Business

HQ2 Research Cost Amazon Millions… Here’s the Free Version

Choosing the location for a company's headquarters can be critical to a company's success. Amazon spent years deliberating over their coveted new headquarters location. In the end, Amazon landed on the DC and NYC metro areas, where they would be able to “attract world-class talent.” This week, we analyze the geographic distribution of talent in Los Angeles (a highly diverse city) at the zip-code level and use it to showcase why skill concentrations have meaningful implications for businesses.

Revelio Labs

6/14/22

Choosing the location for a company's headquarters can be critical to a company's success. Amazon spent years deliberating over their coveted new headquarters location. In the end, Amazon landed on the DC and NYC metro areas, where they would be able to “attract world-class talent.” This week, we analyze the geographic distribution of talent in Los Angeles (a highly diverse city) at the zip-code level and use it to showcase why skill concentrations have meaningful implications for businesses.

Below are the distributions of skills in Los Angeles for engineering, sales, finance, and entertainment. The color pink highlights the hotspots for these skills.

As Alfred Marshall noted at the turn of the century, when strategic talent exists in abundance, it becomes easier for firms to adjust, and ultimately improve, their workforce. When a localized industry is in the same area, it becomes easier for people to share ideas, experiment, and create a strong professional culture. These channels further increase the firm’s productivity and help create what is known as agglomeration economies.

Below we show the average time it takes Amazon to fill an engineering job posting. The analysis suggests that it is easier for Amazon to find the talent they are looking for in skill-dense areas.

plot

We can also see that this phenomenon impacts employee satisfaction. Below is the relationship between company sentiment and the similarity between the company's skill distribution and the skill distribution of their immediate surroundings. The positive relationship suggests that workers are happier when they are around people with similar skills.

plot

Key takeaways:

  • Access to talent is an extremely important aspect of choosing a location.
  • Having abundant local strategic talent makes it easier for firms to attract employees and sustain growth.
  • A higher concentration of similar skills can also lead to more aggressive workforce growth and sentiment.

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