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Sustainability of the Economic Climate in Rhode Island

March 06, 2013

In the wake of a potential overhaul to the state's economic development strategy, Gov. Lincoln Chafee received two reports analyzing the strengths and weaknesses of Rhode Island's existing industry clusters and identifying potential new opportunities. The reports provide guidance for consideration by the Sustainable Rhode Island Initiative, a multi-agency effort to develop an integrated approach for the state related to land use, transportation, housing and economic development. Recommendations include the appointment of an individual to lead and oversee economic planning efforts of the state and the creation of a statewide incubator network and investment in entrepreneurship and small business creation and growth.

The report, Economy RI, authored by Fourth Economy Consulting, finds that the state's business climate is hindered by the tax climate — particularly property and corporate taxes, where Rhode Island has a higher tax rate than its peer states — although the personal income tax rate has been lowered. Another positive indicator is the rates of foreign direct investment and small business ownership in the state, although this is mitigated by low personal saving rates, which make long-term investments difficult.

Rhode Island falls behind in venture capital, particularly compared to its neighboring states, such as Massachusetts. Despite Massachusetts having a much larger population than Rhode Island, the report finds that per capita analysis is not useful when comparing venture investments as scale is more related to resulting job creation and economic impact.

Instead of targeting sectors for growth, the report recommends that Rhode Island not focus on any one cluster and instead, target market opportunities resulting from the alignment and linkages between industries and assets.

An analysis of the Rhode Island market shows that the state content — namely online information and media — lacks a focus on assets and public interaction with an eye toward the creation of an innovative network, and is not business friendly.

Overall, recommendations include the appointment of an individual to lead and oversee economic planning efforts of the state, and improve public communication to make the process more transparent. This would be better facilitated through a restructuring of the online interaction forums. Second, a group of industry leaders should be gathered to promote research and commercialization, support incubators and accelerators, and create a mentoring program for new firms. Third, Rhode Island should continue to survey and reform regulations that impact businesses in the state. Specifically for the Sustainable Rhode Island Campaign, Forth Economy recommends the creation of a statewide incubator network and investment in entrepreneurship and small business creation and growth.

Another report from PolicyLink provides a profile of social equity indicators for the state and is available at: http://www.riedc.com/economic-data-reports/Equity-Profile-of-Rhode-Island-Report.pdf.

Rhode Islandbenchmarking report, policy recommendations