1. Date of Meeting: June 19, 2008
# 3
ECONOMIC DEVELOPMENT COMMITTEE
ACTION ITEM
SUBJECT: Industry Cluster Focus for Economic Development
ELECTION DISTRICT: Countywide
CRITICAL ACTION DATE: At the pleasure of the Board
RECOMMENDATIONS:
Staff: Recommends a position be dedicated to each of these industries: Federal/Government
Contracting Overlay, Information and Communication Technology (ICT) Cluster, and 50% of a
position to the International Overlay. Also commit $150,000 for contractor services, collateral
development and staff related travel associated with the International Program and $100,000 for
industry research analysis and cluster support services (refer to table on page A-10 of Attachment I.)
BACKGROUND:
During the FY 09 budget process, the Board of Supervisors appropriated $340,000 for industry
cluster development. Of this amount, $90,000 from General Fund revenues is to be used to hire one
cluster development manager, and $250,000 from Restricted TOT revenues is to be used for an
International Economic Development program and/or for other key industry clusters. For the latter
amount, the level of increased staff /contractors needs to be determined.
At the May 8, 2008, Economic Development Committee meeting, the Department of Economic
Development presented an overview of the international program area and five clusters that had
been identified as the core focus of suburban economic development for Board consideration. The
committee requested that Staff bring an Action Item to the June Economic Development Committee
meeting that included additional data and information about each of the clusters and program areas,
decision criteria for selecting clusters and programs, and solicit input from the brokerage community
for their recommendations.
The Department of Economic Development has completed a high-level cluster analysis and
additional research to support their recommendations for cluster strategies and programming for
FY09. The attached white paper, “Cluster Analysis, Strategy, and Development White Paper,”
(Attachment I) provides a general overview of the value of employing a cluster strategy for
economic development, summarizes the analysis for each cluster and program overlay, lists site
selection criteria used by companies when choosing a location for their company, discusses
specialized industry sectors and emerging clusters for consideration, and provides recommendations.
Staff was asked to address the total square footage and economic impact of Loudoun’s existing
clusters. Ben Mays, Management & Financial Services, will be present at the committee meeting to
discuss this request for information. Additionally, the Committee asked for comparative information

2. June 19, 2008
Economic Development Clusters
Page 2
on other jurisdiction’s efforts at attracting clusters and business growth. Although this information is
difficult to fully capture, staff will be prepared to provide information at the meeting.
ISSUES:
Initiating a successful cluster development strategy and international program requires a sustained
focus and funding over a number of years to achieve results. Return on investment is difficult to
predict initially, as it depends on many factors outside of the County’s control. Based on contacts
with other jurisdictions who have invested in long-term international programs, staff estimates that
results, in the form of new business growth from abroad, will take 3-5 years depending on business
conditions; results from domestic cluster development/national marketing are expected to show
tangible results in three years. Having said that, performance measures/indicators will be established
with the Economic Development Committee to demonstrate the level of effort expended and how
well the program is progressing.
Based on the Board’s discussions during budget worksessions, the Committee needs to prioritize and
recommend to the full Board the clusters/areas where the Department of Economic Development
will focus its resources given the funding allocated for FY 09. Following the recommendation by the
Committee, Staff will prepare an action item for a July business meeting of the full Board of
Supervisors. Additionally, Staff will prepare an action item for the July Economic Development
Committee that will outline performance measures for each of the targeted suburban cluster
programs and overlay programs.
FISCAL IMPACT:
The Board needs to approve the cluster focus and staffing/contractor level and create any positions
to support this use. These funds have been dedicated as part of the FY09 budget discussion. It is
expected that those efforts funded through Restricted TOT revenues will continue to be funded from
the same source in future fiscal years.
ALTERNATIVES:
1. The Board may choose to focus on alternative clusters or utilize the funds in a different
manner.
2. The Board may take no action.
DRAFT MOTIONS:
1. I move that the Economic Development Committee forward the staff recommendations to the
Board of Supervisor’s for approval.
OR
2. I move an alternative motion.

3. June 19, 2008
Economic Development Clusters
Page 3
ATTACHMENTS:
1. Cluster Analysis, Strategy, and Development White Paper
2. Industry Sector Code Listings for Each Cluster
3. Cluster and Overlay Summaries
4. Broker/Developer Answers to Questions
STAFF CONTACTS:
Larry Rosenstrauch, Department of Economic Development
Tricia Simons, Department of Economic Development
Robyn Bailey, Department of Economic Development

4. ATTACHMENT I
Industry Cluster Analysis, Strategy, and Development White Paper
Industry cluster is a broad concept rather than a precise term. A cluster consists of firms
and related economic actors and institutions that draw productive advantage from their
mutual proximity and connections.
“Cluster analysis is best viewed as a general mode of inquiry rather than a narrow
technical methodology in regional economic analysis. The perspective
emphasizes the value of cluster studies as starting points for open discussions
among public officials, business leaders, and the lay public about their values and
priorities for economic development.” (Edward Feser and Michael Luger)
“Too often economic development focuses on individual firms and specific events
(expansions, relocations, layoffs). Such approaches often miss the opportunity to
address the underlying causes of industry growth and development. The cluster
approach can help deepen the practice of economic development to build better
communications among the firms that make up the regional economy and to focus
public policy on those issues that are likely to have the greatest long-term effect
on growth.” (Joseph Cortright)
Why Businesses Choose to Cluster
One key to understanding clusters is to recognize that there are multiple dimensions to
cluster relationships, including geography, social networks, technology, and production
flows. Not all clusters operate in all dimensions. Clustering is about proximity; the
underlying rationale is that businesses that are closer to one another have advantages that
are unavailable to businesses that are farther away. There is no single cause of clustering,
and advantages likely vary over the life cycle of a cluster. Some factors are more
important to the establishment of a cluster, while others play a larger role in its growth.
Advantages that result from clustering include:
• Competition: Markets thrive on competition. Clusters, however, exhibit a type of
a competition that nonetheless enjoys certain economies of scale from sharing
local workforce, institutions, suppliers, and infrastructure. In a cluster, economies
of scale are achieved while preserving the distinctness of individual firms and
fueling competition as opposed to squelching it.
• Innovation: Competition necessitates innovation. Clusters facilitate innovation
by assembling brainpower from related industries in one place. Innovation is
especially enhanced with the presence of universities and research institutions, but
even without them, clusters have greater power to attract venture capital, R&D
investment, and public funding for research. Entrepreneurship, as well, thrives in
clusters as new opportunities are seen that lead to new businesses being formed.
Spin-off companies formed by innovative employees add to the competitive
environment or provide a pioneering approach to delivering the product.
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5. ATTACHMENT I
• Knowledge Spillovers: Strong social capital within clusters allows for
cooperation between firms and executives whenever such cooperation does not
interfere with competition. Further, cluster networks that result from the sharing
of labor as well as the social interactions that occur outside of business activities
result in an increased amount of information sharing in spite of competition. Such
knowledge spillovers accelerate the pace of, and need for, innovation and enhance
the overall productivity of the cluster.
• Shared Infrastructure, Institutions, and Suppliers: In addition to shared
talent, firms in a cluster also have equal access to local amenities such as utilities,
fiber, universities, and finance institutions. For workforce development, it is much
easier for universities to serve a cluster than an individual firm. Finance
institutions, which are especially familiar with cluster-specific activities, are
therefore more knowledgeable and efficient in allocating resources for enterprise
finance and start-up entrepreneurship. These resources can be allocated to new,
established, and emerging corporations.
• Talent Pool: Clusters allow companies to share a talent pool with industry-
specific skills. As a result, firms do not have to search far to find the proper skill
sets. Employees, as well, enjoy a degree of job security in knowing that if the
firm they work for no longer needs their skills, another firm in the region
probably will. Once the cluster develops a reputation outside the region, it enjoys
the ability to attract top talent, since potential employees, too, recognize the
benefits to labor resulting from cluster economics.
How Clusters Form and Grow
Clusters are fostered, not constructed. Most of the world’s successful clusters have
evolved through a favorable string of events, though strong roots were in place long
before the clusters formed and grew. The growth of the largest clusters has been driven
by market demand and entrepreneurial drive – offered through a supportive business
environment. Some clusters began as large companies that originally located in less-
populated areas to take advantage of low wages and surplus labor markets and that later
fostered spin-offs. Some regions have seeded clusters via recruitment and incentives,
usually in weak economies and typically at a high cost. No single sequence of events,
actions, or environmental and economic conditions fit all clusters.
What Companies Consider When Locating
Site selection includes many factors. There are general site selection criteria that many
businesses use when making a decision about where to locate. An annual survey is
conducted by Area Development magazine. The 2007 ranked results were published in
their March/April 2008 issue:
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6. ATTACHMENT I
Site Selection Factors, 2007
1
2
3
4
5
6
7
8
9
10
Highway accessibility
Labor costs
Energy availability and costs
Availability of skilled labor
Occupancy or construction costs
Available land
Corporate tax rate
State and local incentives
Environmental regulations
Tax Exemptions
Many clusters use criteria that overlap the list above, going beyond it with more cluster-
specific selection criteria. For example, government contractors value proximity to
customer, responsiveness in product development, and flexibility and lowest cost of
operation and product delivery. High-tech firms value a qualified workforce, company
image, proximity to universities with strong R&D, a pro-business environment, and
quality of life elements. Medical device companies in the Life Science cluster consider
availability of qualified workforce, cost of doing business, the regulatory environment,
and community attitude. International companies typically rank a pro-business
environment as their number one criterion which often excludes locations in states that do
not have right-to-work laws; however, other criteria include access to customer base,
suppliers, innovation, and direct flights to their country of origin.
Cluster Development
While there is no easy blueprint for successful cluster development, a carefully-tailored
public policy and strategic plans can greatly influence the success factors in nurturing and
growing clusters. This is where Loudoun government can play a strong role. General
guidelines for cluster strategies include:
• Organize service delivery to address cluster businesses’ needs collectively
• Target investments – in innovation, entrepreneurship, and recruitment – to
clusters
• Increase clusters’ networking and learning for competitive advantage
• Improve the workforce and its readiness for work in the cluster
Any of these strategies must be carried out with attentive consideration for how the
government can add value beyond the outcomes that markets and market actors produce
on their own. Many case studies suggest that clusters require a decade or more to develop
depth and a real competitive advantage. In an article from the Economic Development
Journal, Creating Economic Clusters, the authors state that, “Long-term” is an
important, but often overlooked, aspect of the cluster-building process; clusters exhibit
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7. ATTACHMENT I
“long gestation periods” of ten to fifteen years. Determining cluster strategies is
completely cluster-dependent, determined by the cluster’s stage of development, cluster
priorities, and market imperfections and preferences.
Cluster Analysis for Loudoun County
Methodology
The clusters were defined using standardized groupings of North American Industrial
Classification System (NAICS) codes. These groups include industries that are linked
together and have inter-industry relationships. A listing of all of the NAICS codes used to
build the data for each cluster is included in Attachment II.
Using generally defined criteria for identifying clusters allows for comparisons to and
analyses of other counties and regions, but there are disadvantages as well. The industry
classifications are self-reported by the companies. Companies may have multiple lines of
business but choose to report in only a certain category. This can result in firms that are
known to participate within a certain cluster not being included. The reverse is true as
well. Despite these limitations, this data is the best available.
Once the clusters were defined, the Department of Economic Development (DED)
analyzed five-year growth trends (2002-2007) of firms and employment in each cluster.
To understand the relative concentration, or strength, of each cluster, DED calculated the
location quotient (LQ). The LQ is a measurement commonly-used to indicate the extent
to which a certain geography (e.g. metro region or county) is more specialized in an
industry than the nation as a whole. The LQ is defined as the ratio of a particular
industry’s share of local employment to that same industry’s share of national
employment. An LQ of one (1.0) means that an industry represents the same share of the
local economy that it does of the national economy; higher values indicate a cluster is
relatively more concentrated in a geographic area than in the nation. A high LQ in a
group of related industries in a particular region suggests that a cluster exists.
Cluster Analysis Results
DED has summarized the quantitative analyses in a one-page format for each
cluster/overlay that was originally identified for the Board (Attachment III). The
summaries also include Loudoun’s major employers and prospect activity, a general
overview of the cluster, and current prospect activity in Loudoun.
• Aviation, Cargo, and Logistics - Loudoun is strongly specialized in Aviation,
Cargo, and Logistics, having a location quotient of nearly 3.0. The cluster is
anchored by Washington Dulles International Airport, one of the fastest-growing
airports, and the only large airport east of the Mississippi River with the capability
to add additional runways. This cluster was negatively impacted by the
bankruptcy of Independence Air and the closing of the United Airlines call center,
both in 2006. These dramatic changes are reflected in the employment drop of 15
A-4

8. ATTACHMENT I
percent between 2002 and 2007 in the Aircraft, Cargo and Logistics cluster.
Despite the current economic realities of high oil prices and other airline industry
issues, there are potential opportunities anticipated due to significant service
enhancements, particularly the addition of 145 new weekly flights to international
destinations in 2007 and the expectation of additional international service in the
future.
• Information and Communications Technologies - Loudoun is also strongly
specialized in Information and Communications Technologies (ICT), having a
location quotient of nearly 6.5 accompanied by a dramatic increase in
employment of nearly 170 percent between 2002 and 2007. ICT, while affected
negatively by the “dot-com bust,” continues as Loudoun’s strongest cluster. It is
anchored by local companies like AOL, Verizon Business, Neustar, and Verisign.
It is important to recognize that these large companies, and the others with over
100 employees, account for 57 percent of the employment in this cluster. Small
companies are also very important to the ICT cluster, generating over 40 percent
of the cluster employment. Since most large companies begin as a small, start-up
companies they tend to remain loyal to their home location as they grow. The
regional influence of the Dulles Corridor (and its comparison to the Silicon
Valley) enhances the strength and significance of this cluster.
• Life Science - The Life Science cluster exhibits signs of an embryonic cluster,
with strong employment growth (150 percent) and an increasing location quotient
(from 0.5 to 0.9 in the 5-year study period). Valuable assets located in the county
include: the Howard Hughes Medical Institute Janelia Farm Research Campus; an
active Science and Technology Cabinet; and a regional, cooperative marketing
collaborative – the Northern Virginia Life Sciences Communities (including
Loudoun, Fairfax, Prince William and Arlington counties, as well as George
Mason University). The life science market is very competitive. Additional assets
could enhance Loudoun’s competitiveness in this cluster.
Surprisingly, the Aerospace cluster, defined using national cluster definitions for
aerospace, was represented by only two small companies. The “anchor” for this cluster,
Orbital Sciences Corporation, as well as other companies in the cluster, classified
themselves in the Information Sector versus Manufacturing. Therefore, an analysis was
not completed on the Aerospace sector; however, a majority of these companies are
accounted for in the ICT cluster and/or the Federal and Government Contractor overlay,
discussed next.
For this analysis, staff considered Federal and Government Contractors (FGC) and
International programming as overlays versus clusters because each of these categories is
comprised of a cross-section of businesses from varied clusters.
• Federal and Government Contractors - FGC includes all of the clusters
examined, as well as international companies. Both the number of contracts
awarded to companies in Loudoun and the overall total value of these contracts
A-5

9. ATTACHMENT I
have increased substantially between 2000 and 2007. It is worth noting that
beginning in 2002, two contractors that appear to provide war-related transport
services (the specific nature of which remains unconfirmed) have been awarded
contracts in excess of $4.7B through 2006. Recently there has been an increase in
contractors locating in Loudoun primarily because of available space.
• International – Staff based the International analysis on the 28 known foreign-
owned companies that report data to the Virginia Employment Commission.
European companies dominate the representation of international companies in
Loudoun County, with a majority of those European companies being German.
The 28 companies analyzed in Loudoun are predominantly in the Transportation
& Warehousing and the Wholesale Trade sectors. Nine international companies in
Loudoun were awarded contracts by the U.S. government; the nearly 200
contracts in total are valued at over $58 million.
Education has not been addressed as a cluster or an overlay. It is more appropriately
categorized as an asset. Many clusters are centered around a university because of the
innovation and entrepreneurship advantages it can provide to each cluster. While there
are many institutions of higher learning in the Washington, D.C. region, including some
with campuses in Loudoun, relationships beneficial for cluster growth are not well
established. As discussed earlier, it is essential to understand the relationships and
necessary assets for individual clusters to grow and prosper. With the current interest in
bringing a university to Loudoun, it may be advantageous to integrate this development
with cluster strategies to ensure the university asset could be leveraged by one or multiple
clusters.
Other Specialized Industry Sectors
The clusters and overlays analyzed in this report were originally identified by anecdotal
and quantitative information as well as expert judgment and familiarity. DED reviewed
all industry sectors with activity in Loudoun and Northern Virginia at the most detailed 6-
digit NAICS code level. Using only location quotients (LQ) for this cursory review,
industries with exceptionally high LQs were identified to determine if they fit in clusters
that should be considered in the development strategy. Significant Loudoun sectors with
exceptionally high LQ include:
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10. ATTACHMENT I
NIACS Description
2007
LQ
541360 Geophysical Surveying and Mapping Services 9.4
541890 Other Services Related to Advertising 9.0
332323 Ornamental and Architectural Metal Work Manufacturing 7.2
541618 Other Management Consulting Services 6.5
561730 Landscaping Services 5.5
115210 Support Activities for Animal Production 5.2
327991 Cut Stone and Stone Product Manufacturing 4.6
524292
Third Party Administration of Insurance and Pension
Funds 4.2
541860 Direct Mail Advertising 3.4
611620 Sports and Recreation Instruction 3.2
237120 Oil and Gas Pipeline and Related Structures Construction 3.0
561790 Other Services to Buildings and Dwellings 2.7
522291 Consumer Lending 2.6
541330 Engineering Services 2.4
541620 Environmental Consulting Services 2.3
312130 Wineries 2.1
Northern Virginia sectors with high LQs included:
NIACS Description 2007 LQ
522294 Secondary Market Financing 41.0
813920 Professional Organizations 9.8
212313 Crushed and Broken Granite Mining and Quarrying 9.1
541611
Administrative Management and General Management Consulting
Services 8.2
813910 Business Associations 7.2
541618 Other Management Consulting Services 6.2
611430 Professional and Management Development Training 5.9
712120 Historical Sites 5.5
561210 Facilities Support Services 5.2
236117 New Housing Operative Builders 4.7
541720 Research and Development in the Social Sciences and Humanities 4.3
611420 Computer Training 4.3
541330 Engineering Services 4.0
541620 Environmental Consulting Services 4.0
The brief analysis described above was considered along with a study conducted in 2005
by the Virginia Economic Development Partnership and the Virginia Community College
System. They completed an extensive Industry and Occupational Cluster Analysis for the
Northern Virginia region.
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11. ATTACHMENT I
Based on their findings, the state agencies recommended these industry clusters as
potential targets:
• Communication, Publishing, and Broadcasting
• Entertainment
• Electronics Equipment and Instruments Manufacturing
• Finance and Insurance
• Health Care
• Information Technology & Professional Services
• Machinery & Equipment Manufacturing
• Medical Related Products Manufacturing
• Wood Products & Furniture Manufacturing
While there are other industry sectors in Loudoun and Northern Virginia that are
identified as having high LQs, many are in sectors that are driven by population growth,
may not have high wages, or are industries that may not benefit as much from a cluster
focus.
Emerging Clusters
In an age where new industries are rapidly forming, new clusters and cross-cluster
“overlays” continue to emerge across the United States and the world. All of them signal
a new wave of innovation and may redefine some economic development landscapes of
the future. Before launching into new clusters, it is important to recognize that there is
general agreement in the academic community that it is difficult, if not impossible, to
intentionally create industry clusters where they do not already exist. Although public
policies have served as a mechanism for growth, it is just as likely that it was inadvertent
as much as intentional. The best role for public policy in “creating” a cluster is to
understand the conditions needed to establish the new cluster such as institutions
supporting knowledge creation, programming to support entrepreneurship, and removing
barriers for creation of new firms.
Based on the demographics of the Washington, D.C. metropolitan area – a workforce that
is highly educated and concentrated with scientists, engineers, and other technical
expertise – it is likely that some emerging or embryonic clusters are developing in the
region or could develop in the near future. These include:
• Digital Media - a sub-set of the ICT cluster, digital media is emerging in places
such as Florida and California. This cluster includes animation, simulation, and
gaming and requires a workforce in graphic design services and internet
publishing.
• Nanotechnology – Nanotechnology could be thought of more as an “overlay” (as
defined in this paper) than a cluster and involves research and development of
extremely small components and structures, transcending many disciplines.
Nanotechnology applications are found in industries like ICT, electronics,
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12. ATTACHMENT I
mechanical engineering, construction, forest, energy, environment, chemical,
health and well-being.
• Photonics – Photonics , based on the “photon,” the elementary particle of all light
wavelengths, is one of the fastest-growing high-tech industries in the world.
Photonics technology is used to develop lasers, fiber optics, satellites, holographs,
flat screen displays, DVDs, scanners, and many other medical and consumer
devices. There appear to be potential synergies of photonics with Loudoun’s
existing clusters.
• “Green” - The Greater Washington Initiative reports, “Green business and
innovation is a new multibillion-dollar segment of the economy — and the
Greater Washington region has positioned itself to be a leading player.” They
tout the existence of a local “green collar workforce,” ready to responsibly take on
environmental challenges of a fast-paced economy. While a new emerging
market in green technology exists, a complementary challenge for the area is for
the existing industries to adapt green technology to their operations, leading to
enhanced efficiency and reducing the negative costs inflicted on the environment.
For example, several of Loudoun’s data centers have already bought into the
Green Grid idea for improving IT energy efficiency. These businesses are
realizing that green practices not only take a responsible approach to the
environment, but also reduce energy costs for more efficient production. “Going
Green” offers a competitive advantage that, as energy costs escalate, local
companies cannot afford to overlook.
Prior to making any recommendations and developing a cluster strategy for these and
other emerging clusters, DED recommends that additional resources be dedicated to
understand the nature and potential of these as clusters, including the assets and themes
that Loudoun can leverage in furthering their growth.
Recommendations
Based on the strengths of Loudoun, exceptional LQs in certain clusters and overlays, and
professional expertise, DED recommends:
• Utilizing the $90,000 specifically identified in the FY09 Budget to create a new
position dedicated to the federal/government contracting cluster overlay,
including aerospace. This dedicated focus will allow the department to understand
the needs of this cluster and begin working closely with the current businesses
within this cluster in order to increase Loudoun’s visibility in this market, thus
leading to greater cluster growth.
o Requires a new FTE.
• Dedicating a position to the information communications technology cluster.
Loudoun maintains strength in this cluster, and with a dedicated focus, the
Department will be able to increase its expertise in this area to support attraction
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13. ATTACHMENT I
and expansion of the cluster. This dedicated focus will also enhance networking
opportunities for businesses currently located in Loudoun.
o Utilizes existing FTE.
• Dedicating 50 % of a position to the international overlay, to recruit and retain
targeted cluster companies from outside the United States. This is a diversification
investment strategy to balance Loudoun’s portfolio of companies and expand
business investment opportunities. The department does not anticipate this
investment will immediately result in a significantly larger international
businesses base. However, the expertise gained and the ability to understand and
provide the unique resources required by these companies will provide a strategic
advantage for Loudoun’s recruitment efforts in the medium term.
o Utilizes one-half of an existing FTE..
• Committing $150,000 for the international program to include contractor services,
collateral development, and staff related travel. The contractor will be located in
the international market and will be directed to complement existing target cluster
initiatives.
o Requires new contractor.
• Committing $100,000 for industry research analysis/cluster support services.
o Requires new FTE.
Summary
Amount Source of Funding Function
$ 90,000 1 New FTE - General
Fund
Federal/Government Contracting
Overlay
$100,000 1 New FTE - Restricted
TOT Fund
Industry Research Analysis /Cluster
Support Services
$150,000 Restricted TOT Fund International Program
-- Existing FTE ICT Cluster
-- 50% of Existing FTE International Overlay
Assumptions
• Metropolitan Washington Airports Authority (MWAA) and Washington Airports
Task Force (WATF) will take the lead on the Aircraft, Cargo and Logistics
cluster.
• Life Science will continue to receive support through pre-established initiatives
(i.e. Medical Automation Conference, Northern Virginia Life Sciences
Communities, and Science & Technology Cabinet) in order to increase Loudoun’s
position/recognition. Because competition in this market is fierce, additional
assets that could enhance Loudoun’s competitiveness include: readily available
wet lab space; increased state and local financial incentive options; a Loudoun-
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14. ATTACHMENT I
based research university or innovation facility to support the cluster; a
coordinated state, regional and local vision with sustainable, financially-supported
programs. Staff will be working with top leadership of Howard Hughes Medical
Institute Janelia Farm Research Campus to define an effective cluster
development strategy and to identify valuable opportunities.
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15. ATTACHMENT I
References
Andersson, T., Serger, S.S., Sorvik, J., and Hansson, E.W. (2004, August). The Cluster
policies whitebook. International Organization for Knowledge Economy and Enterprise
Development.
Cortright, J. (2006, March). Making sense of clusters: regional competitiveness and
economic development. The Brookings Institution Metropolitan Policy Program.
Feser, E.J. and Luger, M.I. (2003). Cluster analysis as a mode of inquiry: its use in
science and technology policymaking in North Carolina. European Planning Studies
11(1), p. 11-24.
Mauk, B. (2008). Interview with Assistant Director of the UNC-Chapel Hill Office of
Economic and Business Development on May 27, 2008.
Osama, A. and Popper, S.W. (2006). Creating economic clusters. The IEDC Economic
Development Journal, 5(3), p. 6-13.
Porter, M.E. (1998, November-December). Clusters and the new economics of
competition. Harvard Business Review, p. 77-90.
Stewart, L.S. and Luger, M.I. (2003, November). Best practices in the implementation of
cluster-focused strategy. A report prepared by the Office of Economic Development,
Kenan Institute, UNC-Chapel Hill.
Solvell, O., Lindqvist, G. and Ketels, C. (2003, August). The Cluster initiative greenbook
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16. ATTACHMENT II
NAICS Code Groupings by Cluster
Aircraft, Cargo and Logistics Cluster
NAICS
Code Description
481111 Scheduled Passenger Air Transportation
481112 Scheduled Freight Air Transportation
481211 Nonscheduled Chartered Passenger Air Transportation
481212 Nonscheduled Chartered Freight Air Transportation
484110 General Freight Trucking, Local
484121 General Freight Trucking, Long-Distance, Truckload
484210 Used Household and Office Goods Moving
484220 Specialized Freight (except Used Goods) Trucking, Local
484230 Specialized Freight (except Used Goods) Trucking, Long-Distance
486110 Pipeline Transportation of Crude Oil
486910 Pipeline Transportation of Refined Petroleum Products
486990 All Other Pipeline Transportation
488111 Air Traffic Control
488119 Other Airport Operations
488190 Other Support Activities for Air Transportation
488490 Other Support Activities for Road Transportation
488510 Freight Transportation Arrangement
488991 Packing and Crating
491110 Postal Service
492110 Couriers and Express Delivery Services
493110 General Warehousing and Storage
493120 Refrigerated Warehousing and Storage
493190 Other Warehousing and Storage
532411
Commercial Air, Rail, and Water Transportation Equipment Rental
and Leasing
541614 Process, Physical Distribution, and Logistics Consulting Services
722310 Food Service Contractors
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17. ATTACHMENT II
Information & Communications Technology Cluster
NAICS
Code Description
332710 Machine Shops
333313 Office Machinery Manufacturing
333319 Other Commercial and Service Machinery
333411 Air Purification Equipment Manufacturing
336412 Aircraft Engine and Engine Parts
511120 Periodical Publishers
517110 Wired Telecommunications Carriers
517210 Wireless Telecom. Carriers (except Satellite)
517410 Satellite Telecommunications
517911 Telecommunications Resellers
517919 All Other Telecommunications
518210 Data Processing and Related Services
519120 Libraries and Archives
519130 Internet Pub. & Broadcasting & Web Search
519190 All Other Information Services
532420 Office Equipment Rental and Leasing
541511 Custom Computer Programming Services
541512 Computer Systems Design Services
541513 Computer Facilities Management Services
541519 Other Computer Related Services
811211 Consumer Electronics Repair/Maintenance
811212 Computer and Office Machine Repair
811219 Other Electronic Equipment Repair
Life Science Cluster
NAICS
Code Description
325199 All Other Basic Organic Chemicals
325414 Other Biological Product Manufacturing
334510 Electromedical Apparatus Manufacturing
334516 Analytical Laboratory Instruments
339113 Surgical Appliance and Supplies Manufacturing
339116 Dental Laboratories
541380 Testing Laboratories
541711 Research and Development in Biotechnology
541712 R&D Phys. Eng. & Life Sci. (ex Biotechnology)
621511 Medical Laboratories
621512 Diagnostic Imaging Centers
A- 13

18. Overview
This cluster includes passenger and cargo carriers; transportation companies, hauling freight; state-of-
the-art telecommunications -- from satellites to radio tags -- to track cargo and ensure fast and secure
delivery of shipments; and warehousing services. Dulles Airport has a $4 billion capital projects pro-
gram, including a new runway to accommodate a 67% increase in operations by 2010. In general, air
traffic has achieved annual growth rates well above historical averages, even with high fuel prices and
security concerns. Remarkable service enhancements were witnessed at Dulles in 2007 including: 145
new weekly flights to seven new international destinations; and direct flights to six new countries includ-
ing Beijing, China. In 2008, flights will be added to service Bogota, Dubai, Moscow, and Istanbul.
Washington Dulles International Airport offers airlines, airfreight forwarders and shippers unique and
profitable advantages as an international and domestic cargo gateway. Dulles's air and road feeder net-
work, central mid-Atlantic location, low costs and modern infrastructure together make it one of the most
efficient and economical cargo gateways in the U.S. With nearly 340 departures per week to major
cargo centers in Europe, Asia, Central and South America, the Middle East and Africa, airlines serving
Dulles offer shippers and forwarders a wide array of options to move goods to and from these areas.
Combined with the nearly 2500 weekly departures to U.S. destinations, Dulles carriers can offer exten-
sive service options for both domestic and international customers. The Washington Airports Task
Force (WATF) works closely with the Metropolitan Washington Airports Authority (MWAA) to strategi-
cally position Dulles Airport.
The airport is unique on the East Coast in having substantial expansion capacity. In addition to this ca-
pacity to expand airport operations, the MWAA purchased an 800-acre adjacent property, with the po-
tential for complementary economic development opportunities.
Planning policy along with appropriate zoning have been established to protect the airport. This estab-
lishes an important advantage for Loudoun, particularly as Fairfax has been redeveloping their flex/
industrial product to office, leaving Loudoun as the location of choice for support services for the airport.
Major Employers
500-999 Employees
• United States Postal Service—provides the
nation with reliable, affordable, universal
mail service.
• Gate Gourmet - the world's largest inde-
pendent provider of airline catering and pro-
visioning services
• Air Serv—Humanitarian relief organization
that provides air transportation exclusively
to the global humanitarian community.
• FAA—provide air traffic control and naviga-
tion for both civil and military aircraft.
250-499 Employees
• Fed Ex—provide shipping, logistics man-
agement, and supply chain management
2007 Prospect Activity
• One prospect located in Loudoun in 2007.
• This one prospect will occupy 14,400
square feet.
Aircraft, Cargo and Logistics Cluster
ATTACHMENT III
A-14

19. Overview
Information & Communications Technology (ICT) is a blanket term that includes equipment and technol-
ogy involved with the communication of information.
A study by Gartner reports that ICT spending has been mostly immune to the recent economic down-
turn. Based on a global survey of CEOs by PricewaterhouseCoopers, “Technology CEOs are the most
confident, with 60% saying they are ‘very confident’ of achieving revenue growth over the next 12
months, compared to a global average of 50% across all industries. This finding reflects the unrelenting
demand for new technologies, especially in the emerging markets.” The survey finds communications
CEOs only slightly less confident (59% ) and reports that Technology and Communications CEOs are
equally optimistic for growth over the next three years.
ICT companies tend to pay high wages; require high-skilled labor; be innovation- and entrepreneurship-
driven; dependent on secure, redundant and reliable infrastructure; and affordable power.
Loudoun’s existing cluster is substantial and robust, including brand names such as AOL and Verizon
Business. While AOL has moved their headquarters to New York, the bulk of their professional and
technical staff remain on the Loudoun Campus. Verizon Business plans to relocate much of their re-
gional workforce to their Loudoun campus over the next few years. Also, the Data Center market is a
strong submarket that is currently experiencing substantial growth.
Due to Loudoun’s proximity to the federal government in Washington, D.C., to Washington Dulles Inter-
national Airport, and ability for direct connect to MAE-East, there is a high concentration of ICT compa-
nies that have contracts with the government.
Major Employers
1000-4,999 Employees
• AOL—making transition from subscrip-
tion internet provider (dial-up) to global
advertising-supported Web company
• Verizon Business—delivers advanced
IP, data, voice and wireless solutions to
large business and government.
500-999 Employees
• Verisign— leading secure sockets layer
(SSL) Certificate Authority enabling se-
cure e-commerce and communications
for Web sites
250-499 Employees
• Neustar—a clearinghouse for communi-
cation service providers and enterprises
worldwide
• MasTec—end-to-end telecommunica-
tions and energy infrastructure service
provider
2007 Prospect Activity
• 5 prospects located or expanded in Loudoun in
2007.
• These 5 prospects will occupy approximately
500,00 square feet of space.
Information & Communications Technology Cluster
ATTACHMENT III
A-16

20. 0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
2002 2003 2004 2005 2006 2007
Local Concentration = National Concentration
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2002 2003 2004 2005 2006 2007
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2002 2003 2004 2005 2006 2007
ICT—Firm Trends
ICT—Employment Trends
ICT—Location Quotient Trends
The number of ICT firms increased by a sub-
stantial 215 percent between 2002 and
2007. Companies with over 100 employees
represented 2 percent of the firms, and 57
percent of the employment. While the “large”
firms account for a considerable amount of
the employment, Loudoun has some signifi-
cant small companies that have experienced
substantial growth and success, including
Prototype Productions and Equinix.
Loudoun’s largest cluster is ICT, employing
nearly 15,000 people in 2007. This is an in-
crease of nearly 170 percent more than the
number employed in 2002 in this cluster.
Compared to an 18 percent increase overall
nationally, this growth is tremendous. Lou-
doun’s growth in employment during this 5
year period contributed to 110 percent of the
Northern Virginia regional growth because
some areas within Northern Virginia experi-
enced loss in ICT employment.
The Location Quotient (LQ) for Loudoun’s
ICT cluster shows that the concentration of
employment in ICT locally is six-and-a-half
times the concentration nationally. This sub-
stantial LQ, along with strong employment
growth, reinforces the importance of this
cluster. The county is highly attractive to ICT
companies. Maintaining this attractiveness is
a key to future growth.
A-17

21. 0.0
1.0
2.0
3.0
4.0
5.0
6.0
2002 2003 2004 2005 2006 2007
Local Concentration = National Concentration
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
2002 2003 2004 2005 2006 2007
0
50
100
150
200
250
300
2002 2003 2004 2005 2006 2007
Aircraft, Cargo and Logistics—Firm Trends
Aircraft, Cargo and Logistics—Employment Trends
Aircraft, Cargo & Logistics—Location Quotient Trends
Employment decreased substantially
through the 5-year period from 2002
through 2007, experiencing a 15 percent
loss versus a 3 percent gain that occurred
nationally. The Aircraft, Cargo and Logis-
tics cluster was negatively impacted by the
bankruptcy of Independence Air and the
closing of the United Airlines call center,
both occurring in 2006.
The 2007 location quotient reflects nearly
three times the concentration of employ-
ment exists in Loudoun versus the U.S.
However, the significant decline in Loca-
tion Quotient is of concern, particularly
with the current economic conditions in-
cluding the continuing increase in oil
prices.
In 2007, 7 percent of the companies have
100 employees or more, accounting for 67
percent of the employment.
A-15

22. Overview
The Life Science cluster spans different markets and includes manufacturing, services, and research activi-
ties that are evolving to incorporate the latest research and scientific discoveries. Sub-sectors are Ag Feed-
stock and Chemicals, Drugs and Pharmaceuticals, Medical Devices and Equipment, Bioinformatics, Re-
search, Testing, and Medical Laboratories. The life science industry is also being viewed by many states
nationwide and countries across the globe as the engine that will spur their economic recovery and vitality.
As a result, the life science clusters around the nation and the world continue to enhance their industry’s
business climate, competing against each other to improve their regional advantage and sustain their lead-
ership positions as key life science clusters. In their annual review and analysis of real estate trends in the
life science industry, Colliers International identifies bioinformatics as an emerging growth sector in Life Sci-
ence. Loudoun’s ICT strength suggests the potential for an interesting (and profitable) cross-cluster col-
laboration in this field.
In general, Life Science clusters are highly localized within a handful of metro-areas. They are also time
and capital intensive, risky, and face increasing international competition. Community assets that are im-
portant to Life Science companies include: access to public funding; access to local venture capital; Univer-
sity partnerships; highly-skilled, scientific workforce; and a favorable legal environment. The Life Science
cluster results in a longer horizon for return-on-investment due to the capital investment required.
The primary assets Loudoun has in this cluster are: $500M investment of Howard Hughes Medical Institute
Janelia Farm Research Campus; proximity to research labs, universities and government agencies such as
NIH; a commitment as the site for the international Medical Automation Conference through 2010; an es-
tablished regional cluster, focused primarily in Maryland; and an established regional organization, the
Northern Virginia Life Sciences Communities.
Additional assets that would enhance Loudoun’s competitiveness include: readily available wet lab space;
increased state and local financial incentive options; a Loudoun-based research university or innovation
facility to support the cluster; a coordinated state, regional and local vision that is financially-supported to
achieve a successful cluster.
Major Employers
100-249 Employees
• Howard Hughes Medical Institute Janelia
Farm Research Campus—the identification
of general principles that govern how infor-
mation is processed by neuronal circuits; and
the development of imaging technologies
and computational methods for image analy-
sis.
50-99 Employees
• Experimental Pathology—contract research
organization in toxicological pathology ser-
vices
• Glen Research Corporation—chemical com-
pany. Sell reagents for DNA and RNA syn-
thesis, modification and purification.
20-49 Employees
• EPL Archives—archival company for tissues
and bio-data
2007 Prospect Activity
• Four prospects located or expanded in
Loudoun in 2007.
• These 4 prospects will occupy approxi-
mately 48,300 square feet.
Life Science Cluster
ATTACHMENT IIIATTACHMENT III
A-18

23. 0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
2002 2003 2004 2005 2006 2007
0
10
20
30
40
50
2002 2003 2004 2005 2006 2007
Life Science—Firm Trends
Life Science—Employment Trends
Life Science—Location Quotient Trends
Loudoun’s Life Science cluster is a
small cluster, but has grown signifi-
cantly over the past 5 years. The em-
ployment increased by over 150 per-
cent, a much faster rate of increase
than growth in Northern Virginia, 66
percent, and the nation, 97 percent.
More that one-fourth of the growth can
be attributed to HHMI, and their em-
ployment will continue to represent a
substantial portion of this cluster’s
growth in the coming years as they are
less than half-staffed as of the 2007
data.
The Location Quotient (LQ) reflects the
relative concentration of Loudoun’s Life
Science cluster compared the national
concentration. The positive trend of the
LQ, approaching 1.0, is a potential indi-
cation, particularly when associated sig-
nificant employment growth, that the
cluster is emerging.
During the period between 2002 and
2007, Loudoun had an increase of 14
percent. However, one of the most sig-
nificant additions to the Life Science
cluster during this period was the open-
ing of the Howard Hughes Medical Insti-
tute (HHMI) Janelia Farm Research
Campus.
0
100
200
300
400
500
600
700
800
2002 2003 2004 2005 2006 2007
A-19

24. Overview
The overlay includes professional and technical services and manufacturing companies, among others,
that provide contractual services to the federal government, including outsourced services, research
and development, etc. This overlay also includes Loudoun’s aerospace cluster. The Washington,
D.C. region leads the nation in Department of Defense procurement. Forty-three of Defense News’ top
100 international defense companies have operations in Washington, D.C. region; 12 of the top 100 are
headquartered or have a presence in Loudoun.
While some of the contracts awarded to Loudoun companies are war-related, with the exception of 2
contractors, federal dollars coming into Loudoun have remained fairly stable since 2000. In the future, it
is possible that defense spending may be curbed; however, many outsourcing activities will continue,
particularly as the baby boomers currently working in federal positions exit the workforce.
A Loudoun location offers proximity and access to federal government and its decision makers. There is
the potential to leverage contractor moves in Northern Virginia as a result of BRAC (Base Realignment
and Closure). Many companies will be relocating due to military changes and Loudoun is well-
positioned to capture a significant portion of this transition. Prince William and Stafford counties are
readying sites to take advantage of being located along VRE and a major interstate.
Loudoun’s assets include real estate product/facility diversity and availability, a strong build-to-suit mar-
ket, ability to meet set-back/security requirements, and fiber access. Recently, there has been an in-
crease in contractors locating in Loudoun. In fact, one developer has contacted the Department with
plans to develop a park exclusively for secured, defense-related tenants. With proactive marketing, it is
anticipated that this cluster could deliver short-term return-on-investment.
“Overlay” of Contractors with Clusters
• ICT—653 contracts, $1B
• Aircraft—154 contracts, $40M
• Life Science—5 contracts, $154K
• International—196 contracts, $58M
2007 Prospect Activity
• Four prospects located in Loudoun in
2007.
• These four prospects will occupy ap-
proximately 281,000 square feet.
Federal and Government Contractor Overlay
ATTACHMENT III
A-20

25. $0
$200,000,000
$400,000,000
$600,000,000
$800,000,000
$1,000,000,000
$1,200,000,000
$1,400,000,000
$1,600,000,000
$1,800,000,000
2000 2001 2002 2003 2004 2005 2006
0
200
400
600
800
1,000
1,200
Value
Count
Federal & Government Contractors—Contract Trends
Federal & Gov’t Contractors—Contracts by Industry
Federal & Government Contractors—Top 5
No. of Contracts (2000-2006)
Aero International—284
MC Dean—260
NOVA Power Solutions—180
Telos—160
Anixter—145
Total Value (2000-2006)
North American Airlines—$2,755,362,398
Evergreen Intern’l Airlines—$2,008,553,816
NLX—$576,582,183
Telos—$511,692,442
N E T Federal Inc.—$308,441,386
0% 5% 10% 15% 20% 25% 30% 35% 40%
Wholesale Trade
Prof/Tech Services
Manufacturing
Trans/Warehousing
Retail
Other
Admin Services
Over 35 percent were in the Wholesale
Trade sector, which included Heckler &
Koch, a German company located in Lou-
doun. The sector with the second most
number of contracts was the Professional
and Technical Services sector, with 27 per-
cent. This sector includes many of the com-
panies commonly associated with federal
contracting like SAIC. Manufacturing ac-
counted for nearly 15 percent of the con-
tracts and included companies such as
AeroAstro and Orbital Sciences Corpora-
tion.
From 2000 through 2006, the number of
contracts that Loudoun companies were
awarded increased by over 200 percent.
The total value of the contracts awarded to
Loudoun companies increased by 171 per-
cent. This can be deceiving because there
are two air transport companies that had a
combined contract value of nearly $5B be-
tween 2002 and 2006. Excluding these two
companies from the total value of contracts
award actually result in an 8 percent de-
crease over the period.
A-21

26. Overview
International businesses, typically defined as having significant foreign ownership of at least 10%, con-
tribute over $40 billion to the Washington, D.C. region’s economy, making it one of the top five core sec-
tors along with government, technology, hospitality, and construction. The Washington region has more
than 700 international businesses, including over 60 firms from Germany.
The United States has topped the World Economic Forum’s competitiveness rankings, cited as having a
“combination of sophisticated and innovative companies operating in very efficient factor markets… ex-
cellent university system and strong collaboration between the educational and business sectors in re-
search and development.” Also, among all the states, Virginia was rated the number one Pro-Business
State in 2007 by Pollina Corporate Real Estate, Inc. The “health” of the state is an important factor when
foreign companies are looking to make foreign investments. Financial incentives are less important than
whether or not the state is a “right-to-work” state. In fact, many states that have strong labor unions
never “make the list” when foreign companies look to invest.
Loudoun’s international businesses have identified these reasons for choosing Loudoun: proximity to
airport with flights to their home country, and other countries of interest; access to highly-skilled work-
force; proximity to federal government; quality of schools; and access to beach and mountains.
An initial goal of the international program would be to focus on attracting foreign-owned corporate lo-
cates from targeted clusters to Loudoun County and helping existing ones expand. This requires a
business development effort to clarify target companies, develop relationships, and build presence and
reputation in the markets.
Major Employers
100-249 Employees
• Rehau—German, plastic injection and win-
dow fabrication.
• Gieske & Deverient Americia, Inc. — Ger-
man, financial currency processing and
smart cards.
• De La Rue Global Services, Inc.— United
Kingdom, security printer and paper
50-99 Employees
• L-3 Marine Systems—Canada, marine plat-
form control systems
• British Airways Cargo—United Kingdom,
cargo
2007 Prospect Activity
• There were two International prospects
that located in Loudoun in 2007. One is an
aerospace company, and the other, a life
science company.
• These two prospects will occupy a com-
bined total of 7,300 square feet.
Note: International prospects are not dupli-
cated in the cluster.
International Overlay
ATTACHMENT III
A-22

27. International– Companies by Country
International—Companies by Industry
Germany
UK
France
Austria
Canada
Italy
Switzerland
Sweden
Netherlands
Spain Japan
0
50
100
150
200
250
300
350
400
450
Employment
International—Employment by Country
0 2 4 6 8 10 12
Germany
France
UK
Sweden
Netherlands
Austria
Switzerland
Spain
Japan
Italy
Canada
0 2 4 6 8 10
Trans & Warehousing
Wholesale Trade
Mgmt of Companies
Retail Trade
Manufacturing
Information
Finance
Professional Services
Administrative Services
Educational ServicesThe companies that are currently lo-
cated in Loudoun are predominantly in
the Transportation & Warehouse sec-
tor or the Wholesale Trade Sector.
Of the 28 foreign-owned corporations
reporting data to the Virginia Employ-
ment Commission (VEC), they employ
1,132 people. German firms ac-
counted for the largest percentage of
employment. Over 90 percent of em-
ployment is with companies from Euro-
pean countries.
Over 90 percent of Loudoun’s interna-
tional companies are from European
countries. The largest group of these
companies are from Germany.
A-23