The building blocks for an economic revival
Southwest Virginia seeks small, new-technology companies to replace lost factory jobs

by Rod Belcher
for Virginia Business
September 2006

What’s a few hundred jobs in Pulaski? Maybe the shape of things to come for Southwest Virginia.

James Hardie Building Products, a leading manufacturer of fiber-cement siding used in home and office construction, recently opened first Virginia plant in Pulaski, creating more than 200 jobs. “It didn’t get a lot of media buzz at the time” that plans for the $98 million plant were announced, says Aric Bopp, executive director of the New River Valley Economic Development Alliance. “But it is significant.”

Southwest Virginia’s economy has taken some hard hits in recent years. The slow, decade-long erosion of its manufacturers resulted in the closing of several plants. In the past year, for example, Valleydale Foods closed its pork processing plant in Salem, eliminating 344 jobs, while Hooker Furniture Corp. announced plans to shut down its Roanoke manufacturing facility, which employed 275 workers.

Overall, manufacturing jobs in Southwest Virginia declined 19.4 percent from 2000 to 2004 compared with a 12.9 percent decline for the rest of the state and a 12.9 percent decrease for the United States. The last two years have seen a 7 percent rise in manufacturing jobs, but that increase has yet to offset the losses of the early part of the decade.

Bopp and other economic development officials in the Roanoke-New River Valley area see the James Hardie plant as a major building block in a new foundation for the region’s economy. “We’re looking at smaller, new-technology businesses that are not as labor-intensive,” says Bopp. “They may employ a few hundred people, instead of thousands.

“ It takes a lot of businesses like that to make up the loss of one big manufacturer, but these are good paying and, hopefully, recession-proof jobs,” he says “It isn’t as labor-intensive an industry as textiles or furniture, but these jobs are not going to end up going overseas. They’re stable, and you can build a community around them.”

The loss of blue-collar jobs has been softened by the growth of other industries that are building on the area’s strengths. Roanoke, for example, was created in the 19th century as a railroad town, but today the city and neighboring county are best known as a center for financial and medical services. “Roanoke provides three services for the rest of Southwest Virginia,” says William F. Mezger, chief economist for the Virginia Employment Commission. “It’s a major cluster of health care for western Virginia, it’s a center for private education with Hollins University and Roanoke College, and finally it is a center for finance and trade industries for the region.”

New biomedical and biotechnology companies have emerged that capitalize on the area’s medical and financial expertise. “You’ve got Novozymes Biologicals in Roanoke County’s Center for Research & Technology,” says Wayne Strickland, executive director of the Roanoke Valley-Alleghany Regional Commission. “You have Luna Innovations, Tecton Products and the Carilion Biomedical Institute. Biotechnology is a growing cluster for us.”

The growth of this sector can be seen at the Carilion Biomedical Institute (CBI), a joint effort involving Carilion Health System, the University of Virginia and Virginia Tech. One of CBI’s primary aims is to commercialize products and services resulting from university research.

Carilion is developing a 27-acre business and research park called Riverside Center in the city of Roanoke. Its first building will house a new CBI headquarters. Plans also have been announced to build a Cambria Suites hotel in the development.

Riverside Center is part of a larger brownfield being redeveloped into a technology park by the city and the Roanoke Development and Housing Authority.

Virginia Tech’s presence in the region is a major factor in the growth of its technology-based companies. “If you look at these industries, most of them lead back to Virginia Tech and the research being done there,” says Phil Sparks, executive director of the Roanoke Valley Economic Development Partnership. “It’s a huge engine for growth and development in the region.”

And Tech wants to enhance that role, says Ted Settle, the university’s director of the Office of Economic Development. “The reason why that is important to the community is that roughly every million dollars spent in research here translates into about 30 to 35 good, well-paying and stable jobs. Research is a driver of economic development. It’s not the only one, but it is a major factor.”

Settle points to many Tech projects in the region that could have a significant effect on the economy. “There is Tech and Carilion’s joint effort at Riverside Center in Roanoke,” he says. “Then there is the Corporate Research Center, located on the Tech campuses.”

The Corporate Research Center is a research park that houses 120 high-tech companies. “Businesses come to Blacksburg because of cutting-edge IT and communications technology,” Settle says. “Part of it is scenery, and part of it is a stimulating work environment.”

He says that Tech is looking at ways to bring more of its research to the marketplace. “The university’s interest and attention is on economic development more so now than in some time,” he says.

Tech officials, for example, are considering branching into energy research. Another idea is to allow Tech professors to take entrepreneurial leave to develop pet research projects into viable business models. “It’s considered acceptable for a teacher to take a year or two off to go write a book,” Settle says. “This would let a professor take a leave from his teaching duties to go start a business and develop an idea into something you can take to the marketplace.”

While biotechnology and research promise new opportunities, one of the region’s oldest industries may revive its role as a transportation hub. Norfolk Southern Corp. is considering Elliston, near the Montgomery County-Roanoke County line, as the site for an intermodal terminal.

Scheduled to be open by 2010, the $18 million terminal would be used as a transfer point where cargo coming by rail from Hampton Roads could be placed on trucks. The terminal is part of the $251 million Heartland Corridor project designed to allow trains to traverse a more direct route between Hampton Roads and points as far north as Ohio and Illinois.

Bopp notes that a much larger intermodal facility has operated in Front Royal for many years. “It created $600 million in surrounding investments,” he says “If we see a fraction of that it will have an enormous impact on the region.” Bopp says he has already been approached by several companies scouting the area for potential sites near the terminal.

Also contributing to the region’s efforts to become a transportation hub has been the federal designation of the New River Valley Airport in Dublin as a customs port of entry.

The designation will allow manufacturers and other businesses to have their products and materials cleared through customs at the airport rather than going through congested, high-volume ports at other East Coast sites. Tie-ups at those ports can cause delays in production and distribution. “It will be a big benefit to businesses that rely on transporting raw materials for manufacturing,” explains Bopp. “With the federal government stepping in to oversee it, it adds legitimacy to our region and shows we’ve got the businesses and traffic to warrant a federal port.”

Officials hope that the combination of new industries and transportation facilities will help boost the region’s growth rate. Currently, the region’s economy is expanding at an annual rate of 0.4 percent. “That’s pretty stable,” Strickland says. “But what we’ve got to do is push our growth rate. I’d like to see us at 1 to 1.2 percent growth.”

But economic officials don’t want to sacrifice stability for a roller-coaster economy of booms and busts. That’s why they believe that a strategy emphasizing smaller companies attuned to the global economy is the best course.

“That’s our focus,” Bopp says. “Globalization; the world is flat. The sad reality of the U.S. economy is that labor-intensive industries and businesses are going to go overseas. These days, local industries that employ a thousand or more people are few and far between.”