The study found that the key drivers of innovation now are "the communication channels that local entrepreneurs maintain to the outside world and their open-mindedness toward foreign cultures.and new ideas." Indeed, companies that rely on regional ties are four times less likely to innovate than those globally connected. Wadhwa challenges economic development leadership to adopt new approaches. "Rather than obsessing over clusters, start obsessing over people and connectivity. remove the obstacles to entrepreneurship - such as knowledge of how to start companies, fear of failure, lack of mentors and networks, government regulations, and financing," he advises.
Impact on Site Selection
So what does this mean to corporate site selectors and location advisors? Whether or not one is in agreement with the thinking of today's economic development pundits, advisors and corporate site selectors must keep in mind the current set of dynamics being utilized by these development organizations. These factors will most certainly effect what has been received as standard response and procedure in the past. Key changes include the following:
- The resources of the ED groups are now diluted.
- The focus of the ED groups should not strictly be aimed at attracting new companies to an area.
- New employers to an area must compete for the ED groups' attention - in a manner not necessary in the past.
- State, local, and federal governmental budgets are greatly constrained; therefore, incentive budgets as well as ED staffing are being cut back.
- Ultimately, ED groups have to respond to a constituency, which is comprised of either politicians or involved businesspeople who live in a "sound bite" world, e.g., renewable energy projects are better than pick and packs. (Remember, in the `90s every community wanted a chip plant, and in the early 2000s they were targeting life sciences firms.)
- Site selectors need to "position and sell" their projects, showing why these are important to an area, rather than just assuming that the old "jobs and investments" tale is enough.
- Site selectors should not be turned off to the right community because its perceived priorities don't match their project; if the company's criteria are met, ultimately the community will appreciate the investment.
There are two sides to every coin. Communities should not forget the traditional industries for job creation while chasing the so-called "new innovation" economy. Many communities are electing to not pursue and "incent" certain types of job opportunities based on expected wages and other factors - regardless of the fact that some constituents may need these jobs. The most effective economic development policy will be one that is well balanced, which incorporates as many industries as possible. A long-term strategy and implementation plan is needed, where all legs on the stool must be the same length.