Foreign Direct Investment Grows in the U.S.

Outlays by foreign direct investors to acquire or to establish U.S. businesses rose for the second consecutive year to $79.8 billion in 2004, up 26 percent from a revised $63.6 billion in 2003.

Despite the increases, outlays in 2004 were still less than in 1998–2001, when new investment outlays were historically high, ranging from $147.1 billion to $335.6 billion.

Outlays were boosted by the stepped-up growth in the U.S. economy, and the increase was part of a broader resurgence of worldwide merger and acquisition activity. Transactions of more than $5 billion continued to account for a sizable share of total outlays. Trust me, M&A activity accounts for the lion's share of FDI in the U.S. That has been the case historically.

What does this mean for economic development strategy? It says that more investment activity is expected from international companies in the US in the future. It also says that more foreign companies are looking for acquisitions, which could be both bad and good news for local economies, depending upon how local operations fare in the acquisition.

Download the latest report here from the Bureau of Economic Analysis.

Greater Cleveland's Slowing of Per Capita Personal Income Growth

Personal income growth is an important leading indicator of local economic vitality. In many ways, it is more important than employment growth because income is what makes jobs important. Greater Cleveland lost ground in personal income growth between 1993 and 2003. I am concerned about this fact.

In 2003, the Cleveland-Elyria-Mentor metro area had a per capita personal income (PCPI) of $33,196. This PCPI ranked 54th in the United States and was 105 percent of the national average, $31,472. The 2003 PCPI reflected an increase of 3.0 percent from 2002. The 2002-2003 national change was 2.2 percent. In 1993 the PCPI of Cleveland-Elyria-Mentor was $23,320 and ranked 36th in the United States. The 1993-2003 average annual growth rate of PCPI was 3.6 percent. The average annual growth rate for the nation was 4.0 percent.

In 2003, Cleveland-Elyria-Mentor had a total personal income (TPI) of $71,050,860. This TPI ranked 24th in the United States. In 1993, the TPI of Cleveland-Elyria-Mentor was $49,914,731 and ranked 20th in the United States. The 2003 TPI reflected an increase of 2.9 percent from 2002. The 2002-2003 national change was 3.2 percent. The 1993-2003 average annual growth rate of TPI was 3.6 percent. The average annual growth rate for the nation was 5.1 percent. Read the BEA report on Greater Cleveland here.

Likely culprits for this personal income decline are: 1) loss of good-paying jobs, especially in manufacturing, but also in services; 2) slower growth of wages and salaries in the region; and 3) aging of the population base. All three are likely candidates that we should investigate further in the future.

These personal income performance numbers reinforce the need for Greater Cleveland's ED organizations to give even greater attention to the future growth of wealth-building industries and entrepreneurship.

There are three components to the "new economy:" 1) innovation; 2) productivity; and 3) prosperity. I think Greater Cleveland is doing a better job with the first two than the third. Much greater attention must be given to squeezing more prosperity out of our local and regional economic development strategies.

Annual Tourism Employment Up for First Time since 2000

Here is a bit of encouraging news, which hopefully the bombing incidents in London do not squash. I am seeing growth in the tourism activity in many of the areas in which I am working. How is tourism doing in your area?

Total sales of US tourism-related goods and services grew 11 percent (seasonally adjusted at annual rates in current dollars) to $998.2 billion in the first quarter of 2005 according to preliminary data released by the U.S. Bureau of Economic Analysis. Following a large decline in 2001, tourism sales have steadily increased in each of the last three years, growing 6.8 percent in 2004.

Newly available data on tourism employment indicate that total tourism-related employment grew 0.3 percent in 2004, the first annual increase since 2000. Total tourism-related employment consisted of 5,424 thousand direct tourism-related jobs, and 2,505 thousand indirect tourism-related jobs.

In the first quarter of 2005, total tourism-related sales consisted of $571.3 billion of direct tourism sales – sales of goods and services sold directly to visitors, and $426.9 billion of indirect tourism sales – sales of goods and services used to produce what visitors buy. The highest sales growth was in ‘passenger air transportation’ at 20.4 percent. Sales of 'recreation and entertainment' grew 14.5 percent, and sales of 'traveler accommodations’ grew 14.1 percent.

More from the Bureau of Economic Analysis here.

South Carolina Universities Partner in Biotech

South Carolina State and Claflin have joined the state's "big three" research universities in a three-year, $13.5 million collaboration in biotechnology. The partnership hopes to build momentum for S.C. State's neuroscience program and further boost Claflin's ongoing research into ways to fight deadly illnesses. Read more here.

Korea to Expand Incentives to Attract Investors

Korea's top economic policymaker says the government plans to offer more incentives to foreign investors, noting that foreign capital has played a critical role in the nation's economic development.

In his keynote speech to a meeting organized by the European Union Chamber of Commerce in Korea, or EUCCK, Finance and Economy Minister Han Duck-soo said the Korean government continuously tries to improve business environment and expand investment opportunities for foreigners.

Minister Han added, following the EUCCK's suggestion, that the government has revised regulations on financial services for foreign investors by allowing multinational firms to flexibly transfer funds between their headquarters and branches in Korea without prior notification.

Read more here.

Oregon Seeks California Companies

Add Oregon to the growing list of states pitching California companies to relocate their way. My recent visit to Oregon indicates Oregon economic developers are getting more aggressive abour recruitment. A recent article in Site Selection Magazine reinforces what I saw during my visit. Read more in Site Selection here.

Offshoring's Impact on Call Center Supplier Real Estate

This is a reprint of part of an article from the Outsourcing Center Journal.

"The American press has dissected how the offshoring trend is affecting US employment. A new study by Jones Lang LaSalle (JLL) shines a spotlight on how the trend is affecting US real estate absorption.

Bruce Rutherford, Managing Director and leader of the global offshoring and outsourcing practice, says real estate devoted to outsourcing activities in the US is shrinking one percent a year. "That's no growth at all," he says.

Last year outsourcing companies generated $56 million in real estate commissions for leasing US call center space, according to the JLL study. The real estate firm arrived at this figure by counting the number of call center seats, multiplying that number by the space needed per seat, then calculating how much of that space has to be leased every five years.

The changing nature of call centers is a major contributor to this trend. Rutherford says in the past, call center operators purchased or rented old K Mart, Wal-Mart, and tire stores and converted them into call center space. But now call center work is either going offshore or being done by virtual workers, leaving these stores empty. "Now there's less and less use for that space," the JLL executive says.

However, this trend is not affecting big cities because they have already converted that space to other uses. "This trend is affecting second- and third-tier cities in the South and West," he points out.

Based on rented space, Rutherford says about 70 percent of offshoring work emanates from the US. Another 20 percent moves from companies in Asia-Pacific locations to other countries in the region (i.e. Japan to China or Korea.) Europe currently makes up the remaining 10 percent."

Leapfrog Strategies in Economic Development

I have been plagued by this question for some time: "Should we be using leapfrogging strategies in economic development?"

What is leapfrogging? Most of us think of "leapfrog" as a game that children play, where one child hops like a frog over another child. Businesses obviously took this little game quite seriously, or at least took the game as an instructive metaphor for competitive strategy. Businesses have used technological innovation, mergers and acquisitions, and many other "blockbuster" strategies to "leap over" their competitors for many years. For example, Bank of America has decided to leap over its competition by buying its way to the top.

Can communities, regions, and states, using the right strategies, leap over their economic development competition? I think it is an interesting question because it forces us out of the "classic incrementalism box" that most ED organizations have grown accustomed to.

Some observers would say that is exactly what has happened to many regional economies in India, China, and other rapidly developing nations. Some would say that is exactly what happened in fast growth economic regions in the U.S. South, Southwest, and West. Others would argue that these places have been on growth paths (or trajectories) for some time and the "leap" that we observe is simply the most visible step (that catches our attention) in a longer term process. Maybe we just were not paying attention to what was going on, or we were paying attention to the wrong things.

What does leapfrogging imply for economic development? Does it suggest that places can miss a step (or a series of steps) in growing their economies? I know more than one EDO CEO who would "jump" at the chance to leap over their competitors. Many of these ED leaders are looking for high-performance strategies that will allow them to get to the head of the line.

I think we need to remember that growth paths vary across communities, regions, and states. Cleveland and Phoenix, for example, followed very different growth paths. On the other hand, Cleveland and Pittsburgh followed somewhat similar growth paths. I think the larger regional context (multi-state regional context) helps to shape the growth environment for places and also the "strategy set" they choose to follow. This suggests that "leapfrogging" needs to be related to a place's market position, available opportunities, values, and also its asset base, including its strategic relationships and networks.

I put the idea out there for discussion. I, for one, think places can move ahead faster (maybe leapfrog other places) if they: 1) work together locally and globally; 2) innovate with powerful new ideas and strategies; 3) define emerging opportunities for which the place has a sustainable competitive advantage; and 4) are willing to be a "change-maker" in the global economic development marketplace.

What do you think?

Training Emerging Leaders

Let's say you wanted to help emerging leaders in your community enhance their leadership skills. How would you do that?

In Muncie, Indiana, Ball State University's Emerging Leaders Training Program provides an example you might follow.

Participants

The program is designed for those individuals who:

* are deemed high-potential employees who will be leading their organizations in three to five years;
* hold mid- to upper-level management or executive positions;
* earned a degree five or more years ago (or have the equivalent work experience) and wish to update their knowledge base; and/or
* have a liberal arts, engineering, and/or technical background and want to develop an integrated view of business operations.

Program Highlights

* To accommodate participants' work schedules, each of the six courses will be six hours in length and conveniently held every other Tuesday from 9 a.m. to 4 p.m. with one hour reserved for lunch.
* The program was designed through the input of CEOs and Training Directors from several diverse companies.
* Instructors will include faculty members from Ball State University and seasoned, professional trainers, all experts in their topic areas.

Program Agenda

* Leadership and Change Management
* Marketing and Building Client Relationships
* Strategic Thinking and Shared Vision
* Intrapreneurship: Applying Entrepreneurial
Skills within Organizations
* Mentoring, Coaching and Developing Employees
* Appreciative Inquiry

An Economic Portrait of Rural Alabama

The Economic Development Institute (EDI) at Auburn University issued an interesting report a while back about economic conditions in rural Alabama.

The report speaks to the plight of poor Black communities in particular, but its message goes beyond and speaks to the economic isolation and hardship encountered by many smaller rural communities across America.

It's a good read. Download it here.

Bio 2005

Some of you attended BIO 2005 in Philadelphia last month to position your area as a location for bio business development. It was a good show from the personal reports I've heard. My question is: "What does good mean?" How do you define the results or benefuts of trade and industry show participation?

If you plan to participate in industry and trade shows, you should:

1. Set clear objectives in what you want to accomplish.

2. Do your homework, who who will be there, and set appointments well in advance.

3. Build the right team to represent your area. Make certain that you have the knowledge and connections you need on your team.

4. Work on prompt and effective follow-up on all qualified leads. Be creative in how you handle your follow-up.

Note: I am not overly impressed with trade and industry shows as a source of business attraction leads, but I believe they can be useful in learning more about a target industry and particular companies. They can also help you make contacts in the industry, which will help with later marketing efforts.

Click here to read about the highlights of the show. Here are a few early highlights:

About BIO 2005

-BIO 2005 is the world's largest biotechnology gathering, taking place at the Pennsylvania Convention Center in Philadelphia, June 19-22.

-The last time BIO's annual convention was in Philadelphia in 1996, it attracted about 3,701 attendees.

-BIO 2005 has broken several BIO convention records:

With 1,525 exhibiting companies and organizations, this is the largest number of exhibitors ever.
With the Exhibit Hall sold out, this is the third largest exhibit space the convention has seen.

18,000 attendees are expected at BIO 2005 ? more than the 17,015 record attendees at BIO 2004 in San Francisco.

-For the first time, BIO 2005 hosted a Chief Scientific Officer Boot Camp.

-BIO 2005 and its attendees are expected to pump $38 million into the Philadelphia economy.

-Long-term, the convention is expected to generate more than $100 million of economic growth (licensing, research, collaboration, investments, etc.) for the region's economy.

-BIO 2005 is hosted by the Commonwealth of Pennsylvania, the State of Delaware, and the State of New Jersey.

Attendance Figures:

-18,679 attendees

-18,000 total attendees expected

-More than 6,000 attendees are expected to be international

-48 states are expected to be represented

-61 nations are expected to be represented

-24 patient and medical health advocacy groups will host displays at BIO 2005

London Gets 2012 Olympics

London was awarded the 2012 Olympics on Wednesday, narrowly defeating European rival Paris in the final round of voting to take the games back to the British capital for the first time since 1948.

After Moscow, New York and Madrid were eliminated in the first three rounds, London beat its cross-Channel opponent 54-50 on the fourth ballot of the International Olympic Committee vote -- capping the most glamorous and hotly contested bid race in Olympic history.

Read more here.

Siting Retail Operations

Many communities are giving attention to retail development. If you are, you might want to read about how retailers are using the latest demographic and GIS (geographic information system) technology to make their business location decisions.

A number of EDOs use GIS and various databases to support this process. This is a useful service to help retailer and consumer service companies in locationg future operations.

Economy: Corporate Profits, Jobs, and oil Prices

Many American companies are expected to miss their earning estimates; not because of an economic downturn, but because they are trying to manage stock prices. Employment is expected to show show growth. Yeah! Oil is expected to continue to be a concern.

Read more here.

Eastern Ohio Speaks on the Economy

Ohio, including the eatern part of the state, voted for President George Bush. A July 4th tour of Route 7 in Eastern Ohio by NPR reporters sheds insights into how folks from Youngstown, Wellsville, Steubenville, and other Eastern Ohio communities feel about the economy and their vote for President Bush.

In short, views about the economy are largely negative. Views about how well the President is doing are at best mixed.

Listen to the NPR audio report here.

Portland: A Picture Says It All

Courtesy: OregonScenics

Cleveland: More Than You Imagine

Courtsey: Art Queen Gallery

Aligning the Board and Staff on Strategy

"All too often boards and CEOs fail to connect in a way that brings the full expertise of the board to bear on shaping strategy and that creates alignment between the board and management." Source: Ram Charan, Author, Boards That Deliver: Advancing Corporate Governance from Compliance to Competitive Advantage.

I have been saying exactly the same thing about EDOs!

Does your organization need improvement in aligning its board and staff leaders? According to our ED leadership survey, many do.

In my strategy work, I find a conspicuous absence of defined roles of the board leadership in achieiving strategic plan objectives.

My advice: Use your leadership advantage to get strategic results!

ED Board Performance Assessment

ED boards, by and large, do not assess their own performance. That's what my survey of over 600 EDOs nationwide says.

Why? Three reasons have surfaced: 1) because they don't think they need to; 2) because they don't want to; and 3) because the idea never occurred to them.

If your ED board does not assess its own performance in achieving your EDO's goals, it needs to in the future. That's a recommendation. How else will it know whether it is effective in giving leadership to the organization?

The enlightened ED boards out there are moving in the direction of requirements of the Sarbane-Oxley Act, and they are having serious conversations about how well they are doing in leading the organization; that is they are evaluating their own performance.

Click here to download a very simple, but useful, survey that can help your board assess its performance. I have used similar tools in my work. You might also encourage your board to assess its contributions to your organization's top priorities (hopefully stated as quantifiable goals).

Economic Development Depends Upon Nonprofit and Government Collaboration

Look at the system of organizations serving the economic development needs of your area. What do you see? Chances are that most, if not all, of these organizations are either nonprofit or governmental in nature.

Many conflicts occur between the two types of ED organizations. Also, a great deal of cooperation and collaboration occur between the two. Each needs the other to succeed. For example, I see in many communities that chambers of commerce and other nonprofit development organizations can initiate and bring about local public policy changes that local government could never accomplish because it (government) is on the inside and the system cannot change itself.

We must find new and better ways to help nonprofit organizations and government work together in serving the ED needs of communities. This is an important issue for all of us, as long as the "market" does an insufficient job of economic development and "intervention" is needed by community institutions to bring about economic development.

You might find this article useful as you work to strengthen government and nonprofit collaboration in the ED arena.

San Diego's Sustainable Competitiveness Report

On Friday, I interviewed Julie Meier Wright, the President and CEO of the San Diego Regional Economic Development Corporation for my new book on economic development leadership. She informed me about her organization's new report on sustainable competitiveness. Here is a short summary.

The report analyzes three critical quality of life indicators – economy, environment and equity -- that affect the region’s long-term prosperity and competitiveness.

The 2005 Indicators of Sustainable Competitiveness Report reveals how well San Diego’s quality of life stacks up against 18 similar metro regions, revealing where it excels and where it falls short, as well as how it has done since a similar study in 2001.

According to the latest results, San Diego sustainable competitiveness ranks ninth overall, the same as it did in 2001. The Seattle area ranked first in the report (up from number five in 2001), followed by Denver, Portland, Raleigh, and Austin. At the bottom of the list were Phoenix, Sacramento, Tampa, Orange County, and Washington, D.C.

Minority Business Growth Trends and Outlook

Here is an issue demanding more attention: minority business growth and competitiveness. Also, we need a broaden definition of minority business that includes: Hispanics, Blacks, Asians, and American Indians/Native Americans.

Here are a few clips from a recent Boston Consulting Group assessment report:

"Impressive gains by minority-owned businesses stand to be squandered unless new growth strategies are adapted to compete in a rapidly changing business market, according to a new study by The Boston Consulting Group (BCG).

The report, The New Agenda for Minority Business Development, sponsored by the Ewing Marion Kauffman Foundation, Kansas City, Missouri, argues that minority businesses are not keeping pace with the larger U.S. business community, and that a change of mindset is required to ensure sustained growth. The study further states that it is necessary for minority businesses to work with corporations as well as government agencies to better adjust and take advantage of the changing global marketplace.

“Encouraging minorities to start new businesses will still be a priority. But a second and equally important objective is to ensure that existing minority businesses are taking the necessary steps to achieve substantive growth,” said Carl J. Schramm, president and CEO of the Kauffman Foundation. “This issue has never been more relevant or important than it is today.”

People Like Their Small Towns

"The bad news is that millions of Americans are fed up with big-city prices and congestion. The good news is that dozens of small and medium-sized havens offer a less expensive, more relaxed alternative, according to an American City Business Journals study of the quality of life in non-metropolitan counties.

Topping the list is Los Alamos County, N.M., located about half-an-hour northwest of Santa Fe. Its prosperity and stability would be the envy of most metro areas, yet Los Alamos had fewer than 20,000 residents when the last federal census was conducted in 2000.

Los Alamos also is No. 1 in separate quality-of-life rankings confined to the Interior West, a seven-state section that sprawls from Canada to Mexico.

ACBJ's study identifies the most desirable havens in 13 different sections of America -- from New England to the Far West. Among the chosen places are the islands of Martha's Vineyard and the Florida Keys, rapidly growing exurbs in Maryland and Virginia, and sparsely settled counties in California, South Dakota and Texas."

Source: American City Business Journals