Project Summary Report with cover page

Lock Haven Enterprise Zone Industry Cluster Project

Final Report

Page 1

EXECUTIVE SUMMARY ............................................................................................................ 2

Summary of Highlights......................................................................................................... 2

Brief Description of the Methodology................................................................................. 3

Summary of Recommendations........................................................................................... 3

FINAL REPORT ............................................................................................................................ 5

Background ........................................................................................................................... 5

Methodology .......................................................................................................................... 5

Company Overview .............................................................................................................. 7

Diversified Manufacturing.................................................................................................. 7

Lumber/Wood Products ...................................................................................................... 7

Healthcare........................................................................................................................... 8

Other Statistics.................................................................................................................... 8

Results of the Survey ............................................................................................................ 9

Industry Cluster Information .............................................................................................. 9

Social Capital................................................................................................................ 10

Collaboration................................................................................................................. 10

Innovators In Their Industry ......................................................................................... 11

Affiliations .................................................................................................................... 11

Networking ................................................................................................................... 11

Networking Opportunities ............................................................................................ 11

Marketing & Sales .............................................................................................................. 12

Annual Sales ................................................................................................................. 12

Sales Growth................................................................................................................. 13

Online Business ............................................................................................................ 13

Customers ..................................................................................................................... 14

Suppliers ....................................................................................................................... 15

Regional Branding ........................................................................................................ 15

Business Climate ................................................................................................................. 15

Business Location ......................................................................................................... 15

Top Issues ..................................................................................................................... 16

Competitors................................................................................................................... 17

Workforce............................................................................................................................ 17

Employment Growth..................................................................................................... 17

Job Categories............................................................................................................... 18

Educational Institutions ................................................................................................ 18

Economic Development Resources.................................................................................... 19

CONCLUSIONS AND RECOMMENDATIONS ....................................................................... 21

ATTACHMENTS

A-Industry Cluster Interview Questions

B-Summary of Interview Responses

C-Summary of Interview Responses by Cluster

D-Selected Cross Tabulation Information

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EXECUTIVE SUMMARY

Summary of Highlights, Methodology, and Recommendations

Summary of Highlights

SEDA-Council of Governments was retained by the City of Lock Haven to develop a plan of

action to assist the economic development community in supporting and promoting industry

clusters in and around the Lock Haven Enterprise Zone.

Industry clusters are comprised of companies that locate in close proximity because of shared

linkages such as similar technologies, related products, shared customers, buyer-supplier

relationships or a common labor pool that present the opportunity for competitive advantage.

The purpose of this project was to:

Examine the industry clusters within Clinton County and the surrounding areas of

Lycoming and Centre counties.

Develop ways to improve economic conditions within and around the Lock Haven

Enterprise Zone.

In an initiative started in 2002, the Central Pennsylvania Workforce Development Corporation

(CPWDC) identified four (4) key industry clusters in a nine (9)-county Central Pennsylvania

region that demonstrated a competitive advantage, offered opportunities to earn a family-

sustaining wage, comprised a significant percentage of the local workforce, and generated wealth

for the region. According to the CPWDC, these same clusters were also found to hold the same

competitive advantage in the three-county study area included in this project. The competitive

clusters that have been identified include diversified manufacturing, lumber/wood products,

healthcare, and education. After consideration and discussion, it was determined that education

(i.e. colleges, universities, and public and private primary institutions) is not an industry that

could likely be impacted by the results of this project. For this reason, education was not among

the industries selected for more detailed study.

The central focus of the project was to evaluate available industry cluster data and to conduct a

survey of existing businesses in Clinton, Lycoming and Centre counties to assess strategic

relationships and communication channels. The survey sample included a wide cross-section of

companies in each of the chosen industry clusters. However, the participants were not selected

using probability-based sampling methods and, therefore, no information is provided concerning

margins of error or the statistical representation of the sample.

The owners or managers of 60 (sixty) companies identified within the target clusters were

surveyed by skilled interviewers from local economic development groups. The interviews were

primarily conducted on-site. However, due to scheduling conflicts, some were also conducted

over the telephone. The interviewers asked each participant a standardized set of survey

questions (see Attachment A).

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Brief Description of the Methodology

The five basic elements of the project included:

Obtaining and understanding the industry cluster data available through the CPWDC.

Refining the data based on county and local input.

Interviewing companies within the identified cluster industries to further understand the

data and to look for current economic trends, associations, and relationships among

companies within the cluster(s).

Incorporating cluster data and information available from other sources.

Developing an action plan to assist the economic development community in promoting

and supporting these industry clusters.

The survey revealed that, while more than one-half of the respondents (57%) believe their

company is part of an industry cluster, few of these companies actually exhibit typical industry

cluster behavior. Besides geographical proximity, interviewed companies exhibited few

distinctive characteristics typically found in companies considered to be part of a strong industry

cluster. However, data from this project suggests that there may be some potential to facilitate

and nurture these emerging clusters in the three (3)-county study area. Cluster activity, on a

lesser scale, is currently taking place across the study area in some capacity and the majority of

companies interviewed believe that being part of an industry cluster would be beneficial.

It is important to note in geographically small rural areas, it is often impossible to find all

components of a true industry cluster. Although CPWDC's initiative focused on a broader area,

individual counties and sub-regions were analyzed to demonstrate their contributions to the

regional economy, as well as identify their niche markets. Also, a key component of CPWDC's

cluster initiative is to begin raising awareness regarding clusters and to begin stimulating

mutually beneficial activity among companies within clusters. This effort will take time. While

the mapping of the industries is being completed, there are several other regional efforts already

underway to begin organizing companies into "industry partnerships" as a first step to

strengthening broader industry clusters.

This project examines the social capital, marketing/sales, business climate, workforce, and

awareness of economic development resources of the companies that were surveyed. The project

also provides an action plan and marketing plan to assist the economic development community

in promoting and supporting these industry clusters.

Summary of Recommendations

Based on the review of existing industry cluster data, the results of the study conducted as part of

this project, and input from local and regional economic development professionals, a plan of

action has been developed that encompasses the following recommendations:

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Final Report

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Continue to promote the importance of and opportunities for increased collaboration among

companies and organizations.

Work with local companies to create a greater understanding of the benefits associated with

cluster development.

Encourage companies associated with emerging clusters to tap into underutilized business

assistance services and other economic development resources in the study area. Increase

awareness of these resources by improving outreach and marketing.

Encourage partnerships between educational institutions and emerging clusters.

Target entrepreneurial support and technical assistance towards emerging clusters.

Consider expanding the Lock Haven Enterprise Zone to give more companies an opportunity

to utilize economic development resources available under that program. There is a limited

amount of space served by the appropriate infrastructure within the Enterprise Zone to

accommodate the location of new companies.

Develop a regional brand or identity for the area. Marketing or branding a region is one of

the action items listed in Stuart Rosenfeld's, "A Guide to Cluster Strategies."

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Final Report

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FINAL REPORT

Background

The City of Lock Haven, with assistance from SEDA-Council of Governments and the Clinton

County Economic Partnership, utilized existing industry cluster data for Clinton and two

surrounding counties as the foundation from which to develop ways to improve economic

conditions within and around the Lock Haven Enterprise Zone. Industry cluster analysis is one

method of providing information on industry activity and identifying key industry sectors in a

region or other defined area. This project was based in part on the Stuart A. Rosenfeld model

titled, "Creating Smart Systems, A Guide to Cluster Strategies in Less Favored Regions." In

addition, this project has led to the formulation of an action plan in an effort to focus resources

on these clusters and promote economic growth within and around the enterprise zone.

Methodology

This project relied partially on existing industry cluster data available through the Central

Pennsylvania Workforce Development Corporation (CPWDC). In 2002, CPWDC began

extensive raw data analysis of Pennsylvania Department of Labor and Industry data to identify

growth, emerging and declining industries across a nine (9)-county Central Pennsylvania region.

Further evaluation by CPWDC of this data led to the analysis of key regional industry clusters at

the sub-regional and individual county levels.

Census 2000 data indicates that of the nearly 17,000 employed individuals, 16 years or older in

Clinton County, almost one-third of the workers travel to Lycoming or Centre counties for

employment. These commuting patterns suggested that this project should not only include all

of Clinton County, but also include the surrounding counties of Lycoming and Centre.

CPWDC's initial cluster work, augmented by extensive interviews, was the beginning of a

process to identify and target growth and emerging industry clusters and develop appropriate

strategies to guide future development, business attraction, and marketing efforts. This project

utilized this data to develop a specific action agenda that will impact the Lock Haven Enterprise

Zone and surrounding areas.

The five basic elements of the project included:

· Obtaining and understanding the industry cluster analysis data available through the

CPWDC.

The CPWDC provided existing industry cluster data for Clinton, Lycoming, and Centre counties,

along with a synopsis of the overall limitations associated with this data.

· Refining the data based on county and local input.

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This data was then presented to local economic development organizations for their review. A

thorough review of the CPWDC data began, once it was determined the data was consistent with

county and local trends. This review revealed the existing or emerging industry clusters in the

study area that should be further evaluated through the interview process, which include

diversified manufacturing, lumber/wood products, and healthcare.

· Interview companies within the identified cluster industries to further understand the

data and to look for current economic trends, associations, and relationships among

companies within the cluster(s).

The owners or managers of 60 (sixty) companies identified within the target clusters were

surveyed by skilled interviewers from local economic development groups. The interviews were

primarily conducted on-site. However, due to scheduling conflicts, some were also conducted

over the telephone. The interviewers asked each participant a standardized set of survey

questions. The survey instrument consisted of sample questions from "The Guide to Cluster

Strategies" supplemented with questions developed by SEDA-COG, the Clinton County

Economic Partnership, and the City of Lock Haven. Input into the design of the survey was also

solicited from CPWDC and a professor of Business Administration at a local college who

specializes in survey design and data analysis. See Attachment A for a copy of the interview

questions. Interview results were then tabulated and analyzed.

This survey was not intended to be a statistically representative sampling, but rather a broad-

based survey with observations based on results of the interviews. A Summary of Interview

Responses and A Summary of Interview Responses By Cluster have been included as

Attachment B and C respectively. Selected cross-tabulation information is included as

Attachment D.

All of the companies surveyed in the three-county study area were classified as falling into the

three clusters targeted in this project (diversified manufacturing, lumber/wood products, and

healthcare). Since the main focus of the project is the Lock Haven Enterprise Zone, 30

companies, or one-half of the interviews, were allocated to Clinton County. The remaining 30

interviews were split equally between Lycoming and Centre County.

· Incorporate cluster data and information available from other sources.

Information and trends available from previously conducted Pennsylvania Business Retention

and Expansion Program (PA BREP) interviews were compared with current cluster data and

specific interview findings.

A review and analysis of the Pa SourceNet supplier database was also conducted to further

understand and identify the full range of supplier relationships for future marketing and analysis.

This additional data was incorporated into the analysis, action plan, and recommendations.

· Develop an action plan and other specific deliverables to assist the economic

development community in promoting and supporting these industry clusters.

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An action plan that centers on communication, entrepreneurship, and marketing has been

developed, based on the results of the interviews and review of the CPWDC industry cluster

data. The information helped to identify existing formal channels of communication within the

clusters and recommend new channels of communication needed to further enhance the

development of these emerging clusters. Entrepreneurial assistance and related technical

assistance resources should also be targeted towards the emerging clusters. The proposed

marketing plan for the Enterprise Zone and surrounding areas will incorporate those industry

clusters and supply chains identified as key industries into ongoing local and regional marketing

efforts.

Company Overview

Diversified Manufacturing

Of the sixty (60) companies interviewed for this project, forty (40) (66%) were classified under

the diversified manufacturing cluster. This cluster includes:

Food Mfg.

Textile Mills

Textile Product Mills

Apparel Mfg.

Paper Mfg.

Printing and Related Support Activities

Petroleum and Coal Products Mfg.

Chemical Mfg.

Plastics and Rubber Products Mfg.

Primary Metal Mfg.

Fabricated Metal Product Mfg.

Machinery Mfg.

Computer and Electronic Product Mfg.

Electrical Equipment, Appliance

And Component Mfg.

Transportation Equipment Mfg.

Metal Furniture and Related Product Mfg.

Using 2003 data from the Pennsylvania Department of Labor and Industry, CPWDC found that

industries in the diversified manufacturing cluster employ 14% of the total workforce in the

three-county study area. The Location Quotient (LQ) for diversified manufacturing, which

compares the concentration of employment from Clinton, Lycoming, and Centre counties to the

state, is 1.38 and 1.66 compared to the nation. A LQ greater than one (1) for the three-county

study area implies a higher concentration of employment in the diversified manufacturing cluster

compared to the state and the nation as a whole. The higher concentration also implies that more

of a good is produced locally than is used locally and, therefore, generates wealth by exporting

the good outside of the study area.

Lumber/Wood Products

Thirteen (13) of the companies interviewed (approximately 22%) were in the lumber/wood

products cluster. This cluster consists of:

Logging

Sawmills

Wood Product Manufacturing

Furniture Manufacturing

Lumber and Wood Wholesalers

Building Materials and Supplies Dealers

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The LQ for the lumber/wood products cluster is 2.04 (compared to the state) and 2.03 (compared

to the nation). Again, this LQ indicates that the concentration of employment for this industry is

greater in the three-county study area than the state and the nation. The high location quotient

can be attributed to the abundance of hardwood resources in the region. This industry employs

approximately three (3)% of the workforce in the study area.

Healthcare

The final industry cluster targeted in this study is healthcare. Seven (7) of the companies

interviewed, or roughly 12%, were in this category. The LQ for healthcare is 0.76 (compared to

the state) and 0.94 (compared to the nation) and the industry employs approximately 11% of the

study area's workforce.

While the healthcare industry cluster LQ is relatively low compared to the other clusters,

healthcare employment in the study area is comparatively high. This is especially evident from

the survey data. Even though only 12% of the interviewed companies were in the healthcare

sector, they comprise more than 40% of total employment for all interviewed companies.

It is possible that workforce shortages within the healthcare industry affected the location

quotient or competitive advantage for healthcare. This is especially true in rural areas. It is more

difficult to recruit healthcare workers in rural areas than it is in more densely populated areas.

Industries that comprise this cluster include:

Pharmaceutical and Medicine Mfg.

Medical Equipment and Supplies Mfg.

Electronic Equipment Mfg.

Medical Equipment Wholesalers

Pharmacies and Drug Stores

Offices of Physicians

Offices of Mental Health Physicians

Offices of Dentists

Offices of Other Health Practitioners

Outpatient Care Centers

Medical Laboratories

Home Health Services

Hospitals

Nursing Care Facilities

Residential Care Facilities

Other Statistics

Five of the companies interviewed were established in the 1800's. Seven companies were

founded between 1900 and 1949. The majority of the companies were started between 1950 and

1999. Only one company has been established since 2000.

Nearly one-half of the companies (45%) surveyed export and only one-quarter (25%) import. A

relatively small number of companies are minority or women-owned enterprises. While the

number of companies that participate in government sales as prime contractors is low (17%),

almost one-third of the companies (30%) participate in government sales as subcontractors. The

majority of companies have both manufacturing facilities (82%) and headquarters (70%) located

in the study area.

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Results of the Survey

This survey was not intended to be a statistically representative sampling, but rather a broad-

based survey with observations based on the interviews. The observations provided the basis to

develop a plan of action to assist the economic development community in promoting and

supporting industry clusters in and around the Lock Haven Enterprise Zone.

The project examines the social capital, marketing/sales, business climate, workforce, and

awareness of economic development resources of the interviewed companies in the three (3)

target clusters. The following pages contain those observations. Specific conclusions and

recommendations have been provided at the end of this report.

Industry Cluster Information

The companies interviewed for this project were read a simplified definition for the term industry

cluster and asked if they were aware that their industry might be classified as a cluster, both at

the beginning and again at the end of the interview.

Pre-Survey Industry Cluster Question

Industry clusters are comprised of companies that co-locate in close proximity because of

shared linkages such as similar technologies, related products, shared customers, buyer-

supplier relationships or a common labor pool, that present the opportunity for

competitive advantage. You have been selected to participate in this interview because a

partnership of regional workforce, economic development, and educational entities have

classified your industry as part of four (4) major industry clusters in Central

Pennsylvania. Given this definition:

Were you aware that your industry might be classified as a cluster?

Pre-Survey

Industry Cluster

Question

Number

% Percentage

of Total

70%

Yes

28%

Maybe

Total

100%

Post Survey Industry Cluster Question

Having completed this survey, would you say that your company is part of an industry

cluster?

Post-Survey

Industry Cluster

Question

Number

% Percentage

of Total

Yes

57%

33%

Maybe

Not sure

Total

100%

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At the beginning of the interview, only 28% of the companies thought they were part of an

industry cluster. However, by the end of the interview, significantly more companies (57%)

believed they were part of a cluster. This seems to indicate that once companies understand what

an industry cluster is and how it functions, they are more likely to feel they are part of the

cluster. The design of the interview questions may have influenced the outcome of the post-

survey industry cluster question.

Social Capital

Stuart Rosenfeld states in his book, "Creating Smart Systems, A Guide to Cluster Strategies in

Less Favored Regions", that social capital, a typical activity associated with clusters, is the

existence of "systemic relationships" between companies within an industry sector that have

shared linkages such as similar technologies, related products, shared customers, buyer-supplier

relationships and/or a common labor pool. These shared linkages promote knowledge and

innovation within that industry sector. The companies selected for interviews were given a list

of seven (7) open-ended questions that are aimed at measuring the utilization of social capital in

their industry sector.

Social Capital Questions

1. Name up to three individuals or organizations with which you have

COLLABORATED in the recent past (for example, to bid on contracts

together, attend trade shows together, help fill an order, share equipment or

services, or participate in an industry education partnership), and the type of

cooperation. Interviewer Note: Collaboration is defined as being beneficial to

both parties.

2. Name up to three individuals or organizations (this may be, for example, a

technical school, competitor, customer, supplier, or consultant) that have

helped you recently in some way (such as gave advice, shared information, or

loaned equipment) and form of help (advice, production, loan). Interviewer

Note: Please have them indicate whether it was fee based or free.

3. Name up to three organizations and their locations, which YOU have

recently helped out in some way (such as gave advice, shared information, or

loaned equipment) and form of help (advice, production, loan).

4. Who do you consider to be leaders or innovators in your industry? (Probe

for at least three (3).)

5. What are the most important business groups, affiliations, and/or

professional organizations that your company belongs to? Why are they

important to you? (Probe for at least three (3))

6. What are the most important advisory committees and/or boards that your

company is involved in?

7. Do you think it would be important for your company to participate in

more local/regional networking opportunities? If yes, please describe.

Collaboration

When companies were asked to identify individuals or organizations with which they have

collaborated, helped in some way, or have themselves been helped, a common answer among

every industry sector was "none." Almost one-half of the companies interviewed (48%) said

they do not participate in these types of networking opportunities.

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Innovators In Their Industry

Most of the companies (73%) consider competitors to be leaders or innovators in their industry.

However, twenty-three percent (23%) of the companies considered themselves to be the leaders

or innovators in their industry. Large companies, companies that conduct business online, and

companies involved in exporting were twice as likely to consider themselves as a leader or

innovator in their industry. On the other hand, companies that do not export were ten (10) times

more likely, and companies that do not conduct business online were almost three times more

likely to consider a local competitor as a leader or innovator. Since innovation is one of the traits

required as a prerequisite for successful cluster-based development, one could argue that

companies considering themselves an innovator in the industry could be a strong building block

for future cluster development activities and overall growth.

Affiliations

National, regional, and local industry-related organizations were considered to be important

affiliations for all of the companies in the healthcare, lumber/wood products, and diversified

manufacturing cluster. While no one specific industry-related organization ranked high, most

agreed that it was important for their company to be involved in an organization that catered to

their specific industry sector. Reasons for belonging to these organizations include legislative

assistance, political support, familiarity with the industry, and networking.

The second most important affiliation was with local economic development organizations such

as chambers of commerce and industrial development corporations. Companies across all three-

industry clusters felt that "local involvement in the community" and "business assistance" were

the main reasons to be associated with these types of organizations. Large companies were more

than twice as likely as small companies to consider economic development agencies to be among

the most important groups to which they belong.

Networking

For companies that did participate in these types of networking opportunities, the forms of

collaboration or assistance that were mentioned are diverse and include bidding on contracts with

competitors, working with fee-based consultants, and sharing equipment and advice with local

companies. Large companies (over $5 million in annual sales) were four times more likely than

small companies ($5 million or less) to seek help from local organizations and twice as likely to

seek help from local colleges. The survey also found that companies that anticipate an increase

in employment over the next 12 months were three (3) times more likely than companies that

don't anticipate employment growth to obtain help/assistance from a local college or other

economic development resource provider.

Networking Opportunities

The responses were split down the middle when companies were asked if they thought it would

be important to participate in more local/regional networking opportunities. Some companies

felt their participation in networking opportunities was adequate. Other companies maintain that

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most of their sales come from outside of Pennsylvania and it isn't necessary to participate in

more networking opportunities. On the other hand, there were a number of companies that

believed they were not doing enough networking and felt they should do more.

The data collected from this section of the interview might imply that utilization of social capital

resources, a typical activity associated with clusters, is taking place in a fairly limited capacity.

Most companies recognize the need to tap into the social capital that exists in the region, but may

not completely comprehend or appreciate the benefits of collaboration and networking and/or

associate this activity with being part of a cluster.

Marketing & Sales

The study examined key marketing and sales characteristics to determine if there are cluster-

related observations that can be made relative to a company's marketing or sales activity.

Patterns and comparisons were observed in several areas that included: a company's annual

sales, anticipated sales growth, online business capabilities, customer relationships, supplier

relationships, and regional branding.

Annual Sales

As the table below indicates, almost one-third of the companies interviewed (30%) reported

annual sales greater than $15 million. One-quarter of the companies reported annual sales

between $1 million and $5 million.

What are your annual sales?

Annual Sales

Number

% Percentage of

Total

Confidential

15%

< $250,000

$250,000-$500,000

$500,001-$999,999

11%

$1 MM-$5 MM

25%

$5.1 MM- $10 MM

10%

$10.1 MM-$15 MM

> $15 MM

30%

Total

100%

Cross tabulations were utilized to compare the characteristics of large companies to small

companies. Interviewed companies were divided into two groups based on their annual sales so

that there would be a roughly equal number of companies in each group. Companies were

considered small if they had annual sales of $5 million or less, while companies were considered

large if they had annual sales greater than $5 million. The nine companies that answered

"Confidential" to the annual sales question were omitted from this analysis. Twenty-six (26)

companies had annual sales of $5 million or less. Twenty-five (25) companies reported annual

sales greater than $5 million. This division of sales for companies was used as a basis for

comparison here and later in the report. Some interesting findings identified include:

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Larger companies were more likely to:

Engage in exporting activities

Have a website or online directory

Smaller companies were more likely to:

Indicate that workforce was one of the top issues they face in their industry

Expect their employment to grow over the next 12 months

Sales Growth

As illustrated in the table below, the majority of companies across all industry sectors anticipate

growth in their annual sales over the next 12 months. Only one company expected sales to

decline. Those companies that project sales growth are more than twice as likely to engage in

exporting activities and online buying and/or selling than their counterparts. They are also more

than six times as likely to expect employment growth over the next 12 months.

Do you expect your sales to decline, grow, or remain status quo over the next 12 months?

Sales (over 12 months)

Number

% Percentage of

Total

Growth

68%

Status Quo/No Growth

30%

Decline

Total

100%

Online Business

While interviewed companies Internet market their products and services in many different

ways, most companies indicated they use the to conduct business online in some capacity.

Approximately 85% of the companies interviewed utilize email. Close to three-quarters of the

companies use a website or online directories, and about one-quarter of the companies participate

in online transactional based selling and/or purchasing. Not surprisingly, companies that export

are more than twice as likely to engage in online buying and/or selling. The reverse of that

statement is true as well. Companies that conduct business online are almost twice as likely to

engage in exporting activities.

With the use of e-commerce so prevalent among all industry sectors, the availability of adequate

broadband service or connection options is essential in supporting emerging industry clusters in

the region.

Do you conduct any business online? If yes, which form of e-commerce do you use?

Online Business

Number

Percentage

Electronic correspondence (Email)

85%

Website/online directories

68%

Online transactional based selling

28%

Online transactional based purchasing

22%

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Other

12%

None

10%

Online banking

N/A

Eighty-nine percent of the companies interviewed (89%) have some form of high speed Internet

access (DSL, cable, wireless, T1, or higher) (See table below). The majority of companies felt

their level of Internet connectivity was adequate for their needs. However, some companies

(15%) indicated they needed more. When asked if they were aware of any other connection

options available in their area with comparable or better service, most companies (73%) said

they were not aware of other Internet options. This could indicate that better marketing of

existing services is needed, or that competition simply does not exist.

Internet Connection Number

% Percentage

of Total

High Speed (DSL,

Cable, Wireless)

57%

T1 or higher

32%

Dial Up

None

Total

100%

Only a few companies felt that broadband factored into their company's decision to

locate/expand into the area, or felt that it would be a factor when they decided to expand in the

future. A possible explanation for this may be due to the fact that the majority of companies had

already located to this area prior to widespread usage of the Internet. Of the 60 companies

interviewed for this project, 52 had been located in the study area prior to 1990.

Customers

The most important customers in the healthcare sector are local residents. Quality of care,

service, and location were the top reasons cited by the healthcare sector for why customers buy

from them.

The most important customers from the lumber/wood products industry come from within

Pennsylvania. Price, quality, and location rank as the top three (3) reasons why these companies

believe customers buy from them. The abundance of hardwood resources in the region is,

without a doubt, critical for the successful operation and continued growth of these lumber/wood

product companies.

The majority of customers who buy from manufacturers also come from within Pennsylvania.

Quality, price, and service were listed as reasons their customers buy from them. However, very

few companies in the diversified manufacturing cluster believe that local demand for their

products is growing more rapidly within Central PA compared to the demand overall. Most

companies felt local demand for their products was about the same or growing slower. In

contrast, the lumber/wood products sector was split on this topic with one-third thinking it is

growing more rapidly, one-third growing slower, and one-third about the same.

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Suppliers

The most important suppliers in all three of the clusters studied were located in Pennsylvania.

Price, quality, and service were indicated as being the top three (3) reasons why they buy from

those suppliers. Although most companies buy from within the state, a lack of suppliers is the

top reason for not purchasing more services, products, or raw materials from Pennsylvania.

Regional Branding

Of the 50 companies that expressed an opinion, eighty-two percent (82%) felt the region could

benefit from the development of a regional brand or identity. However, most companies could

not agree on an accurate description. "A Guide to Cluster Strategies..." includes marketing or

branding a region as one of the items listed in his Menu of Actions to support clusters. If future

cluster development and growth is going to occur in this region, significant resources need to be

allocated to develop and secure support for a regional brand or identity.

Business Climate

In an effort to better understand the clusters studied in this project, information was collected

from the survey that measured the business climate in the three-county study area. Information

was collected on several different topics, which included why a business located to the area, the

top issues facing a business, and information on a business's competitors.

Business Location

The reasons why companies located to this area vary depending on the industry cluster. Location

and workforce were listed as the top reasons why diversified manufacturing companies located

to the area. Most lumber/wood product companies are family-owned and located to the area

because of the large quantity of hardwoods resources in the region. Reasons why the companies

in the healthcare sector located to this area include workforce/work ethic and proximity to

markets.

Even though healthcare lists workforce as being the top reason they located to the area, they also

believe that workforce, or lack thereof, is a top issue facing their industry today. Forty-nine

percent (49%) of the respondents in the healthcare industry cited workforce as a top issue.

Twenty-nine percent (29%) ranked it as the number one issue, while twenty-one percent (21%)

ranked it at number two or three. (See chart below) The shortage of nurses and physicians

across the region has increased and is expected to rise over the next decade. This data suggests

that additional training, education programs, and curriculum need to be developed to keep up

with demand.

Lock Haven Enterprise Zone Industry Cluster Project

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Page 16

Workforce

29%

15%

10%

21%

10%

20%

30%

40%

50%

60%

Healthcare

Lumber/Wood

Products

Diversified

Manufacturing

I
n
d
u
s
t
r
y

C

l
u
s
t
e
r
s

Percentage of Responses

% of Top Issues Ranked as #1

% of Top Issues That Ranked as

#2 and #3

Small companies were more than twice as likely as large companies to indicate workforce as one

of the top issues they face in their industry. Companies that anticipate a steady or declining

employment over the next 12 months are almost twice as likely to indicate that workforce was

one of the top issues than those companies that expect employment growth.

Top Issues

The rising cost of healthcare was considered to be a top issue in both the diversified

manufacturing and lumber/wood products clusters. (See chart below). This national problem

has taken a toll locally, especially with small companies.

Cost of Healthcare

19%

20%

23%

10%

20%

30%

40%

50%

60%

Healthcare

Lumber/Wood

Products

Diversified

Manufacturing

I
n
d
u
s
t
r
y

C

l
u
s
t
e
r

Percentage of Responses

% of Top Issues Ranked as #1

% of Top Issues That Ranked as #2

and #3

Lock Haven Enterprise Zone Industry Cluster Project

Final Report

Page 17

Competitors

Competition was listed as a top concern by most diversified manufacturing companies. (See

chart below). One-third of the competitors listed for diversified manufacturing reside in

Pennsylvania, while 13% were listed as overseas competitors. The main competitors for both the

healthcare industry and the lumber/wood products industry are located in Pennsylvania. Large

companies (more than $5 million in annual sales) were twice as likely as small companies ($5

million or less in annual sales) to indicate that competition was one of the top issues they face in

their industry. Since competition has been identified as a top concern for companies in this area,

regional service providers might develop a workshop or seminar series that focuses on

techniques and strategies that can be utilized by Enterprise Zone companies to mitigate the

effects of competition on their business operations.

Competition

15%

23%

21%

10%

20%

30%

40%

50%

60%

Healthcare

Lumber/Wood

Products

Diversified

Manufacturing

I
n
d
u
s
t
r
y

C

l
u
s
t
e
r
s

Percentage of Responses

% of Top Issues Ranked as #1

% of Top Issues That Ranked

as #2 and #3

Workforce

Building a specialized workforce is another important element to developing strong industry

clusters. The study examined business employment growth, job/skill requirements, and the use

of educational institutions in building or maintaining a specialized workforce.

Employment Growth

Nearly one-half of all the companies interviewed (47%) expect their employment to grow over

the next 12 months. Of the 30 diversified manufacturing companies interviewed, twenty-eight

(28) of the companies in the cluster (93%) expect their employment to increase or remain the

same. Only two companies anticipate a decrease in employment, citing rising production costs

as the reason. Overall, this may be viewed as a rather positive finding given the number of plant

closings that have been occurring throughout the rest of the region and the state.

Lock Haven Enterprise Zone Industry Cluster Project

Final Report

Page 18

Do you expect your employment to decline, grow, or remain status quo over the next 12 months?

Employment

Growth

Number

% Percentage

of Total

Status Quo

50%

Growth

47%

Decline

Total

100%

Exporting companies are more than twice as likely to expect their employment to grow over the

next 12 months. Companies that have annual sales of greater than $5 million were almost twice

as likely as those companies with less than $5 million in annual sales to have a positive

employment outlook. Companies that anticipated sales growth over the next 12 months were

more than six times as likely as companies that anticipated a decline in sales to forecast

employment growth over the same 12 months, indicating a close correlation between sales and

employment growth.

Job Categories

Production and management were listed as job categories that are likely to be filled over the

coming year in lumber/wood products and diversified manufacturing clusters. Aside from

positions in the healthcare cluster, most companies do not seem to have a problem filling jobs or

retaining existing employees. Companies also indicated they didn't think there were any job

skills lacking in this study area. This seems to temper somewhat the popular notion that our

workforce cannot support these growing industries.

Which skills are most lacking in this region?

Skills Most Lacking in the Region

Ranked #1

Ranked #2

Ranked #3

1-None (23x)

1- None (30x)

1-None (33x)

2- Writing (tie) (5x)

2- Programming (tie) (3x)

2- Troubleshooting (tie) (3x)

2-Critical Thinking (tie) (5x)

2- Decision Making (tie) (3x)

3- Science (3x)

2-Problem Solving (tie) (3x)

**example: (23x) indicates how many times that option was selected under that ranking.

Educational Institutions

Pennsylvania College of Technology in Williamsport and Penn State University in State College,

with its branch campuses located across Pennsylvania, were the most common educational

institutions utilized for education or training in the study area. The most popular type of training

received from these institutions was computer training. Common strengths among all of the

institutions listed included the variety of courses offered and the quality of instructors for the

courses.

Lock Haven Enterprise Zone Industry Cluster Project

Final Report

Page 19

Economic Development Resources

Companies were given a list of resources in six areas of economic development and asked to

indicate their level of awareness and their level of usage. Those areas consisted of technology,

financing, marketing, manufacturing, workforce, and business development. The survey results

indicate that the level of awareness for these economic development resources is mixed.

Sources Aware and Used

22%

27%

35%

42%

22%

48%

22%

30%

50%

45%

35%

42%

40%

53%

56%

31%

42%

35%

20%

55%

28%

20%

37%

43%

20%

40%

60%

80%

100%

Ben Franklin Technology Partners

Penn TAP

IMC

IDC

Chamber of Commerce

Clinton RLF

SEDA-COG

Lock Haven Enterprise Zone

Williamsport Enterprise Zone

SBDC

West Branch Technology Center

CPWDC

Career Link

Pennsylvania College of Technology

o
u
r
c
e
s

Percentage Aware/Aware and Used

Aware and Used
Aware only

For example, very few of the companies that identified themselves as being aware of Penn TAP

used their services. One-half of the companies (50%) indicated they were aware of Penn TAP's

services, however, only eight percent (8%) of the companies have used Penn TAP's services. On

the other hand, 98% of the companies are aware of their local chambers of commerce and 42%

use their services.

Most companies are aware of and have used the Career Link services that are available in our

area yet, for the most part, few companies are aware of the Central Pennsylvania Workforce

Development Corporation, the organization that oversees the Career Link services. The

Pennsylvania College of Technology was widely recognized by all three industry sectors as a

workforce resource.

The awareness and utilization of business development resources throughout the area differ

depending on the organization. At least 75% of the companies interviewed indicated an

awareness of or have used the business development services offered each of the following

Lock Haven Enterprise Zone Industry Cluster Project

Final Report

Page 20

organizations: Pennsylvania College of Technology, CareerLink, Small Business Development

Centers, SEDA-COG, chambers of commerce, and the industrial development corporations.

Some reasons for varied levels of awareness among these economic development organizations

may include:

Some organizations provide specialized services that may only pertain to a selected group of

companies. For example, PennTAP's services are often very specialized, which may help

explain why a large percentage of those surveyed have not used their services.

Companies are more likely to know the local "point of contact" or organization responsible

for the service delivery rather than the regional organization providing oversight and

administration. For example, CPWDC does not provide direct services to employers or job

seekers. They oversee the CareerLink facilities that deliver these services, which may

explain why companies are more aware of CareerLink than CPWDC.

Some organizations have a very limited geographical service area. For example, the

Williamsport Enterprise Zone only covers the companies in and around that Enterprise Zone,

which may explain why companies outside the zone are not familiar with the Williamsport

EZ.

Overall, it seems that increased outreach and awareness of economic development resources

would benefit most companies and serve to further publicize the services available to help

support industry clusters.

Lock Haven Enterprise Zone Industry Cluster Project

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CONCLUSIONS AND RECOMMENDATIONS

Having amassed a great deal of data and information about the potential for existing and

emerging industry clusters operating in and around the Lock Haven Enterprise Zone, it has

become apparent that the issue is not black and white. While classical industry cluster analysis

and the corresponding quantitative data suggest the existence of a competitive advantage in

certain industry clusters in the study area, the critical mass of businesses within these industries

may not exist. It seems safe to say that most economic development professionals and private

sector businesses, for that matter, might question the real existence of already-developed,

meaningful clusters in this three-county area. That's why it may be important to look beyond the

study area to determine linkages throughout Central Pennsylvania as future cluster work evolves.

The findings from this research project seem to support this hypothesis. For example, while

healthcare is identified as an existing industry cluster, employment in this industry within the

study area is significantly lower than in other areas of the state. This may suggest future

opportunities for growth as this area moves closer toward the statewide average. Likewise,

lumber and wood products may also be perceived as an industry cluster (and with a good number

of businesses), but these businesses are spread out over a large land area and employ only three

(3)% of the study area's workers. Finally, when we look at diversified manufacturing, we see

that while there are many manufacturers in the study area, they cover such a wide range of

business types that it weakens their position as a true industry cluster.

There are other observations that can be made, as well. While formal channels of

communication and supply chains exist among companies interviewed, they are not extensive or

developed enough to indicate the presence of a strong industry cluster in this three-county area.

Furthermore, even though more than one-half of the respondents for this project (57%) believe

their company is part of an industry cluster, the results of the interviews reveal that few of these

companies exhibit typical industry cluster behavior. Besides geographical proximity,

interviewed companies exhibited few of the distinctive characteristics typically found in

companies that make up an industry cluster.

With that said, it is important to note that this project has certain limitations and that the results

are based largely on observation. The three-county geographical area to which this project was

limited and the small number of companies surveyed for the project only show a snapshot at a

certain point in time and may not be indicative of the cluster activity that may exist on a larger

scale. In addition, within diversified manufacturing, the three counties in the study are not likely

to exhibit strength in all types of manufacturing; rather there will likely be key niche markets or

sub-sectors that are more prevalent. It is also critical to understand that the presence of one large

company with a niche product can significantly skew the data, presenting a strong company,

rather than an industry cluster. For these reasons, it is necessary to also look at this type of data

on a regional or multi-regional level. Furthermore, while clusters are not yet functioning at the

level they should be, the cluster process is still in its early stages in this region. Prior to the

cluster work currently taking place, there was little comprehensive economic mapping in place.

The efforts to define and study industry clusters have started the process of driving companies

Lock Haven Enterprise Zone Industry Cluster Project

Final Report

Page 22

and public organizations to become more aware of the existence of competitive industries in the

region and improve planning.

With these limitations in mind, data from this project may suggest the foundation for building

industry clusters exists. Cluster activity, albeit on a lesser scale, is currently taking place across

the three-county study area and the majority of companies interviewed believe that being part of

an industry cluster would be beneficial. Given this foundation, there may be an opportunity to

facilitate and nurture these emerging clusters by advancing some or all of the following

recommendations:

Continue to promote the importance of and opportunities for increased collaboration among

companies and organizations.

Develop industry-specific partnerships through which companies will become more

aware of others within their industry and of the resources and services available to them.

These efforts should not happen unilaterally, but should connect with other regional

activities including those currently underway by CPWDC and CareerLinks, IMC, Ben

Franklin, Penn College, Penn State, The Pennsylvania Heartland Partnership, SEDA-

COG, and others. For example, build upon the existing efforts currently occurring within

the modular home and wood products industry groups.

Develop a regular series of articles for use in existing newsletters and other media

opportunities that highlight recent collaborative efforts and/or the successful application

of economic development services.

Work with local companies to create a greater understanding of the benefits associated with

cluster development.

Hold "mini" industry conferences bringing in experts in industry cluster development to

help facilitate emerging clusters. Increasing collaboration and communication may help

further develop these clusters.

Help to facilitate partnerships and collaborations among a small number of companies to

demonstrate the effectiveness of these relationships. Work towards expanding the

collaborations over time to include more companies.

In cooperation with the PA BREP, meet with or contact all companies in the Enterprise

Zone at least once a year to inform them of the resources available as a result of being

located in the zone. Provide information on existing opportunities for collaboration and

existing economic development resources that may be applicable to their specific

situation or industry group.

Seek media coverage opportunities to discuss cluster report findings.

Identify successful examples of local collaboration and widely publicize these successes.

Encourage companies associated with emerging clusters to tap into underutilized business

assistance services and other economic development resources in the study area. Increase

awareness of these resources by improving outreach and marketing.

Create comprehensive information packets about available resources and distribute to

targeted companies in the study area. Use this opportunity to communicate the

importance of emerging industry clusters.

Collaborate with the PA BREP to market resources to targeted companies.

Lock Haven Enterprise Zone Industry Cluster Project

Final Report

Page 23

Create specialized resources and/or services for specific industry clusters.

Encourage partnerships between educational institutions and emerging clusters.

Identify/develop industry-specific training resources to assist emerging clusters in

acquiring a high-quality workforce. For example: support the expansion of those

education and training programs relating to the healthcare industry.

Leverage the activities within the emerging Keystone Innovation Zones (KIZ) to

encourage the inclusion of industry-specific resources targeted to emerging clusters.

Tap in to the expertise of institutional experts to provide technical assistance and support.

Utilize the proposed KIZ's as a recruiting incentive for companies that can enhance or

further support existing identified clusters.

Target entrepreneurial support and technical assistance towards emerging clusters.

Hold periodic presentations to inform companies of the available entrepreneurial

resources and related activities.

Use the resources of the Central Pennsylvania Entrepreneurial Assistance Network

(CPEAN) to provide intensified technical support to entrepreneurs starting or expanding

a small business within the targeted cluster areas.

Create or expand a loan fund to target companies within a specific industry.

Create an "entrepreneurs club" to encourage the creation and growth of new companies

with each industry cluster.

Consider expanding the Lock Haven Enterprise Zone to give more companies an opportunity

to utilize economic development resources available under that program. There is a limited

amount of space served by the appropriate infrastructure within the Enterprise Zone to

accommodate the location of new companies.

Incorporate the developing Lamar Township Business Park with its KOZ designation

adjacent to the I99 corridor in order to provide additional incentives for recruiting and

expansion efforts at growing and expanding companies that are likely to be competitive

in the global marketplace.

Develop a regional brand or identity for the area. Marketing or branding a region is one of

the action items listed in Stuart Rosenfeld's, "A Guide to Cluster Strategies." More than half

the companies interviewed felt the region could benefit from the development of a regional

brand or identity.

A regional brand has been developed and is currently being marketed throughout the

broader "Central Pennsylvania" region, which encompasses the study area. Encourage

companies in the study area to use this regional brand.

Work with existing companies to encourage and support exporting activities and target

exporters within the identified industry clusters when trying to recruit new business

locations.

Target seminars/workshops on exporting to companies within the Enterprise Zone to

inform them of the wide array of services offered by the state to assist companies

interested in exporting.