Innovation and the Role of the Economic Development Practitioner

October 2006

By Ben Loftsgaarden, Project Manager

AngelouEconomics

There has been much written about the importance of regional innovation as it pertains to successful economic development. Global competitiveness is a national priority and much work has been conducted to show that in order to maintain its current leadership position, the U.S. must focus on building its capacity to innovate. Innovation is the only truly sustainable economic development course.

Many regions in the U.S. that have focused on traditional cost-based (namely, aim to be low cost and supplement with high incentives when necessary) economic development strategies are all too familiar with difficulty in maintaining sustainability. What these communities have found is that when you position yourself as the low cost option for XYZ industry, it is just a matter of time before a competing region can lay claim to the title of the lower cost alternative.

Cost-based traditional approaches have always been a risky, all-or-nothing approach to economic development. But, in the past U.S. communities at least had the comfort of having a good grasp of who their competitors were and what they were offering. They were also generally located in the U.S. and they were typically in a nearby city, county, or state. Detroit worried about Cleveland stealing its jobs, North Carolina worried about Virginia, the Northeastern U.S. worried about industry shifts to the Southwest, etc. Since you knew your competitors well, economic development practitioners had working information on their tendencies (what these regions could and could not offer). This was helpful in guiding their tactics and making enhancements to their community’s product offering.

Today, things aren’t as clear-cut. We’ve all heard that today’s economic landscape is global. This is especially true when it comes to low-cost industries. The infusion of low labor, land, and natural resources coupled with a strong desire by many emerging nations to enter the global economy means that U.S. communities are no longer just competing with their neighbors. In fact, in today’s global environment, if you aim to be the low cost location it is nearly impossible to know who and what you are competing with exactly. In just the past few decades we have seen a low cost shift by many industries to Mexico, the next wave came from India and Southeast Asia, and now China is dominating the headlines on outsourcing. Who’s next - Central Asia, perhaps the African subcontinent?

It is clear then that when communities are playing the cost-based economic development game, it is difficult to achieve sustainable long-term prosperity. This reemphasizes the importance of innovation. Implied in the word innovation is the notion that you are leading the pack. You are creating a product, process, or concept that is original and inventive. If you are innovating, then your community does not have to be as concerned with who your competitor is and what it is doing (whether it’s a neighboring community or one halfway around the globe).

So, for the economic development (E.D.) practitioner the solution seems simple: we need to work to transform our economy into one that is innovation-based. The solution may be simple, but getting there is the tough part. Building an economy that is driven by innovation is hard work and most economic development professionals are unclear as to what their role can and should be. In the past the E.D. practitioner had an understanding of what to do and the tools at his/her disposal. For example, take a community that has a 500-acre parcel that is shovel ready with all utilities, and rail and interstate access. The economic developer knows the steps to actively market this site to potential users that are looking for these specifications. Or, if there was a clear understanding that a region needed to provide incentives in order to be more competitive, the economic developer would build a constituent group and lobby his/her city, county, or state leaders for incentive packages. It is not to say that this work is by any means quick and easy, it is just that it is understood and the economic developer has a clear grasp of where he/she can act as a catalyst.

Spawning innovation, on the other hand, has always been the territory of the scientist, the garage engineer, or the university professor. It is not as clear where the economic developer fits in. Additionally, one must ask if the E.D. practitioner should even insert him/herself into this realm and, if so, how?

To answer the former question first, yes the E.D. practitioner should play an integral part if a region truly expects to build an innovation-based economy. For innovation to thrive, there needs to be strong collaborations between various groups, open lines of communication, links between the public and private sector, and an understanding of the role that government must play. These “non-technical” factors are many and are just as critical for innovation to flourish. Coincidently, these are the exact areas in which the E.D. practitioner is typically the expert.

The E.D. practitioner works in the nexus between public sector groups, private sector businesses, academic institutions, etc. and provides a communication bridge. It is the E.D. practitioner that understands the needs of the business community, and the capabilities and resources of the public sector. In fact, America could be losing some of its historical innovative edge because economic developers haven’t been as actively concerned about how they can help further innovation. E.D. practitioners must treat this as a necessary facet of catalyzing economic growth, with as much (if not more) emphasis than is placed on traditional E.D. tactics – e.g. marketing available sites and lobbying for incentives.