An Institutionalist Take on State Activism in Economic Development: A Theoretical Framework

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This article explores theoretical aspects of state activism in economic development to address specific gaps in the literature. I content that state economic development is a complex and dynamic phenomenon which can not be adequately conceptualized nor modeled using ad hoc classification systems, taxonomies, nor conceptual frameworks. Instead, I propose a theoretical framework which has two principal governmental functions. Each function is defined by a typology of four policy types which are theoretically grounded and organized within an institutional framework. This theoretical system addresses the limitations of efforts to account for foundational economic determinants of state development and to assess both the linkages between policy types as well as the linkages between state economic development and institutions. The narrow and often competing perspectives of previous studies can present a distorted picture of state activism in economic development. This study seeks to present a clearer and comprehensive description of this phenomenon.


State governments have a lengthy history of pursuing strategies to develop their economies (Wood, 1993). This activism is perhaps more extensive than many people realize (Anderson, 1989). One can trace its development from the current "entrepreneurial" strategies (Eisinger, 1988) to the "smokestack chasing" of the 1930s (Hopkins, 1944) back to the building of roads, canals, and later railroads in colonial times (Goodrich, 1965), from which the beginning of any investigation of state economic development should be rooted (Burkhead, 1989: p. 41). Yet, while state activism in economic development is well established, research on development strategies is still in a formative stage (Kalleberg, 1986). Theoretically speaking this policy domain may still be considered terra incognita.

Theoretical research on state economic development can be categorized into four distinct levels: ad hoc classification systems, taxonomies, conceptual frameworks, and theoretical systems (Parsons and Shils, 1962). An ad hoc classification system is the most rudimentary of theories. It consists of arbitrary categories constructed to describe and organize empirical observations. Examples of ad hoc classification systems in the economic development literature would be the works of Plaut and Pluta (1983) and Bingham and Bowen (1994). The next level of theories are taxonomies. Typologies constructed under this theoretical model have carefully crafted definitions, are closely aligned to the empirical world, and are often interrelated. However, taxonomies only describe empirical phenomena, they do not offer explanations. Berman and Martin (1992) and Reese (1993) provide examples of taxonomies of development programs.

Conceptual frameworks are more sophisticated theories than lower level classifications because they provide explanations and predictions for empirical observations. Still, the explanatory and predictive powers of conceptual frameworks are limited because their propositions are not deductively derived. Development studies within this tradition would include the works of Eisinger (1988) and Fosler (1992). The highest level of theorization, according to Parsons and Shils, is theoretical systems. In addition to combining taxonomies and conceptual frameworks they offer descriptions, explanations, and predictions about a phenomenon in a systematic manner. They also do not limit the scope to particular aspects, however much need there is for careful study the sub-systems themselves (Spengler and Allen, 1960).

State economic development is a complex and dynamic phenomenon which can not be adequately conceptualized nor modeled using ad hoc classification systems, taxonomies, nor conceptual frameworks. Spengler and Allen (1960) argue that any theory of state economic policy which fails to recognize all relevant sub-systems and their interaction is inadequate (pp. …