Role of Transportation Accessibility in Attracting New Businesses to New Jersey

Abstract

A general research methodology is developed to analyze the factors affecting companies’ relocation decisions, and its practicality is tested through an application on a study region that includes 21 counties in New Jersey representing the “destinations” for the new businesses, and New York City and Philadelphia representing the “origins.” Within the framework of the suggested methodology, a gravity based business relocation model is developed and calibrated using an iterative approach. The modeling process also involves multi-attribute decision analysis to evaluate the determinants of business relocation process as precisely as possible. Input data includes the number of companies that relocated to New Jersey from New York City and Philadelphia, from 1990 to 1999, and a set of factors that are considered to affect companies’ relocation decisions including land prices, safety, land availability, market size, economic stability, and transportation accessibility. The results show that businesses moving from Philadelphia tend to locate deeper into New Jersey than businesses moving from the New York City area. This result might be attributable to the fact that businesses are attracted to the high density of the New York City market and its economic potential, and therefore do not want to relocate as much. Results of the sensitivity analysis and estimated market elasticities also support this finding. This study also demonstrates that the attractiveness index can be represented in a functional form.