Public-private partnership is effective, but regular review recommended

Topic: Miller College of Business

October 23, 2013

The state of Indiana should maintain the current scale and scope of its efforts to attract new businesses through the Indiana Economic Development Corp. (IEDC), a Ball State University study concludes.

The analysis —“A Study of the Efficiency, Effectiveness and Regional Equity of IEDC” — was produced by Ball State’s Center for Business and Economic Research and funded by IEDC. It evaluates the scope, scale, efficiency and efficacy of the IEDC as it pursues its mission of “attracting and supporting new business investment, creating new jobs for Hoosiers, and furthering our legacy as one of the top states in the nation for business.”

Former Gov. Mitch Daniels created IEDC as a public-private company in 2005 to replace the former Department of Commerce to encourage businesses to set up shop or expand their existing operations in Indiana through tax benefits, grants and other incentives authorized by the state. In order to respond quickly to the needs of businesses, the IEDC operates like a business.

CBER director Michael Hicks, who led the Ball State research team, said IEDC made a remarkable adjustment following its privatization as the share of total new jobs impacted by the organization’s activities has steadily grown from 2.64 percent to 4.47 percent since 2004.

“The vast majority of economic activity in Indiana is unrelated to state programs,” he said. “However, this job creation data should constitute an important evaluation of the overall role of IEDC on the state economy.”

Indiana is one of only five states to have fully implemented a public-private partnership model. The current IEDC structure is focused narrowly on business attraction, retention and marketing, Hicks said.

“That focus permits very rapid response, which is necessary in today’s business environment, and allows for the recruitment and retention of specialized personnel,” he said. “The quality of this approach is apparent in the rapid growth in business engagement, which is what we term the share of all new Indiana jobs the IEDC helps lure to the state.”

IEDC serves all of Indiana and relies upon a series of regional offices to deliver services along with the primary staff located in Indianapolis.

The study also found IEDC:

  • allowed the state to enjoy positive effects of businesses spending money to expand and recruit
  • distributed new job creation on a more geographically balanced scale than would otherwise occur without its efforts
  • lists only 63 employees, including field representatives in Indiana and internationally, making Indiana one of the leaner state development groups in the nation.

As a result of its review, the research team makes a series of recommendations, including:

  • continued evaluation of the scope of the public-private partnership
  • continued review of performance-related data
  • review of the geography of its regional offices
  • creation of an advisory/ombudsman function
  • continued improvement of its website offerings
  • allocation of some assistance toward applications for EB-5 visas for immigrant investors
  • increased economic policy focus in the state through the secretary of commerce
  • review of expenditures.

“We strongly believe that Indiana should preserve the current structure of IEDC, which has become a model for other states,” Hicks says. “We have not prioritized these recommendations, since they all have some degree of resource requirements. However, we feel that the policy-oriented recommendations are especially critical to the long-term performance of IEDC as it seeks to improve Indiana’s economy.”

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