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Inward Investment Guides
Emerging Industries, Emerging Locations
New technologies are pushing the development of new industry clusters. Here are some consultants' ideas about which locations might be on the fast track for growth.
Jennifer LeClaire  (Dec/Jan 08)
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Photonics
Photonics is one of the fastest-growing high-tech industries in the world. Photonics technology is used to develop lasers, fiber optics, satellites, holographs, flat screen displays, DVDs, scanners, and many other medical and consumer devices. The global market for photonics was estimated at $243 billion in 2006, according to Photonics Research Ontario, and is growing at an annual rate of 10 to 20 percent.

"Sometimes photonics clusters are a secret, but they are well-recognized by policy leaders," says Krug, noting that two of those - Orlando and San Antonio - are especially outstanding. Arizona, California, and Massachusetts are also making major inroads into this multibillion-dollar industry.

The optics industry in Tucson started in 1942, based around the area's large number of telescopes. Today, the Arizona Optics Industry Association members number more than 300 companies and organizations covering a broad range of products and services in Tucson, Phoenix, and other cities statewide.

"There are large clusters of photonics companies in Arizona and Central Florida because there are incredibly strong research centers that support the industry," says Krug. "The University of Central Florida has a College of Optics that does leading-edge, pioneering research in photonics and optical design and laser systems. It was birthed out of the Martin Marietta and Lockheed Martin influence there."


Life Sciences
It seems just about every city, county, state, and nation is vying for life sciences cluster status. But site selection consultants are asking a thoughtful question: What exactly is life sciences? Indeed, there are so many niches under this umbrella - and so many clusters developing around those niches - that selecting a location for a "life sciences" firm isn't an automatic trip to Boston or San Diego anymore. There are clusters forming around advanced composite materials, medical devices, analytical instruments, and more.

"If you tear the industry apart, you will see everything from the new delivery of therapeutics to various types of cutting-edge nanotechnology systems," says John Rhodes, a senior principal at Moran, Stahl & Boyer, a site selection consultancy in Lakewood Ranch, Florida. "You'll also see some fairly traditional pharmaceutical products, medical instrumentation, and bioinformatics."

Rhodes points to Denver, Colorado, and Phoenix as two cities that were latecomers to the biotech industry but that have played catch up in the game. Both cities have built facilities and have attracted senior talent. Klinger also points to Minneapolis, Minnesota; Kansas City and St. Louis, Missouri; Memphis, Tennessee, and Austin, Texas, as up-and-coming biotech cluster cities. All this points to the reality that new clusters are still being developed and will continue to be developed as new industries are formed and as technology changes.

Consider Austin. Twenty-five years ago, Austin was a sleepy college town with a state government and the University of Texas as two of its largest employers. Over time, it became a hotbed for the semiconductor industry and now attracts not only chipmakers but also suppliers and suppliers to those suppliers.

Differing Philosophies
At the end of the day, one site selection strategy hardly fits all. There are different approaches to working with clients. Some give little heed to rankings. Others fold studies from organizations like the Milken Institute into the decision-making process.

It's true that a top location for one client may be quickly eliminated for another client. Buzz Canup, principal of Canup & Associates, a site selection consulting firm in Austin, says his site location studies seek an unbiased approach to the client's project criteria. He uses from 100 to 200 evaluative factors that dig deeper than the usual suspects of highly-edged work force, quality of life, cost of doing business, and the like. In Canup's experience, a winner today could be a looser tomorrow.

"We don't start out identifying clusters where our client might fit," says Canup. "If the client has an inclination toward a particular geographical location, then we define the search that way. But for companies that are transportation sensitive, there's usually some logistical analysis involved to determine what regions make the most sense."

Sangster takes a different approach. When he sits across the boardroom table from an economic developer, his key questions are: "What are your target clusters? What industries fit well here?" In many cases, says Sangster, there is some overlap and the natural fit tends to flow along the lines of a region's agricultural or natural resources. Some clusters, like logistics, are location-driven. Others are university-driven. "If you look at certain regions of the country, they are clearly ripe for specialized activities," he says. "High-end projects will always migrate to places where they can tap into area colleges and universities producing graduates with the types of skill sets they need."

Rhodes also considers the lifecycle of an industry. His theory: Explore the lifecycle curve and you can identify clear location patterns. "Industries that are in the power curve for research migrate to research and development locations, such Boston, San Diego and Raleigh, North Carolina," says Rhodes. "Mature industries like aerospace, on the other hand, are more dispersed and have a cost-related pattern for location, while industries such as automotive are positioned for logistics."

As Klinger sums up the situation, "There are always opportunities for places that haven't had robust economies to experience rapid growth, especially when you have a growth industry."

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