Studying Firm Locations: Survey Responses vs. Econometric Models

Industrial recruitment remains an important tool for state and local economic development practitioners (Loveridge 1996). Industrial recruitment is a tool by which development administrators attempt to entice to their area companies considering relocation or expansion. Offi cials in some areas areas in need of jobs or where growth is otherwise actively sought use this tool more actively by developing marketing brochures, advertising in site selection magazines, visiting likely pros pects, etc. (Schoening and Sweeney 1992). In other areas which are “hot” for development or where growth is not particularly sought, practitioners have less need to actively recruit firms. In either case, a successful recruitment effort is influenced by a knowledge of the factors which make your area attractive coupled with an awareness of the types of firms for which these factors are most salient. Industrial location researchers have identified factors which influence location decisions using two basic methods: surveys of companies, and statistical models. Survey research typically identifies one or more key respondents and asks them about the factors which influenced their location decision choice-proximity to markets, development incentives, labor force issues, personal reasons, etc. (Deloitte and Touche as reported by Bergsman 1993, Johnson 1991, Schmenner 1980). Statistical models, on the other hand, collect information on new economic activity, such as new plant openings or building permits; and variables which capture the essence of what may have influenced these new plant locations, such as land costs, relative wage rates, infrastructure spending, access to transportation, markets, etc. Models are then estimated to measure the relative influence of various factors on the plant location