Once in a while one of my longstanding hunches gets validated with statistics. The following chart is taken from the 23rd annual site selection survey of corporate professionals put out by Area Development magazine. The people surveyed are mostly the VPs in charge of site selection decision at large U.S. companies (presumably the targets of investment attraction efforts).
I have said many times on this blog that cash-based incentives (grants, bonds, loans, etc.) are the least attractive to companies searching for a new location for a manufacturing site, software development centre, back office etc. It seems to me that cash is really only of interest to firms that absolutely need it to fund their project – and if that is the case, there should be an automatic concern over the viability of the project.
The survey validates my theory. Tax-based incentives are far more important than cash-based incentive and even other incentives such as land and infrastructure trump cash.
The last time I checked, New Brunswick was primarily in the cash incentive business and Dept. of Finance folks are adamantly opposed to tax-based incentives. Right in line with reality, once again.
Just as a PS to that – I know that some folks will say that access to capital is a uniquely Atlantic Canada problem and others will say we need to help out our own and shun the evil national and international corporations. This specific post is not related to the FDI versus local growth argument. It is specifically about how we attract FDI and the incentive tools that are most likely to be successful.