Formation and Development of Economic and Community Development Networks
To better understand economic and community development networks, we discuss the factors that can influence the formation and development of community development networks. First, we need to differentiate the ties that local governments have in networks. Next, we will introduce the Institutional Collective Action (ICA) framework to lay the theoretical foundation for explaining the development of economic and community development networks.
Then, we discuss what factors contribute to the formation and development of these networks.
Local Governments’ Nehvorking Behaviors
Existing research has focused on local governments’ ties with other governments (e.g., Lee et al., 2012). Yet, local governments' networking behaviors are not limited to horizontal and vertical govermnental relations. Local governments build ties with four groups of organizations: private organizations, nonprofit development organizations, community or residential organizations, and government entities (Ha, Lee, & Feiock, 2016). Local governments often interact with businesses, as they are the main drivers of local economy. Local government relies on investment from businesses for job creation, and businesses receive policy support, funding, and guidance from local governments. In addition, local government often needs to resolve conflicts between businesses (e.g., real estate developers) and residential communities. Many nonprofit economic development organizations take on projects that focus on revitalization of communities, or the creation of favorable investment environment for small businesses. Local govermnents often provide funding and work with these EDOs to ensure the delivery of high-quality services. Another group of stakeholders are community or residential organizations such as neighborhood associations. Local government works with these organizations to mitigate potential conflicts concerning local development projects and gain their support (Ha et ah, 2016). In addition to the three groups of non-state stakeholder groups, local govermnents often interact with other county and city governments, as well as higher-level govermnents, which has been covered already.
Other researchers differentiated internal networks from external networks when examining the impact of informal economic policy networks on economic development (Kim, Song, & Park, 2018). Depending on the boundary of the network, networks are categorized into internal networks and external networks. Internal networks focus on local governments' interactions with other stakeholders within its city boundary (such as city chamber of commerce, real estate or developers, and citizen advisory group) External networks explores local governments' interactions with organizations outside its city boundary (such as regional planning commission, council of government, and other local governments) (Kim et ah, 2018). According to the 2014 national survey of municipality govermnents, internal networks have an inverse U-curve impact on local economic growth, while external networks have a positive impact on local economic growth (Kim et ah, 2018). The findings of this research also call our attention to local governments' networking activities and their impact on local economies.
Institutional Collective Action Framework
Institutional collective action (ICA) frameworks have been introduced and applied in the field of economic development to understand the behaviors of local governments and to address collective action dilemmas (Feiock & Scholz, 2010; Feiock, 2013). Collective action dilemmas refer to the situations in which the behaviors of individual institutions lead to undesirable collective outcomes for all involved parties, although the involved institution would all benefit from certain action (Feiock, 2013; Ostrom, 1990). Collective action dilemmas occur in the context of economic development because one government's behavior can impact other governments in a fragmented system. For instance, economic development decisions in one city can have impacts on the environment and transportation that goes beyond that city’s jurisdiction (Feiock, 2013). The ICA framework not only provides explanations about the behaviors of institutional actors such as city governments but also proposes mechanisms on how to solve the ICA dileimnas (Feiock, 2013).
ICA framework suggests that transaction costs, including negotiation, monitoring, and enforcement costs, constrain local governments’ collaboration activities (Feiock, 2013). To mitigate transaction costs, ICA framework proposed four mechanisms: informal networks that build on social embeddedness of intertwined social, economic, and political relationships, contracts that are legally binding, delegate authorities such as special economic development districts, and imposed authority from high-level authority. In economic development, all four mechanisms are in place to address ICA dilemmas, but informal networks and contractual relationships have been more intensively studied in network research (e.g., Hawkins et al., 2016; Hawkins & Andrew, 2011).
Factors Contributing to Economic and Community Development Networks
Researchers have summarized the key contextual factors that can explain local governments’ networking behaviors in community and economic development, including “financial/economic conditions, community business environment, and political/legal institutions.” (Ha et al., 2016, p. 17) Furthermore, existing relationships and their structural characteristics between local governments and other organizations are important contributors (Lee et al., 2012). Table 11.1 further illustrates this point.