An article in the Scottish press back in January asking “How do you measure whether location A or location B is a better place to do business?” This week Ernst & Young’s European Investment Monitor (EIM) announces the latest European FDI results based on the numbers of inward investment projects attracted. London, UK, Ireland, Germany will all be vying for top slot. European IPAs will be looking to prove their success of their strategies.
But measuring the success of a region to do business in by the number of inward investment “projects” attracted is a dubious one at best, especially for mature economies in Europe. My preference is to go for structured business opinion and intentions surveys, matched with a set of business investment and activity statistics. These can be shaped to measure the nature of sophisticated but mature US or European economies, fast growing economies, or emerging economies.
Let’s compare apples with apples, by using qualities such as juiciness, longevity, even taste! Forget weights and numbers. The World Bank’s Doing Business Database may be a better indicator. Are there any economic agency “fruit sellers” out there with their developed key performance indicators (KPIs)?
Extended version
My attention was drawn to an article in the Scottish press back in January asking “How do you measure whether location A or location B is a better place to do business?” Citing the comparative advantages of Aberdeen for oil industry business and Edinburgh for financial services, the article went on to assert that “.measures of inward investment may be a suitable ‘barometer’”.
This week Ernst & Young’s European Investment Monitor (EIM) announces the latest European FDI results based on the numbers of inward investment projects attracted London, UK, Ireland, Germany will all be vying for top slot. European IPAs will be looking to prove their success of their strategies.
The article went on to discuss what measures of inward investment may be a suitable “barometer”….
The article concluded that, on this basis, London was the better place to do business. After all, in 2006 London received 33 inward investment projects per one million people, nearly twice that of Ireland which generated 18 projects per one million people. Scotland was some way behind London and Ireland with 12 projects per one million people in 2006. But if you set that in the context of all 13 regions of the British Isles, Scotland is doing relatively well, coming in usually fourth or fifth best at attracting inward investment.
Hmm, measuring the success of a region to do business in by the number of inward investment “projects” is a dubious one at best, especially for 
mature economies in Europe. First, the data collection and accuracy for this dataset (inward investment projects)is far from complete. Why not measure the numbers of jobs created? Or the amount of pounds invested? Or the value of jobs created, or the tax take, or … There is no perfect register for this kind of data, and it doesn’t matter either, because these measures are merely interesting indicators, rather than absolute goals for economic development and business attractiveness.
Successful investment attraction is based on a myriad of corporate combinations of a) access to market(s) b) access to talent and skill c) access to low costs cost and d) access to technology and innovation, in order to make more profitable business.
Ultimately companies may choose to start up, expand, acquire, merge businesses, or partner up to make good business. The physical location has to fit these business drivers. And for many English, Scottish and Irish companies, actually India, China, the US etc. may be the places they are really interested in, and are adjusting their business models accordingly.
So the parochial comparisons between Scotland, Ireland, London really do miss the big point. As does the focus on inward investment as a key or real indicator for the most attractive place for doing business in Europe. Governments should be taking measures to ensure their countries stay as competitive as possible in an ever-changing global economy. Tax reductions, deregulation etc. are givens.
Ultimately companies may choose to start up, expand, acquire, merge businesses, or partner up to make good business. The physical location has to fit these business drivers. For many European companies, actually India, China, the US etc. may be the places they are really interested in, and are adjusting their business models accordingly. So the parochial comparisons between Scotland, Ireland, London really do miss the big point. As does the focus on inward investment, in terms of numbers of projects or the dollars invested.
IMHO the big steps that national and local governments and their agencies should be focusing on is in enterprise development: promoting business skills and access to experience, promoting and supporting innovation, encouraging really competitive national and international business strategies (yes, including offshoring and outsourcing to other countries!), providing “best practice” access to finance and the like. If Scotland, Scottish Enterprise, the LECs and others can do this well, then they will be comparing their efforts with the likes of London and Ireland, but also umpteen US locations (e.g. for new business models and access to finance and business knowhow), Singapore (e.g. for internationalisation support), Germany (e.g. for technology), Italy (e.g. for design) and many other locations and business disciplines. And in the areas of enterprise development, innovation and entrepreneurship all regions of the UK and Ireland still have a lot to be modest about!
My preference is to go for structured business opinion and intentions surveys, matched with a set of business investment and activity statistics. These can be shaped to measure the nature of sophisticated but mature US or European economies, fast growing economies, or emerging economies.
Let’s compare apples with apples, by using qualities such as juiciness, longevity, even taste! Forget weights and numbers. Are there any economic “fruit sellers” out there with their developed key performance indicators?
