In a recent article from the Harvard Business Review (HBR Magazine July–August 2010), titled The Secret to Job Growth: Think Small, Edward L. Glaeser and William R. Kerr warned that, with the economy continuing to lag, local communities will be tempted to do “smokestack chasing,” a term used to describe a common practice of attracting big companies into a community by providing tax breaks and other incentives. The authors claim that this is a “misguided approach,” and, based on their research, regional economic growth is more directly linked to small business and entrepreneurs rather than importing big companies.

In cases where U.S. metropolitian regions had a higher number of firms/companies per worker (10% or higher than the average), such regions experienced faster employment growth (by 9%) between 1977 and 2000.

Conversely, large companies do not always contribute to job growth in a region into which they relocate. This had proven true even in cases where the companies where doing well and finding success. The reasons for this are varied: from internal sourcing and relocating employees to sourcing parts from other regions as is seen in the auto industry.