The biggest myth of the new economy? It's that geography no longer matters. Companies can locate anywhere. The United States is evolving into one big homogeneous marketplace. Like most myths, this one contains a kernel of truth. One city's airport and malls do look a lot like every other city's. And plenty of companies have escaped the locational confines of an earlier era.
But for most companies, place continues to matter a great deal. Just look at the evidence. High-tech start-ups continue to locate in crowded, costly Silicon Valley. Manufacturers spring up and thrive in midwestern states despite high taxes and widespread unionization. Some companies seek out cities like New York and Los Angeles; others flee to remote locations in Vermont or New Mexico.
Why should this be? Simple. In this day and age, businesses need every competitive advantage they can get. Location is one more edge that smart entrepreneurs capitalize on.
( If you run an everyday small business, would you rather start up a new branch in Colorado or in Illinois? Hint: Colorado's population is expected to grow twice as fast as that of Illinois between now and 2005. The continuing movement of population from northern and eastern regions to southern and western ones means that sunnier places offer more opportunities to certain kinds of companies.
( If you run a film-services company, you'd like to be in Los Angeles or maybe in one of the movie industry's other pockets of production, such as New York City or North Carolina. But think how many other companies are equally dependent on being part of an industrial agglomeration. Those Silicon Valley start-ups brave the region's many obstacles because that's where the customers, suppliers, and skilled workers are.
( In a fast-changing economy like our own, some cities and regions get a leg up on a rapidly developing business sector and thus provide opportunities that are hard to come by in other regions. The Far West is a focus for the country's booming trade with Asia. Philadelphia and Boston are centers for biotech; San Francisco and New York, for multimedia. South Carolina has become a magnet for investment by European manufacturers.
The one big difference between the geography of the new economy and that of the old: today the variation that counts is within regions, not between them. Take Tennessee, for example. Decades ago the state wouldn't have been on anyone's list of economic hot spots. But Nashville and other cities that used to be sleepy regional capitals have metamorphosed into fierce and successful world-class competitors. Nashville's unemployment rate is down to a rock-bottom 4%. Businesses are scrambling to find space.
As an economic entity, "Tennessee" is an agglomeration of places with radically different prospects. That's true of most states -- and indeed of whole regions. The Southeast? The Far West? New England? Your geographic advantages or disadvantages depend not on your region but on exactly where you are. And where you are still matters -- a lot.* * *
What the Future Holds
*Projected annual job growth, 1993Ñ2005 (percent)
**Projected per capita income as a percentage of national average, 2005
Where the jobs are going isn't necessarily where the money is
Projected annual job growth, 1993Ñ2005
Hothouses: States with 2.6% projected annual job growth
Sluggards: States with 0.9% projected annual job growth* * *
Projected Per capita income, 2005
Aristocrats: States with projected per capita income 118%Ñ134% of national average
Poor relations: States with projected per capita income less than 80% of national average* * *
Hot spots: Large metro areas with the most new businesses, 1994
Salt Lake City
Job boom: Cities with the lowest unemployment, 1995
Fargo, N. Dak. 1.8%
Des Moines 2.4%
Sioux City, Iowa 2.5%
Lafayette, Ind. 2.7%
Gainesville, Fla. 3.1%
Raleigh, N.C. 3.2%
Roanoke, Va. 3.3%
Sources: U.S. Department of Commerce, Survey of Current Business, Washington, D.C., July 1995; Entrepreneurial Hot Spots, Cognetics Inc., Cambridge, Mass., 1995; Comparative Statistics of Industrial and Office Real Estate Markets, Society of Industrial and Office Realtors, Washington, D.C., 1996.* * *
Research assistance for this article was provided by Mary Furash.