Economic Development 101: Growing from within

This is the second in a series of articles written by respected business journalist Bruce Johnstone about why we do economic development.

By Bruce Johnstone

Many people assume that economic development means bringing businesses and jobs from other towns, cities and provinces to relocate in our town, city or province.

And, for many years, that assumption drove economic development agencies to expend much of their energy and budgets on persuading, enticing and even paying companies to move to their jurisdiction.

Accordingly, tax breaks and incentives, grants based on the number of jobs created and similar blandishments were used to uproot companies in one province in order to be transplanted into another. Existing businesses, on the other hand, tended to be ignored and taken for granted by economic development agencies.

But studies have shown that the overwhelming proportion of new jobs are generated by existing businesses, rather than out-of-province relocations. According to the Washington, D.C., think-tank, The Brookings Institution, only 3% of job creation comes from out-of-state business relocations. Guess where the other 97% of new jobs came from?

You guessed it: existing businesses. And many of those existing businesses are locally owned and operated, versus chain and multinational ownership. Locally owned businesses are generally more rooted in the community, less likely to relocate to another jurisdiction and more inclined to pay higher wages and benefits than their non-locally owned counterparts.

Studies have shown that local businesses generate two to four times the multiplier effects of non-local firms, meaning that for every dollar moved from non-local to local firms generated two to four times the jobs, taxes and charitable contributions

As Michael Shuman says in his book, The Local Economy Solution: “(L)ocal businesses are also better at promoting jobs, income growth, entrepreneurship, smart growth, environmental responsibility, charitable giving, and political engagement.’’

So what are economic development agencies, like EDR, doing to support, enhance and promote the growth and expansion of existing local businesses?

Like other economic development agencies, EDR provides businesses with economic data and market intelligence, like housing starts and home sales, building permits and employment numbers, demographics and population statistics. Timely, accurate and relevant information helps companies develop better business plans and marketing strategies.

EDR also gives business owners and managers access to economic forecasts produced by reputable national agencies, like the Conference Board of Canada, and in-depth business surveys, like the Regina Executive Leadership Outlook, a quarterly survey of Regina business leaders by Praxis Consulting.

Then there’s Square One, the first place entrepreneurs can go for information on starting a new business or expanding an existing one.

Square One is a non-profit organization run as a service delivery partnership between EDR and the Saskatoon Regional Economic Development Authority (SREDA) and a member of the Canada Business Network.

With offices in Saskatoon and Regina but accessible online to anyone in Saskatchewan, Square One provides:

In summary, EDR helps business owners to help themselves, providing a hand up rather than a hand-out, a road map to success, rather than a cheque and a pat on the back.