Was Amazon scamming or searching for its HQ2 location?
Presented here for discussion is a summary of a current article published with permission from Knowledge@Wharton, the online research and business analysis journal of the Wharton School of the University of Pennsylvania.
If by announcing a search for a second headquarters Amazon.com intended to play one city against another and generate millions of dollars in free publicity, it has worked. Many observers believe Amazon has long known where it wants to be — or at least has never seriously considered more than two or three specific sites — since there are no more than a handful of cities that fit the requisite criteria.
What matters to Amazon are many of the same things that matter to many other companies.
“For most businesses, the issue of location choice now is driven by labor: Will we be able to attract the white collar skills we need?” said Peter Cappelli, director of Wharton’s School’s Center for Human Resources. “For unskilled or semi-skilled jobs, will we be able to get it at a price we want to pay? No business goes to the Silicon Valley or New York City because it is cheap; they go because of the labor supply.”
“It boils down to access to clients, access to labor force, access to suppliers — these all play a role in these decisions,” said Christopher Thornberg, founding partner of Beacon Economics.
The proposal says Amazon has a preference for metropolitan areas with more than one million people, a “stable and business-friendly environment,” urban or suburban locations with the potential to attract and retain strong technical talent, communities that think “big and creatively” when considering locations and real estate options.
Amazon has also made no secret of the fact that part of this exercise is about getting as much as it can in tax breaks and other incentives from the winning city.
Prof. Cappelli said businesses also often explore to what extent local and state governments can influence issues such as infrastructure and worker training. He said, “It is certainly true that business sees local governments at the final stage as a kind of vendor, and they are not above playing coy, pretending that they have more options than they actually see, and playing them off against each other.”
A decision is expected sometime in 2018.
DISCUSSION QUESTIONS: What should be Amazon’s primary considerations in its search for a second North American headquarters? Are you a fan of the sweepstakes nature of the search?