Local economic development and

cross-border networks
David K. Jesuit and Lawrence Sych
Department of Political Science, Central Michigan University,
Mt. Pleasant, Michigan, USA
Abstract
Purpose The purpose of this study is to apply a model of regional networks and governance to
cross-border cases for the purpose of identifying determinants that help local governments overcome
barriers and promote interaction in border areas most susceptible to globalization realities, namely
old economy manufacturing and industrial centers. It aims to draw together research from a variety
of perspectives on regional networks and explore efforts by two local European communities and one
local US community to respond to the challenges posed by the global economy by interviewing
stakeholders in territories that have experienced signicant deindustrialization.
Design/methodology/approach Interviews were conducted with local, regional and central
government ofcials, as well as private sector actors, in the Italian region of the Marches and in the
countries of Luxembourg and the USA.
Findings The studys preliminary ndings show a range of networks across several arenas closely
associated with economic development, but fail to show direct associations with economic
development alone. The authors attribute this to the centrality of geographic space in development
augmented by local competition and presence of the international border.
Originality/value The authors conclude by identifying a set of determinants that will guide future
research into local networking in cross-border economic development and related arenas.
Keywords Economic development, Public administration, Network organization, Italy, Luxembourg,
United States of America
Paper type Research paper
Introduction
The concept of public administration without borders increasingly attracts scholarly
attention and debate. For example, Feiock et al. (2008), reacting to Friedmans (2005)
the world is at argument and Floridas (2004) the world is spiky rejoinder claim a
middle ground where metropolitan regions are now the central unit of economic
activity as economic development in a globalized world becomes clustered [. . .] Thus,
the world is metaphorically rough and uneven rather than at or spiky (p. 30).
Accordingly, they call for more empirical observation of regional activity to assist
public administrators and scholars seeking greater understanding of economic
development.
In this paper we use three case studies of regions located on two continents, Europe
and North America, to determine which exogenous forces and preconditions, if any, are
sufcient to promote local cross-border interaction. Signicantly, one or more
international borders are included within each region. Moreover, these regions are old
economy manufacturing and industrial centers most susceptible to globalization
realities. Thus our cases enable us to more directly assess border inuence on public
administrators promoting economic development. While tentative, our ndings show a
The current issue and full text archive of this journal is available at
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Local economic
development
473
Received 9 June 2011
Revised 13 August 2011
2 September 2011
Accepted 7 September 2011
International Journal of Public Sector
Management
Vol. 25 No. 6/7, 2012
pp. 473-482
qEmerald Group Publishing Limited
0951-3558
DOI 10.1108/09513551211260667
range of interaction across several arenas closely associated with economic
development, but fail to show direct associations with economic development alone.
We attribute this to the centrality of geographic space in development augmented by
local competition and the continued relevance of international borders. We conclude by
identifying geographic/demographic, economic, political and administrative
determinants to guide future research in local cross-border networks.
Borders and organizational networks
Political boundaries help guide the directions taken by individuals and organizations
engaged in economic, social, and political activities (Gibbins, 1997). Boundaries
inuence cross-border interaction, and geographic features like water or mountains
may draw attention to some functions, like transportation, but suppress work in others
like economic development.
The highly developed literature on networks offers us a framework that highlights
interaction outcomes as consequences of both endogenous and exogenous factors
(Andrews et al., 2011). Research on the former type of factors, such as various network
management strategies, has been dominant (Provan and Kenis, 2007). Economic
development outcomes in our cases may include the contents, or substantive results,
from managed networks. They may also consist of processes or network relations that
facilitate interaction to varied degrees (Klijn et al., 2010; OToole, 1997). Relatively less
research investigates exogenous factors inuencing network behavior. Our
contribution here focuses on the international border as a dominant environmental
factor in cross-border networking.
Institutionalized regional policy in Europe
Unlike in North America, subnational economic development policies have been
institutionalized in Europe. In accordance with Floridas institutional argument, we
thus have an a priori expectation that cross-border interaction would be more intense
in the latter rather than in the former. For example, the preamble to the Treaty of
Rome, which is the foundational treaty for todays EU, proposes that the European
Community should seek to diminish [. . .] the differences existing between the various
regions. Accordingly, since 1975 the EU has promoted a series of programs,
commonly known as the Structural Funds, directly targeting subnational territorial
units for economic development. One of these programs, Interreg, was initiated in 1990
and targets neighboring communities along international borders (European
Commission, 2004a). According to the Commission, the overall aim of the Interreg
initiatives has been, and remains, that national borders should not be a barrier to the
balanced development and integration of the European territory (European
Commission, 2004b). During the 2000-2006 programming phase, which is the focus
of this research, the European Commission committed 5.295 billion (1999 prices) to the
Interreg, making it is the largest of the Structural Funds Community Initiatives
(European Commission, 2007a).
The US case represents the political economy approach consistent with Friedmans
argument. Globalization increases competition over business and location decisions,
and expands it to include foreign nations and especially local governments in a border
region. States, and often counties, have now broadened their economic development
policies to include attracting business rms from other nations (Pammer, 1996).
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Local cross-border cases
The Marches, Italy
The Republic of Italy was the third largest recipient of Structural Funds during the
2000-2006 programming period, totaling almost e33 billion (2004 prices) (European
Commission, 2004a). Although most studies of regional policy in Italy focus on the
poorer southern regions, the central regions have also received substantial European
assistance. In the Marches, for example, European assistance amounted to e125.3
million (39 percent) out of a total investment of e318.2 million (European Commission,
2007b).
With respect to cross-border cooperation in the Marches, all ve provinces in the
region, as well as the other Italian Adriatic provinces, were participants in the
Inter-Adriatico Interreg program promoting cooperation with Croatia,
Bosnia-Herzegovina, Serbia, Montenegro and Albania. A total of e50.5 million in
European funds were directed towards this program, which was justied in the
following way:
The Adriatic area is a crucial cross-border co-operation area to speed up the stabilization and
development process in South East Europe. Trade between Italy and the four Balkans
countries is very dynamic [. . .] On the other hand, the region is characterized by huge
disparities in economic development. Migration, the preservation of the Adriatic Sea and the
management of natural resources are issues, which demand cross-border border solutions
(European Commission, 2007c).
The Grand-Region, Luxembourg
The Grand Duchy of Luxembourg is a small country situated between Belgium, France
and Germany. Because of its size, about 1,000 square miles and 450,000 inhabitants,
there is a great interest in the notion of the Grand-Region, which includes
Luxembourg and the border communities of her three neighboring countries. Mostly
known today for its international nancial sector and European institutions, in the
early twentieth century Luxembourgs steel industry became one of the most powerful
economic sectors in Europe. With the decline of the steel industry, however, this region
of the country and those immediately across the border experienced signicant
economic shocks.
In 2000-2006, e24.5 million were allocated to the departments of Meuse,
Meurthe-et-Moselle, and Moselle in France; all of the Grand Duchy of Luxembourg;
and the districts of Arlon, Virton, Bastogne, and Neufchateau in Belgium. This area
has a population of nearly 2.5 million (European Commission, 2007d). In addition,
Luxembourg participated in an Interreg program with communities along its border
with Germany and northern border with Belgium. This program received a total of
about e11 million in EU funding, distributed among the three partners, during the
same period (European Commission, 2007e).
Great Lakes: USA/Canada
We examine local cross-border networking between three communities in Michigan,
USA sharing an international border with communities in Ontario, Canada. Each state
and province is large in area and population with a signicant manufacturing base
uniquely situated in the Great Lakes region. Michigans border with the Province of
Ontario is reinforced by rivers and Great Lakes Superior, Huron and Erie as well as
Local economic
development
475
Lake St Clair. Each still retains automotive-related research, development and
manufacturing as a dominant industry. Similar to the European cases, Ontarios
automobile-based economy began to decline in the 1960s, when the 1966 Auto Pact
breathed new life into it. Michigans similar economy began to decline in the 1970s,
rst as the result of oil shocks and Japanese competition and later by the foreign
automotive manufacturing transplants within the US. The North American Free Trade
Agreement (NAFTA) in 1994 accelerated the movement of automotive-related
suppliers and assembly operations between Michigan and Ontario. Today, Michigans
trade with Canada its largest trading partner purchasing almost 50 percent of
Michigans exports, mostly associated with automobile manufacturing and assembly
supports an estimated 237,100 jobs (Consulate General of Canada, 2010).
Our rst North American case are the Two Saults: Sault Ste. Marie, Michigan,
with a population of about 14,400 and Sault Ste. Marie, Ontario, with a population of
about 74,500, are separated by the St Marys River and Soo Locks. This border area has
an industrial base, although it is proportionally smaller than those in two other regions
in southeastern Michigan: Port Huron/Sarnia and Detroit/Windsor. In the Michigan
communities, the signicant loss of manufacturing and industrial employment creates
scal stress and increases the stakes for local economic development. Moreover, the
State government nds it relatively difcult to assist such efforts given its chronic
budget difculties and falling revenues. On the Canadian side, communities are
seeking to diversify their employment bases with some success. For example, while
Sault Ste. Maries largest employer, Algoma Steel, employs 2,600 workers, the city
recently developed business-process outsourcing as a new major industry that includes
ve call centers employing 2,300 workers. A planned intermodal rail truck transfer
center would locate both Sault Ste. Marie and its cross-border neighbor on a major
transportation route.
Methodology
We explored local cross-border networks by using evidence drawn from several
stakeholder interviews. A questionnaire in English, Italian and French was developed
and used in semi-structured interviews of nine elected and non-elected public ofcials
at various governmental levels, as well as actors in the private sector, in Italys
Marches region and in Luxembourg in March-April 2006. We interviewed two
non-elected public ofcials, one Canadian and one US, in the North American case.
Table I summarizes the completed interviews. We were primarily interested in
determining which forces and preconditions were sufcient to promote local
cross-border networking.
Location
Actors primary policy-making authority Italy Luxembourg North America
Central government ofcial 1 (IT1) 1 (LX1) 1 (NA2)
Regional government ofcial 1 (IT2) 0 0
Provincial/local ofcial 1 (IT3) 2 (LX2, LX3) 1 (NA1)
Private sector 1 (IT4) 1 (LX4) 0
Table I.
Summary of interviews
conducted in Italy,
Luxembourg and North
America
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Cross-border cooperation: evidence from Europe and North America
Despite nancial incentives, we found little evidence that Europes effort to promote
cross-border networking resulted in more than the most limited type. This may not be
surprising in the Marches considering that it does not directly border a foreign country.
However, it is clearly unexpected to nd that the Interreg programs have not
engendered signicant cross-border networking within Luxembourgs Grand
Region.
With respect to Italy, when asked how much her province cooperated with
neighboring countries through the Interreg program, one local ofcial simply said not
much (interview, IT3). In addition, when asked if these relationships were primarily
between similar levels of government such as province to province she indicated that
no, they were dominated by the central government. A private sector actor in the
region, who stated that there were three primary problems with the Interreg program,
echoed this perspective:
One problem is that it is managed as external ofce-more as foreign relations than as a
partnership in cooperation. The manager can use it as an excuse to work as a diplomat
and this is not very effective (interview, IT4).
In Luxembourg, we found that most of the ongoing local cross-border interaction was
outside the framework of the Interreg program. One local ofcial, who represented a
municipality along Luxembourgs borders with France, indicated that cross-border
cooperation was:
[. . .] on a small scale with our direct neighbors. We meet 3 or 4 times a year to discuss cable
TV signals coming from our city, waste management and water projects, and cooperation for
our re departments (interview, LX3).
As might be expected, when this ofcial was asked whether cross-border interaction
was important, he said that on a small scale, yes, its important, on a large scale less
so.
A private-sector actor who has been involved in promoting the Grand Region and
fostering cross-border networks suggested that, among other things, Luxembourgs
size might actually be a disadvantage when it comes to regional cooperation with her
neighbors:
The problem we have in Luxembourg is that we dont have regional government. Communes
in Luxembourg dont have ideal partners in the bordering countries. Take Trier (about an
hour away in Germany), for example. Communes are too small in Luxembourg to deal with
this German partner and the central government in Luxembourg is too big. This is a
disadvantage for us (interview, LX4).
While the country is organized into three districts, 12 legislative cantons and
116 communes, only the communes perform policy functions. In short, there are no
intermediate level institutional structures that enable the communes to effectively
represent their interests and provide administrative support to the municipal staff,
which, except for the capital city of Luxembourg, is led by part-time mayors
(20 hours/week) and their part-time deputies (14 hours/week). Indeed, one local ofcial
reported that in Luxembourg municipalities dont really have very active competence
in the eld of economic development (interview, LX1).
Local economic
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477
In addition to the lack of comparable local administrative units across her borders,
one interviewee in Luxembourg suggested that the wide disparities in wealth between
Luxembourg and the cross-border communities, which are substantial (Allegrezza
et al., 2004), made cross-border cooperation more difcult to achieve:
We are a rich country. You can understand that the poorer parts of the Grand-Region want to
cooperate but the rich part (Luxembourg) doesnt. Poorer parts of Luxembourg, such as the
communes in the south, are interested but there are still borders and different social policies
result in large disparities (interview, LX4).
Finally, local actors in each country also mentioned the relative difculty associated
with administering the Interreg cross-border programs. For example, the private sector
consultant we interviewed in the Marches said it is very complicated as a program
and very difcult to implement (interview, IT4). In Luxembourg, one interviewee told
us that it is very hard to bring together 4-5 partners having different languages,
different budgeting systems and practices and that as a result when the money from
the EU stops, the programs stop (interview, LX4).
In contrast to Europe, from Friedmans perspective substantial economic
interdependence in our North American case would suggest vigorous local-level
cross-border networking despite the lack of an institutional structure. However, as one
US local ofcial observed:
I think generally for the cross-border communities there are lots of opportunities but theres
certain barriers that are always a challenge to try to meet. The international border is truly an
international border, and even though theres not a wall between us and Canada there are
things that have a tendency to restrict cooperation between the two communities (interview,
NA1).
Nonetheless, administrative factors associated with local interaction are largely
facilitated by similar federal structures in the US and Canada, unlike in Europe. For
example, a Canadian ofcial with responsibility for promoting trade between Canada
and Michigan, among other states, reported that cooperation between governments
tended to be like to like, meaning municipality to municipality, state to province,
federal to federal (interview, NA2). Regardless, such networking is also limited. The
smaller Michigan Sault Ste. Marie, for example, nds itself more isolated from the
states population centers, and so historically has stronger links, like family ties and
cross-border retail shopping, to its Ontario neighbor. Its local government economic
development efforts at fostering options like retail outlets are complicated by more
nationally-oriented corporations. One ofcial explained:
The economic development is really coming from two totally separate sources [. . .] And so
when you try to tie some things together, they dont really come together because not only do
you have two governments, but also two different corporate philosophies and theres not a lot
of looking across the border to try to gure out whats going to work best (interview, NA1).
While small disparities in private income and wealth exist between Michigan
communities and their cross-border neighbors, larger disparities in public revenues,
especially at the national and provincial/state levels, create disincentives for local
cooperation, particularly among Michigan communities. US assistance to local
communities beyond border security and immigration is insignicant, and state
funding for local initiatives is limited when contrasted to Canadian national and
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provincial support for local projects like waterfront redevelopment and regional
marketing. This disparity manifests itself in differences in the quality of life between
communities in Michigan and Ontario, which leads to competition rather than
cooperation. The Canadian ofcial we interviewed offered an example of a German
company seeking to open a plant in North America:
They were considering a jurisdiction in Michigan and a jurisdiction in Ontario [. . .] If you
look at it strictly in terms of dollars and cents, the Michigan option would probably have been
a better business decision, but the person who had [. . .] to run the plant preferred Ontario
because of quality of life [. . .] and so the owner of the company [. . .] said, if thats where this
guy wants to live, thats where my plant is going to go [. . .] Its not always that cut and dried,
but it usually is a major factor (Interview, NA2).
Finally, the post-911 US response, a key political factor, involved signicant
investment in US border security and, combined with NAFTA spurred large
investments in transportation infrastructure located in each community. Such
investment would presumably foster local economic development initiatives. However,
one signicant negative externality, increased trafc, inhibits community efforts at
cross-border interaction by enhancing uncertainty surrounding crossing times and
delays. Both public ofcials highlighted it, and one commented: One of the biggest
issues is the concern over how the border is restricted, and how that can change from
time to time which makes it tricky to do long range planning (interview, NA1).
To summarize, we have found that despite European initiatives, cross-border
economic development networking in both Italy and Luxembourg were limited.
However, in North America we also found similar results in core economic
development activity, although we saw more evidence of a cross-border network in
related areas, especially regional tourism marketing in the north and
automotive-related manufacturing in the south. Beyond core economic development
activities, the Two Saults case revealed higher levels of cross-border relations. The
most dramatic, and symbolic events are recent meetings of both city councils and
mayors in a joint session. In other arenas, enhanced cooperative ventures, particularly
in transportation, offer potential growth in relationships.
Conclusion
We conclude that there are four categories of variables that affect cross-border
interaction: geographic/demographic, economic, political and administrative. For
example, cross-border networks related to the Interreg program in the Marches and the
Balkans is limited by the fact that they do not share a land border. Although
Luxembourg shares a land border with France and Belgium, the dissimilarity in the
sizes of their populations and territories limits interaction among them.
Concerning economic factors, we conclude that the large disparities in income and
wealth between Luxembourg and her cross-border communities, and between the
Marches and the Balkan countries, create disincentives to the development of robust
international networks by local actors in these territories. This factor offsets the
interaction promoted by the economic interdependencies found in the Grand Region.
Moreover, it seems that cross-border economic redevelopment programs targeting
communities once dominated by the old economy, such as steel or automobile
manufacturing, are limited by these sectors heavier reliance on place.
Local economic
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479
Security is one political factor affecting cross-border interaction. In the European
cases, the Interreg program served as such a catalyst fostering cross-border networks
to overcome more parochial interests. In North America, the 9-11 attacks aftermath
induced signicant investment in US border security and, combined with NAFTA
spurred large investments in transportation infrastructure. In addition, we found
widespread elite support for the notion of a Grand Region in Luxembourg, which
undoubtedly engenders international interactions. Similar support exists in the two
Sault Ste. Maries, illustrated by a one city, two countries campaign. However, in both
cases such political factors are insufcient to promote a sustained and intensied
cross-border network.
Finally, turning to administrative factors, we nd that the lack of an intermediate
subnational policy structure in Luxembourg inhibits cross-border cooperation. In short,
local Luxembourgish public administrators lack peers with similar powers and tools
across the border. Furthermore, the level of funding available fromthe Interreg program,
compared to that of other EUprograms, makes it a lower priorityfor local action. Finally,
local actors mentioned specic difculties associated with administering the Interreg
program(e.g. different languages and budgeting systems) that do not apply with respect
to domestic programs and that increase administrative costs.
These conditions are non-existent in the US case given Canadas federation. Here,
administrative factors of capacity, relative unit size, and nancial incentives tend to
inhibit cross-border cooperation. Each pair of cities, unequal in organizational size and
tax base, nd difculty in balancing contributions to mutual benecial projects in
arenas other than tourism. However, the remote location of Sault Ste. Marie, Michigan
prompts it to turn toward its larger cross-border neighbor despite inherent
administrative imbalance.
We hoped this empirical exercise would move us towards a theory of cross-border
interaction that would contribute to the debate sparked by Friedman, Florida and
Feiock: Is the world at, spiky or rough and uneven? Without a doubt, we reject
the notion that global economic change has created a at world. With respect to
Floridas and Feiocks description (spiky or uneven, respectively), we also nd their
depictions lacking. Specically, we nd that despite the efforts of the European Union
and the partners of the North American Free Trade Association to overcome
international borders, especially in the former case where new institutions and policies
explicitly have this goal, focusing on local economic development issues results in a
picture of the world not much different from the classic Westphalian system: the world
is divided into sovereign states and borders still matter a great deal. We presented
several exogenous factors affecting local international interactions in order to help us
understand why this is so.
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About the authors
David K. Jesuit is a Professor of Political Science at Central Michigan University (CMU), in
Mt. Pleasant, Michigan. Dr Jesuits research primarily focuses on social policy and income
inequality in the USA and Western Europe. He teaches undergraduate and graduate level
courses on the main campus in Mt Pleasant and teaches and mentors students enrolled in CMUs
off-campus MPA programs in metro Detroit and Richmond, Virginia. David K. Jesuit is the
corresponding author and can be contacted at: david.jesuit@cmich.edu
Lawrence Sych is a Professor of Political Science at Central Michigan University (CMU), in
Mt. Pleasant, Michigan. Dr Sychs research interests include public budgeting and program
evaluation at the state and local levels. He also conducts research in the political history and state
and local elections. He serves as director of CMUs Master of Public Administration program,
and teaches several courses in the program.
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