Texas Competitiveness: State and Cluster Economic Performance

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

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Texas Competitiveness: State and Cluster Economic Performance

  1. 1. Texas Competitiveness: State and Cluster Economic Performance Prepared for Governor Rick Perry Professor Michael E. Porter National Governors Association Winter Meeting February 26, 2011NGA 2011 – Texas– Rich Bryden 1 Copyright © 2011 Professor Michael E. Porter
  2. 2. Texas Performance Snapshot Position Trend Prosperity Productivity Labor Mobilization Top quintile Innovation 2nd quintile 3rd quintile 4th quintile Cluster Strength Lowest quintile • Business Services • Oil and Gas Products and Services Leading Clusters • Heavy Construction Services • Transportation and Logistics • FootwearNGA 2011 – Texas– Rich Bryden 2 Copyright © 2011 Professor Michael E. Porter
  3. 3. State Comparative PerformanceNGA 2011 – Texas– Rich Bryden 3 Copyright © 2011 Professor Michael E. Porter
  4. 4. Texas Competitiveness Overall Economic Performance Indicators Prosperity Cluster Gross State Product per capita, 2009 Share of State Traded Employment in Strong Clusters, 2008 • In Texas: $46,189 Rank: 23 • In Texas: 45.1% Rank: 14 • In the US: $46,093 • In the US: 41.8% • State difference to US: 0.2% Change in Share of National Employment in Strong Clusters, 1998-2008 Growth in Gross State Product per capita, real annual rate, 1999-2009 • In Texas: 1.52% Rank: 1 • In Texas: 0.43% Rank: 42 • In the US: -0.06% • In the US: 0.86% Share of Employment in Traded Clusters, 1998-2008 • In Texas: 28.0% Rank: 25 • 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 Texas: $95,024 Rank: 17 • In Texas: -0.3% Rank: 10 • In the US: $92,382 • In the US: -2.2% • State difference to US: 2.9% Labor Mobilization Growth in Gross State Product per labor force participant*, 1999-2009 • In Texas: 0.80% Rank: 38 Population, 2009 • In the US: 1.09% • In Texas: 24,782,604 Rank: 2 • % of US: 8.07% Average private wage, 2008 • In Texas: $42,753 Rank: 15 Population growth, annual rate, 1999-2009 • In the US: $42,435 • In Texas: 1.89% Rank: 6 • State difference to US: 0.8% • In the US: 0.96% Private wage Growth, annual rate, 1998-2008 Labor Force Participation, 2009 • In Texas: 3.51% Rank: 17 • In Texas: 65.8 Rank: 26 • In the US: 3.32% • In the US: 65.4 Employment, 2010 (December) • In Texas: 11,202,388 Rank: 2 Innovation Output • % of US: 8.04% Patents Per 10,000 Employees, 2009 • In Texas: 6.43 Rank: 17 Employment growth, annual rate, 2000-2010 (December) • In the US: 6.83 • In Texas: 1.15% Rank: 3 • In the US: 0.11% Growth in total patents, annual rate, 1998-2009 • In Texas: 0.57% Rank: 14 Unemployment, 2010 (December) • In the US: 0.23% • In Texas: 8.3% Rank: 23 • In the US: 9.4% Traded establishment formation, annual growth rate, 1998-2008 • In Texas: 2.29% Rank: 13 Change in Unemployment, 2000-2010 (December) • In the US: 1.79% • In Texas: 4.1% Rank: 22 • In the US: 5.5%NGA 2011 – Texas– Rich Bryden 4 Copyright © 2011 Professor Michael E. Porter
  5. 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 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 – Texas– Rich Bryden 5 Copyright © 2011 Professor Michael E. Porter
  6. 6. Near Term State Prosperity Performance U.S. States, 2007 to 2009 $70,000 High but declining versus U.S. Wyoming Delaware High and rising Alaska prosperity versus U.S. $65,000 Connecticut 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 – Texas– Rich Bryden 6 Copyright © 2011 Professor Michael E. Porter
  7. 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 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 – Texas– Rich Bryden 7 Copyright © 2011 Professor Michael E. Porter
  8. 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 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 – Texas– Rich Bryden 8 Copyright © 2011 Professor Michael E. Porter
  9. 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 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 Texas Illinois Colorado U.S. GDP per Labor Force 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 – Texas– Rich Bryden 9 Copyright © 2011 Professor Michael E. Porter
  10. 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 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 North South Dakota Vermont Dakota Alaska 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 – Texas– Rich Bryden 10 Copyright © 2011 Professor Michael E. Porter
  11. 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 IllinoisNumber 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 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 StatisticsNGA 2011 – Texas– Rich Bryden 11 Copyright © 2011 Professor Michael E. Porter
  12. 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 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 – Texas– Rich Bryden 12 Copyright © 2011 Professor Michael E. Porter
  13. 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 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 Idaho Arizona Missouri Illinois Unemployment Rate: 9.4% Indiana Tennessee West Virginia Ohio North Carolina Georgia Mississippi Oregon Kentucky % 11.0 South Carolina New Jersey 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 – Texas– Rich Bryden 13 Copyright © 2011 Professor Michael E. Porter
  14. 14. 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 North Carolina 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 – Texas– Rich Bryden 14 Copyright © 2011 Professor Michael E. Porter
  15. 15. Texas Patents by Organization Patents Patents Rank Organization Rank Organization 2005-2009 2005-2009 International Business Machines 1 Corporation 2225 25 Stmicroelectronics, Inc. 102 2 Texas Instruments, Incorporated 2089 27 Fina Technology, Inc. 99 Hewlett-Packard Development Company, 3 L.P. 720 28 Raytheon Company 98 4 Freescale Semiconductor, Inc. 572 29 Micron Technology, Inc. 88 5 Dell Products, L.P. 555 30 Motorola, Inc. 82 6 Schlumberger Technology Corporation 487 31 William Marsh Rice University 80 7 Baker Hughes Incorporated 453 31 Ip First Llc 80 8 Halliburton Energy Services, Inc. 425 33 Finisar Corporation 78 9 Advanced Micro Devices, Inc. 415 34 Fujitsu Limited 76 10 Exxonmobil Chemical Patents Inc. 344 34 Texas A And M University 76 11 University Of Texas 317 34 Sigmatel Inc. 76 12 Shell Oil Company 273 37 Dow Global Technologies Inc. 72 13 Silicon Laboratories Inc. 212 38 Sun Microsystems, Inc. 67 14 Weatherford/Lamb, Inc. 193 39 Exxonmobil Upstream Research Company 66 15 National Instruments Corporation 192 39 Alcon, Inc. 66 16 Cisco Technology, Inc. 184 41 Fisher-Rosemount Systems, Inc. 63 17 Cirrus Logic, Inc. 159 42 Sbc Technology Resources, Inc. 61 18 Nokia Corporation 156 42 Varco I/P, Inc. 61 19 Nortel Networks Limited 154 44 Molecular Imprints, Inc. 60 20 Intel Corporation 138 45 Bj Services Co 58 21 Smith International Inc. 120 45 Frito-Lay North America, Inc. 58 22 Southwest Research Institute 119 47 National Semiconductor Corporation 53 23 3M Innovative Properties Company 115 48 Alcatel 52 24 Lockheed Martin Corporation 104 48 Catalytic Distillation Technologies 52 25 Samsung Electronics Co., Ltd. 102 48 Alcatel Lucent 52 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.NGA 2011 – Texas– Rich Bryden 15 Copyright © 2011 Professor Michael E. Porter
  16. 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 – Texas– Rich Bryden 16 Copyright © 2011 Professor Michael E. Porter
  17. 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 – Texas– Rich Bryden 17 Copyright © 2011 Professor Michael E. Porter
  18. 18. Composition of the Texas Economy and Cluster PerformanceNGA 2011 – Texas– Rich Bryden 18 Copyright © 2011 Professor Michael E. Porter
  19. 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 inCluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School (2008) the U.S.NGA 2011 – Texas– Rich Bryden 19 Copyright © 2011 Professor Michael E. Porter
  20. 20. Overall Composition of the Texas Economy, 2008 80% 70% TX US 71.6% 71.7%Private Employment 60% 50% 40%Percent of Total 30% TX US 20% 28.1% 27.4% 10% TX US 0.4% 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 – Texas– Rich Bryden 20 Copyright © 2011 Professor Michael E. Porter
  21. 21. Composition of the Texas Economy Employment by Traded Cluster, 2008 Rank in US Business Services 2 490,110 Oil and Gas Products and Services 1 240,513 Heavy Construction Services 1 224,829 Transportation and Logistics 2 209,341 Distribution Services 2 162,622 Financial Services 3 160,932 Hospitality and Tourism 3 153,741 Education and Know ledge Creation 6 118,008 Information Technology 2 89,842 Processed Food 3 82,950 Metal Manufacturing 7 65,989 Plastics 2 53,019 Publishing and Printing 4 49,261 Chemical Products 1 45,390 Entertainment 4 45,338 Building Fixtures, Equipment and Services 2 44,075 Aerospace Vehicles and Defense 3 42,239 Analytical Instruments 2 40,021 Production Technology 4 36,953 Automotive 12 30,220 Heavy Machinery 5 19,552 Motor Driven Products 3 17,518 Agricultural Products 3 16,369 Construction Materials 1 15,354 Communications Equipment 2 15,105 Medical Devices 9 15,038 Prefabricated Enclosures 2 14,467 Pow er Generation and Transmission 4 11,969 Forest Products 12 10,842 Lighting and Electrical Equipment 6 10,044 Biopharmaceuticals 9 9,748 Furniture 7 9,541 Leather and Related Products 3 7,306 Jew elry and Precious Metals 4 7,274 Textiles 9 6,878 Apparel 9 4,213 Aerospace Engines 9 2,941 Footw ear 1 2,707 Texas overall employment rank = 2Sporting, Recreational and Childrens Goods 8 2,613 Fishing and Fishing Products 7 1,573 Tobacco 9 495 0 100,000 200,000 300,000 400,000 500,000 600,000 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 – Texas– Rich Bryden 21 Copyright © 2011 Professor Michael E. Porter
  22. 22. Composition of the Texas Economy Specialization by Traded Cluster, 1998 to 2008 14.0% Heavy Construction Services Chemical Oil and Gas Footwear Products Products and Services Transportation (+11.6%, 21.3%) (+5.17%, 42.0%) 12.0% and LogisticsTexas’s national employment share, 2008 Aerospace Business Vehicles and Information Services Defense 10.0% Technology Distribution Construction Services Materials Jewelry and Analytical Precious Metals Plastics 8.0% Instruments Texas Overall Share of US Traded Employment: 7.82% Communication Production Equipment 6.0% Technology Metal Manufacturing 4.0% Medical Devices Apparel Employment Overall change in 1998-2008 2.0% the Texas Share of US Traded Added Jobs Employment: +1.12% Lost Jobs 0.0% -3.5% -2.5% -1.5% -0.5% 0.5% 1.5% 2.5% 3.5% Change in Texas share of National Employment, 1998 to 2008 Employees 85,000 =Source: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director.NGA 2011 – Texas– Rich Bryden 22 Copyright © 2011 Professor Michael E. Porter

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