Inertia in Location Based Approaches to Local Economic Development
There's an old saying "a bird in the hand is worth two in the bush", which applies to this concept of "Inertia" in economic development. Business retention is a major concern in location based activities and refers to the tendency for businesses to stay in a given local once they move in. Unfortunately, it is not an insurmountable obstacle: companies sometimes have to leave an area if business becomes impossible to conduct at that location. Maple Leaf left Edmonton for Brandon a few years ago, overcoming whatever "inertia" factors worked in favor of their staying in Alberta.The issue is perhaps best seen from the point of view of customer retention. Any company that relies on one-time sales rather than on repeat customers is in severe trouble and is leaving money on the table unnecessarily. This is because it is very expensive to attract and develop a good working relationship with a customer, making secondary sales far more profitable, as such expenses are considered "sunk costs". In this sense it is easier for the customer to keep shopping with a company that is a known quantity, than to try out another, and it is cheaper for the company to do a small bit of customer maintenance than to start one from the beginning.
Many times people seeking to upgrade their local economy look to business attraction rather than looking at existing businesses and asking what could be done not only to retain them, but to build on the inertial factor (their reluctance to pay relocation costs) and add new jobs to an existing enterprise. There is a high job creation potential in existing businesses that is often overlooked.
The job creation programs, which come out periodically, are designed to help in this approach to local economic development, and are usually some sort of cost sharing arrangement with or without "clawback" at the end if the employee is not kept on beyond a certain period of time.
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