Economic Development As A Triage Activity

1. Economic DevelopmentAs ATriage Activity Marc Anderberg Director, Applied Research Texas Workforce Commission Annual Workforce Conference Phoenix, AZ April 10-11, 2008

2. Limitations of Cluster Theory • Scale • Limited number of “trophy-size” recruits • Competition (86 of 86 MSA for biotech) • Enough to tip the scales??? • TX Emerging Technology Fund vs San Diego, SD, KS • Intangibles (CA, MA, WI, MO referenda) • Small businesses and microenterprises • Existing scale • Job creation • Creative Destruction • Exploitive vs exploratory innovation • Vulnerability

3. When Cluster TheoryDoesn’t Apply(continued) • Regional Differences • Inside versus outside the “Texas Triangle” • Rural vs metro and suburban counties within same LWDA • Migration and aging of the population • Talent supply (“Brain Drain”) • Critical mass/agglomeration (Jane Jacobs) • Theory of the “Creative Class” (Richard Florida) • Consumer demands • Wealth creation versus job creation • “Market Failure” • Location – spatial mismatch • Equitable distribution

4. ALTERNATIVES • Triage concept (remember M*A*S*H) • “Walking wounded” • Critically injured • Beyond hope

5. ALTERNATIVESStrengths and Opportunities Continue to do what you do best • Ag (crops and livestock) and Oil & Gas • Diversify and differentiate • Capture more of the value added • Intermediate vs final demand • New markets (niche, international) • Quality, branding and marketing • Become more efficient • Pooling of resources – cooperative • Be Opportunistic in “appropriating” cluster language

6. ALTERNATIVEStrengths and Opportunities • Understand your comparative advantage • Differentiate between export industries and population-serving industries • Retail is NOT economic development • Retail and personal services follow population and income growth • Conserve scarce resources for export industry development • Resist notion that bidding wars are “business as usual • Use information resources and indirect incentives • Understand leakage, displacement and import substitution • Stimulate population growth • Quality of place • Enhance natural amenities • Market them through tourism and residential relocation • Quality of life • Cheap land, low crime, low cost of living • Market to equity rich-city weary snowbirds • Upgrade services (e.g., cure problems like medically-underserved)

7. ALTERNATIVESStrengths and Opportunities Footloose industries Business as a virtual platform Place still matters • Proximity to final consumer • I have deployed lots of IT – I just don’t have any knowledge worth transmitting across the globe at the speed of light • Knowledge vs Information-based economy • Quality of life and quality of place • Green Economy & Tradability of Skills

8. ALTERNATIVESStrengths and Opportunities Grow your own • World class education • Foundation • Entrepreneurship • Stewardship • Access to capital (angels, micro-lenders, conventional) • Information broker and networking • Business plan development (see Dot Com Flame-outs) • Tech assistance • SCORE, ag extension, MEP, SBDC • Incubator, industrial park and exit strategy • Scale and expectations • IT as enabling rather than as a cluster (There are no low tech industries, only low tech firms) ― Get the infrastructure right

9. ALTERNATIVESAddressing Weaknesses • Base closure and abandoned factories • Resources and best practices • Recovery, renovation (speed essential) • Market spade-ready, finish-out ready • Cooperation • Rather than competition (bury the hatchet, ford the river Mr. Rhoden presentation) • Get a piece of the action

10. ALTERNATIVESWhen life gives you lemons, make lemonade Reversing cluster logic • Absence of legacy industry as barrier (Twin Cities) • Incremental change rather than breakthroughs • Risk-aversion and protectionism • Too much is disadvantage • Degradation of quality of place & quality of life • San Jose, CA migration to Austin, TX • Dispersion of vulnerable critical infrastructure • Gulf Coast refining vs Arkansas, Oklahoma or inland Texas

11. ALTERNATIVESAddressing Weaknesses Public good argument • Function of government is to fill gaps where market forces fail • Market forces will “take care of” the metro and suburban areas • With substantial comparative advantage, they can’t make the “but for” argument to justify financial incentives • Rural areas (and inner-city ones) need larger allocations in order to level the playing field • Rural areas and inner-cities have a greater need for wealth creation and jobs • Productive use of human resources in rural areas and inner-cities achievements decrease “drag” on the system.

12. Measuring Success Efficiency, ROI and net job creation are not the only measure Equitable distribution of cost and benefits Earmarked funds • USDA • and HUD • and EPA • DoD (dual-use) and Homeland Security • NSF and Department of Education • NIH and HHS Special programs • Enterprise and Empowerment Zones • Community Redevelopment Act Reduced vulnerability • Diversification of the economic base • Dispersion of critical infrastructure • Retention of jobs relative to expected loss • Stemming the brain drain • Expanding the knowledge base • Nimble to respond to changing demands • Innovation and entrepreneurship are the foundations of wealth creation

13. Getting Down to Business: Applied Cluster Theory • Economic Development As a Triage Activity (in 2007) • Job Chains and Churning • Megatrends: An Environ-mental Scan of the Forces Sculpting Texas’ Eco-nomic Landscape (in 2007) • Becoming and Employer of Choice: Talent Recruitment and Retention During the Coming Skills Shortage • Technology Workers in the New Texas Economy • Infusing Strategic Planning with Local Wisdom • Bridging the Digital Divide: Under-representation of Women and Minorities in Technology-Intensive Occupations • The Emerging Biotechnology Industry • The Study of Emerging Occupations Marc Anderberg • Email marc.anderberg@twc.state.tx.us • Phone (512) 491-4803 • Mail Marc Anderberg Director of Applied Research TWC – LMCI 9001 N. IH-35, Suite 103A Austin, TX 76753h