It has now become common for companies situating assembly plants (e.g., Ford, Toyota, Honda) to make states compete for their business; states and local governments often race to offer the most generous tax benefits, infrastructure improvements, and other forms of assistance to attract companies promising to provide jobs to people within a given locality. Is such competition for business healthy? What is the short-term and long-term impact of such competition? Should Washington enact rules and regulations that prevent states from racing to provide the most generous benefits to companies seeking to employ workers? Is there a danger that ultimately this competition will be a "race to the bottom," with states and localities paying far more in tax incentives than they will ever receive in the form of job creation or money reinvested in the community?
Is competition for business healthy?
Competition among countries in trying to attract foreign direct investments is high and Zhang (2005) attributes this to limited foreign capital. The factors that determine a country's investment climate are numerous and therefore compete on different aspects in order to attract investments. Competition to attract business is healthy because it leads to creation of an environment conducive to carrying out business.
Competition is healthy because it results in improved efficiency. As a result of this, countries are able to be more motivated in the facilitation of businesses in conducting out their activities. Zhang (2005) provides that most countries compete to attract investors though policies present in the host state and this leads to improved business environment such as reduction in number of procedures required during incorporation. Competition also reduces the costs of doing business as charges are reduced. Thomas (2007) provides that competition between countries results in efficient pricing of government services. Competition among countries to attract business is healthy because it leads to improved economic stability, ...
The expert describes competition for businesses.