Regional Competitiveness
in the Pioneer Valley
Professor Michael E. Porter
Institute for Strategy and Competitiveness
Harvard Business School
Pioneer Valley Regional Competitiveness Council Meeting
MassMutual Learning & Conference Center
Chicopee, MA
October 10, 2003
This presentation draws on ideas from Professor Porter’s articles and books, in particular, The Competitive Advantage of Nations (The Free Press,
1990), “Building the Microeconomic Foundations of Competitiveness,” in The Global Competitiveness Report 2002, (World Economic Forum, 2002),
“Clusters and the New Competitive Agenda for Companies and Governments” in On Competition (Harvard Business School Press, 1998), and
ongoing research on clusters and competitiveness. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any
form or by any means - electronic, mechanical, photocopying, recording, or otherwise - without the permission of Michael E. Porter.
Further information on Professor Porter’s work and the Institute for Strategy and Competitiveness is available at www.isc.hbs.edu
Sources of Prosperity
Prosperity
Prosperity
Productivity
Productivity
“Competitiveness”
Innovative
Innovative Capacity
Capacity
z
The most important sources of prosperity are created not inherited
z
Productivity does not depend on what industries a region competes in, but
on how it competes
z
The prosperity of a region depends on the productivity of all its industries
z
Innovation is vital for long-term increases in productivity
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Copyright © 2003 Professor Michael E. Porter
Productivity, Innovation, and the Business Environment
Context
Contextfor
for
Firm
Firm
Strategy
Strategy
and
andRivalry
Rivalry
z
Factor
Factor
(Input)
(Input)
Conditions
Conditions
z
Presence of high quality,
specialized inputs available
to firms
–Human resources
–Capital resources
–Physical infrastructure
–Administrative infrastructure
–Information infrastructure
–Scientific and technological
infrastructure
–Natural resources
z
z
z
z
A local context and rules that
encourage investment and
sustained upgrading
–e.g., Intellectual property
Demand
protection
Demand
Conditions
Meritocratic incentive systems
Conditions
across all major institutions
Open and vigorous competition
z Sophisticated and demanding local
among locally based rivals
customer(s)
z Local customer needs that anticipate
those elsewhere
Related
and
Related and
z Unusual local demand in specialized
Supporting
segments that can be served
Supporting
Industries
nationally and globally
Industries
Access to capable, locally based suppliers
and firms in related fields
Presence of clusters instead of isolated
industries
• Successful economic development is a process of successive economic upgrading, in which
the business environment in a nation or region evolves to support and encourage increasingly
sophisticated ways of competing
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Copyright © 2003 Professor Michael E. Porter
Composition of Regional Economies
United States
Traded
Traded Clusters
Clusters
Local
Local Clusters
Clusters
Natural
Natural ResourceResourceDriven
Driven Industries
Industries
31.6%
31.6%
1.7%
1.7%
67.6%
67.6%
2.8%
2.8%
0.8%
0.8%
-1.0%
-1.0%
$46,596
$46,596
133.8
133.8
5.0%
5.0%
$28,288
$28,288
84.2
84.2
3.6%
3.6%
$33,245
$33,245
99.0
99.0
1.9%
1.9%
144.1
144.1
79.3
79.3
140.1
140.1
Patents per 10,000
Employees
21.3
21.3
1.3
1.3
7.0
7.0
Number of SIC Industries
590
590
241
241
48
48
Share of Employment
Employment Growth, 1990
to 2001
Average Wage
Relative Wage
Wage Growth
Relative Productivity
Note: 2001 data, except relative productivity which is 1997 data.
Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School
Specialization of Regional Economies
Select U.S. Geographic Areas
Seattle-BellevueSeattle-BellevueEverett,
Everett,WA
WA
Aerospace
AerospaceVehicles
Vehiclesand
and
Defense
Defense
Fishing
Fishingand
andFishing
Fishing
Products
Products
Analytical
AnalyticalInstruments
Instruments
Denver,
Denver,CO
CO
Leather
Leatherand
andSporting
SportingGoods
Goods
Oil
and
Gas
Oil and Gas
Aerospace
AerospaceVehicles
Vehiclesand
andDefense
Defense
Chicago
Chicago
Communications
CommunicationsEquipment
Equipment
Processed
ProcessedFood
Food
Heavy
HeavyMachinery
Machinery
Wichita,
Wichita,KS
KS
Aerospace
AerospaceVehicles
Vehiclesand
and
Defense
Defense
Heavy
HeavyMachinery
Machinery
Oil
Oiland
andGas
Gas
Pittsburgh,
Pittsburgh,PA
PA
Construction
ConstructionMaterials
Materials
Metal
MetalManufacturing
Manufacturing
Education
Educationand
andKnowledge
Knowledge
Creation
Creation
San
San FranciscoFranciscoOakland-San
Oakland-San Jose
Jose
Bay
Bay Area
Area
Communications
Communications
Equipment
Equipment
Agricultural
Agricultural
Products
Products
Information
Information
Technology
Technology
Los
Los Angeles
Angeles Area
Area
Apparel
Apparel
Building
Building Fixtures,
Fixtures,
Equipment
Equipment and
and
Services
Services
Entertainment
Entertainment
Boston
Boston
Analytical
AnalyticalInstruments
Instruments
Education
Educationand
andKnowledge
KnowledgeCreation
Creation
Communications
CommunicationsEquipment
Equipment
Raleigh-Durham,
Raleigh-Durham,NC
NC
Communications
CommunicationsEquipment
Equipment
Information
InformationTechnology
Technology
Education
Educationand
and
Knowledge
KnowledgeCreation
Creation
San
SanDiego
Diego
Leather
Leatherand
andSporting
SportingGoods
Goods
Power
Generation
Power Generation
Education
Educationand
andKnowledge
Knowledge
Creation
Creation
Houston
Houston
Heavy
HeavyConstruction
ConstructionServices
Services
Oil
and
Oil andGas
Gas
Aerospace
AerospaceVehicles
Vehiclesand
andDefense
Defense
Atlanta,
Atlanta,GA
GA
Construction
ConstructionMaterials
Materials
Transportation
Transportationand
andLogistics
Logistics
Business
Services
Business Services
Note: Clusters listed are the three highest ranking clusters in terms of share of national employment
Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School
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Copyright © 2003 Professor Michael E. Porter
Massachusetts Life Sciences Cluster
Health
Healthand
and Beauty
Beauty
Products
Products
Cluster
Cluster Organizations
Organizations
MassMedic,
MassMedic, MassBio,
MassBio,others
others
Health
Health Services
Services Provider
Provider
Surgical
Surgical Instruments
Instruments
and
Suppliers
and Suppliers
Specialized
Specialized Business
Business
Services
Services
Medical
Medical Equipment
Equipment
Dental
Dental Instruments
Instruments
and
and Suppliers
Suppliers
BiopharmaBiopharmaceutical
ceutical
Products
Products
Biological
Biological
Products
Products
Banking,
Banking, Accounting,
Accounting, Legal
Legal
Specialized
Specialized Risk
Risk Capital
Capital
Ophthalmic
Ophthalmic Goods
Goods
VC
VC Firms,
Firms, Angel
Angel Networks
Networks
Diagnostic
Diagnostic Substances
Substances
Specialized
Specialized Research
Research
Service
Service Providers
Providers
Containers
Containers
Analytical
Analytical Instruments
Instruments
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Research
Research Organizations
Organizations
Laboratory,
Laboratory, Clinical
Clinical Testing
Testing
Educational
Educational Institutions
Institutions
Harvard
Harvard University,
University, MIT,
MIT, Tufts
Tufts University,
University,
Boston
University,
UMass,
others
Boston University, UMass, others
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Copyright © 2003 Professor Michael E. Porter
Traded Clusters
Overlap
Textiles
Apparel
Footwear
Leather
and
Sporting
Goods
Chemical
Products
Financial
Services
Agricultural
Products
Publishing
and Printing
Fishing &
Fishing
Products
Education
and
Knowledge
Creation
Information
Technology
Tobacco
Transportation
and Logistics
Entertainment
Communications
Equipment
Aerospace
Vehicles &
Defense
Aerospace
Engines
Lightning &
Electrical
Equipment
Metal
Manufacturing
Power
Generation
Distribution
Services
Sporting,
Business
Services
Note: Clusters with overlapping borders or identical shading
have at least 20% overlap (by number of industries) in both directions
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Prefabricated
Enclosures
Automotive
Hospitality
and Tourism
Jewelry &
Precious
Metals
Heavy
Construction
Services
Medical
Devices
Analytical
Instruments
Furniture
Building
Fixtures,
Equipment
and
Services
Oil and
Gas
Pharmaceuticals
Forest
Products
Processed
Food
Construction
Materials
Plastics
7
Recreation and
Production
Technology
Heavy
Machinery
Motor Driven
Products
Children’s
Goods
Copyright © 2003 Professor Michael E. Porter
The Evolution of Regional Economies
San Diego
Hospitality and Tourism
Climate
Climate
and
and
Geography
Geography
Sporting and
Leather Goods
Transportation
and Logistics
Power Generation
Communications
Equipment
Aerospace Vehicles
and Defense
U.S.
U.S.
Military
Military
Information Technology
Analytical Instruments
Education and
Knowledge Creation
Medical Devices
Bioscience
Bioscience
Research
Research
Centers
Centers
1910
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1930
1950
Biotech / Pharmaceuticals
1970
8
1990
Copyright © 2003 Professor Michael E. Porter
Institutions for Collaboration
Selected Massachusetts Organizations. Life Sciences
Life
Life Sciences
Sciences Industry
Industry Associations
Associations
University
University Initiatives
Initiatives
Harvard
Harvard Biomedical
Biomedical Community
Community
zz MIT
MIT Enterprise
Enterprise Forum
Forum
zz Biotech
Biotech Club
Club at
at Harvard
Harvard Medical
Medical School
School
zz Technology
Technology Transfer
Transfer offices
offices
Massachusetts
Massachusetts Biotechnology
Biotechnology Council
Council
zz Massachusetts
Massachusetts Medical
Medical Device
Device Industry
Industry
Council
Council
zz Massachusetts
Massachusetts Hospital
Hospital Association
Association
zz
zz
General
General Industry
Industry Associations
Associations
Informal
Informal networks
networks
Associated
Associated Industries
Industries of
of Massachusetts
Massachusetts
zz Greater
Greater Boston
Boston Chamber
Chamber of
of Commerce
Commerce
zz High
High Tech
Tech Council
Council of
of Massachusetts
Massachusetts
Company
Company alumni
alumni
zz Venture
Venture Capital
Capital community
community
zz University
University alumni
alumni
zz
zz
Economic
Economic Development
Development Initiatives
Initiatives
Joint
Joint Research
Research Initiatives
Initiatives
Massachusetts
Massachusetts Technology
Technology Collaborative
Collaborative
zz Mass
Mass Biomedical
Biomedical Initiatives
Initiatives
zz Mass
Mass Development
Development
zz Massachusetts
Massachusetts Alliance
Alliance for
for Economic
Economic
Development
Development
New
New England
England Healthcare
Healthcare Institute
Institute
zz Whitehead
Whitehead Institute
Institute For
For Biomedical
Biomedical
Research
Research
zz Center
Center for
for Integration
Integration of
of Medicine
Medicine and
and
Innovative
Technology
(CIMIT)
Innovative Technology (CIMIT)
zz
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Copyright © 2003 Professor Michael E. Porter
Influences on Competitiveness
Multiple Geographic Levels
World Economy
Groups of Neighboring
Nations
Nations
States, Provinces
Metropolitan Areas
Smaller Cities and
Counties
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Copyright © 2003 Professor Michael E. Porter
Massachusetts Regional Competitiveness Council Regions
Regional Competitiveness
Councils and Town/City
Borders
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Copyright © 2003 Professor Michael E. Porter
Regional Competitiveness
Pioneer Valley
z
Foundations of Regional Competitiveness
z
Assessing the Competitiveness of the Pioneer Valley
z
Action Agenda
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Copyright © 2003 Professor Michael E. Porter
Economic Performance
Pioneer Valley
z
Wages are below the US average and most Massachusetts regions, and lag
both in growth
z
Employment has been growing at 1.3% annually over the last five years, far
below the US and Massachusetts average
z
Pioneer Valley registered by far the lowest rates of establishment growth of
all Massachusetts regions
– Establishment size is above average
z
Patenting rates of 6.3 patents per 10,000 employees in 2001 put Pioneer
Valley in the lower group of Massachusetts regions
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Copyright © 2003 Professor Michael E. Porter
Comparative Performance of Regions
Wage Growth and Wages
9.0%
8.0%
Greater Boston
Northeast
7.0%
CAGR of
Average Wage,
1997–2001
6.0%
Cape and Islands
Central
5.0%
US Average Wage
Growth: 4.56%
Southeast
4.0%
Pioneer Valley
Represents
employment of
250,000 in 2001
Berkshire
3.0%
US Average
Wage: $34,669
2.0%
25,000
30,000
35,000
40,000
45,000
50,000
55,000
60,000
Average Wage, 2001
Data: private, non-agricultural employment
Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School
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Copyright © 2003 Professor Michael E. Porter
Wages in Traded and Local Industries
Massachusetts Regions
$45,000
US Average
Traded Wage:
$44,956
Greater Boston
$40,000
Massachusetts,
all regions
$35,000
Average
Local
Wage, 2001
Southeast
$30,000
Northeast
Central
Cape and Islands
$25,000
$20,000
$30,000
US Average Local Wage:
$28,288
Pioneer Valley
Berkshire
$35,000
$40,000
$45,000
$50,000
$55,000
$60,000
$65,000
$70,000
$75,000
$80,000
Average Traded Wage, 2001
Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School
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Copyright © 2003 Professor Michael E. Porter
Comparative Performance of Regions
Wage Growth and Employment Growth
9.0%
8.0%
Greater Boston
7.0%
Northeast
CAGR of
Average Wage, 6.0%
1997–2001
Cape and Islands
Central
Southeast
5.0%
4.0%
Represents
employment of
250,000 in 2001
US Average Wage
Growth: 4.56%
Pioneer Valley
3.0%
US Average
Employment
Growth: 2.21%
Berkshire
2.0%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
CAGR of Employment, 1997–2001
Data: private, non-agricultural employment
Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School
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3.0%
3.5%
Copyright © 2003 Professor Michael E. Porter
Job Creation
Massachusetts Regions
60,000
Net
Net job
job creation
creation in
in traded
traded
clusters,
clusters, 1997-2001:
1997-2001:
+535
+535
Job Creation, 1997-2001
50,000
Net
Net job
job creation
creation in
in local
local
clusters,
clusters, 1997-2001:
1997-2001:
+10,274
+10,274
40,000
30,000
20,000
10,000
Central
Berkshire
Pioneer
Valley
Pioneer Valley
Southeast
Cape and Islands
Northeast
-10,000
Greater Boston
0
Data: private, non-agricultural employment. Note: Regional data does not total precisely to statewide data due to omissions for confidentiality in the regions.
Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School
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Copyright © 2003 Professor Michael E. Porter
Comparative Performance of Regions
Establishment Formation in Traded Clusters
4.5%
US Average
Employees per Traded
Establishment: 23.8
4.0%
Northeast
Central
3.5%
CAGR of Traded
Establishments,
1997–2001
US Average Rate of
Traded Establishment
Formation: 2.79%
3.0%
Berkshire
Greater Boston
2.5%
Cape and Islands
Southeast
2.0%
Represents
4,000 traded
establishments
in 2001
1.5%
Pioneer Valley
1.0%
5
10
15
20
Employees per Traded Establishment, 2001
25
30
Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School
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Copyright © 2003 Professor Michael E. Porter
Comparative Performance of Regions
Wages and Patenting Rates
60,000
US Average Patenting Rate:
7.71 per 10,000 Workers
55,000
Greater Boston
50,000
Average Wage,
2001
Northeast
45,000
40,000
US Average
Wage: 34,669
35,000
Central
Southeast
Pioneer Valley
30,000
Represents 500
patents in 2001
Berkshire
Cape and Islands
25,000
20,000
0
5
10
15
Patents per 10,000 Workers, 2001
20
Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School
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Copyright © 2003 Professor Michael E. Porter
Patents by Organization
Pioneer Valley Region
Organization
Patents Issued from 1997 to 2001
1
SPALDING SPORTS WORLDWIDE, INC.
83
2
LISCO, INC.
39
3
REXHAM GRAPHICS INC.
28
4
UNIVERSITY OF MASSACHUSETTS
26
5
SMITH & WESSON CORP.
14
6
UNITED TECHNOLOGIES CORPORATION
13
7
BAYER CORPORATION
12
8
COMBUSTION ENGINEERING INC.
11
9
MONSANTO COMPANY, INC.
9
10
RESEARCH CORPORATION TECHNOLOGIES, INC.
8
11
AVERY DENNISON CORPORATION
6
12
SOLUTIA INC.
6
13
SPECIALTY LOOSE LEAF, INC.
6
14
TAPESWITCH CORPORATION OF AMERICA
6
15
OTIS ELEVATOR COMPANY
5
16
DIESEL ENGINE RETARDERS, INC.
4
17
PRESSTEK, INC.
4
18
HARDIGG INDUSTRIES, INC.
4
19
THOMCAST COMMUNICATIONS, INC.
4
20
NEW ENGLAND SCIENCE & SPECIALTY PRODUCTS, INC.
4
21
MILLA COMPANY INC
4
22
KOLLMORGEN CORPORATION
4
Note: The USPTO assigns location based on the inventor’s address rather than that of the institutional owner.
Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School
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Copyright © 2003 Professor Michael E. Porter
Composition
Pioneer Valley
z
Pioneer Valley has a very strong position in sporting, recreational, and
children’s goods and in leather and related products, with national
employment shares up to ten times higher than expected given the region’s
size
– Other significant clusters include publishing and printing, plastics,
production technology, and education and knowledge creation
z
The Pioneer Valley is strengthening its position in a number of its strong
clusters, especially in building fixtures and in leather and related products
– More than 60% of employees in clusters with a higher than expected
presence in the region and above national average wages are in clusters
growing share
z
Wages in the region lag the state average across all clusters with significant
employment
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Copyright © 2003 Professor Michael E. Porter
Specialization By Traded Cluster
Pioneer Valley Region
3.0%
Sporting, Recreational and Children’s Goods
2.5%
2.0%
Share of
National
Cluster
Employment
in 2001
1.5%
Leather and Related Products
Publishing and Printing
1.0%
Production Technology
Forest Products
Plastics
0.5%
Region’s
Share of
National
Employment:
0.205%
Building Fixtures, Equipment & Services
0.0%
-0.4%
-0.2%
0.0%
0.2%
0.4%
0.6%
0.8%
Change in Share, 1997–2001
= 0–499
= 500–2,499
= 2,500–7,999
= 8,000+
Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School
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Copyright © 2003 Professor Michael E. Porter
Specialization By Traded Cluster
Pioneer Valley Region
0.60%
Publishing and Printing
0.50%
Plastics
Production Technology
0.40%
Share of
National
Cluster
Employment
in 2001
Education and
Knowledge Creation
Aerospace Engines
0.30%
Financial Services
Metal Manufacturing
Region’s
Share of
National
Employment:
0.205%
Communication Equipment
0.20%
Processed Food
Lighting and
Electrical Equipment
0.10%
Automotive
0.00%
-0.06%
Entertainment
Business Services
-0.04%
Transportation
and Logistics
Construction Materials
Hospitality and Tourism
Analytical Instruments
Distribution
Services
Apparel
Medical Biopharmaceuticals
Devices
-0.02%
0.00%
0.02%
0.04%
0.06%
Change in Share, 1997–2001
= 0–499
= 500–2,499
= 2,500–7,999
= 8,000+
Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School
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Copyright © 2003 Professor Michael E. Porter
Employment By Traded Cluster
Pioneer Valley Region
Financial Services
Education and Knowledge Creation
Publishing and Printing
Business Services
Plastics
Hospitality and Tourism
Metal Manufacturing
Sporting, Recreational and Children's Goods
Production Technology
Forest Products
Processed Food
Building Fixtures, Equipment and Services
Distribution Services
Heavy Construction Services
Leather and Related Products
Transportation and Logistics
Entertainment
Communications Equipment
Analytical Instruments
Automotive
Information Technology
Apparel
Chemical Products
Aerospace Engines
Construction Materials
Textiles
Motor Driven Products
Lighting and Electrical Equipment
Medical Devices
Aerospace Vehicles and Defense
Biopharmaceuticals
Furniture
Heavy Machinery
Agricultural Products
Jewelry and Precious Metals
Tobacco
Prefabricated Enclosures
Power Generation and Transmission
Oil and Gas Products and Services
Footwear
Fishing and Fishing Products
Rank
in MA
4
2
2
4
2
5
2
1
3
1
3
2
5
5
1
5
4
5
5
4
5
5
5
2
5
4
3
5
5
2
4
6
5
6
3
.
.
.
.
.
.
0
2,000
4,000
6,000
8,000
10,000
12,000
Employment, 2001
l - Indicates expected employment at rates in the state benchmark for traded clusters. Rank is across 7 state regions.
Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School
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Copyright © 2003 Professor Michael E. Porter
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-1,500
Forest Products
Automotive
Business Services
Publishing and Printing
Metal Manufacturing
Sporting, Recreational and Children's Goods
Lighting and Electrical Equipment
Textiles
Motor Driven Products
Information Technology
1,000
Furniture
1,500
Processed Food
Chemical Products
Production Technology
Apparel
Heavy Machinery
Transportation and Logistics
Jewelry and Precious Metals
Construction Materials
Aerospace Vehicles and Defense
Aerospace Engines
Entertainment
Agricultural Products
Financial Services
Medical Devices
Communications Equipment
Biopharmaceuticals
Heavy Construction Services
Analytical Instruments
Hospitality and Tourism
Plastics
Distribution Services
Leather and Related Products
Building Fixtures, Equipment and Services
Education and Knowledge Creation
Job Creation, 1997-2001
Job Creation By Traded Cluster
Pioneer Valley Region
2,000
Net
Net job
job creation
creation in
in traded
traded
clusters
clusters from
from 1997-2001:
1997-2001:
+535
+535
500
0
-500
-1,000
Indicates expected job creation at rates achieved in national benchmark clusters, i.e. % change in national benchmark times initial employment
Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School
Copyright © 2003 Professor Michael E. Porter
Relative Cluster Performance
0.205% of U.S.
Employment
1.8
Pioneer Valley Region
Apparel
26.4% of traded employment
16.9% in clusters gaining share
9.5% in clusters losing share
1.6
Relative Cluster Wage, 2001
Metal Manufacturing
1.4
Heavy
Construction
Services Processed
Food
1.2
Building Fixtures,
Plastics
Equipment &
Services
Education and
Knowledge Creation
Sporting, Recreational
and Children’s Goods
(14.2, 1.32)
Leather and
Related Products
(6.66, 1.10)
Forest Products
1.0
Publishing and Printing
Production
Technology
0.8
Aerospace
Engines
Hospitality
and Tourism Financial
Biopharmaceuticals Services
0.6
U.S.
average
cluster
wage
Entertainment
0.4
Agricultural Products
0.2
0.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Relative Cluster Employment, 2001
= 0–499
= 500–2,499
= 2,500–4,999
Red = Gaining Share
= 8,000+
Black = Loosing Share
Note: US wage and employment benchmarks
Data points that fall outside the graph are placed on the borders with their values given in parentheses (Employment, Wage)
Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School
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Copyright © 2003 Professor Michael E. Porter
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Local Food and
Beverage Processing
and Distribution
Local Utilities
Local Household Goods
and Services
2,000
Local Financial Services
2,500
Local Logistical Services
Local Industrial Products
and Services
Local Entertainment and
Media
Local Education and
Training
Local Retail Clothing
and Accessories
Local Motor Vehicle
Products and Services
Local Personal Services
(Non-Medical)
Local Commercial
Services
Local Community and
Civic Organizations
Local Health Services
Local Hospitality
Establishments
Local Real Estate,
Construction, and
Development
Job Creation, 1997-2001
Job Creation By Local Cluster
Pioneer Valley Region
3,000
Net
Net job
job creation
creation in
in local
local
clusters,
clusters, 1997-2001:
1997-2001:
+10,274
+10,274
1,500
1,000
500
0
-500
-1,000
-1,500
-2,000
Indicates expected job creation at rates achieved in national benchmark clusters, i.e. % change in national benchmark times initial employment
Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School
Copyright © 2003 Professor Michael E. Porter
Wages By Traded Cluster
Pioneer Valley Region with State Benchmarks
Information Technology
Financial Services
Aerospace Vehicles and Defense
Forest Products
Business Services
Aerospace Engines
Plastics
Analytical Instruments
Heavy Construction Services
Medical Devices
Distribution Services
Sporting, Recreational and Children's
Communications Equipment
Metal Manufacturing
Automotive
Transportation and Logistics
Chemical Products
Production Technology
Publishing and Printing
Apparel
Processed Food
Heavy Machinery
Building Fixtures, Equipment and Services
Education and Knowledge Creation
Biopharmaceuticals
Construction Materials
Lighting and Electrical Equipment
Motor Driven Products
Textiles
Leather and Related Products
Furniture
Jewelry and Precious Metals
Entertainment
Hospitality and Tourism
Agricultural Products
Region’s average
traded wage:
$41,569
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
Wages, 2001
l - Indicates Massachusetts average wage in the cluster.
Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School
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Copyright © 2003 Professor Michael E. Porter
Leading Sub-Clusters by Location Quotient
Pioneer Valley Region, 2001
Clus te r
Fina ncia l S e rvice s
Educa tion a nd Knowle dge Cre a tion
P ublis hing a nd P rinting
P la s tics
Hos pita lity a nd Touris m
Me ta l Ma nufa cturing
S porting, Re cre a tiona l a nd Childre n's Goods
P roduction Te chnology
Fore s t P roducts
P roce s s e d Food
Building Fixture s , Equipme nt a nd S e rvice s
Le a the r P roducts
Tra ns porta tion a nd Logis tics
Communica tions Equipme nt
Ana lytica l Ins trume nts
Automotive
Appa re l
Che mica l P roducts
Ae ros pa ce Engine s
Cons truction Ma te ria ls
Te xtile s
Motor Drive n P roducts
Biopha rma ce utica ls
Lo c atio n
Quo tie nt
S ubc lus te r
Ins ura nce P roducts
Educa tiona l Ins titutions
P a pe r P roducts
S pe cia lty P a pe r P roducts
P hotogra phic Equipme nt a nd S upplie s
P la s tic Ma te ria ls a nd Re s ins
P la s tic P roducts
Touris m Attra ctions
S a w Bla de s a nd Ha nds a ws
P re cis ion Me ta l P roducts
Me ta l P roce s s ing
Ga me s , Toys , a nd Childre n's Ve hicle s
S porting a nd Athle tic Goods
Ma chine Tools a nd Acce s s orie s
P roce s s Ma chine ry
P a pe r P roducts
P a pe r Indus trie s Ma chine ry
P a pe r Conta ine rs a nd Boxe s
Milk a nd Froze n De s s e rts
Fa brica te d Ma te ria ls
He a ting a nd Lighting
Re la te d P roducts
Bus Tra ns porta tion
Ele ctrica l a nd Ele ctronic Compone nts
Optica l Ins trume nts
P roduction Equipme nt
Knitting a nd Finis hing Mills
S pe cia l P a cka ging
Aircra ft Engine s
Wood P roducts
S pe cia lty Appa re l Compone nts
Applia nce s
Conta ine rs
1.95
2.26
14.74
2.91
2.52
4.64
1.76
1.99
54.48
2.76
1.78
44.00
7.54
8.30
1.64
7.95
7.18
2.38
1.97
7.96
3.22
10.57
4.64
2.10
7.40
2.01
1.53
7.94
1.97
2.18
4.66
2.00
1.75
S hare o f
Natio nal
Emplo yme nt
0.40%
0.46%
3.02%
0.60%
0.52%
0.95%
0.36%
0.41%
11.17%
0.57%
0.36%
9.02%
1.55%
1.70%
0.34%
1.63%
1.47%
0.49%
0.40%
1.63%
0.66%
2.17%
0.95%
0.43%
1.52%
0.41%
0.31%
1.63%
0.41%
0.45%
0.95%
0.41%
0.36%
Rank amo ng
Mas s ac hus e tts
Re g io ns
3
2
1
1
4
1
2
2
1
2
3
1
2
1
4
1
2
1
3
1
2
1
1
5
4
2
4
1
2
1
3
1
2
Emplo yme nt
4,791
7,597
2,642
356
255
1,491
2,202
1,135
941
641
983
1,967
1,023
1,456
271
1,683
194
1,009
310
911
272
1,678
235
694
346
560
273
175
325
255
266
232
128
Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School
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Copyright © 2003 Professor Michael E. Porter
Sole Proprietorship Employment and Growth
Pioneer Valley Region
Sole Proprietorship
Employment
2001
7,000
6,000
Sole
Soleproprietorships:
proprietorships:
Sole
proprietorships:
as
%
as
totalemp:
emp:
as %%of
ofoftotal
total
emp:
CAGR
1998-2001:
CAGR
1998-2001:
CAGR
1998-2001:
Professional, scientific, and technical services
37,648
37,648
13.0%
13.0%
0.51%
0.51%
Construction
5,000
Other services
Health care and social assistance
4,000
Real estate and rental and leasing
Retail trade
3,000
Arts, entertainment, and recreation
Administrative, support and waste
mgmt and remediation services
2,000
1,000
Finance and insurance
Wholesale trade
Accommodation
and food services
Manufacturing
0
-5%
-4%
-3%
-2%
-1%
0%
Educational services
Agriculture, forestry,
Transportation and
fishing and hunting
warehousing
Information services and publishing
1%
2%
3%
4%
5%
Compound Annual Growth Rate (CAGR) of Sole Proprietorship Employment, 1998–2001
Note: Data available on county basis only; the allocation to Massachusetts regions is only approximate.
Source: U.S. Census Bureau, Nonemployer Statistics
RCC Pioneer Valley 10-10-03 CK RB3
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Copyright © 2003 Professor Michael E. Porter
Business Environment
Pioneer Valley
z
Pioneer Valley compares favorably to the Massachusetts state
average on most dimensions of the business environment
– Particular strengths include the low cost of living and doing
business, and the quality of the transportation infrastructure
– Skill availability gets average grades, with room for improvement
especially in vocational schools
z
Despite their satisfaction with most elements of the business
environment, business leaders in the Pioneer Valley are critical
towards the overall attractiveness of their region
z
A key concern is the responsiveness and overall role of the state in
economic development
– Pioneer Valley executives see the lack of business-friendly
policies as key barrier to growth, and report regulations and the
lack of policy predictability as a key concern
RCC Pioneer Valley 10-10-03 CK RB3
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Copyright © 2003 Professor Michael E. Porter
Regional Comparisons
Availability of Inputs
Strongly
Disagree
1
Strongly
Agree
Mean Agreement
2
3
4
5
6
7
The overall quality of life in your region makes
recruitment and retention of employees easy
The communications infrastructure in your local region
fully satisfies your business needs
Advanced educational programs provide your business
with high quality employees
Specialized facilities for research are readily available
The cost of living in your region makes recruitment and
retention of employees easy
Qualified scientists and engineers in your local region
are in ample supply
The overall quality of transportation is very good relative
to other regions
The overall quality of the K-12 education system is high
The available pool of skilled workers in your region is
sufficient to meet your growth needs
Basic education and English language instruction for
immigrant workers meet the needs of my organization
The cost of doing business is low relative to other
regions
Access to risk capital (e.g. venture capital, angel capital)
is easy
The institutions in your local region that perform basic
research frequently transfer knowledge to your industry
Berkshire
Central
Northeast
Southeast
Source: Professor Michael E. Porter and Monitor Group
RCC Pioneer Valley 10-10-03 CK RB3
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Cape and Islands
Greater Boston
Pioneer Valley
Massachusetts
Copyright © 2003 Professor Michael E. Porter
Regional Comparisons
Institutions & Education
How satisfied are you with the impact of the
following institutions, in your region, on your
company?
Strongly
Disagree
1
Strongly
Agree
Mean Agreement
2
3
4
5
6
7
Community Colleges
Universities
Industry or Cluster Trade Associations
Business Assistance Centers
Business Incubators
Public or Private Research Organizations
How would you best describe the quality
of new workers from these sources?
Mean Rating
Inadequate
3
Superior
2
1
Private universities
Public universities
Community colleges
Other private or non-profit training providers
Vocational schools
Source: Professor Michael E. Porter and Monitor Group
RCC Pioneer Valley 10-10-03 CK RB3
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Berkshire
Cape and Islands
Central
Northeast
Southeast
Greater Boston
Pioneer Valley
Massachusetts
Copyright © 2003 Professor Michael E. Porter
Regional Comparisons
Regional Strategy & Summary of the Regional Business
Environment
Strongly
Disagree
Does your local region have a well articulated economic strategy
and are you an active participant in it?
Strongly
Agree
Mean Agreement
1
2
3
4
1
2
3
4
5
6
7
My organization can contribute significant value to an economic development
strategy.
My organization is an active participant in the execution of this strategy.
Local business and government leaders have articulated a clear strategy for
promoting the economic development of the local region.
The state has articulated a clear strategy for the region.
Summary of the Regional Business Environment
5
6
7
Overall, this region in Massachusetts is a good place for my company to do
business.
Overall, my region has strengths in my industry compared to other regions in
Massachusetts.
Berkshire
Central
Northeast
Southeast
Source: Professor Michael E. Porter and Monitor Group
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Cape and Islands
Greater Boston
Pioneer Valley
Massachusetts
Copyright © 2003 Professor Michael E. Porter
Regional Comparisons
Future Threats in the Local Business Environment
0%
Percent of Respondents which Ranked
Characteristic Among the Top Five Greatest Threats
100%
Cost of doing business (e.g. real estate,
wages, utilities, etc)
State government's overall
responsiveness to the needs of business
Available pool of skilled workforce
Predictability of state government policies
State regulations for production
processes and products/services
State environmental/safety regulations
Quality of local K-12 schools
Quality of transportation (e.g. ease of
access, traffic)
Access to capital
Level of locally-based competition in your
industry
Predictability of local government policies
Local government's overall
responsiveness to the needs of business
Overall quality of life for employees
Berkshire
Central
Northeast
Southeast
Source: Professor Michael E. Porter and Monitor Group
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Cape and Islands
Greater Boston
Pioneer Valley
Massachusetts
Copyright © 2003 Professor Michael E. Porter
Regional Comparisons
Priorities for Government
Not at All
Important
1
Critically
Important
Mean Importance
2
3
4
5
Promote world-class primary and secondary education
Simplify compliance procedures for government regulations
(e.g. one-stop filing, websites, etc)
Promote specialized education and training programs to
upgrade worker skills
Improve state government support for transportation and other
physical infrastructure
Improve information and communications infrastructure
Implement tax reform to encourage investment in innovation
(e.g. R&D tax credits)
Improve local government support for transportation and other
physical infrastructure
Promote universal computer literacy
Support the particular needs of start-up companies (access to
capital, incubators, management training)
Catalyze partnerships among government agencies, industry
and universities
Speed-up regulatory approval process in line with product lifecycles
Assist in attracting suppliers and service providers from other
locations
Increase funding for university-based research
Increase government support for funding of specialized
research institutes, labs, etc.
Provide services to assist and promote local exports
Source: Professor Michael E. Porter and Monitor Group
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Berkshire
Cape and Islands
Central
Northeast
Southeast
Greater Boston
Pioneer Valley
Massachusetts
Copyright © 2003 Professor Michael E. Porter
Regional Competitiveness
Pioneer Valley
z
Foundations of Regional Competitiveness
z
Assessing the Competitiveness of the Pioneer Valley
z
Action Agenda
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Copyright © 2003 Professor Michael E. Porter
Shifting Responsibilities for Economic Development
Old
Old Model
Model
New
New Model
Model
•• Government
Government drives
drives economic
economic
development
development through
through policy
policy
decisions
decisions and
and incentives
incentives
RCC Pioneer Valley 10-10-03 CK RB3
•• Economic
Economic development
development is
is aa
collaborative
collaborative process
process involving
involving
government
government at
at multiple
multiple levels,
levels,
companies,
companies, teaching
teaching and
and
research
research institutions,
institutions, and
and
institutions
institutions for
for collaboration
collaboration
38
Copyright © 2003 Professor Michael E. Porter
Role of the Private Sector in Economic Development
•
•
•
•
•
•
•
•
•
A company’s competitive advantage is partly the result of the local
environment
Company membership in a cluster offers collective benefits
Private investment in “public goods” is justified
Take an active role in upgrading the local infrastructure
Nurture local suppliers and attract new supplier investments
Work closely with local educational and research institutions to upgrade
quality and create specialized programs addressing cluster needs
Provide government with information and substantive input on
regulatory issues and constraints bearing on cluster development
Focus corporate philanthropy on enhancing the local business
environment
An important role for trade associations
– Greater influence
– Cost sharing
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Copyright © 2003 Professor Michael E. Porter
Public / Private Cooperation in Cluster Upgrading
Minnesota’s Medical Device Cluster
Context
Contextfor
for
Firm
Firm
Strategy
Strategy
and
andRivalry
Rivalry
Factor
Factor
(Input)
(Input)
Conditions
Conditions
• Joint development of vocationaltechnical college curricula with the
medical device industry
• Minnesota Project Outreach exposes
businesses to resources available at
university and state government
agencies
• Active medical technology licensing
through University of Minnesota
• State-formed Greater Minnesota Corp.
to finance applied research, invest in
new products, and assist in technology
transfer
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• Aggressive trade associations
(Medical Alley Association, High
Tech Council)
• Effective global marketing of the
cluster and of Minnesota as the
“The Great State of Health”
• Full-time “Health Care Industry
Specialist” in the department of
Trade and Economic Development
Demand
Demand
Conditions
Conditions
• State sanctioned
reimbursement policies
to enable easier adoption
and reimbursement for
innovative products
Related
Relatedand
and
Supporting
Supporting
Industries
Industries
40
Copyright © 2003 Professor Michael E. Porter
Towards an Action Agenda for the Pioneer Valley
z
Mount cluster development efforts, especially around the region’s
strong traded clusters
z
Improve the communication between business and government
in setting economic policy
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Copyright © 2003 Professor Michael E. Porter