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).