Minnesota’s Magic Touch

A public-private alliance creates jobs and high-tech companies

As money and manpower continue to rush toward the Sunbelt, Minnesota would seem to be left out. The North Star State, however, has been striving to avoid that danger. Minnesota is currently breeding new high-technology enterprises at a rate rarely seen outside California’s Silicon Valley. That performance, moreover, has helped Minnesota make a vigorous rebound from the recent recession despite continuing problems in the state’s farm sector. In just one year, the jobless rolls in the Minneapolis-St. Paul area have shrunk by more than a third, from 93,800 last spring to 60,600 today. Why all this in Minnesota?

The state’s secret has been a unique coalition of public and private interests that have come together to create jobs. Leaders from such diverse fields as business, government, labor and education have teamed up in ventures ranging from keeping the Twins baseball team in Minnesota to trimming state income taxes. Their cooperative spirit has been winning admirers far beyond the state’s borders. Among them is William Ouchi, author of the 1981 bestselling management guide Theory Z. In a new book, The M-Form Society, Ouchi calls Minnesota’s brand of public-private teamwork a model for regaining America’s competitive edge. Writes he: “Minneapolis has done what many other American cities now hope to duplicate: it has succeeded at developing one new major industry after another, thus continuing to provide jobs, growth and prosperity for its citizens.”

A prominent leader in the drive to create companies has been William Norris, chairman of Minneapolis-based Control Data. Under Norris, 72, the computer firm has helped sponsor a torrent of projects with names like the Minnesota Cooperation Office and Minnesota Wellspring. The latter, whose varied membership includes business and government officials, two years ago persuaded state lawmakers to give tax breaks to big companies that sell, license or lease technology to small ones. Among the beneficiaries of Control Data aid has been Multi-Arc Vacuum Systems, a St. Paul marketer of an advanced coating process that doubles the life of industrial tools. “We’re doers,” Norris says.

Those intent on spurring Minnesota business include Democratic-Farmer-Labor Governor Rudy Perpich. A former dentist who lost his initial bid for a second term in 1978, Perpich spent the next 3½ years as a Control Data trade representative in Vienna. As a result, he recalls, “I decided that I was going to spend my time developing markets.” His resolve stiffened by a flight of new plants to the Sunbelt and to low-tax neighbors North Dakota and South Dakota, Perpich has sponsored some 20 business missions abroad since he returned to office at the start of 1983 and has begun an ambitious effort to finance exports.

Closer to home, Perpich is beefing up Minnesota’s already booming medical and biotechnology industry, which now numbers some 150 firms. To spur growth further, Minnesota last February set up an Office of Medical/Biotechnology and Health Care, whose functions include attracting capital from other regions.

Minneapolis leaders are also busily courting new business. The city has joined the University of Minnesota in setting up a new “hightechnology corridor” that will house research and development facilities on 70 acres of now sparsely used land. The purpose is to spawn new small-and medium-size firms that will go on to open plants around the state.

The university is also encouraging its faculty members to start their own companies. Last year the university put up $100,000 to help Mechanical Engineering Professor J. Edward Anderson patent his dream: a computerized transit system consisting of cars running on an elevated track. Says Richard Gehring, president of Automated Transportation Systems, a new firm that will develop the equipment:

“If all we build is 50 miles of rail a year, that’s $500 million.”

But not all of Minnesota’s corporate leaders are pleased with its business cli mate. Earlier this year 3M, the largest Minnesota manufacturer, declared that it will build a major research center outside Austin, Texas, and move two divisions to the area. Among the reasons was 3M’s anger over a Minnesota law making firms liable for virtually all problems at the hazardous-waste sites they use.

The 3M defection sparked a renewed debate over Minnesota’s hospitality to its corporate citizens. One frequent target of attack has been the state’s personal in come tax, which is among the highest in the U.S. Bowing to the criticism, including intense lobbying by a group of 50 chief executive officers known as the Minnesota Business Partnership, state lawmakers in April repealed an income tax sur charge that had helped to turn an estimated $652 million 1982 budget deficit into a $900 million surplus.

To Governor Perpich, that repeal is one more sign of his state’s eagerness to promote business. Not only will Minnesota remain a fertile breeding ground for new ventures, he asserts, but it will soon start attracting firms from other states.

“We’re working together now,” says he.

“Companies are going to come here. I see that clearly.”

— By John Greenwald. Reported by J. Madeleine Nash/Minneapolis