Public administration as a location factor for companies

Problem definition and methodological approach Companies seek the highest possible level of performance and competitiveness. In order to reach this goal, the company's location has to provide a number of so called location factors to offer the optimal business environment. Traditionally, this includes numerous criteria (e.g. traffic connection, markets for labour, sales and education) that are important for the individual economic success of an enterprise. Accordingly, there is a catalogue of various location factors that determines new companies' choice of and established businesses' satisfaction with their location. As legal requirements force the companies to interact with the local public administration concerning enquiries, applications and permits, the municipal administration also seems to influence the choice. Accordingly, the study addresses the question whether the public administration needs to be included as an independent key element in the theoretical discourse of local factors. To do so, the relevance of municipal administration is explored from the companies' perspective. In addition, the analysis questions the influence of local business development agencies on the location satisfaction. Besides the theoretical discussion of aspects of both administration science and economic geography, the analysis primarily includes a survey of municipal administrations, companies and local business development agencies and is thus incorporates multiple perspectives. The chosen methodological approach uses a mixed methods design in which qualitative and quantitative survey methods are connected in several ways and are also partly recursively. The research objectives are a theoretical description of the municipal administration as a local factor on the one hand and the presentation of practical approaches to improve the mentioned local factors by optimizing administrative services on the other hand. Theoretical foundations and insights An introductory discussion will illuminate the interdisciplinary background of the research in administration science and geography in order to define the problem in terms of the theory. A brief historic outline will then show that the importance of public administration for companies' location decisions has been sufficiently acknowledged by neither administration science nor geography. The theoretical approaches of New Economic Geography and New Public Management reveal that the nature of the interaction at a location is gaining importance. Thus, it becomes clear that the public administration is currently transforming into a service provider for companies. This move is also characterized by a growing “entitlement mentality” within the companies that now expect better service quality from administration. Numerous determinants of social and economic development such as globalisation, municipal financial crisis and administrative integration, just to name a few, reinforce this transformation. It will be shown that this development influences the location choice made by companies and is thus also affecting aspects of companies' location satisfaction concerning municipal administration. Empirical analyses The empirical analyses take up the implications of the theoretical considerations and look at the relevance of municipal administration and business development services for location decisions. In order to do so, the employees of communal services as well as the companies have been polled in contrasting surveys. The analyses point out that municipal administration service has a high relevance for location satisfaction but nonetheless does not meet the companies' requirements. Furthermore, there is the realistic danger of companies relocating due to constant insufficient administrative service, which would imply loss of workplaces and falling tax revenue for the municipality. Formative features of the administration as a local factor are several service criteria concerning administrative procedures. Of highest importance is the processing time of enquiries and applications. This point is even more important to the companies than the legal reliability of the information provided. The empirical results furthermore prove an overall transformation of the companies' “entitlement mentality” towards the local administration. The authorities' employees are very well aware of their importance but not of the negative ratings given by the local companies. Even though both parties describe similar quality expectations for administrative procedures, the administration employees are not able to provide the best possible service due to internal processing problems or legal barriers. Local business development agencies and their services are in a similar situation. Assessment of the relevance of local business development varies, but the overall rating is rather low. The companies wish the institutions to have more power to enforce processes within authorities as well as to offer a bundling of procedures. Conclusions for theory and practice Concerning the theoretical discourse, these results mean an inevitable modification and extension of the classic local factors model to include the influence of municipal administration as a separate factor. For questions of practical administration, the results show that reliable quality criteria are essential for the optimal location satisfaction of companies. To meet these service demands, changes in process management and bundling of procedures at key positions such as entrepreneurial service agencies have proved as suitable measures for a modernization of administration. Nevertheless, considering the increasing virtualization of service processes in public administration, it remains uncertain in what way the local significance of municipal administration services will develop in future