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Business Location Decisions in the Medical Device Industry : Evidence From Massachusetts
Shelley McDonough Kimelberg and Lauren A. Nicoll Economic Development Quarterly 2012 26: 34 originally published online 23 December 2011 DOI: 10.1177/0891242411430327 The online version of this article can be found at: http://edq.sagepub.com/content/26/1/34

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430327
lberg and NicollEconomic Development Quarterly

EDQXXX10.1177/0891242411430327Kime

Business Location Decisions in the Medical Device Industry: Evidence From Massachusetts
Shelley McDonough Kimelberg1 and Lauren A. Nicoll1

Economic Development Quarterly 26(1) 3449 The Author(s) 2012 Reprints and permission: sagepub.com/journalsPermissions.nav DOI: 10.1177/0891242411430327 http://edq.sagepub.com

Abstract Medical device firms, like firms in the high-technology sector, often include business functions characteristic of both the industrial economy and the knowledge economy. Thus, it is not immediately clear which kinds of locational attributes (i.e., traditional cost-based factors or those concerned with attracting and retaining knowledge workers) are most influential in the site selection process. This study draws on survey data from 48 medical device firms in Massachusetts, a state with one of the largest clusters in the industry, to examine the relative importance of various factors and conditions in the location decision. A second objective is to consider the extent to which the rating of a given location factor varies depending on whether the firm maintains manufacturing facilities in the state. The implications of the findings for both location theory and economic development efforts are discussed. Keywords industrial location, industry studies, location decisions, manufacturing

The production and supply of medical devices is a $117 billion industry in the United States, responsible for more than 360,000 domestic jobs in 2007 (U.S. Census Bureau, 2010b). Given the comparatively high salaries paid to employees, medical device firms, like businesses in the more broadly defined areas of life sciences and biotechnology, are seen as desirable targets by many local and regional economic development officials. This is particularly true in states such as Massachusetts, Minnesota, and California, which are among the top regional hubs for the industry (U.S. Census Bureau, 2010a). Likewise, the predicted increase in demand for medical products fueled by a rapidly aging population is expected to buffer the industry from the precipitous employment declines recently experienced by other manufacturingintensive businesses (U.S. International Trade Commission [USITC], 2007). In light of these factors, the question of how medical device firms make location decisions is clearly of interest to those individuals and agencies tasked with attracting and retaining private investment in their communities. An examination of the factors influencing site selection for medical device firms has important implications for location theory as well. The medical device industry, like others that include research and development (R&D) activities (characteristic of the postindustrial knowledge economy) as well as traditional manufacturing functions (characteristic of the industrial economy), challenge us to think in a more nuanced way about business location theory. Many studies

of the location decisions of manufacturing companies tend to emphasize traditional economic factors such as operating costs, taxes, infrastructure, and the like (see, e.g., Bartik, 1985; Buss, 2001; Hekman, 1992; Schmenner, 1982). In contrast, studies of firms in the knowledge economy often highlight the importance of factors thought to enhance the satisfaction and productivity of their human assets (i.e., employees), such as local amenities, desirable housing and quality schools, and access to collaborative public and private institutions and resources (see, e.g., Cohen, 2000; Salvesen & Renski, 2003). With medical device firms, it is not immediately clear which types of location factorsthose associated with production activities or those associated with knowledge activitieswould carry the most weight in the location decision. This is not to suggest that in the extant literature the location factors presumed to be important in one sphere are ignored or deemed irrelevant in another. Indeed, several well-cited studies (e.g., Barkley & McNamara, 1994; Blair & Premus, 1987; Galbraith & DeNoble, 1988) belie such a
1

Northeastern University, Boston, MA, USA

Corresponding Author: Shelley McDonough Kimelberg, Department of Sociology & Anthropology, Northeastern University, 535 Holmes Hall, 360 Huntington Avenue, Boston, MA 02115, USA Email: s.kimelberg@neu.edu

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Kimelberg and Nicoll rigid separation between classic location factors (i.e., those concerning minimization of cost) and contemporary location factors (i.e., those emphasizing quality of life). Rather, there is a tendency to think about the firms themselves in more simplistic terms (e.g., manufacturing intensive or knowledge intensive) than is likely warranted. For instance, despite extensive offshoring and outsourcing, many vanguards of the knowledge economy in the United States do maintain some domestic manufacturing facilities (Lowe, 2007). Thus, it is instructive to consider how such firms that are not so easily categorized make decisions about where to locate their facilities. This article draws on survey data from 48 medical device companies in Massachusetts to examine the relative importance of various factors and conditions in the local site selection process. Massachusetts ranks among the top five states in the United States for medical device employment and payroll, on both a per capita and an absolute level (U.S. Census Bureau, 2010a). It is thus a fitting place to study the factors that influence the location decisions of such firms. A second objective of the research is to consider the extent to which the rating of a given location factor varies depending on the types of facilities the company maintains in Massachusetts (specifically, whether or not the company has manufacturing operations in the state). If, for instance, medical device firms with manufacturing facilities in the state place a greater emphasis on cost-based location factors than firms without local manufacturing facilities, this would suggest a need to think about business location decisions not just in terms of the industry in which the firm competes but also in terms of the types of facilities in their portfolios. In the sections that follow, we provide a brief review of the business location literature, with an emphasis on studies that examine the site selection process for either manufacturing or knowledge-based establishments. Next, we offer profiles of the medical device industry in both the United States and in Massachusetts, and describe the methods used in the present research. Last, we summarize our findings and discuss their implications for both theory and practice.

35 Despite disagreements over the relative importance decision makers assign to various production factors (see, e.g., Buss, 2001, for a review of the evidence concerning taxes), contemporary site selection research has not abandoned the study of traditional location factors (e.g., Hu, Cox, Wright, & Harris, 2008). Indeed, as Henderson and McNamara (2000) demonstrate in their research on food manufacturing facilities, raw material costs, distribution costs, and transportation access continue to drive the location decision for many firms. Similarly, a recent study by Haddad, Taylor, and Owusu (2010) finds that factors such as rail access, population density, and proximity to blending terminals are influential in determining site selection for ethanol plants. A subset of the business location literature focusing on foreign multinational corporations suggests that production factors also influence where these firms will establish branch plants in the United States (Brush, Maritan, & Karnani, 1999; Friedman, Gerlowski, & Silberman, 1992; Woodward, 1992). For a helpful summary of business location factors included in past studies, see Karakaya and Canel (1998).

Location Factors and the Knowledge Economy

Although the realities of doing business in a global, postindustrial society have rendered some traditional location factors far less relevant (if not obsolete) for many companies, geographic location is still a key component of competitive advantage (Porter, 2000). Rather than focusing on an areas tax rates, labor costs, or infrastructure, however, business owners competing in the knowledge economy often locate near the epicenter of their industry to increase opportunities for collaboration with other firms and research institutions, foster innovation and entrepreneurship, and leverage institutionalized business and cultural practices (see, e.g., Allen & Potiowsky, 2008; Delgado, Porter, & Stern, 2010; Manning, 2008; Porter, 2000; Schoales, 2006). Given that the success of knowledge-based firms often depends on their ability to attract and retain quality skilled workers, much of the location research in recent years has emphasized the role of quality-of-life factors in site selection (see, e.g., Dissart & Deller, 2000; Gottlieb, 1995; Granger & Blomquist, 1999; Green, 2001; Klier, 2006; Love & Crompton, 1999; Rast & Carlson, 2006; Salvesen & Renski, 2003). The notion that amenities such as cultural attractions, a vibrant nightlife, and natural beauty may influence where workers (and, thus, businesses) locate has received widespread popular and scholarly attention since the introduction of Richard Floridas (2002) creative class thesis. Though the subject of considerable criticism and controversy (Glaeser, 2004; Hoyman & Faricy, 2009; Malanga, 2004; Markusen, 2006; Zukin, 2009), Floridas argument that highly educated, high-income workers in the creative economy actively seek out exciting, diverse, tolerant, and hip communities

Location Factors and the Industrial Economy

There is a substantial literature devoted to understanding the role of production factors in the location decisions of manufacturing establishments (Blair & Premus, 1987; Schmenner, 1982). While classical location theory emphasized access to markets, labor, transportation, and raw materials as the key determinants of site selection (Christaller, 1933/1966; Hotelling, 1929; Lsch, 1954; Weber, 1909/1929), more recent research has expanded the focus to include factors such as taxes, unionization rates, business climate, and infrastructure (see, e.g., Arsen, 1997; Bartik, 1985; Forkenbrock & Foster, 1996; Halstead & Deller, 1997).

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36

Economic Development Quarterly 26(1)

Figure 1. Medical device industry employment, United States, 2007

Source. U.S. Census Bureau (2010a).

in which to live and work has proven extremely appealing to local officials, and thus, continues to be the subject of academic research (e.g., Bieri, 2010).

Location Factors and Complex Industries:The Case of HighTechnology Firms

Although the specific location factors emphasized in the manufacturing economy and the knowledge economy may vary, this rough taxonomy has limited utility when it comes to describing the activities of certain types of firms. As Mellander (2009) argues in her study of occupations in the creative industries, researchers often conflate an industrys products with its processes and fail to recognize how diverse the occupational distribution of a given industry can be. Indeed, she explains: a large high-tech firm can include occupations such as accountants, software engineers, traditional manufacturing jobs, health-care assistants, and service jobs at the food court. Each of these would be counted as employees in the high-tech industry, but in practice they have very different tasks to perform on an everyday basis. (p. 294) Similarly, several studies of the location preferences of high-technology firms demonstrate the extent to which the disparate activities characteristic of such establishments demand attention to different types of factors or conditions

(see, e.g., Alcacer & Chung, 2007; Appold, 1991; Cohen, 2000; DeNoble & Galbraith, 1992; DeVol, 1999; Feldman, 1999; Hart, Denison, & Henderson, 1989; Haug, 1991; Galbraith, Rodriguez, & DeNoble, 2008; Malecki, 1987; Salvesen & Renski, 2003). In particular, while sharing some of the production needs of traditional manufacturing firms, high-technology firms also typically house R&D facilities that have unique labor requirements (i.e., highly educated and trained scientists and engineers) and specialized information flows (e.g., Feldman, 1999) more representative of the knowledge economy. Furthermore, DeNoble and Galbraith (1992) conclude that the business strategy pursued by any given firm may dictate which location factors are most relevant, as firms that seek to differentiate themselves from the competition may place a premium on locations that allow them to attract more skilled workers, whereas those competing on a cost basis may care more about traditional production-related factors (Karakaya & Canel, 1998). In a similar vein, the mix of manufacturing and R&D activities common to many medical device firms raises interesting questions about the importance attached to various location factors. We turn now to overviews of the industry in the United States and Massachusetts.

Medical Devices in the United States

The medical device industry is generally defined as a field of producers and suppliers who specialize in implements used in the larger health services sector, from the simple,

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Table 1. Medical Device Industry Size by Number of Establishments and Employees, United States, 2007 Establishments by number of employees Industry description In vitro diagnostic substances Electromedical and electrotherapeutic manufacturing Irradiation equipment manufacturing Laboratory apparatus and furniture manufacturing Surgical and medical instrument manufacturing Surgical appliance and supplies manufacturing Dental equipment and supplies manufacturing Ophthalmic goods manufacturing Total, medical device industry Establishments, total 244 599 179 378 1,275 1,960 774 604 6,013 1-4 42 182 52 91 355 703 333 249 2,007 5-99 144 288 103 236 678 1,039 408 306 3,202 100 58 129 24 51 242 218 33 49 804

37

NAICS code 325413 334510 334517 339111 339112 339113 339114 339115

Employees, total 27,215 58,111 17,738 19,273 101,760 108,150 16,581 24,492 373,320

Source. U.S. Census Bureau (2010a).

such as syringes, to the complex, such as pacemakers or hearing aids. North American Industrial Classification System (NAICS) Industry Group 3391 (medical equipment and supplies manufacturing), which includes manufacturers of laboratory apparatuses and furniture (339111), surgical and medical instruments (339112), surgical appliance and supplies (339113), dental equipment and supplies (339114), and ophthalmic goods (339115), makes up a core part of the medical device industry. In addition, industry reports typically include firms identified as electromedical and electrotherapeutic apparatus manufacturers (334510), in vitro diagnostic substance manufacturers (325413), and irradiation apparatus manufacturers (334517). Based on 2007 County Business Patterns data (U.S. Census Bureau, 2010a), Figure 1 shows that 29% of U.S. firms in the medical device industry specialize in surgical appliance and supplies manufacturing, 27% in surgical and medical instrument manufacturing, and 16% in electromedical and electrotherapeutic apparatus manufacturing, with the remainder split between the other industry groups. The majority of the establishments in this industry are small one third of U.S. medical device establishments have 4 or fewer employees and about half have between 5 and 99 employees (see Table 1). Jobs in the industry pay quite well. In 2007, the average U.S. salary for medical device employees was $58,921, nearly 50% more than the national per capita income of $39,392. This represents an increase of 48% over the 19972007 decade, compared with 54% for U.S. jobs as a whole during the same time period (U.S. Census Bureau, 2010b; U.S. Department of Commerce, Bureau of Economic

Analysis, 2010). Medical device workers are also more educated than the U.S. labor force as a whole, with 9.2% holding an associates degree, 18.4% holding a bachelors degree, and 12% holding graduate or professional degrees, as compared with 7.8%, 15.8%, and 6.3%, respectively, of all U.S. workers (Clayton-Matthews, 2001). Industry growth in the United States was relatively flat in the decade between 1997-2007, registering only modest increases in the number of establishments, from 5,998 to 6,007a change of 0.15% (U.S. Census Bureau, 2010b). However, the U.S. Department of Labor, Bureau of Labor Statistics (2009) predicts that by 2018 there will be 359,500 jobs in the medical equipment and supplies manufacturing group (NAICS Code 3391) alone, reflecting a higher rate of growth (16.1% between 2008-2018) for the coming decade than the previous decade (from 301,300 jobs in 1998 to 309,700 in 2008a change of 2.8%). Based on recent purchasing trends and demographic shifts, this growth is likely to continue over the coming years. The worlds largest consumer of medical devices, the United States saw its consumption of these products increase by an average annual rate of 6 percent during 2001-5, from $71 billion to $90 billion (USITC, 2007). Furthermore, as the United States and world populations age at an increasingly faster pace, demand for medical devices is projected to rise. Venture capital activity seems to confirm these expectations. United States investments in the industry in 2009 were more than 4 times the dollar amount invested in 1995 (PriceWaterhouseCoopers, 2010). Additionally, between 1997 and 2002 (the latest year of data available), the medical device industry in the United States invested between 10%

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38
Table 2. Rankings of Top Five Medical Device States by Production Characteristics in 2007 Per capita 1 2 3 4 5 Employment Minnesota Delaware Utah Massachusetts Wisconsin Annual payroll Massachusetts Minnesota Utah New Hampshire California 1 2 3 4 5

Economic Development Quarterly 26(1)

Absolute Employment California Minnesota Massachusetts Florida Pennsylvania Annual payroll California Massachusetts New Jersey Florida Pennsylvania

Source. U.S. Census Bureau (2010a).

and 13% of its sales revenue into R&D, providing a further basis for future innovation. By way of comparison, Japan and the European Union spend far less, 5.6% and 1.7% of sales, respectively (Pammolli et al., 2005).

Medical Devices in Massachusetts

The medical device industry is part of the broader life sciences cluster in Massachusetts, one of the states key strategic interests. The Massachusetts Life Sciences Center (MLSC), a quasi-public agency, is charged with promoting the life sciences within the state. In 2007, the governor of Massachusetts announced a 10-year, $1-billion life sciences economic development package consisting of programs including a small business matching grant fund, tax incentives, cooperative research between academic institutions and industry, and an early-stage company loan fund for businesses within the life sciences (MLSC, 2010). This initiative was intended to build on an existing strength in the industry. In 2007, the location quotient, or measure of the relative geographic density of the industry, was 3.1 for the United States and 6.8 for Massachusetts. In other words, the proportion of employees working in the medical device industry in Massachusetts was twice that of the nation as a whole (U.S. Census Bureau, 2010a). Furthermore, the average salary for these jobs was $68,332, double the per capita income for the state, and nearly $10,000 more than the national average for the industry (U.S. Census Bureau, 2010b). As shown in Table 2, whereas California boasts the largest medical device workforce in the United States in terms of absolute numbers (69,772 employees), Massachusetts ranks third with 20,906 employees,1 just slightly behind Minnesota with 21,781 employees. On a per capita basis, however, both Minnesota and Massachusetts (along with Delaware, Utah, and Wisconsin) outrank the considerably more populous California. Given its comparatively high cost of living and highly educated workforce, Massachusetts annual payroll for medical devices ranks second (behind only California), in absolute dollar amount and first overall on a per capita basis (U.S. Census Bureau, 2010a).

Consistent with national trends, industry growth in Massachusetts has been relatively flat over the decade from 1997 to 2007, both in terms of the number of establishments and the number of employees. At the same time, the total value of product shipments and employee productivity has increased dramatically in the state (and the nation as a whole; see Table 3). Likewise, venture capital investments in Massachusetts increased nearly fivefold over the decade, from $52 million in Q1-Q4 1995 to $247 million in Q1-Q4 2009 (PriceWaterhouseCoopers, 2010). A recent study points to the impact of the medical device industry on the overall state economy: Every hundred jobs is associated with another 79 jobs in Massachusetts, and every dollar of medical-device output is associated with an additional 45 cents of outputs from Massachusetts firms (Clayton-Matthews & Loveland, 2004). These trends, coupled with the states strategic emphasis on the life sciences, point to the continuedand likely increasedpresence of the medical device industry in Massachusetts in coming years.

Data and Method Sample

The Massachusetts Medical Device Industry Council (Mass MEDIC) is an advocacy organization that represents the interests of the medical technology industry at the state and federal levels, and provides a range of informational resources to its private sector members. It is the only organization of its type in the New England region, and thus, is a useful source for data on issues affecting medical equipment and device companies located in and around Massachusetts. In May 2008, we distributed an online survey to MassMEDICs primary membership list, composed solely of representatives from medical device firms in the state. Although membership in MassMEDIC is also open to individuals and organizations that provide services to medical device companies (e.g., law firms) or have a financial stake in the industry (e.g., venture capitalists), for the purposes of this study it was important to ensure that respondents were drawn only from the population of interest, that is, leaders of

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Table 3. Medical Device Industry Trends, Massachusetts and the United States, 1997-2007 United States No. of firms 1997 2002 2007 No. of employees 1997 2002 2007 Average salary ($) 1997 2002 2007 Value of shipments ($1,000) 1997 2002 2007 Output per worker ($) 1997 2002 2007 5,998 6,017 6,007 Massachusetts 264 252 261 20,755 22,605 22,728 47,674 51,173 68,332 4,158,347 5,456,194 8,059,711 200,354 241,371 354,616

39 One of the main concerns with low response rates is the risk of systemic bias in the data. Studies of the use of webbased surveys have highlighted two potential problems, neither of which is in clear evidence here (Solomon, 2001). The possibility of coverage bias or sampling biaswhich would be concerns if segments of the target population had restricted access to e-mail or the Internet, or were inexperienced or uncomfortable with online activitydoes not seem likely. The members of MassMEDIC are regular users of e-mail and the Internet, as these are the typical modes of communication used to share organizational information with members. In addition, given the technical sophistication of the industry, the medical device community is likely more wired on the whole relative to other populations. Similarly, although the overall response rate was on the low side, there does not seem to be cause to suspect nonresponse bias (i.e., that the nonrespondents in the sample differ in a meaningful way from those who did respond). The profile of the firms in the final sample closely mirrors that of MassMEDICs overall membership base, which itself is a good representation of the sector as a whole in the state (Clayton-Matthews, 2001; Goodman, 2007).6 According to a 2001 report of the sector in Massachusetts, the industry employing the most workers in the state is surgical and medical devices, followed by the electromedical and electrotherapeutic apparatus industry (Clayton-Matthews, 2001). Together, these two industries employ more than 60% of the workers in the medical device sector in Massachusetts (Goodman, 2007). Similarly, the largest percentage of firms in our sample (50%) reported a specialty in surgical and medical devices while the second largest segment focuses on electromedical apparatuses (35%).7 The remaining industries in the sector are markedly smaller, in both our sample, and in the state as a whole.8 Likewise, the majority of the firms in both Massachusetts and in our sample are relatively small: 73% of our respondents employ 50 or fewer people, whereas census data reveal that half of the states firms in 1998 employed fewer than 20 people (Clayton-Matthews, 2001). Consistent with the sector as a whole, the firms in our sample are mostly concentrated in the Greater Boston area, with comparatively fewer located in the western, northern, and southern regions of the state (Goodman, 2007). The firms in the sample maintain a variety of facility types in Massachusetts, including those typically associated with the knowledge economy (e.g., R&D and corporate/ office buildings) as well as traditional manufacturing. More than half (54%) reported that their company housed both manufacturing facilities and corporate/R&D facilities in Massachusetts. When completing the survey, most respondents were able to draw on recent experiences opening or relocating facilities in the state. More than a quarter (28%) opened or relocated a facility within the past year and another 36% reported doing so in the past 2 to 4 years. Slightly more

353,473 375,772 364,502

39,840 45,946 58,921

65,146,783 86,307,221 117,466,464

184,305 229,680 322,266

Source. U.S. Census Bureau (2010b).

medical device firms. The contacts on MassMEDICs primary membership list are senior-level employees at their respective firms; the vast majority are C-suite employees (e.g., CEOs, COOs, etc.). In other words, they are the types of people most likely to play an influential role in important business decisions for the firm. The survey was e-mailed to the primary membership list by the president of MassMEDIC.2 At the time of the study, this list contained representatives from approximately 300 firms in the state.3 A total of 48 respondents completed the survey, reflecting 16% of the medical technology firms in MassMEDICs core membership base.4 Although this response was lower than we would have liked, the president of MassMEDIC was pleased with the outcome and noted that it compared favorably with the response rates typically achieved in research efforts sponsored by the organization.5 At our request, the president did send a reminder e-mail 10 days after the initial solicitation (the number of respondents prior to the reminder was closer to 30), but given that other important organizational communications and research initiatives were waiting in the queue, he was reluctant to pursue other follow-up measures beyond that point.

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40 than half (51%) stated that it was at least somewhat likely that they would open or relocate another facility in Massachusetts within the next 2 years. Sample characteristics are summarized in Table 4.

Economic Development Quarterly 26(1)

Table 4. Sample Characteristics (n = 48)
Percentage Primary business Surgical and medical instruments Electromedical and electrotherapeutic apparatuses Ophthalmic goods Surgical appliances and supplies In vitro diagnostic substances Laboratory apparatuses and furniture Other (mix of existing categories, subspecialties) Number of employees in the United States 0-50 50-100 100-200 200-500 500-1,000 >1,000 Number of employees in Massachusetts 0-50 50-100 100-200 200-500 500-1,000 >1,000 Regional presence Greater Boston Central Massachusetts Northeastern Massachusetts Southeastern Massachusetts Pioneer Valley Berkshires Cape and the Islands Types of facilities in Massachusetts Research and development Corporate/office Manufacturing Both manufacturing and R&D or corporate/ office No manufacturing Length of time since company opened/relocated facility In the past 6 months In the past year In the past 2-4 years In the past 5-10 years >10 years ago Likelihood of firm opening/relocating facility in next 1-2 years Very likely Somewhat likely Not sure Unlikely 50 35 15 13 6 4 8 62 6 2 10 4 15 73 2 4 6 6 8 60 15 13 9 4 0 0 79 77 58 54 42 13 15 36 17 19 23 28 9 40

Survey Instrument
Respondents were asked to rank the importance of 39 different factors in the location decision process using a 4-point scale (1 = unimportant, 2 = moderately important, 3 = important, 4 = very important). These factors fell into six broad topical categories: (a) labor, (b) permitting processes, (c) development and operating costs, (d) business environment, (e) transportation and access, and (f) quality of life/social environment. An open-ended section that followed allowed respondents the opportunity to (a) mention any additional factors that they believed were important to the location decision for medical device firms and (b) highlight what they thought were the five most critical factors influencing site decisions for such firms. The survey also included a brief series of questions concerning the number, size, location, and business functions of the firms facilities. The complete survey instrument is presented in the appendix. In an effort to keep the length of the survey manageable (and thus increase the likelihood of response), we did not collect extensive demographic information on the firms. Admittedly, this limits some of the conclusions that can be drawn from our data. We cannot, for example, speak to how the age or size (as measured by revenues) of the firm influences the importance of the location factors in question. Likewise, although we know whether the firms maintain facilities outside Massachusetts, we did not capture detailed information on where these facilities are located or what types of facilities they are. We discuss the implications of these and other methodological limitations in greater detail in the last section of the article.

Results Location Factors and Medical Device Firms

Based on the survey data, the availability of an appropriate labor force in the region (mean = 3.77, on a scale from 1 to 4,) is the single most important factor driving site selection for medical technology firms. The availability of on-site parking (mean = 3.48), the timeliness of approvals and appeals (mean = 3.34), the crime rate in the local area (mean = 3.34), and state tax/financial incentives (mean = 3.30) round out the top five most highly rated factors. At the other end of the spectrum, respondents agreed that the existence of a municipal minimum wage law (mean = 1.44), the presence of strong trade unions (mean = 1.48), access to railroads (mean = 1.61), the awareness of strong neighborhood organizations (mean = 2.15), and an informative

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Kimelberg and Nicoll municipal website (mean = 2.17) are relatively unimportant when deciding where to locate medical technology facilities. Falling somewhere in between are a number of other factors frequently cited in the business location literature. These include, for example, housing costs (mean = 3.00), the quality of local schools (mean = 2.98), labor costs (mean = 2.96), state and property taxes (mean = 3.02 and 2.89, respectively), the existence of a critical mass of similar firms in the area (mean = 2.72), and access to public transportation (mean = 2.50). Mean ratings for all 39 survey items are provided in Table 5. Although these data offer a snapshot of the relative importance of various factors in the location decisions of medical device companies, it is certainly possible that there are other influential factors that were overlooked in the survey instrument. Thus, in Part III we asked respondents to identify any additional factors (i.e., items not included in Part II) that play a role in determining where medical device firms locate. Based on the responses, it appears that the survey effectively captured the key factors driving site selection for these businesses. Only 27% of respondents (n = 13) named any additional factors at all, and none of these new factors received multiple mentions.9 In fact, with the exception of a few specific items (e.g., the weather, access to capital, reputation for innovation, and whether we have an existing presence in a given area), most of the additional factors cited were variations or elaborations on existing survey items. For the second question in Part III, respondents were asked to identify the five most critical factors in the location decision for medical technology firms. Since this was an open-ended question, respondents were free to nominate any factor or condition that they believed was among the most important. To enable analysis of these data, we created content categories and coded all the responses into one of these categories. The qualitative responses reinforce the previous finding concerning the absolute primacy of the availability of a suitable labor force in the location decision. Nearly all respondents (90%) mentioned this in their lists of the top five factors driving site selection for medical technology firms. No other single factor generated anywhere near the same degree of consensus on the open-ended question. (The next most frequently cited factorquality of life/amenities/ good place to livegarnered mention by only one third of the respondents.) The combined results from the factor ratings and the open-ended question provide convincing evidence that for a municipality to be considered a viable candidate for this type of business, a workforce with the requisite education and skills must be readily accessible.
Table 5. Factors Influencing the Location Decision for Medical Technology Firms Factor Availability of appropriate labor On-site parking Timeliness of approvals/appeals Crime rate in the area State tax/financial incentives Quality/capacity of infrastructure Rental rates Predictability/clarity of permitting process Access to major highways Local tax/financial incentives Access to airports Complementary/supplemental business services State tax rates Proximity to research institutions/ universities Cost of housing for employees Municipal reputation as a good place to work Quality of local schools Competitive labor costs Traffic congestion Physical attractiveness Property taxes Fast-track permitting Municipal reputation for economic development Municipal reputation as a good place to live Zoning by right for proposed use Undesirable abutting land use Permitting ombudsman Critical mass of similar firms Land costs Awareness of brownfield contamination Public transportation Proximity to restaurants and shops in surrounding area Availability of cultural/sports amenities Availability of customized workforce training Informative municipal website Awareness of strong, active neighborhood organizations Access to railroads Existence of strong trade unions Existence of a municipal minimum wage law Mean ratinga 3.77 3.48 3.34 3.34 3.30 3.21 3.20 3.19 3.19 3.09 3.06 3.02 3.02 3.00 3.00 2.99 2.98 2.96 2.96 2.91 2.89 2.89 2.83 2.83 2.83 2.79 2.72 2.72 2.70 2.52 2.50 2.40 2.38 2.34 2.17 2.15 1.61 1.48 1.44

41

Group Differences: Facility Type

Next, we sought to determine whether respondents ratings of the location factors in question differed on the basis of the type(s) of facilities these firms maintained in Massachusetts.

a. On a scale from 1 to 4, where 1 = unimportant, 4 = very important.

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42 Although all but two respondents worked for firms that had corporate and/or R&D facilities in Massachusetts, only slightly more than half (54%) of these respondents reported that their companies also had manufacturing facilities in the state. In other words, of all the firms surveyed, 42% did not have any manufacturing plants in their local portfolioall their properties were devoted to the types of knowledgerelated activities characteristic of firms in the postindustrial economy. We thus divided the respondents into two categories: (a) those that had manufacturing facilities in the state (n = 28) and (b) those that did not have manufacturing facilities in the state (n = 20). As demonstrated in Table 6, firms with and without manufacturing facilities rated most location factors similarly. Based on an independent means t test, there was no significant difference between the mean ratings of the firms with local manufacturing facilities and those without local manufacturing facilities on 33 of the 39 factors. Nevertheless, the differences that did emerge are worth noting. Respondents who worked for firms with manufacturing facilities in Massachusetts were significantly more likely to rate strong trade unions (t = 2.18, p < .036), the existence of a municipal minimum wage law (t = 2.24, p < .030), land costs (t = 3.18, p < .003), and the quality and capacity of infrastructure (t = 3.11, p < .003) more highly than respondents whose firms did not maintain manufacturing facilities in the state. At the same time, these respondents were significantly less likely to attach as much importance to the sites proximity to restaurants and shops (t = 2.09, p < .042) or its proximity to research institutions and universities (t = 1.70, p < .096), though the latter finding is only marginally significant.

Economic Development Quarterly 26(1) Last, an examination of mean factor ratings based on the recency of location activity produced several interesting differences. Firms that had opened or relocated a facility in Massachusetts relatively recently (defined here as within the past 4 years) were significantly more likely to assign higher ratings to a municipalitys proximity to restaurants and shops (t = 2.09, p < .044), access to highways (t = 2.46, p < .021), and the physical attractiveness of the area (t = 2.37, p < .024). In contrast, firms that had not made a local move within the past 4 years placed greater importance on competitive labor costs (t = 2.85, p < .007) and land costs (t = 3.06, p < .004). Although these data are only preliminary, the findings concerning regional location and recency of location activity seem worthy of future attention. Given the questions that motivated the present study, the emphasis on quality of life factors among the firms who had recently engaged in the site selection process is particularly interesting. Complete group means data from this section are available from the authors on request.

Discussion
The most significant finding from this study concerns the importance that medical device firms place on the availability of an appropriate workforce in a given region when making location decisions. Both the mean ratings and the open-ended survey question indicate that respondents see this as the most critical factor influencing site selection, thus lending additional support to previous research highlighting labor as a major determinant of location decisions (e.g., Cohen, 2000; Cortright, 2001; Dumais, Ellison, & Glaeser, 1997; Fulton & Shigley, 2001). Although the present study did not ask respondents to name the specific criteria that they look for when assessing the labor pool in a certain area, the education profile of the industrys workforce suggests that regions with a highly educated population are likely to be particularly attractive to medical device firms. This is consistent with the emphasis on human capital characteristic of businesses in the knowledge economy (see, e.g., Almazan, deMotta, & Titman, 2007; Berry & Glaeser, 2005; Florida, 2002; Glaeser & Kohlhase, 2004). Beyond the clear consensus around the importance of labor, however, the broader question concerning the relative weight assigned to production-related factors and knowledgerelated factors in the site selection process is considerably more complicated.10 Although the lowest rated items (i.e., those receiving a mean score of less than 2), are all traditional economic factorsaccess to railroads, strong trade unions in the area, the existence of a municipal minimum wage law some of the most highly rated items, concerning issues such as state and local taxes, infrastructure, and rental rates, are also production-related location factors. Similarly, although among the most highly rated items are several factors

Group Differences: Size, Regional Location, and Recency of Location Activity

Last, we examined whether there were significant differences in the factor ratings based on (a) the size of the firm, (b) its location within Massachusetts, or (c) how recently the firm had opened or relocated a facility in the state. A comparison of ratings based on company size yielded only one notable difference. Larger firms (defined here as those employing at least 50 employees) were more likely than smaller firms (those with fewer than 50 employees) to place importance on land costs (t = 2.63, p < .014). There were no significant differences on the remaining location factors. A comparison of ratings from firms in the Greater Boston area and those outside Greater Boston revealed five statistically significant findings. Firms located outside the Boston area were more likely to cite the importance of a permitting ombudsman in the municipality (t = 2.36, p < .024), land costs (t = 2.08, p < .044), the existence of on-site parking for employees (t = 2.42, p < .019), property tax rates (t = 3.53, p < .001), and state tax rates (t = 3.44, p < .001) than their counterparts in Greater Boston.

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Kimelberg and Nicoll

Table 6. Factors Influencing the Location Decision for Medical Technology Firms With and Without Manufacturing Facilities in Massachusetts Mean rating Factor Availability of appropriate labor On-site parking Timeliness of approvals/appeals Crime rate in the area State tax/financial incentives Quality/capacity of infrastructure Rental rates Predictability/clarity of permitting process Access to major highways Local tax/financial incentives Access to airports Complementary/supplemental business services State tax rates Proximity to research institutions/universities Cost of housing for employees Municipal reputation as a good place to work Quality of local schools Competitive labor costs Traffic congestion Physical attractiveness Property taxes Fast-track permitting Municipal reputation for economic development Municipal reputation as a good place to live Zoning by right for proposed use Undesirable abutting land use Permitting ombudsman Critical mass of similar firms Land costs Awareness of brownfield contamination Public transportation Proximity to restaurants and shops in area Availability of cultural/sports amenities Availability of customized workforce training Informative municipal website Awareness of strong, active neighborhood organizations Access to railroads Existence of strong trade unions Existence of a municipal minimum wage law
*p < .10. **p < .05. ***p < .01.

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Manufacturing (n = 28) 3.79 3.50 3.29 3.26 3.04 3.48 3.04 3.21 3.15 3.11 2.96 2.93 3.04 2.78 3.00 2.93 3.11 3.00 2.86 2.81 2.96 2.89 2.93 2.78 2.93 2.86 2.71 2.63 3.07 2.62 2.50 2.21 2.30 2.48 2.25 2.07 1.56 1.68 1.61

No manufacturing (n = 20) 3.75 3.45 3.42 3.45 3.00 2.85 3.42 3.16 3.25 3.05 3.20 3.15 3.00 3.30 3.00 3.05 2.80 2.90 3.10 3.05 2.80 2.89 3.05 2.90 2.67 2.70 2.74 2.85 2.20 2.40 2.50 2.65 2.50 2.15 2.06 2.26 1.70 1.20 1.20

t 0.256 0.290 0.713 1.08 0.018 3.11 1.56 0.290 0.529 0.247 1.07 0.924 0.169 1.70 0.000 0.566 1.15 0.439 1.04 1.07 0.675 0.007 1.20 0.586 0.920 0.669 0.079 0.784 3.18 0.716 0.000 2.09 0.974 1.15 0.657 0.706 0.719 2.18 2.24

Significance (two-tailed) .799 .773 .479 .286 .986 .003*** .125 .773 .599 .806 .291 .360 .867 .096* 1.00 .574 .256 .662 .303 .291 .503 .994 .238 .561 .366 .507 .937 .437 .003*** .478 1.00 .042** .335 .258 .514 .484 .476 .036** .030**

commonly cited in the knowledge economy literature for their quality of life and agglomeration benefits (crime rates, access to highways and airports, proximity to research institutions and universities, housing costs), other factors presumed to be important for the purposes of attracting highly skilled and educated workerspublic transportation, proximity to

restaurants and shops, the availability of cultural/sports amenitiesreceived far lower ratings. These findings suggest that location decisions in the medical device industry, driven largely by labor needs, are also influenced by a range of other factors captured by both classic and contemporary location theories.11

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44 A second objective of this study was to examine the extent to which the ratings assigned to various location factors differed depending on whether the respondents firm maintained manufacturing facilities in Massachusetts. Although we found no significant differences on the majority of survey items, it is instructive to consider the six location factors that did register statistically significant group differences, as these comport with what location theory might suggest about the way that production-intensive and knowledge-intensive activities fuel a preference for certain locational attributes. Respondents whose firms had manufacturing facilities in Massachusetts were more likely to attach importance to some classic production-related location factorstrade unions, minimum wage laws, land costs, and infrastructureand less likely to do so for two factors commonly associated with the knowledge economyproximity to restaurants and shops, and proximity to research institutions and universities. Granted, the absolute importance attributed to most of these items (with the exception of the quality of the infrastructure and proximity to research institutions) by both groups was still rather low. Nevertheless, the data provide initial evidence that the facility types in a firms portfolioand not merely the industry in which the firm competesmay influence how decision makers evaluate given location factors (see, Nelson, 2005, 2006, for a discussion of how accounting firms locate specific business functions in different places).

Economic Development Quarterly 26(1) the medical device industry, or the result of recollection differences between the two groups. There are, in addition, some limitations that are more specific to the design of this study. First, the sample size is quite small for survey-based research. Although we are comfortable that our sample is a reasonable representation of the population of medical device firms in Massachusetts, a data set of only 48 responses does limit the types of statistical analyses that are feasible or appropriate. In particular, the findings from our group comparisons, although interesting and relevant for theoretical purposes, should be interpreted cautiously. In addition, although our data offer insight into how Massachusetts firms evaluate various location factors, the small sample precludes generalization of our findings to the site selection process for medical device firms nationwide or internationally. Second, the survey instrument did not include a number of questions that would have allowed for multivariate analyses of the location decision. A primary goal of this study was to understand the perceived importance of a wide range of detailed location factors (as opposed to a truncated list of general factors). At the same time, we were cognizant of the need to keep the survey a reasonable length to improve the likelihood of response. Consequently, we opted for depth with the location factor items, but this did come at the expense of a number of relevant demographic questions that would have further informed our findings. For instance, since we only asked respondents to report the types of facilities that their firms maintain in Massachusetts, it is possible that these companies ownand, potentially, have made location decisions concerningfacilities in other states or countries. Thus, even those respondents whose firms do not have manufacturing facilities in Massachusetts (i.e., the no manufacturing group) may have experience selecting locations for manufacturing plants outside the state and reflected on those experiences when rating the location factors on the survey. Future research should seek to clarify the sources of subjects respondents perceptions by asking them to identify specific projects or location decisions, and evaluate site selection criteria on the basis of those cases. In particular, capturing two different sets of ratingsfor example, one for location decisions affecting a firms manufacturing facilities and one for decisions concerning its R&D operations or corporate headquarterswould allow for a more direct and rigorous analysis of the effect that a propertys intended business function has on the importance attached to various locational attributes. Similarly, although we asked how recently firms had opened or relocated a facility in the state, it would also be instructive to know how old the company is or at what stage in the life cycle it is (start-ups, e.g., likely think about the location decision quite differently than more established firms do), as well as the total number of facilities of each type the firm maintains in its portfolio. Whether the firm

Limitations and Directions for Future Research

One of the greatest challenges in conducting location research is determining the most appropriate method for the task. Studies in this area typically use one of two broad strategies: surveys of the decision makers involved in the site selection process, or econometric models that measure the extent to which certain local or regional characteristics predict the location patterns of firms (Blair & Premus, 1987; Carlson, 2000). Each approach has obvious strengths and weaknesses. Studies that make use of statistical models, for example, are constrained by the available data, which may not include enough microlevel information to be of practical value, or may lack useful measures for some qualitative aspects of the location decision. Survey-based research, on the other hand, relies on the respondents knowledge and memory of the decision-making process, both of which may be limited (or subject to conscious manipulation if the respondent believes that his or her answers may have some influence on industrial recruitment policies; Blair & Premus, 1987; Carlson, 2000). The present study, then, like other location research using surveys is vulnerable to the latter set of concerns. It is unclear, for instance, whether the differences observed between firms that had recently made a move in Massachusetts and those that had not is indicative of an actual increased emphasis on quality-of-life factors in

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Kimelberg and Nicoll rents or owns its properties also has clear implications for how decision makers evaluate various location factors, as many of the factors in question may be experienced differently (or not at all) depending on ownership status. Thus, although our findings offer preliminary evidence regarding the importance of a number of key factors in the site selection process for medical device firms, additional research is needed to better establish how firm-specific characteristics influence location outcomes. 2. How recently has your company opened or relocated a MedTech facility in Massachusetts? a. In the past six months b. In the past year c. In the past 2 to 4 years d. In the past 5 to 10 years e. More than 10 years ago f. Not sure 3. How likely is it that your company will open or relocate a MedTech facility in Massachusetts in the next 1 to 2 years? a. Very likely b. Somewhat likely c. Unlikely d. Not sure 4. What types of MedTech facilities does your company maintain in Massachusetts? (Check all that apply.) a. Research and development b. Manufacturing c. Corporate/office d. Other, please specify 5. Which of the following best describes your companys primary business? (Check all that apply.) a. In vitro diagnostic substances b. Electromedical and electrotherapeutic apparatuses c. Irradiation apparatuses d. Laboratory apparatuses and furniture e. Surgical and medical instruments f. Surgical appliances and supplies g. Ophthalmic goods h. Other, please specify 6. Approximately how many employees does your company currently employ in the United States? a. 0-50 b. 50-100 c. 100-200 d. 200-500 e. 500-1,000 f. More than 1,000 7. Approximately how many employees does your company currently employ in Massachusetts? a. 0-50 b. 50-100 c. 100-200 d. 200-500 e. 500-1,000 f. More than 1,000 8. In which region(s) in Massachusetts does your company have MedTech facilities? a. Berkshires b. Pioneer Valley c. Central Massachusetts

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Conclusion
In this article, we have argued that industries with a mix of production-related and knowledge-related activities, such as medical devices, offer an interesting case study for location theory and research. Beyond these scholarly pursuits, however, the data presented here also have implications for government officials or economic development staff who wish to attract medical device firms to their community. The findings clearly emphasize the need for local leaders to understand the labor requirements of medical device firms, and to realistically assess the education and skill levels in their regions workforce, to determine whether the medical device industry would be a good fit. A number of other factorsincluding the clarity and efficiency of the development process, crime rates, taxes and incentives, rental rates, infrastructure quality, and transportation accessappear to be important, but are unlikely to pique a firms interest if the requisite labor needs cannot be met. With the passage of the health care reform bill in 2010, the location decisions of medical device firms are likely to come under additional scrutiny. (The legislation mandates an excise tax on the sale of medical devices, effective January 1, 2013.) Although industry leaders have raised concerns that the newly imposed tax may increase the need to shift more business overseas,12 it remains to be seen whether the additional costs will have an appreciable impact on the way in which medical device firms evaluate and select new sites for their operations.

Appendix Survey Instrument Part I

1. How recently has your company opened or relocated a MedTech facility in the United States? a. In the past six months b. In the past year c. In the past 2 to 4 years d. In the past 5 to 10 years e. More than 10 years ago f. Not sure

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46 d. Greater Boston e. Northeast f. Southeast g. Cape and the Islands

Economic Development Quarterly 26(1) d. Access to major highways e. Access to railroads f. Traffic congestion g. Proximity to restaurants and shops in surrounding area h. Undesirable abutting land use Quality of life/social environment a. Municipal reputation as a good place to live b. Cost of housing for employees c. Crime rate in the area d. Physical attractiveness of area e. Availability of cultural/sports/recreational amenities f. Quality of local primary and secondary schools

Part II
The following section lists a number of factors that companies may take into account when deciding where to locate a MedTech facility. Please rate the importance of each factor, based on your experience with a current or recent siting or relocation decision. In your opinion, how important is each of the followingas either an asset or a deterrentin the decision to locate a MedTech facility in a particular municipality or site within that municipality? Labor a. Availability of appropriate labor pool in the region b. Competitive labor costs c. Existence of a municipal minimum wage law d. Existence of strong trade unions in the municipality e. Availability of customized workforce training Permitting processes a. Predictability/clarity of permitting process b. Timeliness of approvals and appeals c. Permitting ombudsman (single point of contact in municipality) d. Zoning by right for proposed use e. Fast track or concurrent permitting f. Municipal reputation for economic development g. Fully informative municipal website h. Awareness that there are strong, active neighborhood organizations in the municipality Development/operating costs a. Property tax rates b. State tax rates c. Local tax/financial incentives d. State tax/financial incentives e. Land costs f. Real-estate rental rates g. Quality and capacity of basic infrastructure (e.g., water, sewer) h. Awareness of brownfield contamination Business environment a. Critical mass of similar firms in area b. Municipal reputation as a good place to work c. Proximity to research institutions and universities d. Availability of complementary/supplemental business services Transportation and access a. Public transportation b. On-site parking for employees c. Access to airports

Part III
1. Please list any other factors not included above that play an important roleas either an asset or a deterrentin the decision to locate a MedTech facility in a particular municipality or site within that municipality. 2. Taking into account all factors discussed above, please identify the five factors that, in your experience, play the most critical role in the location decision. Acknowledgments
The authors would like to thank Barry Bluestone, Don Zizzi, and Tom Sommer, MassMEDICs president, for their assistance with this research. We are also grateful to three anonymous reviewers for their very helpful feedback on an earlier draft of this article.

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding
The author(s) received no financial support for the research, authorship, and/or publication of this article.

Notes
1. This figure is lower than the number reported in Table 3 because the County Business Patterns and the Economic Census employee data are collected using different methods. The County Business Patterns data are derived from administrative employment and payroll records, which the U.S. Census Bureau acknowledges results in a certain amount of underreporting. The Economic Census data are collected by surveys to all establishments, plus administrative data for a sample of small employers and nonemployers. 2. We felt confident that an e-mail coming directly from the president, indicating his approval of the project, would generate a stronger response rate than an e-mail from a university to which most members likely have no attachment.

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Kimelberg and Nicoll

3. We were unable to confirm exactly how many of the e-mails were actually received or opened. However, given that this e-mail list is the primary means of contact for the organization, it is maintained regularly, and thus it is likely that the number of undeliverables was minimal. If anything, by assuming a sample population of 300 firms, it is possible that we have understated our response rate slightly. 4. In one case, two different individuals from the same firm completed the survey. Because we did not want to arbitrarily select one set of responses from this firm, we decided to retain both respondents in the sample. Admittedly, this is not ideal. However, given the small sample size, we were reluctant to drop any data. 5. Research on the response rates of e-mail or web-based surveys relative to mail surveys is mixed. A few studies have found better response rates with e-mail surveys; others have found lower response rates relative to mail surveys, or no effective difference between the methods (Kaplowitz, Hadlock, & Levine, 2004). Overall, studies have found response rates to vary from roughly 6% to more than 60%, depending on the context and population (Fricker & Schonlau, 2002; Kaplowitz et al., 2004). 6. The president of MassMEDIC estimates that the overwhelming majority (likely 80% to 90%) of medical device firms in the state are members of MassMEDIC. 7. Respondents were allowed to select more than one industry type; thus, the total for all industries exceeds 100%. 8. One important difference worth noting is the absence in our sample of any firms in the irradiation apparatuses industry. Thus, our findings may not apply to this industry, which employs approximately 11% of the medical device workers in Massachusetts. 9. The low response to this question was likely not due to reluctance or unwillingness to answer an open-ended question, as the vast majority of respondents (85%) answered the second question in Part III, which also required a write-in response. 10. One curious result concerns the availability of on-site parking. Although this factor received the second-highest rating among the 39 items in the survey, only 2% of respondents mentioned it in the open-ended section of the questionnaire, where respondents were asked to identify the top five most critical location factors. One possible explanation for this discrepancy is that although parking is considered a very important asset, it is not necessarily a deal breaker or deal maker. In other words, the availability of parking, in and of itself, may not be enough to make a municipality a desirable candidate for business, nor is a lack of parking sufficient to disqualify an otherwise attractive location. 11. A third category of location factors, those related to the development process itself as opposed to business operations, is also worth mentioning. Two of these factorsthe timeliness of approvals and appeals, and the predictability and clarity of permitting processeswere among the most highly rated items in the survey. For a discussion of the meaning that real-estate professionals attribute to these factors, see Kimelberg (2010).

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12. See, for example, www.massdevice.com for discussions with industry leaders on the topic of the excise tax and its potential impacts.

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Bios
Shelley McDonough Kimelberg is an assistant professor of sociology at Northeastern University. She teaches and conducts research in the areas of urban sociology, economic development, urban education, and poverty. Lauren A. Nicoll is a PhD student in the Department of Sociology and Anthropology at Northeastern University with an interest in urban sociology.

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