Volume 3 Issue 1 Fall 2005 Edited by N. Reid & J. Gatrell Editors Special Advisor to the Editorial Board Neil Reid, Articles Section Michael Somers, Director of Libraries Department of Geography & Planning Bridgewater State University The University of Toledo Toledo, OH 43606 Technical Advisor Steve Hardin Jay D. Gatrell, Research Notes & Discussion Section ISU Cunningham Memorial Library Department of Geography, Geology, & Anthropology Indiana State University Editorial Assistant Terre Haute, IN 47809 Shirley Griffey Indiana State University Editorial Board S. Bagchi-Sen Roger Hayter SUNY-Buffalo Simon Fraser J. Bodenman T. Klier Bloomsburg University of PA Federal Reserve of Chicago F. Calzonetti Dan Knudsen The University of Toledo Indiana University Christopher Cusack R. Larson Keene State College Indiana State University A. Glasmeier K. Oshiro Pennsylvania State University Wright State University R. Hanham C. Pavlik West Virginia University University of Iowa J.W. Harrington J. Wheeler University of Washington University of Georgia Mission Publication Information The Industrial Geographer (ISSN 1540-1669) publishes The Industrial Geographer (ISSN 1540-1669) is published bi- articles and research notes that focus on a broad range of annually in the Fall (September-October) and Spring (April-May). economic issues across all economic sectors and explore Additionally, special issues may occasionally be published on an issues at all scales from the firm to the globe. The journal irregular basis. The journal is a collaborative effort between the ISU Cunningham Memorial Library and the Department of encourages submissions that are theoretically driven Geography, Geology, & Anthropology. The IG is also affiliated empirical research, papers with an applied and planning with the Regional Development & Planning Specialty Group of the thrust, and papers that explore directions for future AAG. The journal is also affiliated with the IGU Commission on research. Individuals interested in organizing a special the Dynamics of Economic Spaces. issue should contact the editors or a member of the editorial board. The journal is available free of charge via the internet [http://igeographer.lib.indstate.edu] or vis-à-vis one of many on- line content aggregator services. To contact the publishers, write to The Industrial Geographer, 159 Science, GGA, Indiana State University, Terre Haute, IN 47809. (812)237-2256. © 2005 Indiana State University, Cunningham Memorial Library. All rights reserved. Where specified, individual articles are the property of the authors. Table of Contents Estimating the cost and benefit of hosting Olympic Games 1 J. Owen Information accelerated radical innovation 19 J. Dismukes Continuing Business as usual. 43 S. Alvarez & Impink Select papers in industrial geography 50 E. LaFary Guidelines for Contributors Estimating the Cost and Benefit of Hosting Olympic Games: What Can Beijing Expect from Its 2008 Games? Jeffrey G. Owen Department of Economics Indiana State University Terre Haute, IN 47809 [email protected] ABSTRACT Cities who host the Olympic Games must commit to significant investments in sports venues and other infrastructure. It is commonly assumed that the scale of such and event and the scale of the preparation for it will create large and lasting economic benefits to the host city. Economic impact studies confirm these expectations by forecasting economic benefits in the billions of dollars. Unfortunately these studies are filled with misapplications of economic theory that virtually guarantee their projections will be large. Ex-post studies have consistently found no evidence of positive economic impacts from mega-sporting events even remotely approaching the estimates in economic impact studies. For the 2008 Summer Olympic Games in Beijing, it appears China will take these massive investments in venues and infrastructure to a new level. If organizers of the Beijing Games base their expectations on economic impact studies from previous Olympics, they are sure to be disappointed. The potential for long term economic benefits from the Beijing Games will depend critically on how well Olympics related investments in venues and infrastructure can be incorporated into the overall economy in the years following the Games. INTRODUCTION “Mega-events” such as the Olympic Games require large Ex-post studies, however, have sums of public money to be spent consistently found no evidence of on venues and infrastructure positive economic impacts from improvements. In order to justify mega-sporting events even the use of public funds, economic remotely approaching the impact studies are often estimates in economic impact commissioned which invariably studies. In a study of the impact project large inflows of money that of Super Bowls on local economies, will have a long-term positive Philip Porter (1999) found “no effect on the economy by such measurable impact on spending means as job creation and visitor associated with the event. The spending. Events of the scale of projected spending and spillover the Olympic Games, which attract benefits of regional impact models large amounts of money from ever materialize” (Porter 1999, p. outside a local economy, are 61). Porter’s explanation is that forecasted to have economic capacity constraints in the hotel impacts in the billions of dollars. industry cause room prices to The Industrial Geographer, Volume 3, Issue 1, p. 1-18 ©2005 Owen The Industrial Geographer increase with no change in of the economic conditions in occupancy rates. Higher rates China to previous hosts. It seems contribute to the crowding out of logical that a less developed regular traffic and net spending in country will have more to gain areas other than hotel rooms from long term growth changes little or not at all. opportunities. Matheson and Baade (2003) argue, however, that Longer term sports programs, the prospects of mega-sporting usually involving stadium events are even worse for subsidies to attract or keep developing countries. The professional teams, have also opportunity costs of providing failed to deliver on projected state of the art facilities are much economic benefits. Even for cities higher and lack of modern that usually are considered infrastructure requires significant success stories for sports additional investment. development strategy, such as Baltimore (Hamilton and Kahn In what follows, misconceptions 1997) and Indianapolis that lead to the overly optimistic (Rosentraub 1994), empirical forecasts of economic impact research does not find evidence of studies will be explained, with a statistically or economically closer look at impact studies from significant positive impacts. recent Olympic Games. Finally, the plan for the Beijing Olympics In July of 2001, Beijing was will be examined to see how awarded the 2008 Summer China’s experience may compare Olympic Games. Most people to other Games. assume that such an event will bring enormous economic benefits THE FALLACY OF ECONOMC to the host city not just during the IMPACT STUDIES event, but for years afterward. “The scale of the organisation, Economic impact studies have facilities and infrastructure become standard operating required for such a huge procedure for supporters of public undertaking are such that the funding for sports teams or events. Games cannot but have Their prevalence has led to substantial economic effects” acceptance of their findings by the (Sydney 2000 Games, p. 2). But public, media, and even academic what exactly are these economic circles with little or no critical effects, and how do they affect the evaluation. Because of the high quality of life of local residents? profile of such events, large (and positive) economic effects are The relevance of studies such as taken as given; the studies these to the Beijing games confirm what is already believed. depends in part on the similarity Short et al (2000) provides an Owen 2 The Industrial Geographer example of a typical statement: benefits, ignoring opportunity “The promise of worldwide costs, using gross spending exposure and economic gain has instead of net changes, and using made hosting these major and multipliers that are too large. regularly scheduled sporting affairs a lucrative goal for aspiring In many cases the cost of cities around the world” (Short constructing stadiums, which to a 2000, p. 320). large degree is spent on hiring construction workers and Sports economists, on the other purchasing materials from local hand, have found economic impact suppliers, is counted as a benefit studies lacking both in theory and to the local economy. This is practice. Ex-post studies have arguably the most egregious error consistently failed to find evidence in economic impact studies. It is of any economic benefits related to backward-looking in that it looks sports teams and facilities. In at the production aspect of the examining recent retrospective project and ignores the effect of studies, Coates and Humphreys the actual consumption of the (2003, p. 6) concluded “building product. The following quote new sports facilities and exemplifies the bizarre logic of attracting new professional sports this type of accounting: teams did not raise income per capita or total employment in any The initial construction of a $10 US city.” A closer look at the million sports facility provides methodology of such studies an initial impact of $10 million reveals an appealing but on the local economy. This is the fundamentally flawed line of direct impact.