters on an ad hoc basis from among the firms (and related institutions) that they find close at hand. They frequently define cluster existence and membership by the attendance of firm owners or managers who agree to show up at meetings and who have enough common interest to be able to articulate and possibly act on some agenda of actions that will be to their mutual benefit. These operationally defined clusters may be...”
…called Michigan Main Street Programs!