An important regional economic indicator is the capacity of the metropolitan Chicago area to retain and grow existing firms. Businesses base their site selection selections on criteria such as consumer accessibility, personnel availability, infrastructure, and public policy. CMAP studied data on business movements, establishment launches, and establishment closures in order to gain a better understanding of business churn in our region.
It is the goal of this study to look at establishment-level data — business units at a single site ranging from a one-person operation to a company’s single location or headquarters to a franchise branch — in order to determine which sorts of businesses move to, from, or within the region. For the sake of this study, each of a company’s “establishments” or branches is treated as an independent legal entity.
According to data from 2001-12, relocations from the metropolitan Chicago area to another region account for a disproportionately tiny share of total migrations. When firms do relocate, they prefer to do so in close proximity to their current location, frequently within the same county. Over the 12-year period, smaller enterprises represented a majority of the 300 firms that migrated out of the region. An entrance of larger enterprises into the region helped to moderate this tendency a little.
Overall, metropolitan Chicago witnessed a relatively similar number of company migrations to and from most states, with a few states accounting for a majority of the 300 firms that relocated out of the region. Consider the overall economic environment in which these relocations take place: according to census statistics, company creations and closures, rather than relocations, account for a significantly bigger percentage of regional economic activity.
This Policy Update investigates two datasets that have not before been examined by CMAP. The National Establishment Time-Series (NETS) data track travels between the seven-county CMAP region, which comprises the counties of Cook, DuPage, Kane, Kendall, Lake, McHenry, and Will, and the seven-county CMAP region. Additionally, Business Dynamic Statistics (BDS) data from the United States Census Bureau track the opening and closing of new and existing businesses, referred to as “births” and “deaths,” in the Chicago metropolitan statistical area (MSA), a larger geography that includes the entire CMAP region as well as portions of Indiana and Wisconsin.
The employment habits of people who relocate to the CMAP region are generally unaffected by their decisions. It is the goal of this Policy Update to emphasize the importance of fostering growth within the region, findings that are consistent with the GO TO 2040 comprehensive regional plan and the World Business Chicago (WBC) Plan for Economic Growth and Jobs in that it is critical to implementing regional strategies to invest in our workforce, infrastructure, and innovative capability.
The number of moves varies depending on the size and kind of institution.
Metropolitan Chicago is home to more than 540,000 businesses, representing a varied range of industries. Establishments shift for a number of reasons, including reaching new markets, gaining access to workforce, lowering expenses, and expanding their facilities, among others.
According to an analysis of NETS data, the smallest firms in the region — those with less than five employees — relocate more frequently and in greater numbers than bigger establishments. Between 2001 and 2012, more than 70% of enterprises that relocated to or from the region had less than five employees, with the majority having only one employee. These tiny enterprises account for more than two-thirds of all businesses in the region, yet they account for less than ten percent of all jobs. Personal considerations tend to affect relocation decisions among the region’s smaller companies, which is typically reflective of wider population movement patterns. The following research in this Policy Update is focused on firms with five or more workers, which are frequently more concerned with market, infrastructure, and human capital features in their site selection decisions and account for more than 90 percent of the region’s jobs.
The vast majority of relocations are intraregional in nature.
Business relocations to and from other states accounted for just 15 percent of the 35,000 relocations that took place in the Chicago region between 2001 and 2012. Intraregional migrations accounted for the remaining 85 percent of all relocations, with firms relocating inside the seven-county CMAP region.