November 23, 2015

How to (re)invent your city as an investment destination?

Last week I had the chance to step on the stage of 16th Regional Development Conference in Tokaj, Hungary. I were talking about the city-level investment promotion and its most important precondition, the cluster-based economic development.

I started my presentation with my 350+ investment project experience: most competing cities loose the race for investment before the start of site selection process. The problem is that most competing cities have no focused 'sales stories' for targeted companies, and most cities cannot make an impact on corporate site selectors.

What is the best way to make an enduring impact? Try to offer target company focused business environment. More excatly, try to offer target industry focused business environment, because you cannot organize your city for a single company only. If you offer a target industry focused infrastructure, labor market, supplier base, industry supporting public institutions and better market understanding, you have much much better chances to locate the company in your city. 10 years ago, the City of Kecskemet, Hungary provided for Daimler AG a huge industrial facility with excellent infrastructure, big number of job seekers with special governmental training programmes, the nearness of Budapest with large number of engineering students, a local collage as a 'Daimler Collage', the biggest automotive component supplier pyramid in Eastern Europe within 500 kms etc. Today, Kecskemet has the largest Mercedes-Benz manufacturing plant in Eastern Europe.

The 'cluster-based investment promotion' is not a new concept, it can be derived from Michael Porter's cluster-based economic development or the smart specialization strategies of the European Union - however, almost nobody do it in city-level investment promotion.

I also talked briefly about hows. How to choose the most proper industry(s) to target? I always thought, you shouldn't reinvent the warm water: focus on existing industries and try to upgrade its business environment. How to (re)build these clusters? Try to involve local companies, recruiters, schools, business park managements, local suppliers, NGOs and local media into the discussion. Local media can be critical, because most of career choosing kids would like to be a 'celeb' if media doesn't talk about the local labor market reality and the economic development efforts of the city.

Finally,  here is a brand new, short video with Professor Porter's thoughts about city-level cluster development:

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