We raise the question in Ch. 8 as to why firms choose to locate in one area vs. another—and clearly incentives are one major factor. Today’s Wall Street Journal (Nov.27-28,2010) describes how Utah’s aggressive approach to courting businesses has fueled its high ranking job growth.
Adobe Systems, for example, is setting up a new technology campus there (which hopes one day to create 1,000 new jobs) , after Utah offered $40.2 million in tax credits. Other firms in the article are also mentioned having responded to cash incentives.
But as Jay wrote in his Sept. 23 blog, in the long run, communities are better off investing in honest government, good workers compensation programs, education, and quality of life. Utah seems to recognize this by offering support from local colleges. The U. of Utah, for example, put together 5 new graduate programs in engineering to meet demand in the state’s growing medical devices industry.
Out of state firms say they are impressed with Utah’s pro-business strategy. “More so than any incentives, what makes Utah attractive to businesses is the state’s stable, predictable regulatory and tax environment”, says IM Flash Technology’s CEO. This pretty well agrees with Jay’s assessment. Its not so much the money, its a whole list of other factors that are at least as important.
Discussion questions:
1. Why are some incentives more important than money?
2. Why isn’t every state and county as aggressive as Utah?
3. Provide some examples of situations where financial incentives backfired.