Virginia is better at the traditional economic development game — recruiting outside corporate investment — than just about anyone. The Virginia Economic Development Partnership is highly regarded nationally, as are several of Virginia’s regional economic development organizations. But is that good enough to sustain prosperity in the 21st century?

In my “Economy 4.0” series, I’ve argued that we need to move from a “safari hunting” economic development model — bagging the big game and bringing it home — to a “tending the garden” approach of nurturing and growing start-up companies, and even beyond, to a model organized around the principles of creativity, innovation and energy/environmental sustainability.

I did a lot of digging for my latest piece, “Dead End.” I found, to my surprise, that there’s still a lot of life left in the old corporate-recruitment paradigm. In the years 2004 and 2005, Virginia brought in as much outside investment as during the peak years of the Internet bubble. But economic development successes have been a lot harder to find the past two years, possibly foretelling a long-term downturn in the effectiveness of this strategy. Personally, I believe that we have milked that cow for all she’s got, and it’s time to move on to the next one.

But, as the old saying goes, “If it ain’t broke, don’t fix it.” For a long time, Virginia’s economic development machinery appeared to be working just fine, so everyone was comfortable just fine-tuning the old model. But I argue that traditional strategies are leaving a lot of money on the table. Corporate expansion and relocation announcements, I estimate, accounted for only 10 percent of all business investment in Virginia over the past 10 years. Where’s the other 90 percent coming from? How can we get more of it?

While VEDP keeps careful track of all corporate expansions, including many that never get announced publicly, no one in state government is gathering the metrics of the knowledge economy — at least not where it can be accessed in one place. How many new businesses are being created? How many receive venture capital funding? How many companies launched Initial Public Offerings, or raised capital in public equity markets? How much R&D takes place in Virginia? How many patents are issued? How many fast-growth companies do we have? How well do the skills and education of our workforce match the emerging needs of the industries of the future?

Ironically, the best place to answer most of those questions isn’t any source in Virginia — it’s in Massachusetts. The Massachusetts Technology Collaborative does collect and publish knowledge-economy data for the Bay state and nine other “leading technology states,” including Virginia. Needless to say, that information is not disseminated widely in the Old Dominion. (I was tipped off to it by Pete Jobse, CEO of the Center for Innovative Technology.) The lack of Virginia-specific data is a pretty sad story: If we can’t accurately describe our economy, how can our political, civic and business leaders possibly do an intelligent job of devising policy for it?

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2 responses to “Dead End”

  1. Groveton Avatar

    I have seen a lot of states try their hand at technology-oriented economic development. Technology companies often stay where they start so getting the techie start-ups going in your state is the right idea.

    Now, here’s the bad news …

    Universities play a key role. Look at Mass. or Ca. or NC. Their universities are in population and economic centers. Tech start ups begin with people graduating from these top universities. The founders can attract talent inot the start up. The company grows. If this happens often enough, a venture capital community develops too. Now, the state has a “virtuous circle” of university-led innovation, entrepreneur-led business formation, venture capital – led financing and growth – led employment.

    But it all starts with top universities located in places where talented people are willing to live (in pretty large quantities).

    Virginia’s top universities are in the wrong places. You just can’t get sufficient technical talent into Charlottesville, Williamsburg or Blacksburg to take economic advantage of the universities.

    Why did VW insist on Fairfax County?

    Educated people (by and large) want to live in metropolitan areas. This is especially true for young people.

    Virginia has four choices:

    1. Move one of the priemier universities to a population / economic center. Nearly impossible.

    2. Over – fund public universities already in population / economic centers in the hope of making them premier institutions. Hard but possible.

    3. Force the inbred administrations of the three premier universities to open full blown campuses in population / economic centers. Relatively easy other than demanding that administrators stop acting like clowns.

    4. Heavily invest in the locality where one of the premier universities already exists in the hope of creating an entrepreneurial enclave. Very hard. Possible in Charlottesville. Long shot in Williamsburg. Impossible in Blacksburg.

    Even beyond its normal “business as usual bungling”, the state of Virginia has really screwed this up. By having its most technologically profecient university (Tech) in the most remote location it has absolutely minimized the potential for technology-led economic growth.

  2. Jim Bacon Avatar
    Jim Bacon

    Groveton, Interesting observation… I wonder if the holds true for Michigan (Ann Arbor), Wisconsin (Madison), Illinois (Urbana-Champaign)… Conversely, the location of Duke, UNC and NC State in geographically contiguous urban areas may be the key to the success of the Research Triangle, thus supporting your observation…

    I’ll mull that one over for my upcoming piece on universities, R&D and technology.

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