Competitive Advantage of Regions

Yesterday, Governor Patrick signed into law a $1 billion package for a 10 year plan to support the growth of the life sciences industry in Massachusetts. This seems, to me, like a huge deal, and a really important step for the future Massachusetts economy. Yet news coverage seems kind of muted (see, for example, this article at the Boston Channel) and I’m wondering why?

The law is not without controversy: it has ended up with a number of fixed spending commitments that seem oriented towards individual legislators’ constituencies (see this article in the Boston Globe), and other voices have argued that the money would be better spent on existing businesses. Yet infrastructure investments and government support have played a critical role in developing new competitive industries, contributing to overall economic development, in region after region. Regional differentiation and specialization is an essential to remain competitive in an increasingly global economy.

Although often overlooked in the emotional offshoring debates, the investments which the Indian national and state governments made in building the IT services industry are equally important as the region’s relatively low costs. India established the Indian Institutes of Technology, competitive technical universities whose graduates seeded the industry (and high tech industry worldwide); implemented a tax break for software businesses’ foreign revenue (due to expire in 2009); created special economic zones and opened up land for building IT campuses. Individual states and cities have offered attractive packages of land and tax breaks to encourage leading IT businesses to establish themselves in specific areas. The clusters of IT businesses then support a slew of other businesses, who serve both the IT businesses and their upwardly-mobile employees. (My former employer, Kanbay, since acquired by Capgemini, decided to build a new campus in one city over the other primarily because of a package offered by the local government.) If you have any doubt about the broader impact of such policies, you have only to look at the hot real estate market in the top 5 IT cities in India, or the intense traffic congestion in Bangalore.

So why isn’t there more of a reaction to this Massachusetts law? Is it hard for people to get excited about something that won’t have an immediate impact, but a more gradual effect over the next 5 – 10 years? Or is it a general distrust of government support for business, or flaws in this law, or am I simply missing some of the coverage? I welcome your insights.

Addendum: For a thorough description of the Massachusetts law, I recommend this article at Bioregion News.

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This entry was posted in biotech, global strategy and tagged , . Bookmark the permalink.

1 Response to Competitive Advantage of Regions

  1. Pingback: Competition among US States for Life Sciences Investments « Local World

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