North Dakota Competitiveness: State and Cluster Economic Performance
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North Dakota Competitiveness: State and Cluster Economic Performance

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Harvard Business School

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

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North Dakota Competitiveness: State and Cluster Economic Performance North Dakota Competitiveness: State and Cluster Economic Performance Presentation Transcript

  • North Dakota Competitiveness: State and Cluster Economic Performance Prepared for Governor Jack Dalrymple Professor Michael E. Porter National Governors Association Winter Meeting February 26, 2011NGA 2011 – North Dakota– Rich Bryden 1 Copyright © 2011 Professor Michael E. Porter
  • North Dakota Performance Snapshot Position Trend Prosperity Productivity Labor Mobilization Top quintile Innovation 2nd quintile 3rd quintile 4th quintile Cluster Strength Lowest quintile • Heavy Machinery • Processed Food Leading Clusters • Oil and Gas Products and Services • Agricultural ProductsNGA 2011 – North Dakota– Rich Bryden 2 Copyright © 2011 Professor Michael E. Porter
  • State Comparative PerformanceNGA 2011 – North Dakota– Rich Bryden 3 Copyright © 2011 Professor Michael E. Porter
  • North Dakota Competitiveness Overall Economic Performance Indicators Prosperity Cluster Gross State Product per capita, 2009 Share of State Traded Employment in Strong Clusters, 2008 • In North Dakota: $49,274 Rank: 16 • In North Dakota: 25.5% Rank: 43 • In the US: $46,093 • In the US: 41.8% • State difference to US: 6.9% Change in Share of National Employment in Strong Clusters, 1998-2008 Growth in Gross State Product per capita, real annual rate, 1999-2009 • In North Dakota: 0.07% Rank: 23 • In North Dakota: 3.64% Rank: 1 • In the US: -0.06% • In the US: 0.86% Share of Employment in Traded Clusters, 1998-2008 • In North Dakota: 28.4% Rank: 21 • 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 North Dakota: $87,603 Rank: 22 • In North Dakota: 2.7% Rank: 2 • In the US: $92,382 • In the US: -2.2% • State difference to US: -5.2% Labor Mobilization Growth in Gross State Product per labor force participant*, 1999-2009 • In North Dakota: 3.19% Rank: 1 Population, 2009 • In the US: 1.09% • In North Dakota: 646,839 Rank: 48 • % of US: 0.21% Average private wage, 2008 • In North Dakota: $32,976 Rank: 45 Population growth, annual rate, 1999-2009 • In the US: $42,435 • In North Dakota: 0.04% Rank: 51 • State difference to US: -22.3% • In the US: 0.96% Private wage Growth, annual rate, 1998-2008 Labor Force Participation, 2009 • In North Dakota: 4.04% Rank: 3 • In North Dakota: 72.4 Rank: 2 • In the US: 3.32% • In the US: 65.4 Employment, 2010 (December) • In North Dakota: 354,987 Rank: 48 Innovation Output • % of US: 0.25% Patents Per 10,000 Employees, 2009 • In North Dakota: 2.69 Rank: 36 Employment growth, annual rate, 2000-2010 (December) • In the US: 6.83 • In North Dakota: 0.55% Rank: 13 • In the US: 0.11% Growth in total patents, annual rate, 1998-2009 • In North Dakota: 2.13% Rank: 6 Unemployment, 2010 (December) • In the US: 0.23% • In North Dakota: 3.8% Rank: 1 • In the US: 9.4% Traded establishment formation, annual growth rate, 1998-2008 • In North Dakota: 1.68% Rank: 25 Change in Unemployment, 2000-2010 (December) • In the US: 1.79% • In North Dakota: 1.1% Rank: 1 • In the US: 5.5%NGA 2011 – North Dakota– Rich Bryden 4 Copyright © 2011 Professor Michael E. Porter
  • 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 2009Notes: 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. excludedNGA 2011 – North Dakota– Rich Bryden 5 Copyright © 2011 Professor Michael E. Porter
  • 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 Colorado Maryland North Dakota $50,000 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 Florida Arizona Tennessee Maine Michigan Montana 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 2009Notes: 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 – North Dakota– Rich Bryden 6 Copyright © 2011 Professor Michael E. Porter
  • 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 AlaskaAverage 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), 1998-2008Source: Census CBP report; private, non-agricultural employment. Growth is calculated on nominal wage levels.NGA 2011 – North Dakota– Rich Bryden 7 Copyright © 2011 Professor Michael E. Porter
  • 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 Indiana Rhode Island Iowa South Oregon Dakota Georgia Arizona Tennessee Kansas Alabama Dakota Ohio Wisconsin $80,000 Missouri Florida West Virginia New Mexico Michigan New Hampshire Mississippi Kentucky Arkansas South Carolina Maine Montana Idaho $70,000 Vermont 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, 1999-2009Source: Bureau of Economic Analysis. Notes: Growth rate calculated as compound annual growth rate (CAGR).NGA 2011 – North Dakota– Rich Bryden 8 Copyright © 2011 Professor Michael E. Porter
  • 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 ForceGross 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, 2007-2009Source: Bureau of Economic Analysis. Notes: Growth rate calculated as compound annual growth rate (CAGR).NGA 2011 – North Dakota– Rich Bryden 9 Copyright © 2011 Professor Michael E. Porter
  • 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 IllinoisNumber 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 South Dakota Vermont Alaska North 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 JobsSource: Bureau of Labor StatisticsNGA 2011 – North Dakota– Rich Bryden 10 Copyright © 2011 Professor Michael E. Porter
  • 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 IllinoisNumber of Jobs 2010 Pennsylvania Ohio 5,000,000 Michigan Georgia North Carolina 4,000,000 Virginia New Jersey 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 Nebraska New Hawaii Maine Delaware Hampshire North Dakota Montana Rhode Island South DakotaVermont 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 JobsSource: Bureau of Labor Statistics 11NGA 2011 – North Dakota– Rich Bryden Copyright © 2011 Professor Michael E. Porter
  • 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 Montana Maine Maryland Wisconsin Utah Louisiana Massachusetts New York Arkansas Alaska Delaware Texas New New Mexico Colorado 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 % 0.0Source: Bureau of Labor Statistics Change in Employment Rate, 2000 to 2010NGA 2011 – North Dakota– Rich Bryden 12 Copyright © 2011 Professor Michael E. Porter
  • 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 VirginiaUnemployment Rate, 2010 Kansas 7.0 % Oklahoma Minnesota Montana Maine Utah Maryland Wisconsin Louisiana Arkansas New York Alaska Delaware Texas New Mexico Washington 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 % New Jersey Carolina Rhode Island Florida Michigan California 13.0 % Nevada Unemployment rising Above average 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 2010Source: Bureau of Labor StatisticsNGA 2011 – North Dakota– Rich Bryden 13 Copyright © 2011 Professor Michael E. Porter
  • Long Term State Patenting Performance U.S. States, 1999 to 2009 14 High and declining Idaho U.S. average Growth Rate 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 New Hampshire innovation rate versus U.S. Michigan New Jersey Colorado New York 6 Texas Utah Arizona U.S. average Patents per Wisconsin 10,000 Employees: 5.96 Illinois Pennsylvania Rhode Island Ohio Maryland North Carolina Iowa 4 Indiana New Mexico Kansas Georgia Florida Missouri Virginia North Dakota Montana (-5.7%, 1.58) Nevada South Carolina 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 – North Dakota– Rich Bryden 14 Copyright © 2011 Professor Michael E. Porter
  • North Dakota Patents by Organization Patents Patents Rank Organization Rank Organization 2005-2009 2005-2009 1 Clark Equipment Company, Inc. 37 25 Branick Industries, Inc. 1 2 Deere + Company 25 25 Exportech Company, Inc. 1 International Business Machines 3 Microsoft Corporation 18 25 Corporation 1 4 Pioneer Hi-Bred International, Inc. 10 25 Lisle Corporation 1 4 Goodrich Corporation 10 25 Rubbermaid Incorporated 1 6 Cnh America Llc 8 25 Rugby Manufacturing Co. 1 North Dakota State University Research 7 Foundation 6 25 Summers Manufacturing Company, Inc. 1 University Of North Dakota Energy And 8 Agri-Cover, Inc. 5 25 Environment Research Center Foundation 1 8 Imation Corp. 5 25 Acceleration Products, Inc. 1 Springer Family Patents Limited 8 New Products Marketing Corporation 5 25 Parternship 1 11 Dakota Technologies, Inc. 4 25 Loegering Mfg. Inc. 1 11 University Of North Dakota 4 25 Jacam Chemicals, L.L.C. 1 Alfred E. Mann Institute For Biomedical Engineering At The University Of Southern 13 Nanotek Instruments, Inc. 3 25 California 1 13 Psi-Ets 3 25 United States Seamless 1 13 Packet Digital 3 25 Duratech Industries International, Inc. 1 Hitachi Global Storage Technologies 16 Bailey Nurseries, Inc. 2 25 Netherlands B.V. 1 16 Echelon Corporation 2 25 Bayer Cropscience Gmbh 1 16 North Dakota State University 2 25 Triple I 1 16 Reechcraft, Inc. 2 25 New Design Corporation, Inc. 1 16 Monsanto Technology, Llc 2 25 Terramarc Industries, Inc. 1 16 Magtec Llc 2 25 Aqua-Envirotech Mfg., Inc. 1 16 Sno-Bear Industries, Llc 2 25 Fargo Products, Llc 1 Great Plains Assistance Dogs Foundation, 16 Blade Lift, Inc. 2 25 Inc. 1 16 Cannon Technologies, Inc. 2 25 Wil-Rich, Llc 1 25 Baker Hughes Incorporated 1 25 Great River Energy 1 Universities and Research Institutions Government OrganizationsSource: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director. 15NGA 2011 – North Dakota– Rich Bryden Copyright © 2011 Professor Michael E. Porter
  • 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 – North Dakota– Rich Bryden 16 Copyright © 2011 Professor Michael E. Porter
  • 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 – North Dakota– Rich Bryden 17 Copyright © 2011 Professor Michael E. Porter
  • Composition of the North Dakota Economy and Cluster PerformanceNGA 2011 – North Dakota– Rich Bryden 18 Copyright © 2011 Professor Michael E. Porter
  • 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 inCluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School (2008) the U.S.NGA 2011 – North Dakota– Rich Bryden 19 Copyright © 2011 Professor Michael E. Porter
  • Overall Composition of the North Dakota Economy, 2008 80% 70% ND US 70.9% 71.7%Private Employment 60% 50% 40%Percent of Total 30% ND US 20% 27.8% 27.4% 10% ND US 1.3% 0.9% 0% Traded Clusters Local Clusters Natural Endowment DependentNote: 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 – North Dakota– Rich Bryden 20 Copyright © 2011 Professor Michael E. Porter
  • Composition of the North Dakota Economy Employment by Traded Cluster, 2008 Rank in US Financial Services 41 10,726 Business Services 49 9,370 Hospitality and Tourism 48 9,072 Heavy Machinery 13 8,519 Processed Food 38 6,610 Oil and Gas Products and Services 17 5,281 Education and Know ledge Creation 49 4,188 Distribution Services 46 3,639 Entertainment 45 3,452 Heavy Construction Services 50 3,401 Pow er Generation and Transmission 28 2,500 Analytical Instruments 37 2,045 Automotive 41 1,992 Forest Products 37 1,760 Transportation and Logistics 50 1,671 Agricultural Products 33 1,670 Information Technology 44 1,646 Publishing and Printing 46 1,423 Production Technology 42 1,312 Building Fixtures, Equipment and Services 46 1,092 Metal Manufacturing 46 1,028 Plastics 45 871 Furniture 41 640 Aerospace Vehicles and Defense 33 610 Prefabricated Enclosures 41 397 Lighting and Electrical Equipment 43 360 Chemical Products 48 344 Construction Materials 48 219 Medical Devices 48 130 Leather and Related Products 47 90 Jew elry and Precious Metals 44 80 Communications Equipment 47 80 Apparel 46 80 Textiles 48 70Sporting, Recreational and Childrens Goods 46 70 Biopharmaceuticals 49 70 Motor Driven Products 48 30 Footw ear 37 10 North Dakota overall employment rank = 48 Fishing and Fishing Products 49 10 Aerospace Engines 45 10 0 2,000 4,000 6,000 8,000 10,000 12,000 Employment, 2008Note: 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 – North Dakota– Rich Bryden 21 Copyright © 2011 Professor Michael E. Porter
  • Composition of the North Dakota Economy Specialization by Traded Cluster, 1998 to 2008 Heavy Machinery Power Generation and (2.46%, +0.21% ) Transmission (1.27%, +0.79%) Oil and Gas Products and Services 0.80%North Dakota’s national employment share, 2008 Overall change in the North Dakota Share of US Traded Employment: +0.06% Agricultural Products 0.60% Processed Food Forest Products Financial Services Hospitality and 0.40% Tourism Entertainment North Dakota Overall Analytical Share of US Traded Furniture Instruments Employment: 0.26% Production 0.20% Technology Heavy Lighting and Employment Construction Electrical Equipment 1998-2008 Added Jobs Transportation Lost Jobs and Logistics 0.00% -0.10% 0.00% 0.10% 0.20% 0.30% 0.40% Change in North Dakota share of National Employment, 1998 to 2008 Employees 2,000 =Source: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director.NGA 2011 – North Dakota– Rich Bryden 22 Copyright © 2011 Professor Michael E. Porter
  • Composition of the North Dakota Economy Specialization by Traded Cluster, 1998 to 2008 0.20% Building Fixtures, Automotive Prefabricated Equipment and Services Enclosures Distribution Services Aerospace Vehicles andNorth Dakota’s national employment share, 2008 Defense Information Technology Publishing and 0.15% Business Services Education and Printing Knowledge Creation Plastics Construction Materials Jewelry Sporting, Recreation and Chemical and Children’s Goods 0.10% Precious Products Metals Metal Manufacturing Overall change in the Leather and Related North Dakota Share Transportation Products of US Traded and Logistics Employment: +0.06% 0.05% Apparel Medical Devices Communications Employment Equipment 1998-2008 Textiles Biopharmaceuticals Added Jobs Lost Jobs 0.00% -0.05% -0.03% -0.01% 0.01% 0.03% 0.05% 0.07% 0.09% Change in North Dakota share of National Employment, 1998 to 2008 Employees 1,500 =Source: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director.NGA 2011 – North Dakota– Rich Bryden 23 Copyright © 2011 Professor Michael E. Porter
  • Job Creation, 1998 to 2008 -2,000 -1,000 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 0 Financial Services Hospitality and Tourism Business ServicesNGA 2011 – North Dakota– Rich Bryden Education and Knowledge Creation Oil and Gas Products and Services Forest Products Analytical Instruments Power Generation and Transmission Distribution Services Production Technology Publishing and Printing Processed Food Plastics Information Technology Aerospace Vehicles and Defense Metal Manufacturing Lighting and Electrical Equipment Prefabricated Enclosures 24 Construction Materials Medical Devices Heavy Machinery Communications Equipment 1998 to 2008 Biopharmaceuticals given national cluster growth.* Indicates expected job creation Sporting, Recreational and Childrens Goods Aerospace Engines Fishing and Fishing Products Leather and Related Products Entertainment Textiles Jewelry and Precious Metals Transportation and Logistics Apparel Motor Driven Products Agricultural Products North Dakota Job Creation by Traded Cluster Building Fixtures, Equipment and Services +22,531 Chemical Products Source: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director. 1998 to 2008: Furniture Automotive Net traded job creation, Heavy Construction Services * Percent change in national benchmark times starting regional employment. Overall traded job creation in North Dakota, if it matched national benchmarks, would be +4,868 Footwear Copyright © 2011 Professor Michael E. Porter
  • North Dakota Wages by Traded Cluster vs. National Benchmarks Information Technology Oil and Gas Products and Services Heavy Construction Services Production Technology Financial Services Heavy Machinery Metal Manufacturing Distribution Services Processed Food Agricultural Products Building Fixtures, Equipment and Services Publishing and Printing Prefabricated Enclosures Business Services l Indicates average Transportation and Logistics national wage in Plastics Chemical Products the traded cluster. Automotive Construction Materials Leather and Related Products Education and Knowledge Creation U.S. average traded Hospitality and Tourism Entertainment wage: $57,706 Power Generation and Transmission Aerospace Vehicles and Defense Biopharmaceuticals Analytical Instruments Medical Devices Communications Equipment Aerospace Engines Tobacco Forest Products Lighting and Electrical Equipment Jewelry and Precious Metals Motor Driven Products Sporting, Recreational and Childrens North Dakota average Fishing and Fishing Products Textiles traded wage: $ 39,974 Furniture Footwear Apparel $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 Wages, 2008Source: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director.NGA 2011 – North Dakota– Rich Bryden 25 Copyright © 2011 Professor Michael E. Porter
  • North Dakota Employment in Highest Wage Clusters, 2008 = 26.2% of total private employmentTotal private, non-agricultural employment in North Dakota: 304,906.Source: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director.NGA 2011 – North Dakota– Rich Bryden 26 Copyright © 2011 Professor Michael E. Porter
  • North Dakota Cluster Portfolio, 2008 Fishing & Fishing Products Textiles Entertainment Prefabricated Hospitality Agricultural Enclosures & Tourism Products Processed Food Transportation Furniture & Logistics Building Jewelry & Distribution Aerospace Fixtures, Construction Precious Services Vehicles & Equipment & Materials Metals Information Defense Services Tech. Lightning & Heavy Electrical Construction Business Analytical Services Education & Instruments Equipment Services Forest Financial Knowledge Power Medical Products Services Creation Generation & Devices Communi Transmission Publishing cations & Printing Biopharma- Equipment Heavy ceuticals Machinery Motor Driven Production Apparel Chemical Products Technology Products Tobacco Leather & Oil & Related Gas Metal Automotive Products Plastics LQ > 4 Aerospace Manufacturing Engines LQ > 2 Footwear LQ > 1. Sporting & Recreation Goods LQ, or Location Quotient, measures the state’s share in cluster employment relative to its overall share of U.S. employment. An LQ > 1 indicates an above average employment share in a cluster.NGA 2011 – North Dakota– Rich Bryden 27 Copyright © 2011 Professor Michael E. Porter
  • North Dakota Heavy Machinery Cluster, 1998-2008 Specialization by Subcluster Change in North Dakota Share of US Heavy Machinery Construction 4.0% Employment: +0.21% Machinery Farm MachineryNational employment share, 2008 3.0% North Dakota Share of US Heavy Machinery Employment: 2.46% 2.0% 1.0% Employment Mining Machinery 1998-2008 Added Jobs Railroad Equipment Lost Jobs and Rental 0.0% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% Change in Share of National Employment, 1998 to 2008 Employees 2,000 =Source: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director.NGA 2011 – North Dakota– Rich Bryden 28 Copyright © 2011 Professor Michael E. Porter
  • North Dakota Power Generation and Transmission Cluster, 1998-2008 Specialization by Subcluster 3.5% Change in North Dakota Share of US Power Generation and Transmission Employment: +0.79% Turbines and Turbine 3.0% GeneratorsNational employment share, 2008 2.5% 2.0% North Dakota Electric Services Share of US Power Generation 1.5% and Transmission Employment: 1.27% 1.0% Employment 0.5% 1998-2008 Added Jobs Lost Jobs 0.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% Change in Share of National Employment, 1998 to 2008 Employees = 300Source: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director.NGA 2011 – North Dakota– Rich Bryden 29 Copyright © 2011 Professor Michael E. Porter
  • North Dakota Top 50 Subclusters by National Employment Share, 2008 Change in Employment Employment Employment Share in U.S. Subcluster Cluster Employment Rank in U.S. Share in U.S. 1998-2008 1 Construction Machinery Heavy Machinery 3,750 7 4.1% 1.8% 2 Farm Machinery Heavy Machinery 4,699 12 2.9% -0.6% 3 Turbines and Turbine Generators Power Generation and Transmission 750 9 2.9% 2.8% 4 Milling Processed Food 2,511 12 2.8% 0.2% 5 Ground Transportation Hospitality and Tourism 1,820 19 2.1% 1.8% 6 Prefabricated Wood Products Forest Products 1,760 23 1.5% 1.3% 7 Industrial Trucks and Tractors Production Technology 375 23 1.4% 1.4% 8 Milling and Refining Agricultural Products 185 11 1.4% 0.3% 9 Electric Services Power Generation and Transmission 1,750 31 1.4% 0.6% 10 Flour Processed Food 350 26 1.2% 0.8% 11 Trucks and Trailers Prefabricated Enclosures 317 25 1.2% 0.7% 12 Pipeline Transportation Oil and Gas Products and Services 483 20 1.2% 0.7% 13 Small Vehicles and Trailers Automotive 175 17 1.2% 0.9% 14 Defense Equipment Aerospace Vehicles and Defense 175 11 1.2% 1.1% 15 Electronic Components Analytical Instruments 1,925 22 1.2% 0.9% 16 Hydrocarbons Oil and Gas Products and Services 1,237 13 1.2% 0.2% 17 Farm Material and Supplies Wholesaling Distribution Services 944 30 1.1% 0.4% 18 Oil and Gas Exploration and Drilling Oil and Gas Products and Services 3,326 15 1.1% -0.1% 19 Depository Institutions Financial Services 8,426 31 0.9% 0.8% 20 Agricultural Products Agricultural Products 1,010 26 0.9% 0.0% 21 Baked Packaged Foods Processed Food 1,398 36 0.6% 0.1% 22 Metal Furniture Metal Manufacturing 375 31 0.6% 0.4% 23 Recorded Products Entertainment 175 21 0.5% -0.9% 24 Mining Machinery Heavy Machinery 60 31 0.5% 0.1% 25 Fabricated Plate Work Production Technology 512 33 0.5% 0.5% Rising national employment share Declining national employment shareNGA 2011 – North Dakota– Rich Bryden 30 Copyright © 2011 Professor Michael E. Porter
  • North Dakota Top 50 Subclusters by National Employment Share, 2008 (continued) Change in Employment Employment Employment Share in U.S. Subcluster Cluster Employment Rank in U.S. Share in U.S. 1998-2008 26 Wood Materials and Products Furniture 435 37 0.5% -0.4% 27 Entertainment Venues Entertainment 2,283 43 0.5% -0.1% 28 Switchgear Lighting and Electrical Equipment 175 30 0.5% 0.5% 29 Milk and Frozen Desserts Processed Food 375 41 0.5% 0.0% 30 Farm Management and Related Services Agricultural Products 405 36 0.5% -0.2% 31 Paint & Coating Plastics 175 34 0.4% 0.4% 32 Equipment Distribution and Wholesaling Heavy Construction Services 692 43 0.4% 0.0% 33 Signs and Advertising Specialties Publishing and Printing 361 40 0.4% 0.2% 34 Accommodations and Related Services Hospitality and Tourism 6,377 49 0.4% 0.1% 35 Primary Construction Materials Heavy Construction Services 816 44 0.4% 0.0% 36 Dental Instruments and Supplies Medical Devices 60 32 0.4% 0.3% 37 Specialty Foods and Ingredients Processed Food 786 39 0.4% 0.3% 38 Software Information Technology 1,373 32 0.4% 0.0% 39 Plumbing Products Building Fixtures, Equipment and Services 185 42 0.3% -0.3% 40 Furniture and Fittings Building Fixtures, Equipment and Services 293 39 0.3% 0.2% 41 Glass Automotive 175 40 0.3% 0.2% 42 Insurance Products Financial Services 1,308 40 0.3% 0.1% 43 Entertainment Equipment Entertainment 70 40 0.3% -0.1% 44 Meat and Related Products and Services Processed Food 745 37 0.3% -0.2% 45 Petroleum Processing Oil and Gas Products and Services 175 32 0.3% 0.0% 46 Ophthalmic Goods Medical Devices 60 39 0.3% 0.3% 47 Motor Vehicles Automotive 543 30 0.2% -0.2% 48 Tourism Related Services Hospitality and Tourism 705 43 0.2% -0.2% 49 Metal Parts Lighting and Electrical Equipment 175 37 0.2% 0.1% 50 Fabricated Metal Structures and Piping Heavy Construction Services 484 44 0.2% -0.2% Rising national employment share Declining national employment shareNGA 2011 – North Dakota– Rich Bryden 31 Copyright © 2011 Professor Michael E. Porter
  • North Dakota Employment by Local Cluster Rank in US 2008 Local Health Services 48 46,937 Local Hospitality Establishments 48 27,331 Local Real Estate, Construction, and Develo 47 24,933 Local Commercial Services 48 17,270 Local Financial Services 43 16,487 Local Motor Vehicle Products and Services 45 15,027 Local Retail Clothing and Accessories 47 12,152Local Food and Beverage Processing and Dist 48 11,140 Local Community and Civic Organizations 49 10,334 Local Logistical Services 42 9,914 Local Personal Services (Non-Medical) 48 6,729 Local Entertainment and Media 45 6,404 Local Household Goods and Services 47 5,115 Local Utilities 47 4,932 Local Education and Training 49 3,918 North Dakota overall employment rank = 48 Local Industrial Products and Services 47 2,648 0 10,000 20,000 30,000 40,000 50,000 Employment, 2008Note: 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 – North Dakota– Rich Bryden 32 Copyright © 2011 Professor Michael E. Porter
  • North Dakota Job Creation by Local Cluster 1998 to 2008 10,000 Net local job creation, 8,000 1998 to 2008: + 29,226 Job Creation, 1998 to 2008 6,000 Indicates expected job creation given national cluster growth.* 4,000 2,000 0 -2,000 Local Hospitality Local Health Services Local Financial Services Local Education and Local Retail Clothing Local Real Estate, Local Utilities Products and Services Local Personal Services Local Logistical Services Beverage Processing Local Community and Local Entertainment and Local Industrial Products Local Household Goods Construction, and Local Commercial Establishments Civic Organizations Local Motor Vehicle and Accessories Local Food and Services (Non-Medical) Develo and Services and Services Training and Dist Media* Percent change in national benchmark times starting regional employment. Overall local job creation in North Dakota, if it matched national benchmarks, would be +32,529 Source: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director.NGA 2011 – North Dakota– Rich Bryden 33 Copyright © 2011 Professor Michael E. Porter
  • North Dakota Wages by Local Cluster vs. National Benchmarks Local Utilities Local Industrial Products and Services Local Real Estate, Construction, and Develo Local Financial Services Local Health Services Local Logistical Services Local Commercial Services l Indicates average Local Motor Vehicle Products and Services national wage in the local cluster. Local Household Goods and Services Local Entertainment and Media Local Food and Beverage Processing and Dist Local Education and Training North Dakota Local Personal Services (Non-Medical) average local wage: Local Community and Civic Organizations $30,540 Local Retail Clothing and Accessories U.S. average local wage: $36,911 Local Hospitality Establishments $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 Wages, 2008Source: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director.NGA 2011 – North Dakota– Rich Bryden 34 Copyright © 2011 Professor Michael E. Porter
  • Appendix: Chart Descriptions, Interpretation, and SourcesNGA 2011 – North Dakota– Rich Bryden 35 Copyright © 2011 Professor Michael E. Porter
  • State Snapshot The snapshot chart summarizes the relative performance of a state on levels and trends in five key measures. The circles in the chart indicate quintile of performance as shown in chart legend. 1. Prosperity: State GDP per capita and 10-year trend 2. Productivity: Average private wage and 10-year trend 3. Labor Mobilization: Total labor force as a share of civilian population and 10-year trend 4. Innovation: Utility patents per 10,000 workers and 10-year trend 5. Cluster Strength: • A “strong cluster” is identified by relative employment rank in the top 20% across all states. A state’s “cluster strength” is in turn the state’s total share of traded employment in these strong clusters. • A positive trend in cluster strength is indicated by a state’s increasing national cluster share across these strong clusters. Leading Clusters: A listing of the state’s strong clusters is included. A state may have more than five strong clusters; the top five by employment size in the state are shown in this section.NGA 2011 – North Dakota– Rich Bryden 36 Copyright © 2011 Professor Michael E. Porter
  • Components of Regional Economies A state’s or region’s economy can be divided into traded clusters, local clusters, and natural endowment industries: Traded clusters include those industries that compete across regions, and which tend to concentrate in particular locations. Traded clusters are the engines of regional economic competitiveness. While they account for only about a third of employment, they achieve the highest wages and productivity levels and drive demand for localized businesses. Local clusters involve activities serving almost exclusively the local market. Local clusters are present in every region in roughly the same proportions. They employ the majority of people in any regional economy, so their efficiency is critical for competitiveness in traded clusters. However, they cannot prosper over the long run without success in the traded clusters. Natural Endowment-dependent industries concentrate at natural resource sites. They account for a small and declining share of national employment but can be relatively high wage. The Cluster Mapping Project data presented in this report focuses primarily on traded clusters, though it contains some information about other categories of industries. The performance of traded clusters holds the key to present and future competitiveness.Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business SchoolNGA 2011 – North Dakota– Rich Bryden 37 Copyright © 2011 Professor Michael E. Porter
  • Employment by Traded Cluster Within the broad category of traded clusters, a state’s economy can be divided into individual clusters. Clusters are geographically proximate groups of interconnected companies and associated institutions in a particular field, linked by commonalities and complementarities. Examples include automotive producers in Michigan and Ohio, information technology in Silicon Valley, and money management in Boston. The 41 traded clusters (and their 264 component subclusters) utilized in the Cluster Mapping Project were developed using statistical analysis of the actual patterns of business location in the U.S. economy. Clusters and subclusters are listed at the end of this appendix. Interpretation: This chart gives total employment in the state economy by each traded cluster. Employment by cluster gives a more detailed profile of the activities in the state economy that make up the job base. It can be used to understand the importance of the health of various groups or industries on the overall prosperity of the region. z Also shown on the chart are employment ranks for each cluster versus those in the 50 U.S. states plus D.C. Ranks above the region’s overall share of national employment are an indication of cluster specialization in the state and are highlighted on the chart.Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business SchoolNGA 2011 – North Dakota– Rich Bryden 38 Copyright © 2011 Professor Michael E. Porter
  • Specialization by Traded Cluster While other charts in this report focus on absolute employment and changes in employment, the Specialization chart shows the region’s competitive position by traded cluster. The size of each cluster “bubble” is proportional to the number of jobs in the region. The location of each cluster bubble on the chart identifies a cluster’s relative performance in the US economy: • Clusters on the top half of the chart have local employment levels that are more than proportionate to the region’s overall employment. These are clusters in which the region is relatively specialized. • Clusters on the right half of the chart are growing employment at a faster rate than the national average for those clusters. These are clusters in which the region is gaining position in terms of relative employment. The region’ share of cluster employment Strong and growing relative to its size position Cluster is growing faster than the US average When present, a gray shaded area on the chart indicates that further detail is available on a second version of the chart immediately following the current page.Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business SchoolNGA 2011 – North Dakota– Rich Bryden 39 Copyright © 2011 Professor Michael E. Porter
  • Specialization by Subcluster The specialization by subcluster chart is interpreted similarly to the specialization chart for all traded clusters. Additional insight on particular cluster strengths and trends in cluster composition can be observed. Please note that only one or a few subcluster charts were included in this report. Specialization charts and other data for all subclusters are available online at the Cluster Mapping Project reached from www.isc.hbs.edu. High share of national employment relative to average for Strongest Strong and growing the cluster and fastest position growing positions Subcluster is growing faster than average for the clusterNGA 2011 – North Dakota– Rich Bryden 40 Copyright © 2011 Professor Michael E. Porter
  • Job Creation by Traded Cluster This chart shows the overall net change in traded jobs in the state over the period from 1998 to 2008 and the net gain or loss by traded cluster. The clusters are arranged in order of net jobs created. The blue bars provide benchmarks for job creation based upon rates of growth in the cluster throughout the U.S. Interpretation: This chart allows a state to identify its biggest job generators and job losers among traded clusters over the last decade. A few clusters often account for a large majority of the overall employment gain. Clusters with job losses are a cause for concern. It is helpful to compare job performance with the policy priorities a region has set. Comparison of job growth relative to the U.S. benchmarks provides insights into the strengths and weaknesses in the region’s economy and shifts in the region’s competitive position. A region might not be participating in a cluster which is surging nation-wide; or a region might be gaining market position in an important cluster.Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business SchoolNGA 2011 – North Dakota– Rich Bryden 41 Copyright © 2011 Professor Michael E. Porter
  • Wages by Traded Cluster The state’s clusters are listed in order by average wage. The yellow bars show the benchmark average wage for the cluster nationally. The average wage across all traded clusters in the region is indicated by the green dashed line. Wages are a direct measure of a cluster’s productivity and competitiveness. Clusters that are exceptionally productive (the value of output produced per unit of labor) can sustain higher wages. Note: The wages for some clusters may not be reported due to data suppression in the underlying government reports. When few employers in an industry are present in a given region, wage and precise employment figures are omitted to protect the confidentiality of the data. Benchmark lines provide a comparison to wages in the cluster across the U.S.Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business SchoolNGA 2011 – North Dakota– Rich Bryden 42 Copyright © 2011 Professor Michael E. Porter
  • Employment in Highest Wage Clusters The ten highest wage traded clusters in the state are shown in decreasing order, with the width of the columns proportional to the number of workers in each cluster. The area of each cluster is thus equivalent to the overall wage sum the cluster generated in the state. The chart displays how the average wage in the state’s traded clusters is built up by highest wage clusters. Some high wage clusters may have a small impact on overall wage levels because of their small size, the case in some high wage clusters. Some large, high wage clusters are often those in services. The comparison to the U.S. average wages by cluster (on the previous chart) gives an initial benchmark to evaluate the composition of average wages in the state economy. States can increase wages in two different ways: (1) increase the employment in high wage clusters relative to low wage clusters and/or (2) increase the state’s relative wages in given clusters. In practice, the second effect dominates as the explanation for why state wages differ.NGA 2011 – North Dakota– Rich Bryden 43 Copyright © 2011 Professor Michael E. Porter
  • Cluster Portfolio Cluster Linkages Our research on clusters, in addition to deriving a model of 41 distinct traded clusters, provides a measure for the the strength of the links between these traded clusters. The strength of these links is summarized visually in the portfolio diagram below by the relative positioning and overlapping of cluster circles. Location Quotient (LQ) The Location Quotient is a ratio measure of the concentration of a cluster in a state relative to that state’s average share of employment in the U.S. traded economy. So, LQ is a measure of a clusters level of concentration within a state, with an LQ > 1 indicating higher than average concentration in that state. Interpretation Using Location Quotient as the measure of cluster concentration in the state, we overlay the state’s cluster portfolio on the model of cluster linkages with three color levels as below. The pattern of a state’s portfolio relative to the cluster linkages will often indicate paths of opportunity for development in clusters.Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business SchoolNGA 2011 – North Dakota– Rich Bryden 44 Copyright © 2011 Professor Michael E. Porter
  • Top Subclusters by National Employment Share This chart selects the sub-clusters in the region with the highest National Employment Shares. The subclusters are grouped by cluster and ordered by subcluster National Employment Share. Sub-clusters with a high share of national employment may form the basis for developing a competitive position in a cluster. Strengths in a breadth of related sub-clusters are an indication of an established position in a cluster.Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business SchoolNGA 2011 – North Dakota– Rich Bryden 45 Copyright © 2011 Professor Michael E. Porter
  • Defining the by Organization Patents Appropriate Region Massachusetts in BEA Economic Areas This table lists by organization the top patent recipients in the region for the most recent five-year period. Patents are assigned to regions according to the inventor’s address of residence. In the case of multiple inventors from different locations, the patent is assigned fractionally to each region. Universities and research institutes are highlighted in blue and government agencies in green. Interpretation: Patenting is the best single measure of innovation output. States and regions with a healthy level of innovation tend to have patents originating from a variety of corporations across a number of fields as well as significant patenting from universities and research institutes. Concerns about innovative capacity arise when the patenting rate is low, patents originate principally from a government agency, or patenting is dominated by only a few large firms.Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business SchoolNGA 2011 – North Dakota– Rich Bryden 46 Copyright © 2011 Professor Michael E. Porter
  • A Note on Regions The political boundaries of a state often encompass many distinct regional economies or portions of larger regional economies. A comprehensive approach to economic development should reflect both the distinct economies within a state as well as the often strong linkages to economies in neighboring states. The map on the following page shows the intersection of the state with the Economic Areas defined by the U.S. Bureau of Economic Analysis (BEA.) We find that the Economic Areas are a very meaningful unit of geography for exploring the specialization and linkages in the U.S. economy. BEAs 179 economic areas cover the entire U.S. and define the relevant regional markets surrounding metropolitan or micropolitan statistical areas. They consist of one or more economic nodes - metropolitan or micropolitan statistical areas that serve as regional centers of economic activity - and the surrounding counties that are economically related to the nodes. Please note that while this report has focused exclusively on the state, the website of the Cluster Mapping Project reached from www.isc.hbs.edu provides similar data and analyses for all Economic Areas (and Metropolitan Areas) in the U.S.Note: There are 177 Economic Areas in the continental U.S. and one each for Alaska and Hawaii.NGA 2011 – North Dakota– Rich Bryden 47 Copyright © 2011 Professor Michael E. Porter
  • Defining the Appropriate Region North Dakota in BEA Economic Areas Grand Forks, ND-MN Minot, ND Billings, MT Fargo-Wahpeton, ND-MN Aberdeen, SD Bismarck, NDSource: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director.Data from Bureau of Economic Analysis 2010.NGA 2011 – North Dakota– Rich Bryden 48 Copyright © 2011 Professor Michael E. Porter
  • Traded Clusters and Subclusters in the US Economy A ero space Engines Chemical P ro ducts Furniture M etal M anufacturing P ro cessed Fo o d Aircraf t Engines Int ermediat e Chemicals and Gases Furnit ure Fabricat ed Met al Product s Milk and Frozen Dessert s Precision Met al Product s Packaged Chemical Product s Wood Mat erials and Product s Met al Alloys Baked Packaged Foods Ot her Processed Chemicals Furnishings Primary Met al Product s Cof f ee A ero space Vehicles and Defense Ref ract ories Tableware and Kit chenware Precision Met al Product s Processed Dairy and Relat ed Product s Aircraf t Leat her Tanning and Finishing Fast eners Meat and Relat ed Product s and Services Missiles and Space Vehicles Ammunit ion Heavy Co nstructio n Services Wire and Springs Flour Def ense Equipment Special Packaging Final Const ruct ion Met al Processing Specialt y Foods and Ingredient s Treat ed Garment s Subcont ract ors Iron and St eel Mills and Foundries Milling A gricultural P ro ducts Primary Const ruct ion Mat erials Nonf errous Mills and Foundries Candy and Chocolat e Farm Management and Relat ed Services Co mmunicatio ns Equipment CeramicTile Met al Furnit ure Malt Beverages Soil Preparat ion Services Communicat ions Equipment Equipment Dist ribut ion and Wholesaling Environment al Cont rols Paper Cont ainers and Boxes Irrigat ion Syst ems Elect rical and Elect ronic Component s Fabricat ed Met al St ruct ures and Piping Pumps Met al and Glass Cont ainers Packaging Specialt y Of f ice Machines Explosives Saw Blades and Handsaws Food Product s Machinery Fert ilizers General Indust rial Machinery Agricult ural Product s Co nstructio n M aterials Heavy M achinery Laundry and Cleaning Equipment P ro ductio n Techno lo gy Wine and Brandy Tile, Brick and Glass Const ruct ion Machinery Met al Armament s Machine Tools and Accessories Cigars Plumbing Fixt ures Farm Machinery Process Equipment Sub-syst ems and Component s Milling and Ref ining Wood Product s Railroad Equipment and Rent al M o to r Driven P ro ducts Hoist s and Cranes Cut and Crushed St one Mining Machinery Mot ors and Generat ors Process Machinery A nalytical Instruments Gum and Wood Chemicals Machinery Component s Bat t eries Indust rial Pat t erns Laborat ory Inst rument s Rubber Product s Valves and Pipe Fit t ings Mot orized Equipment Fabricat ed Plat e Work Opt ical Inst rument s Ref rigerat ion and Heat ing Equipment Indust rial Trucks and Tract ors Process Inst rument s Distributio n Services Ho spitality and To urism Appliances Ball and Roller Bearings Search and Navigat ion Equipment Merchandise Wholesaling Tourism At t ract ions Specialized Pumps Elect ronic Component s Apparel and Accessories Wholesaling Tourism Relat ed Services Specialized Machinery P ublishing and P rinting Cat alog and Mail-order Wat er Passenger Transport at ion Tires and Inner Tubes Publishing A pparel Food Product s Wholesaling Accommodat ions and Relat ed Services News Syndicat es Mens Clot hing Farm Mat erial and Supplies Wholesaling Boat Relat ed Services Oil and Gas P ro ducts and Services Signs and Advert ising Specialt ies Womens and Childrens Clot hing Transport at ion Vehicle and Equipment Dist ribut ion Ground Transport at ion Oil and Gas Machinery Phot ographic Services Hosiery and Ot her Garment s Hydrocarbons Phot ographic Equipment and Supplies Accessories Educatio n and Kno wledge Creatio n Info rmatio n Techno lo gy Oil and Gas Explorat ion and Drilling Radio, TV, Publisher Represent at ives Knit t ing and Finishing Mills Educat ional Inst it ut ions Comput ers Oil Pipelines Print ing Services Research Organizat ions Elect ronic Component s and Assemblies Pet roleum Processing Print ing Input s A uto mo tive Educat ional Facilit ies Peripherals Oil and Gas Trading Paper Product s Mot or Vehicles Pat ent Owners and Lessors Sof t ware Wat er Freight Transport at ion Services Specialt y Paper Product s Aut omot ive Part s Supplies Communicat ions Services Inked Paper and Ribbons Aut omot ive Component s P lastics Of f ice Equipment and Supplies Forgings and St ampings Entertainment Jewelry and P recio us M etals Plast ic Mat erials and Resins Flat Glass Video Product ion and Dist ribut ion Jewelry and Precious Met al Product s Plast ic Product s Spo rting, Recreatio nal and Childrens Go o ds Product ion Equipment Recorded Product s Cost ume jewelry Paint s and Allied Product s Sport ing and At hlet ic Goods Small Vehicles and Trailers Ent ert ainment Equipment Cut lery Synt het ic Rubber Games, Toys, and Childrens Vehicles Ent ert ainment Relat ed Services Collect ibles Mot orcycles and Bicycles B io pharmaceuticals Ent ert ainment Venues P o wer Generatio n and Transmissio n Biopharmaceut ical Product s Leather and Related P ro ducts Elect ric Services Textiles Healt h and Beaut y Product s Financial Services Leat her product s Turbines and Turbine Generat ors Fabric Mills Cont ainers Deposit ory Inst it ut ions Fur Goods Transf ormers Specialt y Fabric Mills Securit ies Brokers, Dealers and Exchanges Coat ed Fabrics Porcelain, Carbon and Graphit e Component s Specialt y Fabric Processing B uilding Fixtures, Equipment and Services Insurance Product s Relat ed Product s Elect ronic Capacit ors Text ile Machinery Plumbing Product s Healt h Plans Accessories Yarn and Thread Mills Drapery Hardware Risk Capit al Providers P refabricated Enclo sures Carpet s and Rugs Fabricat ed Mat erials Invest ment Funds Lighting and Electrical Equipment Recreat ional Vehicles and Part s Wool Mills Heat ing and Light ing Real Est at e Invest ment Trust s Light ing Fixt ures Mobile Homes Fibers Furnit ure and Fit t ings Passenger Car Leasing Elect ric Lamps Trucks and Trailers Finishing Plant s Clay and Vit reous Product s Bat t eries Casket s Specialt y Apparel Component s Floor Coverings Fishing and Fishing P ro ducts Swit chgear Elevat ors and Moving St airways Womens and Childrens Underwear St eam and Air-condit ioning Fish Product s Elect rical Part s Of f ice Furnit ure Tire Cord and Fabrics St one and Tile Work Fishing and Hunt ing Met al Part s Household Ref rigerat ors and Freezers Wood Cabinet s, Fixt ures and Ot her Product s Processed Seaf oods Aluminum Processing To bacco Concret e, Gypsum and Ot her Building Product s M edical Devices Cigaret t es Fo o twear Surgical Inst rument s and Supplies Ot her Tobacco Product s B usiness Services Foot wear Dent al Inst rument s and Supplies Tobacco Processing Management Consult ing Specialt y Foot wear Opht halmic Goods Specialt y Packaging Online Inf ormat ion Services Foot wear Part s Medical Equipment Comput er Services Diagnost ic Subst ances Transpo rtatio n and Lo gistics Comput er Programming Fo rest P ro ducts Biological Product s Air Transport at ion Phot ocopying Paper Product s Bus Transport at ion Market ing Relat ed Services Paper Mills Marine Transport at ion Prof essional Organizat ions and Services Paper Indust ries Machinery Ship Building Engineering Services Pref abricat ed Wood Buildings Transport at ion Arrangement and Warehousing Laundry Services Wood Part it ions and Fixt ures Trucking Terminal Facilit ies Support Services Airport s Bus TerminalsSee http://www.isc.hbs.edu/cmp/help.html for Excel listing.Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business SchoolNGA 2011 – North Dakota– Rich Bryden 49 Copyright © 2011 Professor Michael E. Porter
  • About This Report This report was prepared in conjunction with Prof. Michael E. Porter’s presentation before the National Governors Association Winter Meeting on February 26, 2011. It draws on data and analysis from the Cluster Mapping Project and other sources at the Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director. Additional information may be found at the website of the Institute for Strategy and Competitiveness, www.isc.hbs.edu. None of this information may be duplicated, disseminated or copied without express written consent from the Institute for Strategy and Competitiveness. This report is available electronically at http://www.isc.hbs.edu/stateprofiles.htm.NGA 2011 – North Dakota– Rich Bryden 50 Copyright © 2011 Professor Michael E. Porter