McMillan 3
1994). Although economic development is a primary topic in state of the state addresses
(Watson 1996, 9), it is not necessary to examine economic development comprehensively.
Analysis of FDI allows for rethinking governors’ roles and states’ international activities. The
primary reason to focus upon FDI rather than export promotion is that FDI attraction is handled
completely by states, yet export promotion services are also offered by several federal
government agencies including the U.S. Commercial Service and Small Business Administration
as well as many nonprofit world trade centers, business consultants and local governments in
metropolitan areas.
Yet, compared to other industrialized economies, the U.S. government has
“historically paid little attention” to soliciting FDI (Whatley 2003, 7-8). Another reason to focus
upon investment is that results are easily measurable—by the capital invested or number of jobs
created. Trade promotion success is more difficult to decipher because, as state officials point
out, firms do not consistently and accurately report their export sales to officials by the same
formula and it is unclear if success is due to help from state-sponsored services (Interviews with
State Officials 2005, 2006).
This study examines 25 states from 1995-2004 to see how states’ FDI attraction is
affected by governors’ institutional and personal powers, using the typology developed by Thad
L. Beyle (2005), as well as the number of governor-led missions for trade and investment and
states’ international offices. Scholarly literature and the media have often asked if economic
development policies create greater economic benefits to outweigh costs of incentives, but
scholars come up with different answers (Hanson 1993; Netzer 1991; Saiz 2001a, 2001b; Saiz
and Clarke 2004; Watson 1995). Rather than examining specific policies, this study provides
empirical tests of whether states’ international offices and governor-led missions lead to greater
4
For arguments for and against states getting involved in the economy, see Grady (1991).
Convention