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MSP Regional Cluster Competitiveness Study - Oct 2013M I N N EAPOL I S,34 y0 ! 5, 2 % )/ . ! , #, 5 34 0/2 #/ - 0 0/4)4)6 % 0/33 34 5 $ 9 Lee M unnich Jonathan Dworin Nebiyou Tilahun Matt Schmit State and Local Policy Program Humphrey ,Sahool of PublicAffairs University of Minnesota October 2013 ABSTRACT This study uses both quantitative and qualitative data to profile the largest industry clusters in the Minneapolis -St. Paul (MSP) region. Quantitative data was gathered using the Cluster Mapping Tool, a tool developed for the U.S. Department of Commerce, Economic Development Authority (EDA), by Harvard Business School's Institute for Strategy and Competitiveness. The study focuses on the potential for knowledge flows across basic (exporting) industry sectors in the MSP region. This is analyzed by looking at similarities in occupations that different industries hire— particularly focusing on specialized workers. The study presents findings and recommendations for the MSP region. State and Local Policy Program, Humphrey School of Public Affairs, University of Minnesota -Twin Cities; 295 HHH Center; 301 19th Avenue South; Minneapolis, MN 55455; www.hhh.umn.edu/centers/slp. Inquiries may be directed to Lee Munnich, Jr. at lmunnich&umn.edu or 612-625-7357. On the cover, starting from the left: Reflection of the Central Avenue bridge in the Mississippi River, Minneapolis, MN, copyright © 2013 iStockphoto.com/nikitsin; St. Paul skyline, copyright © 2013 bigstockphoto.com/pro ale/stevieg; Minneapolis skyline, copyright © 2013 iStockphoto.com/JMichl. Copyright © 2013 University of Minnesota Board of Regents Contents Introduction..................................................................................................................................... 1 Methodology............................................................................................................................... 1 ClusterSelection.......................................................................................................................... 2 Cluster Competitiveness Analysis ................................................................................................ 4 KeyFindings................................................................................................................................. 6 Minneapolis -El. Paul Medical Devicesauster.............................................................................. 10 Minneapolis -El. Paul Lighting and Bectrical Equipment Cluster .................................................. 18 Minneapolis -El. Paul Analytical Instruments Cluster.................................................................... 22 Minneapolis -El. Paul Processed Food Cluster............................................................................... 27 Minneapolis -El. Paul Metal Manufacturing Ouster...................................................................... 32 Minneapolis -El. Paul Distribution Sarvices, Transportation, and Logistics Clusters .................... 39 Minneapolis -El. Paul Financial Sarvicesauster............................................................................ 45 Minneapolis -El. Paul Publ ishi ng and Printingauster...................................................................49 Minneapolis -El. Paul Production Technology Ouster................................................................... 52 Minneapolis -El. Paul Information Technology auster.................................................................. 59 Minneapolis -El. Paul Management of Companies Quster............................................................ 63 EmergingOustersof Interest/ Connections across Clusters.........................................................66 WaterTech................................................................................................................................ 66 3DPrinting................................................................................................................................. 66 BioFanewabl es.......................................................................................................................... 67 Fbbotics..................................................................................................................................... 67 ClusterInteraction..................................................................................................................... 67 Occupational ClustersintheTwin QtiesFbgion...........................................................................69 Data........................................................................................................................................... 70 Methodology............................................................................................................................. 71 Conclusion................................................................................................................................. 76 Introduction Industry clusters are geographic concentrations that represent multiple levels of the business ecosystem. The framework includes competing, complementary, and independent companies, or companies that do business with each other and/or have similar talent, infrastructure, and technology demands. On a broader scale, industry clusters help paint the picture of the export - based industries within a regional economy. Approximately 26 percent of all jobs within a region can be attributed to traded clusters, those that sell goods or services outside of the region. Traded clusters are of particular interest to policymakers and economic developers since they generate wealth, pay higher salaries, support the locally based jobs within the region, and help to assure a competitive regional economy and quality of life. In June 2012, the State and Local Policy Program at the Humphrey School of Public Affairs at the University of Minnesota, with support from the University Metropolitan Consortium (UMC), set out to conduct an in-depth study on the competitive industry clusters in the Minneapolis -St. Paul (MSP) region of Minnesota. Founded in 1991 to increase the Humphrey School's commitment to policy issues throughout the state, the State and Local Policy Program has conducted regional cluster studies within the Minneapolis -St. Paul (MSP) region and throughout the nation since 1995. This particular study leverages quantitative data in addition to information gained through company interviews to produce a comprehensive cluster study of Greater MSP. It offers a useful compendium to understand the dynamic patterns and linkages within the regional economy today. Methodology The research project used both quantitative and qualitative data to profile the largest industry clusters in the Minneapolis -St. Paul region. Quantitative data was gathered using the Cluster Mapping Tool, developed for the U.S. Department of Commerce, Economic Development Authority (EDA), by Harvard Business School's Institute for Strategy and Competitiveness. This tool uses County Business Patterns (CBP) data, which allows the user to analyze and compare regions and clusters based on geographical and economic factors such as wages, employment, share of employment, and location quotient. Quantitative data was used to assess the strength of the region, while qualitative data was used to help better explain the historical and anecdotal role of clusters in the region. Company interviews were used to gain insights into MSP's competitive advantage. Newspaper, magazine, and journal articles and company websites were also used to gather more information on industries within the region. Each of the companies interviewed for this project is highlighted in its corresponding cluster chapter. Finally, in a separate analysis, the study focuses on the potential for knowledge flows across basic (exporting) industry sectors in MSP, or Twin Cities, region. This analysis looked at similarities in occupations that different industries hire—particularly focusing on specialized workers. The assumption is that the presence of a skilled workforce acts as an attractor to employers sharing similarities in labor needs even if they do not operate in the same industry. The more that multiple industries share a specialized workforce, the higher the likelihood for knowledge sharing through worker transfers. #-pN *:5 30 F)E Eleven clusters were selected from 41 traded clusters (industries that export products or services outside the region) in the Cluster Mapping Tool. In addition, corporate headquarters were added to the cluster analysis because of their importance to the MSP region. Corporate headquarters fall within the "management of companies" category in the NAICS industry classification scheme and are considered a local subcluster for most regions in the Cluster Mapping Tool. The following figure shows the concentration and linkages of traded clusters in the MSP region based on location quotients, the ratio of the share of regional employment to the share of national employment for each cluster. Competitiveness and Composition of MSP Metro Area Linkages Across Traded Clusters Location Quotients. 2010 Fishing & Textiles Fishing Entertainment €etabricated .27 Products Hospitality 1.07 Enclosures .15 & Tourism 12 Agricultural 58 Products 34 ransportation Furniture Distribution & Logistics uilding .22 eros pace Services 1,13 Vehicles & Fixtures, Construction Jewelry & 1.09 Defense Equipment & Materials Precious Information 09 Services .56 Metals Tech 1.01 Heavy Processed 45 Business 1.23 _ Construction Food Services Services 1.01 89 Education & .60 Forest Financial Knowledge Power Products Services Creation _ . Generation 1.07 132 .99 ommuni- .73 Publishingcations & Printing Biopha Equipment Heavy 1.68 Ceuticals -46 Machinery _ 91 otorDriven .57 Apparel Chemical Products .30 Products Tobacco 1.20 Leather & Oil 1.54 .71 Related Gas Products 18 Automotive 82 Plastics Aerospace ,49 1.20 E] Strong Engines ® Stronger 10 Footwear M Strongest Sporting Location Quotient =MSP Industry Job g &Recreation Share / US industry Job Share Goods 5o— Sauce Prof. Michael E. Poner, US Cluster Mapping, ifawd 1.18 Note. Clusters with overlapping borders or identical shading have at Business School and U 5. Economic Deuempment Adrirastratm; Ricard ,east 20%overlap (by number of industries) in both directions, Briden. Project Uiredoe. �clus[efmi-pous The clusters selected for analysis are highlighted below. The following figure shows the level and change in location quotient for each industry cluster and the cluster employment level based on the size of each bubble. RAI 2010 Industry ntlo<Ia t Industry Clusters in the MSP Region: A Dynamic Ecosystem 45 Current strengths, emergence and change, and key selected traded clusters {1999-2010) 4 iSelected cluners 3.5 QNror clusters rota) MSP cluster employment (20101 Reflected In bubble size. 3 Location Quotient: MSPindustry employment ploent share over 1 [US shere) ladicates re�ortal specialization. 2.5 2 1.5 PtnraWncl[A nano sa t 1 aw Smote: Pmf. Michael E. Porter, U.S. cluster Mapping. H.r Buslnass 0.5 Scheal all O.S. Econarmot DeveMpnient Admiaistrstb ; Richard B yk,, ftp- Dlractm. a Mpwgamam of Cent i ias data ham Coolly Bpslnasz Pattams, U.S. Census B.— LQ change 2002 ro 2010 due to discluama limits. Maieagemerd of fnmP'nks' LlBhtlne a,:! -: - rital Equ , t PublKhing end Pnnting ed coon f ica, `y lechnala�y� Pruductr mtn,�r„gang ,J Alai DfrtHbutbne°� PI ucsl �° ufxtu a \\man nn scvices J G— t. oads V -2 -1.5 4 -0.5 0 0.5 Change in Location Quotient (1998-2010) The data available for the Cluster Mapping Tool during the course of this study covers the years 1998 to 2010. The data allows comparisons with other states for the cluster analysis and the major competing regions for each cluster are shown. The Minnesota Department of Employment and Economic Development (DEED) has compiled more recent employment data by industry through 2012. While the employment data collected by DEED is not completely consistent with the Cluster Mapping Tool data, based on County Business Patterns industry data, the following shows percent changes in employment for the clusters examined in this study, based on calculations by DEED staff. MSP Regional Employment Growth by Cluster, 2010-2012 Cluster Employment Growth, 2010-2012 Lighting and Electrical Equipment 13.69% Metal Manufacturing 10.21% Management of companies 6.44% Production Technology 5.86% Processed Food 3.92% Analytical Instruments 1.88% Financial Services -0.26% Information Technology -0.52% Transportation and Logistics -0.68% Distribution Services -1.10% Medical Devices -1.60% Publishing and Printing -1.76% Source: Minnesota Department of Employment and Economic Development 3 For each industry this study includes a cluster competitive analysis based on Michael Porter's diamond of advantage.' The diamond of advantage identifies four components that affect cluster competitiveness by increasing the productivity of constituent firms and industries, by increasing the capacity for innovation and thus for productivity growth, and by stimulating new business innovation that supports innovation and expands the cluster. • Factor conditions specialized labor pool, specialized infrastructure, selected disadvantages that drive innovation and productivity improvement; • Demand conditions sophisticated and demanding home customers driving companies to innovate, especially if local demand anticipates global markets; Firm Strategy, Structure, and Rivalry Factor F_. ..d Conditions Iconditions Related and supporzing industries • Related and supporting industries internationally competitive supplier industries, creating a high quality, supportive business infrastructure, and spurring innovation and spin-off industries; • Context for firm strategy and rivalry intense local rivalry among local industries that supports more sophisticated competition and higher levels of productivity; a local culture, institutions, and policies that influence individual industries' innovation and competition. The following is a summary of this cluster competiveness analysis for all clusters in the MSP region: Factor Conditions: • MSP clusters depend on a skilled work force, particularly in engineering, medical, IT, design, production, logistics, and distribution fields. • University of Minnesota plays a critical role in research and education of high -skilled workers. • MSP's large number of corporate headquarters compete for the best talent within the region and attract highly productive workers to the region. • MSP's clusters historically developed and still benefit from Minnesota's natural resources—food, lumber, minerals, water. • Ninth Federal Reserve District home and corporate headquarters stimulate robust financial service and insurance industry. ' Porter, Michael. On Competition, Harvard BusinessS�hool Press, Boston, 2008. C! Demand Conditions: • Past local demand from computer and telecommunications industries and now medical devices have contributed to development of MSP's electrical equipment, analytical instruments, and metal manufacturing clusters. • Increased global demand for food, feed, and fiber due to economic growth and demographic shifts in key developing countries, such as China and India, are creating opportunities for MSP's globally competitive processed food companies. • Sophisticated local demand for healthy food and green products has helped to influence the direction of MSP's legacy food companies and entrepreneurs. • Corporate headquarters contribute to favorable regional demand conditions for the financial industry as well as other clusters such as publishing and printing, advertising, and legal and business services in MSP. • Local demand from the region's competitive industries has contributed to the development of companies in production technologies and other clusters involved in improving productivity through technology and process improvements. Related and Supporting Industries: • Due to the high concentration of corporate headquarters in Minnesota, there are many strong related and supported companies headquartered in MSP. • MSP's analytic instruments cluster is tied closely to the region's past and current success in medical device and lighting and electrical equipment clusters. • Transportation and logistics and distribution services clusters are related to many other clusters, as nearly all traded clusters require some form of transportation, distribution, and logistical services. • MSP clusters benefit from the high-caliber professional services available, including accounting, advertising, legal, and marketing. • Information technology products and services are utilized by a large and growing segment of the economy, and its employees are often recruited to fill in-house IT positions in competitive MSP clusters. Context for Firm Strategy and Rivalry • MSP's strengths in multiple clusters combined with its concentration of major corporate headquarters combine to create an ecosystem that is ripe for innovation and entrepreneurship across clusters. • MSP's corporate headquarters and major employers have competed historically for talented workers, occasionally recruiting from one another's ranks. • MSP's corporate headquarters tend to focus their attention to global and national competitors, often sharing supportive rather than rivalry -based relationships with one another. 5 This study complements a case study by the Humphrey School's State and Local Policy Program on how the Minneapolis -St. Paul region has benefitted from applying a cluster approach as a conceptual framework for diagnosing the regional economy and as a platform for joint action to address the challenges identified? The cluster framework provides public and private regional leaders with a common language for understanding regional competitiveness, significantly enhancing the effectiveness of their dialogue. By organizing the policy discussion around clusters, regional organizations such as Greater MSP, the Regional Council of Mayors, and the Metropolitan Council have a common platform for focusing programs and investments through a broader regional economic development strategy. This expansive cluster study yields many interesting results and insights. The following are six important findings. Minneapolis -St. Paul is home to a large concentration of corporate headquarters, including 19 Fortune 500 companies and eight Fortune 1000 companies. Minneapolis -St. Paul is also home to the nation's largest private company, Cargill, and several other very large private corporations such as Carlson, M.A. Mortenson, and Holiday Companies. Although the region is also home to many smaller firms and other components of industrial supply chains, these corporate headquarters play a major role in fueling the regional economy. The reasons for the location of many of these headquarters vary; however, many corporations attribute Minnesota's competitive advantage to the state's strong work ethic, well-trained workforce, and high quality of life (CEOs for Cities Report, 2012). Strong 4• M00377 " ° �!. &Oil § O E3— E@ 4— § Orodu£-)�L °fi§ ! §a°,F• § - anufacturing Minneapolis -St. Paul's well-trained workforce, in conjunction with other locational factors, has allowed the region to specialize in production and advanced manufacturing. While shipping costs to major markets on the east and west coasts limit Minneapolis -St. Paul from being a key manufacturer of large-scale products, the region has adapted by manufacturing niche -market, highly specialized, and frequently smaller or lighter products. In many instances, these highly technical components stemmed from demand from some of the region's more established legacy clusters, such as medical devices or processed food. As the MSP region continues to grow within these industries, the ability to attract and retain qualified labor becomes extremely important not only to the larger corporations but to the smaller, more specialized firms as well. 2 Munnich, Lee W., 1., L Burke Murphy, Megan L Fbberts, and Jennifer Schuler. Minneapolis -3. Paul fbgional Ouster Initiative. Roviding a Framework for Minnesota's Economic Competitiveness. Sate and Local Fblicy Program, Humphrey School of Public Affairs, University of Minnesota (2013) C: 7 (E 0 13. > ° # 0/# p�� *�.-.-a�_/��: \_> Yp�G�� R R - 30 2 • 13C O � Y 40' \' O 4:5 - ICL /: The Minneapolis-St. Paul region benefits from a diverse portfolio of traded clusters with linkages to other clusters within the region as well as with competitive clusters in Greater Minnesota. These linkages result from factor conditions, such as a skilled and specialized workforce serving multiple clusters, demand conditions where competitive clusters drive innovation in other regional clusters, and related and supporting industries that form a business ecosystem within the region. For example, in the MSP regional economy clusters, analytical instruments, and production technology play a largely complementary role to other clusters, such as medical devices and processed food. Other clusters, such as distribution services, transportation, and logistics, play a critical role in the distribution and dissemination of the region's manufactured products. The MSP region also benefits from linkages with competitive Greater Minnesota clusters, such as processed food, publishing and printing, and production technology. Linkages (3®+ §(3• Sharing The most prominent sectors in the Minneapolis-St. Paul region also exhibit the potential for knowledge sharing by their occupational hiring practices. This study finds that diverse industries share multiple specialized occupational classes. These common hiring practices enable knowledge sharing as workers flow from industry to industry as job changes occur. For example, occupational data in the region show that corporate headquarters (management of companies sector) seek expertise that is also sought by electromedical manufacturing and insurance carriers. These and other occupational sharing patterns highlight certain occupations as important to multiple regionally important industry clusters. Occupations run the range from those requiring academic degrees (e.g., statisticians, programmers, and engineers) to those in trade sectors (e.g., machine operators and mechanical drafters). The presence of these hiring similarities also suggests that the policymakers ought to take a closer look at the extent to which tomorrow's workforce is being prepared to ensure the regions competitive edge in key industries. �..�<.,[F�o®c °�)°>$<®•o�� C' rowth Many of the most prominent companies are headquartered in Minneapolis-St. Paul because they were formed within the region. Minnesota has long been known for its entrepreneurial and innovative nature, beginning with advanced manufacturing from the mining industry, its legacy as a global milling hub, and as a global epicenter for medical devices. For MSP to continue to grow and prosper it must not only continue to support these legacy industries, but, more importantly, renew and enhance the entrepreneurial and innovative spirit that led to their establishment. Within its established industries, the region continues to innovate, in addition to innovating around complementary and emerging industries as well. 9 • <_(3@E / pportunities Stemming from its legacy industries, Minneapolis-St. Paul is at the forefront of many emerging technological fields, such as advanced water tech, biorenewables, 3D printing, and robotics. Although it is difficult to classify each of these industries in their own cluster (or, in many VA instances, into a predetermined cluster), they all have the capability to advance the region's economy. All of these fields are high-tech and high -knowledge industries with far-reaching regional, national, and global implications. The region needs to continue to attract and retain the workforce necessary for industrial and technological growth. E:? Medical Qevim Employment (Thousands) 30 Me6ical Devices employment and location 25 quotient increased 20 con siste:n tly until 2007, wh ere it fi as since tapered 15 Off. 10 0 Diwosic Ophthalmic Sub;:ances� Goods IP Medical Surgical Equipment lnstrl:ments 374 and .supplies .58 Los Angeles h as the fargest employment within the Medical Devices cluster, followed by Minneapolis -St. Paul and New York. Location Quotient 1595 00 02 04 06 5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 08 2010 The largest sub cluster within the Medicarl Devices cluster h Surgical Instruments an d Supplies, !ollo we d by Medical Equipme.i t. 2{10 Total Employment(Thousands) Los Angeles MSA (1) Minneapolis - St Paul MSA (2) Neve York MSA (3 ) Boston MSA (4) Philadelphia MSA(5) San FranciscoMSA(6) M ilwa ukee MSA (7) Silicon galley MSA (S) Salt Lake City MSA (9) San Diego MSA (10) 0 10 20 30 slow 0 10 20 30 Minneapolis-3¥y0°p •§(r£ $-a(R->_#"per<_ As defined by the BioBusiness Alliance of Minnesota (BBAM) and the Minnesota Department of Employment and Economic Development, "the medical device market consists of all instruments, apparatuses, implements, implants, in vitro reagents, or component parts or accessories that are used to prevent, diagnose, treat, or cure diseases."3 Beginning in 1949 with the invention of the pacemaker and the formation of Medtronic, Inc., the Minneapolis -St. Paul medical devices cluster is one of the metropolitan area's most well known and influential industry clusters. Industry leaders such as Boston Scientific, 3M, Medtronic, and St. Jude Medical anchor the cluster and have benefited historically from being surrounded by numerous small- and medium-sized medical device companies, leading to acquisitions and competition. Likewise, the cluster has been home to groundbreaking medical research stemming from large institutions, such as the University of Minnesota or the Mayo Clinic, and other regional hospitals and life science firms. Although the cluster is relatively new to the area, Minneapolis -St. Paul's strength in medical devices stems from its ability to innovate, collaborate, and compete nationally, leading to decades of growth. The leading private sector firms, specialized suppliers, and strong institutes for collaboration within the region have made the medical device cluster a cornerstone of Minnesota's economy. Despite Minneapolis -St. Paul being home to many major cardiac device firms, the cluster is diverse and ranks high nationally in a variety of other medical device fields. As a whole, the MSP region has the second most medical device employees in the United States, and the third largest location quotient, which is used to measure how concentrated the industry is in the region compared to the nation. In 2010, the region had 20,297 employees and a location quotient of 3.75, meaning that industry employment is 3.75 times more concentrated within the region than in the nation. Other highly competitive regions with significant employment in the medical device industry cluster are Los Angeles, New York, Boston, Philadelphia, San Francisco, Milwaukee, San Jose, Salt Lake City, San Diego, and Chicago. 3 BioBusinessAlliance of MN & Deloitte Consulting, "Destination 2025—Minnesota's Medical Device Industry: AVision for the Future," January 2009. 10 Medical Devices Cluster Employment by Metropolitan Statistical Area, 2010 Los Angeles -Long Beach -Santa Ana, CA Minneapolis -St. Paul -Bloomington, MN -WI New York -Northern New Jersey -Lang Island, NY -NJ -PA Boston -Cambridge -Quincy, MA -NH Philadelphia -Camden ;, ilmington, PA -NJ -DE -MD San Francisco -Oakland -Fremont, CA tlilwaukee ,'Vaukesha ,'Vest Allis, VVI San Jose -Sunnyvale -Santa Clara, CA Sai Lake City, UT San Diego -Carlsbad -San Marcos, CA Chicago -Naperville -Joliet, IL -IN -VVI Dallas. -Fort Worth -Arlington, TX Indianapolis -Carmel, IN Denver -Aurora. CO Miami -Fort Lauderdale -Pompano Beach, FL Seattle -Tacoma -Bellevue, WA Providence -New Bedford -Fall River, RPMA Portland -Vancouver -Beaverton, OR -WA Cleveland -Elyria -Mentor, OH Memphis, TN -MS -AR Employment, 201D � 1 a,�o-4 �a,aao sa,a4 Rank I in us I L 1 26,65- 2 20,297 3 19-3D4 4 1 6,087 5 1y -S9 6 11,008 7 10,5542 8 9,:750 9 8,878 19 8,401 11 3,395 12 6,774 13 6-427 14 5,929 15 5-297 16 5,291 17 5-254 18 5,215 19 5,115 20 5,055 The MSP region is most competitive within the medical equipment and surgical instruments and supplies subclusters, where it ranks second nationally in terms of employment. Of metropolitan areas with greater than 5000 surgical instrument employees, MSP has the second highest location quotient. Warsaw, IN, which has the highest location quotient within the subcluster, is home to DePuy Manufacturing, the world's first orthopedic device manufacturer and competitors, such as Zimmer, Inc. and Biomet. Despite having the second most medical equipment employees, MSP has the seventh largest location quotient of metropolitan areas with more than 1000 employees within the subcluster. Still, the region has a location quotient of 6.71 within the subcluster, meaning that medical equipment employment is nearly seven times more concentrated within the region than in the nation. 11 2010 Cluster Breakdown, Minneapolis -St. Paul -Bloomington, MN -WI Metropolitan Area, Medical Devices Cluster Cluster/Subcluster National MSP Other Competitive Name Employment Employment Location Regions Rank Quotient Medical Devices 20,297 2 3.75 Los Angeles, New York, Boston Biological Products 31 96 0.07 East Stroudsburg (PA), Philadelphia, San Francisco, New York Dental Instruments and 37 61 0.17 Salt Lake City, Suppliers Portland, Los Angeles Diagnostic Substances 375 26 1.05 Indianapolis, San Diego, San Francisco, Boston, Rochester (NY) Ophthalmic Goods 580 12 1.87 Los Angeles, Dallas, Jacksonville, Rochester (N') Surgical Instruments 11,730 2 4.10 Los Angeles, New and Supplies York, Warsaw (IN), Boston Medical Equipment 7544 2 6.71 Milwaukee, Los Angeles, San Jose, New York Several major breakthroughs in the Medical Devices realm have occurred in the MSP region. Medtronic developed the first wearable, external, battery-operated pacemaker in 1957. Other notable inventions and innovations include the first bileaflet mechanical heart valve (University of Minnesota, 1972), the first inflatable penile prosthesis implant (American Medical Systems, 1973), the first implanted mechanical heart valve (American Medical Systems, 1977), and the single -channel cochlear implant (3M, 1984). Advancements with the pacemaker also occurred in 1978, with the first single -chip pacemaker, which reduced size and increased reliability (Siemens- Elema), and in 2004, when Medtronic unveiled the first digital pacemaker. Innovations have also occurred at the university level, especially with the work of Dr. Doris Taylor, who specializes in groundbreaking stem cell research. In 2008 Dr. Taylor created a working rat heart from baby rat stem cells. 12 Medical Devices Cluster: Medical Equipment Subcluster Share of National duster Employment by Metropoiitan Statistical Area. 1998 - 2010 12%- 11W Milwaukee -Waukesha -West Allis, WI -4% -3% -2% -1% 0% 1% 2% 3% 4% 5% 6% Change in Share of National Employment, 1998 - 2010 Employment 1998 - 2010 Added Jobs Lost Jobs =Employees 4,625 Medtronic was founded in the MSP region and is the world's largest medical technology company. The company develops and manufactures devices and therapies that treat more than 30 chronic diseases ranging from heart failure to Parkinson's disease to obesity and diabetes. St. Jude Medical, a major manufacturer of catheters and cardiac resynchronization devices, and pacemakers, also was founded in the region. Boston Scientific, a developer and manufacturer of devices in areas such as neuromodulation and electrophysiology, also maintains a strong presence in the region with offices in Maple Grove, Plymouth, and St. Paul. In addition to the many small firms that comprise the cluster, other major medical device companies with a presence in the area include: • 3M, which largely manufactures solvents used by the medical device industry for precision cleaning and coating deposition; 13 1095 G70 r � 995 8%- off Minneapolis -St Pavel -Bloomington. MN -W 0 E T C, 9{j 8ostnn-CarnMidge-4uine)j, MR -NW Lies Angeles -Lang Beach -Santa Ana. CA c ra 595 San JoseSunnyvale-Santo CA Z .` o 495 York-Nwhhaern tWersey-Long Denver-AWore. CQ lsta*d. W-NJ•PA % :--attle-Tamma-9ellens elt Lake City, UT Pittsburgh, PA fA 2%-p eveland-EI X41[I� -.mgo-Naperville-Joliet. IL -IW T n FrsnCi__Oas r - A 1% • PhildaW - rn{kt-'UE-MD Houston-SuWLand-, .p�� I �J �� seeh. FL �W Mantt LNV -4% -3% -2% -1% 0% 1% 2% 3% 4% 5% 6% Change in Share of National Employment, 1998 - 2010 Employment 1998 - 2010 Added Jobs Lost Jobs =Employees 4,625 Medtronic was founded in the MSP region and is the world's largest medical technology company. The company develops and manufactures devices and therapies that treat more than 30 chronic diseases ranging from heart failure to Parkinson's disease to obesity and diabetes. St. Jude Medical, a major manufacturer of catheters and cardiac resynchronization devices, and pacemakers, also was founded in the region. Boston Scientific, a developer and manufacturer of devices in areas such as neuromodulation and electrophysiology, also maintains a strong presence in the region with offices in Maple Grove, Plymouth, and St. Paul. In addition to the many small firms that comprise the cluster, other major medical device companies with a presence in the area include: • 3M, which largely manufactures solvents used by the medical device industry for precision cleaning and coating deposition; 13 • Starkey Laboratories, which specializes in hearing aids ranging from digital, invisible, wireless, and children's hearing aids of several varieties; • Smiths Medical, a manufacturer of drug delivery systems that help treat cancer patients and provide pain relief, and vital care products for the reduction of infections and managing patient airways throughout the surgical process; • GN Resound, a developer of hearing aids and diagnostic audiological instruments; and • EV3, a developer of devices such as stents, guidewires, and catheters. Minnesota's general business environment also allows for the region to maintain its competitive advantage. The factor conditions within the cluster are strong, as the Twin Cities are home to numerous skilled workers with a relationship to medical devices, such as engineers, technicians, regulatory professionals, manufacturing assemblers, and clinical staff. Many companies seek out this skilled and specialized workforce. The University of Minnesota and the Mayo Clinic also interact heavily with the cluster and have historically aided in groundbreaking research and fostering entrepreneurship. These institutions, in addition to a variety of technical ::: ST. JUDE MEDICAL; EWE MORE CONTROL L"s RISK. / EAA Tt'mzk (( Wf 9 a srJ'A Founded in a. Paul in 1976, 8t. Jude Medical got its start as a manufacturer of bi-leaflet implantable mechanical heart valves. Beginning in 1994, the company went through a period of acquisitions and diversification, purchasing companies that make pacemakers and defibrillators. The company now develops and manufactures cardiac resynchronization devices, pacemakers and defibrillators, catheters, heart valves, and groundbreaking neuromodulation systems. Aglobal company with operations and manufacturing facilities worldwide, the company stands to benefit from global demographic changes, lower health care costs, and the need for medical devices in underdeveloped countries. 8t. Jude Medical employs 2800 workers throughout the Twin Oties with operations in Plymouth, Minnetonka, Maple Grove, and 8t. Paul, employing many Twin Qties engineers and other talented workers. The company incorporates many local businesses in its supply chain and continues to innovate, using advanced information technology systems to update surgical procedures while revolutionizing and modernizing the cardiovascular devices that allowed the company to grow and prosper. colleges, are also critical in training the workforce. Although the prestige of the Mayo Clinic and the University of Minnesota Medical School draws patients from across the nation, the demand for medical devices is far greater outside of the region than inside of it. Still, historical demand conditions proved pivotal in the development of the cluster as the region innovated in areas such as cardiovascular devices. Firm rivalry is critical to the continued success of the region's medical device cluster. The hundreds of firms in the cluster work closely together in supply chain linkages, while also directly competing against one another for business. This competition fosters innovation. Between 2006 and 2010, 3M, which manufactures medical device components, among other technological products, had 1016 patents while Medtronic, a strictly medical device company, had 771. Other industry leaders with a strong innovative presence include Cardiac Pacemakers, Inc., which had 575 patents between those years, Boston Scientific, which had 272 patents, and Sci-Med Life Systems and St. Jude Medical, which both had 46 patents within that timeframe. It is critical to the long-term viability of the cluster that firms compete with one another and race for market share, prompting even more innovation. Furthermore, many companies seek to buy out or merge with smaller companies in order to expedite this innovative process or diversify their medical 14 device holdings. It is important that these companies continue to grow and compete globally in order to reach newer markets. The innovative environment for new medical device companies and the venture capital dollars needed for entrepreneurship continue to create new startups to increase competition. Currently, the region is lacking in venture capital, especially when compared with other competitive areas such as California and Massachusetts. Many other clusters within the region are critical to the success of the medical device cluster. For example, the analytical instruments, biopharmaceuticals, financial services, and information technology clusters all play a role in the medical device cluster supply chain. Many companies have a distinct advantage by being geographically close to many of their more important suppliers. Suppliers within the medical device cluster include component suppliers, equipment manufacturers and integrators, and software vendors, while institutions for collaboration, educational institutions, and hospitals and doctors' offices also play a major role in shaping the cluster. One notable policy concerning the medical device cluster is the medical device tax. With the June 2012 Supreme Court decision to uphold the Affordable Care Act, a tax on medical devices also was upheld. This excise tax, which took effect in January 2013, collects 2.3 percent of the sale price on medical devices and is expected to raise an estimated $29 billion over the next decade. The tax is hotly contested among critics, including many in the medical technology industry, who suggest that it will increase health costs and lead to job losses. Minnesota's Research and Development Tax Credit is designed to encourage innovation within the cluster, helping Minnesota to be more competitive in research -intensive, high-tech areas, such as medical devices. #'jj�*<#Q#—Q.,cF» 1E 'nom Factor Cbnditions- Minneapolis -St. Paul has a skilled workforce with labor stemming from the region's premier research universities, in addition to workers from the region's larger companies. Furthermore, the region is able to utilize research that comes from the area's hospitals and universities to commercialize medical device products. Demand Conditions Demand for medical device products has become increasingly international. Because of locational factors, area hospitals and doctors' offices are able to leverage relationships with medical device companies to not only express areas of need or concern, but for testing. In recent years, the demand for medical devices has become global as many new foreign firms are entering the field, while a new global middle class (whose health has been increasing) now demands advanced medical care. FL-lated and 9ipporting Industries Among traded clusters, the analytical instruments cluster and biopharmaceutical cluster are related to medical device care. Ultimately, the development of medical devices requires relatively high-tech and high -skilled manufacturing. In addition to manufacturing, local health services (such as doctors' offices and hospitals) play a critical role in the research and development side of the industry. Professional services firms, such as patent lawyers, consultants, and regulatory aids are also crucial to the process. 15 Context for Firm Srategy and Rvalry Historically, Minneapolis -St. Paul has relied on competition among its smaller and larger firms to create a critical mass in this cluster. In recent years, with funding and regulatory inconsistencies, it has been crucial for firms to continue to innovate. These inconsistencies, however, have had an impact on the entrepreneurial market. Because of this, larger firms, research institutions, and universities have attempted to spin-off companies and new devices where they can still have the support not found in traditional start-up culture. 16 Ligh tin g and Electrical Equipment employment peaked in 2001, while the region's location quotient peaked in 2005. etal Parts 52 Lighting and Electrical Eq ENWkvp— jThci a ) 10 9 7 6 5 4 3 2 1 0 1998 Location Quotient 3 2.5 2 1.5 1 0.5 0 2410 00 02 04 06 08 The largest sub cluster within the Electrical PartsP Lighting and Electrical Equipment 42% cluster is Metal Parts, folio wed by Electrical Parts. '� Lighting Swi chgear Fixtures Manufacturing 3% 3% Chicago has the largest employment within the Lighting and Electrical Equipment cluster, followed by Los Angeles and Reading (PA). Minneapolis -.St. Paul h as the 51h highest total employment of all metropolitan areas. 2010 Lighting and Electrical Equipment Employment (Thousands) Chicago MSA (1) Los Angeles MSA (2) Reading (PA) MSA (3) New York MSA (4) Minneapolis -St. Paul... St. Louis MSA (6) Milvdaukee MSA (7) Pittsburgh MSA (8) Dallas MSA (9) Houston MSA (10) 1 0 5 10 15 Minneapolis-3Vi0' p. , Q °A§ °%• EWE" °/atp@* •AIf#"p>_* <_ The MSP region ranks fifth in the U.S. in employment in the lighting and electrical equipment cluster. Other competitive regions for this cluster are Chicago, Los Angeles, Reading, and New York. The region ranked second in employment among metropolitan regions in two subclusters, electrical parts and metal parts, with cluster employment shares three -and -one-half times the national shares. The development of this cluster has been influenced by the evolution of strong technology-based regional clusters since World War II. The MSP region was a major player in the development of the computer industry from the late 1940s through the mid-1980s, drawing upon local electrical equipment companies for specially designed components. Similarly, the telecommunications industry had a strong presence in the region from the late 1980s through 2000, generating further business for these companies. Finally, the medical device industry cluster has emerged as a premier cluster within the region since the 1980s, creating opportunities for the region's cluster of electrical equipment suppliers. Companies in this cluster may also be critical as the MSP seeks opportunities in emerging energy and green industries. 2010 Cluster Breakdown, Minneapolis -St. Paul -Bloomington, MN -WI Metropolitan Area, Lighting and Electrical Equipment Cluster Cluster/Subcluster 2010 MSP National MSP Name Employment Employment Location Other Competitive Regions Rank Quotient Lighting and Electrical 5,677 5 2.16 Chicago, Los Angeles, Reading (PA), New Equipment York Electric Lamps 10 56 0.09 Lexington (KY), Manchester (NH), New Haven (CT), Cleveland, Columbus (OH) Lighting Fixtures 175 43 0.5 Chicago, Los Angeles, New York, Philadelphia Switchgear 175 61 0.43 Chicago, Houston, Los Angeles, Pittsburgh, Milwaukee Electrical Parts 2,377 2 3.5 Chicago, Los Angeles, Allentown (PA), Little Rock Metal Parts 2,940 2 3.57 Chicago, St. Louis, Los Angeles, New York, Pittsburgh, Milwaukee Batteries N/A N/A N/A Reading (PA), St. Joseph (MO), Los Angeles In 2010 the MSP region employed 5,677 in the lighting and electrical equipment cluster with an average annual wage of $55,585. The MSP average annual wages for this cluster were the third highest in the nation. Over 90 percent of the jobs in the region were in two subclusters—electrical parts, 2377, and metal parts, 2940. The MSP region has very little employment in lighting equipment. 18 Lighting and Electrical Equipment Cluster i=mployment by ivietropolltarl 6taustl cal Lrea, 2010 Precision Incorporated was started as a machine shop in 1919. The company's major customer was the vending machine industry until electronic machines replaced mechanical machines in the 1960s. Precision was sold to Cummins in 1964. The company specialized in coil winding for transformers and provided power resistors for Onan Power, Honeywell, Summit Gear, and NSP in the 1960s and 1970s. The Minnesota computer industry was a major customer for Precision until the computer industry's decline in Minnesota in the mid-1980s. Since then Precision has shifted to the medical device industry, with Medtronic as one of its primary customers. Precision's other long-term customers have included Graco, Data Card, Cummins Engine, Honeywell, General Electric, and Rockwell International. Precision has experienced the rise and fall of the computer and telecommunications industries in the Greater MSP region and benefited from the growth of the region's medical device industry. The company has implemented quality systems and is ISO 9000-1345 (medical device) certified. Precision Inc applications for medical device customers include: • High frequency inductors for surgical navigation instruments • Primary and secondary coils for wireless charging applications • Antenna coils for telemetry use in reading and programming pacemakers and other like devices • PFC inductors used in defibrillation devices • Send and receive coils for base to device communication 19 Employment, 2010 a z,o-na 4,000 6,aaa s,o-o-o 1a,00 -a 1z,aaa 14,o -aa ftnk Inn US Chicago-NapewilleJoliet, IL -IN -WI 1 Las Angeles -Long Beach -Santa Ana, C4 2 9,238 Reading, PA 3 8,160 New York -Northern New Jersey -Lang Island, NY -NJ -PA 4 7,419 Minneapolis -St. Pau -Bloomington, h1N-WI 5 5,677 St. Louis, 1.10 -IL 6 31963 I,iilwaukee-Waukesha-West Allis, WI 7 3,549 Pittsburgh, PA 8 3325 Dallas -Fort Worth-Arlingtan, TX 9 3,2,aO Houston -Sugar Land-Baytoven, TX 10 3,480 Cleveland-Elyria-Pdentor, CH 11 2,836 Boston -Cambridge -Quincy, MA -NH 12 2,790 Providence -New Bedford -Fall River, RIMA 13 2,768 Hartford-Ydest Hartford -East Hartford. C7 14 2,679 Philadelphia -Camden 7Nilmington, PA -NJ -6E-&16 15 2,605 New Haven-P.lilford, C7 16 2,165 Allentown-Bethlehern-Easton, PA -NJ 17 2,000 CincinnatkPdiddletown, OH -KY -IN 19 1,972 Atlanta -Sandy Springs -Marietta, GA 19 1,943 Little Rock -North Little Rack -Conway, AR 20 1„936 ■ Precision Incorporated was started as a machine shop in 1919. The company's major customer was the vending machine industry until electronic machines replaced mechanical machines in the 1960s. Precision was sold to Cummins in 1964. The company specialized in coil winding for transformers and provided power resistors for Onan Power, Honeywell, Summit Gear, and NSP in the 1960s and 1970s. The Minnesota computer industry was a major customer for Precision until the computer industry's decline in Minnesota in the mid-1980s. Since then Precision has shifted to the medical device industry, with Medtronic as one of its primary customers. Precision's other long-term customers have included Graco, Data Card, Cummins Engine, Honeywell, General Electric, and Rockwell International. Precision has experienced the rise and fall of the computer and telecommunications industries in the Greater MSP region and benefited from the growth of the region's medical device industry. The company has implemented quality systems and is ISO 9000-1345 (medical device) certified. Precision Inc applications for medical device customers include: • High frequency inductors for surgical navigation instruments • Primary and secondary coils for wireless charging applications • Antenna coils for telemetry use in reading and programming pacemakers and other like devices • PFC inductors used in defibrillation devices • Send and receive coils for base to device communication 19 • Antenna coils for communication • Isolation transformers for medical equipment requirements • Switch mode transformers and inductors for ablation equipment Solar energy is one of its growing markets, and the company has expanded in this market by purchasing a company for in Loveland, Colorado. Precision Inc. is a major supplier of key components to inverter manufacturers who are providing products to the alternative energy market including solar energy, wind energy and geothermal power. These products consist of buck/boost inductors, DC to AC conversion, drive inductors, line reactors, EMI filters, isolation transformers, and gate drive transformers. The company has also expanded in China to take advantage of market opportunities there. The company needs highly skilled electrical engineers to design its specialized products for corporate clients. The company's competitors are in the Chicago area associated with the TV industry. #.P�* < $SOA Factor Conditions' The companies in this cluster rely on PRECISION INCORPORATED / ;.4ETt'm2k t wl*6 L■I'drl drMf Precision Incorporated was founded as machine shop in 1919 serving the vending machine industry. The Brooklyn Center company now designs and manufactures magnetic coils for medical devices and the energy market. The company does ultrafine wire windings for implantable devices, hearing aids, surgical navigation, neurological implants, and dialysis equipment. In addition to medical devices, Precision's customers are aerospace, controls, and alternative energy industries. skilled electrical engineers and technicians with strong design and quality skills. Education at all levels and workforce training focused on STEM skills, design, and quality tools are likely to be important for the future competitiveness of this cluster. Demand Conditions Local demand from the computer and telecommunications industry have contributed to the development of the electrical equipment cluster in the MSP region. Demand for high-quality electrical components from the region's medical device cluster have driven the companies in this cluster to focus on design and quality in recent years. Demand for new energy technologies are offering new opportunities for the electrical equipment cluster in the MSP region. lWated and Sipporting Industries The electrical equipment cluster plays an important role as a supplier of other clusters in the region and has expanded its business to major companies outside of the region, making the MSP region one of the top competitors in this cluster. Context for Firm Srategy and fdvalry The electrical equipment cluster is an important part of the ecosystem that contributes to the success of other regional clusters, such as medical devices. 20 Analytical Instrument employment and location quotient has remained relatively constant since 1998 Process Instruments 30% Search and Navigation Equipment 29% Analytical Instruments Employment (Thousands) 20 18 16 14 12 10 8 6 4 2 0 1998 Laboratory Instruments 16'. Electronic Components 24°iG Location Quotient O p.. t.a l Instruments 1° Los Angeles has the largest employment within the Analytical Instruments cluster, followed by Boston and Dallas. Minneapolis -St. Paul as the 91h highest total employment of all metropolitan areas. 00 02 04 06 08 2.5 2 1.5 1 0.5 0 2010 The largest sub cluster within the Analytical Instruments cluster is Process Instruments, followed by Search and Navigation Equipment and Electronic Components 2010 Total Employment (Thousands) Los Angeles MSA (1) Boston MSA (2�, Dallas MSA (3) New York MSA (4� Silicon Valley MSA (.5} Baltimore MSA (6) Chicago MSA (7) Philadelphia MSA (8� Minneapolis -St. Paul MSA €9} .San Francisco MSA (10} 0 20 40 Minneapolis-3Vi0°p"! M TrW° )tea# •A>_#"per<_ The analytical instruments cluster accounted for over 13,000 jobs in the region in 2010, placing MSP ninth among U.S. metropolitan areas. Los Angeles, Boston, and Dallas are the top three regions in analytical instruments employment. With a location quotient of 1.96, MSP's analytical instruments cluster boasts an employment concentration roughly twice the national rate. The average annual wage for analytical instrument employees in the MSP region was $62, 816 in 2010. Analytical Instruments Cluster ,, _tropoiaan Statistical Area, 2010 Los Angeles -Long Beach -Santa Ana, CA Boston-Cambridge-❑uincy, MA -NH Dallas -Fort Worth -Arlington, TX New York -Northern New Jersey -Long Island, NY -NJ -PA San Jose -Sunnyvale -Santa Clara, CA. Baftimore-Towson, liD Chicago -Naperville -Joliet, IL -IN -WI Philadelphia -Camden li' ilmington, PA -NJ -DE -MD Minneapolis -St. Paul- -Bloomington, MN -WI San Francisca-Oakland-Fremont, CA Phoenoc-Mesa-Scottsdale, AZ Manchester -Nashua, NH Orlando-Kasimmee, FL San Diego -Carlsbad -San Marcus, CA Houston -Sugar Land -Baytown, TX Cedar Rapids, A Austin -Round Rock, TX Portland -Vancouver -Beaverton, OR-}adA Seattle -Tacoma -Bellevue, WA Tampa -St. Petersburg -Clearwater, FL Employment, 2010 0 10,OGG 20.090 30,000 Rank mus 1 30,049 2 26,973, 3 23,447 4 21,092 5 19,277 6 18,878 7 14,322 & 13,677 9 13,,157 10 11,347 11 11,165 12 19,96.3 13 9,531 14 9,517 15 8,149 16 7,755 17 7, 304 18 6,9A 19 6,6% 20 - 6,684, 40,909 Between 1998 and 2010, the MSP region's analytical instruments cluster held steady by capturing a nearly 4 percent share of the cluster's national employment during the span; only Boston and Houston performed better in this regard. 22 Analytical Instruments Cluster: Process Instruments Subcluster Share u! Na,u Tial (Giustur Enipliuymet lt �)y fdiuirupuaiLai l Stalia,;Gal arca, 79Jb - 20110 0 H r E a. a CL E LU e v_ `o 0 -cd, :,- J.�-a1,_Y, Y 6,NH 0 40051011•suMI Lai]S 6uVnr s•,. TX Las H.Ji$ S.u, JJBu=Su,ny ua,�,Zu-i.i Cwru. Cr', Naw York- New Je �-.o gle; fare _•- -jyo1. PH Ssa rrmw :7akk-U4f�F7&nMWJNu��ivc s::: �•Jera-1hL�,nynn, PPt.N.1-4E-R+.P P.ra�lpa r Amtei-Roared Rack. TX 4R.WH Cdlins-ln kand CLD Phosn nriAesa-Scaiisd - 9C FL 51. -495 -3% -2% -1% 0% 1% 2% 3% Change in Share of National Employment, 1998 - 2010 Employmert 1998 - 2614 Ob Added Jobs Lost Jobs -Employees 3.708 The MSP region's analytical instruments cluster is comprised of process instruments (30% share), search and navigation equipment (29%), electronic components (24%), laboratory instruments (16%), and optical instruments (15%). The MSP region is particularly competitive within the process instruments subcluster, ranking third nationally with a location quotient of 2.62 and regional employment of nearly 4000. The region also is relatively strong in laboratory components, employing over 2100 with a location quotient of 2.19 and standing in the nation's top eight. 23 2010 Cluster Breakdown, Minneapolis -St. Paul -Bloomington, MN -WI Metropolitan Area, Analytical Instruments Cluster Cluster/Subcluster Name Employment National Location Other Competitive Regions Rank Quotient Analytical Instruments 13,157 9 1.96 Los Angeles, Boston, Dallas, New York, Silicon Valley, Baltimore Optical Instruments 175 32 0.77 Boston, Springfield (MA), Los Angeles, Portland, Santa Rosa (CA), Detroit Laboratory Instruments 2,130 8 2.19 Silicon Valley, Boston, San Francisco, New York, Los Angeles, Philadelphia Electronic Components 3,157 11 1.62 Los Angeles, New York, Boston, Chicago, Silicon Valley, Austin Search and Navigation 3,750 14 1.83 Dallas, Baltimore, Los Angeles, Equipment Cedar Rapids (IA), Manchester (NH), Boston Process Instruments 3,945 3 2.62 Boston, Houston, Chicago, Los Angeles, Silicon Valley Among the region's top firms within this cluster, MTS Systems engineers and deploys high performance testing and sensing solutions globally. Rosemount Inc., now an Emerson Electric Company subsidiary, began as a significant supplier for NASA during expansion of the aerospace industry in the 1950s. The company has since diversified, and currently focuses on producing sensors that measure changes in temperature, pressure, level, and flow. The company employs roughly 1000 workers at its Chanhassen headquarters. Factor Cbnditions- Like many of MSP's other major clusters, the region's analytic instruments cluster relies upon highly skilled workers. Historically, the University of Minnesota has provided a pipeline of workers in this and related fields. More and more, though, MSP firms are recruiting talent from beyond Minnesota's borders to supplement the region's existing workforce. Demand Cbnditions The firms in this cluster provide businesses with the NITS Q Eden Prairie -based M TS 8,istems has been working, since 1966, to engineer and deploy "high performance testing and sensing solutions ... around the world, enabling precise control of forces and motions as wel I as real-time feedback that optimizes performance." The firm is a global supplier of test systems and industrial position; specifically, it provides mechanical test systems, material testing, fatigue testing and tensile testing services, aswell as motion simulation systemsand calibration services. Examplesof MTS productsinclude: rolling road simulators; hydraulic actuators; shaker tables; and medical testing equipment. The firm operates in two segments: the test segment and the sensorssegment. In 2012, the test and sensors segments represented approximately 80 percent and 20 percent of the company's revenue, respectively. The test segment providestesting solutions, including hardware, software, and after -market support. Products in the sensorssegment are used by industrial machinery and mobile equipment manufacturersto automatethe operation of their products. technology and precision measurement capability necessary for their products to succeed. Local demand comes from medical device, defense, and aeronautics firms, among others. fblated and Supporting Industries The analytic instruments cluster is tied closely to the region's past and current success in medical device and lighting and electrical equipment clusters. Technological, application, and educational overlap account for some of this interrelation and synergy. Context for Firm Srategy and Rvalry Firms in the analytic instruments cluster provide a wide range of products for customers seeking cutting-edge technology for precision measurement. The firms in this cluster offer a strong foundation for business solutions in this area. 25 Processed Food Employment (Thousands) 22 Processed Food 21 employment and location quotienthasfluctuated 20 since 1998 19 Other 19 18 17 Meat and 16 Related 1998 Products and Services 9% Milk and -- Frozen Desserts 10 6% Baked Location Quotient 00 02 04 06 08 2010 Paper Packaged ontainers Foods nd Boxes 20'% 18% " Specialty FCandy and Foodsand Ingredients _--Chcacolate 6% 22% Los Angeles has the largest employment within the Processed Food Clusterfoffowed by Chicago and New York. inneap ofis -St. Paul h as the TFC" highest total employment of all metropolitan areas. 1.15 1.14 1.12 1.1 1.08 1.06 1.04 1.02 1. 0.98 0.96 The largest sub cluster within the Processed Food Fluster is Specialty Fo o ds an d Ingredien ts, folio wed by Baked Packaged Foods and Paper Containers and Boxes. 2010 Processed Fisc Los Angeles MSA (1) Chicago MSA (2) New York MSA (3) Philadelphia MSA (4) Dallas MSA (5) Atlanta MSA (6) Minneapolis -St. Paul MSA (7) Boston MSA �8j Cincinnati MSA (9) Milwaukee MSA (10) Minneapolis-AIO' p" 09M->� § 80% #"per <_ Agriculture and food processing have played an important role historically in the development of the Minnesota economy and continue to be a significant competitive cluster for the state. The MSP region has some of the largest national and multinational food and agriculture businesses in the world. Major agribusiness companies based in the region include Cargill, General Mills, Land O'Lakes, and CHS. General Mills and Pillsbury (now part of General Mills) played a significant role in the development of Minneapolis in the late nineteenth century. Entrepreneurs from the East took advantage of St. Anthony Falls on the Mississippi River, the rich agricultural land of Minnesota, new technologies such as roller mills, combined with human and knowledge capital to give the region an early competitive advantage in milling and food processing. As these companies matured, diversified, and globalized, the MSP region has benefited from a strong base of research and development in food and agribusiness and corporate leadership. These legacy companies continue to give the region a competitive advantage in the processed food cluster. In 2010, the processed food cluster in Minnesota employed 45,558, with 18,256 of those jobs in the MSP region. The region ranked seventh in processed food employment among metropolitan regions, with Los Angeles and Chicago topping the list. While the MSP region had a location quotient of 1.01 in 2010, indicating Cargill is an international producer and marketer of food, agricultural, financial and industrial products and services. Founded in 1865, the privately held company employs 142,000 people in 65 countries. The company evolved from trading soybeans, to processing them into meal and oil, to producing high-value natural vitamin Efrom a soybean byproduct. And it moved from trading corn, to processing corn into ethanol and fructose, to creating a whole new family of renewable products—from plastics to fabric—made from corn. S3uroe: Cargill website an employment share matching the national average, processed food jobs tended to be located in rural rather than urban areas, so that most metropolitan areas would have location quotients for processed food significantly less than 1. Processed food jobs in metropolitan areas tended to be more related to specialized functions, such as research, marketing, distribution, logistics, management, and administrative, as opposed to actual food production. The average wage for the processed food cluster in the MSP region was $47,065, above the national average of $42,058. 27 Processed Food Cluster 1m��lovMment by Metropolitan Statistical Area, 2010 Cargill, a global leader in agribusiness, based in the MSP region has contributed to emerging bio - based companies with the region. These include NatureWorks LLC, founded in 1997 as a joint venture with Cargill by Cargill employees. NatureWorks has developed bio -based "green" products based on sustainable polymer research, including apparel, bottles, gift cards, films, durable goods, folded cartons, food packaging, textiles, non -woven fabrics, and service -ware and compostable plastic bags. Other recent sustainable polymer start-ups that have emerged from Cargill and other MSP companies are Segetis in 2006, Gevo in 2009, and BioAmber in 2009. 28 Employment, 2010 0 10,000 20,000 30,000 413,000 '10,000 60,000 70,000 Rank in u5 Los Angeles -Long Beach-SantaAna,CA 1 60.833 Chicago-Naperville,Joliet, IL -IN UI 2 55,9134 New York -Northern New Jersey -Long Island, NY -NJ -PA 3 39,118 Philadelphia-Comden'iJilmington, PA -NJ -GE -tie 4 21,91® Gallas -Fort Worth -Arlington, TX 5 21,271 Atlanta Sandy Springs-tiarietta, GA 6 1131wa Minneapolis -St. Paul -Bloomington, MN-Wl 7 1x,255 Boston -Cambridge -Quincy, MA -NH 8 15,121 CincinnatW dletown, OH -KY -IN 9 14,684 Milwaukee -Waukesha VVestAllis, Vk+I 10 14,152 San Francisco -Oakland -Fremont, CA 11 13,934 Omaha -Council Bluffs, NE44, 12 13,669 Kansas City, MO -KS 13 11,9£2 Sioux City, A -NE SC 14 i 11,930 Seattle -Tacoma -Bellevue, VdA 15 11,263 Houston -Sugar Land -Baytown, TX 16 11,231 St. Louis, MO -IL 17 10,660 Portland -Vancouver -Beaverton, OR -WA 1a 10,011 Phoenix -Mesa -Scottsdale, AZ 19 9,194 Chattanooga, TN -GA 20 9,o15 Cargill, a global leader in agribusiness, based in the MSP region has contributed to emerging bio - based companies with the region. These include NatureWorks LLC, founded in 1997 as a joint venture with Cargill by Cargill employees. NatureWorks has developed bio -based "green" products based on sustainable polymer research, including apparel, bottles, gift cards, films, durable goods, folded cartons, food packaging, textiles, non -woven fabrics, and service -ware and compostable plastic bags. Other recent sustainable polymer start-ups that have emerged from Cargill and other MSP companies are Segetis in 2006, Gevo in 2009, and BioAmber in 2009. 28 2010 Cluster Breakdown, Minneapolis -St. Paul -Bloomington, MN -W1 Metropolitan Area, Processed Food Cluster Cluster/Subcluster National Location Employment Other Competitive Clusters Name Rank Quotient Processed Food 18,256 7 1.01 Los Angeles, New York, Chicago, Philadelphia, Dallas Meat and Related 1,658 55 0.40 Los Angeles, Sioux City (IA), Chicago, Products and Services Omaha, St. Joseph (MO/KS) Malt Beverages 73 50 0.21 Denver, Los Angeles, Milwaukee, St. Louis, Fort Collins (CO) Coffee & Tea 123 32 0.61 Los Angeles, Birmingham (AL), Virginia Beach, Charlotte, New York Metal and Glass 610 17 0.95 Chicago, Modesto (CA), Los Angeles, Containers Denver, Cincinnati Processed Dairy and 771 16 0.89 Sheboygan (WI), Springfield (MO), Related Products Wausau (WI), Logan (ITT), Hanford (CA) Milk and Frozen Desserts 1,009 11 0.94 Los Angeles, Boston, Dallas, Chicago, New York Flour 550 10 1.43 Los Angeles, Chicago, Dallas, New York, Atlanta Milling 851 9 0.69 New York, Indianapolis, Chicago, Kansas City, Cedar Rapids (IA) Baked Packaged Foods 3,685 9 1.13 Chicago, Harrisburg (PA), San Francisco, Los Angeles, New York Candy and Chocolate 1,135 8 1.54 New York, Chicago, Los Angeles, Chattanooga, Atlanta Specialty Foods and 4,107 6 1.40 Los Angeles, Chicago, New York, Ingredients Dallas, Cincinnati Paper Containers and 3,238 5 1.59 Chicago, Los Angeles, New York, Boxes Dallas, Cincinnati 29 #'P *:5 #& — .,cF» IE 'i7__@ Factor Conditions' St. Anthony Falls on the Mississippi River was a natural factor in the development of the milling and food processing industry in Minneapolis. Today, the presence of a skilled workforce in all aspects of food production, research, distribution, branding, as well as strong academic base for agricultural and food research at the University of Minnesota, contribute to the competitiveness of the processed food cluster in the MSP region. Demand Conditions While the MSP processed food industry competes in a global marketplace, sophisticated local demand for healthy food and green products has helped to influence the direction of the legacy companies and entrepreneurs. From a global perspective, there is an increased demand for food, feed, and fiber due to economic growth and demographic shifts in key developing countries, such as China and India, creating opportunities for MSP's globally competitive processed food companies. FL-lated and 9apporting Industries Due to the high concentration of corporate headquarters in Minnesota, many strong related and supported companies are headquartered in MSP. Their location in MSP helps agribusinesses facilitate efficient transport and arbitrage of agricultural products and create logistical innovation and knowledge. C.H. Robinson is a global leader in supply chain management and logistics, with roots in the grocery produce transport business. Supervalu is the fourth largest food and drugstore company in the country. Ecolab is a worldwide leader in water and hygiene products and its divisions are devoted to food service, food retail, and food and beverage processing. Furthermore, MSP's nationally recognized health services cluster could become a more important related cluster in the future as consumers increasingly look to food as an aspect of overall wellness. Another related cluster is the plastics industry Context for Firm Srategy and Rvalry Cargill, the nation's largest privately owned company in any industry, not just agribusiness, and General Mills, Land O'Lakes, and CHS are ranked within the top ten companies for their industry in the country. In addition to these national leaders, many other agricultural companies have non -headquarter locations in the state. Twenty-nine of the top fifty U.S. agricultural companies have locations within Minnesota. 30 Metal Man ufacturing employm en t h as decreased since 1998, while location quotient has increased steadily within the region. Environmental Controls 5% Metal Manufacturing Employment (Thousands) 30 25 20 15 10 5 0 1998 00 Location Quotient Numberof • • 1.6 1.4 1.2 • '� 1 0.8 0.6 Location Quotier. 0.4 0.2 136 0 08 2010 Iron and5tee! I -A, s and Foundries 6 Fabr',:ated Nletal Froducts Chicago has the largest employment within the Metal Manufacturing cluster, followed by Los An g eles an d Detroit . Minneapolis -St. Paul h as th a 811� high est total employment of all metropolitan areas. 02 04 06 =as ion Metal The Metal Manufacturing Frodum cluster is diversified. The largest 6% Metal Furniture sub cluster within the cluster is 6% Metal Pro cessin g, followed by Fasteners and General Industrial Machinery. Total 2010 Employment In Thousands Chicago MSA (1), Los Angeles MSA (2) Detroit MSA (3) Cleveland MSA (4) Pittsburgh MSA (5) Neva York MSA (6) Houston MSA �7) M[nneapolis-St. Paul MSA (8) Milwaukee MSA (9) Philadelphia MSA (10) 0 50 100 Minneapolis-3Vi0°p •W"- °KVjF£*p54B#"per:5 The metal manufacturing cluster includes establishments that manufacture both upstream and downstream metal products. Upstream metal products include things such as pipes, tubes, metal closures, wires, springs, and related products. Also included are iron and steel mills, metal forgeries, and foundries, as well as related metal processing techniques. Downstream metal goods included in the cluster are metal containers, prefabricated metal structures, and end user metal products such as tool manufacturing, watch and clock parts, and household products. Because of its strategic location on the Mississippi River and close proximity to the Iron Range of Northern Minnesota, the MSP region has been an economically competitive region for metal manufacturing for over a century. Much of the region's strength can be attributed to its specialization within the cluster. Although MSP's distance made shipping very large metal products difficult, the region has been able to maintain its competitiveness through diversification and specialization. Today, there are over 630 metal manufacturing firms within the region, and despite a decline in industry employment throughout the past decade and the Great Recession, the region still remains particularly competitive as a result of its niche role within the industry. Metal Manufacturing Cluster Employment by Metropolitan Statistical Area, 2010 Overall, the metal manufacturing cluster is diversely defined with 13 subclusters. In 2010 Minneapolis -St. Paul had 16,458 metal manufacturing employees, the seventh highest total in the nation. The region's location quotient in 2010 was 1.36, meaning that the industry is 1.36 times more concentrated within the region than in the nation. The most highly competitive regions in the cluster are Chicago, Detroit, Cleveland, and Pittsburgh. Although Los Angeles also employs the second most people within the cluster (40,140), it has a relatively low location quotient (1.08). 32 Employment, 201D illnk us Ch,icap-Naperville-Joliet, IL -IN -WI 1 Las Angeles -Long Beach -Santa Ana, CA 2 44,140 Detroit -Warren -Livonia, MI 3 24,461 Cleveland -Elyria -Mentor, OH 4 22,942 Pittsburgh, PA 5 19,3&2 New York -Northern New Jersey -Long Island, NY -NJ -PA S 18,904 Houston -Sugar Land -Baytown, TX 7 181745 Minneapolis -St. Paul -Bloomington, MN'IUl 8 - 16,458 Milwaukee -Waukesha -West Allis, WI 9 14,261 Philadelphia -Camden -Wilmington, PA -NJ -DE -MD 10 12,699 Dallas-FDrt Worth. -Arlington, TX 11 12,654 PDrtland-Vancouver-Beaverton, OR -WA 12 11,864 Birmingharn-Houver, AL 13 10,445 Grand Rapids -Wyoming, 1.11 14 9A06 Cincinnati -Middletown, OH -KY -IN 15 9,232 Riverside -San Bernardino -Ontario, CA 16 8,963 BDstm-Cambridge-Quincy, MA -NH 17 8,741 St. Louis, 1.14 -IL 18 7.,953 Indianapolis -Carmel, IN 19 7,936 Holland -Grand Haven, MI 20 7,562 Overall, the metal manufacturing cluster is diversely defined with 13 subclusters. In 2010 Minneapolis -St. Paul had 16,458 metal manufacturing employees, the seventh highest total in the nation. The region's location quotient in 2010 was 1.36, meaning that the industry is 1.36 times more concentrated within the region than in the nation. The most highly competitive regions in the cluster are Chicago, Detroit, Cleveland, and Pittsburgh. Although Los Angeles also employs the second most people within the cluster (40,140), it has a relatively low location quotient (1.08). 32 The average wage for the cluster in 2010 in Minneapolis -St. Paul was $54,261, the seventh highest in the nation. The region is most competitive in the environmental controls and general industrial machinery subclusters, ranking highly in both total employment and location quotient. The environmental controls subcluster comprises establishments that engage in manufacturing automatic controls and regulators for applications, such as heating, air-conditioning, refrigeration and appliances. Within this subcluster, MSP employed 762 employees in 2010, the second most in the nation, and had a location quotient of 5.23, meaning that within this subcluster the region is 5.23 times more concentrated than the nation. General industrial machinery comprises firms primarily engaged in manufacturing general purpose machinery not included in the other subclusters. MSP's strength in this subcluster is a testament to the region's diversification and specialization within the metal manufacturing industry. 2010 Cluster Breakdown, Minneapolis -St. Paul -Bloomington, MN -W1 Metropolitan Area, Metal Manufacturing Cluster 33 National MSP Cluster/Subcluster Employment Employment Location Competitive Regions Name Rank Quotient Metal Manufacturing 16,458 8 1.36 Chicago, Los Angeles, Detroit, Cluster Cleveland, Pittsburgh Saw Blades and 10 65 0.15 Portland, Springfield (MA), Canton Handsaws (OH), Cleveland Laundry and Cleaning 10 57 0.05 Marion (OH), Fremont (OH), Fond du Equipment Lac (WI), Louisville Iron and Steel Mills and 933 30 0.42 Chicago, Pittsburgh, Birmingham (AL), Foundries Detroit, Cleveland, Canton (OH) Nonferrous Mills and 523 20 0.76 Chicago, Cleveland, Milwaukee, Portland Foundries Wire and Springs 638 17 0.88 Chicago, New York, Los Angeles, Houston, Scranton (PA) Fabricated Metal 1,498 13 1.17 Chicago, Houston, Cleveland, Louisville Products Precision Metal Products 982 11 1.28 Los Angeles, Chicago, Indianapolis, Milwaukee, New York, Cleveland, Hartford Metal Furniture 962 7 1.44 Holland (MI), Grand Rapids (MI), Los Angeles, Philadelphia Pumps 983 7 2.24 Dallas, Tulsa (OK), Chicago, Houston, Oklahoma City Metal Processing 3,763 7 1.39 Los Angeles, Chicago, Detroit, Houston, Cleveland Fasteners 2,992 6 1.92 Los Angeles, Chicago, Detroit, Cleveland, Philadelphia General Industrial 2,402 2 3.94 Kansas City, Chicago, Detroit, Boston Machinery Environmental Controls 762 2 5.23 Chicago, Mansfield (OH), Rockford (IL), Atlanta 33 Within this subcluster, MSP employed 2,402 in 2010, the second most in the United States, and had a location quotient of 3.94, fifth among all metropolitan areas. Historically, metal manufacturing played a critical role in the development of many of the region's other industries such as processed food or railroad freight. For example, early companies, such as St. Paul Brassworks, founded in 1889, began producing brass goods, castings, and railroad brass using steam power. Another company, St. Paul Stamps, founded in 1870 was the first manufacturer of rubber stamps in the region and among the first companies to advertise and use catalogs for sales outside of the region. One of the first industries served by St. Paul Stamps was processed food, where the company manufactured labels for flour. The region was well suited for metal manufacturing to become a complementary cluster. In addition to a skilled workforce known for a strong work ethic, the region was also close to transportation networks and large-scale metal deposits. Furthermore, the region is home to a nationally ranked Materials Science and Engineering program at the University of Minnesota, while technical schools provide training in areas such as machine tool technology, welding, or metal fabrication. Metal Manufacturing Cluster: General Industrial Machinery Subcluster Share of National Cluster Employment by Metropolitan Statistical Area, 1998 - 2010 9% 8% 0 7% O N m 6' � A 5% W ru 0 4% M 2 `0 3% 2% 1% 0% 0 Minneapolis -St. Pau�Blaumingtun, MN -WI 00 DWbB"ftf iWWlf n4P,1 gl, IL -IN -WI Lus AngelesLo-ng Beach -Ser. m Bastun-Camhricg,:. Wn ustan-Suy< JDI n, THMew Yo-rk-No-rthern Ne 4C[�PH ga�PPhiladelphia-Camden-Vu'ilc ,Dallas-Foi � e I Char F CA De -3% -2% _1% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% Change in Share of National Employment, 1998 - 2010 Employment 1998 - 2010 Added Jobs Lost Joos —Employees 1 ,875 P1 Today, some of the largest companies in the region are Pentair, Hearth & Home Technologies, and Metal -Matic. Based in Minneapolis, Pentair is a global leader in water, fluid, thermal management, providing critical inputs to a wide range of industries. Originally founded as a manufacturer of high-altitude research balloons, the company is now quite diverse and employs more than 30,000 people worldwide. Hearth & Home Technologies is the world's leader in the production and installation of hearth products such as indoor and outdoor fireplaces, barbecues, and heating systems. Metal -Matic is a global leader among manufactures of specialized carbon steel tubing for a variety of industries. Other specialized manufactures in the region include Kurt Manufacturing, a leading manufacturer of close tolerance parts and assemblies, and Sico Inc., the global leader in folding, rolling, and space efficient products such as carts, platforms, and furniture. Of companies within the general industrial machinery subcluster, the largest is Osmonics, now a subsidiary of General Electric Water and a manufacturer of membrane elements for reverse osmosis systems. Overall, demand for metal 4 METAL-MATIC, INC CARBON STEEL TUBING 6292nd M-1 SE Minn,apcl,, MN 55414 Ph: fl 32H-5494 Fax: 612-342-5399 Family owned and private sinceitsopening, Metal -Matic is a niche player in the metal manufacturing cluster, making metal tubes from '/4to'/ inch OD (outside diameter) thick, primarily for the automotive industry. Originally, the company began as a research and development tool shop doing one-off job orders. In the 1950s, they began making primers for artillery shells for the government. Instead of purchasing steel tubesto prime, Metal -Matic realized they were better off buying steel and making the tubes themselves. In the 1950s, they began contracting with Whirlpool Vacuums and began making handle tubes, leading to a client -base shift from 100%government to 100% civilian. Metal -Matic makes very long steel tubes and then cutsthem to a specific lengths, per the request of the customer. Transportation and logistics are very important to Metal - Matic, especially because all steel oomesfrom the East. O.Irrently, the Minneapolis location is home to much of the firm's technical expertise. The company is relatively unique in that it tends to groom people from the ground up, rewarding employee and company loyalty. The Metal -Matic workforce has particularly specialized skills. In addition to rewarding people/ customer skills, there isan expert metallurgist and another metallurgist in the pipeline. This helpswith quality control and obtaining second- hand knowledge. Overall, Metal -Matic requires skilled labor and, in some instances, has struggled to find a consistent supply of labor. manufacturing products is hardly distinctive to the Twin Cities. Instead, firms from throughout the United States rely on Minneapolis -St. Paul businesses for their technical expertise, specialization, and skilled labor. Like many traded clusters, exports are an important component of the metal manufacturing cluster. Instead of producing large-scale machinery, the metal manufacturing cluster in MSP is largely specialized component -based. An emerging subcluster of interest is pumping technologies as the region has been home to numerous technological advancements. Although Pentair is by far the largest company within this industry subsector, Minnesota's large amounts of aquatic and agricultural land position the state as a potential leader in this area as demand for more innovative pumping technologies continues 35 to rise. Pumps can be used in areas such as natural gas extraction, reverse osmosis filtration, or advanced irrigation, all sectors in which the regional economy stands to gain. #'p *:5 #Q# — •,cF» IE'nom Factor Conditions' The cluster relies on skilled labor for manufacturing, in addition to heavy machinery and raw materials such as steel. Overall, the cluster hires a wide range of workers including mechanical engineers and metallurgists, in addition to skilled laborers for production and machine work. Demand Conditions Because many of the companies within the region are specialized, the demand for Minneapolis -St. Paul metalwork is hardly local, with firms nationwide requiring the goods produced in MSP factories. Although local demand has occurred from the processed food and medical devices industries, many industries require manufactured metal goods. Metal manufacturing is unique in that it includes both components and final products that are available in both business -to -business and straight to consumer type sales. Fblated and 9rpporting Industries Metal manufacturing requires raw metal materials for manufacturing. Although this component of the supply chain is included in the cluster's defmition, Minneapolis -St. Paul is relatively weak in this area and must import these components. Metal manufacturing companies manufacture related products for a wide range of industries including automotive, heavy machinery, production technology, and many other manufacturing or high-tech industries. Context for Firm Srategy and Rvalry Because of Minneapolis -St. Paul's skilled workforce, the region has been able to specialize and diversify in the metal manufacturing cluster. This diversification, in addition to being in a close vicinity to other manufacturing hubs and a historical association with the cluster, has allowed the industry to continue to progress and innovate. As a result, MSP remains highly competitive in the cluster. RRI Transportation and Logistics employment and location quotient decreased sharply in 2002 an d h as since remained relatively constant Transpartatinn and Logistics Employment {Thousands[ %Y0 50 40 30 20 10 0 Location Quotient 1998 00 02 04 06 08 2010 Airports Bus %Transportation 1% The largest sub cluster within the Transportation and Logistics Transportation cluster is Air Transpiration, Arrangement and Warehousing followed by Transpiration Air 31% Arrangement and Wareh ousing. ransportation 63% IF _Transportation Support and Operations 2% New York has the largest employment within the Transportation and Logistics cluster, followed by Los Angeles and Chicago. Minneapolis- .St. Paul has the 331" highest total employment of all metropolitan areas. 2010 Transportation and Logistics Employment (Thousands) New York. MSA (1) Los Angeles MSA (2) Chicago MSA (3) Atlanta MSA (4) Houston MSA (5) Dallas MSA (6) Miami MSA (7) San Francisco MSA (3) Phoenix MSA (9) Minneapolis -St. Paul MSA (13) 3 2.5 2 1.5 1 0.5 0 0 40 so 120 Distribution Services employment and location quotient has remained relatively constant since 3998 Catalog and Mail-order ?1 Distribution Services Employment (Thousands) 40 35 30 25 20 15 10 5 0 Food Products Wholesaling 6 r6 Merchandise Wholesaling 63 New York has the largest employment within the Distribution Services cluster, followed by LosAingeles and Chicago. Minneapolis -St. Paul hasthe 131h highest total employment of all metropolitan areas. Location Quotient 1998 00 02 04 06 08 2010 The largest sub cluster within the Distribution Services cluster is Merch andise Wh olesalin g, followed b y Catalog and Vail -Order Business. 2010 Distribution Services Employment (Thousands) New York MSA (1) Los Angeles MSA (2) Chicago MSA (3) Silicon Valley MSA (4) Dallas MSA (5) Philadelphia MSA (6) Boston MSA (7) Miami MSA (8) Atlanta MSA (9) Minneapolis -St. Paul MSA (13) 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 0 100 200 11 A:. 3QN Because of the close overlap between the two clusters, the distribution services and transportation and logistics clusters are combined here to represent the infrastructural and logistical components associated with the region's trade. Historically, Minneapolis -St. Paul has long been considered a hub for distribution given its close ties to the food, mining, and lumber industries. As sawmills and flour mills began to appear alongside the Mississippi River and St. Anthony Falls, the region required the transportation infrastructure necessary to keep up with the inputs needed for its mills and to disperse its products across the nation. For many years, St. Paul was considered a railroad and frontier town, connected to numerous railroads to both the east and west. Although Minneapolis was originally served by a spur from St. Paul through the Chicago, Milwaukee, St. Paul, and Pacific Railroad, the region was able to gain a competitive advantage by becoming a hub of multiple railroads, namely the Minneapolis and St. Louis Railway, which connected the Lake Superior and Mississippi Railroad. With the establishment of the Great Northern Railway in 1893, the Twin Cities region became connected to the northern portion of the United States, stretching from St. Paul to Seattle .4 With the expansion of the transportation networks, the region was able to enhance its key role as a distributor of lumber and grain. Between 1848 and 1887, Minneapolis led the nation in sawmilling.' Founded as the Minneapolis Chamber of Commerce in 1881, the Minneapolis Grain Exchange (MGEX) was formed to promote the fair trade of wheat, oats, and corn.6 Two years later, the Chamber of Commerce introduced its first futures contract: hard red spring wheat. Before the development of this centralized marketplace, many of the region's farmers were unable to adequately gauge the market for their grain, and because most farmers harvested and sold crops at the same time, there was a glut of a grain in the market that skewed the supply and demand curve for grain. Although the organization no longer operates an open outcry trading floors, trading is continued from an electronic platform. As a whole, Minneapolis -St. Paul lost jobs in the distribution services cluster from 1998 to 2010, although employment fluctuated a bit during this time period and the cluster has done better than others. Much of this uncertainty can likely be attributed to the economic recession. Average wages within the cluster were $73,209 in 2010, the fourteenth highest in the nation. Minneapolis - St. Paul had the third most jobs in the nation in the farm material and supplies wholesaling subcluster, behind only Chicago and New York. By employment, the largest subcluster is merchandise wholesaling, which makes up 62 percent of all cluster employment. " Hofsommer, Don L Minneapolis and the Age of Railways. Minneapolis, MN: University of Minnesota Press, 2005. 5 Kane, Lucile M. The Fallsof S. Anthony.' The Waterfall That Built Minneapolis. St. Paul, MN: Minnesota Historical SDdety, 1966 (revised 1987). 6 http://www.mgex.com/history.html 39 2010 Cluster Breakdown, Minneapolis -St. Paul -Bloomington, MN -W1 Metropolitan Area, Distribution Services Cluster Distribution Services Cluster: Farm Material and Supplies Wholesaling Subcluster Share of National Cluster Employmer - 1S% 1.4% Ch kapJiaµro. IL- r, -V11 1 396 York-}iathem Naw Jarzay-W ng Isiard. Nk'JCJ-PA N C 1.1 °% !.9'i nlled';gii5-5i. d E, 1'0% 3-Camel-fi- DRi^ E W 0.8%_ o 0.7% MeiLM .. z 0.6% 0 o.s%' RI t as% � -D—L. - Ln +. • 07% • • o- i....;'.�-F•._tlt Pomfar,pnurW_, FL Gr Liltla Rank-h'aAh Pg t tem, M 7cfQ'iA7e--Rasevite, CP. L �nWrm, CA •r, FL MPA -2% -1% C% Change In Share of National Employment, 1998 - 2816 Employment 19% -2914 . A.dded Jabs * Last Jobs ' Employees 683 1% National Location Cluster/Subcluster Name Employment Employment Quotient Other Competitive Regions Rank Distribution Services 30,108 13 1.09 New York, Los Angeles, Chicago, Silicon Valley, Dallas, Philadelphia Apparel and Accessories 858 25 0.34 New York, Los Angeles, Miami, Wholesaling Philadelphia Transportation Vehicle and 407 23 0.58 Los Angeles, Miami, Dallas, New Equipment Distribution York, Chicago, Houston Food Products Wholesaling 1,727 18 0.94 Los Angeles, New York, Chicago, Miami, Philadelphia, Atlanta Merchandise Wholesaling 19,129 16 1.13 New York, Los Angeles, Silicon Valley, Chicago, Dallas, Boston, Atlanta Catalog and Mail-order 6,951 8 1.59 New York, Chicago, Los Angeles, Philadelphia, Madison, Dallas, Phoenix Farm Material and Supplies 1,036 3 0.86 Chicago, New York, Sacramento, Wholesaling Philadelphia, Salinas (CA), St. Louis Distribution Services Cluster: Farm Material and Supplies Wholesaling Subcluster Share of National Cluster Employmer - 1S% 1.4% Ch kapJiaµro. IL- r, -V11 1 396 York-}iathem Naw Jarzay-W ng Isiard. Nk'JCJ-PA N C 1.1 °% !.9'i nlled';gii5-5i. d E, 1'0% 3-Camel-fi- DRi^ E W 0.8%_ o 0.7% MeiLM .. z 0.6% 0 o.s%' RI t as% � -D—L. - Ln +. • 07% • • o- i....;'.�-F•._tlt Pomfar,pnurW_, FL Gr Liltla Rank-h'aAh Pg t tem, M 7cfQ'iA7e--Rasevite, CP. L �nWrm, CA •r, FL MPA -2% -1% C% Change In Share of National Employment, 1998 - 2816 Employment 19% -2914 . A.dded Jabs * Last Jobs ' Employees 683 1% With 27,821 total employees, the transportation and logistics cluster is slightly more concentrated in Minneapolis -St. Paul than in the nation. The annual wages in 2010 were $50,738, the sixth highest in the nation. Although the region saw a significant reduction in employment within the cluster in 2002, employment and location quotient has since leveled. Overall, the largest subcluster in terms of both employment and location quotient was air transportation. This is a testament to the size and clout of the Minneapolis -St. Paul International Airport, the largest airport in the Upper Midwest. Although MSP has a high share of employment nationally within the Air Transportation subcluster, it lost share between 1998 and 2010. 2010 Cluster Breakdown, Minneapolis -St. Paul -Bloomington, MN -W1 Metropolitan Area, Transportation and Logistics Cluster Cluster/Subcluster Name Employment National Location Other Competitive Employment Quotient Regions Rank Transportation and Logistics 27,821 13 1.13 New York, Los Angeles, Chicago, Atlanta, Houston, Dallas, Miami Marine Transportation 40 132 0.02 Los Angeles, Houston, New York, New Orleans, Seattle, Miami, San Francisco Airports 834 39 0.37 Miami, New York, Los Angeles, Dallas, Atlanta Bus Transportation 175 31 1.02 New York, St. Louis, Phoenix, Los Angeles, Dallas Transportation Arrangement and 8,603 23 0.63 New York, Los Angeles, Warehousing Chicago, Dallas, Atlanta Transportation Support and 554 20 0.76 Chicago, Los Angeles, Operations Philadelphia, Virginia Beach Air Transportation 17,615 9 2.99 New York, Atlanta, Chicago, Los Angeles, Dallas, Houston, Detroit, Phoenix As a result of its locational competitive advantage and historical roots in transportation and distribution, Minneapolis -St. Paul is now home to many of the nation's largest firms within the two clusters. Cargill, the largest private company in the nation, is a major purchaser and distributor of grain and other agricultural commodities. In a similar light, CHS Inc. is a Fortune 100 company owned by agricultural cooperatives, farmers, ranchers and thousands of preferred stock holders. CHS Inc. owns and operates numerous businesses dealing with food processing, wholesaling, farm supplies, fuel, and financial services. The Mosaic Company, a Fortune 500 company, is a combined producer, marketer, and distributor of concentrated phosphate and potash, which are mostly used for fertilizer. 41 Transportation and Logistics Cluster: Air Transportation Subcluster 11% 0 10% N a% „.., .,,r, na vnei P.ax I v,ry U.+,g k44'1rKl, he-h.e c N a% E � a% T Oo E 6% U.1 vl 5%- 4% - O Az 3%- M rn 2% * oc-VA,i•AD1we url-riab�anva`� L . O JAI .. €]R -WA D° 1 4% -3% 296 -176 076 196 2% Change in Share of National Employment. 1998 - 2014 Employment 7998 -ZD 10 Added Jotvs i Loll JohS - Employ122,313222 Headquartered in Eden Prairie, C.H. Robinson is one of the world's largest third -party logistics providers, offering logistics services such as supply chain analysis, freight consolidation, carrier management and information reporting. In 2005 C.H. Robinson acquired FoodSource Procurement, a leader in procurement, packaging, and transportation services for the food industry. Carlson Wagonlit Travel, a subsidiary of Minnetonka -headquartered Carlson, is a global leader in business travel management and coordination. Until its merger with Delta in 2008, Northwest Airlines was one of the largest airlines in the world and was headquartered in Eagan. The low-cost airline Sun Country Airlines is headquartered in Mendota Heights and serves 31 destinations across the nation. Minneapolis -St. Paul International airport is the largest and busiest airport in the six -state region of Minnesota, Iowa, Nebraska, North Dakota, South Dakota, and Wisconsin, and in terms of passengers were the 17th busiest airport in the United States and the 51St busiest airport in the world.' 2012 Airport Traffic aatistics. The Port Authority of New York and New Jersey. 42 Cp�* < #& — .,cF» IE"ir?@ Factor Conditions Like many of the region's clusters, the transportation and logistics and distribution services clusters are dependent on the region's ability to provide a skilled workforce. Further inputs include actual materials for trade. This is most relevant to the distribution services cluster, especially those companies dealing in agricultural commodities. Minneapolis -St. Paul's vicinity to the "grain belt" of the Midwestern United States aids this competitive advantage. Demand Conditions Although Minneapolis -St. Paul is far from main markets on the West and East coasts, the region has been able to use its location to coordinate between supply and demand. This has largely given the region the important role as the hub of the Upper Midwest, coordinating the trade of commodities and finished products. FL-lated and &ipporting Industries The transportation and logistics and distribution services clusters are related to many other clusters, as nearly all traded clusters require some form of transportation, distribution, and logistical services. Within Minneapolis -St. Paul, there is an especially close relationship between the processed food cluster and the distribution services cluster. This is because the processed food industry is entirely reliant on the distribution of agricultural commodities and processed food products. Context for Firm Srategy and Rvalry Minneapolis -St. Paul has been able to exploit its historical legacy as a transportation and distribution hub. The region is home to many of the cluster's largest companies, especially in the realm of food and commodity related distribution services. 43 Financial Services employment and location quotient has decreased since 3998 Passenger Car Leasing 23G Depository Insurance Institutions Products 25% 31% Securities Brokers, Dealers and Exchanges 42% New York has the largest employment within the Financial Services cluster, followed by Chicago and Boston. Minneapolis- St. Paul has the 301" highest total employment of all metropolitan areas. Financial Services Employment (Thousands) 70 60 so 40 30 20 10 0 Location Quotient 1998 00 02 04 Oda 08 2010 The Financial Services cluster is diversified. The largest sub cluster within the cluster is Securities Brokers, Dealers, and€xchanges followed by Insurance Products and Depository Institutions. 2010 Financial Services Employment (Thousands) Nav York MSA (1) Chicago MSA (2) Boston MSA (3) Philadelphia MSA (4) Los Angeles MSA (5) Dallas MSA (5) San Francisco MSA (7) Phoenix MSA (8) Washington DC MSA (9) Minneapolis -St. Paul MSA (10) 111111111 96 M 91 M 80 M 80 1 65 45 40 40 40 0 200 2 1.8 1.6 1.4 1.2 1 0.s 0.6 0.4 0.2 0 335 400 Minneapolis-AIO° p" &MAE©" 3.:02- >_ #"per <_ The MSP region ranks tenth in U.S. employment in the financial services cluster. New York City is by far the largest employer in the financial services cluster, with Chicago, Boston, Philadelphia, and Los Angeles as the next largest employers. The MSP region lost jobs in the financial service cluster since 1998, dropping from 58,437 jobs in 1998 to 39,806 in 2010. While this was a national trend, the MSP region lost proportionally more jobs in financial services than the nation as a whole. The MSP location quotient for the financial services cluster dropped from 1.88 to 1.38. The average wage for the financial services cluster is $96,691, reflecting very high salaries for many of the jobs in the financial services industry. Financial Services Cluster EmplDyment by Metropolitan Statistical Area, 2010 Empbyment, 2010 8 100,000 280,000 300,980 _80,008 in S I 1 I NeawYixk-Northern NewJ y -Lang Island, NY -N.1 -PA 1 334,854 Chicag-�NapervillEJoliet, IL -IN -00 2 96,182 9aston-CamhridgEQuincsy, NIA -NH 3 90,828 Phi lad El phi a-Camden-yViI mington, PA -NJ -DE -MC 4 86,418 LosAngeles-Long Beach -Santa. Ana, CA 5 E0,084 Dallas -Fart Niorth-Arlingtan, TX 8 —64,943 San Francisca—Oakland-Fremont, CA 7 44,531 Phaenix-NI Esa-Scottsdale,, Z 8 40,238 Wash ington-Arlington-AlExendri s, Df--vA-hiD-vyV 9 48,203 hlinnespalis-St. Faul-9lcamingtan. IVIN-Vil 18 H,80G Atlanta -Sandy Springs -Marietta, GA 11 39,311 Miami -Fort Lauderdale-Pampano Beach, FL 12 37,672 Houston -Sugar Land -Baytown, TX 13 36,98T Bridgepart-Stamfard-NarusI(. CT 14 30,254 Milwaukee -Waukesha -West Allis. WI 15 28,354 Denver -aurora, CO 16 27,922 Hartford -West Hartford -East Hartford, CT 17 26,380 Tampa -St. PEtErsburg-Claar.Vater, FL 1E 24,531 Debmit-Warren-Livonia, MI 19 24,459 San Antonio, TX 20 . 23,212 The financial services cluster includes four subclusters: The largest of these subclusters is securities, brokers, dealers, and exchanges, which represented 16,819 jobs in the MSP region in 2010 and ranked ninth in employment among U.S. metropolitan regions. The next largest subcluster is insurance products providing 12,311 jobs to the MSP region in 2010 and ranking seventh in employment among metropolitan regions. The depository institutions subcluster accounted for 9,906 jobs in 2010 and ranked 18th in the nation. The smallest financial services subcluster is passenger car leasing with 750 jobs in the MSP region in 2010 but ranking fourth in employment among metropolitan regions. 45 2010 Cluster Breakdown, Minneapolis -St. Paul -Bloomington, MN -W1 Metropolitan Area Financial Services Cluster Cluster Year Employment National Rank Location Quotient Other Competitive Regions Financial Services 2010 39,806 10 1.35 NevrYork, Chicago, Boston, Phialdelphia, Los Angeles Depository Institutions 2010 9,906 18 0.91 New York, Dallas, Philadelphia, Los Angeles, Chicago Securities Brokers, Dealers and Exchanges 2010 16,819 9 1.36 New York, Boston, Chicago, Philadelphia, Los Angeles Insurance Products 2010 12,331 7 2.03 New York, Hartford, Milwaukee, Des Moines, Los Angeles Passenger Car Leasing 2010 750 4 8.11 Chicago, New York, Baltimore, Atlanta Minneapolis -St. Paul -Bloomington, MN-Wl Metropolitan Statistical Area r - Iily Subdustor, 26 i L. -ctilC.l�tl ��I dlu��'.�lu �ivl. _Ptji� -Ur(11�'Vlt 'I Chart Control: Mouse over for more information_ Securities Brokers, Dealers and Exchanges Insurance Products Depositary Institutions Passenger Car Leasing Overall Employment Rank = 1 d Employment, 2010 0 3,040 6,000 9,000 Rank in U5 9 7 113 4'■ 750 12,000 15,000 17,000 12,331 unr While all four of the financial services subclusters lost jobs from 1998 to 2010, over 60 percent of the jobs lost, 11,514, were in the insurance products subcluster. Minneapolis -St. Paul -Bloomington, MN -WI Metropolitan Statistical Area Financial Services Cluster: Jobs Created by Subduster, 1998-2010 Chart Control. Mouse over for more information. Net Financial Services Jobs Created, 1998 to 2010 Clusterjobs created 1998 tc 2010 -18,590 Passenger Car Leasing Securities Brokers, Dealers and Exchanges Dep-bry Institutions Insurance Products Iindicates expected job creation' at national trend Percent change in n atiun al ben chma rk times starting regiunal employment summed at the metro po Iden statistical area regiun . Overall Financial Services jobs created, if it matched national benchmarks, would be -3,987. #'p *:5 #& — .,cF» IE 'i7__@ Factor Conditions MSP's location of the Ninth Federal Reserve Bank as well as the home to a concentration of corporate headquarters make it natural center for a robust financial services industry, a major financial influence in the Upper Midwest between Chicago and Seattle. Banking leaders, such as Wells Fargo (formerly Norwest Bank) and U.S. Bancorp, play an important role in the regional economy. Insurance leaders, such as Thrivent, Securian, and United Health, have helped make the region competitive in the cluster. Demand Conditions Corporate headquarters contribute to favorable regional demand conditions for the financial industry in MSP. Historically, insurance companies such as Thrivent (formerly Lutheran Brotherhood) started by serving special populations (Lutherans) in response to local demand but have since expanded to broader national markets. F;L-lated and 9tpporting Industries- MSP financial services firms benefit from the high-caliber professional services available in the metro area, including accounting, advertising, legal, and marketing. Accounting and legal services are strongly supported by Minnesota's educational system with numerous post -secondary educational institutions offering accounting certificates, two-year accounting degrees, four-year accounting degrees, and law. Context for Firm Srategy and Rvalry Several consolidations have taken place within the last decade as shown in following figure: First Si- Paul Bank Compani and First es buys Star Travelers Bank (2004) wells merge to "moved Fargo create ING buys HQ to buys US Bank ReliaStar NYC in wachovi (1997} (2000 2009 a (2006) 49 40 0 0 0 0 Norwest US Bank Western Arneriprise Bank buys National Financial buys buys Piper Mutual Columbia Wells Jaffray buys Managernerrt Fargo and later Farmers (2009) (1998) Spins it Home Off Mutual {2003) (2407) Source: Laura Bolstad, Dan Maloney, Cynthia Yuen. The Financial Services Cluster of the Twin Cities, Humphrey School, 2010. There have also been efforts within smaller regional banks, such as Frandsen Financial Corp., which consolidated the eight charters it held for community banks into one. Finally, other mergers and acquisitions in the Twin Cities have created business for ancillary financial services firms, such as the Delta -Northwest Airlines merger. Publishing and Printing employment peaked in 2008, while location quotient has shifted accordingly. Publishing and Printing Employment (Thousands) 35000 300 ()0 25000 20000 15000 10000 5 000 0 1998 00 Media Other Representatives Paper Products 5% Signs and Advertising Specialties New York has the largest employment with in th a Prin tin g an d Publishing cluster, followed by LosAngeles and Chicago. Minneapolis- St. Paul has the 71h highest total employment of all metropolitan areas. 3 2.5 2 1.5 0.5 0 08 2010 The largest sub cluster within the Publishing and Printing cluster is Publishing, followed by Prin tin g Services. Total 2010 Employment (Thousands) Neve York MSA (1) Los Angeles MSA (2)r17 51 Chicago MSA (3)1 San Francisco MSA (4) Silicon Valley MSA (5) Washington DC MSA (5) Minneapolis -St. Paul MSA (7) Dallas MSA (8) Boston MSA (9) Philadelphia MSA (10) Minneapolis-3Vi0° p" OpO"Q@M °A§ 0 #" p>_* <_ MSP's publishing and printing cluster accounts for nearly 19,000 jobs, with core printing and publishing employment placing fourth and eighth, respectively, in U.S. rankings. In cluster employment, the MSP region ranks seventh behind the New York, Los Angeles, Chicago, San Francisco, San Jose, and the Washington, DC, metropolitan areas. The MSP region has lost employment and employment share since the 2008 recession, but still has a relatively high location quotient of 1.68. Publishing and Printing Cluster Employment by Metropolitan Statistical Area, 2010 Historically, the printing and publishing industries have been closely linked. Minnesota's first printing and publishing companies date back to the late 1800s and these early companies were often vertically integrated with paper companies. For example, Charles Blandin purchased the Itasca Paper Company in 1916 to secure a reliable source of newsprint paper for the St. Paul Pioneer Press/Dispatch Printing Company. Blandin later sold the printing company but kept the paper mill, which became world famous under the Blandin name. Similar arrangements existed for book and periodical publishers as well. For example, the University of Minnesota Press developed as a joint printing and publishing operation to produce and disseminate the work of University professors. Newspaper and periodical publishers played the role of local advertisers as well. z Employment, 2010 0 20,000 40,000 60,000 80.000 110.000 nk in US New York -Northern New Jersey -Long Island, NY -NJ -PA 7 Los .Angeles -Long Beach -Santa Ana, CA 2 51,347 Chicago -Naperville -Joliet, IL -IN -WI 3 40,711 San Francisco -Oakland' -Fremont, CA 4 21},321t San Jose -Sunnyvale -Santa Clara, CA 5 ` 19,836 Washington -Arlington -.Alexandria, DC -VA -MD -WV 6 19,571 Minneapolis -St. Paul -Bloomington, MN -WI 7 18,826 Dallas-FortWorth-Arlington, TK 8 18,736 Boston-Cambridge-4auincy, MA -NH 9 17,730 Philadelphia-Camden-r.Nilmington, PA -NJ -DE -MD 16 17,276 Atlanta -Sandy Springs -Marietta, CA 11 16,583 Kansas City, MO -KS 12 12,515 Rochester, NY 13 11,797 Seattle -Tacoma -Bellevue, WA 14 10,335 St. Louis, MO -IL 15 10,109 Miami -Fort Lauderdale -Pompano Beach, FL 166 9,777 Cincinnati -Middletown, OH -KY -IN 17 9,673 Milwaukee -Waukesha -West Allis, WI 18 8,171 Nos hville-Davidson—Murrre es born—Franklin, TN 19 8,104 Detroit -'.Marren -Livonia, MI 20 7,996 Historically, the printing and publishing industries have been closely linked. Minnesota's first printing and publishing companies date back to the late 1800s and these early companies were often vertically integrated with paper companies. For example, Charles Blandin purchased the Itasca Paper Company in 1916 to secure a reliable source of newsprint paper for the St. Paul Pioneer Press/Dispatch Printing Company. Blandin later sold the printing company but kept the paper mill, which became world famous under the Blandin name. Similar arrangements existed for book and periodical publishers as well. For example, the University of Minnesota Press developed as a joint printing and publishing operation to produce and disseminate the work of University professors. Newspaper and periodical publishers played the role of local advertisers as well. z 2010 Cluster Breakdown, Minneapolis -St. Paul -Bloomington, MN -W1 Metropolitan Area Publishing and Printing Cluster Cluster/Subcluster National Location Name Employment Employment Quotient Competitive Regions Rank Office Equipment and 10 42 0.18 New York, Tampa Bay, San Supplies Antonio, Boston News Syndicates 55 29 0.48 New York, Washington DC, Los Angeles, San Francisco, Glen Falls (NY) Photographic Equipment 136 29 0.45 Rochester (NY), Los Angeles, and Supplies Greeley (CO), New York Specialty Paper Products 235 32 0.57 Kansas City, Louisville, New York, Chicago Photographic Services 280 4 2.07 New York, Los Angeles, Chicago, Greensboro (NC) Printing Inputs 332 15 1.31 Virginia Beach, Los Angeles, Chicago, San Francisco, Portland Media Representatives 355 15 0.89 New York, Chicago, Los Angeles, Detroit, Miami Paper Products 923 11 1.45 Chicago, New York, Los Angeles, Dallas, Atlanta, St. Louis Signs and Advertising 1,154 10 1.17 New York, Brookings (SD), Los Specialties Angeles, Chicago, Dallas Printing Services 5,159 4 1.84 Los Angeles, Chicago, New York, Dallas, Philadelphia Publishing 10,187 8 1.99 New York, Los Angeles, San Jose, Chicago, San Francisco, Washington DC By the 1950s, advertising developed as a mature, related industry in Minnesota. Specialized firms emerged and operated independently of existing publishers. Yet, advertisers remained an integral partner in the success of local printers and publishers. Because these new advertising agencies were not vertically integrated with printers and publishers, the advertising industry has been considered a separate entity. However, the story of MSP's printing and publishing cluster is better understood when advertising is taken into account. Although strict cluster definitions distinguish these areas, there is a great deal of overlap as the clusters share similar challenges tied to an increasing reliance upon digital and electronic media. Publishers and advertising agencies also draw upon many of the same freelance writers, graphic designers, and illustrators. These phenomena may be due to strong occupational spillover. 50 Furthermore, innovations in printing are driven by customer demands from publishing and advertising alike. Research shows that these three industries are bound together in an interdependent customer - supplier network. While printing and publishing firms can be found in nearly every county of the state, advertising is generally concentrated in the MSP region. Altogether, approximately 68,000 people were employed in these clusters in 2010, representing more than 3 percent of all jobs in Minnesota. #P>Y-< #& — yg-,�. »! /E "TTX Factor Conditions, Lumber, clays, and related inputs for the printing and publishing cluster remain readily available in this region. The introduction of new technology, demand for more sophisticated products, and trends in manufacturing require increasingly skilled workers to fill positions in this cluster. Demand Conditions An increased reliance upon electronic documentation, online communications, and cloud -based networking has significantly decreased the demand for traditional printing and Based in Hastings, Snead Manufacturing is classic success story in Minnesota's Printing and Publishing cluster. Begun in 1906with introduction of its "bandless file," Snead has brought thousands of paper-based products to market, ranging from simple file foldersto more complex hanging file systems and accordion folders. In the process, Snead hasestablished its position asa leader in what it callsthe "businessof organization." With advances in computer technology and a relative decline in the reliance on paper-based communications and data retention, Snead has evolved to meet the needsof an ever-changing business world. Agrowing portion of its product line has been tailored to supplement the Internet age, and the company reports stable market share with a small number of established global peers and competitors. As more of its production line becomes automated, and more of its sales Internet -based, Snead is focused on attracting and retaining qualified workers in skilled manufacturing and ITpositions. Although employment growth is not anticipated, the company fills a valuable niche in the business products space and is intent on continued product -line innovation. publishing products. However, niche markets remain and the region's remaining printing and publishing firms have established a foothold in one or more of these specialty areas. FL-lated and Sipporting Industries The printing and publishing cluster has close ties to the region's corporate headquarters concentration and professional services strengths, particularly in the legal and advertising areas. Context for Firm Srategy and Rvalry: In general, pure economic survival has driven strategy for firms in the printing and publishing cluster. As market forces have significantly influenced this sector, regional firms appear to have found their respective niches and anticipate modest, but steady growth in coming years. 51 Production Technology employment and location quotien t h as fluctuated since 1998 Production Technology Einployirrent (Thousands) 18 15 14 12 10 8 5 4 2 0 Location Quotient Chicago has the largest employment within the Production Technology cluster, followed by Los ,An g eles and Cfewelon d. Min n e ap ofis -St. Paul h as th a 71h high est total employment of all metropolitan areas. Total 2010 Employment (Thousands) Chicago MSA (1) Los Angeles MSA (2) Cleveland MSA (3) Houston MSA (4) Detroit MSA (5( Mikedaukee MSA (6) Minneapolis -St. Paul... NEva York MSA (S) Dallas MSA (9) Philadelphia MSA (10) 1.75 1.7 1.65 1.6 1.55 1.5 1.45 1.4 1.35 1.3 0 10 20 30 1998 00 02 04 06 08 2010 Other Machine Tools 3 0 end Accessories } 127n The largest sub cluster within the Production Technologyis Process Fabricated Equipment Subsystems Process Plateork and Components, Equipment Sub- 15` followed by Process systems and Machin ery and Fabricated Components Process Plate Work. 550 Machinery 15% Chicago has the largest employment within the Production Technology cluster, followed by Los ,An g eles and Cfewelon d. Min n e ap ofis -St. Paul h as th a 71h high est total employment of all metropolitan areas. Total 2010 Employment (Thousands) Chicago MSA (1) Los Angeles MSA (2) Cleveland MSA (3) Houston MSA (4) Detroit MSA (5( Mikedaukee MSA (6) Minneapolis -St. Paul... NEva York MSA (S) Dallas MSA (9) Philadelphia MSA (10) 1.75 1.7 1.65 1.6 1.55 1.5 1.45 1.4 1.35 1.3 0 10 20 30 Minneapolis-3Vr0° p" 05%pENM'E4• £YUlDi3rr #" p>-* <_ Production technology is closely related to the metal manufacturing cluster, producing products used in the manufacturing production process. The production technology cluster supports other industry clusters within the region. The MSP region ranks seventh among U.S. metropolitan areas in employment in the production technology cluster, with 9789 jobs in 2010. Other competitive regions in production technology are Chicago, Los Angeles, Houston, Cleveland, and Detroit. Among the production technology subclusters, the MSP region is most competitive in machine tools and accessories, industrial patterns, process machinery, process equipment sub -systems and components, and fabricated plate work. 2010 Cluster Breakdown, Minneapolis -St. Paul -Bloomington, MN -WI Metropolitan Area, Production Technology Cluster With productivity improvements as well as the economic recession, the production technology cluster nationwide has lost jobs nationwide from 1998 to 2010. However, the MSP region was one of the few U.S. regions to increase jobs in the machine tools and accessories subcluster over that period. The average wages in the industry are relatively high, over $60,000 for the MSP region in 2010. Occupations that are important to the production technology cluster are mechanical engineers and high -skilled welders. 53 2010 MSP National MSP Cluster/Subcluster Name Employment Location Other Competitive Regions Employment Rank Quotient Production Technology 9,789 7 1.48 Chicago, Los Angeles, Cleveland, Houston, Detroit Ball and Roller Bearings 10 98 0.03 Chicago, Sandusky (OH), Manchester (NH), Indianapolis Industrial Patterns 89 8 1.66 Cleveland, Fort Wayne (IN), New York, Appleton (WI), Detroit, Portland Industrial Trucks and Tractors 175 42 0.62 Dallas, Columbus (IN), Houston, Chicago, Indianapolis, Kansas City Machine Tools and Accessories 1,185 7 1.77 Detroit, Chicago, Los Angeles, Rockford (IL), Cleveland, Cincinnati Fabricated Plate Work 1,430 8 1.35 Tulsa, Houston, Beaumont (TX), Chicago, Pittsburgh Process Machinery 1,513 11 1.64 Cleveland, Chicago, Detroit, New York, Appleton (WI) Process Equipment Sub -systems 5,387 8 1.62 Chicago, Los Angeles, and Components Cleveland, Houston, New York, Milwaukee, Buffalo With productivity improvements as well as the economic recession, the production technology cluster nationwide has lost jobs nationwide from 1998 to 2010. However, the MSP region was one of the few U.S. regions to increase jobs in the machine tools and accessories subcluster over that period. The average wages in the industry are relatively high, over $60,000 for the MSP region in 2010. Occupations that are important to the production technology cluster are mechanical engineers and high -skilled welders. 53 Production Technology Cluster: Machine Tools and Accessories Subcluster Share of National Cluster Employment by Metropolitan Statistical Area, 1995 - 20 10 0 [faireaaWsl rran-��x,�.. and 0 :�tiar'lgq-hiapeNiliEt-.Faisal, 0--IN-WI 0 Cn,- mat4Aiddiokrwn. CH -KY -IN 2% 0 Rockford. L 0 >x�eles-Loren s3ta Arra. CA 1evetand-E]l ir, 4H Cl.>tnardR New York-!. oft Fayattevrfle-S��iy:.i 13ta�'tia.�.a�. . Arxlusla 4% 096 0 Mr.0, origtoll. MN -WI .. }fzstia{ asi Hartford. CT i - 1vwr[, TX, Co fi-PA FL 4VV 1% Change in Share of National Employment. 1998 - 2010 Employment 1998 -2010 Added .Jobs 0 Lost,Jobs 'Employees 1,690 2% Production technology companies in the Minneapolis -St. Paul region have developed in support of Minnesota's dominant industries, such as agriculture and expanded to other industries over time. One such example is Chart Industries based in New Prague, on the edge of the metropolitan region. Chart Industries started in 1963 as Minnesota Valley Engineering (MVE). The company produced cryogenic containers to preserve and transport bull semen for Holstein bull breeders in the Minnesota Valley. It was a garage shop located across the road from the Minnesota Valley Breeders, their initial customer. The vacuum cryogenic containers keep liquid nitrogen at extreme sub -zero temperature (-320° F) for up to five years. The containers include layers of aluminum insulation and require specialized metalwork and welding to assure high integrity of the container. Chart Industries of Cleveland, W-11. Ohio, later acquired the New Prague operation and has invested in the company's expansion in Minnesota. Chart was a spinoff of Trane industries, specializing in heat exchangers and converting gas to liquid. The name Chart was taken from the first names of the founders, Charlie and Art Holmes. Chart has expanded into other markets for cryogenic containers, and now its markets are divided among biomedical, energy, and general industrial applications. Chart Industries is a leading provider of highly engineered cryogenic equipment for the hydrocarbon, industrial gas, and biomedical markets. In the biomedical area, Chart provides containers for oxygen therapy and gas generation products. End markets include home healthcare and nursing homes, hospitals and long-term care, biomedical and pharmaceutical research, and animal breeding. Chart has been expanding its operations in Minnesota with a new facilities in New Prague and Owatonna, and has set up an engineering office in Burnsville to recruit mechanical engineers, who are critical to its business. The Owatonna plant is designed to increase capacity and competitiveness in producing mobile LNG containers. / ;;ART.�rw2 / Wxriur j ajik Started in 1963 in New Prague, as Minnesota Valley Engineering, the company was later acquired by Chart Industries of Cleveland, OR Chart has expanded its operations in Minnesota, producing cryogenic containers for the biomedical and energy industries as well as for general industrial applications Chart Industries is a technology leader in providing heat exchangers and cold boxes critical to liquid natural gas (LNG), olefin petrochemicals, natural gas processing and industrial gas markets, and in separation, liquefaction and purification of hydrocarbon and industrial gases. The company is a manufacturing leader, one of three global suppliers of mission -critical LNG and WG liquefaction equipment. Chart Industries has expanded its operations in Minnesota to take The Minnesota Department of Employment and Economic Development (DEED) has provided incentive funding for Chart's expansions in Minnesota, which are tied to the booming demand for LNG containers, both stationary LNG fuel tanks as well as mobile equipment for buses, trucks, and trains. The price of natural gas fuel has declined from about the same as diesel fuel in 2000 to about one-tenth the price of diesel fuel currently. Chart employs mechanical engineers who specialize in fluid force and thermodynamics. Chart recruits mechanical engineers from the University of Minnesota and has a rotation of engineering students who work at Chart. The Burnsville engineering office was set up to recruit engineers who would choose to live in the Metro area but are close enough to their operations in New Prague and Owatonna to be involved in production and operations. Chart also employs high - skilled welders and offers an in-house training program for prospective welders. Suppliers include, stainless steel plates from Kentucky, special plates from Belgium, and stamping and metal stamping and spinning for tank heads by Rao Manufacturing and Acme Metal Spinning. Most shipping is by truck and little by rail. Some of the containers are too wide for rail cars, and the company is exploring shipment by sea. 55 Chart's major competitors are Taylor -Wharton in Mobile, Alabama, and INOXCVA, an Indian company with U.S. operations in Houston, producing mobile cryogenic containers. Quality Tool specializes in fabricated sheet metal, press breaking, welding, metal stamping, tool and die manufacturing, and machining. The company is a contract manufacturer, doing vertically integrated metal manufacturing work, making metal casings and platings for products such as computers. Quality Tool makes power delivery bus bars using copper for insulation, ranging from as large as 400 pounds to as small as 4 ounces. Quality Tool's customers include computing, medical device, defense, industrial, and telecommuni- cations companies. Within Quality Tool's industrial base, much is associated with Rockwell Collins, which makes just about anything going into a factory, and Hoffman, which makes electrical boxes. Major medical clients are GE Healthcare in Waukesha, Wisconsin, and St. Jude Medical and Medtronic. The company also has a relationship with FoxCon in China, which does computer switch covers. Quality Tool thrived on high -mix and low-volume orders, typically producing between 1,000 to 2,000 pieces at a time. CHART / cil .�Om:F.�m2k v AJ�FSa% Quality Tool began in 1959 as a tool and die shop. The company has 111 employees in 8t. Paul, and 90 employees in Brookings, 3Duth Dakota. As computers began to advance with sophisticated Enterprise Pesource Planning (B:P) system links, Quality Tool was able to develop a niche market in casings. The company had 28 million in sales in 2012, and has experienced a 14 percent growth in the last 8 years. 60 percent of their client base is industrial, while 21 percent is medical, 6 percent is defense, and 13 percent is associated with computers and electronics. Quality Tool has a full spectrum of employees, including very skilled program engineers, operations staff, customer service workers, and other workers. Its major competitors are located in Chicago. Quality Tool excels is keeping up to date on the latest trends and technologies. The company uses a 31) printer to do quick prototypes, and all of its records are electronic, making it easy to communicate within its own firm and with clients. #.��* <# OA - .IE» I.E'nom Factor Conditions, Production technology relies on highly skilled mechanical engineers and welders. The University of Minnesota is an important source of mechanical engineers for this industry. While welders require less formal education, they need specialized on-the-job training and applied learning skills for jobs in the production technology cluster. Demand Conditions The businesses in the production technology cluster supply other major industries and are driven to innovate and provide quality products by demanding local customers. Local demand from the regions competitive industries, such as agriculture, has contributed to the development of companies such as Chart Industries, and as these companies have matured, they have branched out supplying other industries such as medical and transportation. 56 FL-lated and Supporting Industries The production technology cluster is an important supplier for other industries in the MSP region and exports its products to other regions as well. A strong local supply network in the production technology and metal manufacturing industries allows the region to support and grow other industries as well. Context for Firm Srategy and Rvalry.' Businesses in the production technology cluster provide a range technology solutions for improving manufacturing processes and productivity. The companies in this cluster provide a strong base for development of robotics in the MSP region. 57 Information Tethnolagy Employment (Thousands) Information Technology 25 employment andlocation 20 q u o Lien t h as remain e d relatively constant since j 5 1995 10 eripherals ,* 2256 5 0 Location Quotient 1998 00 02 04 06 08 2010 Communications Compu ers Service5 ?b 12 Electronic Components and Assemblies Software 20 43% Seattle has the largest employment within the Information Technology cluster, followed by Silicon Valley and New York. Minneapolis -St. Poulhasthe 151h high est total employment of all metropolitan areas. 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 Th a largest sub cluster within th e Information Technology cluster is Software, folio wed by Peripherals, an d Electronic Comp on en ts and Assemblies. 2010 Total Employment (Thousands) Seattle MSA (1) Silicon Valley MSA (2) Nelda+ York MSA (3 ) Boston MSA (4) Los Angeles MSA (5) San Francisco MSA (6) Dallas MSA (7 Atlanta MSA (8) Chicago MSA (13) Minneapolis -St. Paul MSA (15) 0 20 40 60 8o Minneapolis -3W10° p")Affl&# ° 4• MW'C9Tr #" p>_* <_ While MSP's printing and publishing cluster must react to the drive toward digitalization, the region's information technology (IT) cluster is benefitting from the increasingly networked and cloud -based economy of the 21st century. Trailing leaders such as Seattle and Silicon Valley, MSP currently ranks 15th nationally in IT employment, with nearly 15,000 metro -area residents working in the cluster. A location quotient of 1.23 indicates that MSP's IT employment concentration is above the national average, but not as competitive as other MSP clusters. The region's average IT salary of $94,305 ranks 12th nationally. 2010 Cluster Breakdown, Minneapolis -St. Paul -Bloomington, MN -WI Metropolitan Area, Information Technology Cluster Cluster/Subcluster Employment National Location Other Competitive Regions Name Rank Quotient Information Technology 14,919 15 1.23 Seattle, Silicon Valley, New York, Boston, Los Angeles, San Francisco Communications Services 1,847 38 0.45 New York, Atlanta, Dallas, Kansas City, Seattle Computers 374 16 1.11 Houston, Johnstown (PA), Portland, Los Angeles, Seattle Software 6,430 14 1.26 Seattle, Silicon Valley, Boston, San Francisco, New York, Los Angeles Electronic Components and 2,951 11 1.63 Silicon Valley, Portland, Dallas, Los Assemblies Angeles, Boston, Phoenix Peripherals 3,317 3 5.02 San Diego, Boise, Boston, Chicago, Silicon Valley The sheer diversity and rapidly changing aspect of the IT cluster have presented the MSP region with an opportunity to stand out in certain areas, though. For its part, the IT cluster is comprised of five predominant subclusters: software, by far the largest subcluster; peripherals, a distant second; electronic components and assemblies, third; communications services, fourth; and computers, a far-off fifth. While Seattle and Silicon Valley stand out in software, for instance, MSP has found its own niche: IT peripherals. The peripherals subcluster includes devices that are connected to a host computer, but not part of it. Peripherals expand the host computer's capabilities but do not form part of the core computer architecture. It is often, but not always, partially or completely dependent on the host computer. There are three different types of peripherals: input, used to interact with, or send data to the computer, such as a mouse or keyboard; output, which provides output to the user from the computer, such as monitors or printers; and storage, which stores data processed by the computer, such as hard drives or flash drives. Indeed, consideration of the IT peripherals subcluster portrays MSP's IT cluster in favorable terms. With an approximate 7 percent share of subcluster national employment in 2010 and nearly 3 percent increase in its share of national employment since 1998, MSP joins the San Diego, Boston, and Boise regions as the nation's most competitive in this area. 59 Information Technology Cluster: Peripherals Sulacluster 9% 8°% p 7% 0 6% E 0 0 OL 596 E Jim 0 4% LO 2°% 1% r-1 CA Pnrfanct.Vanw� .5"r. eF�s,.!yrg +c5,.. _SantF� - Ly„�z#nrt V11��hnAAYpWon. TX San Fran..CI# n« ks s lardy t s w Nark -N alhem Mew Jerre _ • • V •10% -9% -8% -7% -6% -5% 4% -3% -21% -1% 0% 1% 2% 3% 4°% 5% Change in Share of National Employment 1998 - 2010 Employment 1998 -2010 Added Jobs Lost Jobs `Employees 1.99 In addition, the region's moderate climate, lack of natural disaster threats such as hurricanes, earthquakes, and tornadoes, and concentration of skilled, highly productive workers make MSP a natural fit for an emerging growth opportunity in IT: data centers. As more of our electronic devices are connected to the Internet, as more of the economy is based upon data, and as more of that data is stored remotely "in the cloud,” there is an equally growing need for physical locations to store and manage this data. Suitable space for data centers is in demand, and the MSP region has a competitive edge in this realm. We Factor Cbnditions, The demand for skilled workers in any number of IT subfields is on a steady, if not dramatic, rise. Despite the seeming impersonal nature of the online economy, human capital is behind every webpage and accounts for nearly every advance in system interoperability and customer experience. In particularly, talent is highly sought in the areas of software design, data storage, and security. The competition for skilled workers is amplified by the fact that in-house IT service provision is a growing component of businesses across a wide array of clusters. Demand Cbnditions Nothing is more cutting edge in the modern economy than information technology. The pressure for continued innovation and advancement is omnipresent—and ever mounting. Consumers, particularly early adaptors, are reliably interested in the next gadget or gizmo, and businesses are sensitive to providing their products and services on platforms that best serve their needs—and satisfy customer expectations. This is true at the global, national, and regional levels. plated and Supporting Industries- Perhaps more than any other, the information technology cluster has an influence that reaches far and wide. Its products and services are utilized by a large and growing segment of the economy, and its employees are often recruited to fill in-house IT positions. Cbntext for Firm Srategy and fdvalry Providing QUALITY With its Minnesota roots extending to the late 19th century, first as West Publishing and later Thomson West, Thomson Peuters has evolved from a predominantly print -based provider of legal information to an Internet -dependent source of information in four principal markets: financial and risk; legal; tax and accounting; and intellectual property and science. Based in Eagan, the Minnesota branch of Thomson Peuters remainsfocused on legal information, with the Westlaw product line leading theway. Sacond onlyto the company's financial and risk information market, Thomson's legal market accounted for $3.3 billion of revenue in 2012. With more and more of its product available online, largely through searchable databases, Thomson Pbuters is intrinsically tied to advances and challenges in information technology. While the company remains dependent upon access to a pipeline of traditional talent in legal and business analytics, the need for IT professionals– particularly in the areas of software, data storage, and security – is ever -mounting and increasingly competitive. the right mix of innovation and new technology with attention to individual business needs represents the sweet spot for IT success. Driving demand through product awareness and interoperability are imperative. 61 IV innesora"s Fortune 500 Companies (2013) Fortune Company Name 500 Rank:, Revenue millions}'; i Total Employees Fortune Industry Definition 17 ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- United Healr�h Group 110.6 I 133,000 :Health Insurance and Management ----------- 36 Targe l 73.3361,000 : General Merchandisers ................... 61 ................... i .................................................... 1 Best Buy ................ ................................ ....................... . 45.1 . ........................ ........................ 1 165,000 .......... .......................................................................... ..................... S p ecia Ity R eta i I ------------------------ I ............................ 69 ................... CHS ................................................... 40.6 . ................. ------ 9,495 -------------- I ................................................. Food and Grocery Wholesaling .................................. 86 Supervalu 36.1 130,000 Food and Drug Stores ................... 101 ................................................... 3M I .............. 11 -------- 29.9 ------------------------ 87,677 Miscellaneous ................... .................................................... i ............... .............................................................................................................. 132 U.S. Bancorp 22.2 64,486 Commercial Ba n ks ......................................................................... ................... 169 ................... .................................................... General Mills ................................................... 2 ................................................... 16.7 ............................................................................................................................. 35,000 Food Consumer Products 172 ................... Medtronic ........................... I ........................ 16.5 .............................................. 44,944 I -------------------------------------------------------- Medical Products and Equipment I .................... 194 ................... Land O'Lakes ............. --------------- ................................. 14.1 ------------ 9,600 ------- - ............... Food Consumer Products ........................ ------ .......................................... 229 Ecolab 11.8 40,860 Chemicals ................... .................................................... ........................ ........................ .......................................................................... 237 ................... 1C. H. Ro b I n s o n Worldwide! 11.4 .................... .............................. ------------------------ 10,929 -------------- ......... Transportation and Logistics .......................................................................... 246 ................... Mosaic .................................................... 11.18,0,00 ......................... L Chemicals .......................................................................... 263 Amer1pr[se Financial 10.3 ........................ 12,235 Diversified Financials ................... ................................................... ................................................. .......................................................................... 255 ................... Xcel Energy ................................................... 10.1 ............................................................................................................................ 11,113 Gas and Electric Utilities 319 Hormel Foods -------------------------- ....... 8.2 19,700 ................................................................ Food Consumer Products --------------------------- ................... ............ - Thrivent Financial for ...... 325 8 2,983 Life and Health Insurance ----------------------------------------------------------------------- Lutherans - ------------------------ ------------------------ ------------------------------------------------------------------------ 457 ................... Sit. Jude Medical ................................................... 5.515,000 ........................ ---------------------------------------------------------------------------------------------------- Medical Products and Equipment 5W Nash -Finch 4.8 6,410 Food and Grocery Wholesaling 2010 Management of Companies Subduster Employment (Thousands) Ne w York has the largest employment N Evv York M SA (1) within the Management Chicago MSA (2) of Companies Los Angeles MSA (3) sub cluster, followed by Houston MSA (4) Chicago and Los Atlanta MSA (5) Angeles. Min n e ap ofis - Minneapolis MSA (6) St. Paul has the 61h Dallas MSA (7) highest total Philadelphia MSA (8) employm en t of all Seattle MSA (9) metropolitan areas. Boston MSA (10) 0 100 200 33 Minneapolis-3Vi0°p"- 'MR -0 -ANORWA -o°AR>_Cluster With employment of over 90,000 in 2010, the MSP region ranks sixth nationally in the management of companies or corporate headquarters cluster. A location quotient of 2.45 indicates that employment concentration is over twice the national average—placing the MSP region sixth among its peers in subcluster employment. In addition, MSP has outpaced New York, Los Angeles, and Chicago in terms of national employment share between 1998 and 2010. Also, of the 20 top -performing regions in this subcluster, MSP ranks fifth in wages—with the average corporate employee earning nearly $115,000 annually. Local Commercial Services Cluster: Corp, Subsidiary & Regional Managing Offices Subcluster Employment by Metropolitan Statistical Area, 201 New York -Northern New Jersey -Long Island, NY -IJ-PA Chicago-Naperville-Jolret, IL -IN -0 Los Angeles -Long Beach -Sante Ana, 'CA liouiston-Sugar Land -Baytown, TX Atlanta -Sandy Springs-Manetta, GA Mirineapolis-St. Paul-Bloonngton, f,IN-Wl Dallas -Fart Wo rth-Adn gton, TX Philadelphia -Camden -Wilmington- PA -W -DE -41D Seattle-7acortm-Bellevue, WA Boston-Cambndge-Quincy, MA -NH Detroll-Warren-Livonia. Ml Sen Francisco -Oakland -Fremont. CA St. Louis, I.041- Washn9ton-Arington-Alexandria, DC-VA-I,4D-WV Cleveland-EWiia-taentor, OH Phoenoc-Mesa-Scottsdale. AZ Wan -Fort Lauderdale-Porrpsno Beach. FL PdtsSurgh, PA Denver -Aurora, CO San Jose -Sunnyvale -Santa Clara, CA Employment, 2010 D 100,000 200,000 300,0110 1. RW* I I 9 233,355 2 126,578 3 107,147 4 97,3% 5 95,314 6 7 89,981 8 76,61 9 76.114 110 73.04 , 71 61,366 12 53,975 13 52,751 14 48,917 16 37,084 16 36,146 17 36,131 18 35,'945 19 35,536 20 34,$53 Minnesota is home to 31 of the top 1000 publicly traded firms in the U.S. The state hosts 20 Fortune 500 firms and 12 companies on the Forbes Global 2000 list for 2011. UnitedHealth Group leads this, and other top-ranked firms such as Target, Best Buy, Supervalu, 3M, CHS, U.S. Bancorp, Medtronic, and General Mills are household names. Cargill, the largest private company in the country, has flourished in the MSP region for the past century. Many international companies have also chosen the MSP region as home for their U.S. satellite operations. 63 The MSP region consistently ranks among the top two U.S. metropolitan areas for its concentration of corporate headquarters, vying with Connecticut for the distinction. As an additional benefit, the MSP region's concentration of corporate headquarters has spurred the demand for associated professional services that support these major firms. These highly - specialized business and professional services include but are not limited to creative services, legal services, research science services, public relations, accounting, and consulting services. The strong base of corporate headquarters and supporting professional services in the MSP region are instrumental to the overall size, historical growth of the region, potential future growth, competitive supply chain bases, innovation, and philanthropy, as well as the presence of a skilled, highly productive workforce. A great deal of effort and attention has been focused on MSP's corporate headquarters. Regional leaders and economic development professionals are looking at ways to leverage certain strengths in order to grow and maintain jobs; others are intent on nurturing the next generation of corporate headquarters. Outreach to corporate leaders has revealed important insights; for instance, many in the business community believe MSP's corporate headquarters concentration provides a mutually beneficial synergy that provides a key competitive advantage; associated business organizations, executive mentorship, and access to high-quality professional services all stem for MSP's corporate headquarters concentration; and, in the words of one business leader, "The area is a jewel because of the number of great companies and good people here. The cross-pollination of corporate boards exemplifies the benefits of this region." Factor Conditions MSP's corporate headquarters and major employers compete for the best talent they can find within or attract to the region. It is widely accepted that Minnesota's skilled, highly productive workforce and strong quality of life are two of its greatest advantages. Corporate leaders report that retaining this edge is critical for the region's future competitiveness. Demand Conditions The region's corporate headquarters and major employers are diverse and represent a broad array of economic sectors. The success of these firms is often tied to national and global forces, with regional economic realities often providing secondary influence on business trends and decision-making. F;L-lated and 9.ipporting Industries Professional services ranging from legal, human resources, and advertising all contribute to and benefit from the success of MSP's corporate headquarters and major employers. Start-ups and spin-offs enjoy proximity to these corporate headquarter neighbors as well. Context for Firm Srategy and Rvalry While the region's corporate headquarters and major employers have historically competed for talented workers, occasionally recruiting from one another's ranks, these firms tend to focus their attention on major companies in other states or countries. Thus, with few exceptions, MSP's large corporate players share supportive rather than rivalry -based relationships with one another. 65 0/86 • <_BM #-p>_* :5_> OI)AFP G O%E Me 'F_92)_>> #p>_*:2 Minneapolis -St. Paul has long been admired for nurturing a business ecosystem that fosters innovation and entrepreneurship. Many industrial innovations ranging from the aerospace industry to medical devices to supercomputers have their roots within the region. The following chapter details some emerging industries of particular interest to the Minneapolis -St. Paul regional economy. Because of their emergent nature, these industries do not perfectly align within the standardized cluster definition. Still, they are of great importance because they are likely to play a major role in how MSP is able to compete globally in the future.' 7 °#<_4•£® Minneapolis -St. Paul is at the forefront of water and wastewater treatment technologies. Home of industry leaders Pentair, Donaldson, and Osmonics (now owned by GE), the region is able to use its abundant water sources as a proving ground of sorts. As water shortages impact numerous regions across the globe, the sustainability of water resources is of critical importance. The water - tech sector began around a decade ago as large firms such as 3M and Pentair began to expand and diversify their businesses by purchasing smaller water treatment firms.9 Earnings per share are expected to grow at Pentair as a result of an increased demand for industrial water filtration equipment and pumps in addition to residential -related water -tech equipment.10 This emerging subsector, however, has long been a part of the Minnesota economy. For example, Osmonics, a firm formerly headquartered in Minnetonka, founded reverse osmosis technology in the 1960s as environmental awareness began to grow demand for environmental stewardship. In 2011, Minnesota's Department of Employment and Economic Development released a listing of the 18 firms within the water tech sector in Minnesota. While no updated list has been released, it is expected that the number of these firms will continue to increase. These firms range from filtration to construction services to capital investment. It is apparent that there is an entire ecosystem, both natural and economic, surrounding water technology in Minnesota. Minneapolis -St. Paul is home to Stratasys, the world's largest manufacturer of 3D printers and 3D production systems. Their products include 3D printers, rapid prototyping solutions, and direct digital manufacturing solutions. Because of the specialized nature of many of the region's production technology and manufacturing firms, 3D printing has largely been used for prototyping because it is less wasteful and more time -conducive for specialized one-off jobs. The Digital Fabrication Lab at the University of Minnesota has strategically positioned Minnesota students around the emerging industry." 3D Printing has also been explored for use in the health sciences. Recently, scientists and researchers have begun exploring the use of 3D printing to print 8http://www.positi\A-,lyminnesota.00nVBusinesstLDcating in Minnesota/Pesearch Development Capacit y/Minnesota's Inventive History.asm 9 http://m.startribune.00m/business/?id--206986311 10 http://www.startribune.com/businesstl86572311.html 11 http://finance-commerce.com/2011/11/3d-printing-puts-university-of-minnesota-students-at-industry- forefront/ N tissues and organs. As a result of Minneapolis -St. Paul's strength in both 3D printing and medical devices, there could be an intersection between these two sectors in the region. BioRenewables Research at the University of Minnesota's Center for Sustainable Polymers has focused on advanced synthetic polymers for use as environmentally friendly, cost-efficient plastics made from natural and renewable materials. The center researches these polymers on the molecular level in order to make materials stronger and more elastic, giving them the properties admired in petroleum materials. Biorenewables have been used in a variety of commercialized products including pressure -sensitive adhesives for tape or post -it notes, foams for seat cushions, bedding or insulation, and hard plastics for items, such as cell phone cases. 12 Expansion of the advanced biofuels and biobased chemicals sector has a high potential for strong employment growth throughout Minnesota, with the industry contributing over 2,000 indirect and direct jobs in 2011. This growth occurs in three main categories: headquarters, agriculture biorefineries (manufacturing capacity for advanced biofuels and biobased chemicals that utilize agriculture based resources), and forest biorefineries (utilize forest -based resources).13 Robotics Minnesota is a global leader in ground and industrial robotics, including basic and applied research institutions, established firms, and young companies. The robotics field in Minnesota stems from the region's strength in bioscience, agriculture, mining, retail, and industrial manufacturing. In addition to benefiting these traditional industries, robotics is also at the forefront of some of the state's more emerging industries such as security and defense.la Several cluster -strengthening organizations are also being leveraged to help Minnesota's robotics industry grow. For example, Robotics Alley was founded as a way to create public and private partnerships around robotics. The Global Robotics Innovation Park (GRIP) in Minneapolis is a research park and business incubator for the entire robotics industry in the Upper Midwest and seeks to act as the hub for the entire regional industry cluster. Robotics at the University of Minnesota, particularly UMN Scout, has received national praise. #pI ENRM As these emerging industries show, innovation and emergence typically occur on the fringes of clusters. This is because clusters continuously overlap with one another in new and exciting ways. Factor conditions, such as a skilled and specialized workforce serving multiple clusters, demand conditions where competitive clusters drive innovation in other regional clusters and related and supporting industries that form a business ecosystem within the region create linkages across clusters. 12 http://finance-commerce.corrV2011/10/university-of-minnesota-center-develops-earth-friend ly- Ip asticst 13htt os://WWW .I ifescienceal lev.ora/ content/ docu mentst BBAM °/`2ODDcu ments✓ ILTA 1►VA01:1onTffmm. li7fhN• : R.1.'f01:10 :•"1�TiS7fOOTI IRMelI[W 01VANAAWNI /G..-1.I[._7-7fRZINVIi`01 AcknowIedaments).Of 14 http://roboticsinnovation.corn/fag/ RYA Many of Minneapolis -St. Paul's manufacturing bases come from demand from more traditional clusters, such as medical devices and processed food. Other clusters, such as distribution services or transportation and logistics, play a critical role in the distribution and dissemination of the region's manufactured products. The MSP region also benefits from linkages with competitive Greater Minnesota clusters, which is particularly noticeable in clusters where MSP has a high concentration of headquarters but labor is done throughout the state. / i£P00° NW "#"pyo 4ENID 47@E#(W>_2-ME The concept of competitive clusters refers to the geographic co -location of industrial sectors that are related to one another. These relationships maybe competitive or complementary, they may be transactional (buying and selling relationships), or due to shared resource inputs that the industries require, or due to a rich concentration of shared knowledge and skills in a given geographic area. The latter, which is captured by the idea of knowledge spillovers, has been highlighted as an important component of agglomeration economies since Marshall (1890). 15 This chapter looks into the relationships among different industrial sectors in the Twin Cities metropolitan region, in particular, focusing on the potential for knowledge flow between different sectors. Knowledge flows among firms can occur through informal social relationships among workers or through worker flows between different firms as job changes occur. 16 These knowledge transfers may occur between firms within the same industrial sector or those in different sectors. Knowledge transfers can help competitors to keep up with one another; they can transfer best practices across sectors, or may spur innovation and the growth of new related sectors. In addition, the presence of a specialized skilled workforce may also help a region attract new firms that value those skills. One of the difficulties in studying the presence and impact of knowledge spillovers is that a concrete measure of knowledge sharing among industrial sectors is difficult to identify and gather data on. One source of data researchers have used to study knowledge flows is looking at patent citation records and to see whether these citation patterns show geographical concentration. 17 While this approach works well for industries where patents are regularly sought, it works less well when studying sectors where patenting and publishing may not be the norm. In addition, the approach is likely to focus on within -sector knowledge transfers and underplay knowledge transfers that may occur across sectors. The potential for knowledge flows across basic (exporting) sectors in the Twin Cities region is analyzed by looking at similarities in occupations different sectors hire—particularly focusing on specialized workers. The existence of a skilled workforce serves as an attractor to employers sharing similarities in labor needs even when they are not operating in the same sector. The more specialized workforce two sectors share, there exists a higher likelihood for knowledge sharing through worker transfers. 15 Marshall, Alfred. Industryand trade: a studyof industrial technique and business organization, and of their influences on the conditions of various classes and nations. Macmillan, 1920. 16 Breschi, Refano, and Franco Malerba. The geography of innovation and economic clustering: some introductory notes. Industrial and Cbrporate Change 10.4 (2001): 817-833. 17 Examples include: Jaffe, Adam B., Manuel Trajtenberg, and Pebecca Henderson. Geographic localization of knowledge spillovers asevidenced by patent citations. Quarterlyjournal of Economics 108.3 (1993): 577-598. Also, Agrawal, Ajay, Iain Cbckburn, and ,bhn McHale. Gone but not forgotten: Laborflow4 knowledge spillovers and enduring social capital. No. w9950. National Bureau of Economic Pesearch, 2003. Table 1 clarifies the sectors and skill sets that this study focuses on—sectors where the region has a competitive advantage as evidenced by the higher location quotient and jobs that are relatively specialized and high skilled. Local serving sectors as well as skills that are not specialized are not included in this analysis. Table 1. Occupations and sectors focus of this study Sector Skill/Occupation Exporting Sector (LQ> 1.1) Local Serving Sectors (LQ< 1.1) High skill/specialized jobs actors in this category are Not covered in study. drivers of the regional economy. (Varying criteria based on how Pbtential for knowledge sharing many sectors employ that job across these sectors is studied by class and visual elimination) looking at similarities in hiring high skill/specialized job. Otherjobs Not covered in study. Not covered in study. The method adopted here identifies sectors as likely to share knowledge when they share multiple classes of skilled workers. Though this approach doesn't provide a direct measure of knowledge transfer, through a series of steps described in the methodology section, we limit the likelihood that any two sectors are seen as related for spurious reasons. This involves the identification of relatively specialized occupation classes, as well as placing requirements on the number of occupational classes any two sectors share before identifying them as ones where knowledge flow is likely. Data The Minnesota Department of Employment and Economic Development (DEED) provided data for this work. The data provides detailed industry and occupation numbers for the seven -county Minneapolis -St. Paul metropolitan area on how many employees of a given occupation (identified by a SOC code) is employed in each sector (identified by a NAICS code). The industry/occupations matrix used here has the highest level of detail possible both for occupations (6 -digit SOC level) and for industries (4 -digit NAICS level). However, this level of detail also means that employment data for some occupations at the 6 -digit level were suppressed due to a combination of confidentiality and reliability thereby omitting 367,440 workers from the metropolitan total. Getting more complete data on employment is possible with some loss of industry detail (going down to 3 -digit NAICS). However, on the basis of the loss in industrial detail that would occur, we perform the analysis with the more detailed data. In total, the data includes 227 sectors and 492 job categories and covers 1.1 million workers in the seven -county metropolitan region. 70 Another source of data used in this analysis is the 2010 County Business Patterns Data, which was used to identify each industrial sector's location quotient. This data was linked to the industry/occupation matrix based on NAICS code. Methodology Several different methods have been adopted in the literature as a way of identifying competitive clusters in regional and national economies. Many of these methods employ a combination of Economic Base Theory to identify the drivers of a regional economy coupled with other methods that are meant to identify sectors where significant relationships occur. Location quotients are used as a first step to identify "basic" (exporting) sectors in a regional economy. In other cases, identification of clusters is preceded by manually identifying sectors that are considered to be local serving (e.g., wholesale, groceries, etc.) and excluding them from the analysis. Each of these methods then adds an extension that aims to provide additional information on the relationship between the sectors active in a region's economy. These may be co -location patterns or sector -to - sector transactions. A statistical cluster analysis is often applied to evaluate either significant co - location or significant relationships based on buying and selling from each other, or from/to similar sectors. 18 19 Transaction data has also been used to generate sector -to -sector trading networks, which were used to identify clusters?° The approach taken in this work also starts out in the same fashion as those cited above by identifying the export -oriented sectors in the region using location quotients. The analysis then explores what types of similarities exist between sectors by looking at the labor pool that they employ. To do this, the industry/occupations matrix is linked to the County Business Patterns data to filter those sectors where location quotients were below 1.1. The choice of 1.1 rather than 1 provides additional confidence in the sector's higher concentration in the region relative to its national concentration. Local serving sectors such as wholesale, retail, and waste management are also removed from the analysis. Since our goal is to identify clusters based on knowledge sharing, we use occupation classes as a proxy for skills and knowledge. However, since some occupations are present in many sectors, using them as a basis of specialization and knowledge sharing is likely uninformative and wrong. Examples of such occupations include accounting clerks, managers, and customer service—some of which are present in over 100 sectors. Thus, a way to control for them is essential. Other occupations, such as aerospace engineers, computer systems analysts, operations research analysts, etc., are present in far fewer sectors and likely would make a better measure of specialized skills sharing. One challenge of this approach is that it is difficult to know where the cut off for specialization is (i.e., is an occupation present in 20 sectors specialized enough to be used as a basis for clustering? or is 10 or 35 sectors the better measure to use?). The choice can affect what sectors we assume are potentially exchanging workers and knowledge. It would also change the clusters identified. 18 tarter, Michael. The economic performance of regions. ftional studies 37.6-7 (2003): 545-546. 19 Feser, Edward. Benchmark value chain industry dusters for applied regional research. Regional Economics Appl icat ions Laboratory. University of Illinoisat Urbana -Champaign, 2005. 20 Fan, Yingling, and Nebiyou Y. Tilahun. Enterprising Twin atiesTransitways. No. CTS 12-16, 2012. 71 Using a higher number may identify occupations that are not particularly important for transferring innovative knowledge. A smaller number may miss occupation classes that are important in the transfer of knowledge among sectors. For that reason we adopt an approach that tests a range of cutoff values for specialization. Additionally, job sectors that are clearly generic (regardless of how many sectors they appear in) are also removed from being used as a basis of cluster identification. These, for example, include any jobs that fall under personal care and service, or food preparation and serving, which may be present in only a few sectors but also may not be directly important for a region's competitiveness. Table 2 lists the occupational codes excluded from the analysis. Further, among the remaining occupational classes, sectors may, by coincidence, attract one or two job classes between them. We therefore place additional requirements on how many occupations have to be shared between sectors before placing any two sectors in the same knowledge -sharing cluster. We balance the criteria on number of shared occupations against the specialization requirement described in the last paragraph by relaxing it when specialization is narrowly defined and narrowing it when specialization is relaxed. Table 2. Occupations excluded from the analysis {h/ 1'af9 5gffriJl w 21 Community and SDcial S�rvicesOccupations 25 Education, Training, and Library Occupations 27 Arts, Design, Entertainment, Sports, and Media Occupations 29 Healthcare Practitioners and Technical Occupations 31 Healthcare Support Occupations 33 Protective S�rvlce Occupations 35 Food Preparation and Erving Palated Occupations 37 Building and Grounds weaning and Maintenance Occupations 39 Personal Care and S�rvlce Occupations 41 Sales and Palated Occupations 43 Office and Administrative Support Occupations 45 Farming, Fishing, and Forestry Occupations 47 Construction and Extraction Occupations 49 Installation, Maintenance, and Pepair Occupations 53 Transportation and Material Moving Occupations 55 Military S'pecific Occupations Four sets of criteria are used and compared in this analysis to provide some confidence that the clusters identified are stable over the choice of specialization and sharing requirement. The stringent specialization criteria we use identify an occupation as specialized if it appears in five or fewer sectors only. In this case, any two sectors that attract two or more of the same specialized occupations are considered as knowledge sharing. The most relaxed specialization criterion considers an occupation specialized if it appears in 30 or fewer sectors. In this case, any two sectors are considered to be knowledge sharing if they have seven or more of the same 72 specialized occupations in their payroll. We also identify clusters based on ten or fewer sectors as a specialization criterion (along with a requirement that sectors share at least three of these occupations to be considered as knowledge sharing) and 20 or fewer sectors specialization with the requirement of sharing five or more of the same occupations. To illustrate, consider the case where we have decided specialization means an occupation is part of five or fewer sectors (Case 1). In the data there are 69 occupation classes that only exist in five or fewer sectors (out of the original 492). Any given two sectors may have some of these occupation classes employed with either no overlap or with one or more of the 69 job classes being employed by them. We hypothesize that the case for knowledge sharing is stronger when sectors have more jobs they simultaneously attract than not. For this most stringent specialization criteria, we require at least three or more of the specialized jobs to be present in two sectors to identify them as potentially knowledge sharing. Table 3 presents the list of sectors identified as knowledge sharing and the strength of the relationship between any two on this list can be seen in Figure 1. Alternately, when presence in ten sectors is used to define an occupation's specialization, we look for an overlap in five occupations or more between sectors to define knowledge sharing (Case 2). When we require a job to be present in 20 or fewer or 30 or fewer sectors to be considered specialized, any two sectors must attract at least the same eight and ten occupations respectively to signal a strong potential for worker and knowledge exchange (Cases 3 and 4, respectively). Table 3. Occupational cluster using 5 sector specialization criteria and 3+ occupations shared per pair of sectors for knowledge sharing Navigational, Measuring, Bectromedical, and Control Instruments Manufacturing Management of Companies and Enterprises -%miconductor and Other Electronic Component Manufacturing Insurance Carriers Management, Sientific, and Technical Consulting-%rvices Table 4. Occupational cluster using 10 sector specialization criteria and 5+ occupations shared per pair of sectors for knowledge sharing (a drf Converted Paper Product Manufacturing Printing and Palated Support Activities S�miconductor and Other Electronic Component Manufacturing Navigational, Measuring, Bectromedical, and Control Instruments Manufacturing Medical Equipment and Supplies Manufacturing Insurance Carriers Agencies, Brokerages, and Other Insurance Palated Activities Management, Scientific, and Technical Consulting cervices Management of Companies and Enterprises 73 As the foregoing discussion illustrates, we have taken two steps to protect against generic jobs indicating knowledge sharing—first, by setting a cut off for occupational specialization and removing jobs that are clearly not specialized enough; and second, by requiring that sectors share multiple occupation classes before being grouped in the same cluster. In the four cases we analyze, the more stringent one criterion is, we relax the other one. Table 5 summarizes these cases and shows the number of sectors that make up the final clusters. Table 5. Criteria for defining knowledge sharing clusters and size of final clusters Number of sectors used to define specialization Number of Occupationsthat qualify (of 492) Min. number of shared occupations used to define relationship 9zg of duster (number of sectors included) 5 69 3 5 10 86 5 9 20 103 8 14 30 113 10 17 Tables 6 and 7 show the sectors that share labor pool similarities using each of these criteria. The types of occupations that define each cluster are given in Table 8. In addition, under each criterion the strength of the relationship between the sectors (the number of occupation classes they share) is shown in Figures 1-4, where the relationships between jobs and sectors are mapped under each criterion. The figures clarify that not all sectors in each of these clusters share a relationship with one another. For example in Figure 1, insurance carriers and semiconductor and related manufacturing are both in the first cluster but they attract different occupations. Both sectors however meet the criteria by sharing specialized occupations with other sectors in the cluster. Table 6. Occupational cluster using 20 sector specialization criteria and 8+ occupations shared per pair of sectors for knowledge sharing {sl'(drl' Medical Equipment and -Supplies Manufacturing Machine -Shops; Turned Product; and Scbrew, Nut, and Bolt Manufacturing Navigational, Measuring, Bectromedical, and Control Instruments Manufacturing Bectrical Equipment Manufacturing Insurance Carriers Management of Obmpaniesand Enterprises Agencies, Brokerages, and Other Insurance Related Activities Management, SJentific, and Technical Obnsulting cervices Plastics Product Manufacturing Forging and Stamping Obmmercial and S�rvice Industry Machinery Manufacturing Other General Purpose Machinery Manufacturing Obmputer and Peripheral Equipment Manufacturing S�miconductor and Other Bectronic Obmponent Manufacturing 74 There is considerable consistency to the cluster members identified in this analysis though four different combinations of metrics were used in defining specialization and potential for information exchange. That is, as we allow more and more jobs to be part of the criteria for skill sharing, despite more stringent criteria for having more of these sectors being shared, sectors initially identified in Case 1 continue to meet the new requirements. This provides some confidence in regard to the actual skill sharing similarities between sectors. Secondly, the list of sectors identified is very similar to the sectors that were previously identified in other work as important clusters by looking at transactions data. Sectors like medical equipment and supplies manufacturing, insurance carriers, management of companies and enterprises, finance (credit intermediation), have all appeared as central buyers from many other sectors in the region and defining their own clusters. 21 The current analysis suggests that the sectors we regard as drivers of the regional economy also have a relatively strong potential for knowledge transfer and skill sharing between them. Table 7. Occupational cluster using 30 sector specialization criteria and 10+ occupations shared per pair of sectors for knowledge sharing {sl'(drl' Navigational, Measuring, Bectromedical, and Control Instruments Manufacturing Medical Equipment and Supplies Manufacturing Insurance Carriers Management of Companies and Enterprises Commercial and Sxvice Industry Machinery Manufacturing Szmiconductor and Other Electronic Component Manufacturing Other General Purpose Machinery Manufacturing Computer and Peripheral Equipment Manufacturing Bectrical Equipment Manufacturing SDftware Publishers Data Processing, Hosting, and Related Szrvices Management, &ientific, and Technical Consulting Szrvices Agencies, Brokerages, and Other Insurance Related Activities Printing and Related Support Activities Rastics Product Manufacturing Newspaper, Periodical, Book, and Directory Publishers Depository Credit Intermediation 21 Fan, Yngling, and Nebiyou Y. Tilahun. Enterprising Twin atiesTransitways. No. CTS12-16, 2012. 75 Conclusion This chapter looked at the hiring patterns in the "non -local serving sectors" present in the Minneapolis -St. Paul region. All sectors considered had a location quotient of 1.1 or greater, which means they comprise a larger share of the regional workforce when compared to their share of total employment nationally. Our analysis focused on the extent to which sectors pull from similar skill pools and the potential for knowledge flows across sectors. After removing generic job descriptions and requiring multiple shared occupation needs between sectors, we identified the region's sectors that share specialized workforce needs. Moreover, the sectors that are identified as sharing workforce also are related based on transactional flows in other studies. Considering that these firms are highly represented in the region (based on their location quotient) and the similarities in their occupational needs, two potential relationships can be surmised. First, the concentration of specialized workforce makes the region attractive for a wide range of sectors. In the most restrictive occupational specialization cluster we identify, the occupations being shared require engineering, electronic, and management skills (among others) that are sought by multiple sectors. Second, the shared similarities in occupational needs make it likely that one sector is enriched by the others' presence as workforce flows transfer knowledge from one sector to another. These flows may also occur within a sector where directly competing firms are present. In cases where direct trading is taking place between sectors (e.g., the semiconductor and electronic component manufacturing sector and medical equipment and supplies manufacturing, 22 where firms are part of each other's supply chain rather than directly competing), these types of flows are likely to benefit both sectors involved by creating the conditions where the needs of transacting firms are better understood. The presence of a large number of workers in specialized fields also enables the presence of trade organizations whose members both formally and informally exchange knowledge and ideas adding to the region's attractiveness. Our analysis also identifies the types of specialized occupations broadly shared by the sectors that give the MSP region its competitive edge. This finding has implications for workforce development in the region. It suggests that attention should be paid to the shared workforce needs of the region's competitive sectors and to ensure that both the quality and rate of training match the region's needs. While all occupation classes are important to any sector's success, the set of specialized occupations identified here serve multiple sectors. Ensuring the quality and availability of this workforce helps preserve the region's competitive advantages. Table 7 shows that the shared occupations cover a wide range of occupations including degree -requiring statistical, engineering, or programming fields, as well as trade -oriented jobs, such as machine operators and mechanical drafters. Ensuring that the MSP region's labor force acquires the requisite training and skills is critical. A more in-depth study of training rates in these fields and sector needs would help advance the policy discussion to ensure a ready workforce that satisfies the needs of these key sectors. 22 Fan, Yingling, and Nebiyou Y. Tilahun. Enterprising Twin Cities Transitways. No. CTS 12-16, 2012 76 Table 8. Shared occupations in each cluster (list is cumulative so that occupations used in the most restrictive cluster is also part of the next cluster) Occupation Used in cluster Compensation and Benefits Managers Clusters based on occupations that were in only 5 or fewer sectors Computer Hardware Engineers Electrical and Electronics Drafters Electronics Engineers, Except Computer Environmental Engineers Environmental Scientists and Specialists, Including Health Logisticians Materials Engineers Medical and Health Services Managers Statisticians Training and Development Managers Claims Adjusters, Examiners, and Investigators Clusters based on occupations that were in only 10 or fewer sectors Compliance Officers Computer -Controlled Machine Tool Operators, Metal and Plastic Cost Estimators Cutting and Slicing Machine Setters, Operators, and Tenders Electrical and Electronic Equipment Assemblers Electrical and Electronics Engineering Technicians Helpers --Production Workers Lawyers Mechanical Engineering Technicians Meeting, Convention, and Event Planners Natural Sciences Managers Operations Research Analysts 77 Occupation Used in cluster Paralegals and Legal Assistants Plating and Coating Machine Setters, Operators, and Tenders, Metal and Plastic Prepress Technicians and Workers Printing Press Operators Production Workers All Other Public Relations and Fundraising Managers Assemblers and Fabricators, All Other Clusters based on occupations that were in only 20 or fewer sectors Coating, Painting, and Spraying Machine Setters, Operators, and Tenders Compensation, Benefits, and Job Analysis Specialists Computer Programmers Cutting, Punching, and Press Machine Setters, Operators, and Tenders, Metal and Plastic Database Administrators Drilling and Boring Machine Tool Setters, Operators, and Tenders, Metal and Plastic Electrical Engineers Electromechanical Equipment Assemblers Extruding, Forming, Pressing, and Compacting Machine Setters, Operators, and Tenders Grinding and Polishing Workers, Hand Grinding, Lapping, Polishing, and Buffing Machine Tool Setters, Operators, and Tenders, Metal and Plastic Human Resources Managers Industrial Engineering Technicians Machinists Management Analysts Mechanical Drafters 78 Occupation Used in cluster Molding, Coremaking, and Casting Machine Setters, Operators, and Tenders, Metal and Plastic Multiple Machine Tool Setters, Operators, and Tenders, Metal and Plastic Purchasing Managers Software Developers, Systems Software Team Assemblers Tool and Die Makers Welders, Cutters, Solderers, and Brazers Administrative Services Managers Clusters based on occupations that were in only 30 or fewer sectors Architectural and Engineering Managers Computer Systems Analysts Industrial Engineers Information Security Analysts, Web Developers, and Computer Network Architects Inspectors, Testers, Sorters, Samplers, and Weighers Lathe and Turning Machine Tool Setters, Operators, and Tenders, Metal and Plastic Marketing Managers Mechanical Engineers Milling and Planing Machine Setters, Operators, and Tenders, Metal and Plastic Software Developers, Applications Training and Development Specialists 79 Figure 1. Cluster based on occupations that were in only 5 or fewer sectors (Red are sectors Green are occupations) Envimnm Electrics Materials Environmental Engine Electronics Engineers, Except Comp Logisticians ME istmments Manufactudng Scientific, and Technical Consulting Services rent of Companies and Enterprises and Benefits Managers Figure 2. Cluster based on occupations that were in only 10 or fewer sectors (Red are sectors Green are occupations) Production Workes All Omer *Con b h on�Activities t_ Semid Other Electronic Component Manufacturing Helpers—Production Workers ` Navigational, Measuring, Electromedical, and Control Instruments Manufacturing Cutting and Slicing Machine Setters. Operators, and Tenders - -- j//� •Medical Equipment and Supplies Manufacturing Printing Press Operators pop/ /r _ j Insurance Carriers Prepress Technicians and Warkens, 1 0 Plating and Coating Machine Setters, Operators, and Tenders, Metal and Plastic Computer -Controlled Machine Tool Operators, Metal and Plastic ` Electrical and Electronic Equipment Assemblers Paralegals and Legal Assistants Lawyers Environmental Scientists and Specialists, Including Health D> Mechanical Engineering Technicians, Electneal and Electronics Englneedng Technicians, Electrical and Electronics Drafters Agencies, Brokaragea. and Other Insurance Related Activities • Management, Scientific, and Technical Consulting Services A� • �! N •Management of Companies and Enterprises Public Relations and Fundralsing Managers NI Compensation and Benefits Managers Training and Development Managers "i Medical and Health Services Managers Natural Sciences Managers Claims Adjusters. Examiners, and Investigators Materials Engineers, // I/ pliano`fflce Environmental Engineers /! Cost Estimators Electronics Engineers. Except Computer D logisticians Computer Hardware Engpe�ra�IepEVec�h' xnalysglanners RE Figure 3. Cluster based on occupations that were in only 20 or fewer sectors (Red are sectors Green are occupations) Other Coating, Palming. and Spraying Machine Sellers. Opeors. an en ars Extruding, Forming, Pressing, and Compacting Machine Sellers, Operators, and Tenders Plating and Coating Machine Setters, Operators, and Tenders, Metal and Plastic p. Welders, Cutters, Solderers, and Grazers Tool and Die Makers , Multiple Machine Tool Sellers, Operators, and Tandem, Metal and Plastic ► Molding, Commaking, and Casting Machine Setters, Operators, and Tandem, Metal and Plastic ► Machinists, Grinding, Lapping, Polishing, and Bung Machine Tact Setters, Openatars, and Tenders, Metal and Plastic Drilling and Boring Machine Tod Seders, Operators, and Tandem, Metal and Plastic m Cutting, Punching, and Press Machine Setters, Operators, and Tenders. Metal and Plastic D Computer -Controlled Machine Tool Operators, Metal and Plastic D Assemblers and Fabricators, All Other D Tear Assemblers D Electromechanical Equipment Assemblers Electrical and Electronic Equipment Assemblers n Paralegals and Legal Assistants S Lawyers ► Environmental Scientists and Specialists. Including Health 0 conductor and Other Electronic Component Manufacturing Navigators, Measuring, Elactromadical, and Control instruments Manufactumg '•Electrical Equipment Manufacturing Medical Equipment and Supplies Manufacturing &".6 Insurance Carriers Mechanical Engineering Technicians -Logittl Industrial Englneenng Technicians�/' , .yV ! Managamem An sts Electrical and Electronics Engineering Technicians ► Meeting. Convention and Event Plagpem Mechanical Um"Compensation, Benefits. and Job Anaiysls Spei Electrics] and Electronics Drafters III. Computer Prograr®ners Materials Engineers Do. �o ftw re Deve{ope SysI s S*— ElectrgnEry rmental eo��o V csy�i .tors rgme rs, 0orrtHa+ar' I pa LL Brokerages, and Other Insurance Related Activities w Management. Scientific, and Technical Consulting Services kManagement of Companies and Enterprises Public Relations and Fundraising Managers Purchasing Managers GCompensatioa and Benefits Managers Human Resource. Managers ®raining and Development Managers Medical and Health Services Managers Natural Sciences Managers Claims Adjustors, Examiners, and Investigators ►ompllance Officers Cost Estimations 01 Figure 4. Cluster based on occupations that were in only 30 or fewer sectors (Red are sectors Green are occupations) Coating, Paind,t9, and S�rin Mahine Seypers, �'Rftner risgecro s rs, overs, ample s, and sig ars Extruding, Forming, Pressing, and Compacting Machina Setters, Operators, and Tenders Q Grinding Brid1Pg18Ftog Sial tsC9Tatttl _ Plating and Coating Machine Setters, Operators, and Tendem, Metal and Plastic Welders, Cutters, Soldemm, and Bmzers ► Tool and Die Makers Multiple Machine Tool Setters, Operators, and Tenders. Metal and Plasltc�� Melding, Coremaking, and Casiing der!, Machine Setters, Operators, and TonMetal and Pldatio Machinists Milling and Planing Machine Setters, Operators, and Tenders, Metal and Plastic Lathe and Turning Machine Tool Setters, Operators, and Tenders, Metal and Plastic Grinding, Lapping, Polishing, and Buffing Machine Tool Setters, Operators, and Tenders. Metal and Plastic Drilling and Baring Machine Tool Setters, Operators, and Tenders, Metal and Plastic ► Cutting, Punching, and Press Machine Seaem, Operators, and Tenders, Metal and Plastic' Computer -Controlled Machine Tool Operators, Metal and Plasthc, Assemblers and Fabricators, AI Other Team Assemblers - Electromechanical Equipment Assemblers D Electrical and Electronic Equipment Assemblers Paralegals and Legal Assistants D Lawyers ® / Environmental Scientists and Specialists, Including Health , Malnufadurnq ring and Other Electronic Component Manufacturing d, Measuring, Electmmediral, and Control Instruments Manufacturing ca4 Equipment Manufacturing adica€ Equipment and Supplies Manufacturing Software Publishers Data Processing, Hosting, and Related Services 1 Insurance Carriers Brokerages, and Other Insurance Related Activides ment, Sciend8c, and Technical Consulting Services goment of Companies and Enterprises ®Markeling Managers Public Relations and Fundraising Managers lip, Administrative Services Managers wunlhasing Managers 4Compensaban and Benefits Managers Human Resources Managers ` !Training and Development Managem Architectural and Engineering Managers `Medical and Health Servicas Managem Natural Sclwnrws Mannan: Machanical Engineering TWniUans Claims Adjusters, Examiners, and Investiga® tors EfIndustrial Engineering Technicians Campllance Offr�rs eetrical and Electronics Engineering Technicians ,, D Cost Estimates Mechanical Drafters'' �' Logistict5ns Electrical and Electronics Drafters �' - Menagermarl Mechanical Engineers Meering, Convention, and Event Plar�ns Materials Engineers / Compensation, Benefits, and Job Analysis Speci�4sts Industrial Engineers Training and Developmen4 ec�lists Environmental Engineerspa ` Computer S sta Ansts Eloctronlcs Engineers,Ex IQO EnginIC pu(t(�(gFr en ars Information Security Analysts, WebftT iQ d6YtftlE tlpfi�ll 2i lS""" RN