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#ICICSummit: How Can We Harness the Potential of Inner City Growth?
Above: Harvard Business School Professor and ICIC Founder Michael Porter at the Inner City Economic Summit
While the rest of the U.S. economy seems to be rebounding, the most economically distressed urban areas – inner cities – continue to struggle. Michael Porter kicked off his keynote today by remarking that “twenty years ago, when we founded ICIC, we thought we would have made significant progress by now in terms of inner city growth. But it remains a challenge.”
During the past decade, the overwhelming majority of inner cities (nearly 90%) experienced increased poverty and unemployment. Despite representing less than 1% of total land area, all 339 inner cities (in cities with population over 75,000) are home to 15% of U.S. unemployment, nearly one-quarter of U.S. poverty, and over one third of U.S. minority poverty.
As Harvard Business School Professor and ICIC Founder Michael Porter explained, targeting economic development in inner cities allows wholesale rather than a retail approach to addressing poverty and unemployment issues.
As Michael Porter also noted, “the regional tide does not lift all boats.” During the past decade, 64% of inner cities have performed worse than their regions. The correlation between regional and inner city growth is only 8% for inner cities in the largest 100 cities. When looking at all 339 inner cities, the correlation drops to only 1%. Inner cities will continue to struggle unless inner city-specific development plans are integrated into regional economic development strategies.
Beyond linking to regional plans, inner cities need their own focused economic development strategies. While the challenges may seem overwhelming, after almost two decades of research and work in inner cities we have learned a great deal about what works in inner cities and how to create more competitive and prosperous urban communities.
We know that inner cities have four main advantages: strategic location, local market demand, integration with regional clusters and workforce. And long-term solutions to inner cities will be driven by the private sector, with support and collaboration by the public sector, foundations and nonprofit organizations.
But despite these advantages, specific tools must be utilized for driving inner city economic growth. We’ve identified three categories of drivers to increase the competitiveness of the urban core: improving the local business environment; implementing a cluster-oriented growth strategy; and supporting business growth strategies.
Improving the local business environment includes supporting anchor institutions and shared value opportunities. The Cleveland Clinic is the largest employer in Cleveland and provides incentives for employees to live locally, sources locally whenever possible, collaborates on workforce development programs, and has implemented a childhood wellness program. The business environment also requires significant and strategic investments that leverage local assets. The HarborCenter in Buffalo, NY, for example, builds on its existing cluster strengths in hospitality and tourism, the interests of its residents in hockey, and their natural assets—the waterfront and lake.
Implementing a cluster-based growth strategy will involve strengthening existing and emerging clusters. Traded and local clusters are important to inner city economies. During 2003-2011, local clusters have grown in strength in the inner city, while they have weakened in the rest of the metropolitan areas. Traded clusters that have grown in employment in inner cities include Business Services, Water Transport, Oil and Gas Products and Services, Medical Devices, Entertainment, and Aerospace Engines. Local clusters include business-to-consumer (B2C) and business-to-business (B2B) opportunities – both of which are more highly concentrated in inner cities than in the broader U.S. economy. While B2C clusters have grown in the inner cities and the U.S. from 2003 to 2011, B2B clusters have declined in both over the same time period. Cities must align economic policies and cluster development. This includes targeted workforce development, export promotion, specialized infrastructure, and research initiatives.
Supporting business growth and competitiveness strategies involves helping businesses access growth capital, contracting and networking opportunities, and management education. ICIC’s strategic partner, Next Street, has a variety of business education, contracting, and capacity building programs to support inner city companies. Goldman Sachs’ 10,000 Small Businesses program has partnered with ICIC to provide education, support services, and access to capital for high-growth companies.
While in some inner cities economic development might seem like an uphill battle, it is not unattainable. As the disparities between inner city residents and their peers continue to grow, we have an imperative to hone in and execute upon the strategies that we know can create competitive cities for all residents.
Blog co-written by ICIC Senior VP and Director of Research Kim Zeuli and ICIC Senior Research Analyst Thom Goff
October 24th, 2013