10 Principles in Economic Development - Competitiveness
- Have you identified the competitive advantages
and disadvantages of your area?
- How do you provide information or market your area to prospective
or existing businesses that are considering location or expansion
in your area?
Developing and sustaining a vibrant economy requires
thinking competitively. Creating a competitive advantage is based
on making the most effective use of the human, natural, and institutional
resources of an economic region. Understanding these competitive
advantages as well as the disadvantages of a region is a critical
first step in designing an economic development strategy.
What does it mean for an area to be competitive?
Michael Porter, who has examined the competitive advantage of
nations, says that "the only meaningful concept of competitiveness
at the national level is national productivity." To be competitive,
Porter continues, "a nation's firms must relentlessly improve
productivity in existing industries by raising product quality,
adding desirable features, improving product technology, or boosting
product quality." For a state or region, competitiveness
means creating and sustaining an environment for business growth
and economic prosperity that offers long-term, good-paying job
opportunities for citizens. Being competitive requires an under-standing
of the special characteristics of an area that have contributed
to past industry success, how these characteristics are changing,
and how important or unimportant they may be in the future.
Several states have set up competitiveness councils
to examine their states' strengths and weaknesses and to identify
opportunities and strategies for becoming more competitive. The
Indiana Economic Development Council is an independent, nonprofit
council whose goal is to enhance and stimulate Indiana's competitiveness.
This organization has helped to shape and guide the state's economic
development policies since 1985. Oregon undertook a broad-based
study of its competitiveness in 1989 and produced a landmark report
called Oregon Shines. This report set the stage for a fundamentally
new approach to economic development policy based on outcomes
and market-based strategies.
In 1993, the Commonwealth of Massachusetts issued
a comprehensive long-term economic development blueprint for the
state. The report suggests that competitiveness is a "bottom-up"
phenomenon. In the context of their strategy, competitiveness
refers "both to the ability of each individual firm to succeed
in the markets it serves and to the capacity of the business environment
offered by the state to foster and support the growth of competitive
firms."
Being competitive also requires marketing the advantages
of an area, both those that are inherent (labor force, natural
resources, geographical location) and those that are created (tax
structures, worker training efforts, capital access funds, infrastructure).
In some cases these marketing efforts may provide critical information
that businesses need in making location or expansion decisions.
In addition, the marketing efforts of an economic development
effort can produce feedback about public policies, regulations,
programs, and service delivery, all of which may affect the competitiveness
of an area. Most of what goes into a business location decision
may be economic and cost factors that are beyond the reach of
public policy. Understanding and addressing business perceptions
and real concerns, however, may affect marginal decisions. These
decisions may be particularly important in the case of rapidly
expanding businesses.
Several southern states have created "state
of the art" marketing centers to showcase their states' competitive
advantages and provide up-to-date information on communities and
potential business sites. These are usually funded by utilities
and run cooperatively with public economic development agencies.
An example is the Mississippi Resource Center. Marketing may be
as basic, however, as providing a fact book with basic information
on the state and comparisons with other areas. An example is Compare
Minnesota, an economic and statistical fact book prepared biennially
by the Minnesota Department of Trade and Economic Development
(1995).
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