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The inner city-debilitated by poverty and sometimes torn by violence-is also a land of opportunity where millionaires are made. So says Michael E. Porter, whose books on competitive strategy are required reading in most business schools. Porter believes that, nurtured properly, certain businesses can take advantage of inner-city locations and so become the key to urban revitalization. "A new breed of professionally managed major businesses will attract spending power and recycle capital within the community,'' he has written. His "economic'' model of inner-city development focuses on the private sector and depends on larger, mainstream businesses that are already profitable and can be integrated into the regional economy.

If this model is to succeed, Porter acknowledges, certain myths about the inner city must be overcome. For one thing, he says, inner-city residents are not a lazy, untrustworthy work force; they are eager to work and actually have a lower turnover rate than suburban workers. Nor are the only entrepreneurial opportunities in the urban core illegal; Porter cites many thriving minority-owned businesses. Finally, and most pervasive, is the myth that there is no viable inner-city market. In fact, he says, urban markets have huge buying power and are often unserved. As a nearby example, he cites the untapped potential of Boston's Longwood medical area. The whole complex of hospitals and research labs has tremendous demand for laundry services, laboratory equipment, maintenance, and other services that are now supplied by suburban vendors or in-house workers.

Porter recognizes several real disadvantages to doing business on the urban frontier. Vacant, developable land is often held in scattered parcels or is polluted by previous industry. Building costs are steep and water and electric rates are often higher than in the suburbs.

But he argues that past government approaches to overcoming these obstacles have often been misguided. Tax credits intended to attract businesses to the city don't work if there is no inherent competitive reason for the enterprise to be there. For example, government subsidies lured Digital Equipment Corporation to establish a plant in Boston's inner city in the early 1980s. Since the location "offered no advantages to the business-indeed the facility faced disadvantages-the plant was an early target for closure when times got tough,'' Porter has written.

Government efforts should instead be targeted at the specific problems facing inner-city businesses, he says. Burdensome regulations should be streamlined. Government can also play a positive role in assembling parcels of property for inner-city development and subsidizing site preparation work-but the property itself should be sold or leased at market rates. And government could invest in infrastructure improvements-roads and highway exits, for instance-that strengthen urban areas' locational advantages. Porter also advocates reducing capital-gains taxes for those who invest in the inner city.

Turning from policy to practice, the Porter-inspired Initiative for a Competitive Inner City (ICIC) aims to offer a private- sector boost to urban business. ICIC's co-directors, Whitney R. Tilson '89, M.B.A. '94, and Barbara Paige, have extensive experience analyzing the inner-city business environment. Tilson, who works out of a Brooklyn satellite office, was a member of Porter's original research team on inner cities and previously worked for the Boston Consulting Group. Paige, a former White House Fellow, worked previously as an investment specialist for Teachers Insurance and Annuity Association, the nation's largest private pension system.

From an office near the business school campus, Paige oversees the teams of students and corporate executives who assist growing businesses. Although the executive advisory service is only just getting off the ground, Paige said she hopes ICIC's corporate advisers will eventually go beyond providing financial or technical expertise to inner-city businesses and will engage them as suppliers or customers. "Probably the most exciting resource," she said, "is the business community itself."

ICIC has encountered some growing pains. As more business schools were added and students from different schools were mixed together on consulting teams, the two-person staff was overextended, so "a number of teams just did not do that well" in the second year, Paige said. "Now things have improved dramatically.'' The nonprofit organization has also conducted some rigorous self-examination. "We have a very open relationship with client companies. It hasn't been a love-fest," Paige said. "But what came out in the evaluation was that, throughout the three years and even with the fundamental limited capacity of a student-run program, we still have been able to add a lot of tangible value to our client companies."

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