Gaining a Competitive Edge: Economic Development Strategies for State and Local Governments

Article excerpt


For many years, formal economic development efforts have been touted as the means of reviving or revitalizing locales or regions that have undergone recession, loss of key industries, population outmigration or similar traumatic events. Yet these economic development efforts have primarily been reactive--taking place in response to a set of events. The focus of this article is on how states and localities can be more proactive. Looking at a number of actual examples, it will discuss how jurisdictions can adopt a more strategic focus and, as a result, gain a competitive edge.


In a series of reports, the Corporation for Enterprise Development (1988) stated that the fifty states, along with the developed and developing nations of the world, are in a race for the economic future--a race for leadership and dominance in a global economic marketplace. Also, witness the emergence of large regional trading blocs--from NAFTA in the Americans to the Asia-Pacific Economic Cooperation forum (APEC) whose purpose is to coordinate tariff and trade policies as a means of enduring economic vitality for their respective regions. A similar phenomenon can be seen in the United States with regional alliances emerging at the state and local level.

Running in this race may mean developing high technology research parks to facilitate the flow of new ideas and innovation, starting business incubators to provide low rent and management support, promoting export of local products to international markets or providing various incentives to attract expanding firms (McGowan and Ottensmeyer, 1993). In addition, there is concern on the part of all race-runners about the growing mismatch between emerging jobs which will require new skills and the skills of the people now available to fill them. Critical skill shortages may result when twenty-first century jobs intersect an aging U.S. workforce. The uncertainties of the new job market will entail a lifelong commitment to retraining and the prospect of frequent, short bouts of unemployment.

In order to meet such challenges, a number of state and local governments have been making conscious, incremental investments in their ability to support and assist businesses in the challenge of economic development. Successful states and localities have recognized that economic development is a multi-faceted, long-term investment involving a variety of activities to address a multitude of outcomes. Yet, such recognition must be balanced against the political realities that governments, by themselves, cannot be the sole drivers of change. This entails the formation of various coalitions and alliances comprised of businesses, community leaders, and assorted interest groups. The challenge will be the need to develop a common vision and process for managing change.

Strategic management has been viewed as important in linking other areas of commerce and government, for example, industrial R&D (Bozeman, Crow, and Link, 1984). The focus of this article will be on how states and localities can use strategic management and be more proactive in their economic development efforts. Looking at a number of actual examples, the authors will discuss how these jurisdictions can adopt a more strategic focus and, as a result, gain a competitive advantage.


Economic development has been defined in a variety of ways, often focusing on the particular goals or strategies being used. As the term suggests, economic development concerns the development, change or improvement of the economy of a particular region. Local economies are always in a relative state of change, sometimes improving and sometimes in decline, but economic development activities imply efforts to insure positive change.

Besides improved economic conditions, economic development also suggests activity on the part of government or other parts of the community to foster, promote or stimulate business conditions. …


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