Back in early 2002, when virtually no one in the local high-tech community was hiring, Gerry Perkel was. The CEO of software company Merant was filling a few thousand square feet of generic Hillsboro office space with engineers, programmers, salespeople and secretaries. Business was brisk for the company's sophisticated change-management software, used in everything from Lockheed Martin's Joint Strike Fighter program to Toshiba's software development.

Because of a corporate ownership shuffle, Merant, which had been based in London with operations in Oregon and several other U.S. cities, was looking for a new home. Management seriously considered the Silicon Valley and the Silicon Forest, and chose the latter for its 250-person HQ.

"We were able to assemble a team of very capable people very quickly in IT, finance, law, HR, engineering, product marketing," says Perkel. Why did Oregon compare favorably to California, where there's even more high-tech talent hungry for work? Perkel says it comes down to quality of life: a K-12 public education system that, while showing cracks, still looks better than what many California cities have to offer; affordable housing; and easy access to the great outdoors.

The problem is, new recruits like Merant are going to be few and far between. "There has got to be a reason, or some pain, driving a company to relocate," says Perkel. And sometimes that pain is strictly financial, meaning that Oregon, with relatively paltry state and local tax incentives to offer, is at a distinct disadvantage. Which is why mostly what's in the news these days is recruitment defeats -- companies such as Louisiana Pacific leaving for cheaper venues with less stringent and costly environmental and land-use regulation and sky-high financial incentives.

There's a growing consensus across the economic development community -- from business association leaders, to officials of the Portland Development Commission (PDC) and Oregon Economic and Community Development Department (OECDD) -- that the recruitment successes of the future will be employers of dozens, not hundreds, in niche industries where Oregon already has considerable critical mass and cutting-edge R&D. "In high tech we have advantages with Linux, wireless, multi-scale microdevices and nanotech," says OECDD director Marty Brantley. "In agriculture we have niches where there's pretty good infrastructure and market expertise."

Bottom line: It's a pipe dream to think we'll get Intel, Hewlett-Packard, Applied Materials, GE or a host of other major corporations to make Oregon their primary home, though we're in the serious running for those companies to extend their operations here, because what they already do here is doing well. Even another Merant is a long shot, though Oregon will remain attractive to up-and-coming high-tech firms for the same reasons Merant came on board -- work force and a great place for that work force to live.

"I don't believe Oregon is well served to try and hit a home run with the large companies," says Karla Chambers, who owns a big farming operation in the Willamette Valley and chairs the San Francisco Federal Reserve Bank's Portland branch. "We should target the mid-sized and smaller players that bring our economy great diversity, strength and protection from the cycles that we can't seem to avoid in this state."

The question now is: Which companies should we target and what should we be doing to get them here? And should we be going after any company that fits into an emerging industry cluster in Oregon, or concentrate our recruitment efforts on businesses that follow a sustainable, progressive philosophy as well?

OREGON APPEARS FuRTHER ALONG in determining who to recruit than how to recruit. Until recently, the state hasn't had the elected officials or public-private partnerships in place to mount a high-profile, coordinated campaign to land specific companies or even boost specific sectors. (The clear exception is in semiconductors, which got a huge assist from the state's Strategic Investment Program over the past two decades, especially in Washington County.)

For one thing, until recently the economy was too good. In the '90s growth seemed to be falling in the state's lap. Former Gov. John Kitzhaber and his top economic development officials weren't out pounding the pavement. And no one was tapping senior executives of local companies to recruit their out-of-state counterparts to set up shop in Oregon -- the kind of full-court press that so impressed Louisiana Pacific's top brass when they made their decision in October to move the company HQ to Nashville.

But many now agree there's a new wind blowing from Salem. Gov. Kulongoski -- who has dubbed himself the state's "top marketing officer" -- called on Intel and other key players in Silicon Valley immediately after he was elected to ask what he could do for them. He sent recruitment letters to 250 small and medium-sized California companies in October inviting them to take a look at Oregon. He recently traveled to Germany to prospect for new business with the likes of Daimler-Chrysler and Wacker-Chemie, which now have a direct air link to Oregon (the flights are packed), thanks to Lufthansa.

"The landscape has changed," says Portland real estate executive Jim Mark who, along with Mike Michael, US Bank's top executive in Oregon, is leading a new private sector marketing and recuitment campaign. "The right people are in place -- Jack Isselman and Marty Brantley at OECDD, Don Mazziotti at PDC, Bill Wyatt at the port. Our timing couldn't be better."

Neither Mark nor anyone at PDC or OECDD will offer a specific list of recruitment targets, for fear of jinxing ongoing efforts (see naming names). Still, it's clear what kinds of companies are on the radar. There's sure to be tweaking around the margins (and sniping from those left out), but basically, a consensus has coalesced around a handful of economic sectors that have the most strength in the region and can take advantage of local university research. They include: bioscience, especially medical devices that rely on specialized metal fabrication and advanced microchips; semiconductors and software, including biomedical informatics and Linux-based open source applications; sports apparel and equipment, especially where that overlaps with chip design (for instance, running jackets that monitor body temperature or skis that adjust to snow conditions); transportation equipment; recreational vehicles from aluminum boats to high-tech bikes; and sustainable industries, especially alternative energy, natural foods and green building.

SO, HOW DOES RECRUITMENT within these sectors actually happen? Some companies come knocking on our door. PDC economic development director Marty Harris says state or local officials refer companies that are considering locating in Oregon to help them find an appropriate site (difficult if they need more than 50 acres of ready-to-build, uncontaminated industrial land). Or, companies may want to know what incentives and tax breaks they'd get for capital investment and work force training (not much, unless they're locating in one of 50 or so designated enterprise zones, some set aside specifically for e-commerce). "Other areas of the country are more incentive-rich than we are," says Harris, pointing out that in Portland metro, only 13% of the land is covered by an urban renewal area where significant tax incentives can be offered. "Our tools are not adequate," she continues, "but they're better than they've ever been."

A more proactive recruitment strategy is now emerging from the self-organization that's gone on around industrial clusters. For instance, the Oregon Bioscience Association is evaluating the strengths and synergies of local companies and research universities. OBA co-chair Anne Bunnenberg, CEO of Electrical Geodesics in Eugene, says the group has realized that "our ability to sustain steady transport toward Asia and our competitive manufacturing costs are critical."

Another example is in agriculture. Karla Chambers has urged the state Department of Agriculture to target California's top 20 natural food processors for recruitment and not bother with processors of bulk commodities. "With such high workers' compensation, water and electricity rates in California, Oregon suddenly looks attractive." But, she warns, Oregon will have to act quickly -- Nevada, Utah and Idaho also see California as a land of opportunity, and they have lower business costs and bigger incentives to offer potential recruits.

In the end, says Harris, it comes down to networking. "In bioscience, for instance, we hire a consultant, interview people in business, people at OHSU. We list a few companies that existing businesses would want to be near because of the supply chain, intellectual capital, employee base. Then we ask who knows someone there, so it's not a cold call."

Jim Mark's Campaign for Oregon, meanwhile, will be a surgical-strike operation -- driven by private sector priorities and money. The organizers plan to raise $5 million to create 35,000 jobs over five years. The effort has gotten the enthusiastic endorsement of the Portland Business Alliance, PDC and OECDD.

The key, says Mark, will be hiring a lead recruiter -- someone with a strong track record in national sales -- to aggressively market Portland and Oregon as a place to move or expand a business. The recruiter will bring top-level Oregon executives to the table to woo out-of-state firms, tapping these local CEOs to help a new recruit line up financing, developable land, regulatory approvals, business services. "The ultimate dream," Mark says, "is a recruitment structure where Oregon business leaders can plug and play."

The effort is most likely to be successful, Mark thinks, with small (30 to 50 employees) to mid-sized companies (50 to 200 employees) that would be attracted by our affordable housing, livable communities and entrepreneurial business culture. Plus, no one else is going after this tier of firms aggressively, which means we wouldn't have to compete as much for their attention.

"Our neighbors to the south are in much worse shape than we are," Mark points out. "Our total tax burden is not as great as it's made out to be, and our tax on manufacturing is at the bottom. Our work force is available and skilled. The young, educated people you build your company on are coming here. The community thoughtfully prepares for the future."

Not everyone agrees that we have all the ingredients for success locked in, though. Dennis Donovan, a global site selector with Grubb & Ellis in New Jersey, says Oregon certainly has its attractions -- including appealing small communities, well-trained workers and a perfect location for accessing West Coast and Asian markets via air, rail, highway and water. But he offers a litany of disadvantages, starting with a "horrendous tax system" that relies too much on income and corporate taxes and too little on consumption taxes.

Then there's Oregon's reputation for being anti-development. "Your permitting is time consuming," Donovan says. "The norm is 30 days. In Oregon 90 to 120 days is considered fast-tracked." Worst of all are laws that put rural land, riverbanks and wetlands off limits for commercial and industrial development. "Oregon will continue to lose business to other places because of land-use rules that seem like socialistic planning to the outside world," he warns. "Oregon's land-use planning laws should be modified to reflect reality."

Don't do it, say progressive business advocates, who argue that Oregon should market its quality of life rather than cut regulations to make the state cut-rate. "For companies that are environmental, sustainable and socially responsible, being from Oregon is like a Good Housekeeping seal of approval," says Eric Friedenwald-Fishman, president of the Metropolitan Group, a strategic communications firm.

Friedenwald-Fishman suggests a set of criteria for seeking new recruits that favors small, progressive, employee-owned or privately held companies not subject to the quarterly profit pressures of Wall Street. Companies landing on Friedenwald-Fishman's wish list wouldn't want the laws that protect the environment and prevent urban sprawl weakened. And they'd be less likely to demand big public subsidies to move to Oregon because they subscribe to a "triple bottom line" philosophy that gives equal weight to financial, environmental and community return on investment. For these companies, he says, "quality of life isn't icing on the cake."

That kind of talk sets Marty Harris' teeth on edge. "There's a perception that this is a beautiful place and that business will pay whatever premium it costs to do business here. That's not true anymore," she says. "If businesses can't reliably get the land they need, the work force they need, permits and utilities -- and at a competitive price -- we won't make the list."

And could we ever find, let alone recruit, enough of these green, progressive, quality-of-life-loving companies to get Oregon out of the unemployment sewer and recover our prosperity?

"Occasionally you get lucky and recruit on quality of life," says Bunnenberg. "But mostly you have to do tight niche analysis. This can't be done from 30,000 feet -- it's a ground game. You grow a niche, expand it. Grow, expand. It's not an emotionally gratifying strategy, but it works."

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Copyright 2003 Oregon Business magazine