The Fundamentals of Regional Economic Development: The Fundamentals of Regional Economic Development Edward W. (Ned) Hill Vice President for Economic Development Cleveland State University Blue Spring, Missouri February 7, 2007


1. Don’t be a victim: 1. Don’t be a victim Be realistic without being pessimistic Change policies and attitudes that can be changed Respond to opportunity within a strategic framework


2. Economic development is about products; Not jobs: 2. Economic development is about products; Not jobs Employment is derived from product demand End users do not purchase technologies, they purchase products and services A regional economy is a portfolio of products and the technologies they embody


2. Economic development is about products; Not jobs: 2. Economic development is about products; Not jobs The Product Cycle is real and affects strategy and implementation Competitive advantage changes over time as the region’s product portfolio ages


3. Productivity growth is the basis of sustained higher incomes: 3. Productivity growth is the basis of sustained higher incomes The measure of economic development success is change in per capita income. Increases in earnings come from increases in productivity Understand what productivity means: Value added per hour worked


4. Economic development is practiced through the income statement of the business: 4. Economic development is practiced through the income statement of the business Do you represent the world’s best place to operate the business? Gross revenue—the top line Expense items—the middle lines Labor and talent If not, then the business is there either through historical accident and inertia, or because of the CEO’s personal housing investment


5. Economic development is generative; Not redistributive : 5. Economic development is generative; Not redistributive Asset-based; not need-based Encourages community development, but is not community development Short term economic development policy works on the demand side of regional asset markets—uses your land, people, and talents Long term economic development policy works best on the supply side of regional asset markets—changes the quality and cost of land, people and talent


6. Build economies from areas of strength, while intentionally addressing areas of weakness: 6. Build economies from areas of strength, while intentionally addressing areas of weakness Practice the habits of growth The politics of managing decline results in redistribution, not regeneration There is no soft landing in the American economy There must be some bricks and mortar transactions. You need visible successes


7. The economy is regional; the world is competitive: 7. The economy is regional; the world is competitive All regions have effective competitors All municipalities have effective competitors Both within and outside of the region Includes the traditional central city Markets will beat politics into submission over time; regions will either work effectively or the economy (investment) will vote with its feet


7. The economy is regional; the world is competitive : 7. The economy is regional; the world is competitive Necessity Efficiency Predictability Transparency Municipalities should ensure that their rules and regulations of business pass a four-part test


8. Convert political time into economic development time: 8. Convert political time into economic development time Mismatched time frames Business time — the length of the deal cycle Economic time — the length of the business cycle Political time — the length of the election cycle Economic development time — the length of the product development and innovation cycle (time required to change the product mix) Take away: Converting political time into economic development time is critical for success


9. Avoid fads and silver bullet thinking; Celebrate differences and differentiators: 9. Avoid fads and silver bullet thinking; Celebrate differences and differentiators It is important to be distinctive, not imitative Avoid the public sector version of not-invented-here syndrome If you follow fads thoughtlessly the buzz words will be there, but content will be missing


9. Avoid fads and silver bullet thinking; Celebrate differences and differentiators: 9. Avoid fads and silver bullet thinking; Celebrate differences and differentiators Successful economies are constructed from strength and achievement; not conjured from the seven deadly sins of economic development: Entitlement, Envy, Embarrassment, Pride, Sclerosis, Sloth, and Stupidity Skepticism is good. Do not assume or assert competitive strengths Avoid the public sector version of not-invented-here syndrome Think of technology and product development as a portfolio Importance of being distinctive, not imitative Avoid rubeaphobia


Everyone wants high-tech operations: Everyone wants high-tech operations Fight the allure of economic development fads; Do not lose sight of true competitive advantage and the power of distinctiveness; Skepticism is good. Source: Deloitte/Fantus 9. Do not assume or assert competitive strengths


10. Economic development investment requires a long term strategy: 10. Economic development investment requires a long term strategy Built on a widely shared transformative vision Responds to near term political-economic crisis (the catalyst) Flexible so that respond to opportunity Answers the question: Who maintains the long-term civic economic development investment agenda? Take away: Short term politics is often the enemy of long term development strategy


Taming the economic development zoo: Six Parts of Formal Economic Development Practice: Taming the economic development zoo: Six Parts of Formal Economic Development Practice Take away: Six short run, demand-side, practices that dominate practice. The supply side is not formally a part of the practice of economic development—but that is where the long term benefits reside. The Great Buffalo Hunt Attraction Deepen the base of export products (Exogenous Growth) Protecting Endangered Species Protectionism Political crisis to save existing jobs (Lemon socialism) Trapping Foxes Expansion Lower operating costs Invest in resource base (Squeezing the middle lines of income statement) Searching for Gazelles Mistaken Tech Strategies Search for fast-growth firms Breeding Rabbits Entrepreneurship Product Development Process Innovation (Endogenous Growth) Feeding Ostriches Avoidance Bury your head in the sand while expecting change to take place


The contradiction of good economic development practice: The contradiction of good economic development practice Take away: Have a widely shared vision coupled with transparent practices while maintaining client confidentiality


Summary: Do the hard stuff; Fix the basics; Change the value proposition: Summary: Do the hard stuff; Fix the basics; Change the value proposition Successful economies are constructed from strength and achievement Innovation and product development are the keys to long term prosperity Education is at the foundation of economic success Invest do not spend One person’s pork barrel project is another person’s wise investment in the local infrastructure. Thomas Foley, Speaker of the US House of Representatives, 1989


Three questions about the long-term agenda: Three questions about the long-term agenda Can you describe the region’s long-term civic economic development strategy and the resulting investment agenda? Can you identify the catalysts? Are they check writers or check takers? What is their institutional legitimacy and capacity? What is their expected tenure? How inclusive are they? (without diluting their power) Does it change political time into economic development time? No one would remember the Good Samaritan if he only had good intensions. He had money as well. Margaret Thatcher, Prime Minister, United Kingdom, 1980


Three questions about your long-term development strategy: Three questions about your long-term development strategy Does the economic development strategy confront the basics of economic performance? or Is it a fad-driven exercise supported by either a copy machine or the canned solutions of an economic development policy peddler? Are there any barriers to effective action in addressing the region’s economic development success? Is the decision making: Politically based or investment based? Focused on greatest need or greatest strengths? Responsive to opportunity or rigid? Every time you do a favor for a constituent you make nine enemies and one ingrate. John Michael Curley


Economic development is art and science: Economic development is art and science