The Higher ED Blog: What’s new in economic development research (spring 2016 edition)
Michelle Madden / April 11, 2016
The Higher ED Blog publishes a quarterly economic development research roundup that shares new research practitioners might find useful. The series usually draws from Economic Development Quarterly, Regional Studies, and the Journal of Rural Studies, all reputable peer-reviewed academic journals.
Spotting the problems in economic impact analyses for professional sports
When deciding to financially support a professional sports venue or event, local governments typically rely on economic impact analyses from consultants. While elected officials and municipal staff take these documents at face value, many scholars have pointed out that the methods and assumptions are not always sound. A group of US based researchers pored over two decades of academic research on economic impact studies for professional sports and found six common “flaws”. These impact studies often (1) overestimate the benefits, (2) apply intangible social benefits to the whole community, (3) select an impact boundary beyond the subsidizing jurisdiction(s), (4) use multipliers that are unreasonably high, (5) assume there will be positive real estate development around the venue, and (6) underestimate the costs.
Since these deficiencies can be hard to spot, the researchers compiled a list of 20 questions to consider when assessing these studies.
- Does the study adjust for the inappropriateness of counting nonlocal casuals, nonlocal time switchers, and local residents who would have spent regardless?
- Does the study adjust for the possibility of redistributed labor?
- Does the study adjust for the possibility of import substitution?
- Does the study adjust for the possibility of crowding out?
- Does the study adjust expenditure and employment estimates for novelty effects?
- Does the study discuss specific types and sources of intangible social benefits?
- Does the study use a survey of residents to determine the importance of intangible social benefits?
- Does the study use a survey of residents to gauge the importance of a team or an event to the community?
- Does the study use a survey of residents to gauge the importance of a team or an event relative to other community goals?
- Does the study estimate a specific impact for only the jurisdiction(s) subsidizing the venue/event?
- Does the study use an income multiplier and report its value (of any type)?
- Is the logic of the chosen multiplier clearly stated and reasonably defended?
- Does the study incorporate future economic development into its impact estimates?
- Are assumptions about the probability of development and magnitude of investment explicit?
- Does the study discuss shifting economic activity within a jurisdiction as a benefit?
- Does the study discuss project benefits in the context of public costs?
- Does the study discuss capital and ongoing costs such as facility construction, future renovations, land acquisition, infrastructure improvements, municipal services, and transaction costs?
- Does the study calculate expenditure estimates based on different assumptions about the percentage of attendees that are nonlocal casuals, nonlocal time switchers, and local residents?
- Does the study calculate expenditure and employment effects with different multipliers?
- Does the study calculate real estate development impacts based on different probabilities of development actually occurring and based on different investment levels?
This list is a great resource for public servants to use while reviewing economic impact studies for professional sports investments, and probably translates well to other proposed investments as well. It’s also a helpful guide for any kind of organization preparing an economic impact study.
Read more: Suggestions for the Needed Standardization of Determining the Local Economic Impact of Professional Sports. Economic Development Quarterly. Prepublished March 9, 2016.
Rural retailers need to do something—anything—about e-commerce
Broadband internet and other communications technologies have provided opportunities for rural businesses to reach new markets. However, they have also ushered in an era of e-commerce that has changed traditional shopping patterns in rural and isolated communities. Recognizing this shift, two researchers from the Institute for Retail Studies in Scotland examined the extent of online shopping on the island groups of Orkney, Shetland, and the Outer Hebrides. They theorized that e-commerce would be especially attractive to island residents and therefore particularly challenging for island retailers.
Through a survey and interviews, the study found that 85% of the 388 survey respondents had made at least one transaction in the last month and 90% used the internet to gather information prior to a purchase. The primary reasons for shopping online were price (33%), convenience (25%), and range of products (24%). Local retailers are still relevant for perishable goods like groceries, heavy or bulky items like household appliances, and time-sensitive household products like toothpaste or hardware. But even in those categories, e-commerce had an impact.
The study participants wanted to support local retailers in theory (77% thought it was important) but felt that they could improve to be more competitive in the areas of price, differentiation, customer service. Even though the threat of e-commerce was clear, the study found that local retailers were not adapting to the increase in competition. Few were taking steps to differentiate themselves or modernize operations.
E-commerce is clearly a major threat to local retailers. Rural economic developers can help by encouraging them to differentiate their product or improve customer service. For some businesses, a high quality transactional website may be the best strategy to win back increasingly digital consumers.
Read more: Coping with Change: The Implications of e-Commerce Adoption for Island Consumers. Regional Studies, 50(5).
The ingredients for successful university spin-offs
Many regions have been encouraged to work with their local universities to promote the creation of technology and knowledge based spin-offs. A lot of government funding has been spent on programs that support this goal, but how well do they work?
A new study from Spain provides some insight. The researchers set out to assess the efficiency of the spin-offs, measured as a ratio of inputs (grants, services, and other funds) to outputs (jobs, revenues, patents). They found that the most efficient spin-offs have formal technology transfer agreements with the host university, and emerge from universities with higher innovation levels and experience with technology. They also found a positive relationship between patents and efficiency.
A few policy recommendations came out of the findings. It is suggested that universities producing more efficient spin offs should be reviewed for best practices that can be shared with the other universities. Alternatively, regional organizations should consider the strengths of their universities and refrain from trying to produce technology spin offs from universities without a technological focus. The researchers also propose incentives for patent development, or at least to monitor patents carefully since they are a strong indicator of a spin-off’s future success.
Read more: Assessing Technology-Based Spin-offs from University Support Units. Regional Studies, 50(3).
About the author
Michelle Madden is the editor of Higher ED. She is also the Outreach Manager for the Economic Development Program and a graduate of the LED master’s program. She has authored many Higher ED articles sharing information relevant to economic development practitioners, and has written several on behalf of students. She has published several of her own blogs on economicdevelopment.org as well. Follow her on Twitter at @michelle_mad.
About the series
Higher ED: Insights for the Next Economy is a platform for students, guest speakers, staff and faculty of the University of Waterloo’s professional and graduate economic development programs to share knowledge with the field at large. The series takes works destined for an academic audience and reworks them into a fresh, easy-to-digest blog article.
Established in 1988, the Local Economic Development program is the only master’s program in Canada devoted solely to local economic development. It offers a balance between theory and practice by combining coursework, a major research paper, an internship, and weekly seminars featuring guest speakers. Students are prepared for careers in local, community, or regional economic development.
The Economic Development Program is a nationally-accredited provider of professional training. It delivers certification programs and seminars that offer a deep understanding of the Canadian context in a convenient block format. Peer learning is combined with informative lectures and practical case studies to provide dynamic instruction that is beneficial for junior and senior-level practitioners.