One last point – the clustering effect

Most of you are familiar with Michael Porter’s work on industry clusters. Porter in the 1990s did a pile of research and concluded industries that are clustered in a geographic location have a far better chance of success in the long term than onesy and twosy orphaned plants. For example, if you have a cluster of 20 confectionary manufacturers that industry will be far more viable long term than if you have one single chocolate factory.

The logic behind this is solid. If you have 20 firms, then the training industry will start developing customized confectionary industry training. Suppliers will set up in the community. Universities will conduct confectionary research. Etc.

And that is why I don’t understand why our guys in New Brunswick (the NB Biz Council) don’t want the province to be attracting industry. If I was Ganong, I’d be the first one pushing for the development of a cluster of confectionary firms. I have said on these pages before that literally several dozen European confectionary manufacturers – including the big names – Lindt, Nestle, etc. have set up plants in North American in the past 10 years. Why not in New Brunswick?

Sure, there are some ‘negative’ effects such as the elevation of wages, competition for specialized talent. Sure some of the weaker firms go under or are taken out. But the research is clear, in the long run, companies have far better chance of success when part of a cluster than not. And this applies not only to manufacturers. IT firms, animation firms, the film industry, etc. all benefit from clustering effects.

Ganong himself was quoted a couple of years ago as saying he would be far better off with his plant in Mississuaga and that he was only in St. Stephen because of his deep roots in the community.

For me, ‘deep roots’ and nostalgia are not good long term reason for firms to be located here.

So when 70 of Alabama’s biggest firms and institutions get together and form a partnership funded with a budget of millions of dollars to attract industry to the state, you can see why. Mercedes-Benz wants more auto manufacturers and suppilers in Alabama. Aerospace manufacturing firms what more of their kind in that state. Why did Alabama just attract a $3 billion steel plant? Because there are several hundred manufacturers that will use the steel.

Our guys, the provincial business leaders, need to stand up and lead efforts to grow and attract industry here – not impede it.