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Dr. Martin Romitti. What a re you up against? Governor’s Economic Development Conference Sioux Falls, SD April 17, 2013. Diversification. Industrial diversity, 2012. Source: Feser , Hewings & Mix, University of Illinois - Regional Economics Applications Laboratory. Trends.

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Dr. Martin Romitti

Whatare you up against?

Governor’s Economic Development Conference

Sioux Falls, SD

April 17, 2013



Industrial diversity, 2012

Source: Feser, Hewings & Mix, University of Illinois - Regional Economics Applications Laboratory



Number of State Economic Development Incentive Programs



Source: C2ER State Incentives Database



  • The rise in deal closing funds
  • In nearly half the states, governors have been given broad discretionary power in determining awardees for these types of funds. Some states have also opted to involve legislative leaders or gubernatorial appointed boards in award decisions.
  • More targeted, retooled and specialized programs
  • Last year almost half of all economic development programs emphasized specific target industries, prioritized by the agency or other economic development organizations.
  • Calls for more proof before the pudding
  • With slower economic growth and budget constraints, economic development organizations are looking to tie more performance requirements and repayment provisions to incentives.


  • The Midwest has the highest concentration of state economic development incentive programs, followed by the Northeast, South and West.
  • Forty-five percent of state incentive programs had less than $1 million in total financial outlays for the program year, 35% expended between $1M and $10M, while 20% exceeded $10 M annually.
  • Nearly 40% of economic development incentive programs are notactively marketed, except for a basic web presence and/or printed collateral materials.

Source: State Economic Development Program Administrators Survey 2012 (CREC)


What do Napoleon and Raisin Bran have in Common?

They both tried to make it rain!


State Economic Development Budgeted Spending by Function

United States

South Dakota

Source: State Economic Development Program Expenditures Database (CREC)


2. Traded Sector Growth

Non-basic Sector:

Industries that produce goods and services that are consumed locally.

Basic/Traded Sector:

Industries that produce goods and services sold to consumers outside the region.


Outside spending






Net Benefit


Basic/Traded Sector

Non-basic Sector

jobs “crowded out”

Employment growth

Manufacturing: 2.0 to 3.0

Service/Retail: 0 to 1.2


Area of Benefit

Source: US Census Bureau Local Employment Dynamics


3. Clusters and Economic Outcomes

Survial Ratesof New Businesses (+)

The stronger the cluster , the higher the survial rate of new businesses


New Industries (+)

New Business Formation (+)

The stronger the cluster, the more dynamic is the process of new business formation

The stronger the cluster, the more likely new industries within the cluster are to emerge

Job Growth

In New Businesses (+)

The stronger the cluster, the higher the job growth in new businesses

Sources: Porter, The Economic Performance of Regions, Regional Studies, 2003; Delgado/Porter/Stern, Clusters and Entrepreneurship, Journal of Economic Geography, 2010; Delgado/Porter/Stern, Clusters, Convergence, and Economic Performance, mimeo., 2010.


State of award for federally funded regional cluster initiatives since 2006 - including Jobs Accelerator Collaboration Clusters (20), Advanced Manufacturing Jobs Accelerator Collaboration Clusters (10), Rural Jobs Accelerator Collaboration Clusters (13), SBA’s Pilot Contract Based Clusters (10), Initial Clusters (3), Workforce Innovation Fund (26), Regional Innovation Grants (41), Workforce Innovation in Regional Economic Development (39). Mapping by CREC.


Industry Targeting Programs

Sources: State Economic Development Incentives Database and State Program Administrators Survey (CREC)

what to do to maximize effectiveness
What to Do to Maximize Effectiveness
  • 2. Formulate strategies and apply incentives to the real “rain makers” of job growth
  • 1. Recognize and develop regional economies to maximize your benefits

3. Measure well

thank you
Thank you
  • Martin Romitti
    • 703.522.4980, ext. 1026