Why are Existing Businesses Important to Development?

Existing firms are an engine of economic growth. Some studies estimate the percentage of new jobs created by existing firms as high as 80%, while the most conservative estimates say 40%. When a community commits to working with its existing firms, it commits to working with a group of firms that are important to the future of the local economy, and to those who have already invested in the community.

Many communities have pursued policies designed to attract outside firms to move into the area. However, such a strategy is not likely to be effective if existing businesses are not happy with the local business climate. Sometimes communities that are successful at attracting new firms do not see much growth. While new firms come in the front door, their existing firms downsize or exit through the back door. Increasingly, communities are recognizing that it makes sense to pay attention to the survival and growth of their existing firms.