In a recent Knowledge@W. P. Carey article, the findings of Hoskisson and Kim align with my priors. It would seem sheer folly to believe that major multinationals would locate in a region simply to reap the short run tax benefits. R&D investments by businesses pay off in an array of ways but the size of the ROI depends on the quality of the people available to conduct the analysis. And R&D, no doubt, is more dependent on proximity to quality technical workers than are regular manufacturing positions or even high tech manufacturing positions. The lesson for policymakers should be clear. Maintain a business climate conducive to attracting and retaining people with technical skills, and if you don’t, no amount of R&D tax incentives will substitute.

The article reminds me of a related thread. Many businesses may find advantages in locating R&D and related manufacturing facilities in close proximity. Pressures for reducing the cost of manufacturing invariably increase the pressure to locate in less developed countries. But there remain challenges of finding technical talent in the same location where manufacturing labor costs are low. When confronted with this challenge, Motorola responded by maintaining R&D facilities in Arizona and manufacturing in nearby Sonora Mexico. US border States are uniquely positioned to leverage this location advantage and should be devoting more energy to using this advantage in economic development initiatives.