What Will It Take to Reinvent Connecticut?

Identifying Connecticut’s loss of jobs over the last 22 years as the state’s “biggest and most systemic problem,” Governor Dannel P. Malloy opened his Reinventing Connecticut economic summit by telling the 600-plus in attendance that growing our economy and creating jobs “is our battle as a state.” And he made it clear that the battle cannot be fought in the political arena.
“[We must] make sure that we have a bipartisan agenda for moving the state forward,” he said. “There’s not a Democratic way of building jobs and a Republican way of building jobs. If anything, we as a state have proven that we’ve got to get together and get on the same page and get this state moving.”
Held at the Connecticut Convention Center in Hartford on Oct. 6, the summit brought together experts from the business community, academia, and state government to discuss strategies for reinvigorating the state’s economy and reversing the decades-long trend of negative job growth.
“It’s important that people come together and recognize that this is a priority, that Connecticut’s economic future is a nonpartisan issue, and that creating an economically competitive environment is the key to job creation,” said CBIA President and CEO John Rathgeber, who attended the daylong conference.
The event followed Gov. Malloy’s three-month Jobs Tour, in which he and Economic Development Commissioner Catherine Smith met with more than 70 businesses and other organizations, including CBIA. The tour and the summit were designed to generate recommendations and provide a framework for new policies the governor planned to propose in the Oct. 26th special legislative session on jobs and the 2012 regular legislative session, which runs from Feb. 8 to May 9.
The recommendations that emerged from the summit centered around three main issues:
 

• Connecticut has many strengths, and we need to build on them.

• State policymakers must recognize that a competitive Connecticut is the foundation for job creation and build a business environment where state government is a partner in rather than an obstacle to economic progress.

• Greater communication and collaboration among state government, academia, and businesses will help move our economy forward.

Building on Connecticut’s Strengths
It was frequently acknowledged during the summit that Connecticut already has the foundation for an economic resurgence, that the state need not change what comprises its economic base so much as how it supports that base and helps it grow.
“The way to build a productive [Connecticut] economy is not to try to get into fields that are hot,” said Harvard Business School professor Michael Porter, noted author and leading authority on competitiveness and economic development. “The challenge to growing the state’s economy is really to build on our strengths, to build and make what we have more productive.”
Porter pointed out that Connecticut is still a prosperous state with a highly paid, highly skilled, and innovative workforce, which means that we should address our economic challenges from a position of confidence.
“Connecticut has tremendous assets with which to approach the future of this economy.”
One of those assets, he says, is the state’s “enormous breadth of sophisticated businesses,” particularly those within industry clusters: networks of related, growing businesses in close geographic proximity.
Why are clusters so important?
“We know that job growth is disproportionately driven by clusters rather than isolated firms,” says Porter. “We know that new businesses disproportionately form where we have a cluster rather than in some separate field that’s disconnected to everything else.”
Porter noted that Connecticut made a good start at systematically developing industry clusters in the 1990s but hasn’t followed through.
“One of the things I believe the state needs to do is restart that engine,” he said.
Summit attendee Toni Hoover, a senior vice president at Pfizer and global R&D director at its New London laboratories, agrees that the state should place renewed emphasis on what she called the “care and feeding” of industry clusters. She cites the recent decision by The Jackson Laboratory to launch a $1.1 billion personalized medicine project at the UConn Health Center as a step in the right direction.
“I think the recent announcement about The Jackson Laboratory becoming part of the Bioscience Connecticut initiative can create a new spark of excitement in the state,” said Hoover. “I’m very confident that the partnership between state government, the university, and private industry will help to spur new businesses around the bioscience cluster.”
Communication & Collaboration
That partnership is a prime example of what can happen when major players in the state’s economy: for example, private industry, academia, and government: work together for economic development.
“The Jackson Laboratory commitment to the state of Connecticut,” said the governor, “is a tremendous opportunity for the world to know that Connecticut gets what it did wrong over the last 20 years and is willing”_to change with respect to our relationship with business.”
Throughout the summit, speakers emphasized the need for more of that kind of collaboration among economic stakeholders, particularly when it comes to the link between higher education and business.
That link is defined by two primary needs related to economic development and job creation:
 

• Academic researchers need support from businesses and entrepreneurial managers to help them bring their research breakthroughs to market, either by partnering with existing businesses or starting new companies.

• Businesses need educational institutions to understand their workforce needs so that there is no mismatch between graduates’ skills and the jobs Connecticut companies must fill to stay competitive on a global level.

From Ivory Tower to Factory Floor
Efforts to transform intellectual capital into job-producing business ventures are in full-swing at the state’s two leading universities, UConn and Yale.
Speaking on a panel discussing the role of academia in economic development, UConn President Susan Herbst told summit attendees that the university is already commercializing at a rapid pace in engineering, working with companies such as United Technologies Corp. and GE around advanced materials development, new medical devices, new options for jet engines, and sustainable energy.
Herbst acknowledged, however, that UConn “needs to do a much better job supporting our faculty. They have the ideas but don’t necessarily know how to build the business models, and that’s one of the reasons we needed a new vice president in this area.” In September, UConn hired Mary Holz-Clause from Iowa State to be the university’s first vice president for economic development. She begins at UConn on Dec. 2.
Panelist Bruce Alexander, vice president and director of New Haven and state affairs at Yale, provided attendees with numerous examples of his university’s efforts to turn academic successes into business successes. A key driver has been the creation of the Yale Entrepreneurial Institute, which mentors graduates in starting business enterprises in the New Haven area: an initiative that has already yielded 45 active companies.
Closing the Skills Gap
Noting that Connecticut’s four regional universities, 12 community colleges, and the online Charter Oak State College account for 48% of college students in the state: 90% of whom stay in Connecticut after graduation: and 14,000 degrees awarded last year, panelist Robert Kennedy believes that the impact of those 17 institutions has been underestimated.
Kennedy is the new president of the Board of Regents of Higher Education, the state agency charged with overseeing those colleges and universities. He argues that they are critical to preparing graduates to fill middle-skill positions, jobs in fields such as healthcare and the maintenance of advanced machinery that cannot be outsourced.
“Demand for middle-skill jobs [in Connecticut] will increase by 46%,” said Kennedy, calling those jobs the backbone of the state’s economy.
He told the summit audience that a key part of his job is to close the skills gap, to make sure that graduates’ skills match up with workforce needs. To do that, he says, he’ll need to communicate closely with businesses.
“Academia must be more nimble in terms of meeting the changing needs of business and industry,” said Kennedy, adding that he plans to meet with as many businesses and industries as possible in the coming months.
Wanted: More Responsive State Government
If there was one overarching recommendation to take away from the summit, it was that state government must recognize that competitiveness is the foundation for job creation and take steps to become a partner in rather than an obstacle to business growth. How? For starters, by easing the regulatory burden on businesses and streamlining regulatory processes.
Gov. Malloy noted that one of the things he heard most often on his Jobs Tour was how the state has made it more difficult for companies to do business “by giving slow answers, too much regulation, and quite frankly standing in the way of progress, that is, your progress.”
Rathgeber has heard the same from CBIA members for years. He says that the summit included many good points about best practices of other states, particularly North Carolina, whose economic success was attributed by several speakers to large investments in higher education and research infrastructure.
“It’s important to recognize, however, that North Carolina is also a very business-friendly state,” says Rathgeber. “It’s a state that nurtures businesses by not overregulating them or adopting policies that add to their costs. If you want to set job creation in motion, that’s where you start.”
Harvard’s Michael Porter agrees with that premise and urges policymakers to “relentlessly improve the business environment in which all Connecticut companies are operating,” adding that “no company can be productive if it doesn’t have the right kind of business environment that allows it to be efficient, that supplies the right skills, and avoids unnecessary costs and delays. That’s agenda number one”_that’s a classic kind of agenda in economic development.”
Attendees at the summit’s afternoon breakout sessions also called for improvements in the way the state interacts with the business community. Much of the discussion focused on ways of helping small businesses.
Bonnie Stewart, CBIA’s vice president of government affairs participated in one of the breakouts, noting that “there was much talk about the need for state agencies to be better coordinated in an effort to make the state more user-friendly for businesses.”
CBIA Senior Vice President of Public Policy Joe Brennan heard similar points in another discussion group.
“Many of the participants spoke about the need for better cooperation between state government and municipalities,” says Brennan, “as well as among state agencies: a need to break through the silo approach.”
Other recommendations were that the state should:
 

• Concentrate on helping businesses comply with regulations, imposing penalties only as a last resort.

• Appoint a small-business ombudsman to service the needs of small firms.

• Speed up the permitting process. (One participant quipped that startup companies run out of capital by the time they get the permits they need.)

• Adopt strict deadlines for the approval of permit applications.

Will the National Economy Cooperate?
Leading up to his economic summit and the Oct. 26 special session, Gov. Malloy cautioned that the impact of steps the state takes to spur economic development will depend on the performance of the U.S. and global economies.
Economist Steve Cochrane, managing director of Moody’s Analytics, sees some cause for optimism at the national level but warns that Connecticut will have to adjust to some new economic realities.
Cochrane told the summit attendees that optimism is justified for four reasons:
 

• U.S. businesses are generally in good shape; corporate profits are on the rise, and companies have ample cash on hand with which to hire and grow.

• The U.S. economy has an increasingly competitive cost structure, including unit labor costs, which have fallen.

• Households are quickly deleveraging.

• Banks are well-capitalized, very profitable, and in good shape to provide the fuel for job creation.

Cochrane noted, however, that as Connecticut’s government leaders make job creation policy, they need to consider a new economic landscape. Unlike in the last decade, consumers and construction won’t be leading the economy in the next decade. Instead, Cochrane argues, the economy will be driven by exports to emerging markets and business investment in equipment, machinery, computers, software, and advanced corporate services.
“So job creation [efforts],” he says, “would do well to focus on goods and services needed for business investment and exports, including the high-value products that serve both [emerging and European] markets.”