High-Tech Location and ED Strategies

High-Tech Industrial Location and Economic Development
Darrene Hackler
Public and International Affairs
George Mason University

Abstract

Popular literature and sentiment speculates that information technology enables “footloose” location decisions. Business location determinants should have a greater effect on the location
decision of a firm that relies on information technology in production than a firm that uses little or no information technology in production. If so, such firms would be more likely to locate in areas that offer lower costs of production, like suburbs and second-tier metropolitan areas. Using a large-scale dataset of five metropolitan areas, the location choices of both high-tech and low-tech manufacturing firms are econometrically analyzed to study the importance of location determinants on location decisions.

Results indicate that information technology's influence on high-tech location decisions does not contribute to footlooseness. Changes in business location determinants do not stimulate much high-tech growth nor are significant determinants necessarily maneuverable by policy. Of state, metropolitan and local level determinants, only state level policy seems to generate greater high-tech than low-tech growth. Additionally, high-tech location patterns are not characteristic of decentralization. In fact, high-tech growth is not occurring outside of central cities, indicating that cities in inner and outer suburbs have little ability to attract high-tech. Second-tier metropolitan areas, however, are benefiting from high-tech growth, but it is also concentrated in central cities. These findings are useful since it shows local policymakers “where” it is not salient to offer incentives or spend money, depending on the maneuverability of business location determinants, a city’s location within a metro area and whether it is a first- or second-tier metro city.

Local governments should not seek a “one-size-fits-all” development policy; instead differences between jurisdictions should be understood. Additionally, the sheer lack of maneuverable determinants at the local level presents challenges to a local government’s traditional perception of economic development. The costs of coordinating high-tech development policy far outweigh the benefit of minimal high-tech growth, and local economic development dollars would be better spent elsewhere.

Download the paper here.