After hundreds of hours speaking with the leaders of America’s transformed cities, analyzing data until our eyes crossed and summarizing all of our findings in an action oriented report, I am ready to provide you with the cliff notes. To summarize, we found that there are nine key themes to consider if you are looking to transform your community.
Admittedly it is awkward to boast about the economic recovery that is occurring in much of the Rust Belt. In our own neck of the woods, Akron, Cleveland, Pittsburgh and Youngstown have all experienced strong recoveries. According to Brookings Youngstown Ohio ranked 8th out of 100 metro areas for job growth. Yes, Youngstown Ohio. Here are a few insights from Brookings’ Metro Monitor:
- Manufacturing regions in general led the recovery – Recovery in the automotive sector has helped the auto-producing regions – Recovery in Information Technology has also helped the IT regions.
- There might be signs of the regional impact of stimulus – “The metropolitan areas with the strongest economic recoveries generally gained government jobs, while those with the weakest recoveries generally lost them. Eleven of the 20 strongest-recovering metropolitan areas (Bakersfield, Boston, Dallas, Des Moines, Houston, McAllen, New Orleans, Provo, San Jose, Worcester, and Youngstown) gained government jobs (federal (including military), state, and local combined) in the time since their total employment bottomed out, while one (Lakeland) had no change in government employment.?”
I think these findings have interesting implications for the national debate going on right now about our economy and the role of the federal government. We always seem to want a clear Yes or No, Stop or Go type of answer and in a complex economy like the U.S. that is never easy. The truth is that what works for one region does not work for another. Maybe what is wrong is our idea of a national economic policy. It might work better if we created regional policies and plans to address the unique needs of regional employers, workers and the environment. The Obama Administration has attempted to do this with their support for Regional Innovation Clusters, but I think it will take a more fundamental restructuring of how federal agencies work. As long as we try to fit square regional pegs into round national policies, we are going to continue to be frustrated with our economic policy.
IBM estimates that we create 2.5 quintillion bytes of data every day. They do not, however, estimate how much of this data is duplicated – all of the documents emailed between friends and coworkers that get stored on personal devices, corporate servers and cloud machines. By my own unscientific and completely arbitrary estimate, at least 55 percent of our daily data production is duplication.
Big Data includes a lot of transactional data – what you purchase from stores as well as your Google searches or the fact that Person A sent an email to Person B, as well as the content of that email. There is also data from sensors used in industrial production as well as climate, weather and traffic monitoring. It includes Twitter and other social media posts, digital photos, Wikipedia entries and data produced by researchers, scientists, corporations and government agencies.
Big Data is often unstructured but it is usually timely. It is not simply an aggregation of a bunch of data. The challenge is to structure this data and make sense of it. Economists and regional developers have been behind in tapping into Big Data but it can be useful in a number of ways. Much of it enables firms to better segment customers or develop next generation products. It can also provide value in itself by selling access to that data for specific types of users and uses.
One of the problems we have with a lot of economic data is that it is too structured or aggregated to make it useful for data mining and other Big Data analytical techniques. For instance, our use and definition of industry sectors (NAICS) hampers analysis of emerging industries. This structure is used to provide anonymity and confidentiality but it also distorts the kind of variation that is useful to better understanding how our economy works. For one, we have no idea what happens within a nondisclosed NAICS code. But even within a sector we don’t know how many firms are growing or declining or the magnitude of those changes. For most economic developers working within a local or regional economy, it can make a big difference whether an apparent “industry trend” is broadly shared by companies in the sector or if there are diverging patterns.
Currently there are few sources of Big Data for economic development analysis, but job postings, social media feeds and patent data are a few that Fourth Economy has been working on to yield new insights on economic trends. Patent data has been particularly ripe for this analysis, in part because it is so unstructured that it is difficult to analyze with traditional tools and techniques. These can be frustrating times for analysts and for anyone seeking answers. There is a wealth of data out there, but too often we aren’t able to hammer it into useful information.
We’ve set up a quick poll to gather some data of our own. It’s only one question, so share your thoughts.
There has been a lot of talk recently about the role of “innovation” and “technology” in strengthening our national economic competitiveness. While some firmly believe that innovation is the key to recovery and future growth, others say we should focus first on traditional manufacturing jobs. Many who advocate for the latter submit that manufacturing jobs make more of an economic impact in more regions of the country.
While most of us can be sympathetic to both views, we also can’t forget that manufacturing jobs and products were made possible first through innovation, research, discovery and capital. All parts of the country, small towns and big cities alike, must determine how their location and assets can serve the modern economic development continuum, from the budding entrepreneur with a new idea, through to product development, reinvention and production.
A client recently asked us a basic question – “If we want to attract and increase high-pay, high-growth investment, what do we need to know?” In response, our team gathered a sample of incentive programs and strategies that some states have employed to attract higher value, technology-based research and development sectors while also hoping to accelerate new company formation. While not a comprehensive search to say the least, this scan does provide some program themes of what has been put in place over the past few years to grow higher growth, higher wage sectors. First some general observations:
Unlike highly cost sensitive sectors, R&D operations, corporate headquarters and technology-driven firms will likely place more emphasis on place-based assets and resources. These include community factors such as high-quality and diverse housing options, recreational venues, transit linkages, good airport access and cultural venues. Operational resources such as wet-lab space, university access, flexible capital, venture funds and ready-to-go class A/B flex office space are also critical. Increasingly, we are also finding an attraction to urban infill redevelopment opportunities, live-work-play centers and adaptive reuse of older or historic buildings to accommodate these sectors. Many of these factors came together to help Google expand in Pittsburgh and in their choice of the expensive high profile Chelsea neighborhood in New York City.
Venture Capital, Tax Credits and Micro Grants
While capital is important to all sectors, high growth high wage sectors will likely require more access to risk capital, venture funding resources and networks. We have also found that smaller firms to include start-ups and spin-outs also value micro-grant programs that offer $5,000 to $25,000 to support patent filings/research, IP protection lab rental or graduate student research support. Mid-sized and larger firms take advantage of Research and Development Tax Credit programs. Several examples of these programs are included in the links below.
Knowledge Network Management
Another growing industry demand represents an opportunity for economic development intermediaries to position as a core service or incentive program. That is the facilitation and management of collaborative partnerships among high value sector firms, universities, researchers or other resource providers. Through our work with the Pennsylvania Keystone Innovation Zone Program, many smaller technology-based companies and legacy firms in search of new product development or spin-out services, found value in a “single point of contact;” one able to facilitate those efforts and bring the right resources effectively to the table. States such as Michigan and Minnesota have taken on “networking” among high-growth high-wage sectors as a core economic development delivery service.
Aligning New Programs
When planning new incentives or revamping older programs, it is important to keep in mind that the general profile and characteristic of the modern business and how it operates is rapidly evolving. Modern firms are often smaller than what we may expect, usually less than 25 employees, and will likely stay that way for a longer period of time. They are more comfortable than legacy industry to rely on contract labor and sub-relationships rather than hiring permanent in house staff. For efficiency and security reasons, even larger firms are also becoming more decentralized, with smaller offices and manufacturing facilities spread across more locations. These conditions pose challenges for traditional incentive programs that have established eligibility thresholds based on larger manufacturing or corporate headquarters profiles. As a result, many legacy workforce, loan and grant programs then are less applicable and attractive to the smaller, more nimble high growth high wage firms.
Articles and Resources
The following articles talks generally about state programs and rankings as they relate to higher value industry sectors such as Biotechnology, Life Sciences, Medical Devices and Energy.
We have highlighted a few states that have established incentive programs and approaches targeting research and development activities as well as high value sector firms generally. These states have consistently been placed in the top 10 or 15 states in various technology economic development (TBED) rankings. We have included a public policy narrative under the North Carolina section that provides third-party policy recommendations that other regions may find of interest.
Any industry sector including manufacturers who cite favorable location factors other than “cost” alone are more likely to remain and grow in that community. Employees that enjoy living in certain communities are often happier and more productive, wanting to ensure the operational success for their employer. So it is no longer as simple as water supply and interstate access. Technology and Place-based economic development strategies will continue to challenge many communities to reposition their program tools and incentives. But the sustainable economic outcomes are worth the effort.