detecting regional competitive advantage

8/8/2019 Detecting Regional Competitive Advantage

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Detecting Regional Competitive

Advantage


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Module 3

Describing a CollaborativeRegional EconomicDevelopment Framework

Leading the Planning Effort

Detecting Regional Advantage

Formulating Strategies

Executing Your Plan

Module Objectives

* Conceptualizing regionaladvantage

*Organizing the analysis

*Analyzing regional connections

*Reviewing key tools

& techniques


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Scenario

Youve developed a regional call to action around a

set of perceived challenges:

Slowing or declining employment opportunities in

traditionally strong industries in various parts of the region

New job opportunities in a diversity of seemingly unrelated

industries, some of which pay low wages

A host of training demands as regional labor force seeks to

transition to new industries

Uncertainty with respect to individual & joint infrastructureconstraints and needs given economic transition underway


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Whats next?

Information gathering, but what kind?

Assess your regions economic competitive

advantages

What is the relevant region? What kinds of analysis should you undertake?

What indicators should you assemble?

How should the study be organized and carried out? Who

should do it? Assess your regions capacity to implement a

strategy (addressed in Module 4)


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Objectives

I. Basic concepts of competitive advantage

II. Guides for organizing your regional analysis

III. Approaches to analyzing regional connections

IV. An overview of tools & data for detecting regionalcompetitive advantages

Foundations: Amenities, costs, infrastructure

Understanding your economic base, talent base, capacity

for innovation & new ideas generation, capacity for newbusiness formation & old business regeneration


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I.

Basic Concepts


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Influences on Competitiveness

The success of businesses in

a location depends on their

own strategies

(microeconomic factors)

as well as factors in thebroader place in which

companies do business

(macroeconomic conditions)

Places as jurisdictions have

control over some of the

latter and can influence

some of the former

Macroeconomic, political,

legal context

Microeconomic

foundations

Company

operations &

strategy

Micro business

environment

Internal External

Productivity growth

From Porter (May, 2000)


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Porter Diamond Theory Perspective

Four majordeterminants ofcompetitiveadvantage ofindustries

Industries arelocated inplaces, andtherefore placesinfluence

industry success

Firm strategy,

structure and

rivalry

Factor conditions

Demand

conditions

Related and

supporting

industries

Local context

encourages

investment and

sustained

upgrading

Sophisticated anddemanding local

customers

Factor quantity,

quality, cost

Clusters, not

industries

From Porter (May,

2000; 1990)


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Businesses, Industries & Places

Economic value is created by the business enterprise,

but industries and places help shape, nourish, sustain

or erode it

The source of place prosperity in Porters diamondtheory is consistent with many other regional macro

theories

Entrepreneurship

Creative destruction, Endogenous growth

Innovation


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RegionalCompetitive Advantage

Businesses are competitive to the degree they are

able to generate profits in contested markets

Places are competitive to the degree their

residents are able to build wealth Local private sector businesses are not the sole

source of wealth building opportunities for

residents

Other sources are government & non-profit

organizations, investments & transfers, non-local

businesses


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Geography of Wealth Creation

Origins ofwealthcreation ina place are

rarelystrictlylocal

Examples: A business that draws on a regional

labor pool to achieve productivitygains & thus profits

A supplier business serving a distantmarket

Faculty at a local universityconducting federally funded R&D

Restaurants & hotels serving tourists

visiting multiple nearby destinations Consumer services industries

targeting retirees


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Lessons

We can think of the competitive advantage of a place

in terms ofthe sources of local wealth creation

Some of those sources are regional, others are

national or global Moreoverthe geographies of wealth creation are

becoming increasingly complex

We can define the analysis supporting regional

strategic planning as an effort to identify the sourcesof local wealth creation in a set of places for which

economic opportunities are jointly determined


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II.

Organizing the Analysis


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Five Overall Guides

Building blocks of local wealth creation

Flexible understanding of geography

Comprehensive versus focused

Analysis as ongoing inquiry, not a one-time

enterprise

Analyzereportinterpretadjustanalyze:

Build leadership into the analysis phase


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1) Five Building Blocks

A way to organize inquiry into the sources of

regional wealth creation

ECONOMIC

BASE

ENTRE-

PRENEURSHIP

TALENT

INNOVATION

& IDEAS

Location, Infrastructure, Amenities,

Factor Costs

What you make, including

your existing &prospective industry

clusters

Your capacity to create

companies wholly new or

from existing firms

Your capacity to innovate

and generate new ideas

What you do: your

workforce skills &

human capital base

The basic conditions defining the

economic milieu of the region


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2) Understanding of Geography

Were accustomed to thinking about geography as a

container

Example: We undertake analysis for a defined set of

spatial units, e.g., a metropolitan area made up of multiple

counties

Many tools available to help us use geography to

understand our economic assets (i.e., as an indicator)

Example: GIS techniques that identify locations where

industries are clustered


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Examples

More employment

Megaregion

Employment in USfurniture industry

Employment growth

by state, 1989-99

0%

5%

10%

15%

20%

25%

30%

35%

40%

US NC GA MA MI PA TX VA

Geography ascontainer

Geography as

indicator


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Comprehensive: Organize Findings

using SWOT Framework

Creation of Strategy

Threats &

Opportunities in

Environment

Key Success

Factors

External Appraisal

Strengths &

Weaknesses of Region

Distinctive

Competencies

Internal Appraisal


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4) Analysis as Ongoing Inquiry

One-time studies of limited value Trends change quickly

Data collection start up costs high

After comprehensive studies, subsequent planning oftenrequires additional, focused analysis

Regional planning process can be used as a way to build

economic intelligence function

Wholly out-sourcing work not recommended Need an ability to do analysis to commission, interpret, and

implement analysis


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5) Build Leadership into Analysis

Heavy element of regional analysis is

interpretation, adjustment, and re-analysis

It is fundamentally exploratory

Assembled leadership team and stakeholdersfor regional planning effort an important

source of expertise

Analysis gains credibility if leadershipfeedback is solicited and incorporated as work

is conducted


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Initial Target Clusters IDd

Leadership/Stakeholder Review

Target Refinement/Refocusing

Strategy Formulation

Strategy Implementation

Monitoring and Evaluation

Analysis of Industrial BaseMethods typicallyquantitative, may

use benchmarks

Analysis of Target Clusters: Regional SWOT

Methods heavily

qualitative, focus

group modal

approach

Analysis of Targets: Global Assessment

Methods heavily

qualitative, key

informant

interviews modal

approach

Ideal is analysis &

planning on an

ongoing basis

Example: Industry Cluster Analysis

Key phase ofindustry cluster

analysis is

leadership &

stakeholder

review


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III.

Understanding Regional Connections


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Conceptualizing Regions

What is a region?

A geographical area of similar characteristics

Homogeneity within

Heterogeneity between (different from other places)

A place of interest to people, with a unique identity and meaning

Why regions?

Indicator of change, capture trends

Potential for economies of scale, greater efficiencies

Measure of personal ability, faults, achievements

Understand challenges and opportunities under similar

conditions


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Regional Scales

DefinedPlanning

Area

Working

Region of

Neighbors

Nation

State


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Identify Interactions

Commuter Flows- Census BureauJourney to Work Labor market area

Net job exporter or net job importer?

What industrial strengths does your jurisdiction have within the region?

Trade Flows- Commodity flows Clusters of industry chains- industrial cluster analysis

Value chains of major industries/services

Demographic needs Elderly population, minority communities, school districts

Existing Administrative Districts Federal Reserve Districts

Homeland Security regions


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What Makes Sense

Sometimes neighboring counties dont have

anything in common

Dont let state lines define regions

Dont be afraid to go beyond county lines to

identify townships or major cities for

rural/metro interests

Find areas that share interests and goals


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Legend

Commute Region

Non core

Micropolitan

Metropolitan

Census Urban Areas

InterstateHighway

Planning Region as Labor Market


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Commuting Flows Analysis


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Using Regions

A given place will often have multiple

overlapping and distinct regions that are

relevant for economic development

Appropriate region will depend on strategies andconcerns at hand

Some regions will only be used for data

analysis and comparison factors

There is rarely a single definitive region for

any locality


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IV.Tools & Data Overview


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Foundations:

Profilingbasic

conditions in the

region & regional

characteristics

ENTRE-

PRENEURSHIP

TALENT

INNOVATION

& IDEAS

ECONOMIC

BASE

Location, Infrastructure,

Amenities, Factor Costs


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IEDC Data Standards as Guide

1,200 data elements, 25

spreadsheets

2/3 of data is available

from public datasources, the rest is local

knowledge

Develop the extensive

database over time,focus on key indicators

Benchmark one place

against others, observe

weaknesses/strengths

Tailor planningapproaches

Advantages beyond site

selection, a yearly

update and way to trackthe process of your

economy


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Location

Leading employers, new &

expanding companies

Research bases, R&D personnel

Population and labor forcedemographics

Available land and buildings

Business Directory,Reference

USA, BLS, Census, Dun &Bradstreet, cbre.com,

economicmodeling.com,

LocationOne

Key indicators

Other

indicators

Data Sources


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Amenities

Quality of life data- climate,

housing, healthcare

Environmental conditions

Higher education resources,vocational schools, community

colleges

Census, ERS Amenities Scale,

nces.ed.gov,epa.gov/water/region,

epa.gov/air/data/, hhs.gov

! Key indicators

! Other indicators

! Data Sources


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Infrastructure

Utilities

Transportation Modes- air, rail,

water, road

International Resources Government

Transtats.bts.gov, fra.dot.gov,

FAA, nerc.gov/regional,

usatradeonline.gov

! Key indicators

! Other indicators

! Data Sources


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Understanding the

Regional

Economic Base with

Industry Cluster

Analysis

ENTRE-

PRENEURSHIP

TALENT

INNOVATION

& IDEAS


Factor Costs

ECONOMIC

BASE


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Industry Cluster Analysis

A type of analysis that views firms, and therefore

industries, as interdependent, not isolated

Functional, Spatial/geographic, Temporal

A way of understanding a regions economic base ata given point in time

Not a means of identifyingfixedcompetitive

strengths; clusters are always changing

Therefore, must be exploratory,spatialand dynamicin approach and perspective


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What is a regional industry cluster?

A cluster is a geographic concentration of interrelated

competitive firms and institutions with sufficient established

or prospective scale to generate external economiesmaking

the whole greater than the sum of its parts

With different vintages

Established

Competitive High scale and growing

Mature High scale and stable, or declining

Stabilizing High scale and diversifying into new areasProspective

Emerging Low scale but high recent growth

Strategic Based on plans, needs, investments

Potential Pinned on hopes and dreams


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To Analyze

Define business interdependence

Make conceptual & empirical leap to

sectoral interdependence

Measure sectoral interdependence to derive

cluster templates

Invoke an assumption regarding geography

Build appropriate datasets to utilize templates Refining geographic presentation/use


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Sectors ClustersEnterprises

First mapping Firms to sectors

Second mapping

Sectors to clusters


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How to do this mapping?

In large scale quantitative analyses, first

mapping is dictated to us

Second mapping requires definition of

functional interdependence, as well as anassumption of geography at which that

functional interdependence is defined

Once we have that mapping, we can apply toregional data


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Global

linkages

Study

Region

U.S. Industries Value Chains, Clusters

Target: Emerging Opportunities

Target: Specializations

Target: Gaps

Target: Clear Strengths

PastPerformance

Projected Growth

Regional

Historical

Performance

Regional

ProjectedGrowth

Regional Specialization

Under-represented in Region


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Industries in core industry value chain

Core industry value chain in total

Individual core industry

National growth,

post-recession?

LA or

region

growth?

Concentrated in

Louisiana or

region?

Assessment:

Core size, mix & chain depth

Good US growth

Strong recent LA performance

ESTABLISHED

Example Scanning Analysis

ID Industry NAICS Core

Linked

FullChain

Core

Linked

FullChain

Core

Linked

FullChain

Oil, Gas & Energy

6 Oil & gas extraction 211 1 1 1 1 1 1 0 0 053 Petroleum & coal product mfg 3241 1 0 1 0 1 1 0 1 0

129 Pipeline transportation 486 1 1 0 0 1 1 1 0 1

84 Agricultural, cons truc tion & m ining machinery mfg 3331 1 0 0 1 0 0 0 0 0

12 W ater, sewage and other systems 2213 1 1 1 0 1 1 1 1 1

10 Power generation & supply 2211 1 0 1 0 1 1 0 1 1

150 Architectural & engineering services 5413 1 0 0 1 1 1 1 1 1

11 Natural gas distribution 2212 0 1 1 0 0 1 0 1 0

9 Nonmetallic mineral mining & quarrying 2123 0 1 1 1 1 1 0 1 0

105 Misc electrical equipment mfg 33599 0 1 0 1 0 1 1 1 1

7 Coal mining 2121 0 1 1 1 1 1 0 1 1

LA '02-'05

Growth

U.S. '02-'06

GrowthLA S pecialization


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Individual core industry

Industries in core industry value chain

Core industry value chain in total

Concentrated in

Louisiana or

region?

National post-

recession growth?

LA orregion

growth?

Assessment:

Core small, mix limited, little depth

Good US growth

Strong recent LA performance

PROSPECTIVE

Example Scanning Analysis

ID Industry NAICS Core

Linked

FullChain

Core

Linked

FullChain

Core

Linked

FullChain

Information Technologies140 Data processing & related services 5182 0 0 0 0 1 1 1 1 1

152 Com puter system s design & related services 5415 0 0 0 1 1 1 1 1 1

1 39 W e b p ub lish in g, b ro ad ca stin g, IS Ps & se arch p or ta ls 5 1A 0 0 0 0 0 1 0 0 1

133 Software publishers 5112 0 0 0 0 1 1 0 1 1

94 Com m unications equipm ent m fg 3342 0 0 0 0 0 0 1 1 1

96 Sem iconductor & electronic com ponent m fg 3344 0 1 0 0 1 0 0 1 1

LA '02-'05

Growth

U.S. '02-'06

GrowthLA S pecialization


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Reminders

A type of analysis that views firms, and therefore

industries, as interdependent, not isolated

Interdependence has three dimensions: Functional,

spatial/geographic, temporal

A way of understanding a regions economic base at

a given point in time

Not a means of identifyingfixedcompetitive

strengths

Therefore, must be exploratory,spatialand dynamic

in approach and perspective


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Talent:Understanding

Regional

Workforce Skills

ENTRE-

PRENEURSHIP

INNOVATION

& IDEAS


Factor Costs

ECONOMIC

BASE

TALENT


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Understanding Talent

Why is talent important

Businesses want to hire top talent, talent drives innovation

and entrepreneurship

What is talent?

Skills, training, education, intuition, specialization, and

capacity

Talent comes in all ages and occupations

Talent is more than educationit is leadership, experience,

skills, embedded human capital

What do you measure?


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Measuring Talent

What are the regions established knowledge, skills and abilities

(KSAs)?

Find occupation/skill clusters

Is the economy diverse or specialized?

Sources: OES, Census occupations, ONET

What type of skills do your major occupations need?

Sources: Conduct employer surveys to determine necessary

skills and measure current workers abilities

Analyze education provision and performance at all levels Sources: Test scores, teacher & graduate retention rates, placement,

outcomes


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Regional Workforce Adaptability

Are your workers technology oriented?

Source: computers/pop, internet use on the job and at home

Is your area engaged in adaptive worker training?

Source: Catalogue agencies involved in workforce training,industry type, skills taught

Is the population supportive of change and new

ideas?

Source: Community attitude surveys, past reactions tochange and new ideas


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Demographic Influences

Is your region retaining the skills it creates?

Out-migration, age mix shifts, educational attainment

trends

What type of skills are you attracting? New companies, new workers, salaries

Is your economy absorbing population changes?

Latent talent, underutilized workers, unemployment

rates, under-employment


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Regional

Innovation

CapacityAssessment

ENTRE-

PRENEURSHIP


Factor Costs

ECONOMIC

BASE

TALENT

INNOVATION

& IDEAS


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Research

Firm specific knowledge and platforms

General knowledge

Identify

potentialmarket

Invent and/or

produce

analyticdesign

Conduct

detailed

design andtesting

Redesign then

produce good

Distribute and

market

One R&D/Innovation Model


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R&D and Innovation Producers

Regional innovation base built on

Larger companies

Smaller companies & entrepreneurs

Universities Private R&D houses

Federal R&D labs

State R&D labs Community colleges

Often doing

different types of

innovation, but

considerable

feedback among

them


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Innovation Does Not Respect Geography

Part of the regional innovation system is its

capacity to absorb ideas & innovations from

elsewhere

Neighboring & distant regions Companies & industries to which it is linked

Knowledge spillovers from university research


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Analysis Aims to Answer

What are the regions most nationally competitive R&D

assets?

Within each academic institution, what are the greatest relative

strengths?

What are the industry sectors/technology areas of greateststrength among private industry R&D performers?

What are the emerging areas of R&D strength? (Change in

rank and $ research funding)

How effective are regional universities at commercializingnew ideas and innovations?


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Indicators & Sources

Total research expenditures by institution and discipline (NSF-CASPAR)

NSF research funding

NIH research funding (NIH)

Any state research funding agencies or sources

National Research Council rankings of strength of faculty

U.S. News and World Reports university (reputational) rankings

Academic Analytics faculty scholarly productivity indexes

Websites of universities, departments, and research centers

Utility patents by region and industry sector (USPTO)

Small Business Innovation Research grants, by region and industry sector

Directories of independent research laboratories


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Industrial

Strengths

AssessmentEstablishedeconomic base

Prospective

economic base

R&D Strengths

Assessment

AcademicPrivate

Established

Prospective

Set of existing & emerging

science strengths/investment

opportunities

Set of joint science/industrial

strengths/investment

opportunities

Analysis Approach


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Regional

Entrepreneurship

CapacityAssessment

ECONOMIC

BASE

ENTRE-

PRENEURSHIP

TALENT

INNOVATION

& IDEAS


Factor Costs


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Defining Entrepreneurship

Small

businesses

Self- Employed

People withunderutilized talent

Social Entrepreneurs

The unemployed

Youth leadersCommunity programmers

Club leaders

Innovators

High growth

businessesEntrepreneurship

Youth

Retirees


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6363

Previous Reports

Assessment Approaches

Quantitative Public Data & Previous

reports

Provides basic scope of existing

entrepreneurship

Data are not extensive Compare your area to other

regions, states

Qualitative Surveys & Interviews

Community specific

Gathered on the ground

Richest data available but local

Essential to effective policydesign and a deeper

understanding of

entrepreneurship


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Quantitative Assessment

Current Status

BEA-REIS data

Census Bureau Decennial Census

Nonemployer Statistics

County Business Patterns

SBUS Business TrackingLongitudinal Studies

Survey of Business Owners

Current Population Survey American Community

Survey

Capacity

Educational attainment

Immigration and diversity

Financial resources

Business resources

Form hypotheses about

the entrepreneurial

activity & capacity ofyour region


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Qualitative Assessment

Capacity

Community readiness tocreate programs

Existing programs

The ability to createprograms

Leadership and networks

Current Status

Community surveys

Interviews

Small businesses, self-

employed, business leaders Group assessment tools

Community identifies goals

Entrepreneur identification

Assess ambitions and needsFocused

investigation

tests hypotheses

formed partially

with quantitative

assessment


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Entrepreneurship Mapping in

Perspective

Intensity Scale of Entrepreneurial Mapping Techniques

Census

dataFull

Community

Asset

Mapping

Small Business

Interviews

Self Employed

Inventory

Community

Perceptions

Intensity of resources and time should reflect

intended outcomes, regional support and

anticipated participation


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Review


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What We Covered

I. Basic concepts

II. Organizing your regional analysis

III. Analyzing regional connections

IV. Overview of tools & data for detecting

competitive advantage


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Whats Next?

How do we put the different analyses together

to inform the design of regional development

strategies?

Integrate with assessment of regional planningcapacity in a SWOT process

Module 4

Tomorrow!

detecting regional competitive advantage

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