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Where the Action Is (The Wall Street Journal)

Where the Action Is (The Wall Street Journal)
by Emily Maltby, The Wall Street Journal | Aug 22, 2011

Location matters.

It’s a lesson that’s all too easy to forget in a world driven by mobile devices, cloud computing and home offices. There are big benefits to setting up shop in the right spot-especially among lots of peers in the same field.

Just ask sports-gear makers in Ogden, Utah. Or health-care companies in Nashville. Or nanotechnology researchers in Albany, N.Y.

These cities, and others like them across the country, have become hubs for specific industries. Entrepreneurs are moving there and flourishing in the teeth of a bleak economy. The cities, in turn, are nurturing the entrepreneurs by giving them access to funding, mentors and facilities.

All in all, these clusters can be ideal spots for an entrepreneur in the field. Being there means getting access to a much wider range of suppliers, customers, employees and industry experts. What’s more, industry peers are often willing to support each other as they get off the ground, sharing recommendations about staffers, potential sales leads and attractive office space, or giving each other guidance and insight about the industry.

Jeffrey Logsdon can attest to that. Five years ago, he moved his cybersecurity firm from Phoenix to San Antonio-a city that’s seeing a surge in business for companies in the field. Company revenue doubled within three years of the move.

“I’d attribute a lot of our success to the location,” he says. “I think the availability of cybersecurity talent and the low cost of doing business here has helped us. And because there are so many different cybersecurity companies, we have improved each other’s business through partnerships.”

As a hub grows, it brings other benefits to small firms. For one thing, even as businesses cooperate, they challenge each other to innovate-to come up with new ideas that make them stand out from the crowd. “Specialization in a region increases patents, business formation and higher wages,” says Rich Bryden, director of information products at Harvard Business School, who’s working with a team mapping industry hubs in the U.S.

When businesses come together, they also catch the eye of big players with deep pockets-especially beneficial when the economy is weak and financing is limited.

“It’s easier to be on the radar for investors when you’re part of a critical mass,” says John Fernandez, assistant secretary of commerce for economic development at the U.S. Economic Development Administration.

Hubs also catch the eye of government, says Dan Carol, senior fellow at the New Policy Institute think tank in Washington, D.C. A concentration of small firms in the same field is more likely to be recognized on the municipal level, where funding programs and policies can be created to stimulate their growth.

Here’s a look at seven up-and-coming innovative centers. All have solid partnerships between the public and private sectors, a growing work force to fuel the industry and long-term strategies for development. And entrepreneurs say being there is vital to their success.

Early last year, the federal government passed legislation calling for a host of health-care reforms. And Nashville is poised to benefit from the overhaul.

There are more than 250 health-care companies in the city, and their numbers are rising. Employment in nursing, hospital and ambulatory services jumped 16% between 2004 and 2008, for instance. That, in turn, provides fertile ground for companies that create medical devices and patient-care systems.

The entrepreneurial spirit “is infectious,” says Leon Dowling, founder and chief executive of IMI Health Inc., which collects and organizes health records to give insight into the best patient-care practices. “Within 10 miles of my office, I can have more potential clients than any other city in America.”

Last August, the city launched an entrepreneur center to spur innovation; two-thirds of the firms that have sought mentoring and financing are related to health care. State programs have also helped propel the industry. Recently, some $180 million in public funds has been made available to burgeoning firms.

It’s an attractive spot for entrepreneurs like Stephen Hau, president and chief executive of Shareable Ink Corp. The company, whose digital pen records doctors’ notes and transfers them to an electronic format, launched nearly three years ago in Boston and established a presence in Nashville last year. Today, 60% of the company is in Nashville.

“The community here is so well versed in health care that it keeps us plugged in to the key issues and how to resolve them,” says Mr. Hau. “And in terms of the investment community today, people are careful about where they place their bets. Being here, [investors] see we are aligned with thought leaders.”

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