Tech Clusters for Investment Attraction

Economic development officers (EDOs) at the municipal level are nearly all keenly interested in having their municipalities or cities share in the technology revolution that is sweeping the world. They view it as a creator of jobs and wealth. EDOs should be aware that it takes much more than technology to get into the technology race.

One of the most important ingredients is access to early stage capital and mentorship, sometimes fortunately linked in a combination referred to as ‘smart money’. Another is access to supporting products, services, and processes. Another is a clear understanding on the part of the community of the issues related to the building and growth of individual companies.

An EDO should become thoroughly familiar with the dynamics of both the startup and the building phases of a high technology company. While there are similarities with those of a conventional company of the type EDOs are more familiar with, the differences can be enormous.

There are a number of things that EDOs can do to make technology happen in their communities that have not been covered in the subject matter to this point. One of the most enlightened articles on this subject was written by two Canadians in the July/August 1985 issue of the Harvard Business Review. It has withstood the test of time and is even more relevant today than it was then. It identified a number of pitfalls to avoid, such as trying to ‘buy your way in’, relying too heavily on ivory tower advocaters, and allowing the government (at any level) to pick winners.

Its main advice was to match the existing resources of the community with its needs and capabilities and to focus on home-grown companies. It stressed the importance of good communications between all sectors of the community that are in a position to help in the incubation of new companies. The key sectors include existing companies (high technology and otherwise), venture capitalists, knowledge brokers, and individual investors (commonly referred to as angels), to name a few.

The strategies available to any community for becoming involved in technology fall into two broad categories:

• a grow-your-own strategy in which the emphasis is on creating and growing local companies; and
• an importation strategy in which the emphasis is on attracting branch plants and branch offices of existing companies that are located elsewhere.

The two strategies are not mutually exclusive, but they require very different tactics. The first one requires a community effort of the type espoused by Miller and Coté as well as others who have written extensively on the subject.The various components of such a community effort will be the main topics of discussion in this chapter. The second strategy requires an intense marketing communications campaign. It involves extensive travel, advertising, attendance at conferences, and lobbying of companies.

To illustrate the point, it is useful to review the case of one of the most hotly contested location opportunities in the early eighties in the United States. It involved a research facility known as the Microelectronics and Computer Technology Corporation (MCC) which was formed as a joint venture by the major U.S. computer and microelectronics companies to address what appeared to be an erosion of their world market share for such products.

Every major city and state competed actively for the site location and in the end it went to Austin, Texas. The people who made the selection pointed to the excellent infrastructure that was in place in Austin and was expanding rapidly. While they acknowledged that the Austin civic authorities were impressive in their lobbying and in providing supporting information, what appealed to them most was the prospect of workers in the new facility interacting on a daily basis with people who understood their technology and with senior corporate managers who could relate to MCC’s goals.

Places like Portland, Oregon, Salt Lake City, Utah, and Boise, Idaho were also considered for the same reason — the emergence of a new wave of entrepreneurial activity and the infrastructure to go with it. Austin won out because it seemed to have slightly more of these than the others. So in the end, it was Austin’s grow-your-own strategy that really won it for them.