State - Competitiveness - Georgia - v312

Georgia Competitiveness:
Creating a State Economic Strategy
Professor Michael E. Porter

Harvard Business School
March 20, 2012
For further material on regional competitiveness and clusters: www.isc.hbs.edu/econ-clusters.htm

For state– Rich
2012 State Competitiveness economic
Bryden profiles: www.isc.hbs.edu/econ-statesregions.htm
1 Copyright 2012 © Professor Michael E. Porter
The Economic Challenge for Governors in 2012
Achieving Fiscal Stability
Enhancing State
Competitiveness
2012 State Competitiveness – Rich Bryden 2 Copyright 2012 © Professor Michael E. Porter
What is Competitiveness?
• Competitiveness is the productivity with which a state utilizes its

human, capital, and natural endowments to create value
• Productivity determines wages, jobs, and the standard of living
• It is not what fields a state competes in that determines its

prosperity, but how productively it competes
Where Does Productivity Come From?
Businesses and government play different but interrelated roles in

creating a productive economy
• Only businesses can create jobs and wealth
• States compete to offer the most productive environment for
business
Agenda
1. How is your state doing? State Performance Scorecard
2. Why? Explaining your state’s performance,

strengths, and weaknesses
3. Where to go from here? Action Steps
Georgia Performance Scorecard
Start Position Trend Current Position
Prosperity
GDP per Capita, 2000-2010
17 50 31 -14
Wages
Average Private Wage, 1998-2009 17 42 19 -2
Job Creation
Private Employment Growth, 7 45 43 -36
1998-2000 and 2007-2009
Labor Mobilization
Proportion of Working Age Population 19 48 33 -14
in the Workforce, 2000-2010
Labor Productivity
GDP per Workforce Participant, 2000-2010 17 49 26 -9
New Business Formation

Traded Cluster Establishment Growth, 10 35 18 -8
1998-2000 and 2007-2009
Innovation
Patents per Employee, 2000-2010 31 11 29 +2
Cluster Strength
Employment in Strong Clusters, 1998-2009 47 1 19 +28
• Business Services (8)
Leading Clusters • Transportation and Logistics (6)
State Rank 21-30
by employment size, 2009
(national rank)
• Textiles (1) 1-10 31-40
• Motor Driven Products (2) 11-20 41-50
• Aerospace Vehicles and Defense (7)
2012 State Competitiveness – Rich Bryden 6 Copyright 2012 Professor Michael E. Porter
Comparative State Prosperity Performance
2000 - 2010
$65,000
High but declining High and rising
Alaska
versus U.S. Delaware prosperity
Wyoming versus U.S.
$60,000
Connecticut
$55,000
Gross Domestic Product per Capita, 2010
New York
Massachusetts
$50,000 New Jersey
California Virginia
Colorado North Dakota
Illinois Maryland
Washington Minnesota
$45,000 South Dakota
U.S. GDP per Texas Nebraska
Hawaii Oregon
Capita: $42,346 Louisiana
Nevada New Hampshire Rhode Island Iowa
$40,000 North Carolina Wisconsin Kansas
Georgia
Indiana Pennsylvania
Ohio Tennessee Utah Vermont
Missouri Florida Oklahoma
$35,000 Arizona Maine New Mexico
Michigan
Kentucky Alabama
Idaho Montana
South Carolina Arkansas
$30,000 West Virginia
Mississippi
Low and declining U.S. GDP per Capita
Low but rising
versus U.S. Real Growth Rate: 0.63% versus U.S.
$25,000
-1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5%
Real Growth in Gross Domestic Product per Capita, 2000 to 2010
Source: BEA. Notes: GDP in real 2005 dollars. Growth rate is calculated as compound annual growth rate.
Comparative State Labor Mobilization Performance
1999-2010
75%
High but declining High Labor Force Participation and
versus U.S. Participation rising versus U.S.
Proportion of Working Age Population in the Workforce, 2010
Minnesota North Dakota
Nebraska South Dakota Iowa

Vermont
70% New Hampshire Kansas
Alaska Wyoming Virginia
Wisconsin
Colorado Utah Connecticut
Nevada Washington Rhode Island
Maryland
Illinois
Texas Massachusetts New Jersey U.S. Labor Force
Idaho Ohio
Missouri Oregon Maine Participation Rate: 64.7%
65%
Montana California Pennsylvania
Georgia Indiana Hawaii Arizona
North Carolina Florida
Oklahoma
Michigan Tennessee New York
Kentucky New Mexico
Delaware South Carolina
Arkansas
Louisiana
60%
Mississippi
Alabama
55%
West Virginia Change in Labor Force
Participation Rate: -2.4%
Low and declining Low but rising

versus U.S. versus U.S.
50%
-7% -6% -5% -4% -3% -2% -1% 0% 1% 2%
Change in Proportion of Working Age Population in the Workforce, 1999-2010
Notes: Source BLS.
Comparative State Labor Force Productivity Performance
2000-2010
$140,000
High but U.S. GDP per Labor Force Participant Highly productive
declining Real Growth: 0.803% and productivity
versus U.S. Delaware rising versus U.S.
Gross Domestic Product per Labor Force Participant, 2010
$130,000
Alaska
$120,000
Wyoming
Connecticut
$110,000
New York
$100,000
New Jersey Massachusetts
California
Louisiana Hawaii
Texas Virginia
$90,000 Colorado Maryland U.S. GDP per Labor Force
Illinois
Washington Participant: $85,229
North Carolina Oregon
Nevada Minnesota North Dakota
Nebraska South Dakota
$80,000 Pennsylvania
Georgia Rhode Island Kansas Indiana Oklahoma
Utah Iowa
New Hampshire New Mexico
Michigan Arizona Tennessee
Ohio Florida Alabama
Missouri Wisconsin West Virginia
$70,000 Kentucky
Low and South Idaho
Mississippi
Maine Arkansas
declining Carolina Montana Low but rising
versus U.S. Vermont versus U.S.
$60,000
-0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5%
Real Growth in Gross Domestic Product per Labor Force Participant, 2000-2010
Sources: BEA, BLS. Notes: GDP in real 2005 dollars. Growth rate is calculated as compound annual growth rate.
Comparative State Employee Productivity Performance
2000-2010
$150,000
High but U.S. GDP per Employed Worker Highly productive
declining Real Growth: 1.42% Delaware and productivity
$140,000
versus U.S. rising versus U.S.
Gross Domestic Product per Employed Worker, 2010
Alaska
$130,000
Wyoming
Connecticut
$120,000
New York
$110,000 California
New Jersey
Massachusetts
Texas Louisiana Hawaii

$100,000 Illinois Virginia U.S. GDP per Employed
Washington Nevada Worker: $94,315
Colorado North Carolina Maryland
Oregon
$90,000 Minnesota Rhode Island
Pennsylvania Indiana
Georgia South Dakota North Dakota
Florida New Mexico Nebraska
Michigan Kansas Oklahoma
Utah Tennessee Iowa
$80,000 Ohio Arizona Missouri Alabama
New Hampshire Kentucky Wisconsin West Virginia
South Carolina
Idaho Mississippi
Maine Arkansas
$70,000 Low and Vermont Montana
declining Low but rising
versus U.S. versus U.S.
$60,000
0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5%
Real Growth in Gross Domestic Product per Employed Worker, 2000-2010
Sources: BEA, BLS. Notes: GDP in real 2005 dollars. Growth rate is calculated as compound annual growth rate.
Comparative State Innovation Performance
20
2000 - 2010
High and declining U.S. average Growth Vermont
innovation Rate of Patenting:
+2.25%
California
Massachusetts
Idaho
Washington
15 (16.5, +10.6%)
Patents per 10,000 Workers, 2010
Minnesota
Oregon
Connecticut New Hampshire
10 New Jersey Michigan High and improving

Delaware Colorado
U.S. average Patents per
innovation rate versus U.S.
10,000 Employees: 7.77 New York Utah
Texas
Arizona
Illinois Wisconsin North Carolina
Pennsylvania
Maryland
Rhode Island Ohio New Mexico
5 Indiana Iowa Nevada
Florida Kansas
Tennessee Missouri
Virginia Georgia
Oklahoma Maine
Kentucky North Dakota Wyoming
Montana South Carolina Alabama
Louisiana Hawaii
South Dakota West Virginia Nebraska
Arkansas
Alaska Mississippi Low and improving
Low and declining innovation innovation
0
-6% -4% -2% 0% 2% 4% 6%
Growth Rate of Patents per 10,000 Workers, 2000 to 2010 = 2000 patents in 2010
Source: USPTO utility patents, Bureau of Labor Statistics. Note: Growth rate calculated as compound annual growth rate (CAGR). = 500 patents in 2010
Why?
What Drives State Productivity?
3. Policy
Coordination
1. Quality of the
2. Cluster among Multiple
Overall Business
Development Levels of
Environment
Geography/
Government
2012 – State Competitiveness – Rich Bryden

Why?
3. Policy
Coordination
1. Quality of the
Overall Business
Environment
Geography/
Government

Quality of the Overall Business Environment
Context for
Firm
Strategy
and Rivalry
Rules and incentives that encourage

local competition, investment and
productivity
Factor
– e.g., tax policy that encourages Demand
(Input) investment and R&D Conditions
Conditions – Flexible labor policies
– Intellectual property protection
– Antitrust enforcement
Access to high quality business Sophisticated and demanding local
inputs needs and customers
– Human resources – e.g., Strict quality, safety, and
– Capital access environmental standards
– Physical infrastructure Related and – Consumer protection laws
– Administrative processes (e.g., Supporting – Government procurement of
permitting, regulatory efficiency) Industries advanced technology
– Scientific and technological – Early demand for products and
infrastructure services
Local availability of suppliers and
supporting industries
• Many things matter for competitiveness

• Economic development is the process of improving the business environment to enable
companies to compete in increasingly sophisticated ways
Improving the Business Environment
Common Action Items
1. Simplify and speed up regulation and permitting
2. Reduce unnecessary costs of doing business
3. Establish training programs that are aligned with the needs of the
state’s businesses
4. Focus infrastructure investments on the most leveraged areas for

productivity and economic growth
5. Design all policies to support emerging growth companies
6. Protect and enhance the state’s higher education and research

institutions
7. Relentlessly improve the public education system, the essential

foundation for productivity in the long run
Why?
3. Policy
Coordination
1. Quality of the
Overall Business
Environment
Geography/
Government

What is a Cluster?
A geographically concentrated group of interconnected

companies and associated institutions in a particular field
Traded Clusters Local Clusters

• Compete to serve national • Serve almost exclusively
and international markets the local market
• Can locate anywhere • Not directly exposed to
• 30% of employment cross-regional competition
• 70% of employment

Example: Massachusetts Life Sciences Cluster
Health and Beauty

Cluster Organizations
MassMedic, MassBio, others
Products Teaching and Specialized Hospitals
Surgical Instruments
and Suppliers
Medical Equipment Specialized Business

Services
Biopharma- Banking, Accounting, Legal
Biological
Dental Instruments ceutical
Products
and Suppliers Products
Specialized Risk Capital
Ophthalmic Goods VC Firms, Angel Networks
Diagnostic Substances Specialized Research

Service Providers
Research Organizations Laboratory, Clinical Testing
Containers
Analytical Educational Institutions

Instruments Harvard, MIT, Tufts,
Cluster Boston University, UMass
Example: Houston Oil and Gas Cluster
Upstream Downstream
Oil Oil Oil

Oil Oil Oil
Trans- Wholesale Retail
Trading Refining Distribution
Oil & Natural Gas Oil & Natural Gas portation Marketing Marketing
Exploration & Completion &
Development Production Gas
Gas Gas Gas Gas Gas
Trans-
Gathering Processing Trading Distribution Marketing
mission
Oilfield Services/Engineering & Contracting Firms
Equipment Specialized Subcontractors Business

Suppliers Technology Services
Services
(e.g., Oil Field (e.g., Drilling (e.g., Surveying, (e.g., MIS
Chemicals, Consultants, Mud Logging, Services,
Drilling Rigs, Reservoir Services, Maintenance Technology
Drill Tools) Laboratory Services) Licenses,
Analysis) Risk Management)
Specialized Institutions
(e.g., Academic Institutions, Training Centers, Industry Associations)
Strong Clusters Drive Regional Performace
• Specialization in strong clusters

• Job growth
• Breadth of industries within each
• Higher wages
cluster
• Higher patenting rates
• Strength in related clusters
• Greater new business
• Presence of a region’s clusters in
formation, growth and survival
neighboring regions
On average, cluster strength is much more important (78.1%) than cluster mix
(21.9%) in driving regional performance in the U.S.
Source: Porter/Stern/Delgado (2010), Porter (2003)

Clusters and Economic Diversification
Fishing &
Fishing
Products Textiles
Entertainment
Prefabricated
Hospitality
Agricultural Enclosures
& Tourism
Products
Processed
Food
Transportation Furniture
& Logistics Building
Aerospace Fixtures, Construction
Vehicles & Equipment & Materials
Distribution Information Defense Services
Jewelry & Tech.
Precious Services Heavy
Lighting &
Metals Electrical Construction
Business Analytical
Equipment Services
Services Education & Instruments
Knowledge Medical Power Forest
Creation Generation Products
Devices Communi-
Publishing cations
Financial & Printing Biopharma- Equipment
Services Heavy
ceuticals Machinery
Motor Driven Production
Chemical Products Technology
Products Tobacco
Oil &
Apparel Gas Mining & Metal
Automotive
Plastics Aerospace Manufacturing
Engines
Footwear Leather &
Related Sporting
Products & Recreation
Goods
Note: Clusters with overlapping borders or identical shading have at least 20% overlap (by number of industries) in both directions.
The Evolution of Regional Economies
San Diego
Hospitality and Tourism

Climate Sporting
and Transportation Equipment
Geography and Logistics
Power Generation
Aerospace Vehicles Communications
and Defense Equipment
U.S.
Information Technology
Military Analytical Instruments
Education and
Knowledge Creation
Medical Devices
Bioscience Biotech / Pharmaceuticals

Research
Centers
1910 1930 1950 1970 1990

Traded Cluster Composition of the Georgia Economy
25.0%
Overall change in the Georgia Share of US
Traded Employment: 0.02%
Textiles
20.0%
Georgia national employment share, 2009
15.0%
10.0%
Employment
1998-2009
Motor Driven Products
Added Jobs
Business Services
5.0%
Fishing and Lost Jobs
Fishing Products Information Technology
Prefabricated Georgia Overall Share of US

Enclosures Traded Employment: 3.01%
Apparel (-2.02%, 1.95%)
0.0%
-2.0% -1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5%
Change in Georgia share of National Employment, 1998 to 2009 Employees 32,000 =
Source: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director.
2012 – State Competitiveness – Rich Bryden 23 Copyright © 2012 Professor Michael E. Porter
Traded Cluster Composition of the Georgia Economy
(continued)
6.0%
Overall change in the Georgia Share of US
Traded Employment: 0.02%
Construction Materials
5.0%
Transportation
Georgia national employment share, 2009
and Logistics
Aerospace Vehicles
Forest Products and Defense
4.0% Chemical Products
Building Fixtures,
Distribution Services Equipment and Services
Georgia Overall Share of US Power Generation
Processed Food
Traded Employment: 3.01% Furniture and Transmission
3.0%
Heavy Construction Services Plastics
Lighting and Electrical Equipment Hospitality and Tourism Publishing and Printing
Financial Services Heavy Machinery
Entertainment
Leather and Communications
2.0% Agricultural Products Education and
Related Products
Automotive Equipment
Knowledge Creation
Aerospace Engines Production Technology
Sporting, Recreational Metal Manufacturing
Medical Devices
and Children’s Goods
Biopharmaceuticals
1.0% Jewelry and Employment
Precious Metals 1998-2009
Added Jobs
Analytical Instruments
Oil and Gas Products and Services Lost Jobs
0.0%
-1.0% -0.8% -0.6% -0.4% -0.2% 0.0% 0.2% 0.4% 0.6%
Change in Georgia share of National Employment, 1998 to 2009 Employees 24,000 =
Job Creation, 1998 to 2009
-80,000
-60,000
-40,000
-20,000
20,000
40,000
60,000
80,000
100,000
0
Business Services
Transportation and Logistics
Education and Knowledge Creation
2012 State Competitiveness – Rich Bryden

Distribution Services
Entertainment
Financial Services
Motor Driven Products
Oil and Gas Products and Services
Publishing and Printing
Footwear
Power Generation and Transmission
Jewelry and Precious Metals
Sporting, Recreational and Children's Goods
given national cluster growth.*
Biopharmaceuticals
Indicates expected job creation
Heavy Machinery
Leather and Related Products
Fishing and Fishing Products
25
Aerospace Engines
Medical Devices
1998 to 2009
Processed Food
Aerospace Vehicles and Defense
Agricultural Products
Chemical Products
Communications Equipment
Building Fixtures, Equipment and Services
Tobacco
Metal Manufacturing
Plastics
Georgia Job Creation in Traded Clusters
Lighting and Electrical Equipment

Heavy Construction Services
Production Technology
-24,034
Furniture
Forest Products
1998 to 2009:
Prefabricated Enclosures
Automotive
Net traded job creation,
Apparel
Textiles
Copyright © 2012 Professor Michael E. Porter
* Percent change in national benchmark times starting regional employment. Overall traded job creation in the state, if it matched national benchmarks, would be -71,095
Georgia Wages in Traded Clusters
vs. National Benchmarks
Oil and Gas Products and Services
Financial Services
Communications Equipment
Aerospace Vehicles and Defense
Distribution Services
Business Services
Entertainment
Publishing and Printing
Forest Products
Chemical Products
Medical Devices
Aerospace Engines
Heavy Construction Services
Leather and Related Products
Transportation and Logistics
Automotive
Processed Food l Indicates average
Motor Driven Products national wage in
Education and Knowledge Creation the traded cluster
Production Technology
Sporting, Recreational and Children's Goods
Biopharmaceuticals
Metal Manufacturing
Jewelry and Precious Metals
Plastics
Heavy Machinery
Agricultural Products Georgia average traded
Building Fixtures, Equipment and Services wage: $51,753
Textiles
Lighting and Electrical Equipment
Furniture
Prefabricated Enclosures
Apparel
Fishing and Fishing Products
Power Generation and Transmission U.S. average
Tobacco
Footwear traded wage: $56,906
$0 $25,000 $50,000 $75,000 $100,000 $125,000
Wages, 2009
Productivity Depends on How a State Competes,
Not What Industries It Competes In
State Traded State Traded
Wage versus Relative Wage versus Relative
National Cluster Mix Cluster National Cluster Mix Cluster
State Average Effect Wage Effect State Average Effect Wage Effect
Connecticut +27,171 7,028 20,142 Oregon -10,359 -1,304 -9,056
New York +24,102 3,628 20,474 Missouri -10,427 -1,425 -9,002
Massachusetts +16,169 4,391 11,778 Alabama -10,934 -3,563 -7,371
New Jersey +13,535 3,761 9,774 Florida -11,007 -1,559 -9,448
California +9,573 349 9,224 Wisconsin -11,722 -3,516 -8,206
Maryland +6,651 2,496 4,155 Nebraska -11,777 241 -12,018
Washington +5,652 2,692 2,960 Utah -11,992 2,072 -14,064
Virginia +5,319 1,617 3,702 Tennessee -12,172 -3,156 -9,016
Illinois +2,658 16 2,642 Indiana -12,554 -4,840 -7,714
Colorado +1,662 2,416 -754 Vermont -13,368 -1,572 -11,796
Texas +352 2,494 -2,142 Oklahoma -13,572 497 -14,069
Delaware +164 11,060 -10,896 Nevada -14,277 -2,365 -11,911
Alaska -930 -2,417 1,487 North Dakota -14,394 1,004 -15,397
Pennsylvania -3,970 -995 -2,975 South Carolina -15,276 -5,067 -10,209
Louisiana -4,280 95 -4,375 Arkansas -15,378 -4,560 -10,818
Georgia -5,322 -1,102 -4,220 Hawaii -16,043 -12,555 -3,487
Minnesota -5,576 -425 -5,150 New Mexico -16,123 -288 -15,835
New Hampshire -6,387 374 -6,761 Kentucky -16,215 -5,024 -11,191
Arizona -7,021 1,149 -8,169 Maine -16,379 -968 -15,412
Kansas -7,705 2,241 -9,946 Iowa -16,606 -2,721 -13,885
Wyoming -8,057 1,040 -9,097 West Virginia -16,645 -3,894 -12,751
Michigan -8,176 -2,544 -5,633 Idaho -18,671 -787 -17,884
North Carolina -9,245 -4,330 -4,915 Mississippi -19,942 -5,291 -14,651
Ohio -9,284 -2,495 -6,788 Montana -20,073 -2,259 -17,815
Rhode Island -9,791 -2,290 -7,501 South Dakota -20,968 289 -21,257
On average, cluster strength is much more important (78.1%) than cluster mix
(21.9%) in driving regional performance in the U.S.
Source: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director. 2009 data.
2012 - State Competitiveness – Rich Bryden 27 Copyright © 2012 Professor Michael E. Porter
Georgia Cluster Portfolio, 2009
Fishing &
Fishing
Products Textiles
Entertainment
Prefabricated
Hospitality
Agricultural Enclosures
& Tourism
Products
Processed
Food
Transportation Furniture
& Logistics Building
Jewelry & Distribution Aerospace Fixtures, Construction
Precious Services Vehicles & Equipment & Materials
Metals Information Defense Services
Tech. Lighting & Heavy
Electrical Construction
Business Analytical Services
Education & Instruments Equipment
Services Forest
Financial Knowledge Power
Medical Products
Services Creation Generation &
Devices Communi Transmission
Publishing cations
& Printing Biopharma- Equipment
Heavy
ceuticals Machinery
Motor Driven Production
Apparel Chemical Products Technology
Products Tobacco
Leather & Oil &
Related Gas Metal
Automotive
Products Plastics LQ > 4 Aerospace Manufacturing
Engines
LQ > 2
Footwear
LQ > 1. Sporting
& Recreation
Goods
LQ, or Location Quotient, measures the state’s share in cluster employment relative to its overall share of U.S. employment.
An LQ > 1 indicates an above average employment share in a cluster.
Georgia Performance Scorecard
Start Position Trend Current Position
Prosperity
GDP per Capita, 2000-2010
17 50 31 -14
Wages
Average Private Wage, 1998-2009 17 42 19 -2
Job Creation
Private Employment Growth, 7 45 43 -36
1998-2000 and 2007-2009
Labor Mobilization
Proportion of Working Age Population 19 48 33 -14
in the Workforce, 2000-2010
Labor Productivity
GDP per Workforce Participant, 2000-2010 17 49 26 -9
New Business Formation

Traded Cluster Establishment Growth, 10 35 18 -8
1998-2000 and 2007-2009
Innovation
Patents per Employee, 2000-2010 31 11 29 +2
Cluster Strength
Employment in Strong Clusters, 1998-2009 47 1 19 +28
• Business Services (8)
Leading Clusters • Transportation and Logistics (6)
State Rank 21-30
by employment size, 2009
(national rank)
• Textiles (1) 1-10 31-40
• Motor Driven Products (2) 11-20 41-50
• Aerospace Vehicles and Defense (7)
Cluster Development
Common Action Items
1. Build on the state’s existing and emerging clusters rather than chase
“hot” fields
2. Pursue economic diversification within clusters and across related

clusters
3. Create a private sector-led cluster upgrading program with matching

support for participating private sector cluster organizations
• Government should listen and remove obstacles to cluster
improvement
4. Align other state economic policies and programs with clusters
Source: Porter/Stern/Delgado (2010), Porter (2003)

Aligning Economic Policy and Clusters
Business Attraction Education and Workforce Training
Science and Technology

Export Promotion Investments
(e.g., centers, university
departments)
Clusters
Natural Resource Standard Setting / Certification
Protection Organizations
Specialized Physical
Environmental Improvement
Infrastructure
• Clusters provide a framework for organizing the implementation of many

public policies and public investments to achieve greater effectiveness

Why?
3. Policy
Coordination
1. Quality of the
Overall Business
Environment
Geography/
Government

Geographic and Governmental Influences on Productivity
Nation
Neighboring State State Neighboring State
Metropolitan Areas
Metropolitan Areas
Metropolitan Areas
Rural Regions
Rural Regions
Rural Regions
Defining the Appropriate Economic Regions
TN NC
Atlanta
Economic Area SC
AL Augusta
GA Economic Area
Columbus
Economic Area
Savannah
Economic Area
Dothan
Economic Area Macon
Economic Area
Jacksonville
Albany Economic Area
Economic Area
Tallahassee
Economic Area FL
The economies of states are often an aggregation of distinct

economic areas with differing circumstances
Source: Data from Bureau of Economic Analysis 2010. Prof. Michael E. Porter, Cluster Mapping Project, Harvard Business School; Richard Bryden, Project Director.
2012 State and City Competitiveness – Rich Bryden 34 Copyright © 2012 Professor Michael E. Porter
Georgia Metropolitan Areas
Dalton MSA
Chattanooga MSA
Gainesville MSA
Athens MSA
Rome MSA
Atlanta MSA
Augusta MSA
Macon MSA
Columbus MSA Savannah MSA

Hinesville MSA
Warner Robins MSA
Brunswick MSA
Valdosta MSA
Albany MSA
2012 State and City Competitiveness – Rich Bryden 35 Copyright © 2012 Professor Michael E. Porter
Wage Performance in Georgia Metropolitan Areas
$50,000
Georgia Growth Rate U.S. Growth Rate
of Wages: 2.79% of Wages: 3.01%
Atlanta MSA
$45,000
U.S. Average
Private Wage: $42,403
Average Private Wage, 2009
$40,000
Georgia Average
Savannah MSA Gainesville MSA

$35,000 Macon MSA Columbus MSA*
Augusta MSA*
Dalton MSA
Rome MSA
Hinesville MSA
Athens MSA
Albany MSA
$30,000 Brunswick MSA
Warner Robins MSA
Rest of State
Chattanooga MSA*
Valdosta MSA
$25,000
2.0% 2.3% 2.6% 2.9% 3.2% 3.5% 3.8% 4.1% 4.4% 4.7%
*Georgia portion only Growth Rate of Private Wages, 1998-2009
Source: Census CBP, authors’ analysis. Note: “Bubble” size in chart is proportional to employment in 2009.
Employment Performance in Georgia Metropolitan Areas
$50,000
U.S. Growth Rate Georgia Growth Rate
of Employment: 0.52% of Employment: 0.58%
Atlanta MSA
$45,000
U.S. Average
Average Private Wage, 2009
$40,000
Georgia Average
Gainesville MSA
$35,000 Columbus MSA* Augusta MSA* Savannah MSA
Macon MSA
Dalton MSA
Rome MSA
Athens MSA Hinesville MSA
Albany MSA
$30,000 Rest of State
Brunswick MSA
Warner Robins MSA
Chattanooga MSA*
Valdosta MSA
$25,000
-1.2% -0.8% -0.4% 0.0% 0.4% 0.8% 1.2% 1.6% 2.0% 2.4% 2.8% 3.2% 3.6% 4.0% 4.4%
*Georgia portion only Growth Rate of Private Employment, 1998-2009
Source: Census CBP, authors’ analysis. Note: “Bubble” size in chart is proportional to employment in 2009.
Geographic and Governmental Influences on Productivity
1. Influence and access

Nation federal policies and
programs
Neighboring State State Neighboring State
4. Integrate policies and Metropolitan Areas 2. Work with each metro

infrastructure planning Metropolitan Areas area to develop a
Metropolitan Areas
with neighbors prioritized strategic
agenda
Rural Regions 3. Connect rural regions

Rural Regions with proximate urban
Rural Regions
areas
Agenda

Agenda

Biggest Action Item of All
Create an Economic Strategy
• What is the distinctive competitive position of the state or
region given its location, legacy, existing strengths, and
potential strengths?
– What unique value as a business location?
– For what types of activities and clusters?
Define the Value Proposition
Achieve and Maintain

Develop Unique Strengths
Parity with Peers
• What elements of the business • What weaknesses must be addressed to

environment can be unique strengths remove key constraints and achieve
relative to peers/neighbors? parity with peer locations?
• What existing and emerging clusters
represent local strengths?
• Economic strategy requires setting priorities and moving beyond long lists of
separate recommendations.
How Should States Compete for Investment?
Tactical Strategic
(Zero Sum (Positive Sum
Competition) Competition)
• Focus on attracting new investments • Also support greater local investment

by existing companies
• Compete for every plant • Reinforce areas of specialization

and emerging cluster strength
• Offer generalized tax breaks • Provide state support for training,

infrastructure, and institutions with
enduring benefits
• Provide subsidies to lower / offset • Improve the efficiency of doing

business costs business
• Every city and sub-region for itself • Harness efficiencies and

coordination across jurisdictions,
especially with neighbors
• Government drives investment • Government and the private sector

attraction collaborate to build cluster strength
2012 State Competitiveness – Rich Bryden Copyright 2012 © Professor Michael E. Porter
42
Harnessing the New Process of Economic Development
Competitiveness is the result of both top-down and bottom-up processes

in which many companies and institutions take responsibility
Old Model New Model
• Government drives economic • Economic development is a

development through policy collaborative process involving
decisions and incentives government at multiple levels,
companies, teaching and research
institutions, and private sector
organizations
Example: Organizing for Economic Development
 Chaired by a business leader and reporting

South Carolina Council to the governor
on Competitiveness  Convenes working groups, provides
direction and strength, holds working groups
accountable
Executive
Committee
Coordinating
Staff
Cluster Committees Task Forces
Cluster Education /
Automotive Apparel
Activation Workforce
Hydrogen / Research / Start-ups /

Agriculture
Fuel Cells Investment Local Firms
Distressed /
Travel and Measuring
Textiles Disadvan.
Tourism Progress
Areas
Effective economic policy also requires coordination within government

Summary
• The goal of economic strategy is to enhance productivity. This is the only

way to create jobs, high income, and wealth in the long run
• Improving productivity and innovation must be the guiding principles for

every state policy choice
• Improving productivity does not require new public resources, but using
existing resources better
• Improving productivity demands that governors mobilize the private

sector, not rely on government alone
• Economic strategy is non-partisan and about getting results
Next Steps
1. Reach out to your team
2. Reach out to the business community
3. Take advantage of Harvard Business School data and tools to support

this effort. Go to www.isc.hbs.edu.
The prosperity of the U.S. economy will depend more on the success of
states in improving competitiveness than what happens in Washington

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Georgia Competitiveness:

Creating a State Economic Strategy

Professor Michael E. Porter

March 20, 2012

For further material on regional competitiveness and clusters: www.isc.hbs.edu/econ-clusters.htm

Achieving Fiscal Stability

• Competitiveness is the productivity with which a state utilizes its

• Productivity determines wages, jobs, and the standard of living

• It is not what fields a state competes in that determines its

Businesses and government play different but interrelated roles in

1. How is your state doing? State Performance Scorecard

2. Why? Explaining your state’s performance,

3. Where to go from here? Action Steps

New Business Formation

$50,000 New Jersey

Minnesota North Dakota

Nebraska South Dakota Iowa

Low and declining Low but rising

Texas Louisiana Hawaii

10 New Jersey Michigan High and improving

2012 – State Competitiveness – Rich Bryden

2012 – State Competitiveness – Rich Bryden

Rules and incentives that encourage

• Many things matter for competitiveness

2. Reduce unnecessary costs of doing business

4. Focus infrastructure investments on the most leveraged areas for

5. Design all policies to support emerging growth companies

6. Protect and enhance the state’s higher education and research

7. Relentlessly improve the public education system, the essential

16 Copyright 2012 © Professor Michael E. Porter

A geographically concentrated group of interconnected

Traded Clusters Local Clusters

17 Copyright 2012 © Professor Michael E. Porter

Health and Beauty

Medical Equipment Specialized Business

Diagnostic Substances Specialized Research

Analytical Educational Institutions

Oil Oil Oil

Oilfield Services/Engineering & Contracting Firms

Equipment Specialized Subcontractors Business

• Specialization in strong clusters

Source: Porter/Stern/Delgado (2010), Porter (2003)

Hospitality and Tourism

Bioscience Biotech / Pharmaceuticals

1910 1930 1950 1970 1990

Prefabricated Georgia Overall Share of US

2012 State Competitiveness – Rich Bryden

Lighting and Electrical Equipment

New Business Formation

2. Pursue economic diversification within clusters and across related

3. Create a private sector-led cluster upgrading program with matching

4. Align other state economic policies and programs with clusters

Source: Porter/Stern/Delgado (2010), Porter (2003)

Business Attraction Education and Workforce Training

Science and Technology

• Clusters provide a framework for organizing the implementation of many

31 Copyright 2012 © Professor Michael E. Porter

32 Copyright 2012 © Professor Michael E. Porter

Neighboring State State Neighboring State

The economies of states are often an aggregation of distinct

Columbus MSA Savannah MSA

Savannah MSA Gainesville MSA

$35,000 Columbus MSA* Augusta MSA* Savannah MSA