According to the article, this tactic got its first tryout in Littleton, Colorado in the late 1980s. The city had just lost Martin Marietta, a major missile manufacturer, which had laid off 7,800 people in a year and a half. Instead of attempting to draw another large company to the area, a group of small business owners and city officials tried a new strategy based on a theory that companies that employ between 10 to 100 people and have annual revenues of $1 million or more have the best potential for growing an economy. Nationally, these businesses, called “stage 2” businesses, make up only 10% of the business population, but create 35% of jobs and grow the middle class workforce.
Littleton identified these stage 2 companies and gave them resources tailored to meet their specific needs. The results:
.Over the next 25 years, Littleton’s population increased by one-quarter, but the number of jobs tripled and the city’s sales tax revenue went from $6 million to $21 million
The city’s business director told Governing, “When Martin Marietta was there, we were a rocket town. Now that the economy is so diverse, there is no one industry that could fail and bring down Littleton like it could 25 years ago.”
Littleton’s success has since spawned the National Center for Economic Gardening, which helps states set up their own economic gardening program, such as the Advance Maryland program launched in 2013. According to Governing, economic gardening is catching on because the targeted nature of its assistance requires less of an investment to make an impact (Advance Maryland is spending roughly $5,000 per business), and it is therefore more politically popular than large, expensive tax credits. It also reduces the need for “economic hunting,” or luring large companies from other states. More information on economic gardening, along with tools and programs for those interested, is available here.
