In a word yes!
And the critical role that public sector (government) policy plays in terms of being the primary link between successful domestic engagement and effective international cluster development cannot be underestimated.
From a domestic engagement perspective, public sector procurement practices are leading to an erosion of the overall supply base. This escalating level of erosion and its negative impact on innovation was initially presented as part of an October 2002 U.S. report by the Executive Office of the President.
Specifically, the practice of contract bundling which resulted in a steadily decreasing number of Small – Medium enterprises receiving federal contracts was seen as a direct threat to the nation’s pool of “innovation and creativity.” This of course has paved the way for newer legislation which has resulted in agencies such as NASA unbundling contracts in an effort to make business more manageable for small enterprises, or groups of small enterprises.
In turn, the strength of a supply base domestically (of which innovation is a key tenet), lays the foundation for a sound national economy by equipping suppliers to compete more effectively in the emerging global economy.
In fact, a 2006 presentation by the Foundation for Advanced Studies on International Development (FASID) asserted that globalization will ultimately “reduce the number of industrial clusters in the world in each industry.” FASID concluded that “in an era of globalization, only efficient industrial clusters can survive!”
Therefore, the inability to build strong clusters of innovation domestically will directly threaten a nations long term viability to compete globally in key industries.
There are of course numerous other studies which provide further insight into cluster development and the impact on innovation. If you would like to receive a copy of this information send me an e-mail at jwhansen@sympatico.ca with “Cluster” in the subject line.
Past posts on Cluster Development:
October 13, 2007 – Cluster Development and the CAC (PWGSC): Facilitator or Competitor?
August 28, 2007 – Public Sector Procurement Practice and the Principles of External Economies, Clustering and the Global Value Chain
Procurement Insights 
procureinsights
November 16, 2007
Are they saying the earlier part of the article that “piggybacking” or multi state contracts such as WSCA Western States Contracts Assoc or CMAS are hurting small and medium businesses?
Chris Wessendorf
Buyer II
Elk Grove Unified School District
procureinsights
November 16, 2007
ANSWER
Often times Chris, it is not the vehicle (in this case the utilization of a consortium’s buying power) that indirectly limits or deters SME engagement. It is the misalignment of tools or technology with regard to the spend that creates the biggest challenge.
While centrally negotiated /managed contracts are viable vehicles with certain commodities or services, it is in the broad application where misalignment occurs. This of course produces unfavorable results for all stakeholders. It is also one of the main reasons that the U.S. Federal Government has introduced legislation in which the unbundling of contracts is a key element. (Please let me know if you would like to receive a copy of both the original 2002 Report and the 2007 Summary of Reports on this trend reversal).
To be specific Chris, a proper Commodity Characteristic Analyses will determine if a commodity (and the supply base that provides it) is better suited to a contract-centric RFP (which is usually too onerous for the vast majority of SMEs), or a open-market acquisition which encourages the widest possible engagement of potential suppliers.
procureinsights
November 21, 2007
Given the current contribution of SME to Canada’s economy both in GDP and jobs, I would say that to not have a strong SME sector would be disastrous.
Anne Phillips
Editor, Summit Magazine