R EACHING N EW H EIGHTS IN R EGIONAL C OMPETITIVENESS WITH V ALUE -C HAIN A NALYSIS Marty Romitti, PhD, Senior Vice President CREC 1 The 2014 EMSI Leadership Conference Coeur d'Alene, ID . October 21, 2014
W HAT DO N APOLEON AND R AISIN B RAN HAVE IN C OMMON ? They both tried to make it rain! 2
R EACHING N EW H EIGHTS IN R EGIONAL C OMPETITIVENESS WITH V ALUE -C HAIN A NALYSIS Topic Why Clusters? Identifying Clusters from the Top Down Identifying Clusters from the Bottom Up with Value Chains Applying Value Chain Analysis in Regional Planning – NW PA 3
W HAT IS A C LUSTER ? A geographic Emphasis is on Interdependence Economically important linkages • concentration of within and between businesses inter-related firms and and other organizations institutions that… Linkages can take the form of • trade, information, innovation collaborate, • and labor compete, • learn from one another, • attract assets, and • share unique talent. • Combined, these factors reinforce the regional cluster’s market advantage. 4
T HE BASIC LOGIC Cluster Competitive Identification Analysis Cluster -Innovation growth Strategy -Productivity growth -Income distribution Regional Cluster Economic Expansion Outcome 6
A PPROACHING A NALYSIS : E NTERPRISE Enterprise Innovation Talent What your region makes How your region renews What your region does • • Goods & services • New ideas and Human capital base created by existing • innovations Embodied in skills of • and prospective Mechanisms to take existing and future industries them from concept to workforce supply • Linkages to national • market , Improved through • and global economies Creation of new education, • Formation of new business models, experience and industries through companies, or training reflecting new business product lines industry demand formation . LOCATION ASSETS The basic conditions facing firms and innovators 7 in the region.
A PPROACHING A NALYSIS : E NTERPRISE Key Questions Measures/Techniques Which industries are largest Absolute size sources of jobs and income? Are some industries local Relative size specializations? Which industries are growing? Local vs. state/national growth Which are declining? Are new businesses being New business start-ups formed, leading to new industries? Is the mix of key industries Application of cluster definitions unique? Are related and mutually dependent industries present? Is there evidence of multi- industry specializations? 8
6 CONTRIBUTING FACTORS TO MAKING DATA RELEVANT Availability Ease of Relevance Extraction Making Sense of It All Accuracy Findability Timeliness 9
EMSI A NALYST Go to www.economicmodeling.com Key advantages Detailed Comprehensive Regional Current Pulling together an overview Creating a region Demographic trends Economic structure 10
R EACHING N EW H EIGHTS IN R EGIONAL C OMPETITIVENESS WITH V ALUE -C HAIN A NALYSIS Topic Why Clusters? Identifying Clusters from the Top Down Identifying Clusters from the Bottom Up with Value Chains Applying Value Chain Analysis in Regional Planning – NW PA 11
C HOOSING Y OUR C LUSTER D EFINITIONS There is no single best way to define clusters Off the shelf or self- defined? Depends on your needs EMSI Analyst provides pre-defined clusters that can be used 17 clusters defined by Purdue University researchers 12
S ETTING C RITERIA FOR T ARGETING C LUSTERS Traded or Local – Number of (multiplier impact) establishments in clusters Employment size of cluster Relative concentration of cluster (“Location quotient”) Employment growth trends of cluster Average annual wage 13 level of cluster
O NE A PPROACH TO C ATEGORIZING C LUSTERS FOR T ARGETING • Shrinking employment, declining faster than the nation Receding regional concentratio n • At-Risk Stable Growing • Consistent and large • Large employment size • employment size Growing more rapidly than • the region or nation Close to national growth • Most interested in higher trends wages Emerging • Continuously rising employment • 14 Growing faster than the nation • Rising regional concentration in the cluster industries
K EY DATA POINTS O NTARIO ’ S C LUSTERS Employment Average Cluster Cluster LQ 2011 Wage Type Advanced Materials 65,151 1.31 $48,391 At-risk Agribusiness, Food Proc & Tech 187,315 0.91 $38,353 Stable Apparel & Textiles 25,270 0.93 $37,895 At-risk Arts, Entmnt, Recreation & Visitor Ind. 191,238 0.92 $31,669 Stable Biomedical/Biotech (Life Sciences) 476,257 0.95 $44,540 Growing Business & Financial Srvcs 451,539 1.13 $58,775 Stable Chmls & Chml Based Pdcts 50,820 1.26 $65,535 Stable Comp & Elec Pdct MFG 23,299 1.41 $59,623 At-risk Defense & Security 79,849 1.08 $41,030 Emerging Education & Knowledge Creation 436,806 0.99 $52,791 Growing Elec Eqpt, App & Compont MFG 49,802 1.15 $44,428 Stable Energy (Fossil & Renewable) 169,214 0.82 $71,381 Growing Fabricated Metal Pdct MFG 72,078 1.17 $51,146 Stable Forest & Wood Pdct 164,624 0.79 $50,771 Stable Machinery MFG 54,922 1.12 $55,973 Stable IT & Telecomm 194,044 1.28 $69,680 Stable Printing & Publishing 36,192 1.07 $62,698 Stable Transportation & Logistics 196,464 0.93 $47,139 Growing Transp Eqpmt MFG 106,341 1.69 $56,672 Stable 15 $46,100 Ontario average
T HE C LUSTER B UBBLE C HART 16
R EACHING N EW H EIGHTS IN R EGIONAL C OMPETITIVENESS WITH V ALUE -C HAIN A NALYSIS Topic Why Clusters? Identifying Clusters from the Top Down Identifying Clusters from the Bottom Up with Value Chains Applying Value Chain Analysis in Regional Planning – NW PA 17
Value Chain Example Source: Center on Globalization, Governance & Competitiveness, Duke University. 18
F RAMEWORK FOR C ONDUCTING V ALUE C HAIN A NALYSIS A Customer 1 Supplier 1 Supplier 2 Customer 2 Core Supplier 3 Customer 3 Industry Supplier 4 Customer 4 Supplier 5 Customer 5 Core Backward Forward 19 Industry Linkages Linkages (supplier opportunities) (market opportunities)
Value Chain Example Exports Consumers Wheels Government Rubber Tires Rubber Automotive Vehicle rental Steel molding assembly services Automotive assembly’s forward Engines linkages Legal services Direction of sales Advertising 20 Source: Edward Feser, University of Illinois. Automotive assembly’s backward linkages
B EGIN BY CONSIDERING LINKAGES Which linked industries’ value chains are in the region? Are the linked industries significant/competitive in the region? Where are the gaps? Which linked industries could be in the region? Which industries are not appropriate for your region? 21
R EACHING N EW H EIGHTS IN R EGIONAL C OMPETITIVENESS WITH V ALUE -C HAIN A NALYSIS Topic Why Clusters? Identifying Clusters from the Top Down Identifying Clusters from the Bottom Up with Value Chains Applying Value Chain Analysis in Regional Planning – NW PA 25
NW Pennsylvania has seen an erosion in jobs over the past decade, especially when compared to broader state and national trends 106.00 104.00 102.00 100.00 98.00 NW PA PA 96.00 US 94.00 92.00 90.00 Employment Index for NW Pennsylvania, Pennsylvania, and US. Base Year 2001 = 100 88.00 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: Economic Modeling Specialists Int’l., Analysis by CREC 26
Mapping the Shale Gas Boom 27 Gas wells (red) and oil wells (blue) Source: FracFocus chemical disclosure registry, a partnership between federal and state governments and private companies, lists more than 50,000 gas and oil wells nationwide where companies have voluntarily reported using fracking.
Employment trends in Oil and Gas-related activities Index of Employment in Oil and Gas Related Activities* (2001=100) 350.0 Northwest Pennsylvania Pennsylvania 300.0 USA 250.0 Employment Index (2001=100) 200.0 150.0 100.0 50.0 *Include NAICS industries: Crude Petroleum and Natural Gas Extraction (211111), Drilling Oil and Gas Wells (213111), Support Activities for Oil and Gas Operations (213112), and Natural Gas Distribution (221210) 0.0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: Economic Modeling Specialists, Int'l 28
C ONDUCTING A VALUE - CHAIN ANALYSIS Identify Regional Strengths/Trends with Data Analysis Define Inter- Supplement Data with Interviews and Industry Linkages Focus Groups using NAICS Codes 29
K EY LINKAGES FOR OIL AND GAS EXTRACTION Backward linkages Forward linkages Support activities for oil & gas Electric power generation, operations transmission, & distribution Construction Natural gas distribution Industrial gas MFG Petroleum refineries Metal valve MFG Petroleum & coal products MFG Mining & oil & gas field machinery MFG Lessors of nonfinancial intangible assets 30
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