David Deeds’ research ranking IPOs by metropolitan region has uncovered a number of surprises. But the one that seems to bother him the most is how much more successful the Minneapolis/St. Paul area has been than similarly situated Northeast Ohio in producing new public companies.
According to his research, in the period between 1988 and 1996, the Minneapolis/St. Paul metro region produced more than 150 initial public offerings, while Cleveland had just 32. This yawning gap is striking, since the two regional economies seem otherwise to be so similar. Moreover, the hoary Rust Belt excuse doesn’t explain the disparity, since Minneapolis’s weather is even colder than Cleveland’s, and its economy isn’t much older and thus more mature.
“Someone has yet to give me a reason as to why we can’t do it if they can,” he says. “It’s hard to say that Minneapolis has some great endowment that we don’t … we have equivalent infrastructure. I’ll put the Case (CWRU) research up against the University of Minnesota, or the Cleveland Clinic up against the Mayo Clinic” as catalysts for new commercial ventures.
Struggling to account for the stark difference in the numbers, he wonders aloud if it could be attributed to the role played by giant consumer products such as 3M or Medtronics (a large Minneapolis-based medical instruments company) in spinning off new companies. “Maybe it’s the Mayo Clinic,” he adds, nevertheless sounding doubtful.
In addition to the yawning gap in the total numbers of IPOs between the two areas, it’s the fact that Minneapolis has them in interesting categories that most troubles him. Minneapolis had 22 IPOs in the business services sector, for instance, while Cleveland hadn’t any. And in the business category of “measuring, analyzing and controlling instruments,” Cleveland had but a single IPO in that nine-year span to Minneapolis’ 21.
For now, at least, the metropolitan mystery will probably have to remain unanswered. But Deeds hopes to shed additional light on the Cleveland-Minneapolis anomaly by delving further into the particular histories of the various newly public companies, with the aid of a research assistant.
These “business genealogies,” as he calls them, will explore the background of the founders and trace the route they took to becoming established. All this documentation should help him move closer to a real explanation for the sharp regional disparity.
What it won’t do, of course, is help close it.
