CEO Partnerships: The Next Great Leap in Economic Development

Overcome the false divide between those who seek to lure companies to invest in their geographies (i.e. the “smokestack chasers”) and those who seek to develop  indigenous technology-based clusters. The fact is, these strategies are complementary, not competitive. The ability of Texas to persuade so many companies to relocate to the Lone Star state is predicated on the existence of ecosystems in Texas that support those companies, not just on tax breaks and the governor’s Texas Enterprise Fund. The support of universities and community colleges in creating the right skill sets, for example, helps increase the “stickiness” of the state’s metropolitan regions, five of which now rank in the nation’s top 10 cities by population. Once settled in Austin or San Antonio or Dallas, companies are less likely to pull up stakes and leave when tax breaks expire. This is one reason why Texas consistently wins Chief Executive’s award for Best State for Business.

To create the ecosystems and infrastructure that companies must have, EDOs must understand the supply networks that companies in specific industries need. One example of that is what NorTech (Northeast Ohio Regional Non-Profit Technology) has done in the greater Cleveland-Akron area. It identified three emerging industries—advanced energy, water technology and flexible electronics. It then brought in seasoned private industry experts to become directors of “cluster acceleration” for each sector. It has been their job to find emerging technologies, whether from large or small companies or from university researchers, and help those players find new customers.

“One of the major problems in many regions is that
different players don’t truly communicate with each other.”

“It didn’t matter where the idea came from,” says Rebecca Bagley, who just departed NorTech as president and CEO after six years. “It was all about moving new technologies and new products to market.” Doing the nitty gritty work of building supply chains and customer networks is one way to both nurture start-ups and draw in larger companies for the long run. Developers know that roads, bridges, airports and seaports are crucial pieces of infrastructure, but they need to look more broadly at what Willy Shih at Harvard Business School termed the “industrial commons,” the agglomeration of integrated suppliers and providers of human capital. That’s been one of the problems associated with persuading American companies to bring their manufacturing home from China—the supplier base has been wiped out and the skills sets that are necessary, like quality engineers, may not exist. As EDOs come of age as a profession, they’re learning that chasing smokestacks is more productive if they build the broad infrastructure to support them. That’s how a genuine cluster is developed. It’s not just a matter of flipping a switch by luring in one major transplant company.

Partly thanks to the research that the International Economic Development Council has funded, EDOs now have solid information about what works and what doesn’t work when it comes to technology transfer from universities, federal research labs, research institutes and other “idea factories.” Incubators require long-term funding and must have carefully calibrated motivations to encourage young companies to leave the nest and achieve scale.

We know a great deal about how to develop and attract angel investors and venture capitalists. We realize that large companies such as Intel and Johnson & Johnson can play key roles in these clusters by investing in smaller companies and taking seats on their boards. We’ve learned a great deal about workforce training and retraining, and also about export promotion, which is an essential ingredient for any technology cluster. We should ask ourselves, across all these areas, what are the structures that work? It is not possible to guarantee that innovation occurs, but we know, as in the art of cooking, what ingredients are essential to enable the desired outcomes. All this means that we take economic development out of any ideological or political context and concentrate on doing what is most pragmatic. If macroeconomists can argue that their field is a “science,” so can development experts.

To help develop further credibility, the profession needs to insist that governors and mayors hire developers who have genuine credentials and are not just political fundraisers or friends
of the family. To that end, the IEDC has developed certifications for economic developers and conducts frequent conferences and seminars in its effort to codify best practices. There are competencies that can be defined.

One other best practice to stimulate a community’s learning is organizing visits to cities or regions that have demonstrated success. The Orlando EDC in 2012 took 100 business and political leaders, technologists and university experts from Orlando to Austin, Texas, to see how that city has become such a leader in advanced manufacturing. Now Orlando is organizing a similar trip to Phoenix, which has world-class leadership in aerospace and advanced electronics and is now trying to nurture what it sees as the next wave of growth in software, biomedicine and financial
services clusters.

RICK L. WEDDLE is president and CEO of the Orlando Economic Development Commission and was CEO of Research Triangle Park in North Carolina from 2004 to 2011. WILLIAM J. HOLSTEIN has been writing about economic development issues since 1992 and is the author of The Next American Economy: Blueprint For A Real Recovery.