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Community assessment and industrial targeting for nonmetropolitan areas

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Community assessment and industrial targeting for nonmetropolitan areas
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Schumacher, Kurt R
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ix, 96 leaves : ; 29 cm

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Community development -- United States ( lcsh )
Community development -- Case studies -- Colorado ( lcsh )
Industrial location ( lcsh )
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Industrial location ( fast )
Colorado ( fast )
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theses ( marcgt )
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Includes bibliographical references (leaves 87-90).
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Submitted in partial fulfillment of the requirements for the degree of Master of Arts, Department of Economics.
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by Kurt R. Schumacher.

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Full Text
COMMUNITY ASSESSMENT AND INDUSTRIAL TARGETING
FOR NONMETROPOLITAN AREAS
by
Kurt R. Schumacher
B.S., Colorado State University, 1981
A thesis submitted to the
Faculty of the Graduate School of the
)
University of Colorado in partial fulfillment
of the requirements for the degree of
Master of Arts
Department of Economics
1986
i4f I


This thesis for the Master of Arts degree by
Kurt R. Schumacher
has been approved for the
Department of Economics
by
Thomas A. Clark
Date


Schumacher, Kurt R. (M.A., Economics)
Community Assessment and Industrial Targeting
for Nonmetropolitan Areas
Thesis directed by Professor John R. Morris, Jr.
Numerous communities throughout the nation are
attempting to revitalize their economies by attracting
basic industry to their region. The limited number of
industrial plant start-ups and relocations, coupled
with the intense competition among communities suggests
that economic development officials must utilize their
resources effectively to become winners in the
industrial chase.
This thesis examines methodologies for
nonmetropolitan communities to evaluate their local
economies and identify industrial development
potentials. Existing methodologies are presented and
evaluated for their potential use by nonmetropolitan
economic development officials. This paper focuses on
methodologies which use secondary data sources for the
analysis of manufacturing industry potentials.
To provide an understanding of current economic
development in nonmetropolitan communities, the results
of a survey of economic development agencies on the
western slope of Colorado are presented, along with a
summary of problems facing these communities in their


iv
efforts to expand their economic base. Toward
rectifying these problems, a number of suggestions are
made regarding community assessment and industrial
targeting based on the methodologies presented
earlier.
Also presented are a number of qualitative
issues that face nonmetropolitan communities seeking
nonlocal manufacturing firms. These issues include the
efficiency of targeting nonlocal firms, the benefits
from infrastructure investments, quality of life
considerations, and a discussion of the size and scale
of development.


CONTENTS
CHAPTER
I. INTRODUCTION.................................. 1
The Scope and Purpose of this Paper......... 6
Manufacturing Firms....................... 6
Nonmetropolitan Communities............... 7
Thesis Organization........................ 8
Notes...................................... 10
II. THEORY AND METHODS OF COMMUNITY
ASSESSMENT AND INDUSTRIAL TARGETING........ 11
Comparative Advantage.................... 12
Methods of Determining Comparative
Advantage.............................. 15
Descriptive/Historical Methods........... 16
Occupational Targeting................... 20
The Location Quotient.................... 26
Shift-Share Analysis..................... 29
Industrial Location Theory................. 30
industrial Site Determinants............. 31
Industrial Location Search Costs......... 34
The Comparative Cost Approach............ 36
Matching Community Attributes with
Industrial Requirements.................. 38


vi
CONTENTS (Continued)
CHAPTER
The Screening Matrix..................... 39
Input-Output Analysis.................... 42
Summary of Methods......................... 45
Notes...................................... 48
III. ECONOMIC DEVELOPMENT IN WESTERN COLORADO... 50
The Study Area............................. 50
Survey of Economic Development
Officials............................. 55
Results of the Survey.................... 56
Survey Response.......................... 56
Respondents' Characteristics............. 59
Agency Goals........................... 61
Agency/Individual Activities............. 63
Promotional Activities................... 64
Community Assessment Procedures
for Nonlocal Promotion................ 65
Targeted Sectors......................... 66
Location of New Firms................... 67
Financing Mechanisms..................... 68
Summary of Survey Responses.............. 68
Notes...................................... 72
IV. ISSUES IN NONMETROPOLITAN
COMMUNITY INDUSTRIAL TARGETING............. 73
Community Participation.................... 74
Size and Scale of Development.............. 75


- VX1
CONTENTS (Continued)
CHAPTER
Quality of Life.......................... 77
Focusing Within the Local Community...... 78
Coordination Among Regions............... 80
Notes.................................... 83
V. SUMMARY OF FINDINGS AND FINAL CONCLUSIONS.. 84
SELECTED BIBLIOGRAPHY.............................. 87
APPENDIX........................................... 91


viii
LIST OF TABLES
Table
1 Sample Community Ranking of Labor
Force Characteristics..................... 22
2 Occupational Characteristics for
Colorado Manufacturing Industries.......... 25
3 Hypothetical Employment Data and
Location Quotients........................ 27
4 Screening Matrix Variables................... 41
5 Summary of Methods: Community
Assessment and Industrial Targeting...... 46
6 Study Area Population by County.............. 53
7 Analysis of Basic Employment by
County in Western Colorado................. 54
8 Average Economic Development Expenditures
per Resident for Survey Respondents
Western Colorado Survey, 1985............ 60
9 Economic Development Goals from
Western Colorado Survey, 1985............ 62
10 Types of Promotion to Nonlocal Firms
Western Colorado Survey, 1985............ 64
11 Targeted Sectors Identified by Respondents
Western Colorado Survey, 1985............
66


IX
FIGURES
Figure
1 Western Colorado Study Area.................. 51
2 Survey Response: Location and
Agency Represented......................... 58


CHAPTER I
INTRODUCTION
In the past, the location of industrial
facilities was determined largely by a firm's cost
structure. A firm would evaluate the costs of
production including such factors as labor, raw
material, land, taxes and transportation costs. The
firm's optimum site would be the location with the
lowest total production and distribution costs.
During the past two decades, changes in the
production processes of industries and in the
receptiveness of states, counties, cities and
communities hosting these industries have altered the
location selection process. Today fewer firms are tied
to a resource base which means that transportation
costs are lower relative to total costs and the
industries are therefore more footloose. Additionally,
many development organizations realize the employment
and monetary benefits to their region from basic
industry. Communities throughout the nation are
competing for new plant construction and relocations


2
touting cash incentives, free land, and tax deferments
to bait new industries. The end result is that the
more mobile firms potentially face lower production
costs, reduced risk and a wider variety of plant site
options. This phenomena has been described by John
Blair as "The Market for Jobs."
The emergence of the market for jobs is
evidenced by the rapid increase in the number of
states that offer a wide array of business
location incentives. Between 1966 and 1980,
the number of states offering various tax
exemptions or moratoriums increased across the
board by 89% (Industrial Development, 1981).
Forty-six states now provide tax exemptions on
raw materials and goods in transit, compared to
32 in 1966. The number of states providing
inventory tax exemptions increased even more
dramatically, from 19 to 43; and exemptions on
new equipment were offered by 16 states in 1966
compared to 36 in 1980. City and county revenue
bond financing was available in 23 states in
1966, as compared to 47 in 1980, and the number
of states offering other forms of state and
local industrial bond financing also increased
dramatically. The seven incentives identified
by the Industrial Development Research Council
in 1977 as 'most important' to firms considering
relocation, expansion, or new facilities were
available in twice as many states in 1980 as in
1966 J
Given the ability of communities to affect a
firm's plant location decision and the competition
among communities to attract new industry, communities
must work not only to attract and promote new industry,
but to retain existing industries as well. State and
local development programs are not new, but in the past
few years, most have been rejuvenated. The title


3
"industrial developer" and its negative connotations
have been discarded for the more acceptable title,
"economic developer." The renewed interest in economic
development may have been stimulated by a number of
factors, including a reduction in governmental
transfers, an increase in public-private partnerships,
or perhaps just the swing of the pendulum away from the
no-growth policies of the '70s. Whatever the cause,
the implications for communities are clear.
The goals of most economic development agencies
usually fall into at least one of three
categories: increasing the tax base, creating more jobs
or promoting economic growth.2 To meet these goals a
number of strategies are available, including assisting
local business, stopping leakages,3 or attracting
nonlocal firms. One method of attracting nonlocal
firms to an area is to "target" industries. The
concept behind targeting is that by identifying
community assets and industrial needs, an optimal
industry can be identified for a particular location.
This process assumes that an accurate assessment of a
community's assets can be made, the needs of many types
of industry can be determined and evaluated, and
identification of assets and needs will provide the
economic development official with a listing of


4
industrial candidates which have a high probability of
plant location or relocation. These prospects are then
courted through a number of means which may include an
onslaught of community promotional materials, special
tax breaks and cash incentives for plant start-ups, or
perhaps a visit from a local economic development
official.
An alternative to this approach involves
initially broadcasting a message about the attributes
of the prospective community to a wide audience, and
responding to the inquiries which are generated by the
broadcast. This method has been described as the
" ready-shoot-aim1' process by an economic development
official in the State of Colorado.4
The intent here is not to discuss the relative
merits of each system used to attract industry, but
rather to point out that targeting is only one method
of attempting to attract industrial development. Each
economic development agency must determine an
appropriate strategy and proceed. In fact, many
communities, particularly nonmetropolitan communities,
may determine that attempting to attract nonlocal
industries is less cost-effective than assisting
existing firms to expand, or investing in local
infrastructure.


5
Communities that will target face a number of
decisions, including determining cost, time frame,
whether the study should be performed in-house or by a
consultant, and the methodology to be used in the
study. A number of consulting firms currently offer
these services to economic development agencies, but as
Moriarty (1980) pointed out, many areas may have the
capability to perform the analysis for themselves. In
addition to lower cost, communities that perform the
study themselves potentially increase local awareness
in the process. This community awareness/development
process has gained the support of many economic
development officials on all levels of government in
the state of Colorado. A self-help handbook for
targeting has been used a number of times in the
state,5 and although some results have occurred
because of the process, many economic development
officials believe the most beneficial aspect of the
process to date is the community awareness process
which prepares the community to evaluate and assess the
impacts of walk-in6 industrial prospects. Community
members become able to distinguish between their
generalized goals, such as the term "jobs," and can
learn to specify particular types of needs, such as
"employment for 30 nonskilled teenaged workers."


6
The Scope and Purpose of this Paper
The focus of this thesis is to describe and
evaluate methodologies for communities to identify
industries with a high probability of building a new
plant or expanding existing facilities. To provide a
concise and manageable study, this paper focuses on
manufacturing plant development in nonmetropolitan
communities.
Manufacturing Firms
Manufacturing firms are the principal targets
for most economic development agencies attempting to
attract nonlocal firms. Manufacturing, mining,
tourism and agricultural industries, according to
export base theory, serve as the foundation and driving
forces for economic growth. These basic industries
bring dollars into the community, and serve as the
principal consumers for local services.? With the
mining and agricultural industries experiencing
significant declines, and since tourism demand is
dependent on the health of the national economy,
manufacturing becomes the obvious target for many
communities.


7
Nonmetropolitan Communities
Nonmetropolitan communities share many economic
development problems with larger cities, including
intense competition for limited plant expansions and
relocations, and limited staff and financial resources.
However, certain factors separate smaller communities
from their urban counterparts. Smaller communities
frequently rely on a "dominant"8 resource-based
economy such as agriculture, mining or tourism. An
economy based on a single dominant resource is
susceptible to economic swings caused by national
demand for the dominant resource. This instability has
led many nonmetropolitan communities to seek to
diversify their economic base by encouraging
manufacturing sector growth. Additionally, many
nonmetropolitan communities have an economic
development staff of one employee or perhaps a
volunteer staff. The limited staff may mean that
expertise in the availability of financing mechanisms
and access to development issue information may be
limited.
Another problem frequently facing nonmetro-
politan communities is inadequate infrastructure to
support industrial prospects. Numerous factors
directly affect industrial performance, including
utility availability and rates, transportation cost,


8
quality and size of the available labor force, etc.
Larger communities frequently have adequate resources
to serve industry or the potential to provide
infrastructure, if demanded, but this may not be the
case with nonmetropolitan communities.
Thesis Organization
The subsequent chapters of this report describe
theory and methods to identifying community poten-
tials and industries which utilize those potentials.
Chapter 2 presents a review of the existing literature
on methods of community assessment and targeting
industries. This chapter identifies strengths and
weaknesses in each of the methods and points out
problems and potentials for applying these methods in
nonmetropolitan communities.
The third chapter attempts to examine the
subject from the "real world" perspective through the
examination of assessment and targeting efforts on the
western slope of Colorado. In this chapter, problems
facing the western slope economy and current economic
development efforts are described.
The fourth chapter examines less quantifiable
aspects of industrial targeting and attempts to
identify pitfalls in the process.


The final chapter of the report, Chapter 5,
presents a summary of findings and final conclusions.


10
NOTESCHAPTER I
1john P. Blair, Rudy H. Fichtenbaum, and
James A. Swaney, "The Market for Jobs: Locational
Decisions and the Competition for Economic Develop-
ment," Urban Affairs Quarterly, 20 September 1984:
p. 6 4.
^Leakages refer to expenditures made by
community members to purchase non-locally-produced
goods. Dollars that flow out of the community will not
have the potential of generating multiple rounds of
expenditures. No communities capture all local expen-
ditures, but frequently significant improvements can be
made.
^Thomas A. Clark, Community Economic
Development: A Self-Help Handbook. (Denver: University
of Colorado at Denver (1985)): pT 5.
^Steve Kolby, Director of Research, Interview
on industrial targeting in Colorado. Colorado Depart-
ment of Local Affairs, Denver, Colorado. November 6,
1985.
^Thomas L. Clark, A Guide for Targeting
Industries in Your Community, 1985. This resource has
been used by a number of communities in the state of
Colorado, including Delta, Montrose and Fort Collins.
^Walk-in prospects refer to industry site
planners that seek out a community rather than being
sought. Frequently unprepared communities fail to
capitalize on the opportunity to enhance the visit of a
potential firm, by not demonstrating how the community
meets the prospect's needs.
^John A. Kuehn, and Lloyd D. Bender, "Non-
metropolitan Economic Bases and Their Policy Implica-
tion," Growth and Change, January 1985, p. 26.
Slbid., pp. 25, 26.


CHAPTER II
THEORY AND METHODS OF COMMUNITY ASSESSMENT
AND INDUSTRIAL TARGETING
This section of the report presents the
theoretical and methodological considerations behind
the processes of community assessment and industrial
targeting. The theories presented here focus on the
concepts of comparative advantage and industrial
location in an effort to explain the basis for
targeting in the economic development process. The
methodologies for targeting discussed in this section
include examples of a number of analytical tools. Each
methodology will be outlined and evaluated for use by
nonmetropolitan communities with regard for ease of
use, data requirements and degree of target
specificity.
Numerous theoretical assumptions are made when
an economic development agency attempts to target
industries. The backbones of the process are the
theories of comparative advantage and industrial


12
location. The concept of comparative advantage
explains the specialization of communities in the
production of goods. Industrial location theory
attempts to explain why industries involved in
expansion and relocation select a specific site over
other alternative locations. Both theories and their
shortcomings are presented in this chapter.
Comparative Advantage
The concept of comparative advantage^ was
first used by David Ricardo to describe specialization
among nations in terms of the items each nation
produced and traded. A nation experiences comparative
advantage in a good when its "opportunity cost"2 for
producing that good is lower relative to all other
goods. (This concept differs from an earlier theory of
"absolute advantage" which suggested that a community
would produce only goods where the absolute cost of the
production of those goods was lower than for any other
location.) Nothdurft (1984), in his book, Renewing
America, identifies a major fault in economic
development agencies and the need for state agencies to
apply the concept of comparative advantage.
There tends to be a kind of bandwagon mentality
among economic development officials. In their


13
endless search for new development opportunities,
development officers quickly detect successful
initiatives and move immediately to duplicate the
formula. In the current cycle, many of these
officials are busy trying to replicate the economic
characteristics that spawned California's Silicon
Valley as a way of attracting high-technology
industries. While these innovative enterprises may
indeed become important components of the economies
of a number of states, it makes as little sense for
every state to try to become a high-technology
mecca as it does for every state to become, for
example, the nation's breadbasket. Or steel mill.
Or mining center. Each state's economy is unique
and operates in a complex, diverse, and rapidly
changing national and even international
marketplace.
It is, in fact, the differences in the
structure and character of state economies, not
their similarities, that can offer the best source
of future state economic success. The states with
the greatest likelihood of successfully creating
new development initiatives will be those that have
audited their assetsnatural resources, human
resources, physical infrastructure, access to
markets, availability of capitaland have
identified the comparative advantages they have
over their neighbors.3
Nothdurft's comments are directed at state
agencies, but the same holds true for county, city and
local economic development agencies as well.
Nothdurft suggests the proper response by the agencies
should be to inventory their assets. Community
assessment, when completed in the pursuit of an
industrial target, can represent an attempt to identify
a community's comparative advantage.


Identifying comparative advantage is the goal
when assessing a community's resources for industrial
development, and the units of measure will be the
opportunity costs of alternative types of activities,
and riot limited to industrial development. It is
doubtful that a community could accurately measure its
opportunity costs for all types of endeavors;
therefore, frequently a proxy for opportunity costs is
utilized. This proxy is the identification of
underutilized resources in the community. The proxy i
justified, as the reemployment of underutilized
resources represents no opportunity cost to the
>
community and in fact may possibly carry a negative
opportunity cost. In contrast, utilizing resources
that are not in surplus represents a foregone benefit
to the community.
A community's comparative advantage may exist
in any number of forms. In the following quote,
Nothdurft has demonstrated state level comparative
advantages for Massachusetts and North Carolina
(Nothdurft (1984)).
Every state has some comparative advantage.
Some exist naturally, others are converted
liabilities, still others may be created from
scratch. Despite a very high cost of living,
Massachusetts packaged its exceptional educational


15
institutions and its pleasant and protected
amenity resources together with converted
liabilitiesunemployed but skilled workers and
abandoned but sound factory buildingsto become
one of the nation's most successful
technology-based growth regions. In several
southern states the combination of vast tracts of
abandoned farmland and a long growing season
provided the right environment for a fast growing
pulp, paper, and wood products industry. North
Carolina, building on its universities, spent
twenty-five years using its land-use and related
regulatory powers and targeting investment funds to
establish the kind of environment that would
attract the kind of people and businesses needed to
make its Research Triangle one of the nation's
leading centers for research and development.4
From Nothdurft's example, it is evident that to
successfully rejuvenate a region's economy, the process
requires a number of skills, including identification
of underutilized resources in the community, an
understanding of the current trends in the economy
outside the region, a creative process to determine how
resources can be reutilized, and the financial and
moral support of the community to successfully
implement the reemployment of these resources.
Methods of Determining Comparative Advantage
In this section of the report, a number of
methodologies for assessing community potentials and
identifying industrial targets are presented. The
focus of this analysis is methods and tools which can


16
be used by nonmetropolitan economic development
officials. Since ease of use and low cost are
prerequisites for application, the methods mentioned
here rely largely on secondary data sources.
Several of the community assessment methods
presented examine existing community conditions.
Community assessment tools identify strengths and
shortcomings of the community which relate to
industrial development. These tools include a
historical/descriptive approach, the location quotient,
an occupational-industrial requirement analysis, and
shift-share analysis.
While these methods serve only to analyze the
community, other methods of regional analysis focus
more directly on the relationship between the community
and industry. Methods which focus on this relationship
will be presented under the heading "Industrial
Location."
Descriptive/Historical Methods
One method of understanding the relationships
within a community is to describe the historical
development and existing industrial mix of the study
region. This descriptive method of regional analysis


17
requires the researcher to examine not only existing
conditions, but he/she must attempt to identify the
historical causes underlying these conditions. This
process, as applied to industrial targeting, is
described in the following paragraphs by Graham Jones
(1980).
. the industrial developer would first study
the economic history of the community seeking to
understand the factors that produced the first
economic system, what that system was, and what
influences of that system might remain a factor in
today's economy. In the process, it is likely that
something of the origin of some of the older
industries existing in the community today would be
learned.
Second, the industrial developer should study
all of the community's existing industries to learn
when they located in the community and what
attracted them to that location. The industrial
developer must learn what changes have taken place
since existing industries located; changes that
might make those location factors more or less
attractive or advantageous today. The developer
must also learn what problems existing industries
now face. This should lead to an understanding of
events and factors in the community that are proven
assets to industrial location.
Third, using the assets that attracted existing
industry as a base, the industrial developer should
study all the attributes of the community. An
analysis of these attributes should help to
identify other assets and define negative factors
as well. The developer should be able, at this
point, to draw some conclusions as to the type and
size industry that would find these factors
favorable.
With this data in hand, the industrial
developer is prepared to make a knowledgeable


18
presentation to a) potential new industries that
require the assets of the area and would complement
and promote the development of existing industry,
b) existing industry that might expand at its
present location or establish satellite locations,
c) industries that are economically tied to
existing industries, such as suppliers, service
facilities, consumers, or competitors.5
In this excerpt from his unpublished thesis,
Jones effectively details the descriptive process used
to assess economic development potentials. By applying
this process, he is able to analyze the development
potentials for a county in the state of Virginia. In
the analysis he first examines the historical roles of
transportation, agriculture and industry in Campbell
County, Virginia. Next, with consideration for the
timing and causes for economic development in the
region, he proceeds to evaluate the existing industrial
makeup of the region. In the following quote, Jones
discusses the benefits derived from examining existing
industries.
The developer can learn what factors or community
assets attracted these industries, what problems
they now face, and their future plans. Also, what
other industries might be attracted by the existing
industries as competitors, suppliers, or consumers.
The industrial developer should determine too, if
the assets that attracted the existing industries
would still be assets today, and which industries
are likely to expand, or locate satellite
operations, in the community.


19
Through the interviews with firm management and
statistics about labor force, transportation, and
resource requirements of the area's firms, he was able
to gather not only data on employees and resources, but
also acquired an understanding of employers' percep-
tions of the area. To supplement the existing industry
analysis, Jones examines a number of area resources,
including raw materials, transportation, labor markets,
energy and water availability, climate, ecology,
community factors and industrial site availability.
In the final assessment, the report determines
the community's shortcomings and identifies some
attributes, but fails to identify firms or even types
of industries which have high potential for relocation.
The report has significant value to an economic
development agency in that it provides an accurate
listing of the types of firms located in the community
and their reasons for location, and therefore
identifies the elements which make up the community's
comparative advantage. Jones stops short of
identifying the industries which benefit most from
these factors, but it would appear that the
interindustry linkage data collected through the
descriptive approach would allow a developer to at


20
least identify types of firms with high probability of
relocating in the community. In comparison to the more
quantitative methods, this method of community
assessment provides a "feel" of the business
environment, but does not rely on numerical
analysis.
Occupational Targeting
A recent article by Thompson and Thompson
(1985) provides a valuable and innovative addition to
the methods of community assessment and targeting. The
article? uses an "occupational-functional" approach
to evaluating communities' development potentials, and
is based on the fact that the human resources within a
community are frequently the most important asset in
the community.
The methodology accepts that communities may
have a work force whose occupations reflect the
community's development potentials. Using a labor
force occupation classification and by ranking labor
force merits, the relative strength of their study
region can be determined. While the authors used the
analysis to compare 32 metropolitan communities, the
methodology has potentials for nonmetropolitan regions


21
as well. The authors suggest incorporating the concept
of the product life cycle to identify the current
growth phase of a particular industry. The term
"phase" in this example refers to whether the firm is
involved in research and design, production, or exper-
iences price competition in the marketplace. Each
phase represents a separate type of occupational work
force. The following example may provide an
understanding of the concept.
If a plastics manufacturer is attempting to
develop a new product, the work force may be largely
scientists and engineers. When the research nears an
end and manpower shifts are required to gear up for
production, precision laborers may be required.
Finally, when the process is routinized, a work force
adept in routine work at low wages will be necessary to
make the process competitive. Given these changes in
occupational requirements among different industries
and among similar industries at different stages in the
product life, the authors suggest most communities will
have available labor qualified for a particular
industry or type of process. They also suggest that
employing this labor should be the focus of economic
development targeting. Table 1, on the following page,


TABLE 1
SAMPLE COMMUNITY RANKING OF LABOR FORCE
CHARACTERISTICS
Ranking of Characteristic
Communities
1
5
Characteristic
< % Technologists
< % High school grads.
< % Engineers
- % of Mfg. Empl. in
^ Central Admin. Off.
. % of Managers in Mktg.
^ and Advertising
15
CENTRAL PRECISION
ADMINISTRATION OPERATIONS
Functional Labor Force Category
Characteristic
< Office clerical wage
< Unskilled mfg. wage
_l------------------->
ROUTINE
WORK
SOURCE: Wilbur R. Thompson and Philip P. Thompson, "From Industries
to Occupations," C.U.E.D. Fall 1985, pp. 12-18.


23
presents a simplified version of the scale used by the
authors to identify the relative strengths of the
community labor force.
Table 1 demonstrates a ranking of key labor
force merits. The ranking compares these same merits
to a number of other cities. For example, our sample
community would rate high in most categories of
precision work suggesting that this may be one of the
community's strengths with a potential for further
development. In addition to the categories listed in
the table (central administration, precision operations
and routine work), the authors suggest examining
research and development and entrepreneurship
categories. A number of additional labor merits can be
ranked and used in this type of analysis.
One serious drawback with using this
methodology is the lack of data by stage of product
life. Information for occupational category by types
of manufacturing industry is available on a national
level, and in many cases on a statewide level, through
the Census of Population^ and occupational-industry
statistics.However, examination of data for the
state of Colorado suggests their applicability for this
purpose may be limited at best. The data by industry


24
for various occupations demonstrates little
differentiation by type of industry. For example, in
Colorado the industries of food processing, apparel and
furniture demonstrate very similar labor occupation
profiles. Table 2, on the following page, presents
partial data for the major manufacturing categories in
Colorado for 1977. Note the similarities in labor
occupations among types of manufacturing firms.
The Thompsons apply the occupational targeting
method to metropolitan communities in Ohio and initial
findings demonstrate the usefulness of this technique.
The method may be less useful in nonmetropolitan
communities, particularly when a large number of
resource-based counties face similar problems. For
example, layoffs which result from the recent decline
in the mining industry will lead to unemployment in all
sectors of the mining industries, from research
chemists to hard rock miners. In this example, it is
unlikely that the occupational approach could identify
economic potentials. However, the method may be used
to identify alternative types of employment for a
specific class of employees. Should a firm lay off a
specific category of workers, such as precision
machinists, analysis of industry occupations could be


TABLE 2
OCCUPATIONAL CHARACTERISTICS FOR COLORADO MANUFACTURING INDUSTRIES
SIC Industry Type of Employment (%)
Managers and Officers Profes- sional Occup. Techni- cal Occup. Service Occup. Maintenance and Production Clerical Occup. Sales Occup.
200 Food & kindred prod. 9.3% 0.8% 0.9% 3.2% 72.3% 10.1% 3.4%
230 Apparel & other mdse. 9.3% 1.3% 1.0% 74.9% 11.0% 2.5%
240 Lumber & wood prod. 7.3% 1.5% 0.8% 1.5% 80.9% 6.3% 1.9%
250 Furniture & fixtures 7.4% 1.3% 1.8% 0.9% 75.1% 9.6% 3.9%
260 Paper & allied prod. 8.1% 1.2% 1.2% 72.5% 11.5% 5.7%
270 Printing & publishing 10.5% 9.4% 1.1% 1.3% 52.1% 20.8% 4.9%
300 Rubber & plastics 10.4% 7.1% 2.4% 1.9% 62.1% 14.5% 1.6%
310 Leather, leather prod . 6.6% 4.1% 1.9% 73.3% 10.4% 3.8%
320 Stone, clay & glass 8.5% 6.3% 3.1% 0.8% 68.6% 10.4% 2.4%
340 Fabricated metal prod . 7.2% 5.2% 3.3% 1.2% 72.4% 9.0% 1.7%
350 Machinery, exc. elect . 9.1% 10.0% 7.3% 0.9% 59.7% 11.7% 1.4%
360 Electric & elec, eqpt . 7.0% 9.6% 12.9% 0.6% 53.0% 15.6% 1.4%
370 Transportation eqpt. 6.0% 34.05 4.3% 1.8% 42.6% 9.9% 1.4%
380 Instruments & related 8.4% 19.4% 10.5% 2.0% 43.1% 15.1% 1.5%
390 Misc. mfrg. indus. 10.5% 26% 0.5% 1.2% 69.7% 12.6% 3.3%
SOURCE: Colorado Division of Employment & Job Training:
Report of the Colorado Occupational Employment
Statistics Survey^Denver, Colorado, July 1978),
pp. 34-201.
to
Ln


f
26
used to identify alternative industries which might
employ these workers.
The Location Quotient
In the book Regional and Local Economic
Analysis for Practitioners, Avrom Bendavid-Val
identifies two methods of "Relative Regional Industrial
Composition Analysis."11 These methods are the
location quotient and mix-share (or shift-share)
analysis. Both of these methods compare a community or
regional economy to some larger regional, state or
national economy. The intent of these measures is to
identify the "relative" standing of the smaller region
compared to the larger region. This section of the
chapter examines the location quotient and the
following section evaluates shift-share analysis.
The location quotient is a ratio of ratios
which compares the relative specialization in a
selected industry of some region to that of a larger
region. The form of the location quotient (LQ) is:
Manufacturing Employment of Community
LQ = Manufacturing Employment of Larger Region
Community Total Employment
Larger Region Total Employment


27
Using this ratio, it is possible to determine a
region's relative share of employment for any sector of
the economy.12 The value of the location quotient
is indicative of the relative specialization of the
region. With a location quotient of
* less than 1, the area of concern is less
specialized than the larger region;
* greater than 1, the area of concern is more
specialized than the larger area;
* equal to 1, the specialization of the area is
the same as the larger area.
The following table presents employment data and
associated location quotients for a hypothetical
region.
TABLE 3
HYPOTHETICAL EMPLOYMENT DATA AND
LOCATION QUOTIENTS
Category (No Employment of persons) % of Total Manufacturing LQ
REGION X
Pood and kindred products employ- ment 25 25/100 = .25
Total manufactur- ing employment 100 . 25/.50 = .5
NATION
Pood and kindred products employment 500 500/1000 = .50
Total manufacturing employment 1000


28
In the example in Table 3, the location quotient for
Region X is one-half. This suggests that relative to
the nation, the region has a much smaller proportion of
its manufacturing labor force involved in Food and
Kindred Product manufacturing. The factor suggests
that the region is less specialized in that industry
than the nation as a whole. While this fact may be
interesting to the analyst, the reasons behind this
specialization should be the analyst's main concern.
The location quotient itself only identifies
points of relative strengths and weaknesses of a
region, but the analyst must utilize this information
to determine how these strengths and weaknesses can be
tapped. For instance, a location quotient greater than
one suggests that the region is more specialized
relative to the nation in that industry. This may
suggest that spin-off industries could be generated
because of the relative strength.
The simplicity of the location quotient makes
it a complementary technique to many other forms of
regional analysis, including time series analysis,
input-output analysis and other techniques. However,
the tool, as a relative measure, must be used


29
cautiously and by itself does little toward identifying
industrial targets.
Unfortunately, the ease with which the location
quotient is computed can lead to its overuse and to
an overstatement of its significance. It is, at
best, a rough, descriptive indicator. Results of
location quotient computations will be seriously
influenced by the level of disaggregation of the
specialization variables selected, the choice of
reference variables, the choice of reference areas,
and the choice of years for which it is computed.
It will be found, too, that a location quotient
computation produces results of inconsistent
significance for different industries.
Furthermore, the caveats implicit in any interareal
comparison apply as well to the location quotient.
Interareal differences in tastes and needs, levels
of income, family sizes, exploitable resources,
labor practices, and, therefore, economic structure
require that statistical,results of location
quotient computations receive cautious analytical
interpretation.13
An additional application of the location
quotient will be presented in the discussion of
input-output analysis.
Shift-Share Analysis
As with the location quotient, shift-share
analysis can be used as a relative measure of a
regional economy. Any indicator, such as dollar output
or employment, can be used in the analysis, but
employment is the most frequently used measure as data
are easily obtained.


30
Shift-share analysis provides a relative
comparison of three separate factors affecting the
regional economy: national growth, changes in the
industrial mix, and the share of the regional
employment relative to the nation. This type of
analysis allows the analyst to measure the performance
of local industries relative to national industries.
Like the location quotient, the measure is calculated
using ratios of local data and a larger area, for
example, the state or nation.
Using shift-share analysis, the analyst can
identify local growth industries (relative to the
larger area). Shift-share does not identify the
underlying cause of growth, and therefore these simple
ratios can be misleading if the analyst relies solely
on quantitative results. In summary, these relative
measures are best used as general indicators to
identify sectors of the economy which merit further
study.
Industrial Location Theory
Industrial location theory is an attempt to
identify patterns in firms' locational decision and


31
the causes behind those locational patterns. In
researching economic development issues, it becomes
apparent that there are two views of the process: that
of the community and that of the firm. The economic
developer represents the community's method of
attracting firms, while the site planner represents the
firm's instrument to determine what location will best
serve the firm's needs.
The methods presented earlier, including the
descriptive approach, occupational analysis, location
quotient and shift-share analysis, represent methods of
examining a community's assets. This section examines
methods that identify the firm's needs and how the firm
determines the best location when faced with a number
of sites to choose from. Specific topics in this
section include industrial site determinants,
industrial location search costs, and the comparative
cost method of site selection.
Industrial Site Determinants
The study of industrial site determinants
provides the economic developer with information
about how the firm chooses a location for construction
of a plant or for expansion of an existing operation.


32
By developing an understanding of this process, the
developer can evaluate the probability of attracting a
particular type of firm, and assuming community
resources are available, can mold the infrastructure in
the community to enhance that probability.
A number of site determinant studies have been
completed (Wheaton (1971), IDRC (1977), and Keishnick
1
(1984)). While these studies have generally presented
similar findings about what attracts firms to a
location, the study by Keischnick delineates the site
demands of new firms and branch plant developments
separately. The study was performed by the Council of
State Planning Agencies. The goal of the study was to
determine the relative importance of tax incentives to
firms, but through the study the locational factors of
critical importance were also solicited. The following
paragraph presents the site determinants identified as
most important by both new firms and new branch plant
developments.
New firms are very concerned with the size of
their markets, with access to a growing market and
current customers most important. Personal reasons
of management are also very frequently mentioned.
After these factors, a number of 'supply' factors
are considered to be important: access to raw
materials, availability of capital, supply of
skilled labor, and transportation are frequently
mentioned. Familiarity with the local economy is


33
considered quite important as well. Business taxes
are of only modest importance, as are personal
taxes. The political climate and air quality
regulations, which are frequent topics of political
discussion, are rarely considered by new
businesses. .
For new branch plants, labor market concerns
particularly the supply of both skilled and
unskilled laborwere deemed most important. In
addition, the presence of unions was seriously
considered. In contrast to both new firms and
expansions, the state business tax structure was
considered generally important. Somewhat
surprisingly, market factorseither access to a
growing market or to current customerswere seen
as relatively unimportant.^
It is interesting to note the sharp
distinctions in site determinants by these two
categories of prospects. To the economic developer
that is attempting to attract firms, it will be useful
to know that new firms are concerned with markets,
availability of supplies for production as well as an
understanding or familiarity with the local economy.
Branch plants, however, are concerned largely with
cost-reducing factors such as labor supply and tax
incentives. Armed with an understanding of the sharp
contrast in needs of these two types of industrial
prospects, an economic developer can present the
attributes of his community to a prospect or modify his
community's incentive package. The number of
prospective industrial targets can be reduced by


34
understanding their industrial needs, and the
community's strengths can be packaged to meet those
needs.
An understanding of industrial site
determinants will be beneficial to an economic
developer, however, this broad understanding is not
sufficient to attract firms. A developer must know
what specific firms require in a site, not what
generally affects their decisions. It is not feasible
that an economic developer could understand the needs
of all types of industries and firms, but by combining
community assessment methods with an understanding of
site determinants, the developer can gradually reduce
the universe of industries to potentially prospective
industrial candidates.
Industrial Location Search Costs
Many firms searching for new plant sites and
expansions have limited time and budget to identify
potential sites. These limitations can drastically
reduce the area covered by an industry's site search,
thereby eliminating a number of communities as
prospective candidates.


35
An important qualification to these models of
business investment and location behavior is that
information about prices, markets, and costs is
costly for both the present and future. This
costly process of acquiring information will
directly affect location decisions. A profit
maximizing process of investment decisionmaking
requires accurate information about each project at
each possible location. If the costs of search
increase less than proportionately to project size,
firms undertaking smaller projects could be
expected to search less than those undertaking
larger projects. Similarly, since information
obtained in a search for new locations by a
multiplant firm can be used by units other than the
prospective venture, we should expect multiunit
firms, controlled for size, to search more widely
than single-unit firms. .15
In this paragraph Kieschnick (1984) identifies
a number of issues which are not commonly identified in
economic development literature. A firm's searching
for new locations will be related to the size of the
project and the cost of the search process. This
suggests that communities may be less likely to attract
fewer small new firms than large new firms because of
the search costs involved. This may have an even more
significant impact on nonmetropolitan communities, as
the cost of searching numerous nonmetropolitan
communities is probably higher than comparable searches
in metropolitan communities.
Communities frequently send promotional
materials to firms and advertise in trade journals and


36
business magazines, attempting to identify firms
seeking to relocate or expand, and thus to introduce
the community to the firm. This process reduces search
costs to the firm and improves the community's chances
of attracting a firm.
Information for industries about communities
may be delivered in a number of forms. Some of the
most common include the community brochure, trade
associations and publications, direct mail campaigns,
advertising and news releases, and site tours.
This understanding of the search process
undertaken by firms can assist -communities in designing
effective promotional materials.
A region (perhaps a state or larger) is first
selected on the basis of such factors as the size
of the potential market, the general level of labor
costs, or the existence of a reliable supply of a
natural resource. Within that region, a number of
communities will be examined in much greater
detail, with specific information collected on the
cost and availability of different types of labor,
land, transportation, taxes, and other spatially
varying factors.16
The Comparative Cost Approach
In Method of Regional Analysis by Walter Isard,
a methodology is described which allows firms to
evaluate alternative sites with respect to economic
feasibility. The method is called the comparative cost


37
approach, and "The objective of the study is to
determine what region or regions the industry could
achieve its lowest total cost of producing and
delivering its product to market."1? The method as
described is potentially useful to the firm. However,
it seems that the method may be useful to the region
seeking firms as well.
As the method is described in the text by
Isard, many factors of production will have the same
relative cost among different sites, but Isard notes:
Since the difference in total cost from
region to region is the important magnitude, it
becomes clear with further reflection that the
regional comparative cost study need consider only
the production and transport cost elements which
actually differ from region to region. The
components of production and transport cost that do
not vary regionally in amount may be ignored; they
give rise to no regional advantage or -
disadvantage.^
Therefore, the relative differences in transportation
costs and production costs are the concern of the
analyst, not the cost of the whole production process.
The method could potentially be utilized by the
economic developer to identify the study area's
transportation and production cost differences relative
to competitive communities. By knowing the magnitude
of these differences, the analyst may identify


38
categories of products which could be produced
competitively. For example, a community that
identifies that transportation costs are high relative
to other communities would concentrate on industries
that did not require significant transportation.
However, low production cost alone is not a sufficient
basis for an industry to locate in a region.
More broadly speaking, from a cost stand-
point a region may be ripe for industrial
development. Yet because of native attitudes,
cultural patterns and institutions, and other
noneconomic factors, attempts at industrial
development are aborted.19
Given these limitations it is unlikely that
many nonmetropolitan communities would be able to
utilize this methodology to research a wide range of
firms. It is more likely that some form of a
comparative cost study would be performed for a few
select industries which had already been identified as
potential targets.
Matching Community Attributes with
Industrial Requirements
Up to this point we have described methods of
examining a community's comparative advantage, and
methods to identify a firm's locational requirements
and decision-making process. Both categories of


39
techniques provide necessary insight to the economic
developer, but both categories have been one-sided:
comparative advantage details the community, while
industrial location theory provides an understanding of
industrial needs.
A community attempting to encourage and
stimulate economic development must successfully match
its attributes with a firm's needs. The two methods
presented on the next few pages are means to match
these attributes and needs. The first method is the
screening matrix which serves as a guide for
communities to perform this matching process, assuming
the community attributes and industrial requirements
are known. The second is an application of
input-output models.
The Screening Matrix
A method of industrial targeting that is
frequently employed by private consultants is the
screening matrix. A handbook of the Economic
Development Administration, prepared by Battelle,
Columbus Laboratories, provides an outline of the
screening methodology.
The industry screening matrix is an orderly
system which may be used to identify manufacturing


40
industries which are either feasible and/or
desirable for a given geographic area, i.e., city,
town, county, etc. Feasibility and desirability
are terms which refer to the compatability between
the industry and the given geographic area and the
degree to which the community feels the industry
can satisfy its developmental needs. .
The screening process itself is made up of the
following components which collectively allow one
to systematically examine large numbers of
manufacturing industries and select those which
exhibit certain predetermined characteristics:
* A list of industry specific variables
such as wages, skill requirements, and
types of transportation required
* A bridge which allows the developer to
relate characteristics of his community
to the requirements of industries
* A detailed data base which presents
objective descriptions of the locational
requirements of individual manufacturing
activities.20
In effect, the listing of product requirements by
industry is compared with community amenities to
determine which industries would best fit into the
community. A listing of screening matrix variables is
presented in Table 4.


41
TABLE 4
SCREENING MATRIX VARIABLES
Employees Per Establishment
Average Hourly Wages
Percent of Urban Orientation
Land Area Per Establishment
Percent of Shipments by Rail
Percent of Shipments by Motor Carriers
Natural Gas Per Establishment (cu.ft./day)
Fuel Oil Per Establishment (barrels/day)
Water Use Per Establishment (gals./day)
Water Discharge Per Establishment (gals/day)
Forward Linkage Present
Backward Linkage Present
Percent of Professional and Technical
Percent of Craftsmen
Percent of Laborers
Percent of Females in Work Force
SOURCE: U.S. Department of Commerce, Economic
Development Administration Handbook, Community
Level Target Industry Identification Program.
(Washington, D.C.: U.S. Government Printing
Office, December 1976) pp. 112, 113.
Developing the data requirements for the
screening matrix is beyond the capabilities of most
nonmetropolitan communities. To provide accurate
estimates of every industry's screening variable is an
immensely difficult task. The potential for variation
in data is very large and would reduce the
effectiveness of the model. For example, the task of
assigning an average hourly wage for employees within
industries is very difficult. Regional variation, firm
management variation and numerous other factors make


42
any estimate questionable. Yet, if one assumes that
variables can be estimated for industries and the
community's resources can be successfully estimated, it
would be possible to compare the requirements of each
industry to the attributes of the community and attempt
to identify "matches." However, unless the process
were computerized, it would be an unmanageable task to
perform this type of analysis with an adequate level of
detail. It is likely that many analysts do compare
industry requirements and community attributes at the
level of detail suggested in Table 4, but only after an
industry has been scrutinized and has been determined,
through other means21, to have a high probability
of locating in the community.
Input-Output Analysis
From the academic's point of view, one of the
most valuable tools of regional analysis is
input-output (1-0) analysis. 1-0 analysis is a method
of examining interindustry relationships. Input-output
analysis is performed using matrix algebra.
The process requires detailed information on
resource and payment transactions among the industries
in the economy. Through matrix algebra, it is possible


43
to derive a direct requirements table which shows the
required inputs from suppliers per unit of output
produced, for each industry in the economy.
Numerous publications demonstrate the
construction of the input-output table, and our concern
here is less on the construction and more on the
application of input-output to targeting. However, a
word of caution is necessary at this point. '
Input-output is a data-hungry analysis which requires a
computer model to perform the analysis. Input-output
data can be utilized without constructing an 1-0 table
from scratch, as long as the limitations of 1-0 and the
corresponding data base are understood.
Input-output analysis is highly respected and
pursued by a variety of agencies. This is because the
level of detail the analysis provides is much greater
than any other form of analysis. Using input-output
analysis, the analyst can identify the extent of
interindustry exchange, the linkages between
industries, and a number of other factors which serve
to detail the economy and the industrial requirements.
The 1-0 provides a model of the interaction of industry
and the community which cannot be detailed by other
methods. Unfortunately, the complexity and cost of 1-0


44
modeling frequently prevents its use as an aid to
economic development analysts.
One method which may have potential for
economic developers has been developed by Fannon
(1982). In her unpublished thesis,22 she describes
a method of utilizing national input-output tables as a
guide to interindustry transaction. Using the location
quotient, regional employment in an industry is
compared to national employment and the relative
strength of the industry in the community is
determined. Additionally, the methodology can be
utilized to identify potential support industries. For
example, if in a region shoe manufacturing is a basic
industry, the analyst can examine the national
input-output tables and determine which industries
provide resources to the shoe industry. These support
industries could potentially be targeted by the
community. This is one of the few methods that
provides a systematic approach to identifying new
industries to target. There are numerous problems with
this method, some of which were mentioned earlier in
the discussion of the location quotient.


45
Summary of Methods
Methodologies which have been presented in this
chapter represent only a sampling of the methods
available for community assessment and targeting
industries. The intent has been to demonstrate a wide
variety of the available methods and those which have
greatest applicability to the needs of nonmetropolitan
communities. Except for the screening matrix and
input-output analysis, the methods can be applied
easily and at low cost. A summary of these
methodologies is presented in Table 5 on the following
page.
The majority of the methods presented rely on
secondary data sources which are widely accessible.
Most of the methods allow the user to identify
industries to target on a four-digit Standard
Industrial Classification (S.I.C.) basis.23 it has
been reported by economic developers in the state of
Colorado that progressing beyond the four-digit S.I.C.
to the individual firm name to target is a difficult
transition. Typically, communities who have progressed
to the four-digit S.I.C. level purchase a listing of
industries within that classification. However,


TABLE 5
SUMMARY OF METHODS
COMMUNITY ASSESSMENT AND INDUSTRIAL TARGETING
Community Assessment_________Attributes
Limitations
Descriptive/Historical Provides a feel of comparative advantage
Method Includes historical development
Provides an inventory of existing industry
Non-quantitative
Does not identify targets
Occupational Targeting A new complementary method
Focuses on the human resource
Provides competitive ranking
May be of limited use
Little differentiation
among categories
Location Quotients Identifies industrial strengths
Indicates potential spin-offs
An approximation
A relative measure
Lacks explicative capacity
Shift-Share Analysis Identifies growth industries
A relative measure
Industrial Location
Site Determinants
Ranks industrial requirements
Elicits strengths of incentives
Not industry-specific
Comparative Cost
Delineates economic feasibility
Neglects non-economic
factors
Difficult to apply to
broad industrial sectors
Community/Industrial Matches
Screening Matrices Compares industrial requirements with
community attributes
Requires extensive data-
base
Input-Output Analysis Detailed model of economy
Expensive
Data-hungry
Requires expertise


47
depending on the category, this listing may yet include
a wide variety of actual firm types and sizes. The
community must then distill this broad listing of firms
and attempt to target only those firms which have the
resources and capabilities to expand or relocate. In
effect, the community is performing the targeting
operation on a separate level.
Despite these problems, the targeting
methodology presented should allow communities to weed
through the almost infinite possibilities and focus
their limited resources on attracting new firms or
plant relocations.


48
NOTESCHAPTER II
^The term "comparative advantage" was first
applied in the field of international economics. The
concept describes why communities specialize in the
production of a particular mix of goods and services.
^Opportunity costs are the measure of
foregone opportunities. For example, storing money in
a mattress rather than in a savings account incurs
opportunity cost equal to the interest that could have
been earned. Likewise, the community with workers who
are unemployed when they could be working experiences
an opportunity cost.
3william E. Nothdurft, Renewing America:
Natural Resource Assets and State Economic Development
(Council of State Planning Agencies, Washington, D.C.:
1984) p. 164.
4Ibid. p. 165.
^Graham L. Jones, "Identifying Potential
Industrial Prospects Through Analysis of Economic
History, Existing Industry and Area Assets: Campbell
County, Virginia" (Norman, Oklahoma: American
Industrial Development Council, University of Oklahoma,
1980) p. 12.
8Ibid. p. 63.
^Wilbur R. Thompson and Philip P. Thompson,
"From Industries to Occupations: Rethinking Local
Economic Development," C.U.E.D. (Washington, D.C.,
U.S. Department of Commerce, Economic Development
Agency), Fall 1985, p. 12.
8Ibid, p. 13.
9u.S. Department of Commerce, Bureau of the
Census, Population Characteristics 1980, General Social
and Economic Characteristics (Washington, D.C.: U.S.
Government Printing Office, 1981).


49
1In Colorado see: Colorado Division of
Employment and Job Training: Report of the Colorado
Occupational Employment Statistics Survey (Denver,
Colorado: July 1978).
^Avrom Bendavid-Val, Regional and Local
Economic Analysis for Practitioners (New York: Praeger,
1983) pp. 75-78.
l2Ibid. p. 77.
13Ibid. pp. 77, 78.
^Michael Kieschnick, Taxes and Growth:
Business Incentives and Economic Growth (Washington,
D.C.: Council of State Planning Agencies, 1984)
p. 108.
I5ibid. p. 37.
16ibid.
17Walter Isard, Methods of Regional
Analysis (Cambridge: MIT Press, 1960) p. 233.
1Ibid. p. 235.
19Ibid. p. 244.
^Missouri State Division of Commerce and
Industrial Development, Handbook for Develoipment of a
Community Level Target Industry Identification Program
(Washington, D.C.: Economic Development Administration,
1976) pp. 104-114.
21"Other means" of analysis that can reduce
the number of industries would include many of the
methods presented in this chapter.
22Kathleen Fannon, "One Step Beyond:
Combining Location Quotients with Input-Output Models
to Identify Industrial Support" (Missouri Division of
Commerce and Economic Development, Jefferson City,
Missouri), 1984.
23U.S. Department of Commerce, Standard
Industrial Classification Manual (Washington, D.C.:
U.S. Government Printing Office, 1972).


CHAPTER III
ECONOMIC DEVELOPMENT IN
WESTERN COLORADO
To provide an understanding of the actual
problems and potentials facing economic developers in
nonmetropolitan communities, this chapter of the thesis
examines the economic development efforts of
communities in western Colorado. The information for
this chapter comes from a number of sources, including
printed materials from communities, interviews with
state and local agency officials, and a survey of
western slope economic development officials.
The Study Area
The study area for this thesis is the western
portion of the state of Colorado. The area is
bordered by the state boundary on the north, west and
south, and by the continental divide on the east, as
shown in the map on the following page. This area is


COLORADO
MOFFAT
ROUTT
GARFIELD
JACKSON
GRAND
EAGLE
MESA
DELTA
MONTROSE
PITKIN
GUNNISON
LAKEJ
SAN MIGUEL
DOLORES
1RAY
-'JUAN
1INSDALE
-SUMMIT
STUDY AREA
BOUNDARY
STATE AND 1
W MONTEZUMA J 1 COUNTY BOUNDARY |
1 f' LA
/ PLATA ARCHULETA 1
Figure 1
Western Colorado Study Area
U1


52
divided into five state planning regions, 9, 10, 11, 12
and 13, which will facilitate our analysis. (Note that
only Lake County is included in the analysis from
Region 13.) This portion of Colorado is largely rural
with only one county, Mesa, having a population of over
25,000 persons. Population statistics for each of
these study area counties and regional totals are
presented in Table 6 below.
In data from the 1980 census of population,
only Mesa, Moffat and Gunnison Counties indicate that
over fifty percent of their populations live in
nonrural areas.
The study area is unique in that a number of
types of dominant resource-based communities are
present. Table 7 shows the basic employment categories
for each of the counties in 1980. This data, from the
1980 census, shows that 6 of the 22 counties have 50%
of their basic employment in the basic resource sectors
of agriculture, forestry and mining.1 it is
understandable that many of the western slope
communities have attempted to diversify toward non- ..
resource-based sectors, particularly since in the past
decade these resource-based sectors have been volatile,
demonstrating large boom and bust cycles.


53
TABLE 6
STUDY AREA POPULATION BY COUNTY
Rural
Population
Popul ation________ Percent
County 1960 1970 1980 1985 1980
Region 9: 58,402 54.0%
Archuleta 2,629 2,733 3,664 5,160 100.0%
Dolores 2,196 1,641 1,658 1,706 100.0%
La Plata 19,225 19,199 27,424 31,439 58.3%
Montezuma 14,024 12,952 16,510 19,154 57.0%
San Juan 849 831 833 943 100.0%
Region 10: 68,589 63.2%
Delta 15,602 15,286 21,225 25,032 81.5%
Gunnison 5,477 7,578 10,689 11,236 45.9%
Hinsdale 208 202 408 543 100.0%
Montrose 18,286 18,366 24,352 26,364 64.2%
Ouray 1,601 1,546 1,925 2,127 100.0%
San Miguel 2,944 1,949 3,192 3,287 100.0%
Region 11: 143,414 33.3%
Garfield 12,017 14,821 22,514 25,892 65.1%
Mesa 50,715 54,374 81,530 96,661 26.8%
Moffat 7,061 6,525 13,133 14,320 38.1%
Rio Blanco 5,150 4,842 6,255 6,541 100.0%
Region 12: 69,272 66.3%
Eagle 4,677 7,498 13,320 17,654 100.0%
Grand 3,557 4,107 7,475 9,609 100.0%
Jackson 1,758 1 ,811 1 ,863 1,699 100.0%
Pitkin 2,381 6,185 10,338 11,761 64.4%
Routt 5,900 6,592 13,404 15,193 62.0%
Summit 2,073 2,665 8,848 13,356 95.9%
Region 13 (Partial):
Lake 7,101 8,282 8,830 7,180 56.1%
SOURCE: U.S. Department of < Commerce, Bureau of the
Census, 1980 Census of Population, General
Population Characteristics (Washington, D.C.
U.S. Government Printing Office, 1981)
pp. 7.8-7.11
Colorado State Demographer, Annual Population
Estimates (Denver, Colorado, 1985)


TABLE 7
ANALYSIS OF BASIC EMPLOYMENT BY COUNTY
IN WESTERN COLORADO
Resource-Based Employment as a Percent of
Basic Employment
Total
Resource-
Based
County Agriculture Forestry Mining Employment
Region 9:
Archuleta 22.6% 9.3% 3.6% 35.6%
Dolores 25.2% 0.0% 42.1% 67.3%
La Plata 12.8% 4.4% 6.4% 23.6%
Montezuma 13.5% 3.2% 13.3% 30.0%
San Juan 0.8% 0.8% 71.2% 72.9%
Region 10:
Delta 27.4% 2.4% 26.0% 55.7%
Gunnison 17.4% 4.7% 17.5% 39.6%
Hinsdale 26.4% 4.6% 11.5% 42.5%
Montrose 21.1% 0.9% 19.0% 41.0%
Ouray 32.5% 0.0% 16.0% 48.5%
San Miguel 15.0% 1.9% 28.0% 44.8%
Region 11:
Garfield 11.4% 3.1% 28.8% 43.3%
Mesa 8.1% 0.3% 15.1% 23.5%
Moffat 8.3% 0.2% 36.2% 44.7%
Rio Blanco 13.7% 0.8% 43.4% 57.9%
Region 12:
Eagle 10.7% 1.2% 5.0% 16.9%
Grand 15.1% 4.6% 21.7% 41.4%
Jackson 39.7% 4.0% 25.1% 68.9%
Pitkin 11.8% 0.0% 4.2% 16.1%
Routt 9.0% 3.2% 25.1% 37.3%
Summit 2.5% Region 13 (Partial): 0.8% 19.4% 22.7%
Lake 0.0% 0.3% 77.4% 77.7%
SOURCE: U.S. Department of Commerce, Bureau of the
Census, 1980 Census of Population, General
Population Characteristics (Washington, D.C.
U.S. Government Printing Office, 1981)
pp. 7.251-7.259.


55
The area's diversity makes it a unique study
area. Additionally, the counties in Region 11 suffered
severe setbacks during the oil shale bust. Economic
development efforts have been essential in these
hard-pressed counties.
Survey of Economic Development Officials
In an effort to attract new industries, many of
the communities on the western slope of Colorado have
established economic development programs. To provide
an understanding of the level and types of community
assessment and industrial targeting that are being
performed in western Colorado, a survey was distributed
and mailed to economic development officials of the
area. Copies of the questionnaire and cover letters
are presented in Appendix A of this thesis.
The focus of the questionnaire was to determine
the extent of industrial targeting and the methods
being used by nonmetropolitan communities to assess
their community resources and assets (comparative
advantage), and to attract and encourage industrial
development. The twelve-question survey and cover
letter were handed out to a group of economic
developers and other attendees^ at the


56
November 1, 1985 meeting of the Mountain Area
Developers.3 on November 22, 1985 the same
questionnaire with a modified cover letter was mailed
to economic developers on the western slope. The list
of developers was provided by the western slope office
of the Colorado Department of Local Affairs.
Results of the Survey
The results of the survey are presented in
tabular form in the appendix. To protect individual
responses in the competitive field of economic
development, the author has summarized survey responses
into nondescriptive, generic categories (e.g., a
response to the question about targeted sectors of
"processing animal hooves into glue" would now appear
under "agricultural processing").
Survey Response
Approximately thirty-five questionnaires were
distributed on November 1 at the Mountain Area
Developers meeting. Of those questionnaires, only five
were returned for a response rate of fourteen percent.
The limited response was probably due to a number of
factors, including a full meeting schedule, meeting
overruns, lack of return envelopes to allow respondents


57
to mail the questionnaire after the meeting, and a
large number of nondevelopers in attendance.
For the November 22, 1985 mailing, the response
rate was thirty-seven percent, as sixteen of the total
forty-three surveys mailed were returned. In this
analysis, overall response rate for both surveys is
insignificant as some individuals received
questionnaires at the meeting and through the mail. Of
the twenty-one surveys returned, sixteen were usable in
r
the analysis. Since the goal of the study is not to
predict but rather to find out about economic
development efforts, the small response rate provides
adequate data for the study. (The other questionnaires
were not completed as the recipient was not aware of
economic development efforts in their community.) The
survey response is presented on the map on the
following page.
A potential bias exists in the survey as the
organizations surveyed were those identified by the
Colorado Department of Local Affairs. This list
includes the active organizations and neglects less
active communities. The results which follow will


COLORADO
Figure 2
Survey Respondents: Location and Agency Represented ^
00


59
present data only for sixteen usable responses. It
must be remembered that the data presented here
provides a feel for economic development efforts in
nonmetropolitan communities. No one model is standard
for all economic development agencies, and goals may be
different, as well as amount of time the agency has
been in operation. In fact, a number of respondents
mentioned that their organizations were just getting
started or were planning major expansion in 1986.
Respondents' Characteristics
Of the usable responses, nine represented
city, town or community economic development
officials, five represented county agencies or
organizations, and two represented regional offices.
In the questionnaire, the respondents were asked to
detail characteristics of their agency, including
manpower, budget and status. The staff size in these
organizations ranged from a single part-time volunteer
to staffs with two full-time employees and several
part-time employees. Regional staffs had "large"
two-employee staffs and towns and counties averaged
less than one full-time person.


60
Operating budgets varied largely among
organizations. To provide a standard unit of measure,
the budget for the economic development agency was
divided by the community, town, city, county or
regional population they served. The results are
presented in Table 8 below. The benefit of this data
is limited since the exact contents of the budget were
not provided by the respondents. In some responses,
available loans appear to be included.
TABLE 8
ECONOMIC DEVELOPMENT EXPENDITURES PER RESIDENT
FOR SURVEY RESPONDENTS
Range of Expenditures by
Type of Region, 1985
City and Town $ 0.75 - $ 9.50
County $ 2.25 - $19.25
Region $ 1.00
SOURCE: 1985 Author's Survey of Western Slope Economic
Development Officials
NOTE: Amounts rounded to nearest $0.25.
Based on the respondents' understanding of their roles
and responsibilities, nine agencies are primarily
public agencies, two agencies were privately funded,


61
and four were public-private. Some confusion may have
resulted from the agencies' abilities to loan
funds.4
Agency Goals
The responses to the question on agency goals
is particularly informative about the way economic
development agencies view their role in their
respective communities. The goals most frequently
listed are presented in Table 9.


62
TABLE 9
ECONOMIC DEVELOPMENT GOALS FROM
WESTERN COLORADO SURVEY, 1985
Number of
Rank __________________Goal_____________ Responses
1 Diversify the economy 13
2 Create more jobs or improve wages 9
3 Expand or assist existing businesses 7
4 Stimulate economic growth 4
5 Stimulate or promote tourism
activities 4
6 Expand tax base 2
7 Stimulate mining operations 1
8 Other 7
SOURCE: 1985 Author's Survey of Western Slope Economic
Development Officials
Based on these survey results, the communities
studied are interested primarily in economic
diversification, job creation and assisting existing
businesses. Since the sample is biased by
resource-based economies, it is not surprising that
economic diversification is a primary goal.
The individual responses varied greatly as to
the level of detail provided on their goals. For


63
example, several agencies described their goals as
"create jobs," while others articulated more defined
goals, such as "create 'x' number of manufacturing jobs
by 1986." While the openness of the question may have
largely accounted for these differences, it is also
probable that level differentiation exists among
organizations.
Agency/lndividual Activities
A question was posed to determine the effort
expended by economic developers to assist local
business, research community potentials, and attempt to
attract nonlocal firms. Wide variations of responses
were made, and the most frequent "Other" responses were
for planning and administrative duties. Fourteen
respondents answered the question and an average of
these fourteen responses suggests that economic
development efforts on the western slope are spent in
the following categories: Fifteen percent on assisting
local.firms, twenty-four percent on assessing
development potentials, sixteen percent on promotion
directed at nonlocal firms, and the remaining
forty-five percent on other activities.


64
Promotional Activities
While eleven respondents answered that some
portion of their time was spent on promoting their
community to nonlocal firms, only ten respondents
mentioned the type of promotional activities they
participated in. Table 10 presents the types of
promotional activities used.
TABLE 10
TYPES OF PROMOTION TO NONLOCAL FIRMS
City
and
County Town
2
1
1
2 2
1
1 4
Type of Promotion Regional
Advertising in general
magazine and newspaper
Advertising in trade journals
Sending promotional materials
to firms
Advertising on radio orTV 1
Attending trade conventions
Other
Telephone
Mail 1
Other
SOURCE: 1985 Author's Survey of Western Slope Economic
Development Officials


65
It is also interesting to note that of the ten
respondents, seven participate in more than one form of
promotional activity.
Community Assessment Procedures for
Nonlocal Promotion
Twelve individuals responded to questions about
their community assessment procedures. In the study
area, three formal community assessments have been
completed and two communities suggested that new
studies are under way. Two of the three targeting
studies that have been completed were done by the same
small group of individuals in the communities of Delta
and Montrose. This group has been very active in
economic development on the western slope. These
communities used a community participation model,
developed by an economic development official who
worked on the eastern slope of the state. The third
study performed by a consultant for the City of Grand
Junction was actually more of a community strength
analysis. This study did not identify industrial
targets, but rather identified characteristics that
might be amenable to particular types of
industries.


66
Targeted Sectors
When questioned about the sectors targeted for
economic development, nine persons responded that
they had specific types of targets. The responses
varied from general categories such as light industry,
to detailed four-digit S.I.C. code industries. The
summary of responses is presented in Table 11
below.
TABLE 11
TARGETED SECTORS IDENTIFIED BY RESPONDENTS
WESTERN COLORADO SURVEY, 1985
________________Industrial Sector______________
Tour- Heavy Mining High Lt.
Agency Agric. ism Mfg. Related Tech Mfg. Other
Regional
Responses 1 1 1
County Responses 6 3 1 1 5
Community Responses 1 1 3 1 8
Totals: 8 5 6 4 2 1 13
SOURCE: 1985 Author's Survey of Western Slope Economic
Development Officials
From the nine respondents, agricultural-related
industries were the most frequently identified target
sectors, followed by tourism and mining. The "Other"


67
category had 13 responses, but these were varied
responses, such as cottage industries. Heavy
manufacturing, tourism and mining-related industries
were also frequently identified by the western slope
developers. High-tech industries were identified by
only two respondents.
Based on these responses, it seems apparent
that many of the communities continue to expect growth
in existing resource-based industries or industries
directly related to the resource-based industries.
Location of New Firms
Seven of the nine persons that responded to
this question indicated that new firms had located
within their region during the past three years. A
total of 22 firms were identified as having located in
the seven areas. It should be noted, however, that a
number of the firms specified as having relocated were
not basic industries and in fact, over half were
service industries. Unfortunately, the question was
not phrased to determine how active the economic
development agency had been in the location of these
firms.


68
The location of the new firms to the respective
areas cannot be considered as an indicator of economic
growth for the communities because many of the new
firms are service organizations, and because no
indication of the number of firms having closed or left
the region was indicated.
Financing Mechanisms
Eight individuals responded to the question
regarding finance mechanisms designed to aid
newly-located firms. Revolving loan funds were the
most frequently identified form of financial
assistance. Industrial revenue bonds and state funding
programs were also mentioned by a number of respondents
as financial incentives. Surprising to the author was
the fact that tax abatement was mentioned by only one
respondent as an incentive. Other mechanisms mentioned
by at least one respondent included joint venturing,
tax abatement or deferment, and a number of other
programs.
Summary of Survey Responses
Because of the diversity of the economic
developers who responded to the Target Industry


69
Community Assessment Survey, the results from the
survey can serve only as a general indicator of
economic development efforts in the region. The survey
mechanism was generally ineffective in coping with the
diverse goals and activities of these agencies. It is
understandable that the agencies which serve this
region do not follow a set structure relating to goals
and objectives because of the diversity in their
respective regions. The author was impressed by the
coordination among developers in the region as well as
their understanding of the mechanisms used to attract
new industries.
Targeting in the region had been performed by
only three of the nine developers responding, yet a
much greater number of respondents suggested that their
community was attempting to attract specific types of
industries. Without further study, it is impossible to
ascertain how those industries were identified.
However, it would appear that targeting, in some form,
could be utilized on a much broader level. The method
identified by communities that had performed targeting
studies in this region had the attribute of enhancing
their respective communities' understanding of the
economic development process.


70
The lack of targeting in the region suggests
that either targeting mechanisms are unavailable,
too complex, or unknown. It is interesting to note
that during the completion of this thesis in April
1986, a handbook on community industrial targeting was
distributed to the group.5 Additionally, a new
targeting method was scheduled for presentation to the
group by one of the group's members who had previously
participated in a targeted industry study. This new
method was identified as a one-day targeting approach. ,
This would suggest that the importance of targeting has
become greater to the group's members.
In summary, it is evident that the need for
economic development in this region of western Colorado
is great. The methodologies used by these
non-metropolitan-based economic developers are
comparable to methods used by their urban counterparts.
Although the scale of urban economic development was
not measured, it appears to the author that the funding
and manpower dedicated by non-metropolitan communities
to economic development is on a much smaller scale
relative to their urban counterparts.
From discussions with the economic developers,
it appears targeting industries by communities will


remain a diverse activity suited to the individual
communities' goals and financial constraints.


72
NOTESCHAPTER III
^Note that for this example a rough
approximation of basic employment has been used. The
total basic employment was estimated as the summation
of agriculture, forestry, mining, manufacturing,
transportation, communication and utilities.
^The Mountain Area Developers' meetings are
open to anyone. Frequently participants may visit who
are not directly involved in economic development.
^The Mountain Area Developers represent a
diverse group of city, county and regional developers
who hold informal meetings to discuss western slope
development issues.
4A variety of funding mechanisms are
available to development agencies. For example, state
funds may be channeled through a county organization.
^Through an organization of Colorado
developers, Thomas Clark's A Guide for Targeting
Industries In Your Community was distributed.


CHAPTER IV
ISSUES IN NONMETROPOLITAN COMMUNITY
INDUSTRIAL TARGETING
As mentioned in the first chapter, a number of
strategies are available to nonmetropolitan communities
attempting to stimulate economic development.
Targeting nonlocal manufacturing firms is one method
discussed in this thesis, but a number of alternative
strategies that focus largely on local resources are
also useful, including reducing leakages, providing
incubators for new start-ups, and financing local plant
expansions. This chapter is designed to temper
economic development efforts which envision targeting
nonlocal firms as a primary strategy.1
The technical problems with targeting
methodologies have been presented earlier, but other
non-methodological problems are also inherent in
targeting strategies and must be addressed. The issues
presented here include: the need for community
participation, the appropriate size and scale of


74
development, quality of life issues related to
development, the benefits of focusing on development
from within the community and the importance of
coordinating with neighboring communities.
Community Participation
As demonstrated in Chapter 2, many tools of
regional analysis have potentials for analyzing a
community's economic assets and development potentials.
One element of the economic development process has
been largely ignored up to this point, the development
of community members' awareness of the economic
development process. The importance of community
participation in the process cannot be overstated.
Improving the community is the. primary goal of economic
development, and an analyst who attempts to determine
what is best for the community, without public input
and support, will have a slim chance of success.
A manual designed to guide the economic
development official in soliciting community
participation has been designed and applied a number of
times in the state of Colorado.2 The manual, A Guide
for Targeting Industries in Your Community,3 presents
a step-by-step approach to compiling, organizing and


75
presenting data, forming a "Target Industry Council"
and soliciting local opinion input about the type
industry the community wants and can support. The
tools of analysis used in the handbook are generally
less rigorous than those presented in Chapter 2 of this
thesis. Many economic development officials suggest
that the awareness, understanding and involvement the
community gains through the process is at least as
important as selecting a realistic target.4
Although several problems have been identified
in the methodology in the manual (including reliance on
Industrial Outlook Forecasts and difficulty of moving
beyond the S.I.C. to firm names), the manual is a
significant step towards mobilizing the community,
which is an important yet difficult process.
Size and Scale of Development
Nonmetropolitan communities face substantial
risk through their economic development efforts.
Resources, both time and money, that are spent on
chasing nonlocal firms could be used locally to expand
existing enterprises or create incubators. Economic
development efforts which focus within the community
allow the community to retain some control over the


76
size and scale of development. Nonlocal industry,
whether a new firm or branch plant, may be managed from
outside the community. Nonlocal management can bring
about numerous problems resulting from a lack of
community awareness and an understanding of local
norms, and disregard for longer-term impacts of
production.
An additional concern when large-scale
operations are initiated in small communities is the
potential for the firm or industry to overwhelm the
planning capabilities of the community. The recent oil
shale boom in western Colorado may not be a typical
example of what normally happens when large-scale
development occurs, but it is certainly an example of
some of the worst consequences that can happen.
Communities on the western slope were largely swept up
in the intensive buildup of industry centered around
shale oil production. Communities attempted to keep up
with the development by planning ahead and developing
infrastructure capable of handling the proposed
expansion, including schools, roads and other public
facilities. When the bust cycle occurred, most
communities were overextended and few had made
contingency plans. This does not suggest that these


77
communities acted improperly, but rather demonstrates
the potential for large-scale development to engulf the
community rather than be directed by the community.
The scale and size of development has the potential to
impact a community's quality of life, political
atmosphere and a number of factors beyond economic
health and stability.
Given this influence, economic developers may
be well advised to consider scale of development prior
to targeting nonlocal firms. The relative scale of
existing firms and the employment, tax base and
stability needs of the community can serve as
guidelines regarding the size of firms the community
attempts to lure.
Quality of Life
During the mid '70s, quality-of-life
considerations reached a peak in American
communities. The population and a number of industries
demonstrated a desire toward settling in the
hinterlands, with quality-of-life considerations
frequently outweighing economic motivations. The
nation demonstrated an environmental consciousness
by numerous regulations and standards that protected


78
the ecosphere, and a number of communities attempted to
control their home turf through planning regulations,
some adopting limited or no-growth policies. These
changes and many others demonstrated the realization of
resource finiteness and the need to cope with the
problems of expanding, producing and extracting too
much, too quickly. The field of economic development .
also underwent changes,^as most agencies moved out of
the smokestack chase and into the high tech, research
and development, and light manufacturing chase.
Economic hardships in many areas have forced some
communities to adjust the relative weight assigned to
quality-of-life issues relative to "more important
concerns," such as job security. A jobs versus
environmental degradation issue may now be an even more
difficult decision.
Focusing Within the Local Community
The extensive competition among communities in
economic development programs (with some adjacent
communities targeting each other's basic industries),
suggests that communities will be losers and unable to
attract new industries. Perhaps isolation, lack of
available work force, poor quality of life or any


79
combination of a number of factors can prevent some
communities from attracting plant relocations,
particularly on a national scale. It may be that for
these underdog communities, the focus on attracting
nonlocal firms is too hopeful. For these communities
the focus should include promoting existing businesses
and exploring the possibilities for new local
start-up.
For a rural community with little potential for
attracting a nonlocal entrepreneur or plant relocation,
opportunities can perhaps be identified which have
significant potentials but have yet to be exploited.
In many instances the targeting should be focused on
basic industries that already exist. "Incubators" is a
frequently discussed topic in many communities. The
incubator concept is to provide some support for
entrepreneurs attempting to start up. Frequently free
land or rent, tax breaks and cash incentives provide
the initial protection for these "hatchlings."
This concept of developing from within allows a
community to devote financial and manpower resources to
foster local efforts. This process keeps the
desperately needed dollars working inside the
community. In this author's estimation, many


80
communities, particularly nonmetropolitan communities,
would benefit more from spending economic development
dollars at home rather than attempting to chase
nonlocal firms.
Coordination Among Regions
An issue related to fostering local growth is
coordination among communities in a nonmetropolitan
region such as the western slope of Colorado. The
western slope lacks a major metropolitan community to
serve as the "regional hub," and therefore many
material resources purchased by the smaller communities
come from the eastern slope.
While research has not been performed to
estimate the total demand by western slope communities
from nonregional sources, it is probable that this
demand is quite substantial. A recent article in a
Colorado newspaper noted that a number of local
computer firms frequently purchased goods and services
from nonlocal sources. Their buying practices were
largely due to the fact that the purchasing firms did
not realize that the products they needed were
available locally. A similar situation may be
identified in many nonmetropolitan economies. It may
be feasible for communities to unite and identify their


81
regional imports, and to work toward providing for the
demand internally or make bulk purchases from the
nonlocal sources. Directories of manufacturers are
frequently suggested as one means to alleviate the
problems associated with firms being unaware of
potential local providers.
A similar issue involves competition among
communities within a region for a prospective new basic
industry. It is not unheard of for an industrial site
planner to travel from community to community within a
region in the attempt to find the "best" incentive
package among those offered by communities within a
region. Competition among neighboring communities can
be destructive and perhaps, in the long term, even
competitive neighbors would benefit from regional
cooperation.
It would seem that in many circumstances
competitive communities would be able to negotiate a
joint offer to the prospective firm. The joint offer
could incorporate some incentives to the firm from each
community, allowing the communities to give up less
individually yet still benefiting by the new firm's
location. In such an example, communities may be able


82
to offer their surplus resources as incentives while
conserving their scarce resources.
Another advantage of regional coordination may
involve communities working together for regional
development rather than each individual community
struggling on their own. In this scenario, communities
could combine resources to establish larger revolving
funds, and receive economies of scale from advertising
and promotion. Tourism generation is an example of
this type of cooperation, where Community A would
inform tourists of the amenities of Community B and
vice versa.


83
NOTESCHAPTER IV
1as mentioned previously, targeting can be
used to examine local industrial potential as well as
nonlocal.
^The manual by Thomas Clark has been applied
in the communities of Fort Collins, Delta and Montrose,
Colorado.
^Thomas Clark, A Guide for Targeting
Industries In Your Community (Region 10 Economic
Development District: Montrose, Colorado, 1985).
^Steve Kolby, Director of Research, Interview
at the Colorado Department of Local Affairs,
November 6, 1985.


CHAPTER V
SUMMARY OF FINDINGS AND FINAL CONCLUSIONS
Stimulating economic development in a community
is a difficult task. The economic developer must
interact with the community to answer a number of
questions, including the following:
I
* What resources are currently underutilized
in the community?
* Which industries can effectively employ
those resources?
* What type of industry is appropriate to mesh
with community values?
* Which firms have the resources to relocate?
Finding the answers to these questions and numerous
related questions requires in-depth understanding of:
(a) the regional economy, (b) how the regional economy
contributes to the state and national economy, and
(c) how basic industries operate and select site
locations.
This thesis has presented a number of methods
for segmenting and analyzing some of the key components


85
which form the community economic system. By examining
the individual building blocks of the economy and how
they interrelate, the economic developer can
potentially identify strengths and weaknesses which can
serve as the focal point for stimulating economic
progress.
In this thesis, a few of the available
descriptive and analytical techniques have been
presented and may be utilized to examine community
resources and identify prospective firms.
Additionally, these methods have been contrasted to the
current practice and experience of one nonmetropolitan
region in western Colorado. The experience of the
economic developers in this region demonstrates that
effort and commitment alone in regional economic
development are not sufficient to stimulate economic
growth. These developers have demonstrated in practice
the need for industrial targeting.
Nonmetropolitan communities face significant
handicaps over urban areas with respect to manpower and
funding for economic development. It has also been
suggested that these shortcomings are compounded by
the lack of economies of scale; that is, urban areas
can afford to staff agencies, provide project funding


86
and develop infrastructure incentives of a much larger
magnitude than their rural counterparts. Clearly,
nonmetropolitan communities face a number of unique
economic development problems.
By applying the methods of community assessment
and industrial targeting, rural communities can more
effectively allocate their limited resources. Another
potentially valuable strategy for rural communities
appears to be coordination with neighboring
communities. By working together, communities may
identify regional leakages that can be reduced.
Potentially, the regional appeal can be enhanced by
communities working together to pool their surplus
resources, increase incentives, and more effectively
market their resources.


SELECTED BIBLIOGRAPHY
Abel, Joseph H., "Targeting as a Tool for Developing
an Industrial Development Strategy for Dupage
County". Norman, Oklahoma: American Industrial
Development Council, Economic Development
Institute, University of Oklahoma, 1984.
Bendavid-Val, Avrom, Regional and Local Economic
Analysis for Practitioners. New York: Praeger
Publishers, 1985.
Blair, John P., Fichtenbaum, R. H., and Swaney, J. A.,
"The Market for Jobs", Urban Affairs Quarterly, New
York: Sage Publications, September 1984,
pp. 64-77.
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Clark, Thomas L., A Guide for Targeting Industries in
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APPENDIX


Full Text

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I I i COMMUNITY ASSESSMENT AND INDUSTRIAL TARGETING FOR NONMETROPOLITAN AREAS by Kurt R. Schumacher B.S., Colorado State University, 1981 A thesis submitted to the Faculty of the Graduate School of the: _I University of Colorado in partial fulfillment of the requirements for the degree of Master of Arts Department of Economics 1986

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This thesis for the Master of Arts degree by Kurt R. Schumacher has been approved for the Department of Economics by Date deV'. ;;2. <{, /2K0 I I

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Schumacher, Kurt R. (M.A., Economics) Community Assessment and Industrial Targeting for Nonmetropolitan Areas Thesis directed by Professor John R. Morris, Jr. Numerous communities throughout the nation are attempting to revitalize their economies by attracting basic industry to their region. The limited number of industrial plant start-ups and relocations, coupled with the intense competition among communities suggests that economic development officials must utilize their resources effectively to become winners in the industrial chase. This thesis examines methodologies for nonmetropolitan communities to evaluate their local economies and identify industrial development potentials. Existing methodologies are presented and evaluated for their use by nonmetropolitan economic development officials. This paper focuses on methodologies which use secondary data sources for the analysis of manufacturing industry potentials. To provide an understanding of current economic development in nonmetropolitan communities, the results of a survey of economic development agencies on the western slope of Colorado are presented, along with a summary of problems facing these communities in their

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efforts to expand their economic base. Toward rectifying-these problems, a number of suggestions are made regarding community assessment and industrial targeting based on the methodologies presented earlier. iv Also presented are a number of qualitative issues that face nonmetropolitan communities seeking nonlocal manufacturing firms. These issues include the efficiency of targeting nonlocal firms, the benefits from infrastructure investments, quality of life considerations, and a discussion of the size and scale of development.

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CONTENTS CHAPTER I. INTRODUCTION.. 1 The Scope and Purpose of this Paper...... 6 Manufacturing Firms.................... 6 Nonmetropolitan Communities............ 7 Thesis Organization...................... 8 Notes 10 II. THEORY AND METHODS OF COMMUNITY ASSESSMENT AND INDUSTRIAL TARGETING 11 Comparative Advantage l2 Methods of Determining Comparative Advantage............................ 15 Descriptive/Historical Methods 16 Occupational Targeting .. 20 The Location Quotient 26 Shift-Share Analysis 29 Industrial Location Theory 30 Industrial Site Determinants 31 Industrial Location Search Costs 34 The Comparative Cost Approach 36 Matching Community Attributes with Industrial Requirements 38

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vi CONTENTS (Continued) CHAPTER The Screening Matrix ..... 39 Input-Output Analysis ... 42 Summary of Methods... 45 Notes. . . . . . . . . 48 III. ECONOMIC DEVELOPMENT IN WESTERN COLORADO 50 The Study Area........................... 50 Survey of Economic Development Officials... . . . . . . 55 Results of the Survey ..... 56 Survey Response .. 56 Respondents' Characteristics 59 Agency Goals........................... 61 Agency/Individual Activities 63 Promotional Activities ..... 64 Community Assessment Procedures for Nonlocal Promotion ... 65 Targeted Sectors ...... 66 Location of New Firms .. 67 Financing Mechanisms ..... 68 Summary of Survey Responses 68 Notes.................................... 72 IV. ISSUES IN NONMETROPOLITAN COMMUNITY INDUSTRIAL TARGETING 73 Community Participation ... 74 Size and Scale of Development 75

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CHAPTER vii CONTENTS (Continued) Quality of Life 77 Focusing Within the Local Community 78 Coordination Among Regions............... 80 Notes .. 83 V. SUMMARY OF FINDINGS AND FINAL CONCLUSIONS 84 SELECTED BIBLIOGRAPHY.............................. 87 APPENDIX. 91

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viii LIST OF TABLES Table 1 Sample Community Ranking of Labor Force Characteristics................... 22 2 Occupational Characteristics for Colorado Manufacturing Industries....... 25 3 Hypothetical Employment Data and Location Quotients...................... 21 4 Screening Matrix Variables................. 41 5 Summary of Methods: Community Assessment and Industrial Targeting..... 46 6 Study Area Population by County........... 53 7 Analysis of Basic Employment by County in Western Colorado.............. 54 8 Average Economic Expenditures per Resident for Survey Respondents Western Colorado Survey, 1985........... 60 9 Economic Development Goals from Western Colorado Survey, 1985........... 62 10 Types of Promotion .to Nonlocal Firms Western Colorado Survey, 1985........... 64 11 Targeted Sectors Identified by Respondents Western Colorado Survey, 1985........... 66

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ix FIGURES .Figure 1 Western Colorado Study Area 51 2 Survey Response: Location and Agency Represented 58

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CHAPTER I INTRODUCTION In the past, the location of industrial facilities was determined largely by a firm's cost structure. A firm would evaluate the costs of production including such factors as labor, raw material, land, taxes and transportation costs. The firm's optimUm site would be the location with the lowest total production and distribution costs. During the past two decades, changes in the production processes of industries and in the receptiveness of states, counties, cities and communities hosting these industries have altered the location selection process. Today fewer firms are tied to a resource base which means that transportation costs are lower relative to total costs and the industries are therefore more footloose. Additionally, many development organizations realize the employment and monetary benefits to their region from basic industry. Communities throughout the nation are competing for new plant construction and relocations

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touting cash incentives, free land, and tax deferments to bait new industries. The end result is that the more mobile firms potentially face lower production costs, reduced risk and a wider variety of plant site options. This.phenomena has been described by John Blair as "The Market for Jobs." The emergence of the market for jobs is evidenced by the rapid increase in the number of states that offer a wide array of business location incentives. Between 1966 and 1980, the number of states offering various tax exemptions or moratoriums increased across the board by 89% (Industrial Development, 1981). Forty-six states tax exemptions on raw materials and goods in transit, compared to 32 in 1966. The number of states providing inventory tax exemptions increased even more dramatically, from 19 to 43; and exemptions on new equipment were offered by 16 states in 1966 compared to 36 in 1980. City and county .revenue bond financipg was available in 23 states in 1966, as compared to 47 in 1980, and the number of states offering other forms of state and local bond financing also increased dramatically. The seven incentives identified by the Industrial Development Research Council in 1977 as 'most important' to firms considering relocation, expansion, or new facilities were available in twice as many states in 1980 as in 1966 1 Given the ability of communities to affect a firm's plant location decision and the competition among communities to attract new industry, communities 2 must work not only to attract and promote new industry, but to retain existing industries as well. State and local development programs are not new, but in the past few years, most have been rejuvenated. The title

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3 "industrial developer" and its negative connotations have been discarded for the more acceptable title, "economic developer." The renewed interest in economic development may have been stimulated by a number of factors, including a reduction in governmental transfers, an increase in public-private partnerships, or perhaps just the swing of the pendulum away from the no-growth policies of the '70s. Whatever the cause, the implications for communities are clear. The goals of most economic development agencies usually fall into at least one of three increasing the tax base, creating more iobs or promoting economic growth.2 To meet these goals a number of strategies are available, including assisting local business, stopping leakages,3 or attracting nonlocal firms. One method of attracting nonlocal firms to an area is to "target" industries. The concept behind targeting is that by identifying community assets and industrial needs, an optimal industry can be identified for a particular location. process assumes that an accurate assessment of a community's assets can be made, the needs of many types of industry can be and evaluated, and identification of assets and needs will provide the economic development official with a listing of

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4 industrial candidates which have a high probability of plant location or relocation. These prospects are then courted through a number of means which may include an onslaught of community promotional materials, special tax breaks and cash incentives for plant start-ups, or perhaps a visit from a local economic development official. An alternative to this approach involves initially broadcasting a message about the attributes of the prospective community to a wide audience, and to the inquiries which are generated by the broadcast. This method has been described as the "ready-shoot-aim" process by an economic development official in the State of Colorado.4 The intent here is not to discuss the relative merits of each system used to attract industry, but rather to point out that targeting is only one method of attempting to attract industrial development. Each economic development agency must determine an appropriate strategy and proceed. In fact, many communities, particularly nonmetropolitan communities, may determine that attempting to attract nonlocal industries is less cost-effective than assisting existing firms to expand, or investing in local infrastructure.

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5 Communities that will target face a number of decisions, including determining cost, time frame, whether the study should be performed in-house or by a consultant, and the methodology to be used in the study. A number of consulting firms currently offer these services to economic development agencies, but as Moriarty (1980) pointed out, many areas may have the capability to perform the analysis for themselves. In addition to lower cost, that perform the study themselves potentially increase local awareness in the process. This community awareness/development process has gained the support of many economic development officials on all levels of government in the state of Colorado. A self-help handbook for targeting has been used a number of times in the state,S and although some results have occurred because of the process, many economic development officials believe the most beneficial aspect of the process to date is the community awareness process which prepares the community to evaluate and assess the impacts of walk-in6 industrial prospects. Community members become able to distinguish between their generalized goals, such as the term "jobs," and can learn to specify particular types of needs, such as 11emplo:Yment for 30 nonskilled teenaged workers."

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The Scope and Purpose of this Paper The focus of this thesis is to describe and evaluate methodologies for communities to identify industries with a high probability of building a new plant or expanding existing facilities. To provide a concise and manageable study, this paper focuses on manufacturing plant development in nonmetropolitan communities. Manufacturing Manufacturing firms are the principal targets for most economic development agencies attempting to attract nonlocal firms. Manufacturing, mining, 6 tourism and agricultural industries, according to export base theory, serve as the foundation and driving forces for economic growth. These basic industries bring dollars into the community, and serve as the principal consumers for local services.? With the and agricultural industries experiencing significant declines, and since tourism demand is dependent on the health of the national economy, manufacturing becomes the obvious target for many communities.

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7 Nonmetropolitan Communities Nonmetropolitan communities share many economic development problems with larger cities, including intense competition for limited plant expansions and relocations, and limited staff and financial resources. However, certain factors separate smaller communities from their urban counterparts. Smaller communities frequently rely on a "dominant"8 resource-based economy such as agriculture, mining or tourism. An economy based on a single dominant resource is susceptible to economic swings caused by national demand for the dominant resource. This instability has led many nonmetropolitan communities to seek to diversify their economic base by encouraging manufacturing sector growth. Additionally, many nonmetropolitan communities have an economic development staff of one employee or perhaps a volunteer staff. The limited staff may mean that expertise in the availability of financing mechanisms and access to development issue information may be limited. Another problem frequently facing nonmetropolitan communities is inadequate infrastructure to support industrial prospects.-Numerous factors directly affect industrial performance, including utility availability and rates, transportation cost,

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quality and size of the available labor force, etc. Larger communities frequently have adequate resources to serve industry or the potential to provide infrastructure, if demanded, but this may not be the case with nonmetropolitan communities. Thesis Organization 8 The subsequent chapters of this report describe theory and methods to identifying community poten.tials and industries which utilize those potentials. Chapter 2 presents a review of the existing literature on methods of community assessment and targeting industries. This chapter identifies strengths and weaknesses in each of the methods and points out problems and potentials for applying these methods in norimetropolitan communities. The third chapter attempts to examine the subject from the "real world" perspective through the examination of and targeting efforts on the western slope of Colorado. In this chapter, problems facing the western slope economy and current economic development efforts are described. The fourth chapter examines less quantifiable aspects of industrial targeting and attempts to identify pitfalls in the process.

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The final chapter of the report, Chapter 5, presents a summary of findings and final conclusions. 9

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NOTES--CHAPTER I 1John P. Blair, Rudy H. Fichtenbaum, and James A. Swaney, "The Market for Jobs: Locational Decisions and the Competition for Economic Development," Urban Affairs Quarterly, 20 September 1984: p. 64. 1 0 2Leakages refer to expenditures made by community members to purchase non-locally-produced goods. Dollars that flow out of the community will not have the potential of generating multiple rounds of expenditures. No communities capture all local expenditures, but frequently significant improvements can be made. Economic (Denver: University : p. 5. 4steve Kelby, Director of Research, Interview on industrial targeting in Colorado. Colorado Department of Local Affairs, Denver, Colorado. November 6, 198 5. 5Thomas L. Clark; A Guide for Targeting Industries in Your Community, 1985. This resource has been .used by a number of communities in the state of Col6rado, including Delta, Montrose and Fort Collins. 6walk-in prospects refer to industry site planners that seek out a community rather than being sought. Frequently unprepared communities fail to capitalize on the opportunity to enhance the visit of a potential firm, by not demonstrating how the community meets the prospect's needs. 7John A. Kuehn, and Lloyd D. Bender, "Nonmetropolitan Economic Bases and Their Policy Implication," Growth and Change, January 1985, p. 26. 8rbid., pp. 25, 26.

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CHAPTER II THEORY AND METHODS OF COMMUNITY ASSESSMENT AND INDUSTRIAL TARGETING This section of the report presents the theoretical and methodological considerations behind the processes of community assessment and industrial targeting. The theories presented here focus on the concepts of comparative advantage and industrial location in an effort to explain the basis for targeting in the economic development process. The methodologies for targeting discussed in this section include examples of a number of analytical tools. Each methodology will be outlined and evaluated for use by nonmetropolitan communities with regard for ease of use, data requirements and degree of target specificity. Numerous theoretical assumptions are made when an economic development agency attempts to target industries. The backbones of the process are the theories of comparative advantage and industrial

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location. The concept of comparative advantage explains the specialization of communities in the production of goods. Industrial location theory attempts to explain why industries involved in expansion and relocation select a specific site over other locations. Both theories and their shortcomings are presented in this chapter Comparative Advantage The concept of comparative advantage1 was first used by David Ricardo to describe specialization among nations in terms of the items each nation produced and traded. A nation experiences comparative advantage in a good when its "opportunity cost"2 for producing that good is lower relative to all other 12 goods. (This concept differs from an earlier theory of "absolute advantage" which suggested that a community would produce only goods where the absolute cos t of the production of those goods was lower than for any other location.) Nothdurft (1984), in his book, Renewing America, identifies a major fault in economic development agencies and the need for state agencies to apply the concept of comparative advantage. There tends to be a kind of bandwagon mentality among economic'development officials. In their

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13 endless search for new development opportunities, development officers quickly detect successful initiatives and move immediately to duplicate the formula. In the current cycle, many of these officials are busy trying to replicate the economic characteristics that spawned 'California's Silicon Valley as a way of attracting high-technology industries. While these innovative enterprises may indeed become important components of the economies of a number of states, it makes as little sense for every state to try to become a high-technology mecca as it does for every state to become, for example, the nation's breadbasket. Or steel mill. Or mining center. Each state's economy is unique and operates in a complex, diverse, and rapidly changing national and even international marketplace. It is, in fact, the differences in the structure and of state economies, not their similarities, that can offer the best source of future state economic success. The states with the greatest likelihood of successfully creating new development initiatives will be those that have audited their assets--natural resources, human resources, physical infrastructure, access to markets, availability of capital--and have identified the comparative advantages they have over their neighbors.3 Nothdurft's comments directed at state agencies, but the same holds true for county, city and local'economic development agencies as well. Nothdurft suggests the proper response by the agencies should be to inventory their assets. Community assessment, when completed in the pursuit of an industrial target, can represent an attempt to identify a community's comparative advantage.

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Identifying comparative advantage is the goal when assessing a community's resources for industrial development, and the units of measure will be the opportunity costs of alternative types of activities, and not limited to industrial development. It is doubtful that a community could accurately measure its opportunity costs for all types of endeavors; therefore, frequently a proxy for opportunity costs is utilized. This proxy is the identification of 14 underuti.lized resources in the community. The proxy is justified, as the reemployment of underutilized resources represents no opportunity cost to the ) community and in fact may possibly carry a negative opportunity cost. In contrast, utilizing resources that are not in surplus represents a foregone benefit to the community. A community's comparative advantage may exist in any number of forms. In the following quote, Nothdurft has demonstrated state level comparative advantages for Massachusetts and North Carolina (Nothdurft (1984)). Every state has some comparative advantage. Some exist naturally, others are converted liabilities, still others may be created from scratch. Despite a very high cost of living, Massachusetts packaged its exceptional educational

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institutions and its pleasant and protected amenity resources together with converted liabilities--unemployed skilled workers and abandoned but sound factory buildings--to become one of the nation's most successful technology-based growth regions. In several 15 southern states the combination of vast tracts of abandoned farmland and a long growing season provided the right environment for a fast growing pulp, paper, and wood products industry. North Carolina, building on its universities, spent twenty-five years using its land-use and related regulatory powers and targeting investment funds to establish the kind of environment that would attract the kind of people and businesses needed to make its Research Triangle one of the nation's leading centers for research and development.4 From Nothdurft's example, it is evident that to successfully rejuvenate a region's economy, the process requires a number of skills, including identification of underutilized resources in the community, an understanding of the current trends in the economy outside the region, a creative process to determine how resources can be reutilized, and the financial and moral support of the community to successfully implement the reemployment of these resources. Methods of Determining Comparative Advantage In this section of the report, a number of methodologies for assessing community potentials and identifying industrial targets are presented. The focus of this analysis is methods and tools which can

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be used by nonmetropolitan economic development officials Since ease of and low cost are prerequisites for application, the methods mentioned here rely largely on secondary data sources. 16 Several of the community assessment methods presented examine existing community conditions. Community assessment tools identify strengths and shortcomings of the community which relate to industrial development. These tools include a historical/descriptive approach, the location quotient, an occupational-industrial requirement analysis, and shift-share analysis. While these methods serve only to analyze the community, other methods of regional analysis focus more directly on the relationship between the community and industry. Methods which focus on this relationship will be presented under the heading "Industrial Location." Descriptive/Historical Methods One method of understanding the relationships within a community is to describe the historical development and existing industrial mix of the study region. This descriptive method of regional analysis

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requires the researcher to examine not only existing conditions, but he/she m1;1st attempt to identify the historical causes underlying these conditions. This process, as applied to industrial targeting, is described in the following paragraphs by Graham Jones (1980). 17 the industrial developer would first -study the economic history of the community seeking to understand the factors that produced the first economic system, what that system was, and what influences of that system might remain a factor in today's economy. In-the process, it is likely that something of the origin of some of the older industries existing in the community today would be learned. Second, the industrial developer should study all of the community's existing industries to learn when they located in the community and what attracted them to that location. The industrial developer must learn what changes have taken place since existing industries located; changes that might make those location factors more or less attractive or advantageous today. The developer must also learn what problems existing industries now face. This should lead to an understanding of events and factors in the community that are proven assets to industrial location. Third, using the assets that attracted existing industry as a base, the industrial developer should study all the attributes of the community. An analysis of these attributes should help to identify other assets and define negative factors as well. The developer should be able, at this point, to draw some conclusions as to the type and size industry that would find these factors favorable. With this data hand, the industrial developer is prepared to make a knowledgeable

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18 presentation to .a) potential new industries that require the assets of the area and wotild complement and promote the development of existing industry, b) existing industry that might expand at its present location or establish satellite locations, c) industries that are economically tied to existing industries, such as suppliers, service facilities, consumers, or competitors.S In this excerpt from his unpublished thesis, Jones effectively details the descriptive process used to assess eco.nomic development potentials. By applying this process, he is able to analyze the development potentials for a county in the state of Virginia. In the analysis he first examines the historical roles of transportation, agriculture and industry in Campbell County, Virginia. Next, with consideration for the timing and causes for economic development in the region, he proceeds to evaluate the existing industrial makeup of the region. In the following quote, Jones discusses the derived from examining existing industries. The developer can learn what factors or community assets attracted these industries, what problems they now face, and their future plans. Also, what other industries might be attracted by the existing industries as competitors, suppliers, or consumers. The industrial developer should determine too, if the assets that attracted the existing industries would still be assets today, and which industries are likely to expand, or locate satellite operations, in the community.6

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19 Through the interviews with firm management and statistics about labor force, transportation, and resource requirements of the area's firms, he was able to gather not only data on employees and resources, but also acquired an understanding of employers' percep-tions of the area. To supplement the existing industry analysis, Jones examines a of area resources, including raw materials, transportation, labor markets, energy and water availability, climate, ecology, community factors and industrial site availability. In the final assessment, the report determines the community's shortcomings and identifies some attributes, but fails to identify firms or even types of industries which have high potential for relocation. The report has significant value to an economic development agency in that it an accurate listing of the types of firms located in community and their reasons for location, and therefore identifies the elements which make up the community's comparative advantage. Jones stops short of identifying the industries which benefit most from these factors, but it would appear that the interindustry linkage data collected through the descriptive approach would allow a developer to at

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20 least identify types of firms with high probability of relocating in the community. In comparison to the more quantitative methods, this method of community assessment provides a "feel" of the business environment, but does not rely on numerical analysis. Occupational Targeting A recent article by Thompson and Thompson (1985) provides a valuable and innovative addition to the methods of community assessment and targeting. The article? uses an "occupational-functional" approach to evaluating communities' development potentials, and is based on the fact that the human resources within a community are frequently the most important asset in the community. The methodology accepts that communities may have a work force whose occupations reflect the community's development potentials. Using a labor force occupation classification and by ranking labor force merits, the relative strength of their study region can be determined. While the authors used the analysis to compare 32 metropolitan communities, the methodology has potentials for nonmetropolitan regions

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21 as well. The authors suggest incorporating the concept of the product life cycleS to identify the current growth phase of a particular industry. The term 11phase11 in this example refers to whether the firm is involved in research and design, production, or experiences price competition in the marketplace. Each phase represents a separate type of occupational work force. The following example may provide an understanding of the concept. If a plastics manufacturer is attempting to develop a new product, the work force may be largely scientists and engineers. When the research nears an end and manpower shifts are required to gear up for precision laborers may be required. Finally, when the process is routinized, a work force adept in routine work at low wages will be necessary to make the process competitive. Given these changes in occupational requirements among different industries and among similar industries at different stages in the product life, the authors suggest most communities will have available labor qualified for a particular industry or type of process. They also suggest that employing this labor should be the focus of economic development targeting. Table on the following page,

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Ranking of Coamunities 1 5 10 15 TABLE 1 SAMPLE COMMUNITY RANKING OF LABOR F .ORCE CHARACTERISTICS Chara<;teristic \ of Hfg. Empl. in Central Admin. Off. < \ of Managers in Hktg. and Advertising Characteristic < \ Technologists \ High school grads. I< \ Engineers CENTRAL ADMINISTRATION PRECISION OPERATIONS Functional Labor Force Category Characteristic Office clerical wage Unskilled mfg. wage ROUTINE WORK SOURCE: Wilbur R. Thompson and Philip P. Thompson, "From Industries to Occupations," c.u.E.D., Fall 1985, pp. 12-18. "' "'

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presents a simplified version of the scale used by the authors to identify the relative strengths of the community labor 23 Table demonstrates a ranking of key labor force merits. The ranking compares these same merits to a number of other cities. For example, our sample community would rate high in most categories of precision work suggesting that this may be one of the community's strengths with a potential for further development. In addition to the categories listed in the table (central administration, precision operations and routine work}, the authors suggest examining research and development and entrepreneurship categories. A number of additional labor merits can be ranked and used in this type of analysis. One serious drawback with using this methodology is .the lack of data by stage of product life. Information for occupational category by types of manufacturing industry is available on a national level, and in many cases on a statewide level, through the Census of Population9 and occupational-industry statistics.lO However, examination of data for the state of Colorado suggests their applicability for this purpose may be at best. The data by industry

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24 for various occupations demonstrates little differentiation by type of industry. For example, in Colorado the industries of food processing, apparel and furniture demonstrate very similar labor occupation profiles. Table 2, on the following page, presents partial data for the major manufacturing categories in Colorado for 1977. Note the similarities in labor occupations aJnong types of manufacturing firms. The Thompsons apply the occupational targeting method to metropolitan communities in Ohio and initial findings demonstrate the usefulness of this technique. The method may be less useful in nonmetropolitan communities, particularly when a large number of resource-based dounties face similar problems. For example, layoffs which result from the recent decline in the mining industry will lead to unemployment in all sectors of the mining industries, from research chemists to hard rock miners. In this example, it is unlikely that the occupational approach could identify economic potentials. However, the method may be used to identify alternative types of employment for a specific class of employees. Should a firm lay off a specific category of workers, such as precision machinists, analysis of industry_occupations could be

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TABLE 2 OCCUPATIONAL CHARACTERISTICS FOR COLORADO MANUFACTURING INDUSTRIES Type of Employment (%) Managers ProfesTechni-Maintenance and sional cal Service and Clerical Sales SIC Industry Officers Occup. Occup. Occup. Production Occup. Occup. 200 Food & kindred prod. 9.3% 230 Apparel & other mdse. 9.3% 240 Lumber & wood prod. 7.3% 250 Furniture & fixtures 7.4% 260 Paper & allied prod. 8.1% 270 Printing & publishing 10.5% 300 Rubber & plastics 10.4% 310 Leather, leather 6.6% 320 Stone, clay & glass 8.5% 340 Fabricated metal prod. 7.2% 350 Machinery, exc. elect. 9.1% 360 Electric & elec. eqpt. 7.0% 370 Transportation eqpt. 6.0% 380 Instruments & related 8.4% 390 Misc. mfrg. indus. 10.5% 0.8% 1. 3% 1. 5% 1.3% 1.2% 9.4% 7.1% 4. 1% 6.3% 5.2% 10.0% 9.6% 34.05 19.4% 26% 0.9% 0.8% 1.8% 1 1 % 2.4% 1.9% 3.1% 3.3% 7.3% 12.9% 4.3% 10.5% 0.5% 3.2% 1.0% 1. 5% 0.9% 1. 2% 1.3% 1. 9% 0.8% 1.2% 0.9% 0.6% l. 8% 2.0% 1.2% SOURCE: Colorado Division of Employment & Job Training: Report of the Colorado Occupational Employment Statistics Survey (Denver, Colorado, July 1978), pp. 34-201. 72.3%. 74.9% 80.9% 75.1% 72.5% 52.1% 62.1% 73.3% 68.6% 72.4% 59.7% 53.0% 42.6% 43.1% 69.7% 10.1% 11.0% 6.3% 9.6% 11.5% 20.8% 14.5% 10.4% 10.4% 9.0% 11.7% 15.6% 9.9% 15. 1% 12.6% 3. 4% 2.5% 1. 9% 3.9% 5.7% 4.9% 1. 6% 3.8% 2.4% 1. 7% 1. 4% 1.4% 1. 4% 1.5% 3.3% N lJ1

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26 used to identify alternative industries which might employ these workers. The Location Quotient In the book Regional and Local Economic Analysis for Practitioners, Avrom Bendavid-Val identifies two methods of "Relative Regional Industrial Composition Analysis."11 These methods are the location quotient and mix-share (or shift-share) analysis. Both of these methods compare a community or regional economy to some larger regional, state or national economy. The intent of these measures is to identify the "telative" standing of the smaller region compared to the larger region. This section of the chapter examines the location quotient and the following section evaluates shift-share analysis. The location quotient is a ratio of ratios which compares the relative specialization in a selected industry of some region to that of a larger region. The form of the location quotient (LQ) is: Manufacturing Employment of Community LQ = Manufacturing Employment of Larger Region Communit Total Employment Larger Total Employment

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27 Using this ratio, it is possible to determine a region's relative share of employment for any sector of the economy. 12 The value of the location quotient is indicative of the relative specialization of the region. With a location quotient of *less than 1, the area of concern is less specialized than the larger region; *greater than 1, the area of concern is more specialized than the larger area; equal to 1, the specialization of the area is the same as the larger area. The followingtable presents employment data and associated location quotients for a hypothetical region. TABLE 3 HYPOTHETICAL EMPLOYMENT DATA AND LOCATION QUOTIENTS Category REGION X Food and kindred products employment Employment % of Total (No. of persons) Manufacturing 25 25/100 = .25 LQ 100 Total manufactur NATION Food and kindred products employment 500 Total manufacturing 1000 employment 500/1000 = .so

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28 In the example in Table 3, the location quotient for Region X is one-half. This suggests that relative to the nation, the region has a much smaller proportion of its manufacturing labor force involved in Food and Kindred Product manufacturing. The factor suggests that the region is less specialized in that industry than the nation as a whole. While this fact may .be interesting the analyst, the reasons behind this specialization should be the analyst's main concern. The location quotient itself only identifies points of relative strengths and weaknesses of a region, but the analyst must utilize this information to determine how these strengths and weaknesses can be tapped. For instance, a location quotient greater than one suggests that the region is more specialized relative to the nation in that industry. This may suggest that spin-off industries could be generated because of the relative strength. The simplicity of the location quotient makes it a complementary technique to many other forms of regional analysis, including time series analysis, input-output analysis and other techniques. However, the tool, as a relative measure, must be used

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29 cautiously and by itself does little toward identifying industrial targets. Unfortunately, the ease with which the location quotient is computed can lead to its overuse and to an overstatement of its significance. It is, at best, a rough, descriptive indicator. Results of location quotient computations be seriously influenced by the level of disaggregation of the specialization variables selected, the choice of reference variables, the choice of reference areas, and the choice of years for which it is computed. It will be found, too, that a location quotient computation produces results of inconsistent significance for different industries. Furthermore, the caveats implicit in any interareal comparison apply as well to the location quotient. Interareal differences in tastes and needs, levels of income, family sizes, exploitable resources, labor practices, and, therefore, economic structure require that statistical,results of location quotient computations receive cautious analytical interpretation. 13 An additional application of the location quotient will be presented in the discussion of input-output analysis. Shift-Share Analysis As with the location quotient, shift-share analysis can be used as a relative measure of a regional economy. Any indicator, such as dollar output or employment, can be used in the analysis, but employment is the most frequently used measure as data are easily obtained.

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Shift-share analysis provides a relative comparison of three separate factors affecting the regional economy: national growth. .changes in the industrial mix, and the share of the regional employment relative to the nation. This type of analysis allows the analyst to measure the performance of local industries relative to national industries. Like the location quotient, the measure is calculated using ratios of local data and a larger area, for example, the state or nation. Using shift-share analysis, the analyst can identify local growth industries (relative to the larger area) Shift-share does not identify the underlying cause of growth, and therefore these simple ratios can be misleading if the analyst relies solely on quantitative results. In summary, these relative measures are best used as general indicators to identify sectors of the economy which merit further study. Industrial Location Theory Industrial location theory is an attempt to identify patterns in firms' locational decision and 30

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31 the causes behind those locational patterns. In researching economic development issues, it becomes apparent that there are two views of the process: that of the community and that of the firm. The economic developer represents the community's method of attracting firms, while the site planner represents the firm's instrument to determine what location will best serve the firm's needs. The methods presented earlier, including the descriptive approach, occupational analysis, location quotient and shift-share analysis, represent methods of examining a community's assets. .This section examines methods that identify the firm's needs and how the firm determines the best location when faced with a number of sites to choose from. Specific topics in this section include industrial site industrial location search costs, and the bomparative cost method of site selection. Industrial Site Determinants The study of industrial site determinants provides the economic developer with information about how the firm chooses a location for construction of a plant or for expansion of an existing operation.

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32 By developing an understanding of this process, the developer can evaluate the probability of attracting a particular type of firm, and assuming community resources are available, can mold the infrastructure in the community to enhance that probability. A nmnber of site determinant studies have been completed {Wheaton IDRC {1977), and Keishnick \ {1984)). While these studies have generally presented similar findings about what attracts firms to a location, the study by Keischnick delineates the site demands of new firms and branch plant developments separately. The study was performed by the Council of State Planning Agencies. The goal of the study was to determine the relative importance of tax incentives to firms, but through the study the locational factors of critical importance were also solicited. -The following paragraph presents the site determinants identified as most important by both new firms and new branch plant developments. New firms are very concerned with the size of their markets, with access to a growing market and current customers most important. Personal reasons of management are also very frequently mentioned. After these factors, a number of 'supply' factors are considered to be important: access to raw materials, availability of capital, supply of skilled labor, and transportation are frequently mentioned. Familiarity with the local economy is

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33 considered quite important as well. Business taxes are of only modest importance, as are personal taxes. The political climate and air quality regulations, which are frequent topics of political discussion, are rarely considered by new businesses. For new branch plants, labor market concerns-particularly the supply of both skilled and unskilled labor--were deemed most important. In addition, the presence of unions was seriously considered. In contrast to both new firms and expansions, the state business tax structure was considered generally important. Somewhat surprisingly, market factors--either access to a growing market or to current customers--were seen as relatively unimportant. 14 It is interesting to note the sharp distinctions in site determinants by these two categories of prospects. To the economic developer that is attempting to attract firms, it will be useful to know that new firms are concerned with markets, availability of supplies for production as well as an understanding or familiarity with the local economy. Branch plants, however, are concerned largely with cost-reducing factors such as labor supply and tax incentives. Armed with an understanding of the sharp contrast in needs of these two types of industrial prospects, an economic developer can present the attributes of his community to a prospect or modify his community's incentive package. The number of prospective industrial targets can be reduced by

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understanding their industrial needs, and the community's strengths can be packaged to meet those needs. An understanding of industrial site determinants will be beneficial to an economic developer, however, this broad understanding is not sufficient to attract firms. A developer must know what specific firms require in a site, not what generally affects their decisions. It is not feasible that an economic developer could understand the needs of all types of industries and firms, but by combining community assessment methods with an understanding of site determinants, the developer can gradually reduce the of industries to potentially prospective industrial candidates. Industrial Location Search Costs Many firms searching for new plant sites and expansions have limited time and budget to identify potential sites. These limitations can drastically reduce the area covered by an industry's site search, thereby eliminating a number of communities as prospective candidates. 34

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35 An important qualification to these models of business investment and location behavior is that information about prices, markets, and costs is costly for both the present and future. This costly process of acquiring information will directly affect location decisions. A profit maximizing process of investment decisionmaking requires accurate information about each project at each possible location. If the costs, of search increase less than proportionately to project size, firms undertaking smaller projects could be expected to search less than those undertaking larger projects. Similarly, since information obtained in a search for new locations by a multiplant firm can be used by units other than the prospective venture,. we shoq.ld expect multiunit firms, controlled for size, to search more widely than single-unit firms 15 In this paragraph Kieschnick (1984) identifies a number of issues which are not commonly identified in economic development literature. A firm's searching for new locations will be related to the size of the project and the cost of the search process. This suggests that communities may be less likely to attract fewer small new firms than large new firms because of the search costs involved. This may have an even more significant impact on nonmetropolitan communities, as the cost of searching numerous nonmetropolitan communities is probably higher than comparable searches in metropolitan communities. Communities frequently send promotional materials to firms and advertise in trade journals and

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36 business magazines, attempting to identify firms seeking to relocate or expand, and thus to introduce the community to the firm. This process reduces search costs to the firm and improves the community's chances of attracting a firm. Information for industries about communities may be delivered in a number of forms. Some of the most common include the community brochure, trade associations and publications, direct mail campaigns, advertising and news releases, and site tours. This understanding of the search process undertaken by firms can assist in designing effective promotional materials. A region (perhaps a state or larger) is first selected on the basis of such factors as the size of the potential market, the general level of labor costs, or the existence of a reliable supply of a natural resource. Within that region, a number of communities will be examined in muoh greater detail, with specific information collected on the cost and availability of different types of labor, land, transportation, taxes, and other spatially varying factors.16 The Comparative Cost Approach In Method of Regional Analysis by Walter Isard, a methodology is described which allows firms to evaluate alternative sites with respect to economic feasibility. The method is called the comparative cost

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approach, and "The objective of the study is to determine what region or regions the industry could achieve .its lowest total cost of producing and delivering its product to market.n17 The method as described is potentially useful to the firm. However, it seems that the method may be useful to the region seeking firms as well. As the method is described in the text by Isard, many factors of production will have the same relative cost among different sites, but Isard notes: Since the difference in total cost from 37 region to region is the important magnitude, it becomes clear with further reflection that the regional comparative cost study need consider only the production and transport cost elements which actually differ from region to region. The components of production and transport cost that do not vary regionally in amount may be ignored; they give rise to no regional advantage or disadvantage. 18 Therefore, the relative differences in transportation costs and production are the concern of the analyst, not the cost of the whole production process. The method could potentially be utilized by the economic developer to identify the study area's transportation and production cost differences relative to competitive communities. By knowing the magnitude of these differences, the analyst may identify

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categories of products which could be produced competitively. For example, a community that identifies that transportation costs are high relative to other communities would concentrate on industries that did not require significant transportation. However, low production cost alone is not a sufficient basis for an in9ustry to locate in a region. More broadly speaking, from a cost standpoint a region may be ripe for industrial development. Yet because of native attitudes, cultural patterns and institutions, and other noneconomic factors, attempts at industrial development are aborted. 19 Given these limitations it is unlikely that many nonmetropolitan communities would be able to utilize this methodol6gy to a wide range of firms. It is more likely that some form of a comparative cost study would be performed for a few select industries which had already been identified as potential targets. Matching Community Attributes with Industrial Requirements Up to this point we have described methods of examining a community's comparative advantage, and methods to identify a firm's locational requirements and decision-making process. Both categories of 38

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techniques provide necessary insight to the economic developer, but both categories have been one-sided: comparative advantage details the coi:nmunity, while 39 industrial location theory provides an understanding of industrial needs. A community attempting to encourage and stimulate economic development must successfully match its attributes with a firm's needs. The two methods presented on the next few pages are means to match these attributes and needs. The first method is the screening matrix which serves as a guide for communities to perform this matching process, assuming the community attributes and industrial requirements are known. The second is an application of input-output models. The Screening Matrix A method of industrial targeting that is frequently employed by private consultants is the screening matrix. A handbook of the Economic Development Administration, prepared by Battelle, Columbus Laboratories, provides an outline of the screening methodology. The industry screening matrix is an orderly system which may be used to identify manufacturing

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industries which are either feasible and/or desirable for a given geographic area, i.e., city, town, county, etc. Feasibility and desirability are terms which refer to the compatability between the industry and the given geographic area and the degree to which the community feels the industry can satisfy its developmental needs. The screening process itself is made up of the following components which collectively allow one to systematically examine large numbers of manufacturing industries and select those which exhibit certain predetermined characteristics: A list of industry specific variables such as wages, skill requirements, and types of transportation required A bridge which allows the developer. to relate characteristics of his community to the requirements of industries A detailed data base which presents objective descriptions of the locational requirements of individual manufacturing activities.20 In effect, the listing of product requirements by industry is compared with community amenities to determine which industries 'would best fit into the 40 community. A listing of screening matrix variables is presented in Table 4.

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TABLE 4 SCREENING MATRIX VARIABLES Employees Per Establishment Average Hourly Wages Percent of Urban Orientation Land Area Per Establishment Percent of Shipments by Rail Percent of Shipments by Motor Carriers Natural Gas Per Establishment (cu.ft./day) Fuel Oil Per Establishment (barrels/day) Water Use Per Establishment (gals./day) Water Discharge Per Establishment (gals/day) Forward Linkage Present Backward Linkage Present Percent of Professional and Technical Percent of Craftsmen Percent of Laborers Percent of Females in Work Force 41 SOURCE: u.s. Department of Commerce, Economic Development Administration Handbook, Community Level Target Industry Identification Pro ram. Wash1ngton, D.C.: u.s. Government Printing Office, December 1976) pp. 112, 113. Developing the data requirements for the screening matrix is beyond the capabilities of most nonmetropolitan communities. To provide accurate estimates of every industry's screening variable is an immensely difficult task. The potential for variation in data is very large and would reduce the effectiveness of the model. For example, the task of assigning an average hdurly wage for employees within industries is very difficult. Regional variation, firm management variation and numerous other factors make

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42 any estimate questionable. Yet, if one assumes that variables can be estimated for industries and the community's resources can be successfully estimated, it would be possible to compare the requirements of each industry to the attributes of the community and attempt to identify "matches." However, unless the process were computerized, it would be an unmanageable task to perform this type of analysis with an adequate level of detail. It is likely that many analysts do compare industry requirements and community attributes at the level of detail suggested in Table 4, but only after an industry has been scrutinized and has been determined, through other means21, to have a high probability of locating in the community. Input-Output Analysis From the academic's point of view, one of the most valuable tools of regional analysis is input-output (I-0) analysis. I-0 analysis is a method of examining interindustry relationships. Input-output analysis is performed using matrix algebra. The process requires detailed information on resource and payment transactions among the industries in the economy. Through matrix algebra, it is possible

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to derive a direct requirements table which shows the required inputs from suppliers per unit of output produced, for each industry in the economy. 43 Numerous publications demonstrate the construction of the input-output table, and our concern here is less on the construction and more on the application of input-output to targeting. However, a word of caution is necessary at this point. Input-output is a data-hungry analysis which requires a computer model to perform the analysis. Input-output data can be utilized without constructing an I-0 table from scratch, as long as the limitations o I-0 and the corresponding data base are understood. Input-output analysis is highly respected and pursued by a variety of agencies. This is because the level of detail the analysis provides is much greater than any other form of analysis. Using input-output analysis, the analyst can identify the extent of interindustry exchange, the linkages between industries, and a number of other factors which serve to detail the economy and the industrial requirements. The I-0 provides a model of the interaction of industry and the community which cannot be detailed by other methods. Unfortunately, the complexity and cost of I-0

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modeling frequently prevents its use as an aid to economic development analysts. One method which may have potential for economic developers has been developed by Fannon (1982). In her unpublished thesis,22 she describes 44 a method of utilizing national input-output tables as a guide to interindustry transaction. Using the location quotient, regional employment in an industry is compared to national employment and the relative strength of the industry in the community is determined. Additionally, the methodology can be utilized to identify potential support industries. For example, if in a region shoe manufacturing is a basic industry, the analyst can examine-the national input-output tables and determine which industries provide resources to the shoe industry. These support industries could potentially be targeted by the community. This is one of the few methods that provides a systematic approach to identifying new industries to target. There are numerous problems with this method, some of which were mentioned earlier in the discussion of the location quotient.

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45 Summary of Methods Methodologies which have been presented in this chapter represent only a sampling of the methods available for community assessment and targeting industries. The intent has been t'o demonstrC!.te a wide variety of the available methods and those which have greatest applicability to the needs of nonmetropolitan communities. Except for the screening matrix and input-output analysis, the methods can be applied easily and at low cost. A summary of these methodologies is presented in Table 5 on the following page. The majority of the methods presented rely on secondary data sources which are widely accessible. Most of the methods allow the user to identify industries to target on a four-digit Standard Industrial Classification (S.I.C.) basis.23 It has been reported by economic developers in the state of Colorado that progressing beyond the four-digit S.I.C. to the individual firm name to target is a difficult transition. Typically, communities who have progressed to the four-digit S.I.C. level purchase a listing of industries within that classification. However,

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TABLE 5 SUMMARY OF METHODS COMMUNITY ASSESSMENT AND INDUSTRIAL TARGETING Community Descriptive/Historical Method Occupational Targeting Location Quotients Shift-Share Analysis Industrial Location Site Determinants Comparative Cost Attributes Provides a feel of comparative advantage Includes historical development Provides an inventory of existing industry A new complementary method Focuses on the human resource Provides co;npetitive ranking Identifies industrial strengths Indicates potential spin-offs Identifies growth industries Ranks industrial requirements Elicits strengths of incentives Delineates economic feasibility Community/Industrial Matches Screening Matrices Input-Output Analysis Compares industrial requirements with community attributes Detailed model of economy Limitations Non-quantitative Does not identify targets May be of limited use Little differentiation among categories An approximation A relative measure Lacks explicative capacity A relative measure Not industry-specific Neglects non-economic factors Difficult to apply to broad industrial sectors Requires extensive database Expensive Data-hungry Requires expertise ,. m

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47 depending on the category, this listing may yet include a wide variety of actual firm types and sizes. The community must then distill this broad listing of firms and attempt to target only those firms which have the resources and capabilities to expand or relocate. In effect, the community is performing the targeting operation on a separate level. Despite these problems, the targeting methodology presented should allow communities to weed through the almost infinite possibilities and focus their limited resources on new firms or plant relocations.

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NOTES--CHAPTER II 1The term "comparative advantage" was first applied in the field of international economics. The concept describes why communities specialize in the production of a particular mix of goods and services. 2opportunity costs are the measure of 48 foregone opportunities. For example, storing money in a mattress rather than in a savings account incurs opportunity cost equal to the interest that could have been earned. Likewise, the community with workers who are unemployed when they could be working experiences an opportunity cost. 3williarn E. Nothdurft, Renewing America: Natural Resource Assets and State Economic Development (council of State Planning Agencies, Washington, D.C.: 1984) p. 164. 4Ibid. p. 165. 5Graharn L. Jones, "Identifying Potential Industrial Prospects Through Analysis of Economic History, Existing Industry and Area Assets: Campbell County, Virginia" (Norman, Oklahoma: American Industrial Development Council, University of Oklahoma, 1980) p. 12. 6Ibid. p. 63. 7wilbur R. Thompson and Philip P. Thompson, From Industries to Occupations: Rethinking Local Economic Development," c.U.E.D. (Washington, D.C., u.s. Department of Commerce, Economic Development Agency), Fall 1985, p. 12. 8rbid, p. 13. 9u.s. Department of Commerce, Bureau of the Census, Po ulation Characteristics 1980, General Social and Economic Characterist1cs Wash1ngton, D.C.: u.s. Government Pr1nt1ng Off1ce, 1981).

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10In Colorado see: Colorado Division of Employment and Job Training: Report of the Colorado Occupational Employment Statistics Survey (Denver, Colorado: July 1978). 49 11Avrom Bendavid-Val, Regional and Local Economic Analysis for Practitioners (New York: Praeger, 1983) pp. 75-78. 12Ibid. p. 77. 13Ibid. pp. 77, 78. 14Michael Kieschnick, Taxes and Growth: Business Incentives and Economic Growth (Washington, D.C.: Council of State Plann1ng Agenc1es, 1984) p. 108. 15rbid. p. 37. 16rbid. 17walter Isard, Methods of Regional Analysis (Cambridge: MIT Press, 1960) p. 233. 18Ibid. p. 235. 19Ibid. p. 244. 20Missouri State Division of Commerce and Industrial Development, Handbook for Develoement of a Communit Level Tar et Industr Identificat1on Pro ram Wash1ngton, D.C.: Econom1c Development Adm1n1strat1on, 1976) pp. 104-114. 21"other means" oi analysis that can reduce the number of industries would include many of the methods presented in this chapter. 22Kathleen Fannon, "One Step Beyond: Combining Location Quotients with Input-Output Models to Identify Industrial Support" (Missouri Division of Commerce and Economic Development, Jefferson City, Missouri), 1984. 23u.s. Department of Commerce, Standard Industrial Classification Manual (Washington, D.C.: u.s. Government Pr1nt1ng Off1ce, 1972).

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CHAPTER III ECONOMIC DEVELOPMENT IN WESTERN COLORADO To provide an understanding of the actual problems and potentials facing economic developers in nonmetropolitan communities, this chapter of the thesis examines the economic development efforts of communities in western Colorado. The inf.ormation for this chapter comes from a number of sources, including printed materials from communities, interviews with state and local agency officials, and a survey of western slope economic development officials. The Study Area The study area for this thesis is the western portion of the state of Colorado. The area is bordered by the state boundary on the north, west and south, and by the continental on the east, as shown in the map on the following page. This area is

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MESA C 0 L 0 R A D 0 INS DALE PLATA IARCIIULETA Figure 1 STUDY AREA BOUNDARY STATE AND COUNTY aOUNQARY Western Colorado Study Area U1

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52 divided into five state planning regions, 9, 10, 11, 12 and 13, which will facilitate our analysis. (Note that only Lake County is included in the analysis from Region 13.) This portion of Colorado is largely rural with only one county, Mesa, having a population of over 25,000 persons. Population statistics for each of these study area counties and regional totals are presented in Table 6 below. In data from the 1980 census of population, only Mesa, Moffat and Gunnison Counties indicate that over fifty percent of their populations live in nonrural areas. The study area is unique in that a number of types of dominant resource-based communities are present. Table 7 shows the basic employment categories for each of the counties in 1980. This data, from the 1980 census, shows that 6 of the 22 counties have 50% of their basic employment in the basic resource sectors of agriculture, forestry and mining. 1 It is understandable that many of the western slope communities have attempted to diversify toward non, resource-based sectors, particularly since in the past decade these resource-based sectors have been volatile, demonstrating large boom and bust cycles.

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TABLE 6 STUDY AREA POPULATION BY COUNTY County Region 9: Archuleta Dolores La Plata Montezuma San Juan Region 10: Delta Gunnison Hinsdale Montrose Ouray San Miguel Region 11: Garfield Mesa r-toffat Rio Blanco Region 12: Eagle Grand Jackson Pitkin Routt Summit 1960 2,629 2,196 19,225 14,024 849 15,602 5,477 208 18,286 1,601 2,944 12,017 50,715 7,061 5,150 4,677 3,557 1 '758 2,381 5,900 2,073 Region 13 (Partial): Population 1970 1980 2,733 1,641 19,199 12,952 831 15,286 7,578 202 18,366 1,546 1,949 14,821 54,374 6,525 4,842 7,498 4,107 1 '811 6,185 6,592 2,665 3,664 1,658 27,424 -16,510 833 21,225 10,689 408 24,352 1,925 3,192 22,514 81,530 13,133 6,255 13,320 7,475 1,863 10,338 13,404 8,848 Lake 7,101 8,282 8,830 Rural Population Percent 1985 1980 58,402 5,160 1,706 31,439 19,154 943 68,589 25,032 11,236 543 26,364 2,127 3,287 143,414 25,892 96,661 14,320 6,541 69,272 17,654 9,609 1,699 11,761 15,193 13,356 7,180 54.0% 100.0% 100.0% 58.3% 57.0% 100.0% 63.2% 81.5% 45.9% 100.0% 64.2% 100.0% 100.0% 33.3% 65.1% 26.8% 38.1% 100.0% 66.3% 100.0% 100.0% 100.0% 64.4% 62.0% 95.9% 56.1% SOURCE: u.s. Department of Commerce, Bureau of the Census, 1980 Census of Population, General Population Characteristics (Washington, D.C. u.s. Government Office, 1981) pp. 7.8-7.11 Colo.rado State Demographer, Annual Population Estimates (Denver, Colorado, 1985) 53

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TABLE 7 ANALYSIS OF BASIC EMPLOYMENT BY COUNTY IN WESTERN COLORADO Resource-Based Employment as a Percent of Basic Employment County Region 9: Archuleta Dolores La Plata Montezuma San Juan Region 10: Delta Gunnison Hinsdale Montrose ouray San Miguel Region 11: Garfield Mesa Moffat Rio Blanco Region 12: Eagle Grand Jackson Pitkin Routt Summit Agriculture 22.6% 25.2% 12.8% 13.5% 0.8% 27.4% 17.4% 26.4% 21.1% 32.5% 15.0% 11.4% 8. 1% 8.3% 13.7% 10.7% 15. 1% 39.7% 11.8% 9.0% 2.5% Region 13 (Partial): Lake 0.0% Forestry 9.3% 0.0% 4.4% 3.2% 0.8% 2.4% 4.7% 4.6% 0.9% 0.0% 1. 9% 3.1% 0.3% 0.2% 0.8% 1. 2% 4.6% 4.0% 0.0% 3.2% 0.8% 0.3% Mining 3.6% 42. 1% 6.4% 13.3% 71.2% 26.0% 17.5% 11.5% 19.0% 16.0% 28.0% 28.8% 1 5. 1% 36.2% 43.4% 5.0% ) 2 1 .7% 25. 1% 4.2% 25.1% 19.4% 77.4% Total ResourceBased Employment 35.6% 67.3% 23.6% 30.0% 72.9% 55.7% 39.6% 42.5% 41.0% 48. 5%. 44.8% 43.3% 23.5% 44.7% 57.9% 16.9% 41.4% 68.9% 16.1% 37.3% 22.7% 77.7% SOURCE: u.s. Department of Commerce, Bureau of the Census, 1980 Census of Po ulation, General Population C aracter1st1cs Washlngton, D.C. u.s. Government Printing Office, 1981) pp. 7.251-7.259. 54

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55 The area's diversity makes it a unique study area. Additionally, the counties in Region 11 suffered severe setbacks during the oil shale bust. Economic development efforts have been essential in these hard-pressed counties. Survey of Economic Development Officials In an effort to attract new industries, many of the communities on the western slope of Colorado have established economic development programs. To provide an understanding of the level and types of community assessment and industrial targeting that are being performed in western Colorado, a survey was distributed and mailed to economic development officials of the area. Copies of the questionnaire and cover letters are presented in Appendix A of this thesis. The focus of the questionnaire was to determine the extent of industrial targeting and the methods being used by nonmetropolitan communities to assess their community resources and assets (comparative advantage), and to attract and encourage industrial development. The twelve-question survey and cover letter were handed out to a group of economic developers and other attendees2 at the

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November 1, 1985 meeting of the Mountain Area Developers.3 On November 22, 1985 the same questionnaire with a modified cover letter was mailed to economic developers on the western slope. The list of developers was provided by the western slope office of the Colorado Department of Local Affairs. Results of the Survey 56 The results of the survey are presented in tabular form in the appendix. To protect individual responses in the competitive field of economic development, the author has summarized survey responses into nondescriptive, generic categories (e.g., a response to the question about targeted sectors of "processing animal hooves into glue" would now appear under "agricultural processing"). Survey Response Approximately thirty-five questionnaires were distributed on November 1 at the Mountain Area Developers meeting. Of those questionnaires, only five were returned for a response rate of fourteen percent. The limited response was probably due to a number of factors, including a full meeting schedule, meeting overruns, lack of return envelopes to allow respondents

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to mail the questionnaire after the meeting, and a large number of nonqevelopers in attendance. 57 For the November 22, 1985 mailing, the response rate was thirty-seven percent, as sixteen of the total forty-three surveys mailed were returned. In this analysis, overall response rate for both surveys is insignificant as some individuals received questionnaires at the meeting and through the mail. Of the twenty-one surveys returned, sixteen were usable in the analysis. Since the goal of the study is not to predict but rather to find out about economic development efforts, the small response rate provides adequate data for the study. (The other questionnaires were not completed as the recipient was not aware of economic development efforts in their The survey response is presented on the map on the following page. A potential bias exists in the survey as the organizations surveyed were those identified by the colorado Department of Local Affairs. This list includes the active organizations and neglects less active communities. The results which follow will

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Survey Respondents: C 0 L 0 R A D 0 Figure 2 STATE PLANNING REGION BOUNDARY PLANNING REGION AGENCY RESPONSE COUNTY AGENCY RESPONSE CITY, TOWN OR COMMUNITY e AGENCY RESPONSE Location and Agency Represented Ul co

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59 present data only for sixteen usable responses. It must be remembered that the data presented here provides a feel for economic development efforts in f nonmetropolitan communities. No one model is standard for all economic development agencies, and goals may be different, as well as amount of time the agency has been in operation. In fact, a number of respondents mentioned that their organizations were just getting started or were planning major expansion in 1986. Respondents Characteristics Of the usable responses, nine represented city, town or community economic development officials, five represented county agencies or organizations, and two represented regional offices. In the questionnaire, the respondents were asked to detail characteristics of their agency, including manpower, budget and status. The staff size in. these organizations ranged from a single part-time volunteer to staffs with two full-time employees and several part-time employees. Regional staffs had "large" two-employee staffs and towris and counties averaged less than one full-time person.

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Operating budgets varied largely among organizations. To provide a standard unit of the budget for the economic development agency was divided by the community, town, city, county or regional population they served. The results are presented in Table 8 below. The benefit of this data is limited since the exact contents of the budget were not provided by the respondents. In some responses, available loans appear to be.included. T .1\.BLE 8 ECONOMIC DEVELOPMENT EXPENDITURES PER RESIDENT FOR SURVEY RESPONDENTS City and Town County Region Range of Expenditures by Type of Region, 1985 $ 0.75-$ .9.50 $ 2.25 -$19.25 $ 1.00 60 SOURCE: 1985 Author's Survey of Western Slope Economic Development Officials NOTE: Amounts rounded to nearest $0.25. Based on the respondents' understanding of their roles and responsibilities, nine agencies are primarily public agencies, two agencies were privately funded,

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and four were public-private. Some confusion may have resulted from the agencies' abilities to loan funds.4 Agency Goals The responses to the question on agency goals is particularly informative about the way economic development agencies view their role in their respective communities. The goals most frequently listed are presented in Table 9. 61

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Rank 1 2 3 4 5 6 7 8 TABLE 9 ECONOMIC DEVELOPMENT GOALS FROM WESTERN COLORADO SURVEY, 1985 Number of Goal Responses Diversify the economy 13 Create more jobs or improve wages 9 Expand or assist existing businesses 7 Stimulate economic growth 4 Stimulate or promote tourism activities 4 Expand tax base 2 Stimulate mining operations 1 Other 7 62 SOURCE: 1985 Author's Survey of Western Slope Economic Development Officials Based on these survey results, the communities studied are interested primarily in economic diversification, job creation and assisting existing businesses. Since the sample is biased by resource-based economies, it is not surprising that economic diversification is a primary goal. The individual responses varied greatly as to the level of detail provided on their goals. For

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'v 63 example, several agencies described their goals as "create jobs," while others articulated more defined goals, such as "create 'x' number of manufacturing jobs by 1986." While the openness of the question may have largely accounted for these differences, it is also probable that level differentiation exists among organizations. Agency/Individual Activities A question was posed to determine the effort expended by economic developers to assist local business, research community potentials, and attempt to attract nonlocal firms. Wide variations of responses were made, and the most frequent "Other" responses were for planning and administrative duties. Fourteen respondents answered the question and an average of these fourteen responses suggests that economic development efforts on the western slope are spent in the following categories: Fifteen percent on assisting local.firms, twenty-four percent on assessing development potentials, sixteen percent on promotion directed at nonlocal firms, and the remaining forty-five percent on other activities.

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Promotional Activities While eleven respondents answered that some portion of their time was spent on promoting their community to nonlocal firms, only ten respondents mentioned the type of promotional activities they participated in. Table 10 presents the types of promotional activities used. TABLE 10 TYPES OF PROMOTION TO NONLOCAL FIRMS Type of Promotion Advertising in general magazine and newspaper City and Regional County Town Advertising in trade journals Sending promotional materials to firms Advertising on radio orTV Attending trade conventions Other Telephone Mail Other 1 1 2 1 1 2 2 1 1 4 64 SOURCE: 1985 Author's Survey of Western Slope Economic Development Officials

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65 It is also interesting to note that of the ten respondents, seven participate in more than one form of promotional activity. Community Assessment Procedures for Nonlocal Promot1on _Twelve individuals responded to questions about their community assessment procedures. In the study area, three formal community assessments have been completed and two communities suggested that new studies are under way. Two of the three targeting studies that have been completed were done by the same small group of individuals in the communities of Delta and Montrose. This group has been very active in economic development on the western slope. These communities used a community participation model, developed by an economic development official who worked on the eastern slope of the state. The third study performed by a consultant for the City of Grand Junction was actually more of a community strength analysis. This study did not industrial targets, but rathar identified characteristics that might be amenable to particular types of industries.

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.Targeted Sectors When questioned about the sectors targeted for economic development, nine persons responded that they had specific types of targets. The responses vatied from general categories such as light industry, to detailed four-digit S.I.C. code industries. The summary of responses is presented in Table 11 below. TABLE 11 TARGETED SECTORS IDENTIFIED BY RESPONDENTS WESTERN COLORADO SURVEY, 1985 Industrial Sector Tour-Heavy M1n1ng H1gh Lt. Agency Agric. ism Mfg. Related Tech Mfg. Regional Responses 1 1 County Responses 6 3 1 Community Responses 1 1 3 1 Totals: 8 5 6 4 2 1 Other 5 8 13 66 SOURCE: 1985 Author's Survey of Western Slope Economic Development Officials From the nine respondents, agricultural-related industries were the most frequently identified target sectors, followed by tourism and mining. The "Other"

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category had 13 responses, but these were varied responses, such as cottage industries. Heavy manufacturing, tourism and mining-related industries were also frequently identified by the western slope developers. High-tech industries were identified by only two respondents. Based on these responses, it seems apparent that many of the communities continue to expect growth in existing resource-based industries or industries directly related to the resource-based industries. Location of New Firms 67 Seven of the nine persons that responded to this question indicated that new firms had located within their region during the past three years. A total of 22 firms were identified as having located in the seven areas. It should be noted, however, that a number of the firms specified as having relocated were not basic industries and in fact, over half were service industries. Unfortunately, the question was not phrased to determine how active the economic development agency had been in the location of these firms.

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68 The location of the new firms to the respective areas cannot be considered as an indicator of economic growth for the communities because many of the new firms are service organizations, and because. no indication of the number of firms having closed or left the region was indicated. Financing Mechanisms Eight individuals responded to the question regarding finance mechanisms designed to aid newly-located firms. Revolving loan funds were the most frequently identified form of financiai assistance. Industrial revenue bonds and state funding programs were also mentioned by a number of respondents as financial incentives. Surprising to the author was the fact that tax abatement was mentioned by only one respondent as an incentive. Other mechanisms mentioned by at least one respondent included joint venturing, tax abatement or deferment, and a number of other programs. Summary of Survey Responses Because of the diversity of the economic developers who responded to the Target Industry

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69 Community Assessment Survey, the results from the survey can serve only as a general indicator of economic development efforts in the region. The survey mechanism was generally ineffective in coping with the diverse goals and activities of these agencies. It is understandable that the agencies which serve this region do not follow a set structure relating to goals and objectives because of the diversity in their respective regions. The author was impressed by the coordination among developers in the region as well as their understanding of the mechanisms used to attract new industries. Targeting in the region had been performed by only three of the nine developers responding, yet a much greater number of respondents suggested that their community was attempting to attract specific types of industries. Without further study, it is impossible to ascertain how those industries were identified. However, it would appear that targeting, in some form, could be utilized on a much broader level. The method identified by communities that had performed targeting studies in this region had the attribute of enhancing their respective communities' understanding of the economic development process.

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The lack of targeting in the region suggests that either targeting mechanisms are unavailable, 70 too complex, or It is interesting to note that during the completion of this thesis in April 1986, a handbook on community industrial targeting was distributed to the group.S Additionally, a new targeting method was scheduled for presentation to the group by one of the group's members who had previously participated in a targeted industry study. This new method was identified as a one-day targeting approach. This would suggest that the importance of targeting has become greater to the group's members. In summary, it is evident that the need for economic development inthis region of western Colorado is great. The methodologies used by these non-metropolitan-based economic developers are comparable to methods used by their urban counterparts. Although the scale of urban economic development was not measured, it appears to the author that the funding and manpower dedicated by non-metropolitan communities to economic development is on a much smaller scale relative to their urban counterparts. From discussions with the economic developers, it appears targeting industries by communities will

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remain a diverse activity suited to the individual communities' goals and financial constraints. 71

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NOTES--CHAPTER III 1Note that for this example a rough approximation of basic has been used. The total basic employment was estimated as the summation of agriculture, forestry, mining, manufacturing, transportation, communication and utilities. 2The Mountain Area Developers' meetings are open tq anyone. Frequently participants may visit who are not directly involved in economic development. 3The Mountain Area Developers represent a diverse group of city, county and regional developers who hold informal meetings to discuss western slope development issues. 4A variety of funding mechanisms are 72 available to development agencies. For example, state funds may be channeled a county organization. 5Through an organization of Colorado developers, Thomas Clark's A Guide for Targeting Industries In Your Community was distributed.

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CHAPTER IV ISSUES IN NONMETROPOLITAN COMMUNITY INDUSTRIAL TARGETING As mentioned in the first chapter, a number of strategies are available to nonmetropolitan corrununities attempting to stimulate economic development. Targeting nonlocal manufacturing firms is one method discussed in this thesis, but a number of alternative strategies that focus largely on local resources are also useful, including reducing leakages, providing incubators for new start-ups, and financing local plant expansions. This chapter is designed to temper economic development efforts which envision targeting nonlocal firms as a primary strategy.1 The technical problems with targeting methodologies have been presented earlier, but other non-methodological problems are also inherent in targeting strategies and must be addressed. The issues presented here include: the need for corrununity participation, the appropriate size and scale of

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development, quality of life issues related to development, the benefits of focusing on development from within the community and the importance of coordinating with neighboring communities. Community 74 As demonstrated in Chapter 2, many iools of regional analysis have potentials for analyzing a community's economic assets and development potentials. One element of the economic development process has been largely ignored up to this point, the development of community members' awareness of the economic development process. The importance of community participation in the process cannot be overstated. Improving the community is the. primary goal of economic development, and an analyst who attempts to determine what is best for the community, without public input and support, will have a slim chance of success. A manual designed to guide the economic development official in soliciting community participation has been designed and applied a number of times in the state of Colorado.2 The manual, A Guide for Targeting Industries in Your Community,3 presents a step-by-step approach to compiling, organizing and

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75 presenting forming a "Target Industry Council" and soliciting local opinion input about the type industry the community wants and can support. The tools of analysis used in the handbook are generally less rigorous than those presented in Chapter 2 of this thesis. Many economic development officials suggest that the awareness, understanding and involvement the community gains through the process is at least as important as selecting a realistic target.4 Although several problems have been identified in the methodology in the manual (including reliance on Industrial Outlook Forecasts and difficulty of moving beyond the S.I.C. to firm names), the manual is a significant step towards mobilizing the community, which is an important yet difficult process. Size and Scale of Development Nonmetropolitan communities face substantial risk through their economic development efforts. Resources, both time and money, that are spent on chasing nonlocal firms could be used locally to expand existing enterprises or create incubators. Economic development effortswhich focus within the community allow the community to retain some control over the

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76 size and scale of development. Nonlocal industry, whether a new firm or branch plant, may be managed from outside the community. Nonlocal management can bring about numerous problems.resulting from a lack of community awareness and an understanding of local norms, and for longer-term impacts of production. An additional concern when large-scale operations are initiated in small communities is the potential for the firm or industry to overwhelm the planning capabilities of the community. The recent oil shale boom in western Colorado may not be a typical example of what normally happens when large-scale development occurs, but it is certainly an example of some of the worst consequences that can happen. Communities on the western slope were largely swept up in the intensive buildup of industry centered around shale oil production. Communities attempted to keep up with the development by planning ahead and developing infrastructure capable of handling the proposed expansion, including schools, roads and other public facilities. When the bust cycle occurred, most communities were overextended and few had made contingency plans. This does not suggest that these

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77 communities acted improperly, but rather demonstrates the potential for large-scale development to engulf the community rather than be by the community. The scale and size of development has the potential to impact a quality of life, political atmosphere and a number of factors beyond economic health and stability. Given this influence, economic developers may be well advised to consider scale of development prior to targeting nonlocal firms. The relative scale of existing firms and the employment, taxbase and stability needs of the community can serve as guidelines regarding the size of firms the community attempts to lure. Quality of Life During the mid ''70s, quality-of-life considerations reached a peak in American communities. The population and a number of industries demonstrated a desire toward settling in the hinterlands, with quality-of-life considerations frequently outweighing economic motivations. The nation demonstrated an environmental consciousness by numerous regulations and standards that protected

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78 the ecosphere, and a number of communities attempted to control their home planning regulations, some adopting limited or no-growth policies. These changes and others demonstrated the realization of resource finiteness andthe need to cope with the problems .of expanding, producing and extracting too much, too quickly. The field of eqonomic development .also underwent changes,:as most agencies moved out of the smokestack chase and into the high tech, research and development, and light manufacturing chase. Economic hardships in many areas have forced some communities to adjust the relative weight assigned to quality-of-life issues relative to "more important concerns," such as job security. A jobs versus environmental degradation issue may now be an even more difficult decision. Focusing Within the Local Community The extensive competition among communities in economic development programs (with some adjacent communities targeting each industries), suggests that communities will be losers and unable to attract new industries. Perhaps isolation, lack of available work force, poor quality of life or any

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combination of a number of factors can prevent some communities from attracting plant relocations, particularly on a scale. It may be that for these underdog communities, the focus on attracting nonlocal firms is too hopeful. For these communities the focus should include promoting existing businesses and exploring the possibilities for new local start-up. 79 For a rural community with little potential for attracting a nonlocal entrepreneur or plant relocation, opportunities can perhaps be identified which have significant potentials but have yet to be exploited. In many instances the targeting should be focused on basic industries that already exist. is a frequently discussed topic in many communities. The incubator concept is to provide some support for entrepreneurs attempting to start up. Frequently free land or rent, tax breaks and cash incentives provide the initial for these "hatchlings." This concept of developing from within allows a community to devote financial and manpower resources to foster local efforts. This process keeps the desperately needed dollars working inside the community. In this author's estimation, many

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communities, particularly nonmetropolitan communities, would benefit more from spending economic development dollars at home rather than attempting to chase nonlocal firms. Coordination Amon9 Regions 80 An issue related to fostering local growth is coordination among communities in a nonmetropolitan region such as the western slope of Colorado. The western slope lacks a major metropolitan community to serve as the "regional hub," and therefore material resources purchased by the smaller communities come from the eastern slope. While research nas not been performed to estimate the total demand by western slope communities from nonregional sources, it is probable that this demand is quite substantial. A recent article in a Colo_rado newspaper noted that a number of local computer firms frequently purchased goods and services from nonlocal sources. Their buying practices were largely due to the fact that the purchasing firms did not realize that the products they needed were available locally. A similar situation may be identified in many nonmetropolitan economies. It may be feasible for communities to unite and identify their

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regional imports, and to work toward providing for the demand internally or make bulk purchases from the nonlocal sources. Directories of manufacturers are frequently suggested as one means to alleviate the problems associated with firms being unaware of potential local providers. 81 A similar issue involves competition among communities within a region for a prospective new basic industry. It is not unheard of for an industrial site planner to travel from community to community within a region in the attempt to find the "best" incentive package among those offered by communities within a region. Competition among neighboring communities can be destructive and perhaps, in the long term, even competitive neighbors would benefit from regional cooperation. It would seem tpat in many circumstances competitive communities would be able to negotiate a joint offer to the prospective firm. The joint offer could incorporate some incentives to the firm from each community, allowing the communities to give up less individually yet still benefiting by the new firm's location. In such an example, communities may be able

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to offer their surplus resources as incentives while conserving their scarce resources. 82 Another advantage of regional coordination may involve communities working together for regional development rather thaneach individual community struggling on their own. In this scenario, communities could combine resources to establish larger revolving funds, and receive economies of scale from advertising and promotion. Tourism genera.tion is an example of this type of cooperation, where Community A would inform tourists of the amenities of Community B and vice versa.

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NOTES--CHAPTER IV 1As mentioned p 'reviously, targeting can be used to examine local industrial potential as well as nonlocal. 83 2The manual by Thomas Clark has been applied in the communities of Fort Collins, Delta and Montrose, Colorado. 3Thomas Clark, A Guide for Targeting Industries In Your Community (Region 10 Economic Development District: Montrose, Colorado, 1985). 4steve Kolby, D .irector of Research, Interview at the Colorado Department of Local Affairs, November 6, 1985.

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CHAPTER V SUMMARY OF FINDINGS AND FINAL CONCLUSIONS Stimulating economic development in a community is a difficult task. The economic developer must interact with the community to answer a number of questions, including the following: What resources are currently underutilized in the community? Which industries can effectively employ those resources? What type of industry is appropriate to mesh with community values? Which firms have the resources to relocate? Finding the answers to these questions and numerous related questions requires in-depth of: (a) the regional economy, (b) how the regional economy contributes to the state and national economy, and (c) how basic industries operate and select site locations. This thesis has presented a number of methods for segmenting and analyzing some of the key components I

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85 which form the community economic system. By examining the individual buildingblocks of the economy and how they interrelate, the economic developer can potentially identify strengths and weaknesses which can serve as the focal point for stimulating economic progress. In this thesis, a few of the available descriptive and analytibal techniques have been presented and may be utilized to examine community resources and identify prospective firms. Additionally, these methods have been contrasted to the current practice and experience of one nonmetropolitan region in western Colorado. The experience of the economic developers in this region demonstrates that effort and commitment alone in regional economic development are not sufficient to stimulate economic growth. These developers have demonstrated in practice the need for industrial.targeting. Nonmetropolitan. communities face significant handicaps over urban areas with respect to manpower and funding for economic development. It has also been suggested that these shortcomings are compounded by the lack of economies of scale; that is, urban areas can afford to staff agencies, provide project funding

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and develop infrastructure incentives of a much larger magnitude than their rural counterparts. Clearly, nonmetropolitan communities face a number of unique economic development problems. 86 By applying the methods of community assessment and industrial targeting, rural communities can more effectively allocate their limited resources. Another potentially valuable strategy for rural communities appears to be coordination with neighboring communities. By working together, communities may identify regional leakages that can be reduced. Potentially, the regional appeal can be enhanced by communities working together to pool their surplus resources, increase incentives, and more effectively market their resources.

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SELECTED BIBLIOGRAPHY Abel, Joseph H., "Targeting as a Tool for Developing an Industrial Development Strategy for Dupage County". Norman, Oklahoma: American Industrial Development council, Economic Development Institute, University of Oklahoma, 1984. Bendavid-Val, Avrom, Regional and Local Economic Analysis for New York: Praeger 1985. Blair, John P., Fichtenbaum, R. H., and Swaney, J. A., "The Market for Jobs", Urban Affairs Quarterly, New York: Sage Publications, September 1984, pp. 64-77 0 Bingham, Richard D., and Blair, John P gen.ed., Urban Economic Development. Vol. 27, Urban Affairs Annual Reviews. New York: Sage 1984. Clark, Thomas A., Community Economic Development: A Self-Help Handbook. Denver Division of Planning and Community Development and Center for Community Development and Design, University of Colorado at Denver. 1985. (Preliminary Manuscript.) Clark, Thomas L., l\ Guide for Targeting Industries in Your Community. Region 10 Economic Development District: Montrose, Colorado, 1985. Coffey, William J., Mario Polese, "Local Development: Coriceptual Bases and Policy Implications," Regional Studies, Vol. 19.2, pp. 85-93. Colorado Division of Employment and Training, Report of the Colorado Occupational Employment Statistics Survey, July 1978. Denver, Colorado: Colorado Division of Employment and Training, 1978.

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88 Fannon, "One Step Beyond: Combining Location Quotients with Inpu-t-Output Models to Identify Industrial Missouri Divis ion of Commerce and Economic Development, Jefferson City, Missouri, 1984. Gibson, Lay James, and Stephenson, William U., "Evaluating the of New Industry." Industrial Development (September/October 1983}. Conway Data, Inc., Vol. 152, No. 5, pp. 26-29. Hoover, Edgar M., The Location of Economic Activity. New York: McGraw Hill Book Company, Inc., 1948. Hunker, Henry L., Industrial Massachusetts: Lexington Book, D.C. Heath and Company, 1974. Iowa State University, Center for Agricultural and Economic. Development. Research and Education for Regional and Area Development. Ames: Iowa State University Press, 1966. Iowa State University, North Central Regional Center for Rural Development. Rural Industrialization: Problems and Potentials. Ames: Iowa State Press, 1974. Isard, Walter, Methods of Regional Analysis: An lntroduction to Regional Science. Cambridge, The M.I.T. Press, 1960. Isard, Walter; Schooler, Eugene W.; and Vietorisz, Thomas. Industrial Comalex Analysis and Regional Development: A Case Stu y of Refinery Petrochemical-S nthetic Fiber Com lexes and Puerto R1co. Cambr1dge, Massac usetts: The M.I.T. Press, 1959-1970. Jones, Graham L., "Identifying Potential Industrial Prospects Through Analysis of Economic History, Existing Industry and Area Assets: Campbell County Virginia." Norman, Oklahoma: American Industrial Development Council University of Oklahoma, Economic Development Institute, 1980.

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89 Kale, Steven R., "U.S. Industrial Incentives. and Manufacturing Growth During the 1970s." Growth and Change, January 1984, pp. 26-33. Karaska, Gerald and Bramhall, David F., gen.ed., Locational Analysis for Manufacturing. Massachusetts: Massachusetts Institute of Technology, 1969. Kaynor, Richards., and Schultz, Konrad F., Industrial Development: A Practical Handbook for Planm.ng and Implementing Development Programs. New.York: Praeger PUblishers, 1973. Kieschnick, Michael, Taxes and Growth Business Incentives and. Economic Development. Vol. II. Studies in Development Policy. Michael Barker. gen.ed. Washington, D.C.: The Council of State Planning Agencies. Klassen, Leo H., Developing Job Opportunities and Methods of Selecting Industries for Depressed Areas, An Introduction to Feasibility Studies. Paris: Organization for Economic Cooperation and Development, 1967. Kelby, Steve, Director of Research, Colorado Department of Local Affairs, Interview with Author, Denver, Colorado, November 6, 1985. Kuehn, John A., and Be.nder, Lloyd D., 11Nonrnetropolitan Economic Bases and Their Policy Implications ... Growth and Change, January 1985, pp. 24-29. McNabb, Dan, 11Target Marketing for the Industrial Developer." Norman, Oklahoma: American.Industrial Development Council: University of Oklahoma, Economic Development Institute, 1980. (Mimeographed.) Missouri State, Division of Cownerce ahd Industrial Development Handbook for of a Community Level Target Industries Identif1cation Ptograrn, U.S. Department of Commerce, Washington, D.C.: Economic Development Administration, 1976. Moriarty, Barry M., Industrial Location and Community Development. Chapel Hill: The University of North Carolina Press, 198n.

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Nothdurft, William E., Renewing America:-Natural Resource Assets and State .Economic Development, Washington, .D.C.: The Council of State Plann1ng Agencies, 1984. 90 Pacione, Michael., gen.ed., Progress in Industrial Geography. Breckenham, Kent, U.K.: Croom Helm Ltd., 1985. Pascal, Anthony, and Gurwitz, Aaron, Picking Winners: Industrial Strate ies for Local Economic Development. Santa Mon1ca, Call orn1a: Rand Corporation, 1983. Scanlon, Jay R., "Site Selection and Design for Growth Industries." Industrial Development, March/April 1984. Vol. 153, 2. Conway Data, Inc., pp. 26-29. Shackelford, J. Cooper, "Prelimina,ry Site Studies." Industrial Development, Conway Data, Inc., pp. 12-16. (March/April 1984) (Vol. 153, No.2.) Smith, David M., Industrial Location: An Economic Geographical Analysis. New York: John Wiley & Sons, Inc. 1 9 71 Summers, Gene F., and Selvik, Arne, gen.ed., Nonmetropolitan Industrial Growth and Community Change. Massachusetts: Lexington Books, D.C. Heath and Company, 1979. Thompson, Wilbur, and Thompson, Philip, "From Industries to Occupations: Rethinking Local Economic Development," C.U .. E.D., Washington, D.C., Department of Commerce, Economic Development Administration (Fall 1985). u.s. Department of Labor, Bureau of Labor Statistics, Occupational Employment in Manufacturing Industries, 1977, Bulletin #2057, Washington, D.C.: Government Printing Office, 1980. Wheat, Leonard J., Regional Growth and Industrial Location: An Empirical Viewpoint. Lexington, Massachusetts: Lexington Books, D.C. Heath and Company, 1973.

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APPENDIX

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DEPARTMENT OF LOCAL AffAIRS WesiPrn Slope Office Swe Services Room 40'1 2 2 2 So urn Silh Street Crand lunctron. Colorado 81501 Phone IJOll 248-7110 Dear Economic Development Official: DI!P&IITIIIIIT 01' I!COIIIOIIICI UNIVI!ASITY OF &T DENVER t t 00 ,.ou"Nntl't Street Oenwer COIOtldo 80202 November 1, 1985 Please fill in the accompanying Community Assessment/Targeted Industry Questionnaire and deposit it in the box near the registration desk. 92 The information gathered in this survey will be used in a study of economic development efforts in Colorado. The study is being performed by a researcher at University of Colorado at Denver in cooperation with the Western Slope Office of the state Department of Local Affairs. All responses will be considered confidential. The results of this survey: will be summarized and made available to economic development however, extreme care will be taken to avoid disclosure of sensitive materials and individual responses. Thank you for your Kurt R. Schumacher Principal Investigator

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"DEP.UTMENT OF LOCAL AFFAIRS Western Slope Office Stdte Setvices Room 409 222 South Sixth Street Crnd Junction Colorado 81S01 Phonl' (lO l) 248-7!10 Dear DII'UIT'IIIINT D' ICONOIIICS UNIVIASIT'I OF COLOAADO Af DINV!A It 00 ,ou,.Mntll SITMt Oenwer, Colotldo 80202 November 22, 1985 We would greatly appreciate your assistance in completing and returning the enclosed Community Assessment/Targeted Industry Questionnaire. The information gathered in this survey will be used in a study of economic development efforts in western Colorado. This study is being performed by a researcher at the University of Colorado at Denver in cooperation with the Western Slope Office of the state Department of Local Affairs. All responses will be considered confidential. ---------93 The results of this survey will be summarized and made available to you through the Western Slope Office by mid-December. Extreme care will be taken to avoid disclosure of sensitive materials and individual responses. Thank you for your cooperation. Sincerely, "/ J-//lt / 7-,4 ./1. (! ; ..... ,.-.Kurt R Schumacher Principal Investigator I

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Name: Title: Target Industry/Community Assessment Questionnaire Agency and-Address: Telephone: 1. How many people in your organization spend most of their time on economic development work? Full-time ::::=Part-time What was your 1985 operating budget for economic development? $ ___ 3. Please specify the status of your organization {public, private, public-private). 4. Please list the primary goals of your economic development organization {e.g., diversify the economy toward increase the local tax etc.). { 1 ) {2) { 3) { 4) 5. What percentage of your time/budget is expended on: a) assisting existing businesses in your community b) researching your community's economic development potentials c) promoting your community to non-local firms d) other {please explain) ____ % ____ % ____ % 94

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6. Please detail your efforts towards attracting non-local firms to your area. \ a) Advertise in general readership magazines or newspapers b) Advertise in trade journals c) Send promotional materials to firms d) Advertise on television or radio e) Attend trade conventions r f) Other (please specify) g) Other--------------h) Other--------------Please Check 7. How did your organization determine which non-local finns/industries your community should attempt to attract? a) Personal assessment of community potentials. b) Survey of local business leaders c) Formal survey of existing industries d) Community members study of industries to target e) Hired consultant to determine industries to target f) Other (please specify) Please Check 8. If your community has performed a target industry study, please list the name, date and author of the report and the name of a contact from whom we can gather additional information. Name: _______________ Date of Study: _________ __ Author:, ___________ Cost:. ___ Contact:. ___________________________________ 95

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9. Please list the industrial sectors which your community/organization is currently targeting (e.g., semiconductor manufacturing: fruit and vegetable canning: etc.). 10. Please list all firms that have located in your area in the last three years. 11. What are the primary financing mechanisms offered by your organization to assist/attract prospective firms? 12. Please add comments about your target industry/community assessment programs (staff, budget, goals, etc.). Thank you. 96