Tools for Regional Economic Development: Identifying Value Chain Opportunities

Transcription

1 Tools for Regional Economic Development: Identifying Value Chain Opportunities Brian Richard, PhD Center for Governmental Studies Northern Illinois University

2 Outline Industry Clusters Theoretical Foundation Industry Clusters and Targeting Value Chain

3 Industry Clusters Industry clusters geographic concentrations of interconnected companies, specialized suppliers, service providers, firms in related industries, and associated institutions in a particular field that compete but also cooperate Transactions Communication Share common opportunities and threats Source: Deller, 2009, p. 58.

4 Industry Clusters Industry clusters An array of linked industries and other entities Suppliers of specialized inputs Providers of specialized infrastructure Extend downstream and laterally to manufacturers of complimentary products Can be related by skills, technologies, or common inputs Institutions (governments, universities, training providers) Trade associations Source: Deller, 2009, p. 58.

5 Industry Clusters Industry clusters can affect competition Can increase firm productivity Can increase competition by driving direction and pace of innovation that underpins future productivity growth Can stimulate the formation of new businesses that expand and strengthen the cluster Source: Deller, 2009, p. 58.

6 Industry Clusters Theoretical Foundations Neoclassical profit maximization Behavioral approach Institutional approach Source: Deller, 2009.

7 Industry Clusters Neoclassical profit maximization Firms choose locations in order to maximize profits Maximum sales at lowest cost,, Source: Deller, 2009, p. 51.

8 Industry Clusters Neoclassical profit maximization Firms choose locations in order to maximize profits Maximum sales at lowest cost,, profit revenue production costs transportation to market transportation of inputs Source: Deller, 2009, p. 51.

9 Industry Clusters Neoclassical profit maximization Source: Deller, 2009, p. 53.

10 Industry Clusters Neoclassical profit maximization While intuitively appealing, empirical testing of this theory has shown it poor at predicting real world firm locations Doesn t account for personal preferences and nonmonetary benefits Assumes perfect knowledge about the future Location decisions are made infrequently Inexperience leads to sub optimal decisions Source: Deller, 2009, p

11 Industry Clusters Behavioral approach Relaxes assumptions that firm location is made solely on profit maximization criteria Personal goals Management control Uncertainty about current and future conditions Market Rivals Inputs Source: Deller, 2009, p. 55.

12 Industry Clusters Behavioral approach Permits decision makers to seek objectives other than profit maximization Market penetration/share Minimal return Geographic boundaries to maintain management control Non business objectives Allows for a location decision that meets satisfactory, rather than maximum, profits Source: Deller, 2009, p. 55.

13 Industry Clusters Behavioral approach Location decision makers Assess uncertainty and risk Have a limited ability to absorb information More sensitive to some sources Tend to repeat prior successes Have greater information about geographically proximate locations Source: Deller, 2009, p

14 Industry Clusters Behavioral approach These assumptions are more realistic but make the analysis more complex Potential locations are reduced Sites that don t have desired non economic characteristics Difficult to analyze from an industry targeting perspective Justifies an approach that focuses on industries that already have connections to the region» They have revealed a preference for locating in the region Source: Deller, 2009, p. 55.

15 Industry Clusters Behavioral approach policy implications Attempt to reduce firms risk Providing pertinent and timely information Stability in local rules and regulations Empirical industry targeting based on the behavioral approach is difficult Relies on sociological, psychological, and other soft variables Source: Deller, 2009, p

16 Industry Clusters Institutional approach Goes beyond a firm level analysis Firm location decisions are influenced by institutions and value systems Decision making process involves negotiations between firms, landowners, labor unions, and local government Institutional approach focuses on the rules that set the parameters for negotiation as well as the negotiating power of the firm Source: Deller, 2009, p. 57.

17 Industry Clusters Institutional approach Larger firms have more negotiating power State level ED policies often targeted towards larger firms Large firms accustomed to seeking incentives States bid against each other Asymmetric information leads to over subsidizing Firm knows when subsidy is necessary Community does not Source: Deller, 2009, p. 57.

18 Industry Clusters Institutional approach Smaller and medium sized firms rely on local governments and real estate markets Local governments can have significant impacts on location decisions Land use laws Permits Source: Deller, 2009, p

19 Industry Clusters Institutional approach Local governments and economic developers best served by focusing on business climate and providing information to small and medium sized firms

20 Industry Clusters and Targeting Analysis of industry clusters can be used to support economic development targeting policies and activities Goal is to focus limited resources towards the most productive activities There are advantages and disadvantages of this approach

21 Industry Clusters and Targeting Cluster advantages Production and marketing savings to member firms Specialized input suppliers; workforce with specialized skills; public infrastructure; financial markets Firms can focus on core activities & adopt new production technologies Competition mandates rapid adaptability Facilitates development of linkages, cooperation and collaboration Knowledge spillovers Source: Shields, Barkley, and Emery, 2009, p. 38

22 Industry Clusters and Targeting Cluster shortcomings Regions have difficulty picking winners Too selective vs. too inclusive Many regions have clusters in declining industries, or no clusters Pittsburgh steel Cluster focus may lead to imbalanced economic development The danger of a cluster based approach is that it detracts from the need to take a more holistic view of regional development (Martin & Sunley, 2003, p. 28). Source: Shields, Barkley, and Emery, 2009, p

23 Industry Clusters and Targeting Targeted Economic Development using Clusters Step 1: identify clusters that have high potential for locating or expanding in the region Analysis of patterns Step 2: narrow sector candidates to sectors that provide attractive economic development impacts Job growth, high wages, taxes, minimal negative externalities More subjective than step 1 Source: Shields, Barkley, and Emery, 2009, p. 40

24 Industry Clusters and Targeting Targeted Economic Development using Clusters Analytical methods include trend analysis, location quotients, and shift share analysis However, these techniques classify historical and current strengths of the region Relying on these industries can be a limiting, or even wrong headed strategy (p.43). Data availability delayed by 1 2 years Analytical methods are not predictive Source: Shields, Barkley, and Emery, 2009, p

25 Industry Clusters and Targeting Targeted Economic Development using Clusters choosing the targeted industries is as much a political decision as an economic one (p. 44) Targeted ED programs involve a variety of stakeholders including business, labor, environmental organizations, and government These stakeholders may have competing interests Thus, analysts need to be mindful that analysis is just one component of efforts to identify clusters (p. 45) Source: Shields, Barkley, and Emery, 2009, p

26 Cluster Analysis Cluster analysis exercise: identifying clusters in the SOI region 4 digit NIACS sector screening criteria Manufacturing sector 2012 employment > 500 LQ > 1 Positive RS portion of shift share Exceptions Employment > 2000 LQ > 2

27 SOI Industry Concentrations NAICS IMPLAN Industry SOI Employment 2012 Total 317, Machine shops 6, Fluid power process machinery 5, Cutting tool and machine tool accessory manufacturing 3, Other plastics product manufacturing 2, Motor vehicle parts manufacturing 2, Other fabricated metal manufacturing 1, Coating, engraving, heat treating and allied activities 1, Snack food manufacturing 1, Other major household appliance manufacturing 1, Other commercial and service industry machinery manufacturing 1, Other engine equipment manufacturing 1, Plate work and fabricated structural product manufacturing 1, Printing 1, Automatic environmental control manufacturing 1, Crown and closure manufacturing and metal stamping 1, Surgical appliance and supplies manufacturing Ferrous metal foundries Other rubber product manufacturing 618 Italics: Industries with negative RS shift share components

28 SOI Industry Concentrations NAICS IMPLAN Industry US Growth 2012 National Annual Average Pay Income Multiplier SOI LQ 2012 Total Snack food manufacturing 14.6% $ 53, Printing 31.7% $ 44, Other plastics product manufacturing 19.2% $ 46, Other rubber product manufacturing 26.8% $ 51, Ferrous metal foundries 22.2% $ 50, Crown and closure manufacturing and metal stamping 9.0% $ 55, Plate work and fabricated structural product manufacturing 10.0% $ 48, Machine shops 16.7% $ 49, Coating, engraving, heat treating and allied activities 4.7% $ 44, Other fabricated metal manufacturing 4.6% $ 57, Other commercial and service industry machinery manufacturing 24.4% $ 66, Cutting tool and machine tool accessory manufacturing 12.8% $ 55, Other engine equipment manufacturing 8.3% $ 74, Fluid power process machinery 4.5% $ 62, Automatic environmental control manufacturing 7.1% $ 90, Other major household appliance manufacturing 38.8% $ 55, Motor vehicle parts manufacturing 30.9% $ 55, Surgical appliance and supplies manufacturing 1.6% $ 64, Italics: Industries with negative RS shift share components

29 Methodology Pitfalls Measures are potentially too broad Market for 250 Automatic Environmental Controls Industry Description Inputs 0 Total Industry Demand 38 Construction of other new residential structures 22.7% 36 Construction of other new nonresidential structures 13.8% 34 Construction of new nonresidential commercial and health care 9.0% 283 Motor vehicle parts manufacturing 6.4% 265 Other major household appliance manufacturing 6.3% 58.2%

30 Methodology Pitfalls Measures are potentially too broad IMPLAN sector 319 = NAICS 42 NAICS Industry SOI LQ Motor vehicle and parts merchant wholesalers Furniture and furnishing merchant wholesalers Lumber and const. supply merchant wholesalers Commercial equip. merchant wholesalers Metal and mineral merchant wholesalers Appliance and electric goods merchant whls Hardware and plumbing merchant wholesalers Machinery and supply merchant wholesalers Misc. durable goods merchant wholesalers Paper and paper product merchant wholesalers Druggists' goods merchant wholesalers Apparel and piece goods merchant wholesalers Grocery and related product wholesalers Farm product raw material merch. whls Chemical merchant wholesalers Petroleum merchant wholesalers Alcoholic beverage merchant wholesalers Misc. nondurable goods merchant wholesalers Wholesalers 1.00

31 Methodology Pitfalls Measures are potentially too broad Impacts vary across the region NAICS Industry Winnebago Walworth Rock Racine Kenosha Boone SOI 42 Wholesalers

32 Methodology Pitfalls Measures are potentially too broad NAICS Industry Winnebago Walworth Rock Racine Kenosha Boone SOI 4231 Motor vehicle and parts merchant wholesalers Furniture and furnishing merchant wholesalers Lumber and const. supply merchant wholesalers Commercial equip. merchant wholesalers Metal and mineral merchant wholesalers Appliance and electric goods merchant whls Hardware and plumbing merchant wholesalers Machinery and supply merchant wholesalers Misc. durable goods merchant wholesalers Paper and paper product merchant wholesalers Druggists' goods merchant wholesalers Apparel and piece goods merchant wholesalers Grocery and related product wholesalers Farm product raw material merch. whls Chemical merchant wholesalers Petroleum merchant wholesalers Alcoholic beverage merchant wholesalers Misc. nondurable goods merchant wholesalers Wholesalers

33 Methodology Pitfalls Data suppression A single company, Woodward, employs 1,400 in the region Manufactures airplane parts (NAICS 3364) Employment at this single firm put the industry among the largest in the region Aircraft parts sector had increased employment nationally between 2003 & 2012 However, the industry didn t show up in the data analysis conducted to identify important sectors

34 Value Chain Most cluster based industrial targeting efforts rely on an analysis of value chains Firms that buy and sell from each other and in the process add value to the product as it moves up or down the value delivery chain Source: Stimson, Stough, and Roberts, 2006, p. 268.

35 Value Chain Forward linkages Producer value at Factory = $250 + Transportation Margin = $30 + Wholesaler Margin = $100 + Transportation Margin = $30 + Retailer Margin = $190 Purchaser Price = $600

36 Backward linkages Value Chain

37 Value Chain

38 Value Chain Source: International Labour Organization, 2006, Value Chain Development p. 3.

39 Cluster Analysis Value Chains for SOI clusters For each of the 18 cluster industries, IMPLAN data are used to identify The top five input supplier industries The top five product markets Source: Barkley & Henry, 2005

40 SOI Industry Clusters Linked Industries IMPLAN Commodity Inputs Markets 319 Wholesale trade businesses Motor vehicle parts manufacturing Iron and steel and ferroalloy products Management of companies and enterprises Securities, commodity contracts, investments, and related services 8 36 Construction of other new nonresidential structures 7 38 Construction of other new residential structures Plastics materials and resins Construction machinery manufacturing Semiconductor and related device manufacturing Construction of new nonresidential commercial and health care structures Machine shops Automobile manufacturing Mining and oil and gas field machinery manufacturing Other engine equipment manufacturing Private hospitals 3 37 Construction of new residential permanent site single and multi family structures Steel products from purchased steel Plates and fabricated structural products Valve and fittings other than plumbing manufacturing Farm machinery and equipment manufacturing Heavy duty truck manufacturing Food services and drinking places 2

41 SOI Industry Clusters Linked Industries IMPLAN data can be used for more detailed investigation linkages Backward linkages: Industry balance sheet Intermediate inputs The column in the I/O table Forward linkages: Commodity balance sheet Markets: where production is sold The row in the I/O table

42 Input Output Models Source: Hoover, 1971, p. 226

43 Input Output Models Source: Hoover, 1971, p. 226

44 Machine Shops: Backward Linkages National Industry Balance Sheet Industry Sector Gross Inputs Total Commodity Demand 25,968,972,052 Machined products 2,030,780, % Iron and steel and ferroalloy products 1,683,165, % Plates and fabricated structural products 1,381,889, % Securities, commodity contracts, investments, and related services 1,248,676, % Management of companies and enterprises 1,187,371, % Wholesale trade distribution services 911,246, % Real estate buying and selling, leasing, managing, and related services 742,345, % All other miscellaneous professional, scientific, and technical services 742,167, % Nonferrous metals 707,209, % Monetary authorities and depository credit intermediation services 639,765, % Aluminum products from purchased aluminum 539,466, % Electricity, and distribution services 529,525, % Rolled, drawn, extruded and alloyed nonferrous metals (except copper 488,412, % Custom computer programming services 466,818, % Accounting, tax preparation, bookkeeping, and payroll services 440,001, % Semiconductor and related devices 434,139, % Advertising and related services 366,746, % Paints and coatings 359,077, %

45 Machine Shops: Forward Linkages National Commodity Balance Sheet Industry Sector Gross Inputs Total Industry Demand 46,704,705,536 Motor vehicle parts manufacturing 5,452,116, % Machine shops 2,030,780, % Mining and oil and gas field machinery manufacturing 1,318,085, % Construction of other new residential structures 1,230,042, % Aluminum product manufacturing from purchased aluminum 946,094, % Other industrial machinery manufacturing 930,981, % Transport by air 853,218, % Plate work and fabricated structural product manufacturing 802,762, % Construction of other new nonresidential structures 793,602, % Ornamental and architectural metal products manufacturing 733,834, % Semiconductor and related device manufacturing 711,882, % Extraction of oil and natural gas 688,383, % Construction of new nonresidential commercial and health care s 653,769, % Valve and fittings other than plumbing manufacturing 606,112, % Material handling equipment manufacturing 524,828, % Automobile manufacturing 508,502, % Transport by truck 466,987, %

46 Machine Shops: Backward Linkages SOI Industry Balance Sheet Industry Sector Gross Inputs RPC Regional Inputs Imports Total Commodity Demand 344,073, ,615, ,458,087 Machined products 26,906, % ,881, % 25,024,846 Iron and steel and ferroalloy products 22,300, % ,686, % 20,614,660 Plates and fabricated structural products 18,309, % ,918, % 16,390,694 Securities, commodity contracts, investments, and related se 16,544, % ,588, % 9,955,353 Management of companies and enterprises 15,731, % ,134, % 11,596,970 Wholesale trade distribution services 12,073, % ,475, % 4,598,037 Real estate buying and selling, leasing, managing, and related 9,835, % ,684, % 2,150,819 All other miscellaneous professional, scientific, and technical 9,833, % ,624, % 5,209,065 Nonferrous metals 9,370, % ,136, % 8,233,436 Monetary authorities and depository credit intermediation s 8,476, % ,709, % 1,767,143 Aluminum products from purchased aluminum 7,147, % , % 7,048,989 Electricity, and distribution services 7,015, % ,604, % 1,411,228 Rolled, drawn, extruded and alloyed nonferrous metals (exc 6,471, % , % 6,438,038 Custom computer programming services 6,185, % ,441, % 743,530

47 Machine Shops: Forward Linkages SOI Commodity Balance Sheet Industry Sector Gross Inputs RPC Regional Inputs Total Industry Demand 322,970,496 NA 22,587,812 Motor vehicle parts manufacturing 46,241, % % 3,234, % Fluid power process machinery manufacturing 33,251, % % 2,325, % Machine shops 26,906, % % 1,881, % Automobile manufacturing 16,818, % % 1,176, % Soap and cleaning compound manufacturing 14,048, % % 982, % Other industrial machinery manufacturing 9,952, % % 696, % Other engine equipment manufacturing 8,572, % % 599, % Turned product and screw, nut, and bolt manufacturing 7,787, % % 544, % Pump and pumping equipment manufacturing 7,731, % % 540, % Other commercial and service industry machinery man 7,325, % % 512, % Other rubber product manufacturing 4,953, % % 346, % Motorcycle, bicycle, and parts manufacturing 4,807, % % 336, % Plate work and fabricated structural product manufactu 4,668, % % 326, % Farm machinery and equipment manufacturing 4,632, % % 323, % Coating, engraving, heat treating and allied activities 3,775, % % 264, % Valve and fittings other than plumbing manufacturing 3,757, % % 262, % Mechanical power transmission equipment manufactur 3,514, % % 245, %

48 Machine Shops: Backward Linkages SOI LQs of Top Upstream Industries Industry Sector Gross Inputs SOI Empl LQ Total 344,073, , Machined products 26,906,634 3, Iron and steel and ferroalloy products 22,300, Plates and fabricated structural products 18,309, Securities, commodity contracts, investments, and related se 16,544,228 2, Management of companies and enterprises 15,731,963 3, Wholesale trade distribution services 12,073,479 18, Real estate buying and selling, leasing, managing, and related 9,835,638 15, All other miscellaneous professional, scientific, and technical 9,833, Nonferrous metals 9,370, Monetary authorities and depository credit intermediation s 8,476,518 5, Aluminum products from purchased aluminum 7,147, Electricity, and distribution services 7,015,902 1, Rolled, drawn, extruded and alloyed nonferrous metals (exc 6,471, Custom computer programming services 6,185,065 1, Accounting, tax preparation, bookkeeping, and payroll servic 5,829,759 3, Semiconductor and related devices 5,752, Advertising and related services 4,859,175 1, Paints and coatings 4,757, Restaurant, bar, and drinking place services 4,730,765 33, Ferrous metals 4,705, Telecommunications 4,705,

49 Machine Shops: Forward Linkages SOI LQs of Top Downstream Industries Industry Sector Gross Inputs SOI Empl LQ Total 322,970, , Motor vehicle parts manufacturing 46,241,650 4, Fluid power process machinery manufacturing 33,251,964 3, Machine shops 26,906,634 3, Automobile manufacturing 16,818,831 3, Soap and cleaning compound manufacturing 14,048,678 2, Other industrial machinery manufacturing 9,952, Other engine equipment manufacturing 8,572,660 1, Turned product and screw, nut, and bolt manufacturing 7,787,777 2, Pump and pumping equipment manufacturing 7,731, Other commercial and service industry machinery man 7,325,573 1, Other rubber product manufacturing 4,953, Motorcycle, bicycle, and parts manufacturing 4,807, Plate work and fabricated structural product manufactu 4,668, Farm machinery and equipment manufacturing 4,632,631 1, Coating, engraving, heat treating and allied activities 3,775,051 1, Valve and fittings other than plumbing manufacturing 3,757, Mechanical power transmission equipment manufactur 3,514, Metal can, box, and other metal container (light gauge) 3,471, Other plastics product manufacturing 3,423,777 2, Metal cutting and forming machine tool manufacturing 3,423, Crown and closure manufacturing and metal stamping 3,113, Ammunition manufacturing 3,097,

50 SOI Industry Concentrations NAICS IMPLAN Industry SOI Employment 2012 Total 317, Machine shops 6, Fluid power process machinery 5, Cutting tool and machine tool accessory manufacturing 3, Other plastics product manufacturing 2, Motor vehicle parts manufacturing 2, Other fabricated metal manufacturing 1, Coating, engraving, heat treating and allied activities 1, Snack food manufacturing 1, Other major household appliance manufacturing 1, Other commercial and service industry machinery manufacturing 1, Other engine equipment manufacturing 1, Plate work and fabricated structural product manufacturing 1, Printing 1, Automatic environmental control manufacturing 1, Crown and closure manufacturing and metal stamping 1, Surgical appliance and supplies manufacturing Ferrous metal foundries Other rubber product manufacturing 618 Italics: Industries with negative RS shift share components

51 Other Plastic Products Value Chain Other Plastic Products (NAICS 3335) Largest industry sector that met screening criteria Strong concentration in region 2012 LQ = 1.8, total employment = 2,622 Strong regional growth Shift Share RS component = 2,209 Total growth = 2,111

52 Other Plastic Products: Backward Linkages SOI Industry Balance Sheet Description Gross Inputs RPC Regional Inputs Imports Total Commodity Demand 503,815, ,218, ,596,815 Plastics materials and resins 218,532, % , % 217,719,404 Plastics packaging materials and unlaminated films 23,652, % , % 23,091,229 Wholesale trade distribution services 20,256, % ,542, % 7,714,490 Management of companies and enterprises 13,422, % ,527, % 9,894,189 Monetary authorities and depository credit interme 10,672, % ,447, % 2,225,013 Electricity, and distribution services 10,117, % ,082, % 2,035,011 All other miscellaneous professional, scientific, and 9,070, % ,265, % 4,804,866 Refined petroleum products 8,749, % , % 8,738,639 Plastics and rubber industry machinery 7,867, % , % 7,636,084 All other chemical products and preparations 7,843, % , % 7,654,215 Paperboard containers 7,250, % ,161, % 6,089,769 Unlaminated plastics profile shapes 6,931, % , % 6,145,220 Other plastics products 6,544, % , % 5,846,786 Laminated plastics plates, sheets (except packaging 6,347, % , % 6,099,985 Semiconductor and related devices 5,421, % , % 5,409,540 Petrochemicals 5,197, % , % 5,188,414 Maintained and repaired nonresidential structures 5,007, % ,642, % 365,036 Real estate buying and selling, leasing, managing, an 4,919, % ,843, % 1,075,848

53 Other Plastic Products: Forward Linkages SOI Commodity Balance Sheet Description Gross Inputs RPC Regional Inputs Total Industry Demand 395,575,328 NA 42,184,184 Soap and cleaning compound manufacturing 79,964, % % 8,527, % Automobile manufacturing 46,277, % % 4,935, % Motor vehicle parts manufacturing 24,474, % % 2,609, % Other major household appliance manufacturing 16,863, % % 1,798, % Farm machinery and equipment manufacturing 16,101, % % 1,717, % Private hospitals 13,280, % % 1,416, % Small electrical appliance manufacturing 10,274, % % 1,095, % Construction of other new residential structures 9,702, % % 1,034, % Wholesale trade businesses 9,302, % % 992, % Construction of other new nonresidential structures 8,034, % % 856, % Fluid milk and butter manufacturing 7,575, % % 807, % Snack food manufacturing 7,454, % % 794, % Maintenance and repair construction of nonresidential structures 6,931, % % 739, % Pump and pumping equipment manufacturing 6,689, % % 713, % Other plastics product manufacturing 6,544, % % 697, % Other engine equipment manufacturing 6,307, % % 672, % Construction of new residential permanent site single and multi family stru 6,071, % % 647, % Chocolate and confectionery manufacturing from cacao beans 5,394, % % 575, % Pharmaceutical preparation manufacturing 4,739, % % 505, % Seasoning and dressing manufacturing 4,642, % % 495, % Other aircraft parts and auxiliary equipment manufacturing 4,439, % % 473, % Construction of new nonresidential commercial and health care structures 4,320, % % 460, % Construction machinery manufacturing 4,171, % % 444, %

54 Other Plastic Products: Backward Linkages SOI LQs of Top Upstream Industries Description Gross Inputs SOI Empl LQ Total Commodity Demand 503,815, , Electricity, and distribution services 10,117,030 1, Maintained and repaired nonresidential structures 5,007,522 4, Paperboard containers 7,250, Refined petroleum products 8,749, Petrochemicals 5,197, Plastics materials and resins 218,532, All other chemical products and preparations 7,843, Plastics packaging materials and unlaminated films and sh 23,652, Unlaminated plastics profile shapes 6,931, Laminated plastics plates, sheets (except packaging), and 6,347, Other plastics products 6,544,715 2, Plastics and rubber industry machinery 7,867, Semiconductor and related devices 5,421, Wholesale trade distribution services 20,256,630 18, Monetary authorities and depository credit intermediatio 10,672,800 5, Real estate buying and selling, leasing, managing, and rela 4,919,826 15, All other miscellaneous professional, scientific, and techni 9,070, Management of companies and enterprises 13,422,042 3,

55 Other Plastics Products: Forward Linkages SOI LQs of Top Downstream Industries Description Gross Inputs SOI Empl LQ Total Industry Demand 395,575, , Construction of new nonresidential commercial and health care structures 4,320,109 3, Construction of other new nonresidential structures 8,034,085 7, Construction of new residential permanent site single and multi family stru 6,071,968 2, Construction of other new residential structures 9,702,227 3, Maintenance and repair construction of nonresidential structures 6,931,545 4, Chocolate and confectionery manufacturing from cacao beans 5,394, Fluid milk and butter manufacturing 7,575, Snack food manufacturing 7,454, Seasoning and dressing manufacturing 4,642, Pharmaceutical preparation manufacturing 4,739, Soap and cleaning compound manufacturing 79,964,754 2, Other plastics product manufacturing 6,544,715 2, Farm machinery and equipment manufacturing 16,101,808 1, Construction machinery manufacturing 4,171, Other engine equipment manufacturing 6,307,688 1, Pump and pumping equipment manufacturing 6,689, Small electrical appliance manufacturing 10,274, Other major household appliance manufacturing 16,863, Automobile manufacturing 46,277,931 3, Motor vehicle parts manufacturing 24,474,076 4, Other aircraft parts and auxiliary equipment manufacturing 4,439, Wholesale trade businesses 9,302,816 18, Private hospitals 13,280,403 18,

56 Value Added Employee compensation, profits, taxes Value Added 195 Machine shops Description Coefficient Value Added Total Value Added ,813,012,480 Employee Compensation ,758,847,656 Proprietor Income ,553,345 Other Property Type Income ,117,710,938 Tax on Production and Imports ,900,269 Value Added 149 Other plastics product manufacturing Description Coefficient Value Added Total Value Added ,385,888 Employee Compensation ,588,425 Proprietor Income ,815 Other Property Type Income ,977,356 Tax on Production and Imports ,456,295

57 Methodology Pitfalls Data quality IMPLAN (and other) input output models are based on national datasets Firm production technology in each region is assumed to be the same as for the US economy Grain farmers in Illinois are assumed to use the same inputs (seed, fertilizer, etc.) as farmers in Mississippi or Washington State Source: Hughes, 2009, p. 347.

58 Methodology Pitfalls Data quality If the regional economy differs significantly from the national economy, IMPLAN may over or underestimate local purchases versus imports If the firm operations differ significantly from the national industry sector, IMPLAN may misidentify upstream and downstream linkages Source: Hughes, 2009, p. 347.

59 Tools for Regional Economic Development: Identifying Value Chain Opportunities Brian Richard, PhD Center for Governmental Studies Northern Illinois University