Maryland’s competitiveness policy and ‘culture’

By Donald C. Fry

Maryland has an abundance of strengths that position it for robust business growth, but it needs to work on policy and “cultural” issues relating to competitiveness that dampen the state’s ability to realize its potential for job creation.

That was the message from a CEO-turned congressman and two innovation economy experts to 300 business executives who attended the Greater Baltimore Committee’s Economic Outlook Conference in Baltimore on September 26.

Between them, presenters articulated a substantive policy “to do” list for Maryland.

“The notion of competitiveness is so important for us to talk about as policymakers,” said Maryland 6th District Congressman John Delaney, the only member of the House of Representatives who was the CEO of a publicly-traded company.

Stephen Ezell, senior analyst at the Information Technology and Innovation Foundation, and Newt Fowler, a partner at the law firm of Rosenberg Martin Greenberg LLP and advisor to technology companies in the region, joined Delaney in offering their thoughts on how to improve the competitiveness of our state and the Baltimore region.

Maryland has “spectacular” opportunities for business growth, said Delaney. But two dominant, accelerating macro trends – globalization and technology – are largely framing our nation’s competitiveness challenges.

These fast-moving trends, which many well-educated and creative people have ridden to wealth, have also been “enormously disruptive to a lot of jobs that had sustained people at a decent standard of living over a period of time,” leaving behind a large segment of our population.

“What we haven’t done enough of as policymakers is try to take these trends – globalization and technology – think about where they’re going and then try to bend them” to benefit more people, Delaney said.

In Maryland, public policy “is not all bad,” said Delaney. “There’s a lot of really smart things that have been done” by Maryland policymakers, he said.

Nevertheless, Delaney offered suggestions for making Maryland more competitive, including:

  • Address a state tax policy that “isn’t perfect.” Maryland’s tax structure puts it at a disadvantage to nearby competitors, including Washington D.C. and Virginia, he said.
  • Significantly upgrade transportation infrastructure. Not all of Maryland’s transportation challenges are about funding, some relate to regulatory environment. For example, it takes half as much time to build an intersection in Virginia as it does in Maryland, Delaney noted.
  • Capitalize on energy opportunities. Maryland has “unbelievable opportunity” for energy development, which will be a major source of business growth in future decades. Natural gas has to be a part of our bridge to a “cleaner, greener” energy future, said Delaney, adding that he believes natural gas can be safely extracted in Maryland.

Ezell cited Maryland’s high ranking (No. 7) on the Information Technology and Innovation Foundation’s most recent New Economy Index. Maryland’s many competitive strengths include education and non-industry investment in workforce, both categories where Maryland ranks second. The state also ranks fourth for number of scientists and engineers, high-tech jobs and quality of broadband.

Some of Maryland’s challenges are illustrated by the state’s No. 30 ranking for entrepreneurial activity, a No. 28 ranking for health information technology, and rankings of No. 24 for foreign investment and export focus of manufacturing and services, noted Ezell.

Maryland’s “greatest challenge” is putting into place a stronger environment for innovation. Maryland must “get the framework right” for high-growth entrepreneurship, he said.

It’s still vitally important to “get the business climate right” and to keep the “costs to compete” low. But that’s not enough anymore, said Ezell. An “institutional environment” for innovation, entrepreneurship and technological change needs to be created.

His suggestions included:

  • Replace job-creation tax credits with “incentive” tax credits. “The academic evidence is very clear that job-creation tax credits do not work,” Ezell said. Consider instead implementing tax credits, such as “angel investment” credits enacted in Kansas and Indiana, which are doing a “much stronger job of bolstering economic and employment growth.”
  • Put Maryland’s technology resources to work to revitalize urban manufacturing. The state should aggressively fund manufacturing extension partnerships, for example.
  • Implement strong programs for commercialization. University-developed technology should be nurtured by tools such as an R&D tax credit for industry expenditures at universities and colleges as implemented in Louisiana and Virginia.
  • Better cultivate workforce talent in Maryland. Initiatives could include creating alternative types of STEM high schools and colleges and co-investing in industry-led regional skills alliances.
  • Collaborate. “Regions and states must stop competing with each other and collaborate” to compete with global competitors for business development, Ezell said.

Fowler’s remarks included five succinct principles for nurturing innovation in Maryland, and particularly in Baltimore:

  • Cultivate more entrepreneurs. “Maryland needs more entrepreneurs,” said Fowler. “Nothing else matters. It’s that simple.”
  • Stop exporting talent. This is “the most vexing challenge” for Baltimore, which has an exceptional environment for young innovators, he said.
  • Re-think how we market Baltimore. “The race for corporate headquarters is over. The race for talent has begun.” Two key groups must be convinced to locate in Baltimore – graduates of colleges located in the region and today’s young, mobile workforce.
  • Solve the capital problem. There’s capital here, but very little of it is active in tech start-ups, Fowler said.
  • Think differently about how to support tech communities. Business advocates must concentrate on gaining better awareness of the innovation community. “Everyone should stick their heads into Betamore” and other venues where creative percolation among entrepreneurs is nurtured, he suggested.

From a policy standpoint, many of the issues raised on the “to do” lists offered by presenters at the Economic Outlook Conference were also raised by Maryland business leaders during the GBC’s day-long “Chesapeake Conference of CEOs” last June. A policy priority list for competitiveness compiled at that conference is offered in the report, “Compact for Competitiveness,” released by the GBC earlier this month.

But the issue of the issue of making Maryland more competitive is not just about policy. “It’s a cultural thing,” noted Congressman Delaney. Maryland is “really as well-positioned as anywhere” for economic growth, he said. However, “we really need more of an entrepreneurial culture in the state.”

Well said. By attacking the challenges to growth and innovation and changing our thinking about entrepreneurship, Maryland could be well on its way to maximize its potential to achieve the economic growth and job creation for which it has positioned itself in recent years.

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