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Business development is critical to rural development strategies.
Businesses provide jobs, income, a tax base, and local access to
goods and services. Many rural businesses, however, face difficult
challenges as globalization and other factors are taking a toll.
For example, in the Southeast, the textile and apparel industry
has shrunk in recent years, largely due to competition from imports
(see U.S. Textile and Apparel Industries and Rural America). In
response, affected communities are increasingly emphasizing business
assistance to help rural firms adjust to changing markets.
Over the years, policymakers at all levels of government, often at the
urging of businesses requesting assistance, have devised a wide range
of programs aimed at attracting and retaining businesses and fostering
business growth in rural America. Some general
approaches have been instituted
for the specific purpose of supporting business development.
Focus Has Shifted Over Time
The traditional approach to business assistance in rural areas involved
the use of tax concessions to recruit large business establishments.
This approach proved costly to the public and in most cases offered little
guarantee of lasting benefits to the community. In recent years, communities
have placed more emphasis on credit, training, and technical assistance
to help strengthen existing businesses and grow new small businesses
capable of creating more long-term jobs.
States and some local governments
support existing businesses (through retention and expansion programs),
encourage entrepreneurial activities (through seed capital and microenterprise
loan funds), and strengthen business linkages to markets and sources
of assistance (through marketing assistance, worker training, and business
network support). At the Federal level, business assistance programs
have historically emphasized filling perceived gaps in the business
services industry (by providing financing and technical expertise, for
example). Here, too, the focus has shifted from dealing with each problem
individually to offering a package of services, often melding Federal
assistance with State and local government support.
The importance of business assistance programs to individual firm profitability
and in furthering broader economic development goals is open to question.
Based on responses to a 1996 ERS survey of rural and urban manufacturing
firms, it appears that manufacturers view tax abatement programs as
the most important form of assistance for supporting company operations
(see Who
Benefits from Business Assistance Programs?). This finding is consistent
with the large number of respondents who felt that State and local
taxes seriously hindered their competitiveness.
Firms also viewed
the availability
of skilled workers as a serious problem. Many manufacturers viewed
technical assistance/training programs favorably. Respondents did
not view access to credit as a widespread problem. Thus approaches that
rely heavily on credit programs to assist rural manufacturers may
not be cost
effective.
 d
Assistance Varies Depending on Local Conditions
To get more out of business assistance, rural communities may target
programs to industries or firms that best fit with local development
strategies. Targeted businesses may be expected to thrive locally,
be economically viable over the long run, and fit well with community
objectives, such as job growth and quality, environmental quality,
traffic manageability, and local tax base growth.
Because local conditions vary significantly, business assistance strategies
will vary from community to community. For example, communities losing
population might design a strategy to foster the growth of businesses
that are most likely to increase employment. Communities with natural
amenities might target assistance to businesses that capitalize on amenities
to attract tourists and new residents (see the chapter on Amenity-Based
Development).
In agricultural areas, assistance might target value-added,
farm-based businesses, such as agritourism or ethanol production. Alternatively,
communities burdened by low wages and incomes might focus on encouraging
the growth of high-wage businesses.
Community and Regional Development Contributions
For some business assistance strategies to succeed, rural communities
may have to address aspects of local community development. For example,
communities trying to attract tourists and recreational residents may
choose to beautify the town, improve the roads, increase police protection,
and build a visitors' center and a public golf course or some other
facility that adds to local amenities. Communities fostering the growth
of high-wage firms may decide to upgrade the local labor force by improving
schools, providing specialized training in community colleges, and upgrading
libraries and the telecommunications infrastructure. These kinds of quality-of-life,
community-based improvements may be particularly important to businesses
that rely on the so-called creative class, people in occupations
using novel combinations of knowledge and ideas.
In addition, businesses may require public or private goods and services
that may not be available in rural areas. For this reason, rural localities
may find it advantageous to participate in regional business development
strategies. Such strategies can improve a community's access to
goods and services required by prospective businesses. Regional alliances
can also provide assistance to networks or clusters of firms or industries
that depend on each other's presence.
See related
links and recommended readings covering issues on business assistance.
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