Dan Levine, Practice Leader, Location Strategies and Economic Development, Oxford Economics, Inc. (Aug/Sep 09)
By now it has become clear - the upcoming year will bring fewer and smaller projects, and most of these will be expansions rather than relocated business operations. Weakened labor and real estate markets have eliminated primary motivations for companies to seek new business locations and business leaders are much less inclined to entertain adventurous site selection strategies. Yet even in today's turbulent economy, companies continue to seek locations from which they can effectively attract employees from difficult-to-recruit disciplines - and too often that means opening an overseas facility.
In response, collaborative relationships between companies and universities are slowly gaining in popularity and effectiveness. Moreover, some U.S. states have begun introducing major new incentive programs that target local businesses willing to make investments in areas defined by the states as priorities. This article will highlight a few examples of what some states and Canadian provinces are doing to attract major new investments closer to home, and how your business might take advantage of today's investment climate to initiate new partnerships with economic development officials in your community.
Foreign Direct Investment
There is no doubt that relative to recent years there is a scarcity of new location projects; and while it easy to blame the entire decline on the overall state of the economy, it is important to note that a contributing factor is a change in foreign direct investment (FDI) trends. In its recent report A New Investment Paradigm, OCO Global Ltd. says that the United States remains the number-one source for all FDI - that is, U.S. companies investing overseas. Yet the opposite is not true - not a single U.S. metropolitan region appears as a top 10 global recipient for FDI. Moreover, it is not just manufacturing jobs going overseas. Among the largest categories of U.S. projects going overseas during 2008 were investments by financial service companies, research and development projects, and software and information technology centers.
In large part, U.S. companies continue to scour the globe for best-in-class technical expertise, particularly from difficult-to-recruit disciplines, and businesses remain willing to invest in overseas facilities that will enable them to intercept this talent. However, in some U.S. communities, universities and local businesses hope to pre-empt this trend though innovative and targeted collaboration.
University and Corporate Collaboration
Many universities are actively engaged in economic development initiatives ranging from business incubation to technology transfer. These efforts are typically oriented toward business startups or commercialization of technologies developed on campus and accordingly are viewed with only marginal interest by the region's major employers. This is a missed opportunity for both parties. Businesses and universities operating in the same community often have significantly overlapping areas of interest and expertise that, when properly joined, can promote regional economic growth. In today's challenging economy, businesses are open to new channels of profitability - including outsource opportunities and skill development - and universities have become more entrepreneurial in pursuing corporate relationships that generate revenue needed to offset reductions in state aid and other funding sources.
Two examples of successful partnerships are the Center for Manufacturing Excellence, created jointly by the University of Mississippi and Toyota Motor Corporation; and the State University of New York at Albany's College of Nanoscale Science and Engineering, which is a partnership between that university and a consortium of partners, including IBM, AMD, and SEMATECH. Each of these university-corporate partnerships now directly contributes to the vitality of core business clusters within each community. In the case of Mississippi's program, faculty and staff are trained specifically for the advanced manufacturing skills needed to support auto manufacturing. Albany's program takes a similar approach but targets the semiconductor industry. Each university gains access to industry expertise and state-of-the-art equipment that would not otherwise be available to its faculty and students. Leading local companies have greater confidence that their host communities will be able to provide the specialized skilled work force that they will need to compete in their present geographic location.
What can be learned from these success stories? Most importantly, truly effective business and university partnerships do not simply happen organically. Instead, as a first step, they require a commitment to sustained and active dialogue on the part of both the academic and business communities.