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STUDY COMPARES EXPORTS FROM SIX MIDWEST CITIES:
SMALLER CITIES HAD BETTER EXPORT RESULTS
THAN LARGER CITIES IN EARLY 1990s, REPORT SAYS
BLOOMINGTON, Ind. -- While Minneapolis and Cleveland are well known as home bases for multinational manufacturers, in terms of exporting they have trailed smaller cities such as Indianapolis and Milwaukee, whose success has depended on a cadre of key companies that did very well in the early 1990s.
That's one conclusion of a new study by researchers in Indiana University's Kelley School of Business. The study examined exporting by companies in Indianapolis and six other Midwestern cities of comparable size: Cincinnati, Cleveland, Milwaukee, Minneapolis and St. Louis.
Minneapolis was by far the largest exporter of the group, with total 1996 exports of $12.28 billion. Cleveland followed with exports totaling $5.08 billion; St. Louis, $4.5 billion; Indianapolis, $4.01 billion; and Milwaukee, $3.72 billion.
But while Milwaukee and Indianapolis ranked at the bottom of the list in terms of overall exports, they experienced the highest rate of export growth between 1993 and 1996, according to the study done by the Global Business Information Network for the Metropolitan Association for Greater Indianapolis Communities.
Four cities -- Milwaukee, Indianapolis, Cleveland and Minneapolis -- registered higher rates of export growth than the nation as a whole, while rates in St. Louis and Cincinnati grew more slowly.
"Milwaukee was the smallest exporter in the study, yet it was the fastest-growing exporter," notes Lawrence Davidson, GBIN director and IU professor of business economics and public policy. "Its export growth can be attributed to strong performance across the board. Its five largest exporting industries grew faster than the United States' rate."
Exports to eight of Milwaukee's top 10 export destinations grew at a faster rate than the U.S. rate. Overall, Milwaukee led the field of six cities with 59 percent export growth, followed closely by Indianapolis with 53 percent; Cleveland, 42 percent; Minneapolis, 38 percent; St. Louis, 32 percent; and Cincinnati, 23 percent.
"Indianapolis is an inexpensive place to do business," Davidson said. "The city has relatively low indirect labor costs, energy costs, rental rates for office and industrial space, tax rates and living costs."
Like Milwaukee, exports to eight of Indianapolis' top 10 export destinations outpaced those of the nation and four of the Indiana capital's top five industries had greater export growth as well. Indianapolis also had several rising markets for its goods, particularly Brazil, where export growth was 368 percent.
While the news has been good for these two cities, Davidson said their export performance could be adversely affected if these few firms in these few industries have less success.
While its rate of export growth was sixth, Cincinnati joined Indianapolis in having a relatively high rate of exports per manufacturing employee. Indianapolis came in first with $28,476 in exports per employee, and Cincinnati was close behind with $28,309. Following were Minneapolis with $25,571 per employee; Cleveland, $19,550; St. Louis, $17,712; and Milwaukee, $16,629.
"We see here that the two cities with the smallest employment bases have relatively high exports per employee. This could be the result of two things," Davidson said. "First, these cities, through public policy or individual corporate initiative, are more actively pursuing international markets, compared to the other cities.
"Secondly, the industrial base of these cities may naturally be less labor intensive than that of the other cities. As a result, these cities produce more dollars per worker and their exports reflect it."
Cincinnati's exports grew 11 percent more slowly than U.S. exports, mainly because of the poor performance -- a 40 percent decrease -- in machinery/transportation equipment exports to France. France was a market that had accounted for 36 percent of the Cincinnati machinery/transportation equipment industry's total exports. Exports to only six of the city's 10 destinations grew at a rate faster than did the U.S. rate, and exports to two destinations -- France and Turkey -- saw a decline.
Here are results for other cities in the study:
Cleveland is very reliant on export shipments to Canada, which was the leading destination for the city's five largest exporting industries. Exports of machinery led the city's growth, followed by chemicals and transportation equipment to Canada. South Korea was the fastest-growing destination for three of the city's five leading export industries, and overall exports there grew by 288 percent. Chemicals accounted for nearly one quarter of all the city's exports.
Minneapolis was by far the largest exporter in the study. As a result, growth is measured against a high base value, so large growth rates are hard to achieve. The city is dependent on non-manufactured goods for export success -- they account for 40 percent of the city's exports. Shipment of non-manufactured goods paced the city's overall growth, while exports to Japan and the Netherlands grew at a healthy rate. Food products, which accounted for 13 percent of city exports, grew by 5 percent, but at a rate 26 percent slower than the overall U.S. export rate.
St. Louis lagged behind the other cities in most categories, and only three of the city's top 10 export destinations -- Mexico, Australia and Taiwan -- had growth rates higher than the U.S. rate. Two of the city's larger export destinations -- Japan and the United Kingdom -- saw decreases in business. The city's largest exporting industry -- chemicals -- experienced sluggish growth; and two of the industry's largest markets, Belgium and Canada, only grew by 16 percent and 12 percent respectively. The city's export growth was a result of increases in electronics shipments to Mexico and machinery exports to Canada.
One section of the study focused on policies and programs that promote export success and sustainable growth. Community and business leaders in each city were asked to rank and compare the key factors for success. Davidson said in many cases they chose the "actions of specific companies" as the most effective factor.
"In short, these experts agreed with our belief that the business actions of existing firms were critical to export success," he said. "Somewhat surprising was the small weight they attached to the importance of traditional economic development programs relative to business assistance. This may reflect the bias among the experts polled, most of whom are directly involved with international business assistance programs."
The efforts by universities to provide business assistance were not given much credit by the cities, with the exception of Indianapolis. "Compared to other cities, Indianapolis' university programs promoting exports were seen as influential, whereas these programs in other cities ranked at or near the bottom."
(George Vlahakis, Office of Communications and Marketing, 812-855-0846, gvlahaki@indiana.edu)