How one state is wooing high-tech
Minneapolis — In the nationwide rush to breed new businesses and lure high-tech industries, Minnesota is emerging as a leading laboratory. Already well endowed with some of the country's top high-tech companies, the North Star State is trying to build on its strengths in such areas as supercomputers, educational software, and biomedicine. At the same time, a flurry of public-private initiatives have been launched here to encourage entrepreneurs and spur innovation.
Such thrusts by states, of course, have become as fashionable as Trivial Pursuit (Question: Which state boasts a ''Silicon Desert''? Arizona. Where's ''Polymer Valley''? In Ohio's rubber belt. How about ''Robot Range''? In Michigan's Detroit-to-Ann Arbor region).
But Minnesota has come up with its own formula to become part of tomorrow's more ''knowledge oriented'' economy. It is out in front of most states in trying to home-grow industries instead of luring outside companies - the modern equivalent of ''smokestack chasing.'' Moreover, it is attempting to do this with an unusual degree of cooperation among government, business, and other groups - an outgrowth, partly, of the state's activist corporate community.
The result is no economic miracle but one of the more vibrant entrepreneurial areas outside the country's two electronics bookends, California's Silicon Valley and Route 128 in Massachusetts. It also offers a looking glass for what some industrial strategists tout as the type of collaboration needed to beat foreign competitors.
''Minnesota is learning to grow its own industries from the base it has,'' says Douglas Henton, a senior analyst at the California-based Stanford Research Institute, who is studying state and regional industrial strategies. ''That's an important lesson for the states.''
Minnesota, of course, had trump cards to begin with. One is the long list of high-tech companies that have settled here (Control Data, Honeywell, Cray Research, 3M), as well as those with a big presence (IBM, Sperry). It's also considered to have a well-educated, hardworking labor force - partly an outgrowth of its Scandinavian and German roots. There's also the Twin Cities' main brain trust, the University of Minnesota, which is strong in several areas of science and technology. And there's that elusive quality-of-life factor - plenty of Shakespeare on stage and walleye in the waters (severe winters notwithstanding).
But good fishing and labor alone do not an economy make, and for the past couple of years there has been debate over the business climate. With good reason. The state has high corporate and personal income taxes, tough environmental regulations, high unemployment compensation costs, and high wages.
This has caused some manufacturers to join the wagon train to the Sunbelt over the past decade. More recently, it has sent a good number of local firms to the state's low-tax neighbors, particularly North and South Dakota. The depth of the concern surfaced last year when one of the state's corporate patriarchs, 3M Company, decided to put a new reseach center in Texas instead of on local turf.
All this, however, has helped trigger some soul-searching among the state's leaders, including its governor, Rudy Perpich. Since returning to office in 1982 - he served in the mid-1970s but was defeated in 1978 - the one-time dentist has been out to improve the business posture. He has been pushing the state's wares abroad and urging changes in the Legislature at home. State lawmakers have obliged, to a degree, by abolishing a 10 percent surtax on personal income taxes imposed a few years ago and changing worker compensation laws, among other things. The governor now vows to reduce personal income taxes.
The high-tech community has been a gainer during the current, more pro-business era. This spring, for instance, lawmakers earmarked $150,000 to set up a state biomedical and health-systems office to aid small medical-technology firms (more than 300 such firms now exist across the state). A similar sum is going to assist start-up software companies. The state has also committed $6 million to build a supercomputer institute at the University of Minnesota and develop a ''high-tech corridor'' linking the college with downtown Minneapolis.
The corridor is envisioned as turning a run-down 70-acre stretch of the city into a research park that will spin off new businesses. Similar projects have sprouted like goldenrod across the landscape. But officials here believe they will have an advantage in building on strength: An early tenant is expected to be the supercomputer institute, which could draw other firms. ''There is enormous (high-tech) strength here,'' says Ettore Infante, dean of the university's Institute of Technology. ''The idea is to try to capitalize on it.''
Perhaps more unusual, however, is a potpourri of public-private programs aimed specifically at assisting small start-up firms. One, dubbed Help Start-A-Company, for example, is an effort by some of the state's largest companies for each to create at least one new business, largely through management assistance. Another, the Minnesota Cooperation Office, a nonprofit group funded by businesses and foundations, was launched a few years ago to give similar aid.
Minnesota Wellspring is a group of business, labor, academic, and other leaders who, among other things, push ideas and policies intended to spur innovation. The group will back two new concepts in the Legislature in January: an ''innovation fund'' to help bankroll new businesses, and a measure to encourage applied research at universities. ''The major thrust in Minnesota is in stimulating new businesses,'' says William Norris, chairman of Control Data and the force behind many of the initiatives. ''I think there is more being done here in that regard than in any other state.''
It's still too early to tell how much of an impact these efforts will have. But some economists believe they helped the state bounce back from the recent recession quicker than normal. They have also helped cement the area as a strong high-tech, entrepreneurial center: Already, high technology makes up a bigger share of the economy here than in all but a handful of states. And it has contributed to a hot venture-capital market here. ''Minnesota is definitely moving into the so-called Information Age in a forthright way,'' says Mike Stutzer, an economist with the Federal Reserve Bank here.
Still, with some companies moving elsewhere and the state economy strong but not sterling, the business climate debate is likely to continue locally. But if, as some observers assert, the states are today's laboratories for industrial innovation, then Minnesota's experiment may bear watching.