For government officials and planning consultants looking to create regional economic growth and drive innovation, industry clusters are the Holy Grail. Popularized by Harvard professor Michael Porter in the early 1990s, cluster theory holds that a government or economic development body can create a viable hub of economic activity in a specific industrial sector by bringing in businesses, suppliers, researchers, and additional related people or entities. In other words, a focused governmental effort can create something from nothing, turning, for example, a fallow field into a tech park bursting with highly competitive, innovative companies. Governments all over the world have invested millions—sometimes billions—of dollars to attract industries they consider strategic.
The trouble is that clusters engineered from the top down don’t usually work. I am hard-pressed to find a single example that has proven an unqualified success because of government intervention or the advice provided by economic development experts. They all talk about how great things will be, one day in the future, when they succeed in attracting venture capitalists to the area. But central planning rarely spawns innovation in free economies. Even in China, where the government has been able to transform slums into economic marvels, regional governments that spent billions on building semiconductor technology clusters have ended up with outdated fabrication facilities and massive oversupply.
Not that regional innovation-based economic development is impossible. It’s just that government officials and consultants put the cart before the horse. The best example I’ve seen of a region that has successfully pursued cluster development is the unlikely locale of the Thar Desert in Rajasthan, India. It wasn’t the government that made the magic happen, but the region’s ambitious entrepreneurs who prodded officials to follow their lead and team up with them. In a few short years, that group has turned the sun-blasted state once known for backwardness and poverty into an up-and-coming destination for top technology companies around the world.
Bakshi: Jaipur meets Silicon Valley
The largest state in India, Rajasthan came late to the technology revolution that has swept the country. In 2002, the Rajasthan state government banned the purchase of computers for personal use because, confusingly, it considered them “luxury items” and the state was experiencing a drought. That’s right. Banned. Women were not allowed to work after sunset in any industry. The state’s capital, Jaipur, had only 10 small technology businesses. Most of the state’s businesses had little or no automation and made limited use of computers.
Enter Naren Bakshi. A Silicon Valley entrepreneur, Bakshi grew up in Jaipur. He earned graduate degrees in engineering and business at University of California-Berkeley, worked for a number of multinationals, and then launched two technology companies in the U.S. before retiring to mentor entrepreneurs in both Silicon Valley and his native state.
Bakshi believed that he could make a big difference by bringing modern management practices and technology to Rajasthan’s entrepreneurs. To get the ball rolling, he arranged a meeting in 2001 between budding technology entrepreneurs and those from traditional industries as diverse as carpet manufacturing, jewelry production, and mining. He encouraged them to work together to boost technology and entrepreneurship in the region. Bakshi laid out no priorities other than making smarter use of technology to drive innovation. There was no planning for a semiconductor or a biotech cluster. Rather, Bakshi hoped that by simply building a network of entrepreneurs and enhancing their global connections, good things would result.
Excited by Bakshi’s vision, the entrepreneurs banded together to educate the state government about technology and help craft more tech-friendly policies.
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