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COVER STORY: THE 2009 BUSINESS CLIMATE REPORT
From Site Selection magazine, November 2009
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NCBalloon

Commerce and curriculum are a natural match in North Carolina, which tops the business climate rankings yet again.

by ADAM BRUNS
H

ow has North Carolina managed to rank No. 1 in Site Selection's annual business climate rankings eight times in the past nine years? It may have something to do with its infrastructure of higher learning.

"When I worked for the state department of commerce in the late nineties, I could count on one hand the number of projects in a five-year period that had serious conversations with our university system," says Leslie Boney, now associate vice president for economic development research, policy and planning for the University of North Carolina's 16-campus system. "Now it's hard to find a project that does not involve a conversation with our university system."

Conversations with several corporate project decision-makers make it easy to corroborate Boney's thesis.

Take Siemens Energy's Oct. 8 groundbreaking for a 60,000-sq.-ft. (5,574-sq.-m.) expansion adjacent to its existing steam turbine generator manufacturing plant in Charlotte. Over the next five years, the company plans to invest a total of nearly US$50 million and create 226 new engineering and manufacturing jobs at this location. The expanded facility, designed to achieve LEED Gold certification, will house engineering operations that will support the company's design, manufacture and service of power generation components.

"We've had a large presence in the Charlotte area and in other areas in North Carolina for 40 years now, and it was our first-hand knowledge of the excellent business environment here that convinced us to expand our investment further," said Randy Zwirn, president and CEO of Siemens Energy, Inc.

Siemens Energy employs 780 at its existing 550,000-sq.-ft. (51,095-sq.-m.) Charlotte facility. Zwirn alluded to the area's emergence as an energy center of excellence. Mark Pringle, plant manager in Charlotte, seconds that assertion.

"Charlotte has become a hub for energy companies that are starting to locate here, predominantly driven by nuclear energy, but now others," he says. They include Westinghouse, AREVA, Shaw, Duke, Fluor Group and the recently located Toshiba America Nuclear Energy. The city also has long been home to one of five principal offices and R&D labs for the Electric Power Research Institute (EPRI). The Siemens facility performs work on all sizes of generators and steam turbines, regardless of the prime mover generation source.

"It's been an excellent climate to work in," says Pringle of the Charlotte area. "You can tell the local government pays attention to it, and wants to help support and nurture according to our needs. We get attention when we ask about things."

That includes attention from the university system, as UNC-Charlotte is in the midst of launching a new program around the new, $76-million Energy Production Infrastructure Center.

"They have a college focused on developing new engineers for the power production business," says Pringle, who serves on that new college's board of advisors. "It's just now starting to take off."

Pringle says the company has also mined machining and welding talent from area trade schools, as well as working with local institutions in recruiting and co-op assignments. That relates directly to the new project.

"We have a large building, the largest plant Siemens has in the United States," says Pringle. "We've launched an initiative to put more engineers at the site so they're designing the product right next to where it's being built. It's the way Siemens does business in Germany and other countries."

Siemens originally bought the power business from Westinghouse in 1998. Its headquarters is in Orlando.

"The obvious decision was to expand in Orlando or make the move and put them next to the factory," says Pringle, who's worked for Siemens for 28 years. "I'm glad we are able to convince them. Being close to the product was a big lever."

According to the Charlotte Regional Partnership, more than 1,400 undergraduate engineering degrees and 1,000-plus graduate and doctoral degrees are awarded annually at major universities within 250 miles (402 km.) of Charlotte.

High-Tech Capital

There's no shortage of major educational institutions in Raleigh-Durham-Cary. The biggest of them — North Carolina State University — gave birth some time ago to Durham-based Cree, a developer and manufacturer of energy-efficient LED lighting and semiconductor applications. In early October, the company announced it would add 275 jobs at its Durham facility, and hopes to create an additional 300 jobs by the end of 2012. Approximately half the company's payroll of 1,500 works at the Durham site. The company in August launched production of LED products in partnership with Flextronics at a site in Mecklenburg County.

Greg Merritt, Cree vice president of corporate marketing, says the company is adding the manufacturing capacity within its existing facility footprint. He says the company considered several options, but chose Durham due to its existing LED chip manufacturing capability. Reasonably priced and reliable power also was important. Asked about the continuing relevance of the university connection, Merritt says, "We were founded in this area due to a strong scientific and technology culture, central location and a high standard of living. We also benefit from a highly skilled local work force. Cree draws talent from the public universities and community colleges in North Carolina, as well as from other states and around the world as we grow."

The company's most recent expansion was in 2004, when a $300-million, 300-job R&D investment was aided by an 11-year Job Development Investment Grant (JDIG) that could total $5.1 million in benefits.

In yet another instance of JDIG assisting in the creation of high-value jobs, Deutsche Bank in August announced it would invest $6.7 million in a new technology development center in Cary, where the newly formed DB Global Technology Inc. will create 319 jobs over the next five years. The JDIG agreement would award the company up to $9.4 million over 11 years. The new jobs at DB Global Technology will pay an overall average wage of $88,213.

In July, Milken Institute named Raleigh-Cary as the second best performing city in the nation when it comes to economic growth, behind only Provo-Orem, Utah.

"We are extremely excited at the prospect of opening a professional IT development center in the Research Triangle, which is home to some of the most highly skilled technology talent," said Anthony P. McCarthy, global CIO, Capital Markets Technology at Deutsche Bank.

"Deutsche Bank is the perfect example of the role that higher education can play in terms of skills and in terms of doing sponsored research," says UNC's Leslie Boney.

"We hosted the delegation before we knew who they were," says Tom White, economic development director at North Carolina State University in Raleigh, who co-hosted delegates from "Project Athena" with Dennis Kekas, associate vice chancellor for N.C. State's Centennial Campus research park (celebrating its 25th anniversary), in March. Presentations from various departments at N.C. State were on the agenda for that meeting, conducted at the College of Engineering. The DB team included representatives from London and Frankfurt, as well as project leaders from the New York office, and consultants from Deloitte and Jones Lang LaSalle. The state's effort was led by Steve Brantley with the North Carolina Dept. of Commerce. Two other buildings in downtown Raleigh and in RTP were considered before the final location was chosen in Cary.

White says DB is part of a cluster in the high-tech financial sector that began emerging about five years ago with projects from Credit Suisse and Fidelity.

"Their willingness to endorse this market as a comfortable home to establish an operation and expand helped us compete successfully for the Deutsche Bank investment," says White.

Hard-Wired Collaboration

Also helping the area compete is Research Triangle Park (RTP), which now can more credibly be called "the granddaddy of all research parks" as it concludes its golden anniversary celebration. Prominent private schools such as Duke University also lend depth to the landscape.

"A creation like RTP supplies a community of active intellect and inquiry that no one school could create on its own," said Duke President Richard H. Brodhead at the annual global conference of the International Association of Science Parks held in Raleigh in June 2009. "We all know how much emerges from obscure laboratories. But one thing we don't sufficiently remember is that the knowledge economy does not and cannot thrive everywhere. The first feature you need in that ecosystem is the phenomenon of critical mass — a community of people similar enough, but different enough to provoke each other and strike sparks. The Research Triangle's main function is it supplies that critical mass, with a very large population of very smart, highly trained people in a small area. I was told there are more PhDs per capita in this area than any other — which I promise you was not true in 1957."

That sense of concentrated brainpower is reflected in the National Science Foundation's just-released ranking of 2008 total R&D expenditures at U.S. universities and colleges. Schools in the Tarheel State ranked 7th (Duke University), 26th (UNC-Chapel Hill), 47th (North Carolina State University) and 87th (Wake Forest), out of 679 institutions in the country. The only states with more institutions in the top 100 in that ranking were, in order, California, New York and Texas — states with populations that range from double to quadruple the 9.2 million residents in North Carolina.

The campuses themselves may attract that funding. But the growing network of research parks in the state only help spread its effects further.

"Like most research universities, Duke does some of the technology transfer work in-house," said Brodhead, "but it is an essential advantage to have access right down the street to an R&D apparatus [RTP] that is adjacent, complementary but not identical to the university."

UNC's Boney says the latest effort to address tech transfer is a new report, developed with IBM, that makes recommendations on how to improve tech transfer across all 16 campuses, in order to "make it easier for companies to work with us," he says. "We want a more innovative culture on campus that creates more intellectual property, and looks at options for how we partner with companies to make sure we offer a full range of relationships."

Boney says working with the community college system is also important, especially when it comes to 2+2 articulation programs that allow for credit transfers: "That ends up making a difference for the number of aerospace companies in the state," he says. "That kind of cooperation is an important thing for the companies to see. It also pays off in determining the range of skills a company will need when they get here. Making sure credits transfer is mind-numbingly boring on one level, but for a company it's very important."

Rick Weddle, president and CEO of Research Triangle Park, says RTP still gets attention because of the big players in the neighborhood, but "nobody paid attention to the fact that there were 1,500 spinoffs out of RTP. SAS, Quintiles ... we have some of the largest companies in the world that were guys just starting stuff. More jobs have come out of those 1,500 firms in the Triangle than out of the big companies."

Weddle also echoed a point Brodhead made: Schools work with business, but they also make the extra effort to do the unthinkable — work with each other.

"Universities are notorious for not working well even among themselves," said Weddle. "In the Triangle, at these three universities [Duke, UNC-Chapel Hill and N.C. State], it is hard-wired into their culture to work well across lines."


Story in Pictures

A view across Hechenbleikner Lake on the campus of UNC-Charlotte. Home to the Charlotte Research Institute (part of the newly formed North Carolina Research Parks Network), UNC-Charlotte just launched a new program built around the forthcoming 200,000-sq.-ft. (18,580-sq.-m.) Energy Production Infrastructure Center (EPIC).
Photo courtesy of UNC-Charlotte
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