Richard K. Rein’s editorial, “How New York & Arlington ‘Lost’ Amazon HQ2” (U.S. 1, November 21) is the most cogent treatment of this subject I have read.
I have worked in economic development and with economic development agencies (EDAs) for the past seven years. Prior to that I worked in various aspects of business development for more than 30 years.
EDAs compete for a finite number of expanding companies. Optimal success requires recognition that economic development is not a one-size-fits-all proposition. Four types of expanding companies exist:
- Entrepreneurial, start-ups created or nurtured by incubators, accelerators, venture capital firms, and other support programs
- Large, established companies with announced expansion plans
- Middle-market companies that would (or should) expand if given access to innovative business models, specific resources, and market confidence
- Large companies seeking unique, metric-centric opportunities (competitive advantage) to justify expansion beyond current linear operations
The number of Type 3 and 4 companies dwarf the number of unicorns and Type 2 projects. Yet despite the intense competition, most EDAs focus on Type 1 and Type 2 opportunities. New Jersey’s focus on Amazon HQ2 and Governor Phil Murphy’s “big idea,” the Evergreen start-up fund, provide classic examples.
Most states and four-year colleges and universities possess the resources needed to form incubators and accelerators. And with acceptance rates at leading accelerators running at less than 2 percent, there is an endless stream of eager entrepreneurs (see Forbes, August 7). Likewise, most EDAs are skilled at preparing slick pitch desks advertising local attributes (tax incentives, talented workers, distribution networks, academic institutions … and, did we mention, tax incentives) in pursuit of Type 2 opportunities.
By contrast, developing business models that attract Type 3 and Type 4 companies requires unique skills — the difference between attracting (advertising for) entrepreneurs and HQ2-type projects and creating new opportunities. EDAs that expand their horizons and meet the needs of Type 3 and 4 companies will differentiate themselves from the increasingly crowded field of me-too competitors for zero-sum-game opportunities (Company A moves 100 jobs from EDA B to EDA C; EDA C wins, EDA B loses, but no net new jobs are created). They also will expand the monetization options for start-up companies.
Economic development is not an either-or proposition. EDAs should not ignore Type 1 and 2 opportunities. But they should expand their horizons, balance their risks, and take control of their own quality-of-life culture by developing the skills required to create Type 3 and 4 opportunities.
Expanding horizons in this fashion is extremely difficult in fiefdom rich states dominated by turf protection and not-invented-here attitudes. But an open mind and a willingness to try new ideas could produce an attractive alternative to HQ2 frenzy and put a dent in escalating inequality. Hopefully Rein’s editorial will stimulate an expanded discussion and an open-minded approach.
— Larry Richards, Ewing