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The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.
By David J. Robinson
January 23, 2015
Dating back to the 1920s, private sector companies worked together to form economic development organizations. According to Daniel Davies of the Atlanta Federal Reserve Bank, these economic development organizations helped private sector companies further their business development. New York City hired its first economic development staff member in the late 1960s. Today, economic development organizations focus on three core tools: job retention campaigns, job attraction campaigns and promotion of entrepreneurship.
Existing companies produce 80 percent of a region’s new jobs. The economic success of a region starts with a successful existing job retention program. A job retention campaign is referred to as a business retention and expansion program (BR&E). These programs are broken down into multiple phases and are geared toward keeping and developing new jobs from a region’s existing base of companies.
Phase 1 of a BR&E Program is organizing the effort internally within an economic development organization to ensure proper funding and staffing is available. Phase 2 consists of researching the companies that exist in a region, identifying the ones growing and developing a common survey instrument. Phase 3 is meeting with local company executives to gather information using the survey instrument about what issues their company is facing and how local economic development officials can assist their company. Phase 4 is solving any challenges the company identified. Problem-solving helps the company gain access to capital, address a regulatory issue with state government, gain better transportation access or other business and policy issues.
Business attraction campaigns promote a region through marketing to companies likely to have an interest or link to the region. A state or regional economic development marketing plan creates a community message, identifies prospect companies and connects with these prospective companies through a range of methods. The economic development marketing message communicates the strengths of the region and state that appeal to prospective companies. These strengths range from the existence of like industry clusters, to a large workforce pool, to special tax advantages and links to markets.
Once a message is developed, a list of company prospects is created. This is done through an industry cluster analysis that identifies local company strengths and connections to like or similar industries. Local companies are a source for prospective development as they provide introductions to key suppliers and others with an interest to be more closely connected with their business.
Finally, a business attraction campaign launches a marketing campaign geared toward the targeted companies on a regional or state prospect list. An economic development marketing campaign includes:
Business attraction campaigns globally market in the hopes of landing a major FDI project. Finally, business attraction campaigns market and react to corporate site location consultants, who represent big and small companies alike, in their efforts to determine the best location for company expansion projects.
Promoting entrepreneurship is the final tool that economic development organizations use. The explosion of the Information Age caused local and state economic development groups to devote resources to fostering the growth of early stage companies. Local and state economic development efforts spend nearly half their total economic development spending on promoting entrepreneurship.
Successful regional and state entrepreneurship strategies encourage people with ideas to take the risk of starting their own business. Regional and state entrepreneurship programs develop a culture that nurtures and supports these small-business owners. They build capital access, business services and business opportunities for emerging small businesses. Entrepreneurship programs develop venture capital and other access to capital tools essential for the growth of emerging, early stage technology companies. In addition, regional and state entrepreneurship programs create capital access programs for small and minority owned firms that may struggle to gain capital from traditional sources. Business incubators and accelerators create homes for early stage company startups. These facilities provide a low cost real estate option along with business services that many emerging small business need but cannot afford to hire.
Entrepreneurship programs educate local businesses on export and government procurement business opportunities and create “buy local” campaigns to grow local small businesses. These entrepreneurship programs support existing and successful small to mid-sized companies that are growing and moving a region up the economic ladder.
Author: This article is a reprint from Economic Development from the State & Local Perspective, by David J. Robinson, Palgrave-MacMillan, 2014.