We're More Effective When We Work Together
By Mark Rigdon, Director – Small Business Forward, JPMorgan Chase
As we approach the 10th anniversary of Hurricane Katrina this summer, New Orleans' economic outlook is on the upswing.
Louisiana State University economists recently projected that the Big Easy will add more than 17,000 jobs over the next two years.footnote 1 Forbes recently cited New Orleans as the fastest growing city in America.footnote 2
But this is just the beginning. New Orleans' economy is poised to grow even more thanks to an innovative approach to economic development -- one that is poised for a big boost nationwide as cities turn to new methods to expand their economies and grow the businesses that call them home.
The strategy turns on what's known as a "business cluster" -- a concentration of closely related and interconnected businesses that share resources and ideas. The result is the creation of local networks of individuals with similar professional interests and expertise, which benefits the businesses within the clusters, and the economies around them.
As early as 1990, economists promoted the idea of using business clusters to boost economic development. In the intervening decades, more and more cities and regions have embraced this approach and the results from these efforts are substantial. The Initiative for a Competitive Inner City recently analyzed data from the ten largest cities in the United States that looked at economic growth trends between 2003- 2011. The results were impressive: businesses in well-established clusters grew three times faster and had a higher job retention rate than other local businesses.
New Orleans has ample experience with the benefits of business clusters. Following the devastation of Hurricane Katrina, the city invested tens of billions of dollars in infrastructure that reflected the city's interest in helping businesses to take advantage of the city's unique assets.
The effort didn't just rebuild the city -- it catapulted New Orleans past almost all others nationwide. Between 2009 and 2012, New Orleans' annual growth averaged 6.3 percent, the highest of any city in the United States.
A vocal advocate of business clusters, JPMorgan Chase launched "Small Business Forward" (SBF) to help spur exactly the kind of growth seen in clusters in metropolitan markets across America, including New Orleans.
In New Orleans, SBF has already provided $500,000 to several organizations in the health sector -- one of New Orleans' fastest growing industries according to Louisiana Economic Development. One of the drivers of this growth is the New Orleans BioInnovation Center, an incubator that offers the supportive infrastructure that small business owners and entrepreneurs need to help launch and grow promising businesses.footnote 3
RenaissanceRX is one such business. A graduate of the BioInnovation Center, the young life sciences company recently announced it had secured $8 million to build a new headquarters and will be hiring 425 people at an average salary of $52,000. This kind of expansion is exactly the growth that clusters are built to encourage, and the kind of success story we hope to see replicated in clusters across America.
The BioInnovation Center is located in BioDistrict, a 1500-acre health campus.footnote 4 With close proximity to LSU's Health Science Center as well as Tulane and Xavier Universities and extensive local and national support, BioDistrict is poised to become the anchor for a health cluster.
The success of business clusters often leads to more success, since other businesses want to get on board. The U.S. Small Business Administration launched a regional cluster grant progam in 2010. Within two years, the number of businesses in its ten clusters had grown by 380 percent. Those same businesses also saw their employment grow by an average of 18 percent.
Clearly, business clusters represent a promising model for urban economic development, one that is proving itself both here and around the world. The economic contributions that cities make to the country's overall economic growth can hardly be overstated. A recent report from the Brookings Institution found that in 2013, 47 states were "majority metro," which accounted for more than 50 percent of a state's total economic output. When viewed in aggregate, the findings showed that cities accounted for 86 percent of total employment and 90 percent of the country's GDP.
And thanks to small business clusters, we hopefully will see more success stories like RenaissanceRX, strengthening our cities, creating jobs, and expanding our economy.