Nevada Competitiveness: Creating a State Economic Strategy

Transcription

1 Nevada Competitiveness: Creating a State Economic Strategy Professor Michael E. Porter Harvard Business School August 2011 For further material on regional competitiveness and clusters: State Competitiveness For state Rich economic Bryden profiles: 1 Copyright 2011 Professor Michael E. Porter

2 The Economic Challenge for Governors in 2011 Achieving Fiscal Stability Enhancing State Competitiveness 2011 State Competitiveness Rich Bryden 2 Copyright 2011 Professor Michael E. Porter

3 What is Competitiveness? Competitiveness is the productivity with which a state utilizes its human, capital, and natural endowments to create value Productivity determines wages, jobs, and the standard of living It is not what fields a state competes in that determines its prosperity, but how productively it competes 2011 State Competitiveness Rich Bryden 3 Copyright 2011 Professor Michael E. Porter

4 Where Does Productivity Come From? Businesses and government play different but interrelated roles in creating a productive economy Only businesses can create jobs and wealth States compete to offer the most productive environment for business 2011 State Competitiveness Rich Bryden 4 Copyright 2011 Professor Michael E. Porter

5 Agenda 1. How is your state doing? State Performance Scorecard 2. Why? 3. Where to go from here? Explaining your state s performance, strengths, and weaknesses Action Steps 2011 State Competitiveness Rich Bryden 5 Copyright 2011 Professor Michael E. Porter

6 Prosperity GDP per Capita, Nevada Performance Scorecard Position in Trend 9 48 Current Position Wages Average Private Wage, Job Creation Private Employment Growth, and Labor Mobilization Proportion of Working Age Population in the Workforce, Labor Productivity GDP per Worker, New Business Formation Traded Cluster Establishment Growth, and Innovation Patents per Employee, Cluster Strength Employment in Strong Clusters, Leading Clusters by employment size, 2009 (national rank) Business Services (35) Hospitality and Tourism (26) Transportation and Logistics (28) Entertainment (19) Leather and Related Products (5) State Rank 2011 State Competitiveness Rich Bryden 6 Copyright 2011 Professor Michael E. Porter

7 $70,000 $65,000 Comparative State Prosperity Performance High but declining versus U.S. Alaska Delaware U.S. GDP per Capita Real Growth Rate: 0.86% Connecticut Wyoming High and rising prosperity versus U.S. Gross Domestic Product per Capita, 2009 $60,000 $55,000 $50,000 $45,000 $40,000 $35,000 Low and declining Mississippi Low but rising versus U.S. versus U.S. $30, % -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% Real Growth in Gross Domestic Product per Capita, 1999 to 2009 Source: Bureau of Economic Analysis. Note: Growth rate is calculated as compound annual growth rate State Competitiveness Rich Bryden New Jersey New York Massachusetts Virginia California Hawaii Washington Maryland Nevada Colorado Illinois Minnesota Nebraska Iowa U.S. GDP per South Dakota Capita: $46,093 Louisiana New Hampshire Texas Rhode Island Pennsylvania Kansas North Carolina Wisconsin Oregon Indiana Oklahoma Ohio Vermont Georgia Utah Missouri Florida Tennessee Arizona Maine Michigan South Carolina Kentucky New Mexico West Virginia Alabama Arkansas 7 Montana Idaho North Dakota Copyright 2011 Professor Michael E. Porter

8 Proportion of Working Age Population in the Workforce, % 70% 65% 60% 55% Comparative State Labor Mobilization Performance High but declining versus U.S. Michigan Delaware Indiana Georgia Alabama Colorado Idaho Missouri Minnesota Nebraska New Hampshire Wisconsin Utah Maryland Montana Hawaii Alaska Nevada North Carolina Tennessee South Carolina West Virginia Texas Oregon Mississippi South Dakota Wyoming Washington Illinois Massachusetts Ohio Maine California Pennsylvania Arizona Florida Oklahoma New York Kentucky New Mexico Arkansas Change in Labor Force Participation Rate: -2.4% High Labor Force Participation and Participation rising versus U.S. Iowa Vermont Kansas New Jersey Louisiana North Dakota Virginia Connecticut Rhode Island U.S. Labor Force Participation Rate: 64.7% Low and declining Low but rising 50% versus U.S. versus U.S. 7% 6% 5% 4% 3% 2% 1% 0% 1% 2% Change in Proportion of Working Age Population in the Workforce, Notes: Source BLS State Competitiveness Rich Bryden 8 Copyright 2011 Professor Michael E. Porter

9 $150,000 $140,000 Comparative State Labor Productivity Performance High but declining versus U.S. U.S. GDP per Worker Real Growth: 1.09% Delaware Highly productive and productivity rising versus U.S. Gross Domestic Product per Worker, 2009 $130,000 $120,000 $110,000 $100,000 $90,000 $80,000 Michigan Washington Alaska Louisiana Connecticut New Jersey Texas Illinois New York Massachusetts Virginia California Colorado Nevada North Carolina Minnesota Pennsylvania Utah Georgia Arizona RI Indiana Tennessee Kansas Ohio Missouri Wisconsin New Mexico Florida West Virginia Kentucky New Hampshire Mississippi Arkansas South Carolina Maine Montana Nebraska Oklahoma Iowa Alabama $70,000 Low and Vermont declining Low but rising versus U.S. versus U.S. $60, % 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% Hawaii Maryland Idaho Real Growth in Gross Domestic Product per Worker, Wyoming U.S. GDP per Worker: $92,382 South Dakota Oregon North Dakota Source: Bureau of Economic Analysis. Notes: Growth rate is calculated as compound annual growth rate; worker = labor force participant State Competitiveness Rich Bryden 9 Copyright 2011 Professor Michael E. Porter

10 14 High and declining innovation Comparative State Innovation Performance Idaho U.S. average Growth Rate of Patenting: -0.30% California 12 Massachusetts Vermont Washington (+8.0%, 13.53) Patents per 10,000 Workers, New Jersey Pennsylvania Delaware Ohio Maryland Indiana New Mexico Montana (-5.7%, 1.58) Florida Louisiana (-6.0%, 1.34) Tennessee Arkansas (-6.9%, 0.76) Oklahoma West Virginia South Dakota Alaska Mississippi Low and declining innovation Connecticut New York Illinois New Hampshire Missouri Virginia South Carolina Kentucky Alabama Hawaii Minnesota Colorado Michigan Texas Arizona Wisconsin Rhode Island Iowa Georgia Nebraska -5% -4% -3% -2% -1% 0% 1% 2% 3% Growth Rate of Patents per 10,000 Workers, 1999 to 2009 Source: USPTO utility patents, Bureau of Labor Statistics. Note: Growth rate calculated as compound annual growth rate (CAGR). North Carolina Wyoming Oregon (+4.9%, 10.31) North Dakota = 500 patents in State Competitiveness Rich Bryden 10 Copyright 2011 Professor Michael E. Porter Kansas Maine Utah Nevada High and improving innovation rate versus U.S. U.S. average Patents per 10,000 Employees: 5.96 Low and improving innovation = 1000 patents in 2009

11 Why? What Drives State Productivity? 1. Quality of the Overall Business Environment 2. Cluster Development 3. Policy Coordination among Multiple Levels of Geography/ Government 2011 State Competitiveness Rich Bryden 11 Copyright 2011 Professor Michael E. Porter

12 Why? What Drives State Productivity? 1. Quality of the Overall Business Environment 2. Cluster Development 3. Policy Coordination among Multiple Levels of Geography/ Government 2011 State Competitiveness Rich Bryden 12 Copyright 2011 Professor Michael E. Porter

13 Quality of the Overall Business Environment Context for Firm Strategy and Rivalry Factor (Input) Conditions Access to high quality business inputs Human resources Capital access Physical infrastructure Administrative processes (e.g., permitting, regulatory efficiency) Scientific and technological infrastructure Rules and incentives that encourage local competition, investment and productivity e.g., tax policy that encourages investment and R&D Flexible labor policies Intellectual property protection Antitrust enforcement Related and Supporting Industries Local availability of suppliers and supporting industries Demand Conditions Sophisticated and demanding local needs and customers e.g., Strict quality, safety, and environmental standards Consumer protection laws Government procurement of advanced technology Early demand for products and services Many things matter for competitiveness Economic development is the process of improving the business environment to enable companies to compete in increasingly sophisticated ways 2011 State Competitiveness Rich Bryden 13 Copyright 2011 Professor Michael E. Porter

14 Improving the Business Environment Common Action Items 1. Simplify and speed up regulation and permitting 2. Reduce unnecessary costs of doing business 3. Establish training programs that are aligned with the needs of the state s businesses 4. Focus infrastructure investments on the most leveraged areas for productivity and economic growth 5. Design all policies to support emerging growth companies 6. Protect and enhance the state s higher education and research institutions 7. Relentlessly improve the public education system, the essential foundation for productivity in the long run 2011 State Competitiveness Rich Bryden 14 Copyright 2011 Professor Michael E. Porter

15 Why? What Drives State Productivity? 1. Quality of the Overall Business Environment 2. Cluster Development 3. Policy Coordination among Multiple Levels of Geography/ Government 2011 State Competitiveness Rich Bryden 15 Copyright 2011 Professor Michael E. Porter

16 What is a Cluster? A geographically concentrated group of interconnected companies and associated institutions in a particular field Traded Clusters Compete to serve national and international markets Can locate anywhere 30% of employment Local Clusters Serve almost exclusively the local market Not directly exposed to cross-regional competition 70% of employment 2011 State Competitiveness Rich Bryden 16 Copyright 2011 Professor Michael E. Porter

17 Example: Massachusetts Life Sciences Cluster Health and Beauty Products Teaching and Specialized Hospitals Cluster Organizations MassMedic, MassBio, others Surgical Instruments and Suppliers Medical Equipment Dental Instruments and Suppliers Biological Products Biopharmaceutical Products Specialized Business Services Banking, Accounting, Legal Ophthalmic Goods Specialized Risk Capital VC Firms, Angel Networks Diagnostic Substances Containers Research Organizations Specialized Research Service Providers Laboratory, Clinical Testing Analytical Instruments Cluster Educational Institutions Harvard, MIT, Tufts, Boston University, UMass 2011 State Competitiveness Rich Bryden 17 Copyright 2011 Professor Michael E. Porter

18 Example: Houston Oil and Gas Cluster Upstream Downstream Oil & Natural Gas Exploration & Development Oil & Natural Gas Completion & Production Oil Transportation Gas Gathering Oil Trading Gas Processing Oil Refining Gas Trading Oil Distribution Gas Transmission Oil Wholesale Marketing Gas Distribution Oil Retail Marketing Gas Marketing Oilfield Services/Engineering & Contracting Firms Equipment Suppliers Specialized Technology Services Subcontractors Business Services (e.g., Oil Field Chemicals, Drilling Rigs, Drill Tools) (e.g., Drilling Consultants, Reservoir Services, Laboratory Analysis) (e.g., Surveying, Mud Logging, Maintenance Services) (e.g., MIS Services, Technology Licenses, Risk Management) Specialized Institutions (e.g., Academic Institutions, Training Centers, Industry Associations) 2011 State Competitiveness Rich Bryden 18 Copyright 2011 Professor Michael E. Porter

19 Strong Clusters Drive Regional Performace Specialization in strong clusters Breadth of industries within each cluster Strength in related clusters Presence of a region s clusters in neighboring regions Job growth Higher wages Higher patenting rates Greater new business formation, growth and survival On average, cluster strength is much more important (78.1%) than cluster mix (21.9%) in driving regional performance in the U.S. Source: Porter/Stern/Delgado (2010), Porter (2003) 2011 State Competitiveness Rich Bryden 19 Copyright 2011 Professor Michael E. Porter

20 Clusters and Economic Diversification Jewelry & Precious Metals Footwear Financial Services Note: Clusters with overlapping borders or identical shading have at least 20% overlap (by number of industries) in both directions State Competitiveness Rich Bryden Processed Food Business Services Apparel Leather & Related Products Fishing & Fishing Products Agricultural Products Distribution Services Publishing & Printing Oil & Gas Transportation & Logistics Education & Knowledge Creation Chemical Products Plastics Hospitality & Tourism Information Tech. Medical Devices Entertainment Aerospace Vehicles & Defense Analytical Instruments Tobacco Biopharmaceuticals Communications Equipment Prefabricated Enclosures Lighting & Electrical Equipment Building Fixtures, Equipment & Services Power Generation Motor Driven Products Furniture Heavy Construction Services Aerospace Engines Textiles Heavy Machinery Construction Materials Forest Products Production Technology Mining & Metal Manufacturing Sporting & Recreation Goods Automotive 20 Copyright 2011 Professor Michael E. Porter

21 The Evolution of Regional Economies San Diego Climate and Geography Hospitality and Tourism Transportation and Logistics Sporting Equipment U.S. Military Aerospace Vehicles and Defense Power Generation Communications Equipment Analytical Instruments Information Technology Education and Knowledge Creation Medical Devices Bioscience Research Centers Biotech / Pharmaceuticals State Competitiveness Rich Bryden 21 Copyright 2011 Professor Michael E. Porter

22 Traded Cluster Composition of the Nevada Economy Nevada national employment share, % 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% Entertainment (-0.48%, 1.72%) Building Fixtures, Equipment, and Services Power Generation and Transmission (-0.24%, 0.53%) Chemical Products Production Technology Medical Devices Prefabricated Enclosures Hospitality and Tourism Business Services Distribution Services Education and Knowledge Creation Analytical Instruments Plastics Publishing and Printing Processed Food Automotive Biopharmaceuticals Apparel Textiles Motor Driven Products Aerospace Vehicles and Defense Overall change in the Nevada Share of US Traded Employment: 0.16% Sporting, Recreational and Children's Goods (1.00%, 1.49%) Lighting and Electrical Equipment Heavy Construction Services Financial Services -0.1% 0.0% 0.1% 0.2% 0.3% 0.4% Change in Nevada share of National Employment, 1998 to 2009 Transportation and Logistics Aerospace Engines Jewelry and Precious Metals Nevada Overall Share of US Traded Employment: 0.62% Metal Manufacturing Forest Products Construction Materials Information Technology Leather and Related Products (3.12%, 5.51%) Employment Added Jobs Lost Jobs Employees 7,000 = Source: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director State Competitiveness Rich Bryden 22 Copyright 2011 Professor Michael E. Porter

23 Nevada Job Creation in Traded Clusters 1998 to ,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 Job Creation, 1998 to Indicates expected job creation given national cluster growth.* Net traded job creation, 1998 to 2009: +44,173-2,000 Business Services Transportation and Logistics Financial Services Education and Knowledge Creation Distribution Services Hospitality and Tourism Information Technology Leather and Related Products Communications Equipment Heavy Construction Services Processed Food Metal Manufacturing Publishing and Printing Forest Products Sporting, Recreational and Children's Goods Heavy Machinery Construction Materials Biopharmaceuticals Oil and Gas Products and Services Aerospace Engines Jewelry and Precious Metals Textiles Aerospace Vehicles and Defense Agricultural Products Lighting and Electrical Equipment Fishing and Fishing Products Furniture Medical Devices Motor Driven Products Tobacco Chemical Products Prefabricated Enclosures Production Technology Apparel Plastics Automotive Analytical Instruments Power Generation and Transmission Entertainment Building Fixtures, Equipment and Services * Percent change in national benchmark times starting regional employment. Overall traded job creation in the state, if it matched national benchmarks, would be +11,040 Source: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director State Competitiveness Rich Bryden 23 Copyright 2011 Professor Michael E. Porter

24 Nevada Wages in Traded Clusters vs. National Benchmarks Fishing and Fishing Products Power Generation and Transmission Leather and Related Products Communications Equipment Information Technology Heavy Construction Services Financial Services Lighting and Electrical Equipment Distribution Services Publishing and Printing Agricultural Products Business Services Building Fixtures, Equipment and Services Oil and Gas Products and Services Medical Devices Transportation and Logistics Analytical Instruments Biopharmaceuticals Sporting, Recreational and Children's Goods Education and Knowledge Creation Metal Manufacturing Forest Products Production Technology Heavy Machinery Aerospace Vehicles and Defense Automotive Plastics Jewelry and Precious Metals Entertainment Textiles Construction Materials Hospitality and Tourism Processed Food Furniture Aerospace Engines Tobacco Chemical Products Motor Driven Products Prefabricated Enclosures Footwear Apparel Nevada average traded wage: $42,600 U.S. average traded wage: $56,906 l Indicates average national wage in the traded cluster $0 $25,000 $50,000 $75,000 $100,000 $125,000 $150,000 $175,000 $200,000 $225,000 $250,000 $275,000 Wages, 2009 Source: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director State Competitiveness Rich Bryden 24 Copyright 2011 Professor Michael E. Porter

25 State Productivity Depends on How a State Competes, Not What Industries It Competes In State Traded Wage versus National Average Cluster Mix Effect Relative Cluster Wage Effect State State Traded Wage versus National Average Cluster Mix Effect Relative Cluster Wage Effect Connecticut +27,171 7,028 20,142 Oregon -10,359-1,304-9,056 New York +24,102 3,628 20,474 Missouri -10,427-1,425-9,002 Massachusetts +16,169 4,391 11,778 Alabama -10,934-3,563-7,371 New Jersey +13,535 3,761 9,774 Florida -11,007-1,559-9,448 California +9, ,224 Wisconsin -11,722-3,516-8,206 Maryland +6,651 2,496 4,155 Nebraska -11, ,018 Washington +5,652 2,692 2,960 Utah -11,992 2,072-14,064 Virginia +5,319 1,617 3,702 Tennessee -12,172-3,156-9,016 Illinois +2, ,642 Indiana -12,554-4,840-7,714 Colorado +1,662 2, Vermont -13,368-1,572-11,796 Texas ,494-2,142 Oklahoma -13, ,069 Delaware ,060-10,896 Nevada -14,277-2,365-11,911 Alaska ,417 1,487 North Dakota -14,394 1,004-15,397 Pennsylvania -3, ,975 South Carolina -15,276-5,067-10,209 Louisiana -4, ,375 Arkansas -15,378-4,560-10,818 Georgia -5,322-1,102-4,220 Hawaii -16,043-12,555-3,487 Minnesota -5, ,150 New Mexico -16, ,835 New Hampshire -6, ,761 Kentucky -16,215-5,024-11,191 Arizona -7,021 1,149-8,169 Maine -16, ,412 Kansas -7,705 2,241-9,946 Iowa -16,606-2,721-13,885 Wyoming -8,057 1,040-9,097 West Virginia -16,645-3,894-12,751 Michigan -8,176-2,544-5,633 Idaho -18, ,884 North Carolina -9,245-4,330-4,915 Mississippi -19,942-5,291-14,651 Ohio -9,284-2,495-6,788 Montana -20,073-2,259-17,815 Rhode Island -9,791-2,290-7,501 South Dakota -20, ,257 On average, cluster strength is much more important (78.1%) than cluster mix (21.9%) in driving regional performance in the U.S. Source: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director data State Competitiveness Rich Bryden 25 Copyright 2011 Professor Michael E. Porter

26 Nevada Cluster Portfolio, 2009 Jewelry & Precious Metals Financial Services Footwe ar Apparel Processed Food Business Services Leather & Related Products Fishing & Fishing Products Distribution Services Publishing & Printing Agricultural Products Oil & Gas Transportation & Logistics Education & Knowledge Creation Chemical Products Plastics Hospitality & Tourism Information Tech. Medical Devices Biopharmaceuticals Entertainment Aerospace Vehicles & Defense Analytical Instruments Tobacco Communi cations Equipment Lighting & Electrical Equipment Prefabricated Enclosures Building Fixtures, Equipment & Services Power Generation & Transmission Motor Driven Products Furniture Heavy Construction Services Aerospace Engines Textiles Heavy Machinery Construction Materials Forest Products Production Technology Metal Manufact uring Sporting & Recreation Goods Automotive 2011 State Competitiveness Rich Bryden 26 Copyright 2011 Professor Michael E. Porter LQ > 4 LQ > 2 LQ > 1. LQ, or Location Quotient, measures the state s share in cluster employment relative to its overall share of U.S. employment. An LQ > 1 indicates an above average employment share in a cluster.

27 Prosperity GDP per Capita, Nevada Performance Scorecard Position in Trend 9 48 Current Position Wages Average Private Wage, Job Creation Private Employment Growth, and Labor Mobilization Proportion of Working Age Population in the Workforce, Labor Productivity GDP per Worker, New Business Formation Traded Cluster Establishment Growth, and Innovation Patents per Employee, Cluster Strength Employment in Strong Clusters, Leading Clusters by employment size, 2009 (national rank) Business Services (35) Hospitality and Tourism (26) Transportation and Logistics (28) Entertainment (19) Leather and Related Products (5) State Rank 2011 State Competitiveness Rich Bryden 27 Copyright 2011 Professor Michael E. Porter

28 Cluster Development Common Action Items 1. Build on the state s existing and emerging clusters rather than chase hot fields 2. Pursue economic diversification within clusters and across related clusters 3. Create a private sector-led cluster upgrading program with matching support for participating private sector cluster organizations Government should listen and remove obstacles to cluster improvement 4. Align other state economic policies and programs with clusters 2011 State Competitiveness Rich Bryden Source: Porter/Stern/Delgado (2010), Porter (2003) 28 Copyright 2011 Professor Michael E. Porter

29 Aligning Economic Policy and Clusters Business Attraction Education and Workforce Training Export Promotion Natural Resource Protection Clusters Science and Technology Investments (e.g., centers, university departments) Standard Setting / Certification Organizations Specialized Physical Infrastructure Environmental Improvement Clusters provide a framework for organizing the implementation of many public policies and public investments to achieve greater effectiveness 2011 State Competitiveness Rich Bryden 29 Copyright 2011 Professor Michael E. Porter

30 Why? What Drives State Productivity? 1. Quality of the Overall Business Environment 2. Cluster Development 3. Policy Coordination among Multiple Levels of Geography/ Government 2011 State Competitiveness Rich Bryden 30 Copyright 2011 Professor Michael E. Porter

31 Geographic and Governmental Influences on Productivity Nation Neighboring State State Neighboring State Metropolitan Areas Metropolitan Areas Metropolitan Areas Rural Regions Rural Regions Rural Regions 2011 State Competitiveness Rich Bryden 31 Copyright 2011 Professor Michael E. Porter

32 Defining the Appropriate Economic Regions OR ID Sacramento -- Arden-Arcade -- Truckee Economic Area VT ME NV UT Reno - Sparks Economic Area CA CT RI AZ Las Vegas Paradise Pahrump Economic Area The economies of states are often an aggregation of distinct economic areas with differing circumstances Source: Data from Bureau of Economic Analysis Prof. Michael E. Porter, Cluster Mapping Project, Harvard Business School; Richard Bryden, Project Director State and City Competitiveness Rich Bryden 32 Copyright 2011 Professor Michael E. Porter

33 Nevada Metropolitan Areas Reno MSA Carson City MSA Las Vegas MSA 2011 State and City Competitiveness Rich Bryden 33 Copyright 2011 Professor Michael E. Porter

34 Wage Performance in Nevada Metropolitan Areas $43,000 Nevada Growth Rate of Wages: 2.95% U.S. Growth Rate of Wages: 3.01% $42,000 U.S. Average Private Wage: $42,403 $41,000 Average Private Wage, 2009 $40,000 $39,000 $38,000 Las Vegas MSA Reno MSA Rest of State $37,000 Carson City MSA Nevada Average Private Wage: $37,554 $36, % 2.9% 3.0% 3.1% 3.2% 3.3% 3.4% Growth Rate of Private Wages, Source: Census CBP, authors analysis. Note: Bubble size in chart is proportional to employment in State Competitiveness Rich Bryden 34 Copyright 2011 Professor Michael E. Porter

35 Employment Performance in Nevada Metropolitan Areas $43,000 U.S. Growth Rate of Employment: 0.52% Nevada Growth Rate of Employment: 2.42% $42,000 U.S. Average Private Wage: $42,403 $41,000 Average Private Wage, 2009 $40,000 $39,000 $38,000 Reno MSA Rest of State Nevada Average Private Wage: $37,554 $37,000 Carson City MSA Las Vegas MSA $36, % 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% Growth Rate of Private Wages, Source: Census CBP, authors analysis. Note: Bubble size in chart is proportional to employment in State Competitiveness Rich Bryden 35 Copyright 2011 Professor Michael E. Porter

36 Geographic and Governmental Influences on Productivity Nation 1. Influence and access federal policies and programs Neighboring State State Neighboring State 4. Integrate policies and infrastructure planning with neighbors Metropolitan Areas Metropolitan Areas Metropolitan Areas 2. Work with each metro area to develop a prioritized strategic agenda Rural Regions Rural Regions Rural Regions 3. Connect rural regions with proximate urban areas 2011 State Competitiveness Rich Bryden 36 Copyright 2011 Professor Michael E. Porter

37 Agenda 1. How is your state doing? State Performance Scorecard 2. Why? 3. Where to go from here? Explaining your state s performance, strengths, and weaknesses Action Steps 2011 State Competitiveness Rich Bryden 37 Copyright 2011 Professor Michael E. Porter

38 Agenda 1. How is your state doing? State Performance Scorecard 2. Why? 3. Where to go from here? Explaining your state s performance, strengths, and weaknesses Action Steps Biggest Action Item of All 2011 State Competitiveness Rich Bryden 38 Copyright 2011 Professor Michael E. Porter

39 Create an Economic Strategy What is the distinctive competitive position of the state or region given its location, legacy, existing strengths, and potential strengths? What unique value as a business location? For what types of activities and clusters? Define the Value Proposition Develop Unique Strengths What elements of the business environment can be unique strengths relative to peers/neighbors? What existing and emerging clusters represent local strengths? Achieve and Maintain Parity with Peers What weaknesses must be addressed to remove key constraints and achieve parity with peer locations? Economic strategy requires setting priorities and moving beyond long lists of separate recommendations State Competitiveness Rich Bryden 39 Copyright 2011 Professor Michael E. Porter

40 How Should States Compete for Investment? Tactical (Zero Sum Competition) Strategic (Positive Sum Competition) Focus on attracting new investments Compete for every plant Offer generalized tax breaks Provide subsidies to lower / offset business costs Every city and sub-region for itself Government drives investment attraction Also support greater local investment by existing companies Reinforce areas of specialization and emerging cluster strength Provide state support for training, infrastructure, and institutions with enduring benefits Improve the efficiency of doing business Harness efficiencies and coordination across jurisdictions, especially with neighbors Government and the private sector collaborate to build cluster strength 2011 State Competitiveness Rich Bryden 40 Copyright 2011 Professor Michael E. Porter

41 Harnessing the New Process of Economic Development Competitiveness is the result of both top-down and bottom-up processes in which many companies and institutions take responsibility Old Model New Model Government drives economic development through policy decisions and incentives Economic development is a collaborative process involving government at multiple levels, companies, teaching and research institutions, and private sector organizations 2011 State Competitiveness Rich Bryden 41 Copyright 2011 Professor Michael E. Porter

42 Example: Organizing for Economic Development Cluster Committees South Carolina Council on Competitiveness Executive Committee Chaired by a business leader and reporting to the governor Convenes working groups, provides direction and strength, holds working groups accountable Coordinating Staff Task Forces Automotive Apparel Cluster Activation Education / Workforce Hydrogen / Fuel Cells Agriculture Research / Investment Start-ups / Local Firms Textiles Travel and Tourism Distressed / Disadvan. Areas Measuring Progress Effective economic policy also requires coordination within government 2011 State Competitiveness Rich Bryden 42 Copyright 2011 Professor Michael E. Porter

43 Summary The goal of economic strategy is to enhance productivity. This is the only way to create jobs, high income, and wealth in the long run Improving productivity and innovation must be the guiding principles for every state policy choice Improving productivity does not require new public resources, but using existing resources better Improving productivity demands that governors mobilize the private sector, not rely on government alone Economic strategy is non-partisan and about getting results 2011 State Competitiveness Rich Bryden 43 Copyright 2011 Professor Michael E. Porter

44 Next Steps 1. Reach out to your team 2. Reach out to the business community 3. Take advantage of Harvard Business School data and tools to support this effort. Go to The prosperity of the U.S. economy will depend more on the success of states in improving competitiveness than what happens in Washington 2011 State Competitiveness Rich Bryden 44 Copyright 2011 Professor Michael E. Porter