October 15, 2008

Economic Development for All Seasons

Ernest Andrade  /  Charleston Digital Corridor

Traditionally economic development organizations have focused on creating a community's wealth by directing a majority of their business recruitment efforts outside the community. These efforts include external marketing campaigns, company visits, attending trade shows and extending invitations to corporate decision makers, journalists and site selection consultants. The behavior of recruiting companies from away is reinforced by media outlets who report with great prominence on the new capital investment and job creation.

Generally, the financial cost, vis-à-vis, tax incentives associated with recruiting companies from outside a community is higher than any other form of business recruitment. Further, it sends a message to the existing business community that they are less important. Statistical data tells us that approximately 80% of all job creation occurs from within the community.

With this in mind, it is important that economic development organizations provide a high level of business support to their existing business community. While communities typically hire outside consultants to provide them with their wisdom about business recruitment strategy, a better quality of actionable intelligence can be gained by speaking with the community's existing businesses; not in group discussions or public forums but private, one-on-one meetings.

If the gathered arsenal of information is acted upon, it will not only strengthen the community's economic base and bolster the existing businesses, but will create a more attractive setting for businesses seeking to relocate. While the current economic climate has caused a dramatic decrease in new company relocation announcements and accompanying headlines, many new businesses are being created in the City of Charleston, South Carolina.

Existing businesses, especially the knowledge based companies, continue to grow and thrive, reinforcing the aforementioned statistic on job creation. Now more than ever, economic development organizations need to utilize their resources to provide value-added services to support their business constituents and less time and resources chasing companies that are unlikely to relocate their business operations.

However, an exception does exist – foreign companies are increasingly seeking to take advantage of the weaker, but currently strengthening, US dollar to expand into new markets. Although State economic development organizations are often better equipped to capture some of the capital investment by large foreign companies, local and regional development initiatives can create opportunity by facilitating expansions by the smaller foreign companies. Local economic development organizations are positioned to best identify technologies that have applicability within their communities and leverage the respective stakeholders/network to build companies with local resources – a win-win for the community.

Tomorrow's successful economic development organizations will be defined as those who acknowledge the changing face of economic development and optimize their financial and staff resources between business recruitment and retention strategy. These efforts should be augmented by the development of technologies into successful businesses using local and regional networks to create value for the community in times of prosperity and in a challenging economic environment.