Association for Public Policy Analysis & Management

The American economy is in a changing era of industrialization through the quickly evolving technology and information industries, collectively referred to as the “new economy.” In the process, community economic bases are changing as a function of the location trends of the IT sector. In an effort to attract the IT sector, economic developers design incentive packages for the recruitment and retention of new economy firms, and this dynamic is much studied and subject to continuous refinement in inquiry. That is the case because the assumption is that tech firms have high value creation job potential and generate positive knowledge spillovers for other local industries. The most often cited beneficial outcomes of such spillovers include increasing entrepreneurial and innovation rates, providing procurement options to local suppliers and attracting human capital. In the context of previous findings on these dynamics, this paper tracks the site location trends of the IT sector in the last 4 decades to identify commonalities in attractiveness strategies. Utilizing the Good Jobs First Subsidy Tracker database, we focus on a) subsidy amount; b) type – the 14 different state and local options and 5 federal options and c) source – state, local or federal. We map out the trends for 607,000 new location deals. We further offer a typology of sub-industry classification based on NAICS codes to map out the job creation outcomes, using ArcGIS programming.

The results indicate the emergence and growth of IT clusters with the following commonalities in terms of subsidies and the associated new jobs created at the municipal level:

1. Most jobs created are in the North East US and Canada and they are congruent with the most generous packages
2. Tax credit/rebate is the most common subsidy awarded
3. The sub-industrial growth is strongest in software and data analytics
4. A clear trend of moving away from Silicon Valley emerges in the last decade, with new deals clustering in Boston, Washington, D.C., Denver and the greater Chicago area
5. Subsidies by the state are most prevalent with county-level subsidies coming second, mostly in denser metro areas

The results suggest that, although most IT jobs have been created in the North East, the number of jobs created in relation to the dollar amount of the incentive packages are highest in Los Angeles and the greater Chicago area. The fairly remote locations seem to consistently have low number of jobs created at much higher dollar amounts spent per new job, as compared to the metro areas.