Economic Development Futures Journal

Saturday, November 29, 2003

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Washington State Aims at Biotech

Washington State wants to become a bigger biotech player. A rough draft of a strategy called "Bio 21" proposes a five-year, $250 million commitment to state biotech. Tobacco settlement dollars have been suggested as one possible source of funding, though no firm financing mechanism is on the table yet.

Under the draft proposal, state dollars would be matched by companies, the federal government or nonprofits. The draft suggests annual awards would go to research in diagnostics and therapeutics, bioengineering and health-care informatics. Collaboration between two or more organizations would be required for all proposals, with priority given to partnerships between nonprofit research organizations and companies, the draft says.

A 2002 Brookings Institute report ranked Seattle as a prominent but second-tier biotech city, on par with San Diego and Raleigh-Durham and trailing only San Francisco and Boston. Local industry and government leaders worry the region could fall behind if state funding doesn't increase.

The Bio 21 committee has been developing a strategy for statewide biotech funding since the state Legislature earmarked $250,000 for the planning process. Locke's office hired the Technology Alliance to develop the initiative.

Go here to read more.

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Latest on Boeing Deal

The Boeing plant deal is far and away the largest corporate site selection project out there at he moment. Soon, the company will make a decision. Until then, communities and states will remain in a dither about the deal. Here is a new twist on the project. Now you have site relocation specialists, not involved in the deal directly, speculating about which location will win. It's almost as though the project is some perverted horse race.

Outside site location experts seem to divide into two schools: those who believe the plant is still Washington's to lose and the entire exercise is about squeezing the best terms from this state; and those who believe the real competition is among an array of states in the South and Southeast, one of which will almost assuredly win the plant away from the incumbent.

"I think the judgment is open, but conventional wisdom is this will go to Southeast U.S. or Texas," said Dennis Donovan, director of global site selections for Wadley-Donovan, a Grubb & Ellis Co. company in Edison, N.J..

From just six miles away, in Fords, N.J., comes a contradictory view from Locations Advisory Service partner Saul Grohs: "The only buzz is that this may all be just a ploy to stay in the state of Washington, and see what they can do about raising the ante there."

Some of the variables leading up to the decision were clarified Nov. 20, when Boeing announced that 35 percent of the structure will be manufactured by Boeing in existing plants in Oklahoma, Washington, Kansas and Winnipeg, and another large piece by a joint venture of Vought-Alenia, in Texas.

Industry relocation experts from around the country all agree the crux of the decision will come down to one point: Boeing's profit margins and what site will help that most.

While Boeing has not asked the competing locations to talk among themselves about the deal, maybe they should to just that as a way to bring some sanity to the project. Who knows...maybe it would help ensure that the winner does not end up paying six times more than the prized plant is actually worth in terms of economic impact.

If Boeing is smart, it will make a decision quickly before several new companies announce the hunt for new facility locations. When that happens, the Boeing deal will no longer be the only deal on the table commanding communities' and states' attention. Locations will be less likely to cough up billions for the Boeing deal when they see their are other deals for them to bid on.

Go here to read more.

Friday, November 28, 2003

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EDOs Should Work on Strategic Relationship Development

Here is the conclusion of a new study released by Deloitte Touche on why companies must adopt a strategic relationship management strategy to serve their global customers effectively:

"The demands of the networked economy mandate a radical change in organization and management mindset. As technology advancements and increased globalization lead to more informed and demanding consumers and investors, companies must find ways to be more flexible and innovative than ever. Leading companies are realizing that they cannot provide the world-class solutions customers demand strictly on their own. More and more frequently, successful players are looking for partners. These companies now face the challenge of how to manage, and even how to think strategically about a profusion of global partners. Companies that develop, build, and manage a portfolio of capability focused relationships that allow them to collaborate innovatively will emerge as winners in this new environment."

This suggests that EDOs will need to move to the same type of model in working effectively with existing companies and new business prospects in the future if they are to succeed to helping them build nw competitive advantage in locations. This new direction will also require a much higher level of regional collaboration by communities within a region to meet local industry needs.

Go here to download the DT report.

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What Is All This Biotech Jazz?

Economic developers are in hot pursuit of biotech, but what do we really know about this rapidy growing field. For example, what exactly is a genome? It is the total hereditary material of a cell. Lean about genomes and many other things from the site referenced below.

A useful starting place is the North Carolina's Biotech Glossary. Go here to learn more.

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State ED Incentives

Looking for information about state economic development incentives. Go here to see a summary of what each state offers to business. Click on the tab "State Incentives."

Looking for more information on the topic? Check out the NASDA Directory of Incentives, which can be purchased by clicling here.

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EU Issues Competitiveness Report

The EU's Competitiveness Council hs just issused its annual competitiveness assessment. This year's report looks at issues such as:

- growth, productivity and employment,

- enterprise reorganisation and productivity growth,

- regional aspects of competitiveness, and

- enlargement and the competitiveness of manufacturing.

The key element of the report is the crucial role of productivity to improve standards of living.

This is not a simple black and white picture throughout the EU and amongst the EU's manufacturing and services sectors. The report finds that productivity performance varies widely amongst EU Member States, regions and accession countries, but is nonetheless heavily influenced by innovation and take-up of ICT.

The report finds that firms that achieve high productivity growth are those that combine organisational improvements with investment in new technologies, and particularly in information and communication technologies (ICT). ICTs have contributed to productivity growth more in the US than an in the EU, which relies more heavily on traditional types of capital.

Productivity growth disparities among EU regions are narrowing, but slowly. Regions that show high productivity growth tend to have good transport and telecommunications links, a strong entrepreneurial culture with good industry-science relations and clusters that encourage networking and a common vision among regional stakeholders.

Policies that support innovation, that improve competitive conditions, that encourage high-tech entrepreneurship at the regional level, and that favours clustering of innovative firms are essential ingredients for raising productivity growth.

A recent study for the Commission has provided more detailed information on which sectors have contributed positively and negatively to the productivity gap of the EU against the US in recent years. Sectors contributing to increase the gap are some key high-tech manufacturing sectors as well as the distributive trades and financial sectors. On the contrary, the communications sector has helped narrowing the productivity gap.

Go here to read more.

Thursday, November 27, 2003

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Some Things Are More Important Than Economic Development

I love my work deeply, but I need to remind myself at times about what is truly most important in life--that is people, especially those who have shaped us during different stages of our lives.

I give thanks on this Thanksgiving Day for my father, who taught me the value of both hard work and doing my best; for my wife, Mary, who reminds me that we need to make the most of everyday of our lives; for my Uncle Ed, who took me under his wing when I was young and struggling to find out what I wanted to do with my life; for my departed father-in-law, Ken, who taught me that your work does not stop when you retire; and for my sons, Jeff and Jason, and grandson, Evan, who remind me that the world of the future will not be like the world of the past.

Finally, I give thanks to economic developers across the world who work to help provide employment opportunities for others.

Happy Thanksgiving.

Wednesday, November 26, 2003

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Foreign Direct Investment in Europe

As we examine our future prospects for international business investment in US communities, it is important to examine what is happening elsewhere around the world. A recent review examines these trends in Europe.

As the world debated the coming war with Iraq earlier this year, discussions often noted the distinction between "Old Europe" and "New Europe" and the apparent political differences. It is also a worthwhile comparison to make when examining economic matters.

Statistical evidence and expert analysis indicate that Europe's economic capitals that are attracting the most interest from outside investors continue to be those in the "Old Europe." However, many within "New Europe" are making dramatic moves, and they appear to be gaining an ever-increasing piece of the action. "The big shift you're seeing is a shift eastward to those joining the European Union in 2004," observes Mark Ambler, director of the New Europe Program at PricewaterhouseCoopers in London. "But it's important to get that in perspective. It's still a relatively small proportion of total foreign direct investment, by virtue of them being relatively small economies."

The latest statistics from the Organization for Economic Cooperation and Development (OECD) add further detail. FDI into OECD countries (including those outside of Europe) was down 20 percent in 2002, following steep declines the year before. FDI into OECD countries totaled $490 billion in 2002, down from $615 billion in 2001, and about one-third of the total recorded in 2000. Expect more declines in 2003, the OECD warns.

Though Europe's figures are down, they're "not down as dramatically as in the U.S.," Laudicina observes. Indeed, OECD figures show FDI plummeting from $131 billion to $30 billion in the United States last year. This, Laudicina says, can be explained by the fact that much of what goes into FDI figures are mergers and acquisitions (M&A), and the United States was the biggest beneficiary of the M&A boom that has more recently gone bust. The M&A slowdown also hit hard in the United Kingdom, which has seen its share of FDI drop more dramatically than in the rest of Europe.

But take the United Kingdom out of Europe's picture and things don't look nearly as bleak. Some countries are down, but some are moving up. Luxembourg was on a significant upward trend in 2002, as were Ireland, Finland, the Czech Republic, and the Slovak Republic. Germany reported healthy gains, while the numbers were relatively steady in Italy and Switzerland, and down just a bit in France.

Go here to read more.

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Brainpower Draws Biotech Companies

If there is any question in your mind that skills and talent are important (vital) to biotech growth, read this recent article about why biotech is growing in New Jersey, Boston, San Diego and the Bay area.

Advice: Grow your brainpower, cultivate the talented people you have, and recruit new talent. All three strategies are essential. These people tend to be mobile. The more skilled and degreed, the greater the chance they can pull up stakes and move somewhere else for a better job and more community amenities. Retention comes first!

Go here to read the article.

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Green Buildings Getting More Attention

The U.S. Green Building Council (USGBC) is comprised of leaders from across the building industry. Members work together to develop Leadership in Energy and Environmental Design (LEED™) products and resources, the greenbuild annual international conference and expo, policy guidance, and tools that support the adoption of sustainable building.

According to Christine Ervin, president and CEO of USGBC: "Green is here to stay; it is not a fad. When you look at the subject of energy efficiency, this is an area plagued by politicizing and the price of energy. In fact, clean energy has a major role in environmental progress. It can be vulnerable to ups and downs. That has been a major problem with the energy field."

Go here to read more.

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Arizona-Mexico Development Cooperation

Arizona has no choice but to forge stronger economic ties with Mexico. To avoid it, would lead to lost trade and investment opportunities and also spark greater economic problems, especially in the southern part of the state.

The respectful working relationship that Arizona's Gov. Janet Napolitano has forged with Gov. Eduardo Bours of Sonora holds great potential for regional trade and economic development. But it's not enough, as both governors stressed during a recent meeting of the Arizona-Mexico Commission and its Mexican sister group, the Sonora-Arizona Commission.

Goodwill, good intentions and even good plans only go so far. Focused energy, prioritized action and investment are also essential to meet the goals of establishing the Canamex Corridor, which could link the interior of Mexico with Canada by way of Arizona, along with related plans to upgrade the Nogales port of entry and create a deep-water port at Guaymas.

This is a case where money talks. Without the right level of public and private investment, opportunities will not grow on both sides of the border.

Go here to read more.

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North Carolina's Alternative Energy Effort is Stalling

If alternative energy is on your development agenda, you may want to look at the situation in North Carolina, which faces some major hurdles in the biodiesel and green power areas.

Many areas are focused on fuel cells. Will they succeed? Only if they get more resources and a greater incentive is given for consumers and industry to switch. Right now, the drivers are reinforcing the status quo.

We should be giving more attention to alternative energy, and we should see it as part of our economic development strategy.

Go here to read more.

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Economy Even Grew Faster

The nation's growth was even more torrid in the third quarter than previously estimated, the government reported earlier this week, while a new survey of consumer confidence suggested that growth should remain strong next year. The Commerce Department raised its estimate for growth for the quarter from an annual rate of 7.2 percent - already the fastest rate in nearly two decades - by a full percentage point, to 8.2 percent.

Ok, that's great, but can we sustain that level of growth? Not for long. What's happening here? It's called "catch-up growth," and it happens every time we pull out of a downturn. It won't last for long, but we should position out communities and regions for this growth burst while we have it.

Go here to read more.

Tuesday, November 25, 2003

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State Announces New Innovation Loan Program

The Ohio Department of Development is rolling out the Innovation Ohio Loan Fund, which will provide individual loans worth between $250,000 and $5 million to existing, Ohio-based manufacturing, information technology, advanced materials, bioscience, and instruments, controls and electronics companies.

While the loans will be available to several types of companies, the program heavily targets manufacturing firms that generate between $5 million and $50 million in annual revenue. And it is restricted to companies that are developing next-generation products. ODOD will provide up to 75% of product development project costs, up to $5 million per loan.

The state is targeting the fund to help mid-sized companies that lack the size, product diversification or other characteristics typically favored by the private sources of capital.

Go here to read more.

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Digital Manufacturing in Perspective

Earlier this year, John Zysman at UC-Berkeley released a very thoughtful working paper on digital manufacturing. It provides a useful context for understanding the influence of IT on manufacturing. It helps us understand what lies ahead and where we must focus on attention in trying to develop solutions to our manufacturing competitiveness problem.

Here is what Zysman has concluded.

The digital era is defined by a set of tools for thought, tools, data communication and data processing technologies, that manipulate, organize, transmit, and store in digital form information, with information defined as a data set from which conclusions can be drawn or control exercised. The emerging digital tool set and networks mean that information in a digital form becomes critical to firm strategies to capture value and market position.

Business strategies and organization, the business models that define the links between objectives and implementation, have all evolved in response to and in implementation of these tools. And with that evolution, the meaning, not just the role, of manufacturing has evolved as well. The term production, as the act or processes of producing something, can encompass a range of products, digital as well as physical, and also delivery platforms that provide services. One implication clearly is that both matters of software and supply-chain management must be understood as questions of production as much as of service.

For a company the question is how to use production as a strategic weapon. For a country the question is how to be the most attractive location for strategic production. When production changes very rapidly, jobs can be dislocated or altered. However, if production doesn’t change, then those jobs become commodities and are vulnerable to innovation abroad or to moving abroad. For both company and country the question, differently framed for each, is how to adapt to the changing logics of production.

Does production matter? Absolutely, but production can either be a commodity that is vulnerable to relocation or closure or it can become a strategic asset. As corporate strategist and national policy makers, we must help make sure that production capability is a strategic asset that we control, not one that is used against us.

Source: BRIE, UC Berkeley

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New Urban Databook Available

As a part of its Living Cities Census Project, the Brookings Institution Center on Urban and Metropolitan Policy has produced 23 databooks, one for each of the cities in which Living Cities focuses its investments. The databooks provide local leaders with a "one-stop" guide to Census 2000 by assembling key information in an accessible format.

The databooks place each of the 23 cities in a national context and provide comparative rankings on all the key indicators in the census. The databooks are organized around ten sets of indicators: Population, Race and Ethnicity, Immigration, Age, Households and Families, Education, Work, Commuting, Income and Poverty, and Housing. For each set of indicators, the databooks compare each Living City to other cities participating in the initiative as well as the top 100 cities. They also provide comparisons within and across the metropolitan areas in which these cities are located.

Here are the cities included:

Atlanta, GA
Baltimore, MD
Boston, MA
Chicago, IL
Cleveland, OH
Columbus, OH
Dallas, TX
Denver, CO
Detroit, MI
Indianapolis, IN
Kansas City, MO
Los Angeles, CA
Miami, FL
Minneapolis/St. Paul, MN
New York City, NY
Newark, NJ
Oakland, CA
Philadelphia, PA
Phoenix, AZ
Portland, OR
San Antonio, TX
Seattle, WA
Washington, D.C.

Source: Brookings Institute

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Cleveland Demographic Mega-Trends

The Brookings Institute recently released its Living Cities Databook, which provides in-depth analyses of 23 of the nation's largest cities and metro areas. Here are the major conclusions the Institute has drawn about the Greater Cleveland region:

* The Cleveland metro area continued to decentralize in the 1990s amid slow growth region-wide. Between 1980 and 2000, the City of Cleveland lost 17 percent of its population, although the pace of decline slowed in the last decade. Meanwhile, the region's suburbs grew modestly, but the locus of that growth occurred far from the core. In the 1990s, a few neighborhoods in downtown Cleveland gained residents, but population loss was widespread throughout the remainder of the city and most inner suburbs. The city lost households of all types: The number of married couples living in the city dropped by 16,000, and for every additional single-person household the city gained, the suburbs added more than 40. Today, only one in five residents of the Cleveland region lives in the central city, and less than one-third of the region's workers are employed there.

* Cleveland remains highly segregated and profits from little international immigration. The number of whites living in Cleveland plummeted in the 1990s, and modest gains in black, Hispanic, and Asian populations were not enough to compensate for these losses. The city's foreign-born population grew by a mere 400 persons over the decade, signaling that while modest numbers of immigrants continued to arrive in Cleveland (9,300 in the 1990s), an equivalent number of earlier arrivals left the city for the suburbs or beyond. In addition, the metro area remains highly stratified along racial and ethnic lines, with blacks confined to the city's east side and eastern suburbs, Hispanics clustered on the west side, and whites located in the downtown and southern/western suburbs.

* Cleveland lacks a young, highly-educated population. During the 1990s, the number of 25-to-34 year-olds nationwide declined by 8 percent, due to the aging of the Baby Boom generation. In Cleveland, this age group shrank nearly three times as fast. Consequently, the share of adults with a college degree grew more slowly than elsewhere in the 1990s, and Cleveland now ranks 96th out of the 100 largest cities in college degree attainment. Efforts to retain students attending its own universities may help accelerate growth in educational attainment, but since Cleveland's college-student population is one of the smallest among the Living Cities, strategies to increase educational access for existing residents may be needed. Unlike in many other cities, low educational attainment is not confined to Cleveland's minority groups—whites, blacks, and Hispanics all have below-average rates of college completion.

* Incomes grew in Cleveland during the 1990s, although the city remains home to a primarily low-wage workforce. As in other Midwestern cities, median household income grew at an above-average rate in Cleveland during the 1990s. However, the city's median income still ranks 98th out of the 100 largest cities. Middle-income households declined over the decade, while the ranks of moderate-income "working poor" families grew. In fact, some 62 percent of the city's households made do with incomes below $34,000 in 2000. Families with children were especially likely to earn low wages; nearly half had incomes below or near the federal poverty line.

* Homeownership increased for some groups in Cleveland, but many families face difficulties paying for housing and moving toward homeownership. About half of Cleveland's households own their own homes. That share is typical among the 23 Living Cities, but it remains low for a city with such a large stock of single-family homes. Homeownership rose for the city's Hispanic households, 41 percent of whom now own. But black households in Cleveland did not share in these homeownership gains, and were likely impeded by their low incomes, which trail those for other racial/ethnic groups. Rents in Cleveland increased by almost 10 percent in the 1990s, but remain the lowest among the Living Cities—the median unit rents for only $465. Yet even so, 40,000 Cleveland renters still pay more than 30 percent of income on rent, suggesting that most earn too little to afford even a modestly-priced unit.

Go here to download the Cleveland report.

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Forces Moving the Economy

Here is what economists at Economy.com believe will drive the economy into next year. They say the unleashing of business pent-up demand will ensure that the U.S.economy’s recovery will continue, but the unwinding of consumer spent-up demand will ensure that it won’t come roaring back. The principal impetus for near term growth will be pressure on businesses to replace their rapidly depreciating stock of information technology and to replenish their depleted inventories. The principal constraint on growth will be weaker vehicle and housing demand, as households have been enticed to make purchases well before they would have otherwise given perceived once-in-a-lifetime deals.

The implications of this is that while the economic expansion is taking root, it will be very modest, at least by the standards of business cycles of the past half century. Unemployment will fall and inflation will ultimately accelerate, but only slowly. The sources of growth will shift from households to businesses. The U.S.economy will remain especially vulnerable to the vagaries of global events.

Go here to read more if you subscribe to Economy.com.

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Dana Says No to ArinMeritor's Takeover

Auto parts supplier ArvinMeritor Inc. has ended its takeover bid for Dana Corp. after the rival's board on Sunday rejected a recently increased $18-per-share offer.

ArvinMeritor had planned to terminate its latest offer — its fourth — on Dec. 2 unless Dana's board of directors agreed to begin negotiating a merger agreement.

"We are disappointed that the Dana board is unwilling to sit down with us and has chosen instead to deprive Dana's shareowners of the immediate and substantial value," Larry Yost, chairman and chief executive of the Troy-based ArvinMeritor, said in a statement.

Toledo, Ohio-based Dana — ArvinMeritor's largest competitor and the parent company for Brake Parts Erie — sent Yost a letter informing him of the decision and approved another letter to shareholders explaining the decision.

ArvinMeritor employs about 32,000 people at more than 150 manufacturing facilities in 27 countries. Dana employs about 60,000 people in 30 countries.

Go here to read more.

Monday, November 24, 2003

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Two Takes on IT Outsourcing

Just how big of a deal is the offshore outsourcing of IT? Read this.

The outsourcing of business operations via the internet could earn some of the world's poorest countries billions of dollars over the next few years, according to a United Nations study. In its latest annual report on electronic commerce published yesterday, the UN Conference on Trade and Development (Unctad) says offshore outsourcing could generate some 3.3 million jobs worldwide by 2015, 2.3 million of them in India and most of the rest in developing nations, the report adds.

Though India's skilled English-speaking workforce and low salaries have enabled it to capture a dominant share of the international outsourcing market, the report notes that business process service providers are emerging in countries as varied as Bangladesh, Brazil, China, the Philippines, Romania, Russia, Singapore, Thailand, Venezuela and Vietnam. Unctad nevertheless points out that internet use depends not simply on income levels but also on government policy. "Internet penetration rates in developing countries with comparable income levels vary by as much as 25 times," it says. In particular, the report recommends the use of free and open-source software.

Another point of view on I.T. outsourcing from CIO Today: Information-technology outsourcing to low-wage foreign countries will more than quadruple by 2007, according to research firm IDC. The study offers a mixed picture of the future of the I.T. job market: all the focus on the job loss has been disproportionately attributed to the offshore trend, and it's really more to do with the realignment following an economic bubble. That's the good news. The bad news is that offshore is certainly a structural change that is coming to the industry.

Yet such a dramatic shift may not necessarily translate into a doomed outlook for U.S. I.T. services jobs or U.S.-based services firms. While U.S. services firms will continue to use offshore resources to reduce costs, upper-echelon I.T. jobs will remain U.S.-based. There will always be a place for those highly skilled I.T. workers, but there's going to be a lot of 're-skilling' needed to push up the skill level of workers in the U.S. so they can do the high-end consulting and business strategy work. It's going to be all the stuff that goes on underneath these activities that can be done offshore.

Get the UN Conference on Trade and Development report here.

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People Continue to Move Farther Outward in Louisville Region

During the past decade, thousands of Louisville residents have left behind the urban core for bigger homes in surrounding counties. They take with them their higher salaries, and the people who replace them typically make much less, according to a Courier-Journal analysis of Internal Revenue Service data.

Since 1992, Jefferson County has recorded a net loss of more than $600 million in personal income to neighboring counties, including $66million last year, according to IRS data compiled from tax returns.

The average household income during 2001 and 2002 for residents leaving Jefferson County was $31,000, compared with $24,000 for those moving in.

Metro Mayor Jerry Abramson and city boosters said those leaving Jefferson County still work here, and the county has maintained 80 percent of the region's workforce.

My question is this: How long will the jobs remain in the urban core if the skilled and high-talent workers continue to move outward? Answer: Not for long. The jobs will follow the people!

Go here to read more.

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Study Says Workers More Loyal Now

Two years of layoffs and a lousy economy have made Americans still on the job more devoted to their employers.

A national study released this month by Indianapolis-based Walker Information shows that the percentage of "truly loyal" employees has increased in Indiana and across the country since the survey was last taken two years ago.

Of the 2,400 workers surveyed by Walker this summer, 30 percent were deemed to be truly loyal because they were engaged with the organization and planned to stay for at least two years. Two years ago, only 24 percent of American workers fell into that category.

Walker researchers and human resources experts attribute the increase to greater gratitude among employees just for having a job, a greater emphasis on training by employers, and lower expectations of employers by employees.

That is now. I wonder what will happen to this new-found loyality once the economy really cranks up and competition for skilled labor and talent grows. My advice to employers is this: Continue to work on keeping your good people happy and satisfied.

Head over to Walker Information to learn more.

Go here to read more.

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ED 101: Setting Reasonable Expectations

That is the message in a recent St. Petersburg Times article about the new Scripps Biotech Institute to be developed in Florida. The article examines the Texas Research Park in San Antonio and says that the Scripps project should learn from it.

The Texas Research Park was supposed to spark a biotech boom in San Antonio, with 100 companies and 30,000 employees by 2020. Thirteen years later, only 15 companies with about 300 employees have set up shop. Are Florida's goals for a boom led by Scripps Research Institute overly ambitious?

Undisputed biotech centers such as Boston, San Francisco and San Diego developed over several decades, fueled by a potent mix of academia and entrepreneurship, rather than being the inventions of an economic development task force. Like Florida, San Antonio set out to build a biotech economy from scratch. The results have been mixed.

Setting reasonable expectations is a lesson all of us need to learn. Beware of those inflated numbers in your economic impact study that is designed to convince state and local government to invest heavily in the deal. In two words: "Get real!"

Go here to read more.

Sunday, November 23, 2003

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Internet More Important to Site Selection

The role of Internet websites in economic development is not only growing in numbers, but more importantly in impact.

How effective is your ED website in delivering customized data and information to companies looking for the right place for their next business facility? It's not about a PR site that talks about all the great things in your community. It's about hard data and honest information that helps business decision-makers evaluate whether your community has what it takes to support their project. That's the message in a recent Expansion Management Magazine article.

Go here to read more.

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Clusters in Sarasota, Florida

Last year, Sarasota, Florida hired three consulting firms to analyze the local economy and identify emerging clusters.

In a report published in February, the consultants suggested that Sarasota's economy is at risk because it's dominated by tourism and real estate development, sectors that pay wages below the national average. The consultants said the county's economy is also at risk because exports from regional companies have stagnated.

Sarasota companies exported $202 million worth of goods and services in 1999, a mere 8 percent increase from 1993. Companies in the Tampa and Melbourne metro areas, by comparison, increased their exports by 85 percent or more during the same period.

To create a more vibrant economy, the consultants recommended that Sarasota concentrate on stimulating four promising industry clusters: "Life and Environmental Sciences," "Technology," "Creative Services" and "Specialty Manufacturing."

They selected those clusters by looking at the level of employment in each of the groups relative to the national average and by considering special assets that each group has to offer.

For example, the Creative Services cluster, which includes architects, graphic designers, Web developers, film producers and other artistic types, was included because of the conglomeration of students and faculty at the Ringling School of Art and Design, one of the top institutions of its kind in the country.

Will clusters help grow the Sarasota regional economy? Local officials are hopeful, but it's a struggle to get local companies engaged in the clusters and increase their collaboration. These are common issues in most areas trying to follow the cluster development model. Time will tell. One thing is clear though. Unless there is a compelling reason for Sarasota companies to work together, they won't. Right now, it does not seem like that compelling reason exists.

Go here to read more.

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Joel Kotkin: Expect Second and Third Tier Cities to Grow

"Blame 9-11, technology or geographic shifts in the national economy or a combination of all three, but the nation's urban hierarchy is flattening out. A host of smaller players are chopping off chunks of what was once the big boys' exclusive domain. What used to take place almost entirely in New York, Los Angeles, Chicago or San Francisco, whether in high finance, advertising or marketing, is now happening more and more in unlikely locales such as Omaha, Des Moines, Fargo, N.D., and Columbus, Ohio." That's the message that Joel Kotkin, a researcher from Pepperdine University, has been broadcasting for the past couple years.

According to Kotkin, the events of 9-11 have accelerated this de-clustering trend. Since the attacks, many major securities companies have moved out of Manhattan in search of cheaper and more secure suburban locations.

But the fundamentals for this shift were already well in place before 9-11. Take the retail sector, one of the linchpins of the U.S. economy. Locating in New York was once critical for major retailers. Today, not one of the nation's top 20 retail firms is headquartered there. J.C. Penney moved to Plano, Texas. Other retail capitals include Cincinnati (Federated Stores), Minneapolis (Target), St. Louis (May Company) and Bentonville, Ark., home of, yes, Wal-Mart. Other types of corporations also see little reason to locate in New York or competing urban centers, with their high cost of doing business and astronomical housing prices. The number of Fortune 500 firms in New York was down to 39 in 2002, from 42 in 1999, 77 in 1979 and 140 in 1955.

The greatest beneficiaries of the demographic shift have been the cities of the South and West, such as Phoenix and San Antonio. But a surprising development has been the gradual slowing, and even reversal, of flight from the Midwest, which was a virtual torrent several decades ago. Today, more Americans are moving into cities in the heartland, such as Fargo, Des Moines, Columbus and Indianapolis, than are moving out. Even cities like St. Louis, which people have been leaving in massive numbers since the 1960s, are now approaching an equilibrium among domestic migrants. These "Bridgeports" are doing far better attracting domestic migrants than New York, Chicago, Seattle or Los Angeles. And they are also attracting a growing proportion of the nation's immigrants.

Go here to read more.

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Greater Cleveland to Study Regionalism...Again

Cleveland's 14 biggest law firms are pushing for a study on regional government and will team with the Citizens League and the League of Women Voters on the project. Together, the groups plan to look into how regional government could work in Northeast Ohio. They hope to finish a report by the middle of next year. It's not yet clear who will pay for it.

My opinion: Maybe a long shot, but worth a look. Expect lots of resistance from both the City of Cleveland and surrounding suburbs. Why? Because it is "Cleveland's culture" to resist change and innovation. On the other hand, regional government does not solve all problems. It's wrong to over-expect what regionalism can do. It will not heal all problems--just look at Indianapolis and Minneapolis. Regionalism is weakening in both areas as we speak. Creating government service efficiencices is the first reason for doing it. Improving the planning of infrastructure and regional land development is a second reason.

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Atlanta Economy Picking Up

Some say that the re-booming of Atlanta's economy may be the sign everyone is waiting for in terms of economic growth. Things are clearly picking up, according to a recent NY Times article.

Atlanta businesses, however, say they are taking things a day at a time in terms of new investments. They want to be sure that the demand is there before they spend money on new facilities, equipment and employees. That view coincides with what most economists see, including analysts that Economy.com, who predict good growth in 2004, but see businesses taking their time to invest in new facilities.

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