The fundamentals of regional economic development

Edward W. (Ned) HillDean, Levin College of Urban AffairsCleveland State University

Edward W. (Ned) Hill 2

This is economic development and it’s a zoo

Edward W. (Ned) Hill 3

Taming the economic development zoo: Six Parts of Formal Economic Development Practice

Take away: Six short run practices that dominate practice. The supply side of the regional economy is not formally a part of the practice of economic development—but that is where the long term benefits reside.

The Great Buffalo Hunt

AttractionDeepen the base of export

products

(Exogenous Growth)

Protecting Endangered

Species

ProtectionismPolitical crisis to save

existing jobs

(Lemon socialism)Trapping Foxes

ExpansionLower 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

EntrepreneurshipProduct Development Process

Innovation (Endogenous Growth)

Feeding Ostriches

AvoidanceBury your head in the sand while expecting change to take place

Edward W. (Ned) Hill 4

Why practice economic development?

o Job creationo Better incomeso Improved tax baseo Wealth creationo Less cyclicality in employmento Greater diversity of the economic base

Lesson: Employment is derived from product demand

Lesson: In economics desirable outcomes are frequently a byproduct of market activities. The best route to those outcomes is often indirect

Edward W. (Ned) Hill 5

1. Don’t be a victim

o Be realistic without being pessimistic

o Change policies and attitudes that can be changed

o Respond to opportunity within a strategic framework

Edward W. (Ned) Hill 6

2. Economic development is about products; Not jobs

o Employment is derived from product demand

o End users do not purchase technologies, they purchase products and services

o A regional economy is a portfolio of products and the technologies they embody

Edward W. (Ned) Hill 7

2. Economic development is about products; Not jobs

o The Product Cycle is real and affects strategy and implementation

o Competitive advantage changes over time as the region’s product portfolio ages

Edward W. (Ned) Hill 8

3. Productivity growth is the basis of sustained higher incomes

o The measure of economic development success is change in per capita income.

o Increases in earnings come from increases in productivity

o Understand what productivity means:

Value added per hour worked

Edward W. (Ned) Hill 9

4. Economic development is practiced through the income statement of the business

o Do you represent the world’s best place to operate the business? o Gross revenue—the top lineo Expense items—the middle lineso Labor and talent

o If not, then the business is there either through historical accident and inertia, or because of the CEO’s personal housing investment

Edward W. (Ned) Hill 10

5. Economic development is generative; Not redistributive

o Asset-based; not need-based

o Encourages community development, but is not community development

o Short term economic development policy uses your regional assets—your land, people, and talents

o Long term economic development policy invests in your regional assets—changes the quality and cost of land, people and talents

Edward W. (Ned) Hill 11

6. Build economies from areas of strength, while intentionally addressing areas of weakness

o Practice the habits of growth

o The politics of managing decline results in redistribution, not regeneration

o There is no soft landing in the American economy

o There must be some bricks and mortar transactions. You need visible successes

Edward W. (Ned) Hill 12

7. The economy is regional; the world is competitive

o All regions have effective competitors

o All municipalities have effective competitorso Both within and outside of the regiono Includes the traditional central city

o Markets will beat politics into submission over time; regions will either work effectively or the economy (investment) will vote with its feet

Edward W. (Ned) Hill 13

8. Avoid fads and silver bullet thinking; Celebrate differences and differentiators

o It is important to be distinctive, not imitative

o Avoid the public sector version of not-invented-here syndrome

o If you follow fads thoughtlessly the buzz words will be there, but content will be missing

o Avoid rubeaphobiao Definition: Fear that others

think you are a rube for what you do or who you are.

o Leads to down playing real strengths, emphasizing imagined strengths.

o Results: Prove that you are a larger rube than originally imagined

Edward W. (Ned) Hill 14

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 Real Estate Services

Silicon Seaboard/Internet Coast

Media Del ReyMedia Del Rey

Silicon ValleySilicon Valley

Silicon MountainSilicon Mountain

Silicon HollowSilicon Hollow

Silicon ForestSilicon Forest

Silicon Gulch/ Silicon Hills

Silicon Gulch/ Silicon Hills

Silicon VillageSilicon VillageSilicon VineyardSilicon Vineyard

Silicon GulchSilicon Gulch

Silicon ValleySilicon ValleyMultimedia GulchMultimedia Gulch

Silicon IslandSilicon Island

Silicon BeachSilicon Beach

Digital CoastDigital Coast

Silicon DesertSilicon Desert

Cyberchella ValleyCyberchella Valley

Silicon MesaSilicon Mesa

Silicon CitySilicon City

Silicon PrairieSilicon Prairie

Telecom CorridorTelecom Corridor

Silicon FreewaySilicon Freeway

Biotech BeachBiotech Beach Silicon BayouSilicon Bayou

Silicon BeachSilicon Beach

Silicon SwampSilicon Swamp

Telecom ValleyTelecom Valley

Silicon TriangleSilicon Triangle

Silicon RiverSilicon River

Automation AlleyAutomation Alley

Silicon Tundra/ Silicon Valley NorthSilicon Tundra/ Silicon Valley North

WebPortWebPort

Silicon IslandSilicon Island

Silicon AlleySilicon Alley

Silicon Valley ForgeSilicon Valley Forge

Philicon ValleyPhilicon Valley

Silicon HollerSilicon Holler

Silicon MountainSilicon Mountain

Silicon SeaboardSilicon Seaboard

Silicon Dominion/ Silicon PlantationSilicon Dominion/ Silicon Plantation

E-CoastE-Coast

Cyber DistrictCyber District

Silicon HillSilicon Hill

Silicon NecklaceSilicon Necklace

Silicon SandbarDot CommonwealthSilicon Mountain

Silicon SandbarDot CommonwealthSilicon Mountain

Silicon SnowbankSilicon Snowbank

Silicon PlainsSilicon Plains

Silicon GlacierSilicon Glacier

Silicon OrchardSilicon Orchard

Silicon IslandSilicon Rain ForestSilicon IslandSilicon Rain Forest

8. Avoid fads and silver bullet thinking; Celebrate differences and differentiators

Edward W. (Ned) Hill 15

9. Economic development investment requires a long term strategy

o Built on a widely shared transformative vision

o Responds to near term political-economic crisis (the catalyst)

o Flexible so that respond to opportunity

o 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

Edward W. (Ned) Hill 16

10. Have a conversion experience

o Business time — the length of the deal cycle

o Economic time — the length of the business cycle

o Political time — the length of the election cycle

o Economic development time — the length of the product development and innovation cycle (time required to change the product mix)

Take away: Converting economic development time into political time is critical for success

Convert economic development time into political time

Convert economic geography into political geography

Edward W. (Ned) Hill 18

What does effective leadership do?Overcomes the geographic mismatchBuilds practical, functional regionalism

o Political federal structureo Municipalityo Countyo Stateo Nationo Trading block

o Economic federal structureo Region—geography of labor & housing markets warped by

transportation costso Nationo Trading blocko Globe

Take away: Who represents the regional economy?

Edward W. (Ned) Hill 19

The contradiction of good economic development practice

Take away: Have a widely shared vision coupled with transparent practices while maintaining client confidentiality

Edward W. (Ned) Hill 20

Summary: Do the hard stuff; Fix the basics; Change the value proposition

1. Successful economies are constructed from strength and achievement

2. Innovation and product development are the keys to long term prosperity. Invest do not spend

3. Education is at the foundation of economic success

4. Skepticism is good. Do not assume or assert competitive strengths.

5. Think of technology and product development as a portfolio

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

Edward W. (Ned) Hill 21

Economic development is art and science

I think you should be more explicit here in step two