Regional ED Partnerships: Is There a Theory Behind Them?

Regional economic development partnerships are the rage. Is there a theoretical basis for this flurry of cooperation by communities and counties within the same economic region? According to researcher Julie Cencula Olberding from the University of Kentucky, there is a theoretical foundation. She calls it "the norms-based theory of regional partnerships for economic development." What does that mean? In short, it means that cooperative social norms provide explanation for a good bit of the partnering by local governments and private sector development organizations in sub-state regions across the U.S. In other words, our values are telling us to work together with those facing common problems and opportunities. Not a bad idea.

Cencula-Olberding did empirical research on 244 metro areas and found that 147 of them had at least one regional partnership for economic development. And you thought you had the only one? Check again. Her research provides some support for the claim that "cooperative norms" explain--at least in part--why more partnerships are being formed. Are other factors at work here? I suspect they are, but Cencula-Olberding's research helps us to understand that there is at least a partial theoretical explanation for why EDO's are organizing more regional partnership type organizations.

Julie Cencula Olberding's article "Does Regionalism Beget Regionalism" was published in July-August 2002 issue of Public Administration Review (Vol. 62, No. 4, pg. 480-491.) Here is the PAR's website. (To get the article, you will either need to subscribe to the journal or have access to the electronic version of the journal.)

Are regional partnerships more effective than other organizational approaches to ED in achieving their goals? The study does not really address this question. That is another study for the future. If you talk to practitioners like Rick Weddle (Greater Phoenix), Ronnie Bryant (Pittsburgh region) and a number of other ED executives running regional programs, they will tell you that regional approaches are more effective. They may qualify that statement by saying "if done right."

Regionalism is not only the rage in the U.S., but it is well-embedded in economic development strategy across Europe, Australia and New Zealand and Asia. Actually, the Europeans are ahead of the U.S. in this area.

We will be sharing more about regional ED policies and strategies very shortly. Stay tuned.

Looking for R&D Spending Data for Your Local College or University?

Look no further. The National Science Foundation (NSF) maintains an individual academic institution research profile database that contains much of the data and information you may be looking for. You can find this infromation at the NSF website located here.

If that does not provide you with what you need, then you may want to visit the U.S. Department of Education's state higher education links page, which provides you with direct links to the higher education boards or agencies in all 50 states. Most of these agencies maintain databases on R&D activities at colleges and universities in their state. You can also find other useful data at these state websites. Click here to go to the U.S. Department of Education's "Higher Education Links Page."

Ontario Gets High Marks for ORION

What is ORION? It is the Ontario Research and Innovation Optical Network. ORION is a really cool 3,700-kilometer high-speed network that will connect Ontario's 43 post-secondary institutions and its 50+ publicly funded research institutes and organizations. Why do we think it is important? It is important because "connectivity" is key to synergy in conducting research and it is very important also in applying research results in products and services for the future marketplace.

This will put one of the world's leading optical-based networks into the hands of Canadian researchers. ORION is scheduled for completion in late January and it is expected to be fully operational later this Spring. This is one to follow.

You can download the Ontario report here. It also contains an information report on R&D by Ontario companies.

Economic Development Evaluation: More Rigorous Study Is Urged

Tim Bartik at the Upjohn Institute for Employment Research released an important and valuable paper in November 2002, critiquing current evaluation and performance assessment efforts in the economic development field.

Blistering in places, Bartik takes aim at the narrow focus of earlier ED evaluation studies and also argues that these studies should assess more than simply impacts on business and job growth. Bartik argues that local and state government fiscal impacts and geographic area and population impacts should be considered by these studies. Some of these same ideas were echoed in a 1999 study I led on Ohio's economic development programs. You can download the Ohio study report here.

The paper offers some constructive ideas on how future ED evaluation studies should be conducted. You can download Bartik's paper here.

In 1999, I co-authored the book, Evaluating Business Incentive Programs, with Ken Poole (then at NASDA) and George Ercheck (Upjohn Institute). You can download a copy of the book from EDA's website here.

How Is Global Entrepreneurship Doing?

Global entrepreneurial activity plunged 25 percent last year reflecting a universal decline in national economic growth, acording to a recent report sponsored by the Kaufman Foundation in Kansas City.

Interest by would-be entrepreneurs to start new businesses dropped sharply last year in all developed countries, according to the 2002 Global Entrepreneurship Monitor (GEM). This study of entrepreneurship and economic growth in 37 countries was conducted by Babson College and London Business School, and funded by the Ewing Marion Kauffman Foundation.

With the exception of the U. S., particularly steep declines were recorded by the G 7 countries, which include Canada (-22 percent), France (-57 percent), Germany (-35 percent), Italy (-42 percent), Japan (-65 percent), and the United Kingdom (-31 percent).

“It appears that the U.S. has stabilized at a level of entrepreneurial activity that will allow us to begin rebuilding or at least maintaining our current position for some time,” said Larry Cox, director of research at the Kauffman Foundation and GEM project director.

According to Paul Reynolds, the GEM project coordinator and a professor at both Babson College and London Business School, the pattern of global decline in entrepreneurial activity mirrors changes in the growth of national GDP (gross domestic product) in the GEM countries between 2001 and 2002.

According to the GEM 2002 study, about 286 million people, or 12 percent of the 2.4 billion labor force in the 37 GEM countries analyzed, are involved in new business formation.

The number of individuals involved in entrepreneurial activity varies sharply from country-to-country. Overall levels of activity are relatively low in Europe, Central Europe and developed Asian countries; moderately high in Latin America and former British Empire Anglo countries (including Australia, Canada, New Zealand, South Africa, and the United States); and highest in the developing Asian countries, where entrepreneurship is more the result of economic necessity.

For more details download the 2002 report from the Kaufman Foundation website.

Higher Education and Economic Development

Because of our work with colleges and universities across the country, we thought it might be useful to share what we see ahead in terms of higher education's role in economic development.

First, there is a great need for America's colleges and universities to give more attention to economic development issues. Many are. Unfortunately, financial resources to address this need at the present time do not exist in most states. You may find it interesting to read a recent speech by Akron University President Luis Proenza on the role of higher education in economic development. It identifies some of the current ways colleges and universities contribute and some ideas for the future. Click here to read Dr. Proenza's speech to the Cleveland City Club.

New state government investment in Ohio's colleges and universities is urged and it looks, at least for now, that Ohio Governor Bob Taft is listening. Taft's Third Frontier Fund is aiming to boast college and university research and technical support to Ohio businesses and industries. Check out the Ohio Third Frontier website.

Second, for a good example of how a major university supports economic development, we suggest that you take a look at what the University of Arizona's Office of Economic Development does to support economic development in Southern Arizona and elsewhere across the state. Click here to go to the U of A's Economic Development website. The U of A has done an exceptional job with its Science and Technology Park and its efforts to support industry and knowledge cluster development in Arizona.

Third, to learn more about the role played by community colleges in economic development, visit the American Association of Community College website. Community colleges nationwide are leaders in workforce and economic development.

Finally, want to know more about higher education, locate college and university websites or know other things about higher education issues? Visit the higher-ed.org website.

Stay tuned. We will be looking in more detail at how colleges and universities support economic development. Look for some future stories about our clients and what they are doing.

A Look at Capital Investment Plans of Japanese Companies

Domestic Business Investment

The Japanese economy remains in a stalled mode. Recent economic reports do not paint a very optimistic picture for 2003. Capital spending by Japanese businesses both domestically (in Japan) and internationally (in other countries) remains low, when compared to investment trends in the 1980s and 1990s.

The forecast for 2003 indicates a continued conservative attitude toward domestic capital investment by Japan's major industries. Domestic capital investment was down 9.6 percent in 2001 and the final figures for 2002 are expected to come in around -0.6 percent. Manufacturing investment in 2002 is expected to come in at -5.6 percent.

A recent survey by the Development Bank of Japan expects total business capital investment to decline by 5.1 percent in 2003, with manufacturing investment expected to be down by 3.9 percent and non-manufacturing investment is expected to be down by 5.3 percent.

International Business Investment

International capital investment by Japanese businesses is expected to register a favorable gain in 2002, rising by 6.1 percent. The 2003 international capital spending forecast for Japanese businesses has not been released yet. In 2002, 32 percent of Japanese international investment was headed to the Euro Zone, and another 13 percent to other Asian countries.

Japanese investment in the United States is expected to decline by 0.6 percent in 2002. About 48 percent of all Japanese international investment occurred in the U.S. in 2001 and 45 percent of the total is expected to occur in the U.S. in 2002. Over 85 percent of all Japanese business investment overseas is by manufacturing companies; most of which was investment in upgrading existing production facilities.

What are the chief motives for Japanese capital investment? Across all industries, 41 percent is motivated by the expansion of production capacity. Another 12 percent is accounted for by new product development. R&D investments account for 3-4 percent of these capital investment totals.

For more details, download the new Development Bank of Japan's report here .

The recent studies reviewed in this article suggest that Japanese businesses will invest cautiously this year given the current world uncertainties that are holding back investment by businesses in all nations.

On a closing note, you might find it interesting to read about how the Development Bank of Japan (DBJ) works to encourage foreign direct investment (FDI) in Japan. To visit the DBJ's Foreign Direct Investment Home Page, just click here.

What lies ahead for India beyond IT?

India has made a name for itself in recent years as an emerging IT center for both back-office and programming business activities. The IT market is soft right now and international security concerns are pronounced everywhere, but especially in the Middle East and surrounding regions.

According to a recent India Economic Forum sponsored by the Wharton School of Public Policy and Management, India is looking in new directions beyond IT. These include consumer branded goods manufacturing, financial services and many other industries. This move points to the need globally for balanced and diversified national and local economies that can position themselves for growth opportunities in many markets. While it is likely that India will continue to stalk the IT sector for growth opportunities, it appears that thinking has broadened and that growth promotion efforts are likely to follow multiple paths in the future.

This points to the need for scenario thinking and planning--a topic we discussed in earlier blog articles. For more information about India's future economic development strategy, check out the Wharton website here.

Stay tuned.

Understanding the Geography of Cyberspace

Does cyberspace have a "geography?" Some geographers and information scientists believe that it does. The geography of cyberspace can help us understand current and potential future information, knowledge and communication "connections" between and among geographic places worldwide. What are Cleveland's major information and communication links to cities like London, Calcutta and Mexico City? Understanding the geography of cyberspace can give us some valuable insights about these links.

Connectivity is vitally important to the growth of knowledge-based economic development in communities, regions and states worldwide. For this reason, you might want to spend some time browsing a set of Cyberspace Geography websites that I ran across in my study of local economic development in a global context.

Start here at this website and follow its links to a variety of other informative websites providing research information and resource contacts in the field of cyberspace geography.

What are some of the practical benefits of this information? This information can help you: 1) learn about how the Internet is growing and linking certain places across the world; 2) identify how information and knowledge business markets are shaping up worldwide; 3) identify where and how you can use Web-based marketing to support your economic development efforts; and 4) locate potential partners or collaborators to "globalize" your economic development program.

Take a look and let us know what you think. Happy cyber-travels!

Toronto Does It Right

I am very impressed with Toronto's (Canada) strategy for economic development. "Take risks or be at risk." That is one of the major conclusions of its strategy, which was set in motion just about two years ago. Toronto is truly a wonderful "world-class" city. Clearly one to benchmark in my book as we scan the economic development scene globally to find out who's on the leading edge. I'm sure the Toronto folks are eager for the economic skies to clear some so they can put more parts of the new strategy into play.

Download the Toronto report. It's great reading.

"Risk-taking" is a key issue for everyone right now given the high levels of risk and uncertainty that exist in the world. 9/11 and subsequent events, including the Iraqi conflict, have greatly changed our perception of risk. Economic development has been heavily impacted by these events. Business investment levels remain very low as executives look for greater assurances of a favorable return on the capital they invest in new products and services, facilities, equipment, people and other assets. Investors remain wary of the stock market despite its improvements.

Many companies, government agencies and other entities have devised new strategies for assessing risk and coping with those risks from a management perspective. How has economic development responded to this new era of elevated risk? For one, the level of communication has grown to ensure that economic development stakeholders understand what's happening to the economy and the community. Some EDO's have extended their environmental scans to include more national and global factors and issues, which are having a driving effect on local business and economic behavior. Finally, a number of EDO's are working to create new information, financial and other tools to help businesses and workers cope with the lingering economic downturn. The Greater Phoenix Economic Council has done an extraordinary job in responding to these issues. Many others are also on the leading edge in this regard.

I believe the folks in Toronto are correct: Either we gain confidence and skill in taking risks, or we will remain at risk. Understanding in a realistic way the risks that your area faces is in the starting point in any case. We are interested in knowing how geographic areas are dealing with the increased risks they experience. Please share this information with us. Thank you.

Contact Don Iannone at: dtia@ix.netcom.com, or call us at: 440.449.0753.