Minner Makes Economic
Development a Priority
By Ryan DuBosar

When Ruth Ann Minner was sworn in as Delaware's first female governor in January 2001, the Twin Towers and Pentagon were still intact. The United States was not at war. The Dow was above 10,000, and the technology bubble was intact. Delaware's top private-sector employer was chemical giant DuPont.

But the towers tumbled, the Dow downed and the bubble burst. Between 2001 and 2003, Delaware lost 10,000 jobs, the first three-year consecutive loss in 60 years. And in 2002, MBNA overtook DuPont as the state's top employer.

As Delaware's economy has changed, the state's approach to economic development has changed as well. Delaware Business sat down with Gov. Minner and talked with other economic development experts for an update and a look ahead at the next four years.

"Every governor goes in a little reluctant about getting involved in [economic] development," Gov. Minner says. But clean, well-paying jobs are being created and retained in Delaware, and she wants to build on that.

"I want people to know that each morning when they get up there are opportunities for them," Gov. Minner says, "Whether it's opportunities for a better education or opportunities for a better job or an opportunity to start their own business."

A New Way of Thinking
Delaware's economic development strategy hinges on the concept of clusters ­ an economic model developed by Harvard professor Michael Porter. Porter observed how craftsmen in northern Italy collaborated while designing and cobbling the world's most desirable shoes. He expanded this idea across all industries and called it clustering.

Applied across other economic sectors, clusters combine businesses by their interdependencies with their clients and suppliers, rather than just by type. The theory is that clusters encourage face-to-face meetings. These meetings, in turn, increase efficiency, spur innovation and facilitate new business formation.

Clusters are the key to future economic growth, according to Randall T. Kempner, Vice President, Regional Innovation for the Washington, D.C.-based Council on Competitiveness.

"I absolutely believe that a cluster approach to economic development is the right one for the state of Delaware," Kempner says. "The idea of clusters is that they spur innovation because you get a more rapid diffusion of knowledge, a face-to-face discussion that takes place and close physical proximity to firms that focus on the same sector."

The Delaware Economic Development Office (DEDO) has followed the lead of Arizona, Massachusetts, Georgia and Texas, among other states, in applying clusters. Delaware now has seven: automobiles, chemicals, financial services, bioscience, tourism, agriculture, and corporate and legal services.

The auto cluster combines the state's two auto manufacturers not only with their parts suppliers, but the trucking companies that transport parts back and forth and the colleges and universities that train workers.

"Instead of me or DEDO telling these clusters what they need, we're meeting with them, talking to them and letting them tell us what they need and then seeing how we can work that into state government to assist them," Gov. Minner says.

Biotechnology Boosted
Biotechnology has become a promising cluster. Delaware's bioscience companies have created 3,500 new jobs directly since 1998, according to the Governor's Strategic Council Update and reported by Kempner at the Wilmington Regional Competitiveness Summit in December 2003. A Biotechnology Industry Organization study found Delaware was the leading location nationally for biotech businesses. The study ranked growth, employment and economic impact, and also concluded that out of all 50 states, Delaware was the only one that specialized all four sectors: agriculture feedstock, pharmaceuticals, medical devices and research and testing.

Biotechnology isn't only an area of economic development, but it is an area of growth that doesn't face the finite resources of other economic clusters, says Michael Bowman, chairman and president of Delaware Technology Park, home to 42 of Delaware's technology- and research-based startups. Since 1998, its companies have accounted for 500 onsite employees, another 2,500 jobs across the state, $100 million in private investment and another $200 million in federal grants, Bowman adds.

Biotechnology has created or preserved another 12,000 jobs in Delaware since 1998, Bowman says. AstraZeneca has doubled in size, and the success of startups has countered the loss of jobs at DuPont and the departure of Bristol-Myers Squibb, he notes.

Now, Gov. Minner is looking to replicate biotechnology's success in other clusters, such as for the financial sector, which could manufacture credit cards locally, or the tourism industry, which is Delaware's fifth largest industry. That cluster could expand from tourist hot spots to include hotels and motels, restaurants, tourist attractions and museums.

"Before we'd just have a destination at the beach and left it at that. We want to broaden it now," Gov. Minner says.

Guiding Plan
A key piece of Gov. Minner's economic development plan is the New Economy Initiative, a broad guide to invest seed money into biotechnology, clean energy or small business development, as well as support Delaware's manufacturing base. First introduced in February 2004, the New Economy Initiative combines $34 million in state funds with a potential $16 million in federal and private matches into small business start-ups, high-tech industries of the future, or job retention and creation.

"The New Economy Initiative is exciting," Gov. Minner says. "I'm going to push that as hard as I can."

The New Economy Initiative includes $12.5 million to create a Delaware Competitiveness Fund to make one-time investments to preserve jobs at existing Delaware companies facing global competition. Specific goals include:

• providing matching grants to manufacturers who modernize their facilities,

• helping manufacturers convert to newer processes and products,

• bringing in or diversifying product lines,

• finding buyers for idled facilities, and

• attracting research and development operations.

Gov. Minner adds that the New Economy Initiative is flexible and allows for funds to be shuffled toward successful programs. "In future years, we can determine which ones are most effective and put money there to do what we need to do."

High-tech Innovations
A key area of focus for the New Economy Initiative is technology. Technology-Based Small Business Seed Funds will funnel $1.5 million from the state's 2005 budget toward entrepreneurial engineers, scientists and researchers. Another $1 million is proposed for a Virtual Emerging Technologies Incubator to provide legal, marketing, accounting and patent services via the Internet.

Hundreds of thousands of dollars will be invested in a Clean Energy Research Center and Clean Energy Performance grants. Finally, the Experimental Program to Stimulate Competitive Research will develop biotechnology-focused research and programs. These programs require state money to start, and will draw federal matching grants.

The initiative also offers $50,000 to cover start-up expenses to fund technology-based small businesses launched by "entrepreneurial engineers and scientists from local companies, including those who have been downsized."

Four venture capital firms and five banks are interested in economic development packages. For example, Citizens Bank formed a partnership with the state, called Citizens Business Bank, that provides $14 million in below market rate loans made available through the Delaware Economic Development Office.

Venture capital has already gone to companies such as Foxfire Printing in Newark, which used the money to grow from 15 jobs to 65, according to the Governor's office.

The state has worked closely with the University of Delaware, Delaware Technical & Community College, Delaware State University and Wesley College, to bring some dollars to Delaware from the National Science Foundation and other private groups.

Looking Ahead
Delaware has led the way in approving business-friendly laws and in developing a court system that can handle high-technology cases, Kempner says.

"The state of Delaware has consistently been able to move faster than other states in creating new laws and regulations to support business," Kempner adds. "The state is small and close knit and can get new laws passed quickly."

Delaware can't spend as much money on attracting new businesses like its neighbors do, Bowman adds, but it can showcase its business-friendly court and regulatory systems, as well as its knowledge-based work force.

And now, the initial thrusts of the state's economic development efforts are working, Gov. Minner says.

"We have now more investments from the private investors than we do from the state. Under the last administration, we were investing more than private investors were," she says. "Now, private industry is investing dollars and the state is going to be able to now invest as much. And that's what we've been working toward."

This story originally appeared in the Jan/Feb 2005 issue of Delaware Business.