Learning from Glasgow

Probably the most common question I get is “why would company or industry x want to ever locate in New Brunswick”?  People intuitively understand investing here in forestry or mining or some other natural resource but they can’t get their head around why a manufacturing firm, a computer animation firm, a data centre firm, or any other firm that is not fully dependent on the local market (for customers or raw materials) would locate here.

In fact, I think that explains the psychology behind the small, local business obsession in New Brunswick.  The idea is that these firms are loyal to NB because their owners are from here. I think, broadly speaking, that is true but there also has never been enough of them to provide the economic foundation we need.

So we have to change the question to “why aren’t they locating here”?    Stopping well short of trying to ‘buy’ in companies to move here, we need to put a strategic focus on building the broad value proposition for investing here in targeted growth industries (local, national or international firms).  I’ve never thought that enormous subsidies work but government investment in the broader infrastructure and attributes of a growth cluster does seem to have efficacy.

Take renewable energy in the U.K.   I’m not going to get into the merits of broad subsidization of the industry through arbitrarily high rates for end customers, that is a public policy issue that actually sits outside economic development considerations.  A jurisdiction may accept high power rates and the effects on industry to pursue some higher societal goal.    For this post I am talking about building the broad attributes that turn an industries in to a large scale economic driver for a jurisdictions.

This Economist article discusses the case of Glasgow (I hope you can read this I have a subscription so I can’t tell).

Like other forms of manufacturing, however, this one is cyclical: turbine-makers were badly hit by the recent global downturn. Glasgow’s slice of the action might prove more durable. In 2009 Scottish and Southern Energy (SSE), a utility, founded a renewable-energy research centre in the city; last year Mitsubishi, a giant Japanese firm that is rapidly building a big renewable-energy manufacturing capacity in Europe, decided to join SSE in funding the centre, which will employ 400 people. Iberdrola, the Spanish owner of ScottishPower (another utility), and one of the world’s biggest generators of renewable energy, has placed its global offshore-wind headquarters in Glasgow. Gamesa, a Spanish turbine-maker, is to set up its own research facility there.

I love the word ‘durable’.  It’s the holy grail of economic development but beyond semantics the word assumes there is enough strength in the cluster that it will be among the last to fall during a downturn.

Why the rush to a post-industrial city on the other side of Scotland from the renewable action on the east coast? ScottishPower and SSE have helped, by cultivating skills in the sector and drawing in contractors, such as Gamesa. The biggest asset, however, is Strathclyde University.

The university’s electrical-engineering department is probably Britain’s best. Four utilities fund research in its Institute for Energy and Environment which, with 210 staff, claims to be Europe’s largest such outfit, equipped to take new technology from design to operation. This pre-eminence is in large part the work of Jim McDonald, formerly the department’s head and now the university’s vice-chancellor.

Mr McDonald spent eight years in the power industry before entering academia. He is adamant that universities should be as concerned with practical as theoretical innovation and has championed collaboration with manufacturers such as Rolls-Royce. He wants Strathclyde to be the world’s top energy-research hub. He is set to announce £112m in extra research funding, some 40% of it from industry. Glasgow has seen some rough times, he says, but it “has always been an engineering city and it will be even more so in the future.”

There are many layers to the Glasgow story but I love the idea of a smaller university becoming the ‘best’ at some form of research linked to a growing cluster in a jurisdiction.  This builds durability.   I love the notion of the university as an attractor of global firms to do research in a smaller jurisdiction.   How many global firms have research partnerships at UNB? or UdeM?   If New Brunswick wants to grow its shale gas industry, for example, its universities should be attracting the R&D of the large global firms that are already here in New Brunswick on the E&P side.  I would say a critical component of any targeted growth industry should be the role of universities and R&D.

I also like the role of the electricity utilities as attractors of investment.  Not just wind farms – that’s low hanging fruit – but using leverage to attract a wider range of investment (manufacturing, R&D, IT, services, etc.).  I still think it would be nice for NB Power to have a VP of economic development – or at least a VP with economic development responsibilities.    Many argue that NB Power’s business model precludes this but, then, change the business model.

In the end a big part of the Glasgow story in this sector has been the ability to leverage large assets like universities, power companies, etc. into attracting global firms and building depth and durability into a targeted industry cluster.

It’s a nice story.

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5 Responses to Learning from Glasgow

  1. anonymoose says:

    FYI your link works fine for those without a subscription.

  2. richard says:

    “I love the idea of a smaller university becoming the ‘best’ at some form of research linked to a growing cluster in a jurisdiction. This builds durability. ”

    Exactly, yet no one seems to be willing to give UNB an order to march in this direction (yes, an order – they do spend our tax dollars after all). Why not? Does no one at GNB get it? The case for more science and engineering R&D seems solid and NB certainly needs the high-wage jobs that will almost certainly follow.

  3. > the ability to leverage large assets like universities, power companies, etc. into attracting global firms

    Well worth noting is the distinction between “leveraging” and “squeezing”. A university (or even, for that matter, a power company) isn’t something you can just give “marching orders” to and have them turn on the economic development tap.

    Rather, they need to be located at the centre of a wider infrastructure (I like this phrasing: “I’ve never thought that enormous subsidies work but government investment in the broader infrastructure and attributes of a growth cluster does seem to have efficacy” – just my thinking).

    My experience thus far in the province is that there seems to be the perception that we just tell universities or researchers what to produce, and then just sit back and collect the revenues. It doesn’t work that way. As you describe here – and as the Economist describes – you create the right environment, and them market that environment.

    There has been discussion in this column of RIM – another major tech company that developed in a relatively small city. But looking at *where* RIM developed – Waterloo – and knowing the history of its university’s world famous computer science department, it turns out to be no surprise that RIM grew there, and not here.

  4. richard says:

    “A university (or even, for that matter, a power company) isn’t something you can just give “marching orders”

    Of course you can. UNB for example can be told to focus on science and engineering R&D and do it by moving resources from the humanities. Sure there will be a fight – but remember the fight over merging the community college system with the unis? There were demos and GNB appeared to back down, But what is happening now? New bldgs for the community colleges on uni campuses; wait a few years and the integration will be complete. UNBSJ will become a polytech and be all the better for it. So, yes we can give the unis marching orders. Its largely our money.

    “knowing the history of its university’s world famous computer science department”

    UNB once had a very well known computer science group; but UNB let that shrink. If not, perhaps RIM would have developed here. You seem to arguing against yourself.

    UNB also had an internationally recognized organic chemistry group. That too was allowed to shrivel. What if the uni admin had poured money into that, rather than throw it away on MBA programs or Sociology? Would we now have innovative products based on extraction of organics form wood fibre forming the bases for new industries?

    “It doesn’t work that way.”

    Umm, yes that’s exactly how it works. You give UNB the money and tell them what to do with it. Their job is to make the right hires to ensure it does happen. There is nothing mystical about it; neither standing under crystals nor mind/body meditations are required.

    UNB admins made some terrible decisions over the past three decades; different decisions could have changed the picture considerably.

  5. Jim Kitts says:

    But honestly, the upcoming private land expropriation plan farced in as ‘wetland protection’ will finish small holder investments in NB. Especially because of the extortion. I expect to have to pay somebody’s first year biology student $6000 so they can tell me how much of my woodlot they will let me have back. That is, if I sit around on my investment for several (tax) years and live long enough. I would have been better off to invest anywhere else, even Libya, and we all know it.

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