Council In the News Index

Off With Their Headquarters (Boston Herald)

By Jay Fitzgerald  |   Sunday, March 7, 2010 

Massachusetts has labor-market pains because it’s not giving enough births to companies with headquarters in the Bay State, a new study says.

The report by the Pioneer Institute of Boston shows a dramatic decline over the decades in the number of firms headquartered in Massachusetts, reducing the potential total labor market here by more than 250,000 jobs.

In recent years, there’s been much focus on the loss of big companies calling Massachusetts their corporate homes from the old Digital Equipment Corp. to FleetBoston Financial Corp.

But the Pioneer report says the problem goes much deeper: Not as many firms are forming - or births, as the study describes it - and then expanding with multiple numbers of employees and offices associated with a corporate headquarters.

In 1990, there were 16,223 firms with a headquarters in Massachusetts and that number steadily declined to 11,117 by 2007, the last year the report studied. It’s unlikely the number has increased since 2007, considering the severity of the current Great Recession.

The cause of the decline is hard to determine, said Steve Poftak, research director at Pioneer.

Some of the blame can be attributed to the state’s high cost of doing business, experts say.

Chris Anderson, president of the Massachusetts High Technology Council, said everything from the state’s capital-gains tax structure to high utility costs are hindering formation of businesses in Massachusetts.

Poftak agreed, but he said part of the problem could also be attributed to the changing nature of technology and the work force. The Pioneer study, entitled Heading Down, found that there’s been a corresponding increase in the number of standalone businesses in the state or a single-location business without any secondary branches or offices.

Poftak said the dramatic rise in standalone businesses, now numbering 341,000 firms, suggests there are more sole-proprietor businesses relying on the Internet to communicate with workers, partners and contractors at multiple locations, often in home offices.

Others suggest that related out-sourcing of work from accounting needs to manufacturing of actual products has also reduced the need for old-fashioned headquarters.

The Pioneer study found that out- migration and in-migration of firms to and from the state is less important than actual company births and expansions in the state.

Kofi Jones, a spokeswoman for Gov. Deval Patrick’s economic-development office, said the Pioneer study clearly demonstrates that the administration is on the right track by focusing more on young and old companies that are already in Massachusetts, as opposed to putting a heavy emphasis on recruiting out-of-state firms to the Bay State.

The Pioneer study appears to agree with that approach.

But the key is also making sure more firms are started here, Poftak said.