Welcome to the Cluster Republic

Clusters are groups of firms and research institutions with a common focus that use their proximity to provide mutual support and work towards shared aims. These high-tech hubs are ideal entry points for foreign companies that want to innovate.

June, 2018

It all began with beer and pretzels. Jim Walls, CEO of OrthoMedex, a young U.S.-based orthopedic implant company, had traveled to Cambridge, Massachusetts, to attend a gala evening for a delegation of German scientists and entrepreneurs who were visiting the area’s Life Science Cluster in an effort to encourage high-tech U.S./German collaboration.

“The evening proved well worth my travel,” says Walls, who was looking for partners and a suitable location for his company to develop a new bioactive glass for orthopedic applications. Over beer and pretzels, he met Heike Walles from the Fraunhofer Institute for Interfacial Engineering and Biotechnology, a renowned German research hub, who was traveling with a delegation of the Medical Valley medtech cluster from southern Germany. “I left the discussion thinking Ms. Walles seemed very interested in what OrthoMedex was attempting to accomplish; or was that simply my entrepreneurial exuberance?”

Bavaria’s innovative medtech hub

Eighteen months later, Jim Walls is himself a member of the Medical Valley cluster. OrthoMedex’s German subsidiary will begin work on a research project with the Fraunhofer Institute for Silicate Research in spring 2018 with other medtech companies from the cluster and researchers from Yale University Medical School.

»The Medical Valley cluster is not only professionally equipped, it also has an entrepreneurial vibe to it that I enjoy when on site.«

Jim Walls, CEO of U.S.-based medtech startup Orthomedex LLC

“At the same time, we use the facility and location within the Medical Valley cluster for launching new implants in Germany and the EU,” explains Walls. “The cluster is not only professionally equipped, it also has an entrepreneurial vibe to it that I enjoy when on-site.” The cluster, which is situated in northern Bavaria, has world-class academic and research institutions nearby, lots of early-stage medtech startups as well as established medium-sized companies.

The global headquarters of Siemens’ healthcare business is just down the street. “To me, the cluster possesses a small-town Boston-like ambiance”, says Walls. “A small, manageable academic community with lots of young people doing exciting things.”

Investment opportunities in clusters

Throughout Germany there are numerous regional networks that bring together large companies, SMEs and startups, which then pool resources with local research institutes and universities toward a common goal: to develop innovative products and services for the global market. “The diverse research and development infrastructure these innovation ecosystems offer in Germany is unique,” says Gabriel Flemming, Senior Manager in the Chemicals and Healthcare team at Germany Trade & Invest (GTAI).

Fabrication of a pavilion made from carbon fiber-reinforced composites is underway, using fiber-winding robotic arms and an autonomous drone “weaver.” For this commission for the University of Stuttgart’s Institute for Computer-Based Design, SGL Group was tasked with delivering 104 kms of SIGRAFIL® 50k carbon fiber. The design technology was modeled on the larvae of the apple leaf moth, which spins its cocoon on apple tree leaves using long threads.

© ICD/ITKE Universität Stuttgart

Since the aim of the clusters is to develop products and services for the world market, the companies in these networks are particularly interested in foreign members joining and participating in the cluster activities, he says. “That’s why German clusters are an ideal starting point for foreign investors to gain a foothold in the German market and find partners for innovation projects and product development.”

Foreign companies will find cooperative, pragmatic development partners here. “Science is not being conducted here for the sake of science; it is about bringing products and innovations to market maturity efficiently and at the highest level,” says Flemming.

58 %

of companies in German clusters say that their economic situation is better than the sector average.

600 m

in government funding has been invested in Germany’s leading-edge clusters over the last decade.

Sources: Clustermonitor Germany, BMBF

“Companies from abroad will find in the clusters an infrastructure of suppliers, potential customers and world-class partners for research and development. There is a lot of potential for new synergies.” “The German clusters are strongly supported by the German government. Specific programs even fund international research and development partnerships. The clusters are open to foreign members and actively seek partners from abroad to help them innovate on future issues.”

Making waves in Industrie 4.0

As one example, Günter Korder, Managing Director of the high-tech cluster “It’s OWL,” is looking for foreign investors interested in getting involved in the network of innovative companies. The cluster pools the resources of global market leaders in mechanical engineering and the electrical, electronics and automotive supply industries, as well as internationally-renowned, cutting-edge research institutes. “We are one of the leading clusters in Europe on the topic of Industrie 4.0,” explains Korder. “This is because medium-sized industrial companies have traditionally engaged in very close cooperation.

Sources: Clustermonitor Germany, European Secretariat for Cluster Analysis (ESCA)

The cluster management meetings are attended by the heads of the participating companies and university presidents, as opposed to just the project managers. The cooperation has a very high strategic significance for all the companies involved. Many of the companies in northwestern Germany are so-called “hidden champions,” meaning they are hardly known to the general public but are world market leaders in their sector or market niche.

The cluster’s members are currently looking for partners for artificial intelligence (AI) projects. “We have already identified the first companies, scientists and investors we would like to work with in the United Kingdom, China, Finland and Canada,” says Korder. “Our model of close research cooperation on future topics such as Industrie 4.0 and artificial intelligence has generated a lot of interest there.”

Saxony’s “Silicon Valley”

Silicon Saxony is another highly successful and internationally active cluster. The network has more than 320 partners in the semiconductor, electronic, microsystems and software industries, several of which are international companies. The PEER Group is a Canadian systems integrator that serves the global semiconductor, photovoltaic and other high-tech industries. The company currently generates more than 40 percent of its annual turnover at its branch office in Dresden.