Exploring Opportunities for
a Stronger Regional Economy
Module
Six
Reflecting on the Previous Session
• What did you find most useful or valuable?
• What progress have you made since then?
• Any questions or clarification needed?
Overview of Module Six
• Explore basic concepts of competitive
advantage
• Provide an overview of tools and data
available to detect regional competitive
advantage
• Examine strategies for building stronger
regional economies
BASIC CONCEPTS OF
COMPETITIVE ADVANTAGE
Competitive Advantage: Four Factors
Business shapes the economic value of a
region, but places can help shape, nourish and
sustain local enterprises and industry.
What determines competitive advantage?
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Firm Strategy, Structure and Rivalry
Factor Conditions
Related and Supporting Industries
Demand Conditions
How many
competitors?
What is the threat
of new entry?
Related and Supporting
Industry:
25% of durable supplies
can be purchased locally
0% of non-durable supplies
can be purchased locally
What value
chains or
clusters exist
in our region?
Firm Strategy:
3 hospitals
7 full-time doctors
Industry determined by
university-owned hospital,
located 100 miles away
Local customer
base? What do
people want?
Demand Conditions:
Health
Care
Industry
Unemployed and
underemployed seeking
low-cost health care
Higher income leaving the
region for large urban
hospital
Factor Conditions:
Low rent
Inexpensive unskilled labor
Difficult to retain medical
professionals
How does place
influence the
quantity, quality
and cost of input
factors?
DETECTING REGIONAL
COMPETITIVE ADVANTAGE
What Are the Keys to
Economic Growth?
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People
Place
Businesses
Innovation
Clusters or branding
First Key to Economic
Growth: People
• Who are our workers?
 Skill level, education, occupation
 Work ethic
• Who are our residents?
 History and culture
 Long time residents, newcomers
People: The Residents
• Who are the people that live in this region?
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How long have they lived here?
How many generations have lived here?
Where did they originate?
Why did they come?
• Why do they like living here?
 Social conditions
 Cultural factors
 Economic prospects
People: The Workforce
• Who are our workers?
 Basic demographics
 Experience
 Work ethic
• Is our workforce adapting to change?
 Technology
 Recognizing needs
Second Key to Economic Growth:
Place
• What amenities does
our region offer?
• Why would people want
to live here?
• Why would businesses
relocate here?
Place: Industrial Indicators
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Current leading employers
New and expanding companies and industries
Research facilities, R & D
Available land and buildings
Existing infrastructure
Access to transportation networks
• Tax structure
Place: People & Quality
of Life Indicators
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Population and labor force
Education
Health care
Recreational opportunities
Shopping
Crime, weather, etc.
Third Key to Economic Growth:
Business
• What is the portfolio of businesses (small,
medium, large)?
• What does entrepreneurship look like?
• What’s the mix of industrial sectors?
Industries & Occupations:
Looking at Your Region’s Data
• What types of industries/
businesses currently exist?
• What are key occupations?
• How have these businesses
fared, particularly during the
recent economic downturn?
Business Assistance in the Region
What type of programs, assistance
or incentives are offered to:
• Support expanding businesses?
• Recruit new businesses?
• Foster the growth of
entrepreneurs or small, locallyowned businesses?
Identifying Entrepreneurs
People with
underutilized talent
Small
businesses
Social
Entrepreneurs
Unemployed
Entrepreneurship
Youth
High growth
businesses
Innovators
Self- Employed
Who Is an Innovator/Entrepreneur?
Identifying Innovators &
Entrepreneurs
Problem/Opportunity
New
Old
New
YES
YES
Old
YES
NO
Solution
Entrepreneur: one whose goal is to
create or capitalize on new economic
opportunities through innovation.
Assessing Entrepreneurship Capacity
• Community surveys
 Existing programs
 Community readiness
 Leadership
 Networks
• One-on-one interviews with local
entrepreneurs
 Assess ambitions and needs
 Identify local/regional constraints
Assessing Entrepreneurship Capacity
Inventory of Entrepreneurship:
• BEA-REIS data
• Census (non-employer statistics)
• County Business Patterns
• Panel Study on Entrepreneurial
Dynamics
• Business owners survey
Capacity for New Entrepreneurs:
• Educational attainment
• Immigration and diversity
• Financial resources
• Business resources
Fourth Key to Economic Growth:
Innovation
"Innovation . . . the successful
introduction of a new thing or
method . . . Innovation is the
embodiment, combination or
synthesis of knowledge in original, relevant,
valued new products, processes or services.”
Luecke and Katz, 2003
How Nurturing is Your Region?
Three Phases of Innovation
Conception
Business
Process
Regional
Capacity
Implementation
Marketing
• Idea Generation
• Project Planning
• Development
• Prototype Dev
• Testing
• Production
• Launch
• Education
• Technical
Assistance
• R&D centers
• Universities
• Industrial Parks
• Capital Availability
• Community Support
Source: Tawari, Buse and Herstatt, 2007
Your Region’s Capacity for Innovation
• Research & Development (R&D) assets
• Regional universities or community
colleges
• Other resources that foster innovation
The Creative Class
• Should be attracted and
retained
• Develop, design or create new
applications, ideas,
relationships, systems or
products
• Considered “footloose”
• Attracted to amenities
Florida, 2002
Why the Creative Class?
• The density of creative class has
a positive effect on job growth
both in the ‘creative’ and ‘noncreative’ sectors.
• Creative capital and
entrepreneurship work in
synergy with one another to
increase employment
opportunities in both sectors.
Where is the Creative Class in the US?
How "creatively-driven" is your economy compared to the national average?
Dark-blue is the least creative and dark-red the most creative areas.
An Example
Fifth Key to Economic Growth:
Clusters or Branding
• Cluster – making the whole greater than the
sum of the parts
• Branding – consolidating the essential
characteristics of the individual identity into a
brand core
Industry Cluster Analysis
• Views firms and industries, as
interdependent, not isolated
• Identifies value chains
• Discovers collections of businesses
producing similar outputs
What Can Regional
Cluster Analysis Tell Us?
Where we have . . .
• Gaps
• Growing industries/clusters
• Declining industries/clusters
Data Needs
• Industry sector data: number of
establishments (over time), number of
employees, payroll, earnings
• Potential linkages to determine value
chains
You Think There Is a Regional Cluster,
So Now What?
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Map the cluster
Determine if growing or declining
Evaluate regional capacity
Identify potential leakages
& opportunities
• Determine potential strengthening
strategies
MAPPING THE CLUSTER
Value Chain Cluster Example
Grape stock
Fertilizers,
Pesticides,
Herbicides
Grape
harvesting
equipment
Irrigation
technology
Wine
State government
agencies
Winemaking
equipment
Barrels
Bottles
Growers/
Vineyards
Wineries/
Processing
facilities
Educational, Research
& Trade organizations
Caps & Corks
Labels
Public
Relations &
Advertising
Specialized
publications
California
Agricultural Cluster
Food
Cluster
Tourism
Cluster
Source: California Department of Food and Agriculture
Cluster Illustration: KY Bubble Chart
Source: EMSI.com
Identify Potential Leakages and
Business Opportunities
For the cluster, determine the:
• Current regional capacity
• Industry potential
• Future growth of industry
• Types of skills needed
Identify Potential Leakages and
Opportunities for New Businesses
Grapes
Advertising
Research
Fertilizer
Wine
Zero inputs available regionally
Small % of inputs available regionally
Large % of inputs available regionally
100% of inputs available regionally
Industry Overview
Business and Industry
Examining Clusters in Your Region
Cluster Choices
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Advanced Materials
Agribusiness, Food Processing &
Technology
Apparel & Textiles
Arts, Entertainment, Recreation & Visitor
Industries
Biomedical/Biotechnical (Life Sciences)
Business & Financial Services
Chemicals & Chemical Based Products
Communications
Computer & Electronic Product
Manufacturing
Computers & Software
Construction Materials
Defense & Security
Education & Knowledge Creation
Electrical Equipment, Appliance &
Component Manufacturing
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Energy
Energy (Fossil & Renewable)
Fabricated Metal Product Manufacturing
Food Products & Services
Forest & Wood Products
Glass & Ceramics
Health
Information
Information Technology & Telecommunications
Machinery Manufacturing
Manufacturing Super Cluster (6 sub-clusters)
Metals & Machining
Mining
Primary Metal Manufacturing
Printing & Publishing
Transportation & Logistics
Transportation Equipment Manufacturing
Example: Health Cluster
Health Cluster
Health Cluster
Health Cluster
Looking Deeper into the Health Cluster
Distribution of Jobs
Strengthening the Hospital Sector
Regional Occupations Related to Health Care
EXPLORING
POSSIBLE
ECONOMIC
DEVELOPMENT
STRATEGIES
Strategies to Strengthen a Cluster or Brand
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Targeted attraction of industry
Business retention and expansion
New firm creation/entrepreneurship
Attraction of the creative class
Network development and
meta-business creation
Targeted Attraction of Industry
• Past: Blindly attracting industry
• Now: Targeting businesses likely to be
successful in the region
• Strategies:
 Cluster mapping
 Location models
 Community Business Matching
model
Location Models
Employs place specific data to:
• Analyze the probability of an
industry moving to the region
• Evaluate the region’s ability to
respond to industry needs
• Select industries with the
highest likelihood of success
Community Business Matching Model
Community
Assets
Goals
The
Ideal
Compatibility
Desirability
Needs
Profile
Business
Source: Cox et al., 2009
Business Retention & Expansion
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Lets businesses know they are valued
Helps solve local business issues
Improves community awareness
Connects businesses to community
resources
• Creates connections between community
organizations
• Fosters job retention & growth
How BR&E Works
• Planning Phase
• Action Phase
 Recruit volunteer visitors
 Visit local businesses
• Follow-up
 Respond to concerns
 Plan for future
Regional Strategies to
Increase Entrepreneurism
• Community-based training options
 Weekend boot camps
 FASTRAC or other 13-week programs
 Short-term targeted business training
• Access to business coaching
• Youth entrepreneurship: 4H,
Scouts, in-school programs
Entrepreneurial Communities or Regions
Openness to
new ideas and
intellectual
stimulation
Capital: Equity and Debt
Education: K-22
Conception
Community
Support
Information
Birth
Infrastructure
Connections +
Networking
Services and Amenities
Source: Based on Reynolds, et. al., Small Business Economics 23: 263–284, 2004.
Attracting the Creative Class
Potential to Affect
The creative class is ‘footloose’ and tends to
congregate in places with a high quality of life.
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Networking
Retain/attract youth
Recreational activities
Cultural diversity, tolerance and
inclusiveness
Infrastructure
Population density
Proximity to metropolitan areas
Natural amenities (esp. mountains, forest)
Business Network Development
A formal or informal collaboration or cooperation
among either competing firms or
firms that are part of a value chain
for the purpose of
creating a net benefit for all involved
Network Examples
Workforce Development Example
• Milwaukee Seven Water Council:
Transform the workforce system and create high
performance talent pipelines within the region
Entrepreneurship Network Example
• The Entrepreneurs Network:
Promote job growth and business creation
Meta-Business Formation
Strategies for generating revenue that
support all local business
Examples:
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Local coupons
Local credit/debit cards
Local currency
Business directories
Local stock exchange
Businesses that support other businesses
What’s Next?
• Consider other potential strategies that
could be successful in the region
• Further examine the regional data
Final Reflections
 What topics did you
find most helpful?
 What did you find
confusing?
 What other data do
you need?
 Other items you want
to mention?
Looking Ahead: Module Seven
We will:
 Examine regional assets
 Explore the region’s seven
capitals
 Take an honest look at
potential barriers
 Take steps to link assets to
your potential regional goals