In an increasingly economically integrated world, local leaders are recognizing that regional economic development strategies must create environments in which firms and industries can compete internationally to generate sustained growth and quality jobs. Since 2012, the Global Cities Initiative (GCI), a joint project of Brookings and JPMorgan Chase, has helped metropolitan areas strengthen their international competitiveness and connections through research, problem-solving, and exchange, including development of trade and investment strategies with more than 30 regions around the world.
About 40 percent of global economic activity now comes from cross-border trade and capital investment, containing tremendous potential to generate wealth locally.1 Increasingly, economic development leaders are looking to realign traditional economic strategies with global opportunities by helping local companies export to global markets, promoting their metro areas as sites for foreign investment, and cultivating exchanges of innovation and talent. This global economic engagement takes various tactical forms, including:
- Conducting trade missions abroad and hosting foreign delegations;
- Launching export grant competitions;
- Facilitating supply chain mentorships;
- Establishing “soft landing” accelerators to minimize investment risk;
- Providing global fluency training; and
- Forming long-term economic partnerships with international counterparts.
Yet, too often the international outreach is not guided by data and a clear decisionmaking process on where to focus resources. Trade mission destinations frequently are driven by the latest emerging market fad or political headline, rather than by which markets make the most sense given local industry strengths. Incoming foreign delegations may be welcomed randomly and without priority, overwhelming the international offices of municipalities and regional economic development organizations with too many visits having low return value. Leaders making the “international relations” decisions are frequently separated from the regional economic development agenda, and thus misaligned with broader efforts to grow businesses.
Map: Metro area participants in the GCI market prioritization pilot, with lead entities
This new Global Cities Initiative (GCI) report offers metropolitan leaders a strategic approach to making these choices. It adapts “market prioritization,” a concept used by private companies to guide international expansion, and applies it to metropolitan economic planning.
Specifically, market prioritization incorporates data analysis, insights from key private and civic stakeholders, and broader market intelligence into a process that aligns local economic priorities with international market trends and opportunities.
By making evidence-based decisions through a consistent, comprehensive market analysis, these methods help identify blind spots in existing strategies and make allocation of economic development resources more accountable.
The report draws on lessons learned from a one-year GCI pilot in which the Brookings Metropolitan Policy Program worked with nine U.S. metro areas to explore market prioritization. It breaks down market prioritization into six action steps:
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the Six steps
Step 1. Organize for action
Market prioritization is a rigorous and time-consuming process. Metro areas must organize a core team and coordinate with other key internal or external advisors. In each team, it is essential to have at least one research lead capable of analyzing large datasets and combining quantitative and qualitative information. Market prioritization ultimately seeks to use limited resources more efficiently for greater return, but metro areas first must invest the human and financial resources required to conduct the analysis.
Step 2. Select a priority specialization
Teams analyze their regional industrial context and select which segments of their economy are best positioned for market prioritization. Priority markets may differ depending on the specific industrial or technological specialization. In this step, metro leaders select a strong sector or economic activity to channel limited resources toward and ensure distinctiveness in a crowded and competitive global marketplace. While it’s critical to address each specialization distinctively, optimally market prioritization would be applied to a few sectors of competitive advantage to identify whether geographic overlaps emerge.
Step 3. Set the goal
Trade and investment planning processes center on intentional programs and activities to support global engagement—export promotion; foreign direct investment attraction (FDI); and international partnerships facilitating exchanges of knowledge, innovation, and talent. Market prioritization targets those activities to subnational geographies based on more granular insights about international markets. However, specific objectives drive those choices. Markets that make sense as export destinations may not offer opportunities for foreign direct investment attraction. Therefore, explicitly stating the goals to be advanced for the specialization also guides the type of foreign market that should be prioritized, and sets metrics for success.
Step 4. Measure global market opportunity within the specialization
With the goals in mind, local leaders use data analysis and qualitative insights from firms and industry experts to identify international counterparts with the highest opportunity for exchange within their target specialization. This step includes assessing foreign market demand, current and potential trading connections, investment relationships, sectoral initiatives, and other commercial links to pinpoint locations that share strong economic similarities, complementarities, or other strategic alignments.
Step 5. Factor in market accessibility
Economic development organizations must practically ensure that the ease and cost of accessing prioritized markets aligns with their own capacity. Metro leaders should assess a host of connectivity factors to determine a market’s broader accessibility. The cost of building and maintaining a relationship with a foreign location depends on various factors, including but not limited to national and global economic trends, regulation, distance, business norms, culture, language, and awareness or visibility.
Step 6. Combine and synthesize data
Once the quantitative and qualitative data have been gathered, core teams must pull together the findings into a cohesive structure that leads to actionable decisions on priorities. There is no universal algorithm that scientifically applies to every local circumstance, so metro areas can take different approaches to summarize, combine, and weight inputs. However, there are two main options to help organize the analysis: a matrix or a modular methodology. An experienced researcher should take the lead on this critical component, guided by policy considerations of economic development practitioners and stakeholders.
Ultimately, market prioritization should inform the deployment of limited resources and better support economic development goals.
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Footnotes
- James Manyika and others, “Digital globalization: The new era of global flows” (McKinsey Global Institute: 2016), available at www.mckinsey.com/business-functions/digital-mckinsey/our-insights/digital-globalization-the-new-era-of-global-flows.
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