EDPro Weblog: Economic Development for Today's Professionals

Economy Watch

Saturday, January 29, 2005

Here are the best economics articles I came across last week.

Growth in the U.S. cools off
Vital Signs for the Week of Jan. 31
Booms and Bubbles
The war on tort
Goldman Sachs: Social Security, Tax Reform Unlikely This Year
U.S. economy finishes 2004 with its best performance in five years
Older Workers: Untapped Assets for Creating Value

posted by Ed |

Custer County starts collaborating

With a population of 3,500, Custer County, Colorado (named after George Armstrong Custer) is one of the smallest of the 3,100 counties in the U.S. The county is moving ahead with a collaborative economic development effort. Learn more.

A couple of issues are noteworthy. First, the county's extension agent provided the facilitation. In other words, the county did not need to reach outside to start. Second, the new committee has started by setting some common sense rules. This step is important because economic development happens in the civic space outside the four walls of any one organization. There are no rules in the civic space unless we impose them on ourselves.

Finally, the group has some practical outcomes to drive its activities, including a commitment to meet monthly.

posted by Ed |

Michigan's tax subsidies for sprawl

A new report from the Michigan Land Use Institute details how state tax policy encourages sprawl. Sprawl represents a higher cost pattern of development. Read a detailed summary of the report and get a download from from this page.

posted by Ed |

Challenges of development in West Alabama

Here's a good article that explores the complexities of rural development in West Alabama. The Tennessee-Tombigbee Waterway was supposed to ignite development along its corridor of 54 counties in four states. But development has not reached in West Alabama counties along the waterway.

Development is more complex than that. There are no simple answers.

One conclusion does ring true. As one EDPro notes: "You have to come together and work as a region, because the reality is we don't have the resources to do things by ourselves." Read more.

posted by Ed |

Michigan's governor proposes major tax overhaul

Governor Granholm in Michigan has proposed a major overhaul of her state's tax system. Here proposal shifts the tax burden away from manufacturers and toward service companies. Read more here and here.

posted by Ed |

Are clusters over-rated?

My friend Jay Garner has completed an analysis of the economic development organization in Louisiana. He makes the point that "the cluster concept is overrated". Read more.

I have a different take. I think the concept of clusters has been not so much over-rated as misunderstood. Our business is no different than many others: fashions run through it. (The latest example: The Creative Class.) As the corporate community saw with "re-engineering", fads can generate good fees for consultants, but they can also leave clients perplexed and, at worse, frustrated.

The cluster concept -- popularized by Michael Porter -- has been misunderstood by some. The basic statistical technique for identifying clusters -- location quotients -- is no different that the approach that consultants have been using for decades in target marketing studies. In this sense, Jay is right.

But Porter's idea goes deeper than simply identifying clusters. The real challenge is seeing a cluster as a network for innovation, a productivity engine.

Here's where the approach gets a little sticky. Porter -- who comes out of a corporate strategy background -- uses his five forces model and his diamond model to explain clusters...and by implication what you can do to strengthen them. This is a concept of corporate strategy that does not translate well into the civic space of economic development.

In sum, Porter has delivered important insights, but we have a lot of work ahead to develop practical policy tools. EDPros need these tools to accelerate innovation and productivity improvement across communities and regions.

Macro economic policy focuses on the level of investment within an economy. Economic development focuses on the pattern of investment within an economy. With simpler, more intuitive tools, EDPros can measure the pattern of their investment and make steps to gain more productivity and leverage.

Even the most advanced consulting firms using this approach struggle with the translation of ideas into action.

It's no surprise. We're in the midst of a paradigm shift.

posted by Ed |

Arizona governor: Invest early in children

The governor of Arizona has figured it out. Workforce issues will dominate economic development for the rest of our lifetimes. If you want to invest in workforce skills, start early. According to the governor: "We know that waiting until first grade is too late. Where we really need to invest is from birth up to 5 years." Read more.

For hard-boiled EDPros who still do not see the connection between early childhood investments and economic development, think of it this way. Generations ago, we had to build an economic infrastructure of roads, bridges, utility systems. These physical investments are still important.

But now our global economy runs on brainpower. Early childhood programs are the infrastructure of the brainpower economy. Investments in early childhood education make sense, because they pay returns in higher incomes.

Next week, in Cleveland, we will start to strengthen the connection between early childhood and economic development. You can read about our forum from this page.

posted by Ed |

Working to save an auto assembly plant

The University of Michigan's Center for Automotive Research runs an interesting initiative: the Automotive Communities Program. The project helps nearly 40 communities across the upper Midwest that host automotive manufacturing facilities. (The program includes two publications on recent trends in the auto industry. You can download them from this page.)

Officials from the program were in Normal, Illinois. Leaders in that community are trying to restore the Mitsubishi plant to full production. Read more.

posted by Ed |

Louisiana assesses the business climate and attraction factors

Louisiana has completed a candid assessment of its business image. One not so surprising finding: Workforce issues are at the top of most employers' minds. Read more. Download the report from this page.

The survey is based on the response of 945 executives from across the country. According to the report: "The overwhelming finding that emerges is the importance of workforce issues in location decisions. The availability of skilled labor, labor productivity, and labor costs all rate as the most important considerations in business location decisions."

posted by Ed |

Incentive news of the week

Some interesting incentive news this week.

The Dell deal is still not done. The lawyers are working on the details. Read more. (That was $267 million in state incentives and $37.2 million in local incentives for 1,500 jobs: $203,000 per job)

The fall-out from Dell is hitting other communities in North Carolina. A $5 million deal to attract a Sysco warehouse and distribution center has come under attack. Read more. ($5.2 million for 600 jobs: $8,700 per job)

Meanwhile, in New Mexico, Bombardier officials have told the State that it will have to come up with $700 million in incentives if it wants the 5,000 jobs for a new aircraft assembly plant. Read more. ($140,000 per job)

In Iowa, an Associated Press article criticizes the money invested in two firms through the Iowa Values Fund. Read more. The report concludes that investments in two companies -- Wells Fargo and Trans Ova Genetics -- will end up costing the state $21 million, even after including increased economic activity from the investments.

The head of Iowa's Department of Economic Development has responded to the report on public radio.

posted by Ed |

Louisiana's adult education report

Thursday, January 27, 2005

Globalization is focusing a new light on our adult education system. Here's why: As workers are displaced from previously stable companies, they may not have the new basic skills needed for today's employers. A remarkably high proportion of our existing workforce operates at relatively low levels of literacy.

Here's a report to get you up to speed on the issue. Go. You can get estimates on the level of adult literacy in your community from this site.

(Note: Level 1 and Level 2 represent the lowest levels of literacy. Almost all adults in Level 1 can read a little but not well enough to fill out a job application. Adults in Level 2 usually can perform more complex tasks, but they generally do not have adequate reading and problem-solving skills. About 50% of the adult U.S. population fits into Level 1 or 2. Learn more.)

In Louisiana, the governor received a report from her adult education task force. Not surprisingly, the task force found the adult education system to be fragmented and disconnected from employers. Read more. You can download the report here.

posted by Ed |

City planning with advanced visualization

My brother, Hunter, was the city planner for Cleveland. He's largely responsible for planning the transformation in Cleveland over the past twenty years. He has told me a number of times that the future of city planning will happen at the intersection of business schools and art schools.

By that he means that advanced visualization technology will allow us to design our cities like we now design our toothbrushes.

Here's an example: In Iowa the Community Viz project enables people to visualize different development scenarios. "What happens if we tear down this building? Or, put a parking garage over there?"

Here's what's noteworthy: This powerful tool is available to smaller communities. Visualization technology has been around for a while. But now it's within the reach of most EDPros. Learn more.

posted by Ed |

Recrafting incentives in Missouri

Tuesday, January 25, 2005

Ed Bee from Taimerica Management is an authority on state incentives, and he has recently completed a project in Missouri. It appears that his work is generating some change.

The governor has indicated a willingness to move away from a patchwork of tax expenditures (which are difficult to measure and monitor). He appears to be moving toward a more transparent system based on the Oklahoma Quality Jobs program that Bee developed. Read more.

The Oklahoma Quality Jobs Program provides quarterly cash payments of up to 5% of newly created payroll to qualifying companies.�The program applies to manufacturing, research & development, central administrative offices, and selected service companies. Learn more.

In my own view, incentives directed at companies have very unclear impacts. But at least the Quality Jobs approach makes incentives transparent and accountable. Most states have no clue on the cost or impacts of their incentive programs, and monitoring is virtually impossible. A good case in point is the New York Empire Zone program. An audit last year showed that costs and benefits are unknown. Read more.

posted by Ed |

Eliminating income taxes for young workers

Here's another example of the shift of economic incentives from companies to people. In Iowa the state's GOP legislators have proposed a plan to eliminate income taxes for workers under thirty.

The plan is not entirely slanted this way, though. It also proposes to give businesses a tax credit for newly created jobs paying at least $10 an hour. Read more.

posted by Ed |

Trying to keep appliance jobs in the U.S.

Maytag's Amana division is expanding its refrigerator production facility in Iowa. The news is significant, because it runs counter to the trend of appliance manufacturers moving production to lower cost locations, like Mexico.

(Maytag closed its Galesburg, IL facility recently and moved the production to Mexico. This move has given rise to a controversy over whether Galesburg should sue Maytag to recapture incentives. Learn more.)

In Iowa, Maytag is trying to expand with the introduction of a two tiered wage: entry level workers will start at $3 less than current workers. Read more. The lower entry level wage has led the state to cap the tax incentives available to the company. The International Association of Machinists and Aerospace Workers represents the Amana workers.

Earlier this month, the United Auto Workers agreed to a six year contract with Caterpillar that also included a two tier wage. Read more.

posted by Ed |

Building collaboration in Shawnee, OK

It's too early to pull out the cake and candles, but Shawnee, Oklahoma and the surrounding county, Pottawatomie, are beginning to work together. This is a good article that explains how the city and county are inching toward deeper collaboration. Read more.

When it comes to building trust, it's really not so important what you do together, but it is very important that you do something together. We build trust through actions, not words.

posted by Ed |

Virginia's biotechnology plans

The Virginia Economic Development Review reports that the Virginia Biotechnology Association has released �Virginia Biotech: Vision 2010 � Action Items to Achieve Leadership in the Life Sciences.� The Review is a subscription publication, so you'll have to pay to read the full article.

You can learn more from the Virginia Biotechnology Association web site.

posted by Ed |

Entrepreneurship trends

Jim Roberts from Western North Carolina sends along this article on national entrepreneurship trends. The article refers to the Global Entrepreneurship Monitor's latest report. You download the report from this page.

posted by Ed |

Pennsylvania releases innovation indicator report

Pennsylvania has released its first statewide evaluation of its efforts to build a technology-based economy. The report represents a collaboration of 35 technology-based economic development organizations.

This report represents an important innovation. It departs from the traditional approach to innovation reports represented, for example, by the Massachusetts Innovation Index. Traditional innovation indicator reports divide indicators generally into "inputs" and "outputs".

The Pennsylvania report takes a different view. It is organized around the life cycle of business development. This cycle ranges from developing business concepts to assisting mature firms with reinvention of their businesses. Learn more. You can download the report here.

posted by Ed |

Rural broadband in northern New England

Monday, January 24, 2005

Rural broadband is a hot topic during a cold New England winter.

Next month, a committee of the Rural Development Council in New Hampshire will unveil a plan to reach the northern counties. In Vermont, they are already moving in this direction. And Maine has a fiber optic network in place.

Learn more about what is going on. Go.

posted by Ed |

Chicago home to grid computing initiative

Chicago has become a major base for grid computing, an important new infrastructure that allows users to share processing power, software and storage across networks. A new trade association based in Chicago will promote open standards for grid computing. Learn more.

North Carolina and West Virginia have launched their own statewide grid computing initiatives to promote economic development.

posted by Ed |

Resource: Industry Outlook 2005

Business Week has published it Industry Outlook 2005, and it provides you a good overview of economic trends in different sectors. Go.

posted by Ed |

Economy Watch

Saturday, January 22, 2005

Here are the best articles on the economy from last week.

Fed's Bies says still slack in U.S. economy
Can Bush plug the economic gaps?
Surveys Hint at Economic Sluggishness
Vital Signs for the Week of Jan. 24
U.S. consumer confidence drops to 3-month low
Why Greenspan Isn't That Worried

posted by Ed |

Florida pushes new strategies in growth management

Conflicts over growth management often present "Pay me now, or pay me later" problems. If conflicts cannot be addressed early, they will ripen into full fledged (an expensive) litigation. Conflicts cannot be avoided. Unlike other areas of economic development, land use can quickly become a zero sum game. A piece of land cannot end up as both open space and a parking lot. (Unless you like your open space with asphalt and painted lines.)

In Florida, state officals are eager to try new approaches to encouraging public dialogue. By encouraging more open, deliberative and sustained public processes, state officials believe that they can head off costly disputes. Read more.

posted by Ed |

Starting to think like a region

Here's an interesting commentary on regional approaches to economic development. The author makes an important point: regional strategies involve more than cooperation. Read more. They truly mean starting to think like a region.

When that starts to happen, civic leaders will move beyond cost reductions to value creation. In other words, civic leaders start to move their thinking from "How can we work together to save money?" to "How can we collaborate to create wealth?"

Here's a good example of a group of counties in Indiana that are moving in this direction. Read more.

posted by Ed |

Shifting incentives from companies to people

In the years ahead, economic development incentives will be shifting from companies to people. Investments in companies are marginally valuable, speculative and risky. Investments in people are not.

Here's an example of the new trend: a legislator in Maine is promoting a plan to keep college graduates in the state. He wants the state to help them pay off their college loans. Read more

posted by Ed |

Major cuts in CDBG's?

Urban EDPros often use community development block grants (CDBG's) to finance development initiatives. Under the new Bush budget, funding for CDBG's could be cut in half. Read more.

Mayors and their staffs are just starting to contemplate the changes ahead, if CDBG's are cut dramatically. Read more.

posted by Ed |

Maryland legislature misses opportunity to fund research

Maryland's bid to enter the nanotechnology development race suffered a setback last week. The state legislature turned down a $24 million proposal to fund nanotechnology research at the University of Maryland. Read more.

posted by Ed |

Attracting private investment to innovation initiatives

The public sector can "seed" innovation initiatives, but these initiatives die if they do not attract private sector investment quickly.

So, it's a sign of success for Georgia's Maritime Logistics Innovation Center in Savannah that three new member companies have joined. Georgia Department of Economic Development's Office of Science and Technology manages the program, a unique partnership between the Georgia Ports Authority and the University System of Georgia. Learn more.

You can learn more about Georgia's Centers of Innovation from this web site.

posted by Ed |

Kansas charts a bioscience roadmap

Kansas Technology Enterprise Corporation has chosen to work with new Economy Strategies, a consulting firm based in Washington, D.C. The purpose of the collaboration is to define specific business plans for development in six areas of the state's bioscience cluster. Learn more.

You can also visit the project web site, where you can download background presentations. Go. New Economy Strategies uses the approach of "hot teams" to develop specific initiatives for implementation. They recently deployed a similar approach in Philadelphia.

posted by Ed |

New vision for Indiana agribusiness

The nonprofit group, BioCrossroads, has released a report that creates a new vision for Indiana agribusiness. After completing an industry targeting process in 2002, BioCrossroads identified agricultural biotechnology as key economic opportunity for Indiana. This report articulates the road ahead in clearer terms.

Read more. Downaload the report. Learn more about BioCrossroads from their web site.

posted by Ed |

Innovation Philadelphia closes first angel fund

Thursday, January 20, 2005

Innovation Philadelphia has announced the closing of the first formally organized angel fund in the region. The fund represents a commitment of $3.3 million by 68 accredited investors. Read more.

posted by Ed |

Ohio loses appeal on tax incentive

The State of Ohio has lost its bid to reverse a federal appellate court ruling that held the state's investment tax credit violates the Constitution.

A three judge panel for the Sixth Circuit had ruled that the investment tax credit interferes with interstate commerce and is, therefore, unconstitutional. The State had tried to get the full 12 member court to reverse the ruling, but the full court decided not to intervene.

The State will now make an appeal to the U.S. Supreme Court. Read more here, here and here.

posted by Ed |

Toyota Watch

In the coming months, I'll keep track of the competition for the new Toyota plant. It will be interesting to see how extensive the subsidy package will end up. Here's an article from Illinois.

posted by Ed |

Resource: Global Entrepreneurship Monitor

Babson College and the London Business School released the latest Global Entrepreneurship Monitor report. This is the sixth annual GEM report. Started in 1999, the GEM provides an analysis across countries of the factors that stimulate entrepreneurship. The project started in 1999 with 10 participating countries; it has expanded to include 34 countries in 2004,

This year's release includes an analysis of entrepreneurial financing. This portion of the report outlines the fact that formal venture capital provides a very small portion of the financing needed for most companies.

According to William Bygrave of Babson College, "Entrepreneurs seeking capital to start a business must first use their own savings, then turn to family members, next friends, work colleagues, and neighbors and finally strangers for informal investment. They should forget about formal venture capital." Read a summary of the report.

You can download the reports from this page.

posted by Ed |

Focusing Los Angeles on business development

A harsh report tries to focus political attention on business development in the Los Angeles region.

The report argues that political leaders have been spending too much time on environment and social justice issues, not enough on wealth creation. Read more. You can download a copy of the report here.

posted by Ed |

Are jobs the right measure of success?

Measuring success in economic development is tricky. If you measure your success broadly in temrs of jobs, you can run into trouble. Here's a good example from the Greater Houston Partnership. Read more.

In the years ahead, leading edge economic deevelopment organizations will develop custom scorecards to measure their success. These scorecards measure progress along different dimensions, all tied to the organization's strategy.

posted by Ed |

Indiana launches new planning framework

Wednesday, January 19, 2005

The Indiana Economic Development Council has released its blueprint for the state. The complete strategic plan for economic development is available on this page. Read more about the report.

posted by Ed |

So this is corporate responsibility?

You have to wonder whether this is at all worth it. Dell came into the negotiations with North Carolina with a simple set of demands: "Free land, free building, no taxes". Read more.

If true, Dell's management has an odd definition of corporate responsibility. Dell is effectively telling North Carolina: "We'll come here and build a plant (that you pay for). We'll put stress on your roads, schools and public services. And we expect other taxpayers to pick up the tab."

Dell's behavior reminds me of a friend from law school. When she announced that she was getting married, I asked her how she and her fiancee were going to handle their finances. (I knew Mary to be a very head-strong person when it came to her future.) "Well," she replied, "What's my money is my money, and what's John's money is my money."

posted by Ed |

Revamping Connecticut's approach to economic development

Monday, January 17, 2005

Connecticut legislators are set to revamp the state's economic development apparatus. Not enough is being done to "create jobs". One proposal is moving the state to think more regionally. Read more.

posted by Ed |

Report: Convention market is shrinking

In a new report by the Brooking Institution, convention expert Heywood Sanders throws up a caution sign to convention center proponents. Read more.

Sanders' report deflates the argument that convention center investments make a lot of sense. The reason: a soft national market and an over-supply of space. The market is not down just a little. It has fallen 30% to 50%, according to the report. At the same time 53 cities have either built or expanded their convention centers. Another 44 coties have work planned or underway.

Here is another article from USA Today. Here is a summary of the Brookings report.

You can download the Brookings report here.

posted by Ed |

Resource: National Dialogue on Entrepreneurship

This morning's e-mail brought the latest copy of the newsletter for the National Dialogue on Entrepreneurship. You can learn more from their web site. You can sign up for the newsletter from this page.

Entrepreneurship is the process by which we translate brainpower into wealth. Twenty years ago, when I first entered the economic development field, entrepreneurship was a bit of a sideshow. Recruitment was the name of the game. Now, thanks to the steady work of the Kauffman Foundation and others, entrepreneurship is moving to center stage. We are learning that dynamic regional economies thrive on innovation and entrepreneurship networks.

If you are a rural EDPro, you can look to the Center for Rural Entrepreneurship. You can sign up for their newsletter from this page.

posted by Ed |

Economy Watch

Sunday, January 16, 2005

Here are th best articles I came across last week.

U.S. economy growing fine but deficit, trade imbalances may hurt expansion
PPI Falls, Industrial Output Gains
US retail sales up, jobless insurance claims rise
Vital Signs for the Week of Jan. 18
US trade gap swells to record as exports drop
What Do The Numbers Really Mean? Uncovering the Secrets of Economic Indicators
Study Documents Negative Impact of U.S. Trade Deficit with China
Not So Super Anymore

posted by Ed |

TVA certifies another megasite

Saturday, January 15, 2005

TVA has certified another "mega site" for automakers. Read more.

TVA launched the megasites certification program in March 2004. The approach assumes a growing need for large industrial properties appropriate for automotive manufacturing facilities. TVA believes that several major manufacturers may locate additional automotive plants in the U.S. during the next decade. This strategy plays on the market pressure that companies are under to to make siting decisions and start up new facilities quickly.

posted by Ed |

Resource: State of the state addresses

It's always a good idea to know what your governor is saying about economic development. It's even better to know what other governors are saying.

You can keep up with the state of the state addresses from this page.

posted by Ed |

Rural broadband deployment in Iowa

Community leaders in rural Iowa are not happy about the relatively slow deployment of broadband in their state.

Even though 73% of the state is covered, over 300 towns still lack broadband acccess. As this article points out, the consequences of slow deployment on business development are real. Read more.

posted by Ed |

Early childhood proposal in New Mexico

New Mexico is moving ahead with a proposal for pre-K as part of a longer term economic developmment strategy. According to the Lt. Governor Diane Denish: "Pre-K is long-term economic development for New Mexico".

Governor Richardson outlines his vision: "What we�re creating is a seamless education, from pre-K, to all-day kindergarten, to K through 12 to the universities. That�s our objective. A coordinated, seamless system.� Read more.

posted by Ed |

Why diversity matters

EDPro Dean Whittaker recently gave a talk to regional leaders in the Lehigh Valley of Pennsylvania. He echoed a theme they already know: When you are competing as a region in a global economy, not enough diversity hurts you. Read more.

Here's why: We live in a world in which the future is unknowable. In this environment, diversity adds different perspectives and accelerates complex learning. As James Surowiecki has pointed out in his book, "The Wisdom of Crowds", a diverse group of people knows more.

Diversity matters in another way. In diverse groups, individuals are more likely to share what they really think. So candor and trust can build more quickly, if there is sufficient leadership to guide the group.

Diversity is critically important to large group intervention techniques like Appreciative Inquiry, developed at Case. Appreciative Inquiry is an effective framework for strategic learning that can engage thousands of people. With our colleagues at Cleveland State, we are busy adapting this framework to the needs of economic development professionals.

Regions that will be competitive in the future will have thick networks of collaborations and civic habits of leadership that encourage diverse voices. Regional leaders will work hard to make their tables bigger and rounder. The reason: They will learn faster, spot opportunities faster, and -- utlimately -- act faster.

posted by Ed |

Northern KY takes a regional look

Northern Kentucky is another region to watch. In the coming year, they will be launching an efffort to define more precisely their regional strategy. Read more.

They will be working with the Alliance for Regional Stewardship, a national network of regional leaders. Based in Denver, the group focuses on building a stronger regional awareness and strategies. They have a good set of publications that you can download from this page.

posted by Ed |

A milestone in wind energy development

Wind power is another energy source that is gaining a market position in the U.S.

While our development is far behind the Europeans, high oil prices will spur development. The latest evidence: Gamesa, the large Spanish leader in wind power, has announced that it will be establishing a manufacturing facility in Pennsylvania. Read more.

posted by Ed |

The view from Fort Smith

Jeff Collins, director of the Center for Business and Economic Research at the University of Arkansas at Fayetteville spoke recently in Fort Smith. He made several important points about the future direction of economic development. In particular, he tightly tied the future of education reform to economic development.

A banker in the audience later commented: "(Collins) is trying to open everybody�s eyes. If you look at what�s going on around us, if we continue to sit on ... the things we�ve always relied on, we�re going to get left behind. We�re going to have to do something to keep up with what everybody else is doing and at some point get progressive, do some things that nobody else is doing.� Read more. Translation: old economic development formulas won't work in the new global economy.

posted by Ed |

The politics of aerospace

The politics of aerospace are subtle and complex. Airbus, the European competitor to Boeing, is considering a U.S. plant as a way to expand U.S. market share. You can read more here and here.

posted by Ed |

Oklahoma's higher education agenda

Oklahoma's Board of Regents has outlined a clear agenda that reinforces the state's economic development strategy. Read more.

In the years ahead, we will see EDPros focusing more and more on investments in education and less on incentives for companies. Why? The returns from education investments are real, measurable, and diversified. On the other hand, investments in companies are speculative and far more risky. It will take time, though, for state legislators to make the connections.

Take the case of Texas. the governor and the legislature will be considering more money for the Texas Enterprise Fund, a superfund designed to be a "deal closer" in large projects. At the same time, the Texas education system needs far more investment. Read more. (Free registration required.)

It will be interesting to see if any Texas legislators start making the trade-off.

posted by Ed |

The future of autos

Friday, January 14, 2005

Michigan EDPros asked auto industry experts to peer into the future of making automobiles. They talked about the coming transition to a hydrogen fuel economy. Despite uncertainty about when the transition will take place, the move is widely viewed by industry experts as inevitable. Read more

posted by Ed |

Iowa's new branding campaign

Iowa has launched a new branding campaign with a two year, $6 million budget. Read more

posted by Ed |

Salt Lake chamber pushes research agenda

The Salt Lake City Chamber of Commerce has issued a white paper that advoctes higher levels of research funding at the state's research universities. Read more. Download the white paper.

posted by Ed |

Pushing biosciences in Iowa

Thursday, January 13, 2005

A new group has formed to push bioscience development in Iowa. Their goal is to encourage the state government to make major new investments in the biosciences. The group plans to follow a blueprint laid out by Battelle. Read more.

You can download a copy of the Battelle report here.

posted by Ed |

Markets in the inner city

For a number of years, Michael Porter has been promoting another key concept in economic development: the notion that the inner city can be a competitive location for a business. He founded the Initiative for a Competitive Inner City to develop this strategy.

Here's an article from Baltimore on the market potential of the inner city. Relative incomes are lower, but population densities are relatively higher. That translates into underserved market opportunities. Read more.

posted by Ed |

South Carolina's Swamp Fox

Wednesday, January 12, 2005

More states should be following this lead.

For a number of years, John Warner has been reporting on the development of the innovation economy in South Carolina. With an e-newsletter, Swamp Fox, Warner keeps people informed of new developments. I found it to be an excellent way to keep up with what's going on in the state.

Now that South Carolina is producing results with this strategy, Warner's efforts are gaining more recognition. Read more.

posted by Ed |

Evaluating the Maine Technology Institute

The Maine Technology Institute invests in seven sectors: biotechnology, composites, environmental, forestry and agriculture, information technology, marine and precision manufacturing. Based on a current evaluation by the University of Southern Maine, it's doing a pretty good job. Read more.

posted by Ed |

Economy Watch

Sunday, January 09, 2005

Here are the best articles from last week.

Vital Signs for the Week of Jan. 10
Economy begins to fuel job creation
Hiring for 2004 hits high over five years
Rise in Jobless Claims Shows Uneven Recovery
US consumer confidence fell in Jan 2 week-report
U.S. November factory orders up more than expected
Economy expands in Missouri, shrinks in Kansas

posted by Ed |

York City Business Academy

Here's a good idea out of York, PA: a business academy. In the inaugural class, fifteen residents took evening classes on how to own and operate a business. No tuition is charged for the class, which lasts two months and covers 15 hours.

The City of York dellivers the class through a partnership with a private contractor and SBA's SCORE program. Learn more. Here's the web site of the Office of Economic Development. Go.

posted by Ed |

Technology based economic development

In a recent presentation in South Dakota, a representative from Battelle Memorial Institute outlined some of the critical components of technology-based development. Battelle has a strong position in advising state governments on technology-based development strategies.

The two factors at the top of her list: strong research universities and open networks of collaboration. Read more.

posted by Ed |

Evaluating the Texas technology fund proposal

Here is an interesting commentary on the proposed Emerging Technology Fund in Texas. The writer, a business columnist for the Houston Chronicle, points to a good distinction between the technology fund proposal and the Texas Enterprise Fund, which is used as a superfund to attract companies to the state. Read more.

Investments in technology development, when properly structured, have a nigh potential payoff. The tricky part of technology investing comes in structuring investments to manage risk appropriately. The design of the Small Business Innovation Research grant program, first developed by the National Science Foundaiton in the late 1970's, provides a good model of risk management between public and private sectors.

Incentives for recruitment are a different story. These investments -- like the money North Carolina put in the Dell deal -- tend to leverage far less investment. The chances of finding high leverage pay-offs is very low.

posted by Ed |

The Richard Florida debate continues

Meanwhile the great Richard Florida debate continues. Our colleague, Valdis Krebs, pointed a group of us in Cleveland to this one.

In a recent article, Florida defends himself against "The Squelchers". It appears, not everyone is convinced that he has answered his critics. Read more.

Florida is right in pointing to creativity as a key driver of advanced industrial economies.

To my mind, though, he has made himself the issue. Here some ways for Florida to to get out of the box where his critics have put him.

Don't present your theory as "your theory"

Florida published his book in 2002. Four years before, the Blair government in the U.K. took the first step toward redefining the role of arts and culture in economic development. They applied Michael Porter's concept of clusters to "the creative industries". Learn more from this web site.

In 2000, the New England Council issued a report that followed this approach. Learn more Also in 2000, Charles Landry published an important book called The Creative City (now in its fourth printing).

All of these efforts owe a deep debt to Jane Jacobs. Florida acknowledges Jacobs (pp. 41-43), but one reason he has provoked criticism, I suspect, is that he has claimed too much with too little. A little humility will be helpful.

Don't read too much into the data

Academics hate to play fast and loose with the facts. They are very conservative in this regard. Florida, has offended some of his academic colleauges by building his arguments on a relatively thin layer of data analysis. Some of my economist colleagues simply shake their head at how Florida confuses correlation (A and B appear together) with causation (A causes B). It's not surprising, then, that some critics go after his facts.

That's too bad, because Florida's arguments do not have to be statistical. He could have structured his arguments differently, much like Jane Jacobs or Charles Landry have done. Here is the important thing to remember about economic development statistics: they do a pretty good job of telling us where we've been, but they're not very good at telling us where we are going.

Don't promote simplistic formulas for complex issues

Policy wonks (I put myself in this category) shake their heads for another reason. Florida has taken a vitally important concept and drawn some simplistic and impractical policy prescriptions. His 3T policy formula -- technology, talent, and tolerance -- is too broad to be very useful beyond a lunch speech. It's very good to be more tolerant...but how exactly do you do that? (Civil rights leaders have been trying to figure that one out for decades.)

Find better words

When you are promoting ideas, words matter. Florida has unfortunately shot himself in the foot with some goofy word choices. The "Bohemian Index" may sound clever, but it doesn't sell in a lot of places.

Here's another: Florida's notion of a "creative class" represents a throwback to 19th century social theory. Again, it's an awkward word choice. To posit that there is a "creative class" implies that there is an "uncreative class" (although he takes pains to say that he believes everone can be creative). The truth is that every brain has enormous creative potential and that we do not have a brain to waste. To my mind, he would have been far better off using the existing concepts of "creative industries" or "creative cities".

Move on. Don't take it personally

The real tragedy of Richard Florida's work is that by his language, he has succeeded in making himself the issue. And the controversy is diverting us from what really matters: Figuring out how to connect creativity and innovation with economic development in deep and profound ways. Others are not waiting for us to figure this out, as you can see here, here and here.

posted by Ed |

Arts, creativity and economic development

Here's more on how arts and culture are assuming a new role in econmic development.

The impacts move along different dimensions. In physical development, artists can provide the vanguard to redevelop old neighborhoods. In business development, creative arts play an increasingly important role in the growing markets of digital entertainment. In education, arts education assumes an important role in brain development. And businesses are waking up to the role that creativity and design play in innovation.

Read more with these stories:

Arts about more than economy
Getting Schooled in Innovation
Artists good for business
The 6 Myths Of Creativity

posted by Ed |

The consequences of gaming in New Mexico

Indian casinos in New Mexico have been no clear advantage to the state's economic development. While they have produced jobs and income to some, they have taken jobs and incomes from others.

And that's the point: Casinos mostly redistribute wealth, they don't tend to create it. As a regional economic development strategy, casinos may make sense in poor rural counties, but that's about it.

(In my analysis of casinos, you have to have at least 60% of the patrons coming from outside a region or state for there to be a clear economic win. That happens most easily in rural areas -- like Tunica, MS -- or in areas sitting next to big markets where casinos are prohibited -- like Shreveport, LA next to Dallas/Houston.)

Here's a good article that surveys the evidence in New Mexico. Read more

posted by Ed |

Wal-Mart: Moving from the countryside

Having conquered the countryside, Wal-Mart is moving into the big cities. (By coincidence, this is the same strategy Mao used to take over China.)

The going is tougher here, with opponents more organized and energized. Here's a story from New York.

posted by Ed |

Reforming incentives in Mississippi

In Mississippi, an new report is building steam under reform of state incentives for economic development. The changes will provide some breaks existing companies, as well as prospects. You can learn more here. Or, download a copy of the report.

posted by Ed |

Clean room, cable-ready, no pets

Saturday, January 08, 2005

This is the week of that some dumb deals have come to light.

First, there was news of the golf course in Maryland (see below).

Now, its a clean room in Toledo. It turns out that the City invested in this specialized facility to no collateral. When the company tanked, the City was on the hook for the debt: a $1.2 million loan from the federal government.

Now the city wants to sell the facility for $1. Read more.

posted by Ed |

Tuition levels and economic development

More and more people are starting to figure this out.

If you increase tuition levels, fewer kids will go to college.

If fewer kids go to college, income levels will be relatively lower.

So, if you want to increase your income levels, make it easier (not harder) to go to college.

That's a simple "systems view" of the policy choice to increase tuition levels. The interdependencies are actually a bit more complex. But the results are the same.

Here's a good article from Iowa that traces the logical loops. Go.

posted by Ed |

Resource: The hydrogen economy

Higher oil procies show no signs of abating. In the years ahead, we will hear more about the hydrogen economy.

The major auto companies have fuel cell cars under development, and you can expect to see the emergence of a hydrogen ecoomy in about ten years. Read more

Here's the fuel cell program at General Motors.

To learn more, you can read this article that gives you an overview of the hydrogen economy.

posted by Ed |

Louisiana and video games

Louisiana is going after video game businesses. The market for video games is bigger than the market for films. Read more.

A group of us anticipated this trend when we developed the master plan for Shreveport's historic music district. Learn more.

posted by Ed |

Indiana moves to reorganize

Thursday, January 06, 2005

Indiana, under its new governor Mitch Daniels, is moving quicky to reorganize its economic development efforts.

The Indiana Economic Development Corporation is a public-private entity that is scheduled to take over the economic development functions of the Indiana Department of Commerce starting July 1. The development corporation was first created at the end of the 2003 session of the General Assembly, with a provision to work out its details by July 2005. Governor Daniels wants to move up the efffective date. Opponents are gagging on the idea that the new corporation will not be subject to public disclosure laws.

The corporation will run all the state�s economic development and business programs. In addition, it will be allowed to raise private funds. One of its chief responsibilities would be negotiating incentive packages. Read more.

posted by Ed |

IBM leads a group to invest $2.7 billion in upstate NY

The economic transformation of the Capital region around Albany has accelerated.

Governor Pataki used his State of the State address to announce three related projects.

IBM -- along with six global partners that include Sony, Toshiba, Samsung, and AMD -- will invest $1.9 billion on nanoelectronics manufacturing and development at IBM�s existing 300-mm wafer chip manufacturing facility. IBM developed and completed its initial wafer chip plant in 2002 at a cost of $2.5 billion.

The governor also indicated that IBM and a group of nanoelectronics equipment companies were close to commitments on another project: $450 million to expand the research and development capabilities of the Albany Center of Excellence in Nanoelectronics, located at the State University at Albany.

The third project involves a $350 million commitment by chip equipment manufacturer ASML to invest more than $325 million to create its first-ever R&D center outside Europe at the Center of Excellence in Nanoelectronics.

Read more here and here. You can download the governor's 2005 addres from this page.

Here's another review.

posted by Ed |

Louisiana is gaining some traction

The real tragedy of Louisiana comes in a history of failed public and civic leadership. Few states have had the level of resource wealth Louisiana has enjoyed. Yet, most of this wealth has been squandered. Economic development in the state has been dominated by an ethic of "If it ain't mine, kill it".

Inside deals and political corruption have scared scared away smart money for decades. While a handful of political insiders and connected business people have gotten wealthy, most of the state has suffered. Many smart young people left to Dallas, Atlanta, Nshville.

Now that's changing. The new governor Kathleen Blanco has made some real headway in her first year. Here are a couple of articles that review her progress. Article 1 and Article 2.

posted by Ed |

Connecticut considers incentives for stem cell research

Connecticut may join California, New Jersey, Wisconsin and Illinois as states that are moving to promote both adult and embryonic stem cell research. Read more.

For those of you who would like a simple explanation of stem cells and why they matter, go here.

posted by Ed |

Emerging venture financing networks in Pittsburgh

Wednesday, January 05, 2005

Here's a short, interesting article about how start-ups in life sciences can take advantage of an emerging network of early stage financing vehicles: the Pittsburgh Life Sciences Greenhouse, Innovation Works and Idea Foundry. Read more.

posted by Ed |

Maine's VC funding

Tuesday, January 04, 2005

Maine is seeing a revival of its venture capital investments. The total remains small, but trends tell the story. Read more.

posted by Ed |

Stuck on a golf course

Public officials in Anne Arundel County, Maryland are about to get a haircut: about $26 million to bail out a golf course.

It's a story of twisted public policy, a misguided state agency, and some slick lawyers. According to one public official, the county had been "duped by some city slicker lawyers...What they couldn't do by the front door, they did by the back door."

Read the sad tale of a county that got suckered. It's a cautionary tale of how you can risk your bond rating without knowing it.

posted by Ed |

Vision of a technology corridor in the Black Hills

In the Black Hills of South Dakota, EDPros are studying the emerging technology corridor around Oak Ridge, TN. (EDPros in Eastern Tennessee recently launched a branding of their region as Innovation Valley.) They see the opportunity to develop a similar technology corridor around a proposed national underground laboratory. Read more.

posted by Ed |

University of Florida joins high tech council

The University of Florida has joined the Florida High Tech Corridor Council. The University has pledged $2 million a year in the Council's applied research program. The program conduct research in industries targeted for growth � aviation & aerospace, information technology, medical technology, microelectronics, modeling, simulation & training, and optics & photonics. Read more. Visit the Council web site.

(Just to put this in perspective, the university's commitment to the Council is at the same level as their commitment to the new football coach, Urban Meyer, who will be paid $14 million over seven years.)

posted by Ed |

Economy Watch

Saturday, January 01, 2005

Here are the best articles on the economy that I came across last week.

America�s coming economic changes
America cannot postpone bringing education into the 21st century
Vital Signs for the Week of Jan. 3
U.S. forecasters see a banner 2004 followed by slower growth in 2005
How the 2005 economy could affect Bush's big plans

posted by Ed |

Predictions for 2005

Predictions are always a tricky business, but they're fun to think about. Here's what I expect to see in economic development in the coming year.

Awareness of the skills gap will start to sink in:
We face a basic imbalance in our workforce system. Baby boomers are retiring, and we are not producing enough skilled workers with post secondary education. (Too many kids are dropping out of high school, and too many kids are graduating from high school with weak skills and no career plans.) So, the skills gap is growing. Here's an example from Akron. Here's another from Michigan.

More regional partnerships:
An increasing number of EDPros will recognize that the future lies in regional alliances. The reason is simple: In a global world, no one can afford to go it alone. It is only within a region that businesses can find the brainpower and innovation networks they need to be globally competitive. We'll continue to see our share of regional initiatives undercut by silly considerations like old high school football rivalries, but overall, more EDPros will figure this out.

Growing backlash against incentives:
The $250 million deal for Dell will raise questions in North Carolina, just as the $3.2 billion Boeing deal has done in Seattle. (That deal may have to be reworked if the World Trade Organization intervenes.) The Ohio federal appellate decision will embolden incentive critics, and you can expect bi-partisan efforts, like this one, to reduce subsidies to companies.

More focus on incentive accountability and "clawback provisions":
Increasingly, state and local governments will be negotiating tougher incentive agreements. In part, the move will be defensive. In an era of tight government budgets, no political leader will want to appear "soft" on an incentive deal. At the same time, state legislators will be pressing for more accountability, like this legislation recently passed in Ohio.

More emphasis on entrepreneurship:
Rural areas, especially, are gradually learning that entrepreneurship offers the best pathway to higher prosperity. Business recruitment -- long the single strategy in many places -- has begun to play itself out. Here's an article from Georgia that makes the point.

A new focus on innovation:
Manufacturing is not dead in this country, nor will it be in our lifetimes. But successful manufacturers will be those who innovate with new product and process improvements. Prompted by the new report InnovateAmerica from The Council on Competitiveness, we should begin to understand that innovation represents our best answer to globalization.

More international partnerships:
The weak dollar will help us wake up to the opportunities in the global market. More communities will be following the lead of places like Hampton Roads, Fairfax County, and Tucson in developing innovative global partnerships. The regions that will be ahead of the curve on this trend will see their efforts as building global innovation networks.

Growing visibility for sustainability:
The high costs of sprawl will start to bite local and state budgets even harder. In some regions, water shortages will push sustainability issues to the front. Finally, a backlash against Big Box retailers -- particularly Wal Mart -- will raise questions about what economic development really means. At the same time, sustained high oil prices will lead to new markets in alternative fuels -- biodiesel, ethanol, wind -- and the growing realization that elements of a hydrogen based economy are likely to emerge in ten years or so.

More aggressively entrepreneurial colleges and universities:
Across the landscape of economic development, an increasingly assertive leadership among our colleges and universities is leading to new roles in economic development. Soon, we can hope, state legislators and Congress will wake from their slumber to discover the critical role our colleges and universities play in our international competitiveness. Learn more.

The emergence of creativity as an economic development driver:
Regular readers of EDPro News know that I'm no fan of Richard Florida. And this trend has little to do with his theories of "the creative class". Rather, this trend emerged in Europe several years before Florida wrote his book. This ttrend is rooted in the deep connection of creativity to innovation. This trend also focuses on the emergence of digital media and the convergence of entertainment and education.

Blurring lines between economic development, workforce development and tourism development:
Profvessionally, we all grew up at a time when the boundaries separating these fields were clear. Increasingly, though, we will see professional bridging the gaps. Communities that foster these conversations will move ahead with a shared understanding: In this era of global competition, we're all in the same boat.

New focus on our backyard:
More EDPros will do the math and start pushing ahead with retention and expansion initiatives. Here's an example from Enterprise Florida. The big leap -- and we might not be ready for it yet -- will come in realizing that solid "retention and expansion" initiatives are really innovation initiatives. As Michael Porter points out there's no such thing as high tech or low tech industries...only high tech or low tech companies. (In fact, if we're lucky, we'll ditch the term "retention and expansion" altogether.)

Tighter scrutiny on marketing budgets:
Economic development money is no longer free, and the recruitment game will come under tighter scrutiny. Business, media and political leaders will continue to look for more accountability and metrics. As the economic development zeitgeist shifts to workforce, innovation and entrepreneurship, more people will wonder whether marketing budgets should be so large.

posted by Ed |

EDPro's 2004 Tirebiter Award

EDPro's 2004 Tirebiter Award award goes to Senator Charles Grassley of Iowa.

Some of you will recall that Senator Grassley managed to put $50 million into an appropriations bill to build a rainforest in Iowa...all in the name of economic development. (Looks nice, don't you think?)

This was happening as the Congress cut about the same amount from the budget of the Manufacturing Extention Partnership that helps small and mid-sized manufacturers meet the challenges of globalization.

The project has even spawned its own blog: Iowa Pork Forest. Here's an update on the project

The Tirebiter award is given in honor of George Leroy Tirebiter. Mr. Tirebiter was the Surrealist Party candidate for Vice President in 1976.

posted by Ed |

EDPro's list of the best innovators of 2004

Here's a review of the best developments of 2004.

Leading states:

Pennsylvania: for a range of initiatives including the Keystone Innovation Zones, a manufacturing initiative, and "growing greener" initiative, a new angel investor program, and a serious effort at state tax reform

Michigan: for "Cool Ciites" initiative, support for the tool and die industry, an interesting initiative to connect foundations to economic development, and an effort to streamline state permitting.

South Carolina: for serious efforts to develop a new model of economic development based on knowledge businesses, a new initiative on health research, an emerging strategy to coordinate tech schools, and the new research campus at the University of South Carolina.

Honorable mentions:

Minnesota: for the innovative role its foundations have taken in economic development and its e-commerce certification program
Louisiana: for making progress on a serious economic development strategy, arguably for the first time in state history
Arkansas: for examining the role of higher education in the state's economic development.
Texas: for its innovative deal with Texas Instruments in Dallas
West Virginia: for its grid computing initiative
Ohio: for its Third Frontier network
Georgia: for its certification program to promote entrepreneurship networks in communities

Leading regions
Research Triangle: for developing a new strategy to carry it to the next level of development
Triad region in North Carolina: for finally coming together to act as a region
Western North Carolina: for building strong innovation and entrepreneurship networks
Capital Region in New York: for continuing to build the foundations for a knowledge-based economy

Leading cities
Philadelphia: for its efforts to build a stronger region, encourage innovation, and build networks to retain students
Kalamazoo: for its efforts to build an innovation and entreprneurship network

Leading international network innovations
Fairfax County: for its connections to Indian and Israel
Iowa: for exploring connections in New Zealand in biosciences
Hampton Roads: for connecting with Bremen, Germany
Tucson: for building connections to Canada
Triad region and the vice chancellor for research and economic development at North Carolina A&T: for developing research alliances with Indian Institute of Technology, the leading technology university in India

posted by Ed |

EDPro's list of the best reports of 2004