Economic development as practiced at the state and local level is highly competitive, yet more and more economic development professionals are seeing the benefits of cooperation, particularly through regional economic alliances. An unresolved issue among economic development practitioners is whether economic development efforts should focus on generating wealth or on assuring economic equity by targeting programs to improve the productive capacity of economically distressed areas or individuals with the greatest need. A successful economic development program requires a highly focused effort with specific goals and action steps. Nonetheless, economic development professionals must have a high degree of flexibility to respond to a very dynamic marketplace and to economic opportunities that may arise very quickly. Economic development policymakers and practitioners must worry about both substance and process both what they do and how they deliver their services.
Economic development is both a private and a public sector activity.
Jobs and income are created by the private sector, but government decisions on taxes, spending, investments, regulations, and incentives may affect the business investment and location decisions. During the 1980s, several public policy organizations and think tanks, such as the Corporation for Enterprise Development, tried to bridge the gap between the theory espoused by economists and academic scholars and what state and local governments were actually doing in the area of economic development. Second wave initiatives, which started in the 1980s, sought to fill perceived market gaps and imperfections through government programs that directly provided economic development services to individual businesses. Third wave strategies call for a radical restructuring of state programs based on the principles of increased scale, flexibility, leverage, and accountability. Third wave advocates argue for a wholesale rather than retail approach to economic development, building networks and consortia, relying on local intermediaries, and leveraging resources through strategic investments.