A little more bigger can be better

My assertion that we need a few more big, exporting firms in our manufacturing, ICT and other sectors where there are exporting opportunities – generates a lot of criticism – many times from some of the people I have the most admiration for.   Thankfully, for the most part we just agree to disagree amicably.

Usually the argument is that we don’t need to attract exporters – we need to grow our own.  To that I say fine – I don’t care where they come from – we just need them.  In fact, local firms are more loyal and are more likely to reinvest their profits here than multinationals. 

So let it be written, so let it be done.    Somewhere between $4 and $6 billion spent in New Brunswick over the past 20 years (all levels of government) trying in large part to stimulate more SME exports and 95% of all exports are still generated by less than two dozen firms in New Brunswick.  Further, the total value of exports outside of those large firms is declining in real terms year over year.  Admittedly that doesn’t include services exports but other than call centres and a few high profile exporting ICT firms I don’t see much growth there – in fact call centre employment peaked in 2005 and has been dropping since.

So, we can agree that growing firms like Speilo and Radian6 are wonderful but we can’t figure out the alchemy required to generate 100 of them.

I’m not going to reiterate all my arguments around supply chains, the interconnectedness of large and small firms, the inflows of investment, the role of big firms as entrepreneur incubators, the capacity of big firms to undertake R&D, etc.  

I just want to again clearly state that I can find no example of strong and growing economy that isn’t attracting a share of the big firms.  Even the resource-rich provinces/states are fuelling much of their growth with large firm investment (firms like Vale, BHP Billiton, ExxonMobil, etc.).  There was an article in the Economist that confirmed just about every large oil & gas firm in the world is active in Alberta.

I think it comes down to a lack of belief.  Whle most might not be so blunt, they worry any effort to attract industry here to set up operations and export elsewhere (no one is talking about attracting firms to compete with local firms in local markets) will be futile.  They cite tepid efforts in the past as being ineffective and the only hope we have is with our local entrepreneurs.

I’m not such an unbeliever (yet).  I think we haven’t properly tried to build a strong value proposition for growth sectors and then sell those to the world.  For most economic developers, ‘investment attraction’ is a colourful brochure and attendence at international trade shows.

For me it is about determining a few growth opportunities and then leaning into them with tax policy, R&D spending, workforce development, infrastructure investment, supply chain buildouts – and then selling the crap out of them directly or through joint ventures or partnerships or whatever. 

If we ever get around to doing that (like animation/multimedia in BC) and we fail miserably then I will fold up my tents and join the all in on the SME crowd.  Until then, I will soldier on.

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6 Responses to A little more bigger can be better

  1. Tim says:

    A historical review of NB econ initiatives reveals certain schizophrenia… like a bipolar pendulum swinging between initiatives too broad, and too specific – too near term, or too long.

    Many of our past broad-based approaches have yielded only a diluted economic response – with little spillover/multiplier effect. On the other hand, our specific approaches have soaked up a disproportionate amount of resources and have not been planned or executed in a way that results in some form of “perpetual motion”.

    What I like about “big” companies is their ability to focus our attention and provide a foundation for a cluster – and a huge number of network effect/benefits. But, also a number of “bads” mult be tempered…. At least two “bads” being – resistance to change (the whole innovators dilemma thing) and resistance to competition (like any company would, but they have the clout). If we had an oil patch, and 4,5,6 of the worlds largest oil companies, how could we go wrong. But what will one or two big companies do? Why would they be here? Why are they staying? etc…So how do we get the “good”, while limiting the “bad”?

    I like the “focus” idea, it’s the backbone of some things I’m looking into as well.

  2. Anonymous says:

    Great post David. There has (apparently) been little effort in trying to attract large anchor industries. We need to. The days of our infamous and effective NB ED staffers being tailed when they visited other locales is a distant memory.

    Attracting an industry is difficult and competitive. The list of Florida’s targeted clusters could read the same for New Brunswick (with the exception of Homeland Security):
    http://www.tampabay.com/news/business/economicdevelopment/can-floridas-plan-to-nurture-industry-clusters-revitalize-state-economy/1145547

    So everyone is chasing these opportunities meaning we need a solid value proposition; one that goes beyond referencing magazine rankings. Maybe some ED staffers could be assigned to developing a value proposition and execution strategy. Will this be the goal of InvestNB?

    Besides the external competive environment, perhaps the most significant barrier of all is the internal competition. Imagine a scenerio where New Brunswick developed an ED attraction strategy, let’s say leverage IRB commitments and convince Boeing to locate a 500 employee operation in NB. Where would we locate it? I am afraid all of our devisive forces would come to the surface. Perhaps the first step in making business attraction a reality is to kill off this infighting and allow a company to locate wherever they feel they can be most successful.

  3. mikel says:

    I often see the points that ‘we just aren’t trying’ to get big companies, but I don’t think thats ever been proven. I remember when Lord used to spend months on end in just about every state and many countries trying to do exactly this-bring large companies to NB. We know that NB has amongst the lowest corporate income tax, so thats not it.
    However, if you look at the world right now, its not that difficult to accept the hypothesis that few companies look at NB because its just not viable, and the ones that are expanding, well, can somebody tell me what industries apart from security, temp firms, and weapons manufacture is actually EXPANDING right now?

    So lets look at the list given:

    tax policy- that’s already a given. Innovative companies are generally YEARS away from making serious money, so tax concessions are way down the list.

    R&D spending- This is interesting, but a political hot potato. How does government ‘do’ research and development? We know a lot of funds constantly go into aquaculture and forestry, with limited gains. So here we have an example of the province ALREADY ‘picking a few industries and targeting the heck out of them’. And I just have to point out that even when I’ve made the comment that NEW areas are practically ignored by the province I often get back the reply that ‘natural resources are still the backbone’ kind of thing. In short, the government is ALREADY doing this. I’d simply state that I think they are picking the wrong ones.

    workforce development- its a pretty tough sell to say to people “yes I know there are no jobs in this field, but we’re hoping there MIGHT be in the future. This is more a partnership for universities, like I’ve said, UW is essentially a private school that has handed over computer science curriculae to Microsoft and RIM.

    infrastructure investment-that can mean anything, depending on the industry, so like workforce, its hard to build infrastructure til you know what that industry IS. There’s been mention of high energy business parks, but what if all of a sudden animation takes off, a field that has very little energy requirements?

    supply chain buildouts-no idea what that means, I’ve certainly never seen a government develop a supply chain for ANY industry. Heck, I”m a socialist but even think thats a bad idea (if it means what I think it does).

    What would be fantastic would be a research project that actually does an analysis of what Service NB DOES. I have no trouble believing that there simply isn’t anything OUT there. Again, Ontario has barely just swung back to getting its old auto jobs back, most of them at much lower wages than they were paid previously.

    Finally, what is good for SME’s is usually good for large corporations as well, and I’ve said it before, that if you PROPERLY focus on education and infrastructure for those small businesses, then that builds up a workforce and environment that large manufacturers will notice-you won’t NEED all kinds of bells and whistles to attract them. I can’t remember the name of the company in Fredericton that finally sold out to RIM (or was it Google?), but you ‘build’ or support 20 such small companies with a product each that would interest RIM or Google, and I guarantee they will be calling YOU.

  4. mikel says:

    Sorry, forgot to add-while I could accept their is little ‘out there’, that shouldn’t be construed as support for NB’s efforts. I really don’t know what they are, but wouldn’t be surprised if they WERE less than laudable-but again, thats why we need the data. Personally, if I were a super wealthy businessman who could go anywhere with my company, one look at “Irving land” and I’d forget about it. The lack of competition can act like a catch-22.

  5. Jon Doe says:

    Haven’t you heard? Big companies from outside the country and province are evil and cannot be trusted. We need to sprinkle paltry amounts from a massive pot of taxpayers money amongst everyone on EI in order to turn this province around. We can only trust our own residents, and we must throw up as many roadblocks to outside economic investments as possible, especially if they don’t require government loans and grants. If one of these evil corporations does move into your town you have to insist that government force them to hire locals only, even if they have on training in that particular industry. My cousins are really nice people that they don’t have a job after all of the mills closed in our community. If you’d like to learn more I’d be happy to meet you at Tim Horton’s and refute any other theories you may have about economic development and the benefits of large industrial corporations.

    Sincerely,

    Joe Taxpayer

  6. Folks, I have very lax standards here about posting and so I basically let everything in that isn’t profane or some kind of direct smear but coherency in argument is favoured over silliness. I guess it’s cathartic for some to rant but maybe we should think about adding some value to the discourse.

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