Teaching Tip: Texas Has Location, Location, Location

Of our 100’s of blogs over the past year, the second most widely read one has been on why firms choose to locate in Louisville.  (The first is on “Bottlenecks in Intensive Care Units“). But The Wall Street Journal (Aug.22, 2011) tells why Texas is giving Louisville and Kentucky  a run for their money.  Here are some advantages that other states would be hard to match: convenient location in the middle of the country, transportation hubs, a big bilingual population, mild winters, and abundant space. And as Texas’ governor (who is running for President) trumpets: “no personal income taxes, relatively light regulation, laws that restrict labor unions’ power, and a welcoming attitude that eases the transition”.

“When you put it all together in its totality…that’s what made Texas stand out”, adds the GM of Medtronic, whose firm decided to locate its 1,400 job diabetes center in San Antonio. Of the 900 cities the med tech company explored, 3 of the top 5 choices were in Texas. “The state offers short flights to both coasts, a bounty of qualified workers at a reasonable cost, and a team of local and state economic developers to help jumpstart  operations”.

Texas has gained over a million jobs since 2000, while the US has lost 1.3 million in that period. The private health care and private education expanded by 40% in the decade, public education jobs by 24%, and the mining sector by 67%.

The state is unusual in many ways– covering an enormous swath of land, with a huge and growing population that provides both an ample work force and a robust demand for goods and services. When we discuss location decisions in Chapter 8, we see that financial  incentives are often not as critical as a healthy business environment.