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EW YORK — Don’t be fooled by the NASDAQ. High-technology, digitally driven companies are still the crown jewel of economic development, according to a study by KPMG LLP’s Strategic Relocation and Expansion Services practice.
The survey of state and local economic development agencies revealed that an overwhelming 97 percent of respondents report attracting technology employers as a top priority in 2001. Moreover, the survey found that 78 percent of state respondents and 52 percent of local respondents have modified their incentive packages in their attempts to land technology-based inward investment.
“Our survey results are surprising,” says Kerstin Nemec, national partner in charge of KPMG’s Strategic Relocation and Expansion Services. “Despite the recent fallout in the high-tech sector, e-businesses are still seen as a top priority by state and local economic development agencies looking to thrive and remain competitive in today’s marketplace. Interestingly, our survey also finds that as state and local economic authorities continue to seek out high-tech-related investment, they are finding themselves enhancing the types of incentive packages that they offer. This is becoming an inevitable trend as states face increased competition domestically and abroad.”
The KPMG survey identified labor-related benefits as the most common type of incentive used by economic developers to attract technology firms. The most common form of work-force incentives offered today include work-force training (95 percent of respondents), specialized training (92 percent), help in recruitment of workers (76 percent), grants (75 percent) and college-shared curriculum (70 percent). The KPMG survey of 113 economic developers (77 local agencies and 36 state agencies) also revealed that investment infrastructure (25 percent) and sales, property and employee tax credits (23 percent) are key incentives being used to entice digital companies to establish a facility in a prospective locale.
“As competition continues to thrive, economic development agencies across the country are looking for ways to attract high-tech, digitally driven companies to their respective states,” says Betty McIntosh, a KPMG partner in Atlanta. “Our survey has found that when state and local agencies have modified incentive packages in the pursuit of e-business, the return leads to a substantial amount of inward investment for the respective locale.”
All interviews were conducted over a two-month period over the telephone by the executive interviewers of Clark, Martire & Bartolomeo Inc., a market research firm in Englewood Cliffs, N.J. The study also found that:
- High-tech companies account for a remarkable 47 percent of all inward investment reported by agency executives, and an even higher proportion (49 percent) for those agencies that have modified their incentives to lure these firms.
- Three quarters of agencies report that the Internet has contributed to attracting new business, and 72 percent say the Internet provides a competitive advantage.
- All agencies experience competition from elsewhere in the United States, but state agencies report that they are more likely to feel international competition. The European Union heads the list of international competitors for high-tech jobs (named by 43 percent of respondents).
- On average almost as many agency resources are put into retaining business as is devoted to attracting new ones. The average agency has attracted 70 new businesses and US$415 million in inward investment in the past two years.
For more information on the survey, go to www.us.kpmg.com
