Do government incentives attract and retain international investment? A study of foreign-owned firms in North Carolina

In an era of strong global competition, national, state, and local governments are vying to attract and retain investment by international firms by increasing the range and value of public incentives for businesses to invest in their jurisdictions. A survey of executives in 118 internationally-owned firms in North Carolina reveals that they rank state incentives low in a list of factors that they believe attract foreign-owned companies and retain them in the state. Labor force, transportation, quality of life, and overall business climate factors are consistently ranked highest by business executives, and state tax, finance, plant services, and marketing assistance are consistently ranked low. Questions concerning the effectiveness, appropriateness, and equity of such incentives and their impacts on influencing domestic and international firms to choose locations in a state or locality continue to be debated. Why do governments persist in such questionable policies? Often perception offsets reality in public policy-making. The political need to 'do something' even if it is ineffective, a 'follow the herd' mentality, fear of political criticism, and an unwillingness to 'disarm' unilaterally all seem to explain the persistence of state incentive policies that even the intended beneficiaries claim are of low priority in their decisions.