Impact on the Local Economy

The establishment of a firm new to an area provides employment directly and may also stimulate existing businesses if it purchases locally produced goods. The extent to which such firms integrate into the locality may depend upon the size of the firm. Large plants, owned and controlled from outside the locality, may have little autonomy over purchases of inputs or over sales of final product. Such firms are more likely to have head offices, with central purchasing departments able to negotiate low cost bulk purchasing arrangements. Small volume local producers are unable to compete – even taking account of transportation costs, so that established firms new to the area may have a negligible impact on the local economy.