Establishing a Regional Comparative Advantage: Business Location Decisions in Semi-Rural Areas

By Falcone, Thomas W.; Wilson, Timothy L. | Competition Forum, July 1, 2006 | Go to article overview

Establishing a Regional Comparative Advantage: Business Location Decisions in Semi-Rural Areas


Falcone, Thomas W., Wilson, Timothy L., Competition Forum


EXECUTIVE SUMMARY

The desirability of having firms locate in a specific area is a pervasive consideration in economic development. Results here indicate that location of industrial (i.e., non-retail and non-construction) businesses in semi-rural areas comes from two streams that can be managed strategically by economic development professionals. One stream is the businesses started by local entrepreneurs. The other stream comes from individuals who relocate their businesses in particular semi-rural areas. A pro-active culture of support contributes to success in both streams. This culture is affected by the county's center for economic operations (CEO), which is described in the paper. This organization has the primary effect of helping firms succeed and flourish. It also has a secondary impact of encouraging independent efforts with their supporters to take the necessary steps toward establishing local businesses. Examples of firms from these streams are given along with services provided to them by entities in the county.

Keywords: Regional Development, Entrepreneurship, Firm Locations, Culture of Cooperation

INTRODUCTION

The desirability of having firms locate in a specific area is a pervasive consideration in economic development. It may be that rural, or semi-rural, areas face a particularly difficult task in attracting new businesses. On the one hand, there is an almost desperate need to create jobs, which implies that a labor force is readily available for new entrants into the area. On the other hand, however, there is the likelihood that the clusters of suppliers (cf. Porter, 1998), facilitators and service industries may need to be developed. Under these circumstances, it is common for locales to offer incentives to attract either new businesses or relocation of existing businesses. Consequently, mobile firms have the opportunity to select from a variety of locations in a rather competitive market for them. In assessing the possibility of locating in various locations, it would seem that certain service needs would have to be met. Thus, potential entrants may be concerned about what assistance may be supplied in developing businesses.

Clearly, local economies tend to ebb and flow. Each community and region faces its own unique set of circumstances regarding economic sustainability and growth, but certain overall conditions prevail. Porter (1998) has addressed the case of inner cities, which are presently in an ebb stage, and suggested they have some competitive advantages and some disadvantages. Strategic location, unmet local demand, human resource availability and integration with regional clusters were seen as inner city advantages. Disadvantages were: discrimination against residents and entrepreneurs, high taxes and utility costs, difficulty in finding affordable insurance, crime, poorly maintained logistical infrastructure, burdensome regulations and permitting requirements, environmental pollution, and a weak educational and training system. The general lesson from Porter, however, is that disadvantages are not economically inevitable. They are the result of old attitudes and decades of ineffective policies and strategies; a sustainable economic base can be created through private, for-profit initiatives. They can be turned around by strategies that focus on strengths and engage the private sector. This change in orientation requires more strategic leadership; a leadership that is more inclusive, more long-run and more adaptive.

Ironically, rural economies tend also to be in an ebb stage, but have just the opposite circumstances. That is, the advantages that inner cities enjoy are disadvantages for rural economies. Likewise disadvantages of inner cities tend to be advantages of rural areas. It would appear, however, that the prescription for enjoining economic health is the same in both cases - they can be turned around by strategies that focus on strengths, overcome weaknesses, and engage the private sector. …

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