In the highly competitive market for attracting business, communities historically have developed and offered incentive and financial packages not to overcome disincentives but hoping to gain an advantage over competitive cities.
Studies of location decision factors have universally concluded that incentives have minimal influence on one location over another, yet communities continue to use incentives to be competitive.
Though incentive may have minimal influence directly on the site selection companies still want and ask for them. Particularly during the location decision process when communities feel the competitive heat and make the best offers.
Today companies are increasingly viewing incentives as going directly to the bottom line and have become part of their return-on-investment assessment. And the ROI assessment is often used as one factor in the location matrix, so incentives still play a role in the location decision process even though it is now indirect.
So what does this change of uses of incentives mean for a community? Civic leaders should review there incentives policies to insure that their incentives help increase a company’s ROI. The issue of having an incentive package that is competitive with other cities may take a backseat to the ROI.