Incentives play minor role in attracting foreign firms.

• Author: Breznick, Alan
• Position: Economic Outlook

Dennis Rondinelli, a management professor at UNC Chapel Hill's Kenan-Flagler Business School, has done consulting work for the World Bank, United Nations, U.S. Agency for International Development, Canadian International Development Agency and private corporations. He and Elon University professor William Burpitt recently completed their second study of why foreign-owned companies locate manufacturing plant in North Carolina.

BNC: So why do they come here?

Rondinelli: The factors that almost all executives of foreign-owned firms in North Carolina mentioned were related to business-support assets -- efficient transportation facilities, especially highways and airports, a pool of skilled labor, good quality of life and school systems that offered not only a good primary and secondary education but also vocational and special training programs for workers.

What else draws them?

Many mentioned the importance of a business cluster that included a sufficient number of suppliers, customers and other firms in the same industry. Others were looking for locations that allowed them to produce niche products for which they could test the U.S. market and later expand geographically or with a broader product mix. Others valued locations where they could learn how to do business more effectively in the United States.

What role do economic incentives play?

Few executives mentioned government incentives as a reason for locating in the United States or in North Carolina. They did value government investments that improved location assets such as educational systems or transportation and communications facilities, but none said they decided to locate in North Carolina because the state or local governments offered a large package of incentives.

Did you specifically ask about incentives?

In 2000, we asked another sample of executives of foreign-owned companies to rank 11 sets of factors they thought were important in attracting foreign-owned companies, including four types of government incentives. They ranked labor supply, education, transportation and quality of life highest and the four government incentives lowest. In our current study, we wanted to know what companies that located in North Carolina over the past 15 years actually used to decide on their entry strategy into the U.S. and their location in North Carolina. Again, they placed heavy emphasis on the asset factors.

What about U.S. companies?

Our review of the research on state and local...