Raw Material Flows Important to R and D Regional Economics
By: Lance Winslow
Economic development associations need to be extremely careful when recruiting new businesses to their region. For instance if they are recruiting a high-tech firm which will be doing some manufacturing that may need to be cognizant of the supply chain for that particular business and that particular industry.
So often what I see is that an economic development association will come up with a comprehensive plan which spans all industries rather than focusing on which types of businesses have the best chances for success within their region based on the availability of the raw materials and flows of the supply chain; including those support businesses they will need to succeed. Simply recruiting a big high-tech firm with high-paying jobs and providing public monies for expansion of roads, sewers and energy sources is not enough.
Certainly all those things are needed and considered “must have” and all those items are on the high-tech firms checklist. However, a long-term approach is by far the best policy with strategizing and coming up with the plan for local and regional economic vitality and every economic development association executive needs to be aware of this fact. As I travel United States and having been to every single city with over a population of 10,000 people, and after visiting over 500 economic development associations, I have seen mistakes that did not need to be made.
Securing a large high-tech firm with high-paying jobs is coup for any regional or local economic development association. But it can also become a nightmare. It is much better to make an overall assessment of your region and its capabilities prior to the sending out of any letters, hiring of any industry specialists recruiters or determining how much you will be willing to give away at the negotiating table to compete for that high-tech firm’s choice of your region over another.
If raw materials and the business support structures are not currently in place, then the company is likely to demand more in tax incentives in order to build their own supply chain or pay for the distribution and transportation of those products they need in their manufacturing process to make it all work.
Now then, if you are competing against another region which housed the proper supply chain you will find yourself giving away much more in tax incentives, financial assistance and infrastructure upgrades than your competing economic development company who so very much wishes to recruit that same high-tech company. Consider this in 2006.
Lance Winslow