Economic Development Targeting: Laying a Sound Foundation for Your Strategy Plan

by Lisa Petraglia, Glen Weisbrod and Brett Piercy, EDR Group

It’s a rare day when economic developers aren’t thinking about ways to facilitate economic growth in their areas. Even successful areas are not guaranteed perpetual economic health – not amidst the forces of globalization, intraregional shifts of industries within the U.S., or the inevitable life cycle exhibited by specific business activities.

Successful economic development targeting is about prospectively spotting where the best opportunities exist to accomplish your area’s particular economic development objective. How you think about the process of targeting growth affects your analysis of target industries. Both are pivotal factors in all subsequent economic development efforts to meet your objectives.

Targeting growth along a path

There are five economic conditions in which strategic targeting may be particularly useful. In each type of situation, the nature of the economic performance problem and potential corrective policy actions may differ. These situations are:

• High unemployment and low wages;
• Seasonal fluctuations in employment;
• Isolation and lack of local opportunities;
• Over-dependence on a particular industry or a few large employers; and
• Competition for business locations.

What all successful targeting efforts have in common is that they build upon local assets. Combining an inventory of those assets with an understanding of the area’s economic performance and competitive characteristics are the initial analysis steps to formulating an economic development strategy.

Economic growth or transition for an area can occur along one path, possibly more. The key step in the targeting analysis process is making an informed decision about the growth orientation that is appropriate for your area (view figure).It basically requires the planner to consider what markets are feasible (or could be feasible) given the diagnosis of local economic conditions. Is it tourism development, possibly retirement destination development, or niche manufacturing? Could the area serve the demand of neighboring counties for additional types of services, or could it be a strategic location in an evolving supply-chain? These paths are briefly defined as:

• Trade-center economy – community grows by serving as the nucleus of goods and services for accessible outlying areas with sparse economic activity and limited market access, due to topography or the transportation network.

• Agglomeration economy – commonly known as cluster formation.

• Learning-based economy – community leverages its educational institutions, community development organizations and business associations to promote human capital development and foster innovation and entrepreneurial development.

• Asset-based economy – community develops from its endowed assets, e.g., natural, scenic, historic, cultural, recreational or climatic resources.

• Supply-chain economy – community develops as a functional node (e.g. warehousing, assembly, manufacturing, logistics) in a larger chain of economic activity, typically extending across several states.

In the past three decades, the core analysis procedures have been repackaged under the newer techniques (economic base analysis, SWOT analysis, economic cluster mapping). A recent article published in Economic Development Journal discussed how location quotients and shift share techniques – the core of economic base analysis back in the 1970s – are still a critical foundation of the more recently promoted concept of industry cluster analysis.¹

» Page 2 of 2

¹Heike Mayer, “Cluster Monitor,” Economic Development Journal, Fall 2005, p. 45.