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“SOLID” WALKER PROSPECTS

* Two logistics providers looking at industrial sites

* A hydroponics farm looking at Rossville

* A “business incubator” is looking in Rossville

* A manufacturer is looking to bring 100 jobs to LaFayette

* A solar farm is looking at industrial sites in the county

* A biodiesel company is looking at county industrial sites

Source: Walker County Commissioner Bebe Heiskell

She discussed potential tenants for industrial land across the county and reiterated her commitment to bring 1,000 jobs into Walker County over the next few years.
“It’s ambitious,” Heiskell said after the meeting. “But if we get what we’re looking at, we’ll have it.”

Among “solid prospects” in talks with the county and Northwest Georgia Joint Development Authority, Heiskell listed two out-of-state logistics providers, a hydroponics farm, a “business incubator” that would buy property and lease it to smaller industries, a new manufacturer, a solar farm and a biodiesel company. She did not identify any of the companies, citing confidentiality agreements.

The commissioner acknowledged the jobs lost in Walker County, including the Blue Bird school bus plant that announced its closure earlier this summer. She said, however, that several companies have contacted her with interest in the plant’s building.

“I think the good news outweighs the bad,” Heiskell said

by Edward L. Glaeser and William R. Kerr
With job growth continuing to lag even as the economy picks up, local communities will be tempted to resume “smokestack chasing”—using tax breaks to attract big employers. That’s a misguided approach.

Our research shows that regional economic growth is highly correlated with the presence of many small, entrepreneurial employers—not a few big ones. In fact, a study of U.S. metro regions showed that cities whose number of “firms per worker” was 10% higher than the average in 1977 experienced 9% faster employment growth between 1977 and 2000.

More Small Firms Means More Jobs (Located at the end of this article)

Data can be misleading, of course, so it’s reasonable to wonder whether industry structure, tax policy, or some other special circumstance skewed the results. The answer is no: Even adjusting for such variables, the relationship between small firms and job-growth rate stands.

For example, in a project with Giacomo Ponzetto of Barcelona’s Pompeu Fabra University, we analyzed “city-industry clusters,” which allowed us to adjust for the effects of each city’s and industry’s overall growth rate, among other things. We found that industries with smaller firms and more start-ups enjoyed faster employment growth than other industries in the same city and than the same industry in other cities.

Politicians enjoy announcing a big company’s arrival because people tend to think that will mean lots of job openings. But in a rapidly evolving economy, politicians are all too likely to guess wrong about which industries are worth attracting. What’s more, large corporations often generate little employment growth even if they are doing well. Automakers, for instance, often source parts and other inputs from their internal networks, which limits employment spillover effects. Or a firm may fill staffing needs by transferring employees. Instead of trying to buy their way out of the recession with one big break to one big employer, politicians should reduce costs for start-up companies and small businesses.

And a little work in that direction goes a long way. Research shows that once entrepreneurship gets established, it tends to be self-perpetuating.

HBR.org > July–August 2010
More Small Firms Means More Jobs
Cities relying on only a few large firms for employment experienced slower subsequent job growth than cities with an abundance of small firms.

Edward L. Glaeser is the Fred and Eleanor Glimp Professor of Economics at Harvard.


William R. Kerr is an assistant professor at Harvard Business School.