State seeks a few good giants After Fleet and Gillette, local corporate titans are scarce

The Globe 100 is meant to celebrate Massachusetts' biggest companies. But lately, Massachusetts has been mourning the loss of some of its corporate giants.

John Hancock Financial Services Inc., FleetBoston Financial Corp., and Gillette Co. have all been bought by out-of-town suitors, a development that has triggered a great deal of angst and soul-searching about the future.

''It has left people confused about where we will be in five or 10 years," said William Guenther, president of Mass Insight Corp., a Boston research firm.

When Associated Industries of Massachusetts, the state's biggest business lobby, polled its members on the issue recently, the results were clear: More than 70 percent of the business people surveyed said the conversion of big locally based companies into divisions of out-of-state companies was negative for the economy and the community.

John Hancock is now part of Manulife Financial Corp. of Toronto, Fleet has been absorbed by Bank of America Corp. of Charlotte, N.C., and Gillette's takeover by Cincinnati-based Procter & Gamble Co. is pending.

Some reasons for concern: The giants employ thousands and occupy large chunks of downtown Boston office space. Their top executives sit on the boards of important nonprofit institutions. Their employees contribute to local charities.

And, let's face it, people in the Hub of the Universe don't like to think of themselves as answering to Charlotte or Cincinnati.

Historically, big companies have also produced spinoffs, some of which grew to be substantial companies of their own.

Computer giant Digital Equipment Corp. gave birth to Data General Corp. The consulting firm Arthur D. Little spawned Boston Consulting Group, which in turn, produced Bain & Co. and Bain Capital. Thomas Lee, arguably Boston's most successful private equity specialist, once worked at Bank of Boston (later Fleet, today Bank of America).

All of which gives rise to two key questions:

Which of today's local companies might grow into giants?

And how critical is it to have giants in the first place?

Over the past few years, a handful of Massachusetts' major companies have experienced dramatic growth. Boston Scientific Corp. doubled its sales between 2001 and 2004, thanks, in part, to the introduction of its drug-coated stent for heart patients. Two biotech companies, Genzyme Corp. and Biogen Idec Inc., also doubled their sales with the help of key acquisitions. In the retail field, Staples Inc. and TJX Cos. have expanded at a solid clip, despite formidable competition.

''There is nothing in the water here that prevents us from growing some big new companies," Guenther said.

But if you ask business specialists about who might join the ranks of the big players, you don't get a lot of nominees.

''I wish I could say I saw them on the horizon, but I don't see them yet," said William McCall, president of the real estate firm McCall & Almy.

Venture capitalist Howard Anderson would not identify a single local technology company as a potential future giant. Massachusetts has not produced an electronics powerhouse, Anderson said, since EMC Corp., a Hopkinton computer storage firm that mushroomed in the 1990s.

Boston's biotechnology cluster may yet produce some big winners, analysts say, but predicting which company and which drug will emerge from the pack is nearly impossible.

However, before you get depressed, consider this: It is not at all clear that economies need to stand on the shoulders of giants.

Last month, Fortune magazine came out with its annual ranking of the nation's 500 biggest companies. Massachusetts has 11 of them, the same as Missouri.

Both Ohio and Michigan have far more Fortune 500 headquarters, 30 and 22, respectively. Yet the two Midwestern states ranked dead last among the 50 for job growth last year. Massachusetts was 43d.

At the other end of the scale, Nevada and Arizona are big job producers, yet each is home to just three Fortune 500 companies. Clearly, there are other ways to grow.

There are also other ways to attract large companies. In March, International Business Machines Corp., which certainly qualifies as a giant, acquired Ascential Software Corp. of Westborough. IBM had previously acquired three other Massachusetts software firms. IBM now has about 6,000 employees in Greater Boston, though IBM is not officially a Massachusetts company.

In biotechnology, the pattern has been similar. Novartis AG, the Swiss drug firm, moved its world research headquarters to Cambridge two years ago. Merck & Co., another pharmaceutical giant, recently occupied a new research facility in Boston. Amgen Inc., Pfizer Inc., and Schering AG have established research operations in the Boston area.

The drug companies are here for the same reason IBM is here: to tap into the brainpower that has long been the source of strength in the Bay State economy. Universities like Massachusetts Institute of Technology and Harvard still attract smart people from all over the world, and some of those people go out and start local companies. It happens most often in technology, but not only in technology. It's not a total coincidence that Thomas Stemberg started Staples in Brighton after graduating from Harvard Business School in nearby Allston.

Many local start-ups will eventually be acquired by bigger companies, often from out of state. But that is not necessarily something to worry about. When IBM bought Ascential, Judith S. Hurwitz, who runs a technology research firm in Waltham, observed that ''Massachusetts is a hotbed of innovation. If Massachusetts companies weren't being acquired, that would be a problem."

In the end, what matters is how many jobs and how many good jobs Massachusetts has. For now, even with an economy that's not as strong as anyone would like, Massachusetts still has the second-highest average personal income of any state, lagging only behind Connecticut.

Whether the good jobs of the future come from big companies or little companies, local companies or companies from elsewhere, isn't all that crucial.

Charles Stein can be reached at stein@globe.com.