The high rankings awarded to Texas and many Southeastern States do not surprise us. These states tend to feature generally well-organized economic development and work force development efforts and historically lower wages and other costs of doing business. However, while the Fed's most recent "Beige Book" reveals that many of these same states have been able to maintain a moderate pace of growth even as the recovery falters elsewhere, they also tend to levy some of the highest effective tax rates on new investment, which could prove a hindrance if
overall economic conditions remain weak.
When evaluating overall business environment, it is no surprise to see Texas come out on top. The combination
of a very appealing corporate and individual tax structure teamed with excellent transportation infrastructure and
a large deal-closing incentive fund has resulted in tremendous growth throughout the state. In particular, the life sciences and information technology industries continue to build momentum in different areas of the state.
Indiana, ranked fifth in overall business environment, has continued to rise in the rankings during the past several years. The state is leading the Midwest in economic recovery. Changes to its tax structure and incentive programs, along with outstanding transportation infrastructure, have attracted many companies to the state. Despite the current economic conditions, Indiana's automotive sector has remained strong due to the presence of Chrysler, GM, Honda, and Toyota.
Corporate location strategy and site selection is extremely dynamic, business-process dependent, industry-driven, and often subject to political needs that can make us all scratch our heads regarding why a business is located where it is. However, we can with some certainty conclude that all businesses, whether existing or new, small or large, continue to seek locations where they can be profitable and sustainable. The highlighted leading states align well with this success factor.
Clearly the top states for doing business are predominantly in the Southeast and Southern regions of the country. Why? My opinion is that consistency in business development policy and predictability in business climates across multiple critical location factors will always be rewarded and recognized by corporate America no matter the state of the economy, and that is what Texas, Georgia, Alabama, the Carolinas, Tennessee, and some new rising stars such as Indiana and Louisiana continue to strive for.
Many of the states highlighted have new governors and each has gone on record saying that supporting existing business and nurturing small and medium enterprises is their #1 priority in terms of job creation - that also resonates well, as 80 percent of all jobs emerge from these categories of economic activity.
We do have to acknowledge Louisiana and how they have fought their way into the top 10. Governor Jindal and his administration have done an excellent job of developing sound, targeted economic development policy and notably calculated investment in their surging FirstStart program, which has played a determinant role in recent expansion success stories. Alabama's Governor Bentley has taken his small business background and made some marked changes in the state's incentives policies around small business, entrepreneurship, and business retention programs, which is a switch for a state whose economic development mantra has been predominantly business attraction.
One last comment: For the past two years, we have seen a malaise in Corporate America regarding the "war for talent," i.e., that is attracting and retaining talent pools at the highest technical and professional skill sets - for obvious reasons. But the real smart companies know that is not the case; they recognize people will drive innovation and development of new methods and technologies and our overall competitiveness with the world. For this reason, states with deep R&D and engineering talent pools, such Michigan and California, and others that ranked low in the survey, will rise in the results if they can invest wisely in their human capital and physical infrastructure, and implement reasonably friendly business environment policies that are consistent and predictable!
It is striking to see the consistency with which the Southeastern States and Texas appear in these rankings. While the survey methodology is not necessarily scientific, the results are compelling indicators of the consistency with which site selectors and their clients achieve successful project outcomes in these states.
I work predominantly on manufacturing and distribution facility site selection initiatives, and the survey results are consistent with my own experience and my survey responses. When screening the eastern United States for
optimal industrial operating conditions, the Southeastern States are especially competitive due to their attractive energy and labor costs, as well as the availability and cost of land. The region's continued population growth and rail and port infrastructure also create supply-chain advantages for many of our clients. These states' economies have advanced in recent decades such that their labor quality, industry-sector diversification, industrial services,
and training resources are robust complements to their competitive structural costs. Furthermore, it is no coincidence that these top-performing states possess pro-business leadership and high-performing economic development organizations that excel at business outreach, customer service, and continuous improvement.
The optimal location for any facility should be identified through objective identification and evaluation of critical location drivers, infrastructure needs, and operating costs; these state rankings do not replace the mandate for a comprehensive site selection process. However, these states routinely compete against one another for projects and investment, so we may expect they will continue to evolve, adopt each other's best practices, and maintain their representation in these rankings.