Online Extra: Competition in the Triangle

The counties in North Carolina's Triangle region discover that they can become more competitive only by growing more cooperative

By Peter Engardio

North Carolina's Research Triangle Park was way ahead of its time at its conception 50 years ago. The idea: Have businesspeople chip in to buy a big piece of land—between Duke University in Durham, North Carolina State University in Raleigh, and the University of North Carolina at Chapel Hill—to be managed by a nonprofit agency. Members of the nonprofit Research Triangle Committee included leaders from across the State of North Carolina in government, business, and higher education.

Next: Use the science and technology departments of those schools, low land costs, and a virtually union-free environment to lure investors.

That formula worked beautifully for years as corporations like IBM (IBM ), GlaxoSmithKline (GSK ), Lucent Technologies (LU ), and Cisco Systems (CSCO ) opened huge production plants. By the peak of the tech boom in the late 1990s, the Triangle region, which includes 1.6 million people, was creating 45,000 new jobs a year, and unemployment had plunged to 1.3%. Then came the tech bust, when unemployment shot up for the first time in memory.


  But that wasn't the scary part. The Council on Competitiveness, a Washington think tank, hired Harvard competitiveness guru Michael Porter to do a study of the Triangle.

The findings were disturbing. First, the Triangle still depended too much on fading manufacturing sectors. Even though it had a reputation as a high-tech area, most of that activity was confined to the 7,000 acres of the original industrial park.

In fact, North Carolina's economy depended on manufacturing more than any other state did. And its electronics, textile, and furniture production jobs were fleeing fast to China.

Other key economic drivers were tobacco, government, and universities. "You didn't have to be a real genius to realize these industries wouldn't provide the growth we needed," recalls says Charles Hayes, chief executive officer of the Research Triangle Regional Partnership, an agency coordinating the region's development strategy.

What's more, while other regions around the world had aggressive, well-thought-out strategies for development, the Triangle lacked a clear vision for remaining globally competitive. "Developers forever said that we need a diversified economy and need a strategy," says Hayes. "But when you look at what this region sold for years, it was a good work force, less-expensive land, a good climate, and proximity to most of the U.S. population." Trouble is, many other cities can boast the same things.

The study served as a wake-up call that prompted government agencies, businesses, and universities in central North Carolina to devise a new game plan called Winning the Job Wars of the Future. The basic elements: college training programs for 3,000 new life sciences professionals; research institutes for next-generation manufacturing technologies; and much greater collaboration among governments, schools, and industries across the region in order to develop new growth sectors.


  One big change was greater awareness that communities in central North Carolina were in the same boat. In fact, the real threats were coming from across the U.S. and abroad. "We used to think South Carolina was the competition," Hayes says. "We realized the competition is now global."

A first step was to develop a coordinated strategy for the entire region. Previously, each of the 13 counties in the Triangle region essentially competed against one another for investment with its own economic development agency and strategy. "Now we have one overarching strategy that all 13 countries have bought into," says Hayes, who, before joining the Research Triangle Partnership 10 years ago, led one of those county agencies.

Several counties now even share the same tax base. "None of them sell their counties anymore. They sell the region. We have come to grips with the idea that before County X beats County Y, we had better make sure that project doesn't go to Austin, San Diego, or Singapore," Hayes says.

The Michael Porter study also drove home that the Triangle had to think a lot harder about what it has to offer. Forty different U.S. states cite biotech as a strategic industry to target, and governments in Singapore, Ireland, India, and France are investing heavily to develop the sector. "We realized we can't just say, 'We have a good biotech and life-sciences sector, so y'all come," says White. "We need innovation coming from our universities, the proper tax incentives, good manufacturing, and policies to foster a good entrepreneurial climate."


  The new programs at the region's big universities aim to train thousands of engineers across all life-sciences disciplines, while new programs at community colleges will offer 120-hour programs to train production workers suitable for high-tech pharmaceutical and biotech plants.

The Triangle has long lagged behind regions like Silicon Valley and Boston in creating tech startups. But efforts also are underway to change that by fostering more incubators at universities, boosting public funding for private-sector research collaborations at schools, and efforts to lure more venture capital.

Such efforts efforts will take years to bear fruit. But Hayes says he believes the Triangle has woken up to the challenge. "We have seen other regions and towns that have not survived because they didn't change," he says. "We don't want to wake up some day and say, 'What happened?' "

Engardio is a senior writer for BusinessWeek in New York

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