Economic Conditions and Business Environment

Stressful economic conditions such as the 2008 financial crisis often prompt local governments to participate in economic development networks to take advantage of network resources and buffer from external influence (Ha et al., 2016). The uncertainty of the business environment also motivates local governments to work with diverse stakeholder groups to create a favorable business environment (Ha et al., 2016).

194 Applications

Table 11.1 Factors Influencing Economic and Community Development Networks





Economic stress, resource availability (Ha et al., 2016)



Tension between business development and environment protection (Ha et al., 2016)

Political and legal institutions

Form of government (Ha et al., 2016)




Similarity in economic conditions, political institutions (e.g., form of government), community characteristics, and geographic proximity (Lee et al., 2012)

Perceived competition and cooperation

Perceived cooperative relationship increases the likelihood of collaboration (Lee et al., 2012)

Strengths of relationship

Frequency of interactions contributes to collaboration (Hawkins et al., 2016)

Structures of existing relationships

Reciprocity of relationships

Local government tends to build reciprocal relationships in resource exchange and information exchange (Lee et al., 2012)

Transitivity of relationships

Choosing a partner which has been screened by another partner that local government has relationships with (Lee, 2011)

Political and Legal Institutions

The influence of political institutions on economic development networks has been intensively studied (e.g., Lee et al., 2012; Hawkins et al., 2016,2017). For instance, the specific form of government is a key factor that influences local governments’ networking activities. Researchers noted that both local governments with strong mayors and with council-managers are more likely to interact frequently with businesses, nonprofit EDOs, and other government entities to attract and retain businesses in order to “enhance their political power and prestige” (Ha et al., 2016; Kwon & Park, 2014). Furthermore, loose regulations can promote governments' networking with their stakeholders, whereas strict regulations can hinder governments’ networking activities. In addition, cities’ participation in different regional instimtions may influence their formation of economic development networks (Kwon & Park, 2014; Hawkins et al., 2016). Some institutions, such as the East Central Florida Regional Planning Council, provide forums and meetings for local governments to discuss regional challenges, develop responses, and build consensus. This type of institution encourages information sharing and fosters coordination. Other institutions, such as the Metro-Orlando Economic Development Commission, focus on creating a competitive environment for attracting and retaining businesses (Hawkins et al., 2016). Participation in a cooperative regional institution can enhance the positive influence of informal relationships on formal relationships. Participation in a competitive regional institution may negatively influence the formation of formal ties among govermnents that have built informal ties into economic development (Hawkins et ah, 2016).


Local governments are embedded in social, political, and economic relationships with other organizations in the realm of economic and community development. Social capital that grows out of these relationships can benefit community by reducing transaction costs, improving information flow among economic actors, and improving the business environment (Engbers & Rubin, 2018; Woolcock, 1998). Therefore, it is important to create useful connections and expand these networks (Engbers & Rubin, 2018). Local governments with similar community characteristics (such demographics, median household income), and similarities in political institutions (in the same county, same form of government), and belief systems can increase the likelihood of building collaborative relationships between two local governments (Hawkins et al., 2016; Henry, Lubell, & McCoy, 2011; Lee et ah, 2012). The strengths of relationships positively influence the formation of formal collaborative ties among local governments (Hawkins et ah, 2016). Furthermore, the perceived effectiveness of relationship—competitive or cooperative—may also exert influence on local governments’ inclination to collaborate on economic development activities. In addition to the relationship itself, the structural characteristics, such as reciprocity and transitivity, centralization, and density, can also influence collaborative arrangements among local governments (Lee et ah, 2012), which is covered in detail in the following section.

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