Does local business ownership insulate areas like Ashtabula County from economic shocks (threats of closing, employment reductions, expansions elsewhere, etc.)? The answer is “it depends” on the type business we are talking about. This is a question that has been asked by many economic developers and their leaders. It is an issue that has been discussed often in Ashtabula County. Common sense is always important, but an informed perspective from research is increasingly important in guiding our choices about local economic development policy. Much as healthcare and other fields have shifted to “evidence-based practice,” economic development must be prepared to do the same. Research on the impact and effectiveness of local economic development policies and practices is needed.
Local business ownership is very important to local economies. There is no question about that point. However, one economic study suggests that we need to look more closely at economic development policy recommendations that favor local business ownership to ensure they are properly focused.
So what do we “know” about this issue? The answer is that our knowledge is limited from a research standpoint. One 2010 article (see the download link below) drilled into the issue and found that some types of local ownership do insulate areas from economic shocks, although the clearest benefits do not come from small, independent businesses, but instead from corporate headquarters and, to a lesser extent, from small, locally-owned chains.
Applying these research findings to Ashtabula County, we could argue that locally headquartered companies like Chromaflo, MFG, and others give the county greater economic stability, assuming that external events (economic downturns, industry restructuring, global competition, etc.) do not topple the locally headquartered company. Small independent businesses are important to the county, especially if they are locally headquartered. Chain type businesses, according to the study, provide less insulation from economic shocks.
Download the study article here: local business owership article
The implication of this study’s to our work are:
- We should continue to give priority attention to locally headquartered companies (large and small) to ensure their future commitment to the county.
- Our approach to economic gardening should give priority attention to locally owned independent companies.
- Our first priority across all business and industry targets should be grow the next generation of growth companies in the county.