Monday, May 29, 2006

Economic Development for the Rest of Us?

The sessions and speeches at the IEDC's Tech-Led Conference in San Jose was striking in their emphasis on not attempting to replicate an economic success story elsewhere and doing something distinctive and unique to a region. Rohit Shukla of LARTA lamented the failure of "Me-Too" Development Strategies and the rush to become the next Life Sciences Hub. Joe Cortright while he emphasized the importance of attracting the Young and the Restless (YNR) cautioned against every location, city, and region embarking on its own YNR strategy. Every region must build upon its own unique endowements rather than trying to create something that doesn't exist, he maintained. In contrast, the entire field of economic development is full of cookie-cutter strategies starting from the World Bank and IMF on the top to the leading consulting companies and one-man consulting operations. With the cookie-cutter culture so much a part and parcel of economic development landscape, it is no wonder that regions so often attempt to replicate well-established success stories. But is there really a unique economic development strategy for each one of us? One participant and commentator at a session summed up the frustration: "If Silicon Valley had gone ahead with doing what it did best rather than creating something entirely new from scratch 40 years ago, they'd still be growing oranges." This is, by far, one of the most important intellectual curiousities in regional economic development today.

Gazelle Economies and Me-Too Economic Development Strategies

Los Angeles Regional Technology Alliance's (LARTA) Rohit Shukla spoke about Technology Clusters at the a recent IEDC Conference in San Jose. The main thrust of Rohit's argument was that innovation does not happen in a localized setting--atleast not anymore. That there are "global realities and gazelle economies" that we must all deal with is the easy part. How to deal with these, however, is not a no-brainer. Rohit lamented the fact that regions are following a herd mentality when it comes to clusters. That cluster strategies are "marketing driven, not market-driven". The economic development field is full of "me-too strategies" that do not take into account the economic realities of the regions. The hundreds of attempts to create a biotechnology or life-sciences hub is a clear illustration of that. Rohit noted that today clusters are global, not vertically integrated. A region must find its own unique strength and become a part of a global cluster. Agility, adaptability, and alliances are the keywords for successful economic development. Rohit is one of the most passionate speakers that I've come across in my life. Many of the arguments that he made clearly make sense. However, the policy implications of his talk were either quite obvious and hence somewhat non-trivial or weren't exactly clear beyond the need for US to continue to remain open to immigration. Besides it isn't very long ago that Rohit was a champion and passionate advocate of Southern California's "regional" economy and participated in a study to create a bio-tech or nano-tech hub in Southern California [see this, and this] which, by designation, he probably still is but doesn't speak in the same "local" terms anymore. And Southern California, unlike Silicon Valley, probably isn't that much a part of a global technology ecosystem. Hence the change in Rohit's talk is both interesting and intriguing. It would be useful to see some substance and flesh behind this new vision of clusters in the future.

IEDC's Tech-Led Economic Development Conference

International Economic Development Council's (IEDC) Conference on Tech-Led Economic Development was recently held in San Jose--the heart of Silicon Valley--from May 21-23, 2006. It was attended by around 200 delegates from across the United States and the World. The conference was a fine mix of professional development seminars, informative sessions, and exciting tours for the delegates. With "Silicon Valley" becoming a metaphor for a technology hub around the world, the location provided a great setting for a conference on Technology-led economic development. The delegates were able to visit the Tech Museum in San Jose and listen to the "Rise of Silicon Valley" story. They could also visit eBay's operations Center the San Jose's Bio Center, and Hitachi Global Systems. Confernce sessions included ones on Science Parks, Workforce Development, Rural Entrepreneurship, Site Selection, Measuring Regional Innovation, Technology Clusters, and Venture Capital. While IEDC does not hold a conference on Technology-based Economic Development regularly, it is a welcome addition to its toolkit that otherwise focuses on more traditional issues such as business attraction and retention, real-estate development etc. For Conference website: Click Here.

Sunday, May 28, 2006

Young & Restless: Policy Implications?

Joseph Cotright of Impressa Consulting has recently released a new study of employment and education patterns in the US Economy sponsored by CEOs for Cities. The study identifies one segment of the US workforce--namely, 25-34-yr olds, mostly single college-educated women--as one the most dynamic and critical segments of US workforce. Contright calls them "The Young and The Restless". These are individuals that are more educated but also most likely to be mobile. They are people who'd put, atleast on the margin, choice of place ahead of the choice of career. They represent talent, and talent not companies is the new game in economic development, maintains Cotright. The Young and the Restless prefer denser, more urban living and cities would be well-advised to make their centers more attractive to this group of people. Cotright believes that there are policy implications for this impending shift in US demographic trends. Economic developers must make people the focus of their efforts. Higher education centers as well as vibrant urban neighborhoods serve as good attractors for these people. The complete study may be accessed at CEOs for Cities website [Click]

Tuesday, May 16, 2006

Innovation @ Scale: Rhode Island's Meta Clusters

I spoke today with Saul Kaplan, the Executive Director of Rhode Island's Economic Development Corporation (RIEDC). We talked about Rhode Island's Cluster Initiative. During the context of our discussion, Saul brought up a very interesting idea that, he believes, sets Rhode Island's apart from the nation's--perhaps the world's--other cluster initiatives. Rhode Island's cluster strategy is based on the notion of cross-industry cooperation. Instead of seeking to grow clusters along industry verticals, Saul and his team tries to create horizontal clusters. The real innovation with firms comes from x-functional collaborative when people think beyond their narrow functional (industry) silos. Rhode Island attempts to do that at the cluster level. It does so through something called Business Innovation Factory (www.businessinnovationfactory.com) that is a public-private partnership to bring various industries together to do collaborative innovation. "It is a challenge", Saul admits, "but one for which Rhode Island's economy is particularly suited for. We are small enough not to matter much to any particular company and so we have the flexibility to experiment with these news ideas". Saul and his team are trying to transform Rhode Island into a test-bed for innovative economic development ideas. He might have point here. How it would pan out going forward remains to be seen.

Sunday, May 14, 2006

Clusters: Which Theory Do you Believe?

Most cluster policy interventions are based on certain assumptions about the underlying processes that cause firms in an industry or region to cluster. The most of common of these arise from the "silicon valley" myth. Clusters are formed, the theory goes, because of informational and knowledge spillovers. When people meet other people through chance occurings, nice things happen. Consequently, governments around the world have tried to put together institutions (sometimes referred to as 'institutions of collaboration') to promote this informal networking in region's industry. These interventions to promote informational spillovers would only work if the hypothesized underlying mechanism is correct. Dr. Michael Darby of UCLA, however, aruges for different mechanism underlying the localized character of industries. He reports that industries cluster not because of informational spillovers but because of market-mediated transactions between individuals. According to this view, leading-edge researchers do not find entrepreneurs and financiers by chance but because the latter seek them out and engage the former. The policy implications of believing Darby's theory of economic clustering are significantly different. If you were to believe that firms locate around universities because they need to be near leading-edge researchers who act as advisors, consultants, and entrepreneurs on companies, the logical policy to pursue would be to relax technology transfer policies at univerisities that would allow faculty to consult with the industry and participate in start-up activity.

California's Top-3 Economic Development Issues.

I was recently at the California Association of Local Economic Development (CALED) Spring Conference in Palm Springs, CA (April 21-23rd, 2006). It was a bit suprising to listen in to the very interesting debate on California's economy. Through a number of sessions and keynotes, the top-3 economic development priorities that came across from the session were (in no particular order): California's high costs of doing business and its inability to attract enough manufacturing jobs into the state; the effectiveness of "incentives" to attract businesses and industries into California; and strategies to lure business away from other states and into california. This debate touches upon several important themes in local economic development. These include the possibility and ultility of "economic development wars" between states trying engage in zero-sum game to attract businesses. Especially the fact that sometimes states can give away more in incentives than they can attract from a business that is "shopping" around and playing states against each other. The most surprising message, however, that should give us some pause was the notion that even the mighty California cannot have its own way in its attempt to build a truly high-tech. economy--that manufacturing--no matter how you see it--remains the backbone of today's information economy as it was in yesterday's industrial economy. More on that in a later post.