KPMG: Recruiting Strategies Missing the Dot.Com Boat
Dot.coms are all the rage, right?
Not if you look at most U.S. economic development strategies, which are focused more on the economy of the past than the economy of the moment. So says a new release issued by KPMG (www.kpmg.com).
"The astonishing swiftness with which the Internet has grown suggests that the business cycle is moving much more rapidly than in the past and localities need to update economic development strategies with this accelerated business cycle in mind," says Kerstin Nemec, national partner in charge of KPMG's Business Incentives Group.
The KPMG release commented, "Knowledge-based industries, which create well-paying jobs and are one of the most rapidly growing sectors of our economy, often find traditional incentives packages to be of limited value." KPMG, in fact, found that "the majority of existing state and local economic development strategies target manufacturing entities, even though less than 25 percent of gross domestic product is generated through manufacturing."
Without changes in those recruiting strategies, KPMG foresees some rather dire consequences: "With e-businesses beginning to play an increasingly vital role, state and local economic development entities need to implement strategies focused on the dot.com explosion to ensure sustainable work opportunities and reliable tax bases."
The report also sees dot.coms ultimately creating a sizable ripple effect that will have a substantial impact that's felt in a broad range of economic sectors and business functions.
According to KPMG, "As the e-business market matures, its effects on the economy will become increasingly evident. The ripple effect will ultimately include shifts in the entire supply chain, resulting in the development of regional industry clusters that include e-businesses as well as ancillary functions from warehousing to legal services."
If this is a troubling prospect, it's also one that apparently comes with substantial opportunities. Areas that get on top of the curve may be the winners in the new economy's business recruiting wars, KPMG reported.
Commented Nemec, "Historically, high-tech businesses have tended to cluster in a relatively small number of cities. Some of these geographic clusters, though, are beginning to evidence diseconomies of scale and even a certain staleness. This presents proactive communities with an opportunity to act quickly and lure businesses with lower operating costs, a fresh, creative work force, and incentives to close the deal."
The KPMG release also identified the most important factors for dot.coms in seeking a business location. (It should be noted, however, that some of those same factors are also vital location factors for companies that are totally unrelated to e-business. In many cases, in fact, those companies consider everything that's listed a top-drawer concern.)
The dot.com location factors the KPMG release noted include:
Perhaps the lack of targeted incentives that KPMG noted owes to many dot.coms' seriously profit-challenged status. But with AOL reigning as the current glaring case study, that could change in a hurry.
The KPMG release also looked at "the leading tactics that creative jurisdictions are employing to attract e-businesses." Those tactics included:
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