NOBODY IS going to tell Gov. James Thompson to stay home when there`s a chance for high-visibility trips to Japan, or even Detroit, in the hope of attracting industrial plants to Illinois.
However, professionals in state economic development say the game today is ”cultivating your own garden.”
States still are battling with one another to get out-of-state companies to build plants within their borders, and there is no shortage of competing state tax incentives and other inducements for the illusive industrial facility that will bring hundreds of jobs. Big industrial companies continue to play states against each other.
”Chasing smokestacks” has often proved to be an expensive and futile effort, though, largely because heavy industry isn`t where economic growth is and because the limited incentives states can offer for industrial plants usually are negligible considerations in site selection decisions.
”TODAY, THERE is an emphasis on indigenous business creation,” said Robert E. Friedman, president of the Corporation for Enterprise Development, a consulting group based in Washington. ”If you said `economic development` to a state official five years ago, it meant trying to attract branch plants of large manufacturing firms from out of state.
”Today, the largest manufacturing firms aren`t creating many jobs, and they`re not moving a lot of plants around.
”The gains you can realize from a smokestack-chasing policy have declined. In the last decade half of new jobs came from independent businesses less than four years old.”
The New England states were the first to develop programs to foster home- grown entrepreneurship. Now, national observers say, the Midwest is picking up the ball. The result has been an array of programs with different approaches to the same objective: creating jobs by nurturing small business and young companies.
ROBERT A. BOWMAN, state treasurer in Michigan, said, ”The race for the factory of the future is the key race, and I think the Midwest will win that race.”
Midwest economic development programs on behalf of small and emerging businesses have taken three general forms: making capital more easily available to new and small businesses through a mixture of public and private loans, loan guarantees and equity investments; providing expertise in business management to fledgling firms; and expanding markets for new and small business, especially through exporting to foreign countries.
Miles Friedman, executive director of the National Association of State Development Agencies, says Illinois and Minnesota have pioneered state-sponsored export programs for small business.
”The standard approach is technical assistance” to small companies that have never tried exporting, he said. ”The newer frontier is financing assistance.” Illinois works with the Export-Import Bank to provide loan guarantees for local exporters.
Before a small or new company is ready to export, it often faces numerous financial and management hurdles. In recent years, each of the Midwestern states under Republican and Democratic governors and legislatures has begun programs to help companies clear those hurdles.
State governments are involving themselves in this process in part because it`s politically popular and in part because a state can use its clout and borrowing power to leverage a relatively small public subsidy into a substantial pool of financial and talent resources otherwise unavailable to small and emerging businesses. The payoff each state hopes for is new jobs.
EXPERTS SAY it`s too early to tell whether any of the new programs will be successful in significantly boosting jobs. Here are some highlights from Indiana, Michigan, Minnesota, Wisconsin, Iowa and Illinois:
— Illinois–State officials and officers of Chicago-based Frontenac Capital Corp., a venture capital firm, are sending out letters to major companies soliciting $6 million for a new venture capital pool to invest in emerging Illinois businesses. The state and Frontenac each has put $2 million in the fund.
Next month, state start starts a technology assistance program to help researchers at companies and universities get ideas off the drawing boards and into commerce.
Money isn`t the only answer, says Michael Woelffer, director of the Illinois Commerce and Community Affairs. Illinois has started a network of small business development centers at colleges and junior colleges to provide expertise and financing leads for small businesses. Illinois State University in Normal has applied to be the first state school with an undergraduate degree in small business.
— Indiana–Before 1981, Indiana didn`t have a single small business investment company, a form of venture capital firm created under federal law. Now, Indiana has attracted national attention for its Corporation for Innovation Development, formed two years ago with $10 million in private investments in return for state income tax credits.
The corporation opened a network of small business investment companies and thus far has made 27 investments in Indiana com Lt. Gov. John Mutz.
Indiana also formed the Corporation for Science and Techology with a $20 million appropriation by the legislature to finance grants and loans to companies and univevelopment.
— Michigan–One potential source of capital for local entrepreneurs is the billions of dollars in state pension funds. While other states have been reluctant to target state pichigan has committed $100 million of pension fund assets to venture capital projects with some link to Michigan`s economy.
The pension fund money will be invested in private venture caventure capital firms agree to open an office in Michigan.
”We don`t sit here and think the next Silicon Valley or Route 128 is going to be in Michigan,” said state treasurer Bowman. enture capitalists are looking for a Midwest home, and we think that home is going to be Michigan.” — Minnesota–Countercyclical job-creation programs traditionally have been a popular ng. In Minnesota, a state known nationally for stimulating entrepreneurship, small businesses have become the target for job subsidies.
Two years ago, Minnesota created an emergency emp through which an employer who hires an eligible applicant will get a wage subsidy of up to $5 an hour.
Thomas Triplett, director of state planning, said small business owners, who typigrams like the plague, had been attracted to the job subsidy program by its simplicity. About 80 percent of the $100 million devoted to the program in its first two years is going to private bn–Linking goverment assistance for depressed communities to government assistance for small and emerging businesses has been a kector of the Wisconsin Community Development Finance Authority and president of the Wisconsin Community Capital Corp., says the target is the chronically unemployed in Wisconsin`s cities, smalions. It`s much different than government efforts to attract high tech companies, he says.
The capital corporation is a small business investment company with $2.5 million in capital thnated debt investments in start-up businesses. The finance authority, with the aid of volunteer help from big corporations, provides expertise for emerging companies.
— Iowa–Connecticutor a program drawing attention in Iowa. The Iowa Product Development Corp. was established with about $900,000 appropriated by the legislature in 1983 to provide capital for existing or start-corporation, which is supposed to become self-sufficient, provides money for new products in return for royalties from sales when the products enter the market, said Doug Getter, acting presid So far, the corporation has invested in four local ventures, including an electronics company project in microcircuitry design, a new kidney dialysis solution and retroreflective safety ml and other uses.
