Harvard Business School Professor Michael E. Porter National Governors Association Winter Meeting February 26, 2011

1. Montana Competitiveness:
State and Cluster Economic Performance
Prepared for Governor Brian Schweitzer
Professor Michael E. Porter
National Governors Association Winter Meeting
February 26, 2011
NGA 2011 – Montana 1 Copyright © 2011 Professor Michael E. Porter

2. Montana Performance Snapshot
Position Trend
Prosperity
Productivity
Labor Mobilization
Top quintile
Innovation 2nd quintile
3rd quintile
4th quintile
Cluster Strength Lowest quintile
• Entertainment
• Oil and Gas Products and Services
Leading Clusters • Jewelry and Precious Metals
• Sporting, Recreational and Children's Goods
• Fishing and Fishing Products
NGA 2011 – Montana 2 Copyright © 2011 Professor Michael E. Porter

3. State Comparative Performance
NGA 2011 – Montana 3 Copyright © 2011 Professor Michael E. Porter

4. Montana Competitiveness
Overall Economic Performance Indicators
Prosperity Cluster
Gross State Product per capita, 2009 Share of State Traded Employment in Strong Clusters, 2008
• In Montana: $36,877 Rank: 44 • In Montana: 15.5% Rank: 49
• In the US: $46,093 • In the US: 41.8%
• State difference to US: -20.0%
Change in Share of National Employment in Strong Clusters, 1998-2008
Growth in Gross State Product per capita, real annual rate, 1999-2009 • In Montana: 0.08% Rank: 22
• In Montana: 1.55% Rank: 14 • In the US: -0.06%
• In the US: 0.86%
Share of Employment in Traded Clusters, 1998-2008
• In Montana: 20.2% Rank: 50
• In the US: 27.4%
Productivity
Gross State Product per labor force participant, 2009 Change in Share of Employment in Traded Clusters, 1998-2008
• In Montana: $72,511 Rank: 49 • In Montana: -0.4% Rank: 11
• In the US: $92,382 • In the US: -2.2%
• State difference to US: -21.5%
Labor Mobilization
Growth in Gross State Product per labor force participant*, 1999-2009
• In Montana: 1.78% Rank: 12 Population, 2009
• In the US: 1.09% • In Montana: 974,966 Rank: 44
• % of US: 0.32%
Average private wage, 2008
• In Montana: $30,788 Rank: 51 Population growth, annual rate, 1999-2009
• In the US: $42,435 • In Montana: 0.83% Rank: 21
• State difference to US: -27.4% • In the US: 0.96%
Private wage Growth, annual rate, 1998-2008 Labor Force Participation, 2009
• In Montana: 3.65% Rank: 12 • In Montana: 64.9 Rank: 33
• In the US: 3.32% • In the US: 65.4
Employment, 2010 (December)
• In Montana: 458,987 Rank: 45
Innovation Output
• % of US: 0.33%
Patents Per 10,000 Employees, 2009
• In Montana: 2.03 Rank: 42 Employment growth, annual rate, 2000-2010 (December)
• In the US: 6.83 • In Montana: 0.34% Rank: 19
• In the US: 0.11%
Growth in total patents, annual rate, 1998-2009
• In Montana: -5.11% Rank: 49 Unemployment, 2010 (December)
• In the US: 0.23% • In Montana: 7.2% Rank: 13
• In the US: 9.4%
Traded establishment formation, annual growth rate, 1998-2008
• In Montana: 3.08% Rank: 7 Change in Unemployment, 2000-2010 (December)
• In the US: 1.79% • In Montana: 2.6% Rank: 5
• In the US: 5.5%
NGA 2011 – Montana 4 Copyright © 2011 Professor Michael E. Porter

5. Long Term State Prosperity Performance
1999 to 2009
$70,000
U.S. GDP per Capita Wyoming
Delaware
Real Growth Rate: 0.86%
High but declining Alaska High and rising
$65,000 versus U.S. Connecticut prosperity versus U.S.
$60,000
Gross Domestic Product per Capita, 2009
New York
New Jersey Massachusetts
$55,000
Virginia
Washington California Hawaii
$50,000 Maryland North Dakota
Colorado
Nevada Illinois Minnesota
U.S. GDP per Nebraska Iowa
South Dakota
Capita: $46,093 Louisiana
Texas New Hampshire Rhode Island
$45,000 Kansas
Pennsylvania Oregon
North Carolina Wisconsin
Indiana Oklahoma
Ohio Utah Vermont
$40,000 Georgia Missouri Florida
Tennessee Arizona Maine
Michigan Kentucky Montana
New Mexico Alabama
$35,000 West Virginia Arkansas Idaho
South Carolina
Low and declining Mississippi
Low but rising versus U.S.
versus U.S.
$30,000
-1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0%
Gross Domestic Product per Capita Real Growth Rate, 1999 to 2009
Notes: Real GDP figures in 2005 chained US dollars from the Bureau of Economic Analysis. Growth rate is calculated as compound annual growth rate. D.C. excluded
NGA 2011 – Montana 5 Copyright © 2011 Professor Michael E. Porter

6. Near Term State Prosperity Performance
U.S. States, 2007 to 2009
$70,000
High but declining versus U.S. Wyoming
Delaware
Alaska High and rising
$65,000 Connecticut prosperity versus U.S.
U.S. GDP per Capita
Real Growth Rate: -1.87%
$60,000
Gross Domestic Product per Capita, 2009
New York New Jersey
Massachusetts
$55,000
Washington Virginia
California Hawaii
$50,000 Colorado Maryland North Dakota
Nevada Illinois Minnesota Nebraska
Iowa South Dakota
Texas Louisiana
New Hampshire U.S. GDP per
$45,000 Rhode Island Kansas
Pennsylvania
Capita: $46,093
Oregon
North Carolina Wisconsin
Indiana Oklahoma
Ohio Vermont
Georgia Utah Missouri
$40,000
Arizona Florida
Tennessee Montana Maine
Michigan New Mexico
Kentucky
$35,000 Alabama Arkansas
South Carolina Idaho West Virginia
Mississippi
Low and declining versus U.S. Low but rising versus U.S.
$30,000
-6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0%
Gross Domestic Product per Capita Real Growth Rate, 2007 to 2009
Notes: Real GDP figures in 2005 chained US dollars from the Bureau of Economic Analysis. Growth rate is calculated as compound annual growth rate.
NGA 2011 – Montana 6 Copyright © 2011 Professor Michael E. Porter

7. State Private Sector Wage Performance
1998-2008
$60,000
High but declining versus U.S. High and rising wages
relative to U.S.
New York
U.S. Average Wage
Growth: 3.32%
$55,000
Connecticut
Massachusetts
New Jersey
$50,000
Alaska
Average Wage, 2008
California
Illinois
Washington
$45,000 Delaware Maryland
U.S. Average Minnesota Virginia
Wage: $ 42,435 Colorado Texas
Pennsylvania New Hampshire
Michigan Rhode Island
$40,000 Oregon Georgia Wyoming
Ohio Wisconsin Arizona
Missouri Nevada Louisiana
North Carolina Kansas
Tennessee Florida
Indiana Utah
Hawaii Oklahoma
Maine Nebraska
$35,000 Kentucky New Mexico
Iowa Vermont
South Carolina
Idaho Arkansas North Dakota
Alabama
West Virginia South Dakota
Low and declining versus U.S. Mississippi Montana Low but rising versus U.S.
$30,000
2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5%
Wage Growth (CAGR), 1998-2008
Source: Census CBP report; private, non-agricultural employment. Growth is calculated on nominal wage levels.
NGA 2011 – Montana 7 Copyright © 2011 Professor Michael E. Porter

8. Long Term State Labor Productivity Performance
1999-2009
$150,000
High but declining versus U.S. U.S. GDP per Labor Force
Participant Real Growth: 1.09% Highly productive and
Delaware productivity rising versus U.S.
Gross Domestic Product per Labor Force Participant, 2009
$140,000
$130,000
Alaska Wyoming
Connecticut
$120,000
New York
$110,000
New Jersey Massachusetts
Hawaii
Louisiana California
$100,000 Virginia
Washington Illinois Maryland
Colorado U.S. GDP per Labor Force
Nevada Texas Participant: $92,382
$90,000 North Carolina Minnesota Nebraska North
Pennsylvania Oklahoma
Utah Dakota
Georgia Indiana Rhode Island Iowa South Oregon
Arizona Alabama
Ohio Tennessee Wisconsin Kansas Dakota
$80,000 Missouri
Florida West Virginia
New Mexico
Michigan New Hampshire Mississippi
Kentucky
Arkansas
South Carolina Maine Idaho
$70,000 Vermont Montana
Low and declining versus U.S. Low but rising versus U.S.
$60,000
-0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5%
Gross Domestic Product per Labor Force Participant Real Growth Rate, 1999-2009
Source: Bureau of Economic Analysis. Notes Growth rate calculated as compound annual growth rate (CAGR).
NGA 2011 – Montana 8 Copyright © 2011 Professor Michael E. Porter

9. Near Term State Labor Productivity Performance
2007-2009
$150,000
High but declining versus U.S.
Highly productive and
$140,000
Delaware productivity rising versus U.S.
U.S. GDP per Labor Force
Gross State Product per Labor Force Participant, 2009
Participant Real Growth: -0.97%
$130,000 Wyoming
Alaska
$120,000 Connecticut
New York
$110,000
New Jersey Massachusetts
California Hawaii
$100,000 Virginia Louisiana
Washington Maryland
Illinois Colorado U.S. GDP per Labor Force
Texas
Nevada Participant: $92,382
$90,000 Minnesota South
North Carolina Pennsylvania Nebraska Dakota Oklahoma North Dakota
Oregon
Georgia Indiana Utah Iowa
Rhode Island Alabama
Arizona Wisconsin West Virginia
$80,000 Florida
Ohio
Missouri
New Mexico
Michigan Arkansas
South Carolina Kentucky Mississippi
Maine
Idaho Montana
$70,000 Vermont
Kansas
Tennessee
Low and declining versus U.S. New Hampshire Low but rising versus U.S.
$60,000
-8.0% -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0%
Gross State Product per Labor Force Participant Real Growth Rate, 2007-2009
Source: Bureau of Economic Analysis. Notes: Growth rate calculated as compound annual growth rate (CAGR).
NGA 2011 – Montana 9 Copyright © 2011 Professor Michael E. Porter

10. Long Term State Job Growth
2000 to 2010
9,000,000
California (15,945,558) New York Texas (11,202,388)
Florida
8,000,000
U.S. Average Growth Rate: 0.11%
7,000,000
6,000,000 Illinois
Number of Jobs 2010
Pennsylvania
Ohio
5,000,000
Michigan Georgia
New Jersey North Carolina
4,000,000 Virginia
Massachusetts
Washington
3,000,000 Indiana
Wisconsin Maryland Arizona
Tennessee Minnesota
Missouri
Colorado
Louisiana
2,000,000 Alabama Kentucky South Carolina
Oregon
Connecticut
Iowa Kansas
Mississippi Oklahoma Arkansas Nevada Utah
1,000,000 Nebraska
New Hampshire New Mexico
West Virginia Rhode Island Maine Hawaii Idaho
Delaware Montana North South Dakota Alaska
Vermont Dakota Wyoming
0
-2.0% -1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0%
Losing Jobs Job Growth Rate (CAGR), 2000-2010 Gaining Jobs
Source: Bureau of Labor Statistics
NGA 2011 – Montana 10 Copyright © 2011 Professor Michael E. Porter

11. Near Term State Job Growth
2007 to 2010
9,000,000
California (15,945,558) Texas (11,202,388)
New York
Florida
8,000,000
U.S. Average Growth Rate: -1.52%
7,000,000
6,000,000 Illinois
Number of Jobs 2010
Pennsylvania
Ohio
5,000,000
Michigan Georgia
North Carolina
New Jersey Virginia
4,000,000
Massachusetts Washington
3,000,000 Wisconsin Arizona
Indiana Minnesota
Missouri Tennessee
Maryland
Colorado
2,000,000 Alabama Kentucky
South Carolina Oregon Louisiana
Oklahoma Connecticut
Utah Arkansas Iowa
Nevada Kansas
Mississippi
1,000,000 West Virginia New Mexico
Idaho Hawaii Nebraska New
Delaware Maine Hampshire North Dakota
Montana Rhode Island South Dakota Vermont Alaska
Wyoming
0
-4.0% -3.5% -3.0% -2.5% -2.0% -1.5% -1.0% -0.5% 0.0% 0.5% 1.0%
Losing Jobs Job Growth Rate (CAGR), 2007-2010 Gaining Jobs
Source: Bureau of Labor Statistics
NGA 2011 – Montana 11 Copyright © 2011 Professor Michael E. Porter

12. Long Term State Unemployment Rate
2000 to 2010
%
3.0
Below average
unemployment North Dakota
Nebraska
South Dakota
%
5.0
New Hampshire
Vermont
Iowa Wyoming
Oklahoma Hawaii
Virginia Kansas
Unemployment Rate, 2010
%
7.0 Minnesota
Maine Maryland Montana
Wisconsin Utah
Louisiana
Massachusetts New York Arkansas Alaska
Delaware Texas
Colorado New New Mexico
Pennsylvania
% Jersey Alabama U.S. Average
9.0 Connecticut Illinois Washington
Missouri Unemployment Rate: 9.4%
Indiana Ohio Idaho West Virginia
North Carolina
Georgia Mississippi
Kentucky
Oregon Tennessee
South Carolina
%
11.0 Arizona
Rhode Island
Florida Michigan
California
%
13.0 Change in US Average
Employment Rate: 5.5%
Above average
Nevada Unemployment rising unemployment
%
15.0
%
10.0 %
9.0 %
8.0 %
7.0 %
6.0 %
5.0 %
4.0 %
3.0 %
2.0 %
1.0 %
0.0
Source: Bureau of Labor Statistics
Change in Employment Rate, 2000 to 2010
NGA 2011 – Montana 12 Copyright © 2011 Professor Michael E. Porter

13. Near Term State Unemployment Rate
2007 to 2010
3.0
%
Below average Change in US Average
North
unemployment Employment Rate: 4.4%
Dakota
Nebraska
South Dakota
5.0
%
New Hampshire
Vermont
Wyoming Hawaii Iowa
Virginia
Unemployment Rate, 2010
Kansas
7.0
% Oklahoma Minnesota
Montana Maine
Utah Maryland Wisconsin
Louisiana Arkansas
New York Alaska
Delaware Texas
New Mexico
New Jersey Pennsylvania Massachusetts
Colorado U.S. Average
9.0
% Alabama Connecticut
Unemployment Rate: 9.4%
Idaho Arizona Missouri Illinois
Indiana Tennessee
West Virginia Ohio
North Carolina
Georgia Mississippi
Oregon Kentucky
11.0 South Washington
%
Carolina
Rhode Island
Florida Michigan
California
13.0
%
Nevada Above average
Unemployment rising
unemployment
15.0
%
%
10.0 %
9.0 %
8.0 %
7.0 %
6.0 %
5.0 %
4.0 %
3.0 %
2.0 %
1.0 %
0.0
Change in Employment Rate, 2007 to 2010
Source: Bureau of Labor Statistics
NGA 2011 – Montana 13 Copyright © 2011 Professor Michael E. Porter

14. Long Term State Patenting Performance
U.S. States, 1999 to 2009
14
High and declining U.S. average Growth Rate
Idaho
innovation of Patenting: -0.30% California
12
Vermont
Massachusetts Washington (+8.0%, 13.53)
Oregon (+4.9%, 10.31)
Patents per 10,000 Employees, 2009
10 Minnesota
Connecticut
High and improving
8 Delaware innovation rate versus U.S.
New Hampshire Michigan
New Jersey Colorado
New York
6 Texas Utah
Arizona U.S. average Patents per
Wisconsin 10,000 Employees: 5.96
Illinois North Carolina
Pennsylvania Rhode Island
Ohio Maryland
Iowa
4 Indiana
New Mexico Kansas Georgia
Florida Missouri
Virginia
Montana (-5.7%, 1.58) Nevada
South Carolina North Dakota
Louisiana (-6.0%, 1.34) Tennessee Nebraska Wyoming
2 Kentucky
Arkansas (-6.9%, 0.76) Oklahoma Maine
Alabama
West Virginia
Mississippi Hawaii
South Dakota Alaska
Low and declining innovation Low and improving innovation
0
-5% -4% -3% -2% -1% 0% 1% 2% 3%
Growth Rate of Patenting, 1999 to 2009
3,000 patents issued in 2009 =
Source: USPTO, Bureau of Labor Statistics. Note: Growth rate calculated as compound annual growth rate (CAGR).
NGA 2011 – Montana 14 Copyright © 2011 Professor Michael E. Porter

15. Montana Patents by Organization
Patents Patents
Rank Organization Rank Organization
2005-2009 2005-2009
1 Semitool, Inc. 98 21 Design Rite, Llc. 2
The International Heart Institute Of
2 International Game Technology (Igt) 14 21 Montana Foundation 2
3 Jore Corporation 13 21 Digeo, Inc. 2
4 Montana State University 12 21 Cardiac Dimensions, Inc. 2
5 Locan Properties, Llc 9 21 Montana Black Gold 2
6 University Of Montana 7 21 Hammen Corporation 2
7 Trophy Ridge, Llc 6 21 Advr Inc. 2
8 Bear Archery Inc. 5 21 Cluffy Biomedical Llc 2
United States Of America, Department Of
8 Agriculture 5 21 Ketch-It Company 2
10 Corixa Corporation 4 21 Goodway Industrial (H.K.) Ltd. 2
10 Spectrum Products, Llc 4 21 Techlusion Corporation 2
12 Finisar Corporation 3 21 A& E Manufacturing, Inc. 2
12 Fountainhead Corporation 3 21 Mine Rite Technologies, Llc 2
12 Sun Mountain Sports, Inc. 3 21 Trophy Taker, Inc. 2
Montana Tech Of The University Of
12 Avaya Technology Corp. 3 21 Montana 2
12 Rightnow Technologies, Inc. 3 21 Avistar Communications Corporation 2
12 G & H Technologies Llc 3 21 Kenetrek, Llc 2
Blackhawk Industries Product Group
12 Unlimited Llc 3
12 Crazy Creek Products, Inc. 3
12 Simms Fishing Products Llc 3
21 Advanced Cardiovascular Systems, Inc. 2
21 General Electric Company 2
21 Micron Technology, Inc. 2
21 Sun Microsystems, Inc. 2
21 Luzenac America, Inc. 2
Universities and Research Institutions
Government Organizations
Source: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director.
NGA 2011 – Montana 15 Copyright © 2011 Professor Michael E. Porter

16. The Impact of Cluster Mix and Cluster Strength on Wages
U.S. States, 2008
State Traded State Traded
Wage versus Relative Wage versus Relative
National Cluster Mix Cluster National Cluster Mix Cluster
State Average Effect Wage Effect State Average Effect Wage Effect
New York + 34,578 5,188 29,390 North Carolina -10,673 -5,131 -5,543
Connecticut + 20,008 6,898 13,109 Missouri -10,953 -1,634 -9,319
Massachusetts + 17,308 5,191 12,117 Rhode Island -11,089 -1,370 -9,719
New Jersey + 12,157 4,638 7,519 Florida -11,780 -1,473 -10,307
California + 9,597 121 9,476 Oklahoma -12,225 1,533 -13,758
Maryland + 6,435 2,778 3,657 Alabama -12,301 -4,713 -7,588
Washington + 4,827 3,058 1,769 Tennessee -13,063 -3,987 -9,076
Virginia + 2,550 945 1,605 Vermont -13,095 -2,936 -10,159
Illinois + 2,501 -61 2,562 Indiana -13,309 -5,495 -7,814
Alaska + 2,386 -3,044 5,431 Nebraska -14,659 41 -14,699
Texas +1,400 2,796 -1,396 Utah -14,947 327 -15,274
Colorado + 753 2,292 -1,539 South Carolina -15,256 -5,694 -9,562
Delaware + 612 13,346 -12,733 Nevada -15,429 -2,829 -12,600
Louisiana -4,172 573 -4,745 Maine -15,826 -726 -15,100
Minnesota -4,404 43 -4,448 North Dakota -16,437 2,940 -19,378
Wyoming -4,423 1,408 -5,831 Iowa -16,963 -2,602 -14,361
Michigan -4,981 -2,534 -2,447 New Mexico -16,991 -125 -16,866
Pennsylvania -5,182 -1,064 -4,118 Kentucky -17,303 -5,013 -12,291
New Hampshire -6,359 1,224 -7,584 West Virginia -17,357 -4,290 -13,067
Georgia -7,262 -1,923 -5,338 Arkansas -17,616 -5,171 -12,445
Arizona -8,662 1,557 -10,219 Hawaii -18,103 -14,124 -3,980
Kansas -8,828 1,820 -10,648 Idaho -18,636 -1,567 -17,069
Ohio -9,766 -1,436 -8,330 Mississippi -20,859 -6,165 -14,694
Oregon -9,774 -2,355 -7,420 South Dakota -21,211 955 -22,166
Wisconsin -10,479 -3,341 -7,138 Montana -22,488 -3,494 -18,994
Cluster mix: a region’s particular mix of lower and higher average wage clusters
Relative cluster wage: a region’s cluster wage relative to the average national wage in that cluster
The cluster mix and the cluster wage level effects add up to the total difference between a region’s average wage and the
national average wage. On average, the wage level effect is responsible for 76.3% of the total difference in state wages to the
national average.
NGA 2011 – Montana 16 Copyright © 2011 Professor Michael E. Porter

17. Effect of Urban and Rural Areas on Average State Wages
U.S. States, 2008
Average Average
Overall Overall
Wage Relative Relative Wage Relative Relative
Difference Metro- Metro Rural Difference Metro- Metro Rural
State to U.S. Rural Mix Wage Wage State to U.S. Rural Mix Wage Wage
New York +15,412 982 14,078 353 Nevada -4,560 815 -5,752 377
Connecticut +10,919 1,013 9,592 315 Louisiana -4,739 -630 -4,764 655
Massachusetts +10,197 1,674 8,333 190 Kansas -5,371 -2,175 -2,535 -661
New Jersey +8,488 1,631 6,765 92 North Carolina -5,505 -1,262 -3,796 -446
Alaska +6,538 -1,438 5,158 2,818 Tennessee -5,992 -538 -4,973 -481
California +5,584 1,476 3,844 265 Florida -6,132 -128 -6,074 70
Illinois +3,427 411 3,277 -261 Indiana -6,225 -630 -5,665 70
Washington +3,013 832 2,122 58 Oklahoma -6,501 -2,030 -4,496 25
Delaware +2,664 -191 2,895 -40 Hawaii -6,583 -1,892 -4,871 179
Maryland +2,201 1,159 775 267 Utah -7,054 169 -7,273 50
Virginia +1,182 509 709 -36 Vermont -7,280 -6,080 -968 -232
Minnesota +1,024 -903 2,130 -202 Nebraska -7,419 -2,652 -3,621 -1,146
Colorado +539 -110 -66 714 Alabama -7,544 -1,206 -5,701 -636
Texas +325 350 -234 209 Maine -7,697 -2,479 -5,243 24
New Hampshire -504 -2,856 924 1,428 Kentucky -7,978 -2,179 -5,285 -515
Pennsylvania -1,184 262 -1,480 34 Iowa -8,096 -3,123 -4,509 -464
Michigan -1,785 -165 -1,576 -44 New Mexico -8,531 -1,843 -6,548 -140
Rhode Island -2,143 1,720 -3,846 -17 South Carolina -9,137 -609 -8,203 -325
Wyoming -2,478 -6,929 -2,304 6,755 Arkansas -9,482 -2,207 -6,283 -992
Georgia -3,136 -120 -2,542 -475 Idaho -9,766 -1,928 -6,872 -966
Ohio -3,925 -224 -3,799 98 North Dakota -9,973 -2,963 -6,607 -403
Arizona -3,962 937 -4,897 -2 West Virginia -10,074 -3,104 -7,013 43
Oregon -4,116 -359 -3,505 -251 South Dakota -10,976 -3,811 -5,475 -1,690
Wisconsin -4,336 -910 -3,419 -7 Mississippi -11,446 -4,569 -5,493 -1,383
Missouri -4,540 -573 -3,103 -865 Montana -11,792 -5,468 -5,495 -829
Metro-rural mix: average wage impact from a state’s relative proportion of metro and rural regions
Relative metro wage: average wage impact from state relative performance in metro regions
Relative rural wage: average wage impact from state relative performance in rural regions
On average 66.3% of the average wage gap in a state is due to the metro wage effect.
Note: Data are based on private, non-agricultural employment.
Source: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director.
NGA 2011 – Montana 17 Copyright © 2011 Professor Michael E. Porter

18. Composition of the Montana Economy
and Cluster Performance
NGA 2011 – Montana 18 Copyright © 2011 Professor Michael E. Porter

19. Composition of Regional Economies, United States
Traded Clusters
• Serve markets in other
regions and countries
• Free to choose location
• Exposed to competition
Local Clusters 27.4% of from other regions
employment
• Serve almost
37.3% of income
exclusively the
local market 71.7% of 96.4% of patents
employment
• Not exposed to
61.8% of income
cross-regional
competition for 3.5% of patents
employment Resource-based Clusters
• Location determined by
resource availability
• <1% of income,
Source: Michael E. Porter, Economic Performance of Regions, Regional Studies (2003); Updated via employment, and patents in
Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School (2008)
the U.S.
NGA 2011 – Montana 19 Copyright © 2011 Professor Michael E. Porter

20. Overall Composition of the Montana Economy, 2008
90%
80%
MT
70% 78.1% US
Private Employment
60%
71.7%
50%
Percent of Total
40%
30%
US
20%
27.4%
MT
10% 19.5% MT US
2.4% 0.9%
0%
Traded Clusters Local Clusters Natural Endowment
Dependent
Note: Data throughout this section of the report are based on private, non-agricultural employment.
Source: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director.
NGA 2011 – Montana 20 Copyright © 2011 Professor Michael E. Porter

21. Composition of the Montana Economy
Employment by Traded Cluster, 2008
Rank in US
Hospitality and Tourism 44 11,121
Business Services 48 10,810
Heavy Construction Services 41 7,595
Entertainment 34 6,478
Education and Know ledge Creation 48 4,220
Oil and Gas Products and Services 20 4,036
Transportation and Logistics 43 3,966
Financial Services 47 3,648
Processed Food 45 3,323
Distribution Services 49 2,533
Forest Products 39 1,347
Heavy Machinery 38 1,326
Analytical Instruments 42 1,303
Information Technology 47 1,244
Publishing and Printing 49 1,212
Building Fixtures, Equipment and Services 47 1,063
Metal Manufacturing 47 749
Agricultural Products 44 685
Furniture 40 642
Production Technology 47 610
Chemical Products 46 553
Medical Devices 42 532
Automotive 47 483
Construction Materials 46 355
Plastics 49 340
Jew elry and Precious Metals 37 315
Biopharmaceuticals 43 271
Sporting, Recreational and Children's Goods 37 265
Prefabricated Enclosures 43 265
Leather and Related Products 41 234
Pow er Generation and Transmission 49 195
Fishing and Fishing Products 27 185
Textiles 47 144
Aerospace Engines 38 134
Communications Equipment 46 130
Motor Driven Products 47 80
Footw ear 26 70
Lighting and Electrical Equipment 48 60 Montana overall employment rank = 46
Aerospace Vehicles and Defense 47 60
Apparel 49 50
0 2,000 4,000 6,000 8,000 10,000 12,000
Employment, 2008
Note: Ranks are among the 50 US states plus the District of Columbia.
Source: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director.
NGA 2011 – Montana 21 Copyright © 2011 Professor Michael E. Porter

22. Composition of the Montana Economy
Specialization by Traded Cluster, 1998 to 2008
0.7% Oil and Gas
Employment Products and Overall change in the
1998-2008 Services Montana’s Share of US
Added Jobs Traded Employment: +0.04% Entertainment
0.6%
Montana’s national employment share, 2008
Lost Jobs
Hospitality and Tourism Heavy Construction Services
Footwear
0.5% (+0.37%, 0.55%)
Sporting, Recreational Fishing and Fishing
and Children's Goods Products
(-0.14%, +0.37%) Forest
0.4% Products Jewelry and
Precious Metals
Heavy
Machinery
Montana’s Overall
0.3% Share of US Processed Food Furniture
Leather and Business Agricultural
Traded
Analytical Related Services Products
Employment: Products
0.22% Instruments
Building Fixtures, Construction
0.2%
Financial Services Equipment and Materials
Transportation Service
Aerospace Engines
Distribution and Logistics Information
Power Services Technology
0.1% Generation Education and
and Knowledge Creation Production Biopharmaceuticals
Transmission Technology
0.0%
-0.07% -0.02% 0.03% 0.08% 0.13%
Change in Montana’s share of National Employment, 1998 to 2008 Employees 2,500 =
Source: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director.
NGA 2011 – Montana 22 Copyright © 2011 Professor Michael E. Porter

23. Composition of the Montana Economy
Specialization by Traded Cluster, 1998 to 2008 (continued)
0.20%
Business Services
Building Fixtures,
Financial Equipment and Service
Services
Montana’s national employment share, 2008
Chemical Products
0.15%
Distribution
Medical Devices
Services
Prefabricated
Enclosures Publishing and
Printing
0.10% Biopharmaceuticals
Production
Technology
Metal Manufacturing
Communications
Equipment
Textiles
Plastics
0.05%
Automotive
Analytical
Instruments Overall change in the Employment
Apparel Montana’s Share of US 1998-2008
Lighting and Electrical Equipment Traded Employment:
Motor Driven Products
+.040% Added Jobs
Aerospace Vehicles and Defense
Lost Jobs
0.00%
0.00% 0.01% 0.02% 0.03% 0.04% 0.05% 0.06% 0.07% 0.08%
Change in Montana’s share of National Employment, 1998 to 2008 Employees 2,500 =
Source: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director.
NGA 2011 – Montana 23 Copyright © 2011 Professor Michael E. Porter