Inc.'s 1990 ranking of metropolitan regions by job growth, business starts, and proportion of high-growth companies.
Why some cities boom while others languish
Remember when you could tell how a city was doing by asking a knowledgeable question or two? In Cleveland you inquired about heavy-industry output, in Hartford about insurance. If airplane production was booming, so was Seattle.
Today, metropolitan prosperity seems to swell and recede for a hundred different reasons. Drive around Milwaukee, for example, and check out the shuttered, crumbling Allis-Chalmers Corp. complex, one of many moribund factories that once employed thousands of industrial workers. Then try to figure out why the region's unemployment rate is a tight 4%, and why the city's downtown is booming. Or drive around greater Houston, as staff writer Leslie Brokaw did not long ago (see "The Woodlands, Tex.," [Article link]). Oil isn't going anywhere -- but the Houston metro area is coming back fast.
All of which leads to a suggestion: scrutinize INC.'s 1990 ranking of entrepreneurial hot spots carefully. The list itself is simple enough, indexing metropolitan regions by job growth, business starts, and proportion of high-growth companies. But we think you'll find some surprises, both in the rankings themselves and in what our writers discovered as they set out to places as disparate as Las Vegas and northern New Jersey in search of the many new reasons for economic vitality.
Regional growth, after all, is a subject too important to be left to politicians and booster clubs. How your city is faring has a direct impact on how your business fares. And if you need to know where to find new customers, or new employees, or a site for a new branch -- well, then, you'll need a mental map of America, color-coded for growth. The trick is to keep it up to date, which means understanding the distinctive features of 1990s-style economic development.
One phenomenon is so pervasive we've devoted a whole section to it: see David L. Birch's "Here Comes the Neighborhood" [ [Article link]], and the accompanying firsthand reports. If you don't mind an awkward phrase, call it the localization of growth.
Once, a metropolitan area rose and fell pretty much as a unit. Today, by contrast, you can find pockets of hothouse-style growth in and around cities that are otherwise languishing. Take Philadelphia: the region as a whole is a mediocre #88 on this year's ranking, down from an almost-as-mediocre #74 last year. But don't talk slow growth to the people and companies in the Route 202 corridor just west of the city; out there, roads that were country lanes only a few years ago are straining under the burden of rush-hour traffic from dozens of new office and industrial parks.
Phenomenon two: growth now depends on the role a city plays in the world marketplace, not just in the national economy. International trade was always important to big manufacturing centers and cities with deep-water ports. But the emerging global village has churned up a dozen new niches for enterprising metro areas.
Examples? The Battle Creek-Kalamazoo region in Michigan jumped from #130 last year to #57 this year, partly on the strength of $250 million pumped into the area by Japanese auto-parts and cable-parts companies. El Paso (#35) has capitalized on the so-called maquiladora program, the production-sharing arrangement between U.S. and Mexican factories -- and is transforming itself from a sleepy, low-skill factory town into a sophisticated center of high-value manufacturing. And little Erie, Pa., taking advantage of newly liberalized trade with Canada, has climbed from #125 last year to #58 this year.
More and more cities are learning just how valuable a complex of colleges and universities can be to economic development. You expect to find technology-oriented growth around such higher-education centers as Boston and San Francisco. But look at Lincoln, Nebr., #8, home of a 20,000-student university, or Tallahassee, Fla., which jumped from #61 to #4, thanks in part to growing academic institutions such as Florida State University (28,000 students, up 5,000 from a few years ago) and Florida A&M University (which has seen a 36% increase in enrollment since 1984). "There's a good work force here," says a spokesman for General Dynamics Electronic Division, which recently decided to locate a major manufacturing facility in Tallahassee. "And there's the added incentive of state-funded employment training at the colleges and universities."
Even Birmingham, Ala., #73, whose fortunes once followed the steel industry's, has learned the education lesson. "The University of Alabama at Birmingham is now the city's largest employer," points out Lisa Roberts of the city's economic-development office. "And its medical research has led to spin-offs such as the Southern Research Institute." It has also made the city an attractive location for such companies as Nidek Medical Products Inc., a growing $3-million manufacturer of oxygen concentrators for home health care. "We use the Southern Research Institute's testing facilities for our new health-care ideas to see if they would be sound products," says Nidek president Anand Chitlangia.
Finally, there's a new twist emerging on the old model of the one-industry town. In the past, when you thought of Akron's tires or Pittsburgh's steel, the names of a few big companies came to mind. The cities prospered or declined with the prospects of a couple of corporations. Today, cities are developing industrial specialties without depending on two or three giant employers.
The classic case is California's Silicon Valley. Large employers such as Apple Computer Inc. and Intel Corp. have, like most big companies, been bounced around by the vagaries of the high-tech marketplace. But the San Jose metropolitan area remains near the top of our list because it's still an unparalleled incubator for smaller technology companies. You can see a similar phenomenon, albeit on a more modest scale, in cities as far away as Sioux Falls, S. Dak., and Charlotte, N.C. Sioux Falls (#20) claims to have more retail space per capita than any other city in America. Its 93-acre Empire Mall already includes 180 stores, and more are on the way, along with a $3-million expansion of the nearby Encore Hotel, designed to accommodate overnight shoppers. Charlotte's booming growth (#11 on this year's list, up from #29 a year ago) can be traced to its emergence as a banking center and a hub for product distribution, with many different companies in each industry.
As for Milwaukee, its sorry ranking (#156) on this year's metro list reflects above all a slow rate of net employment growth -- and it's true that the city hasn't yet come back from the decline of heavy-industry giants such as Allis-Chalmers. However, Milwaukee neither looks nor feels like an economic basket case. The old Schlitz brewery, abandoned when The Stroh Brewery Co. bought out the beer that once made Milwaukee famous, is now a thriving office complex. Out in suburban Waukesha County -- the localization of growth, again -- companies are proliferating so fast there's a chronic labor shortage (see "The Economic Microscope," November 1989, [Article link]) Even the industrial suburb of West Allis isn't doing so bad. Although it lost more than 8,000 jobs from Allis-Chalmers and other big manufacturers in the 1980s, it gained several thousand other jobs, mainly from newer and smaller companies. Watch for the Milwaukee region to climb on future metro rankings.
