Phoenix Industries in Resilient Regions

Susan ChristophersonDepartment of City and Regional Planning

Cornell University

What Do We Mean by “Resilience”

The Narrow Definition: the ability of a regional economy to return to a previously established equilibrium state (as measured by employment levels, rate of output or population size) after a traumatic event, such as a hurricane or crisis in financial markets.

The Longer View: connecting the concept of regional resilience to the ideas of regional and industry restructuring popular in the 1980s. They ask how regions affected by structural changes produced, for example, by trade liberalization, avoid severe negative impacts, are less affected than other regions, or benefit from the structural change.

Key Concepts: Lock-In and Path Dependency,

The accepted wisdom: Regions that underperform relative to national averages are

characterized by inefficient political and institutions that prevent adaptation to new market conditions.

A contrarian view: Path dependency can cut two ways. Old industrial regions may have

assets that are the product of long-term (path dependent) investments in workforce skills and research and development capacity.

What Would a Region With Capacity for Resilience (or Sustainability) Look Like?

It would be specialized: The regional economy would have high location quotients in

several interrelated industries.It would be internally diversified: The regional economy would be occupationally diversified.

Assumption and a Question

Processes of trade liberalization and international out-sourcing

have decreased regional industrial specialization and internal occupational diversity.

Is it possible to re-build regional industry specialization in industries using internationally dispersed supply chains?

Phoenix Industries

Phoenix industries have risen out of the ashes of the old industrial centers in the U.S. and U.K. They have several features in common.

They are located in regions with a history of occupation-based expertise in the processes, materials, and technologies in an industry. These tend to be old sites, originally employing thousands and including R&D departments.

Universities in the region have specialized programs supporting basic research related to industry technologies and engineering education around those technologies

Supplier, design and engineering firms were spun off as the “anchor firm” vertically disintegrated, creating value-added capacity in the region.

Average wages are higher than the regional average and higher than the manufacturing average.

Phoenix Industries Focus on Process, Design, and New Technologies

Photonics (precision optics and Imaging) Location: Rochester Originating Firm: Kodak Markets: Healthcare, Defense, Media production, Retailing Environmental Systems (Indoor air quality) Location: Syracuse Originating Firm: Carrier Heating and Air Conditioning Markets: Environmental, Construction, Healthcare Electronic Packaging/ Flexible Electronics Location: Binghamton Originating Firm: IBM Markets: Defense, Healthcare, Advanced Manufacturing

The Pittsburgh Steel Industry Case “Although Pittsburgh lost most of its steel making capacity during the end of the 20 th century, it did

not lose its steel making expertise” (Treado, 2008).

Between 1978 and 1988, over 70,000 jobs were lost in the Pittsburgh region in primary metals (from 10% of all jobs to 2%).

The Steel Technology Cluster, with 1800 firms in the Pittsburgh region, is now the central source of steel-industry equipment, supplies, and services in the United States. 12,000 people are employed. Production includes:• Production equipment used by steel mills; • Engineering services that assist mills in the selection, design, and upgrading of that

equipment; • Parts and supplies needed to keep that equipment operational; and• Raw material inputs to the production process (bundled w/ services).

Source: Treado, Carey et al. “Sustaining Pittsburgh’s Steel Technology Cluster”

What Problems Have Been Identified in Building Phoenix Industries?

The connection between the industry and the regional development community has been weakened during the transition process. An industry composed of SMEs is less visible to state and regional policy makers.

Economic development policy and politics favor national champions. Poor transportation linkages hinder the ability of phoenix industry firms to

reach global customers and markets. Phoenix industry firms often compete with larger firms for skilled labor.

How Can Phoenix Industry Firms Contribute to a Regional Economic Development Strategy?

They can provide leverage to attract multi-national branch plants because they indicate regional skill base.

They can contribute to the regional identity as a locale for specialized expertise.

They can provide entrepreneurial examples and opportunities. They can connect local expertise and supply chains directly to

global markets, creating a learning loop.

What is the Difference Between UK and US Approaches to Phoenix Industries?

U.S. has embedded regional science-based research and development resources linked to local industries.

UK has regional policies that can provide the “glue” to leverage the resource of phoenix industries:

- skill development programs to broaden the regional identity as a skill center. - connecting local firms to global markets through continual education about opportunities;

making connections among firms; and marketing the region as a center of industry expertise.

Fostering collective efforts to build the industry in the region.

Susan ChristophersonDepartment of City and Regional Planning

Cornell University607-255-8772

smc23@cornell.edu

Discussion • Dr David Hewitthttp://www.marinedesigncentre.com/

• Dr Stan Higginshttp://www.nepic.co.uk/

• Prof. Susan Christophersonhttp://www.aap.cornell.edu/crp/