Economic development usually means chasing after a business, hoping to get it to move some of its jobs to your state, city or town.

A recent study, however, suggests that local governments would be much better off chasing the businesses that they already have.

Or, instead of thinking about economic development as filling the bathtub, the authors of the report say it is also worth some effort to plug the drain.

The report “Going Local: Quantifying the Economic Impacts of Buying from Locally Owned Businesses in Portland, Maine,” was funded by Maine Center for Economic Policy, finds that money spent in a locally owned business has more impact on the local economy than money spent at a national chain, even if both businesses are in the same town.

The differences come from how the companies spend the money that customers spend with them.

Although wages are paid to workers and for the most part stay in the local economy no matter who owns the company, locally owned businesses are much more likely to spend for professional services (such as accounting or legal fees) in the home community.

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Locally owned businesses also are more likely to spend locally for car repairs, advertising, supplies and other business expenses and give more to local charities.

As a result, according to a survey of 28 stores in Cumberland County, a dollar spent in a local business generates an additional 58 cents of economic impact in the Greater Portland economy, as opposed to the extra 33 cents from a chain store. And a community with thriving locally owned businesses will benefit in ways that go beyond just the taxes collected.

Considering those figures, Maine municipalities would be better off using their economic development influence to help local businesses grow than in attracting others to move in, especially if the company headquarters are not part of the deal.

Particularly with the holiday shopping season, consumers also should consider shopping with local businesses, where their spending will have the greatest impact on the community in which they live.


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