Three Strategies of State Economic Development: Entrepreneurial,Industrial Recruitment,and Deregulation Policies in the American States

Abstract

State governments have adopted a wide variety of policies to promote economic development over the past two decades. There has been little progress, however in developing a clear conceptualization of the general strategies that underlie these programs or in assessing their impact on economic growth. Using confirmatory factor analysis, the authors examine a wide range of these policies, finding evidence of three general approaches: (1) an entrepreneurial approach focusing on new firm and technology development; (2) an industrial recruitment strategy emphasizing financial incentives for the relocation or expansion of existing enterprises; and (3) a deregulation approach that minimizes governmental control over private enterprise. These policies are modestly associated with particular regions of the United States. The entrepreneurial strategy appears to boost new business incorporations, and the recruitment approach reduces business failures. The results complement and extend other attempts to measure state economic development strategy.