The Hampton Roads Economy - Analysis and Strategies
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The Hampton Roads Economy - Analysis and Strategies - Part 2: Hampton Roads Cluster Study December 2004 E04-03 HAMPTON ROADS PLANNING DISTRICT COMMISSION CHESAPEAKE POQUOSON CLARENCE V. CUFFEE * CHARLES W. BURGESS, JR. * DALTON S. EDGE GORDON C. HELSEL, JR. DEBBIE RITTER PORTSMOUTH FRANKLIN STEPHEN E. HERETICK MARK S. FETHEROLF * JAMES B. OLIVER, JR. * ROWLAND L. TAYLOR CHARLES B. WHITEHURST, SR. GLOUCESTER COUNTY SOUTHAMPTON COUNTY JOHN J. ADAMS, SR. ANITA T. FELTS * WILLIAM H. WHITLEY * MICHAEL W. JOHNSON HAMPTON SUFFOLK * RANDALL A. GILLILAND * R. STEVEN HERBERT ROSS A. KEARNEY, II BOBBY L. RALPH GEORGE E. WALLACE SURRY COUNTY ISLE OF WIGHT COUNTY JUDY S. LYTTLE W. DOUGLAS CASKEY * TERRY D. LEWIS * STAN D. CLARK VIRGINIA BEACH JAMES CITY COUNTY HARRY E. DIEZEL * BRUCE C. GOODSON ROBERT M. DYER SANFORD B. WANNER * LOUIS R. JONES . MEYERA E. OBERNDORF NEWPORT NEWS PETER W. SCHMIDT CHARLES C. ALLEN JAMES K. SPORE * JOE S. FRANK JAMES L. WOOD EDGAR E. MARONEY WILLIAMSBURG NORFOLK * JACKSON C. TUTTLE, II * PAUL D. FRAIM JEANNE ZEIDLER DONALD L. WILLIAMS REGINA V.K. WILLIAMS YORK COUNTY BARCLAY C. WINN * JAMES O. McREYNOLDS W. RANDY WRIGHT THOMAS G. SHEPPERD, JR. *EXECUTIVE COMMITTEE MEMBER PROJECT STAFF ARTHUR L. COLLINS EXECUTIVE DIRECTOR/SECRETARY JOHN W. WHALEY DEPUTY EXECUTIVE DIRECTOR, ECONOMIC GREG GROOTENDORST ECONOMIST RACHAEL V. PATCHETT REPROGRAPHIC SUPERVISOR The Hampton Roads Economy - Analysis and Strategies - Preparation of this document was done in accordance with the Department of Defense Office of Economic Adjustment. This report fulfills Part 2 of a six part series. The Hampton Roads Planning District Commission approved the preparation of this report. This report was prepared by the staff of the Hampton Roads Planning District Commission December 2004 Hampton Roads Cluster Study December 2004 TABLE OF CONTENTS Table of Contents................................................................................................... i List of Tables ........................................................................................................ ii List of Figures .......................................................................................................iii Executive Summary.............................................................................................. v Introduction ...........................................................................................................1 Methods Used to Identify Clusters in Hampton Roads..........................................4 Identification of Candidate Clusters............................................................5 Cluster Evaluation ......................................................................................5 Measures Used to Evaluate Clusters .........................................................6 Selected Candidate Clusters ................................................................................9 Motor Vehicles and Parts ...........................................................................9 Ship and Boat Building.............................................................................15 Electrical Equipment Manufacturing.........................................................17 Tourism ....................................................................................................19 Port/Trucking and Warehousing...............................................................24 Senior Industries ......................................................................................31 Information Technology............................................................................39 Technical Services ...................................................................................43 Modeling and Simulation..........................................................................45 Sensors....................................................................................................45 The Hampton Roads Economy i Hampton Roads Cluster Study December 2004 Conclusions ........................................................................................................46 Appendices .........................................................................................................48 Appendix A: Employment in Hampton Roads ..........................................48 Appendix B - 1: Location Quotients Based on Employment.....................53 Appendix B - 2: High Tech Occupations ..................................................58 Appendix B - 3: Location Quotients for Occupations................................59 Appendix C: Regional Purchase Coefficients...........................................77 Appendix D - 1: Hampton Roads Exports and Imports.............................78 Appendix D – 2: Hampton Roads Commodity Trade Flows .....................79 Appendix D – 3: Hampton Roads Commodity Imports............................ 88 Bibliography ........................................................................................................93 The Hampton Roads Economy ii Hampton Roads Cluster Study December 2004 LIST OF TABLES Table 1: Hampton Roads Clusters.......................................................................6 Table 2: Hampton Roads Cluster Candidates ..............................................10-11 Table 3: Potential Impact of Hampton Roads Cluster Initiatives ........................12 The Hampton Roads Economy iii Hampton Roads Cluster Study December 2004 LIST OF FIGURES Figure 1: Employment in Motor Vehicle Parts Manufacturing ............................14 Figure 2: High Tech Employment in Hampton Roads ........................................41 Figure 3: A Comparison of the Growth in the Number of U.S. and Hampton Roads Computer Specialists ...............................................................41 Figure 4: HR Location Quotients in Computer Occupations ..............................42 Figure 5: HR Location Quotients for Selected Scientific Occupations................43 Figure 6: HR Location Quotient for Engineering Occupations ............................44 The Hampton Roads Economy iv Hampton Roads Cluster Study December 2004 EXECUTIVE SUMMARY In an effort to create a better blend of economic drivers in the region, this investigation scans the region’s economic environment to identify economic clusters that can be encouraged to locate/expand in Hampton Roads and produce a variety of positive benefits for the region’s economy. While there is no single definition of what constitutes an industry cluster, the fundamental notion is that a cluster is a geographical concentration of industries that have co-located in order to gain performance advantages or efficiencies. Identification of Clusters in Hampton Roads Hampton Roads has worked for many years to develop its regional economy. That effort has, in large part, been successful. However, the region continues to have incomes and wages which are a fraction of comparable U.S. statistics, and the region’s rate of long-term regional economic growth has been below the national average. Identifying and then promoting the growth of selected industry clusters may help to strengthen the regional economy and improve its standard of living. It is for this reason that the current study has been undertaken. Most methods used to identify clusters rely upon an eclectic collection of quantitative and qualitative techniques since no single method can deal with the many complexities of a large regional economy. This study is no exception since the methodology used here took a multifaceted approach to identifying economic clusters. Selected Candidate Clusters This study identified ten candidate clusters, eight of which already have a strong regional presence while two do not have a strong presence but are growing rapidly in the region. These ten clusters were selected for further review by several study groups whose mission was to select a smaller number of clusters that, if encouraged to expand locally, could produce important and positive impacts upon the regional economy. The Hampton Roads Economy v Hampton Roads Cluster Study December 2004 The ten candidate clusters recommended for further study are listed below. Motor Vehicles and Parts The automobile industry has had a significant presence in Hampton Roads in recent years. The industry employed, between truck assembly and parts manufacturing, nearly thirty-two hundred workers in 2001 producing output valued a $1.5 billion in 2002 (1996 dollars). Key to the success of the local industry has been the presence of the Ford Motor Co.’s Norfolk Assembly Plant. Norfolk Assembly produces several versions of the F-Series pickup and is the company’s lead facility for the manufacturing of pickups. It is also the company’s most efficient plant. In recognition of its high level of productivity, the plant was picked by Ford for a $375 million retooling of its manufacturing system several years ago. Not surprisingly, parts and supplier companies have located or expanded in Hampton Roads because of the presence of Norfolk Assembly. In fact, because of the state’s favorable location near the Southeast, 117 auto and parts makers have built or expanded facilities in Virginia since 1993. In addition, total auto investments made in Virginia during the past decade were over $2.1 billion with over $627 million having been invested since 2001. Growth in the industry has been substantial in recent years with constant dollar output growing by 7.7 percent in Hampton Roads over the