Reinvigorating mature industries through global engagement

Two metro areas, Milwaukee and Portland, Oregon, offer the strongest evidence for a theory we’ve developed over five years of working on global trade and investment plans: It is crucial, especially for second-tier metro areas, to organize trade and investment efforts around a single globally relevant specialization. Despite early successes, though, it’s not clear that this model is universally applicable. Both Milwaukee (water technologies) and Portland (green cities) are focused on establishing an initial global presence for an emerging, fast-rising cluster. But can metro areas also use exports and foreign direct investment (FDI) to reinvigorate mature clusters that are already thoroughly global?

Indianapolis plans to find an answer. The Indy Chamber, which leads the region’s export and FDI efforts, zeroed in on the life sciences industry—not an obvious candidate for a new global economic development initiative. After all, the industry is already an established economic development priority for the region and state that doesn’t seem to need much help, as it currently accounts for nearly one-third of the region’s exports and a few major foreign investments. Its strengths derive primarily from a small core of major multinationals, which aren’t the right targets for export or FDI assistance. Contrast this to Portland and Milwaukee, which chose clusters that are highly specialized but relatively small, have a base of small to mid-sized firms, and—while not in “new” industries—are new regional priorities that lend themselves to marketing and branding efforts.

But the Indy Chamber’s choice was a deliberate response to three challenges that surfaced from research conducted by BioCrossroads, the region’s life sciences sector-development organization. First, a historic reliance on large public companies makes Indianapolis susceptible to the volatility of industry cycles, including patent expirations. Second, the metro suffers from shortages of specific types of high-skilled talent, with the state retaining less than half of in-state college graduates in engineering, biology, and computer science. Third, as sponsored research conducted through outside partners and the acquisition of later-stage firms has supplanted a considerable level of basic in-house research and development (R&D), and as universities face declining federal research funding, there is a growing need for a bridging mechanism to foster research collaboration to maximize limited funds. 

Two strategic responses led by BioCrossroads were emerging prior to the region’s export and FDI efforts. One, the Indiana Biosciences Research Institute (IBRI), is a $350 million industry-led research center that aims to recruit up to 200 world-class researchers in the metabolic disease and nutrition fields, with the goal of carrying out R&D projects with high potential for sponsored research, commercialization, or spinoff start-ups. The other, 16 Tech, is a planned 60-acre innovation district that will house IBRI and other tech-based firms, and recently received approval for $75 million in bonds for infrastructure development. Its goal is to attract entrepreneurial talent by offering R&D facilities (including accelerators and “maker spaces”) where start-ups, research organizations, and corporations can readily collaborate and commercialize new ideas.

The challenge for Indianapolis, then, is the opposite of that faced by Milwaukee or Portland. Rather than elevating an emerging ecosystem to global prominence, it must take an already globally prominent industry and help an ecosystem emerge underneath it. “Life sciences isn’t a sector we’re trying to get,” says David Johnson, the CEO of BioCrossroads and its parent organization, the Central Indiana Corporate Partnership. “It’s one that we already have—but it’s one we can’t take for granted, and its success will not continue if we don’t bring in new companies, more capital, and talent.”

The region’s global trade and investment plan builds on this work by focusing all refined FDI and export tactics on strengthening the cluster. For FDI, this means aligning with IBRI by recruiting firms in the metabolic health and nutrition fields. It also means making a more targeted, research-driven case about the region’s specific specialization within life sciences: a unique mix of capabilities in production and distribution, alongside R&D. Other tactics include identifying global suppliers and joint venture partners of local firms as potential investors, and eventually using 16 Tech’s co-working spaces as soft landing pads for foreign startups. Indy’s export development efforts are focused on strengthening the cluster’s existing base of small and mid-sized firms through export grants and related educational programming.

At the same time, the Indy Chamber recognizes that, while helping firms export and facilitating FDI are important, its long-term goal is to support a highly functioning cluster that will generate these outcomes on its own. As part of the plan, the Indy Chamber has formed stronger partnerships with BioCrossroads and the Central Indiana Corporate Partnership to support the development of IBRI and 16 Tech. The Chamber has carved out specific roles that fit its advocacy and marketing strengths, including advocating for state appropriations and carrying out a talent attraction campaign to complement BioCrossroads’ workforce development efforts. And, because the region’s pharmaceutical firms are highly manufacturing-intensive relative to other U.S. clusters, the Chamber is leading efforts to improve the region’s logistics capabilities and secure investment for multimodal infrastructure projects.

It isn’t certain that Indianapolis, or any other region, can effectively use exports and foreign investment to inject new talent and R&D capacity into a mature cluster composed of mostly large multinationals. But Indy’s approach—start with solid research, form new partnerships, and build on existing initiatives led by the private sector—is a promising experiment to watch.

The Central Indiana Corporate Partnership is a member of the Metropolitan Leadership Council, a network of business, civic and philanthropic leaders that acts as a financial and intellectual partner of the Brookings Metropolitan Policy Program.