Pasadena Star News
By: Cynthia Kurtz
Posted: 7/02/2014
Do you know your LQ? Maybe we should start with the basics. Do you know what an LQ is? Losing Quarter? No. Last Quartermaster? Nice try James Bond fans but the LQ I am talking about stands for "Location Quotient."
Location Quotient is a relatively new economic term. It refers to the concept of determining what types of industries are concentrated within a city, region or state's boundaries. The study - often referred to as a cluster study - was developed at the Institute of Strategy and Competitiveness, Harvard Business School, by Professor Michael Porter.
The Los Angeles Economic Development Corporation (LAEDC) has adopted the principle and has analyzed the industry clusters in Los Angeles County. The San Gabriel Valley Economic Partnership thought this work was so important that we asked LAEDC to do a similar study for the San Gabriel Valley.
The concepts behind cluster analysis are simple. First, determine the amount of employment by economic sectors in the study region and compare it with the employment in another region or the state.
If the amount of SGV employment in a certain sector equals 10 per cent but only five percent of the state employment is in that sector, the SGV's LQ is 2. Any LQ over 1 means there is a "concentration" of employment in that sector.
Next, you look to see if the sectors in which your region has a concentration of employment are adding or losing jobs. It may be that a region has an area of concentration but that industry is losing jobs. In these cases the concentration will more than likely be short lived.
Finally, you check for the industries that are producing products or services that are serving a wider area than just your region. These are the industries that are bringing new dollars into the region and generating the region's economic growth.
We know the largest employment sectors in the SGV. But the "cluster study" allowed us to determine which ones were gaining jobs and increasing the region's overall wealth.
The results are very interesting. For example, cutting edge hospitals like City of Hope are growing strongly. Food production and specialty food stores enjoy strong growth.
There are a number of manufacturing areas that are concentrated here and growing. These include metal products; electrical equipment; spring and wire products; and resin, rubber, and artificial fibers. All these products are used in the aerospace industry and aerospace enjoys one of the highest LQs in Los Angeles County.
Why am I so excited about this information? It is vital information to assist cities and the Partnership in focusing our business attraction and retention efforts. It can assist schools, colleges and universities in developing the training needed for the SGV's future workforce.
No region controls its future. But the more we understand the trends creating the future, the more able we will be achieving the future we desire.
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