LOIS vs. TINA

The LOIS Alternative article summarizes five arguments as to why the existence of LOIS companies is critical for community wealth. I will be using a case that hits close to home for many American’s in the current economy to support each one of the five arguments. The case I chose illustrates the devastation that Navistar, a TINA company, can have on the growth of a local economy when management chooses to move out of the community. Navistar, who once employed 1,400 citizens in Fort Wayne, announced in 2010 that they would be moving their operations to Lisle, IL. For each of the five arguments we will discuss how local ownership is advantageous for the community, and how TINA firms, such as Navistar, can be detrimental. The first local ownership advantage is long-term wealth generators. Local entrepreneurs are tied to their community and stay to grow their business for many years and generations to come.  Therefore, “LOIS businesses are more likely than TINA ones to be cash cows for community for many years, often for many generations (Shuman, 2007).” Although Navistar contributed to Fort Wayne’s local economy with $100 million in payroll, this was only for a limited number of years due to their decision to move operations to another state. (Slater, 2012) The second advantage to local ownership is few destructive exits. Just as I stated above, LOIS companies are less likely to make sudden changes in the location of their business because they have a connection and vested interest in their community. On the other hand, TINA firms, such as Navistar, devastate a community when they leave. It not only causes unemployment to rise due to the loss of jobs, but tax revenue decreases, which in turn could affect government and educational programs. Also, there is now a 345,000-square-foot-engineering and development facility sitting vacant in the Fort Wayne community that is not exactly esthetically pleasing. (Slater, 2012) The third local ownership advantage is higher labor and environmental standards. A community that consists of mostly LOIS businesses has an easier time promoting regulations. This is because even if the local business owners don’t agree with the outcome of the regulations, they will still continue to do business in the community. On the other hand, if the local government pushes regulations that TINA companies do not agree with, they will threaten to move their operations to another location. A better chance of success is the fourth local ownership advantage. TINA companies will not stay in a local community unless it makes business sense. They will take advantage of opportunities in other regions where they could offer lower wages, or receive a higher rate of return. In Navistar’s situation, Illinois will be giving them $65 million dollars of subsidies, but it costs roughly $31 billion less each year to do business in Fort Wayne than Lisle. (Salter, 2012)The last advantage is higher economic multiplier. LOIS companies’ employee local citizens, use other local companies for administration and business services, and spend their profits locally. (Shuman, 2007) For this reason, LOIS businesses yield a higher multiplier. TINA companies will employ individuals all over the country, and utilize companies that offer the best deal for their business services.  Therefore, in the end, they will yield a lower multiplier than LOIS companies. These five arguments above support the notion that LOIS companies are critical for a community’s wealth and development. Local communities should be thinking of innovative ideas to increase small businesses. “The more times a dollar circulates within a defined geographic area and the faster it circulates without leaving the area, the more income, wealth, and jobs it generates (Shuman, 2007).” This illustrates that it is critical to focus on all industries when trying to build wealth in your community. Whether that’s the entertainment, retail, real estate, or banking industry; each plays a vital role in the wealth generation in local communities.

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One thought on “LOIS vs. TINA

  1. tlhill2012 October 30, 2012 at 8:38 PM Reply

    Thank you. This is an excellent summary of the LOIS ideas, with a telling example.

    You and others who read this might think about how the idea of local ownership is a plea for stakeholder governance. It’s not that owners of local firms are necessarily better managers, or even more ethical people. It’s that they are visible and accountable to their neighbors. It’s much harder to treat a neighborhood shabbily when everyone is watching…

    On a more profound level, I’d argue that being a true part of a community is in and of itself more a source of happiness and satisfaction – which in turn makes paying attention to stakeholders less like being watched and more like contributing to a makign one’s community a better place to live in (not in an abstract sense, bu concretely, and even selfishly).

    These thoughts aside, what would the TINA response be to your example? Presumably, someone might argue that there could have well have been a good business reason to move to IL, and that it is better for the greater good if Navistar moves but stays healthy than if it stays but suffers.

    Such arguments often fall down on the facts, as Shuman argues. But in principle, they could be true. Is there a way in which location can be turned into an advantage -perhaps through the productivity of a loyal, trained work force, the design discipline of treating location as a fixed cost (and innovating elsewhere), or the possibility of anchoring a cluster and so spinning the wheel of import substitution, training and innovation that much faster. (For more on clusters, see Porter’s work on the competitive advantage of nations, Saxenian’s excellent study of Silicon Valley, or Carmuffo’s discussion of the eyeglass frame cluster in N. Italy.)

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