Cooperation, coordination and competition: why do municipalities participate in economic development alliances?

Spicer, Zachary

Introduction

Municipalities cooperate on a host of policy areas (Bae and Feiock 2012; Farmer 2010; Andrew 2009; Feiock 2013). Improving fiscal health is frequently cited as a motivator for inter-local cooperation (Morgan and Hirlinger 1991; Hawkins 2009). In most policy areas there is a perceived benefit of cooperation. For example, partnering with another municipality may reduce the capital and operating costs of certain projects. Economic development is often seen much differently than other potential areas of cooperation. The literature has shown that municipalities have contrasting views on economic development cooperation, with some seeing neighbouring communities as fruitful partners (Arku 2014; Gordon 2009) and others viewing them as competition (Morin and Hanley 2004; Wolfson and Frisken 2000). In many areas, economic development is seen as a zero-sum game: development in one community is seen as a loss for another (Goetz and Kayser 1993).

Despite concerns over competition, municipalities occasionally cooperate on economic development initiatives. Many scholars have examined these counterintuitive arrangements (Arganoff and McGuire 2003; Blakely and Leigh 2010; Gordon 2009; Jansen 1994). This article further explores these dynamics by examining the creation of regional economic development alliances (EDA), which are permanent joint-decision making bodies that pool municipal resources to attract investment on a regional scale. Often EDAs incorporate other public sector groups (for example, other levels of government) and private sector actors. However, these latter groups are generally passive members, included mainly to facilitate funding arrangements and provide knowledge of local economic conditions. Municipalities drive EDAs, providing the majority of the resources and policy capacity. They set the goals of the group and facilitate operations. EDAs are very different than general economic development practices, whereby the scale of investment attraction and commitment are much different. In many cases, these arrangements require pooling of resources, and a loss of capacity and autonomy.

Examining EDA dynamics differentiates this study from other Canadian studies on economic development: some examined single provinces (Arku 2014; Tassonyi 2005) or individual city-regions (Wolfson and Frisken 2000). While immensely valuable, these studies examined individual municipal efforts or perceptions of economic development, as opposed to formal organizations with a significant degree of institutional integration.

This research also sheds light on the understudied area of economic development cooperation in Canada. Much of the existing research is American. Canadian municipalities operate in a very different regulatory and legal environment than their American counterparts and are greatly restrained in the limitations of their local powers (Sancton 1993: 5; Siegel 1997: 129). Provincial legislation guides all municipal financial dealings, including regulations relating to taxing, charging, borrowing and spending (Arku 2014; Graham, Phillips and Maslove 1998). (1) These limitations also extend to the field of economic development, where most provincial governments prohibit granting bonuses to private firms and limit the conveyance of economic benefits to private businesses (Gertler 1990; Wolfson and Frisken 2000; Tassonyi 2005). Therefore, the motivations and perceived incentives of cooperation on economic development vary significantly. (2) Through interviews with economic development officials, this paper asks a series of questions about the formation and dissolution of EDAs in Canada: What motivates municipalities to enter into formal EDAs? On what terms is cooperation achieved? How are potential gains (or losses) distributed? Why, and how, are these cooperative relationships dissolved?

Twenty primary interviews were conducted with EDA officials in Alberta, Manitoba and Ontario. A qualitative approach was chosen to assess ingrained perceptions of local environments. Many authors have used a similar approach for assessing entrenched beliefs, values and perceptions in local inter-governmental relations (Visser 2002; Gordon 2007). It may also have more success identifying key contextual factors, such as political and organizational cultures, influencing dispositions towards local relationships.

This study has several sections. The first reviews theoretical work on cooperation and competition between municipalities and the literature on EDAs. The second section introduces the case studies in more detail, while the third section reviews the findings. The final section concludes the study.

Cooperation and competition in theory and practice

Most of our understanding about inter-local cooperation comes from American scholars. Rational choice frameworks--namely the Institutional Collective Action (ICA) framework introduced as a "second generation" (3) rational choice explanation for voluntary cooperation (Feiock 2004: 6)--have been used to explain cooperation, competition and policy variation within metropolitan areas. (4)

As a theoretical and conceptual tool, the ICA framework identifies five groups of core variables influence cooperation between local jurisdictions: social capital, group composition, geographic density, power asymmetry and political leadership. The ICA framework also links the prospects for establishing cooperative agreements to four identifiable kinds of transaction costs: coordination problems resulting from information deficiencies, negotiation costs derived from dividing mutual gains, enforcement costs of monitoring agreements and agency costs (Maser 1985). (5) Consequently, cooperation between local governments increases when the potential benefits are high and the transaction costs of coordinating, negotiating, monitoring, and enforcing arrangements are low (Lubell et al. 2002).

Social capital positively affects cooperation (Ostrom 1998; Gulati and Singh 1998), often derived from social networks or patterns of interaction with others (Cook, Hardin and Levi 2005). Consistent interaction between localities is more likely to result in a positive relationship among political actors and city staff (Matkin and Frederickson 2009). Increased interaction familiarizes these actors with each other, eventually leading to increased trust and reciprocity, making cooperative arrangements more likely.

Group composition is another important factor in reaching agreement. Two aspects exert particular influence over cooperation. Group size determines how benefits can be distributed to members and the transaction costs associated with negotiating and monitoring an agreement. Smaller groups are easier to form and have fewer problems associated with determining the allocation of benefits and monitoring agreements (Post 2004: 74). Larger groups are harder to organize, produce smaller benefits to members and create opportunities for some jurisdictions to free ride, which is why research demonstrates that increasing number of actors in a region will limit cooperation (Visser 2004). The homogeneity of the actors is also important. Post (2004: 84) argues that a decrease in the heterogeneity of the populations served by local governments entering new agreements is positively related to collective action. A smaller group with a homogenous population will achieve cooperation more easily than a larger group with a more heterogeneous population.

Closely associated with group size is the government's geographic density. For several reasons, geographic density increases the likelihood of cooperation between local governments (Bickers and Stein 2004). First, the relative closeness of local governments increases the likelihood that residents of one jurisdiction may work in the other and vice versa. Individuals see themselves more as regional citizens and less isolated into one jurisdiction, increasing the pressure on politicians to similarly cooperate with other areas (Post 2004: 73). Second, a higher density of local governments implies greater spillover effects across jurisdictions. Consequently, externalities and economies of scale gradually motivate governing units to cooperate (Shrestha and Feiock 2007).

Differentials in power can also determine whether governing units can reach cooperative arrangements. The degree by which partners vary in their power affects the motivation of actors and ultimately determines whether or not the relationship is coercive (Steinacker 2004). Political leaders have a large role in initiating and formalizing agreements. If they have more autonomy to make decisions--and, consequently, are stronger--cooperation is easier to achieve; however, if a municipal government has very few autonomous areas of jurisdiction, its political leadership may be wary of ceding authority through cooperative arrangements (Alcantara and Nelles 2009).

Transaction costs affect the formation and outcome of cooperative agreements (Ugboro, Obeng, and Talley 2001). As Feiock (2007) reminds us, cooperative arrangements most likely arise when the benefits are high and the transaction costs of negotiating, coordinating, monitoring and enforcing agreements are low. Four different types of transaction costs have been identified: information and coordination costs, negotiation and division costs, enforcement and monitoring costs and agency costs (Feiock, 2007: 51). Coordination costs refer to the process of identifying opportunities for mutual gain and potential policy partners. Once a potential partner establishes a connection, a negotiation of formulas or procedures to allocate costs or benefits ensues. This can be a challenging process, and then the conditions under which the agreement was first established can change over the lifespan of an agreement, affecting each partner's perceived value and possibly increasing the incentive for either municipality to renege. Enforcement costs derive from efforts to maintain and adhere to the agreement. Finally, agency costs arise when the preferences of public officials negotiating agreements depart from those of citizens (Feiock 2002).

In the area of economic development, transaction costs are viewed differently than in the traditional ICA literature. Feiock, Steinacker and Park (2009) argue that neither bargaining nor enforcement costs tend to be problematic, because bargaining costs accrue from delay. For municipalities, economic development joint ventures rarely have the urgency in finalizing negotiations for infrastructure development. Enforcement costs are also seen as low because cooperation is finalized by contract or statutory requirements, providing both parties with legal protection. Feiock, Steinacker and Park (2009) instead argue that transaction costs derived from information and division issues are more critical to establishing cooperative economic development. Incomplete information, they argue, can prevent municipal officials from recognizing potential cooperative gains and increase concerns about the trustworthiness of potential partners (Inman and Rubinfeld 1997).

Division problems are perhaps the largest concern in EDA initiatives (Feiock, Steinacker and Park 2009). Here the largest division is the allocation of costs or benefits. Dividing gains is challenging largely because of perceptions that economic development is a zero-sum game. There is disbelief that development in one community could benefit nearby communities. Indeed, geographic density may increase feelings of competition and distrust in potential partners. Johnson and Neiman (2004) find that as the number of municipalities in a metropolitan area increases, so does the perception of competition. Municipalities in such areas believe their neighbours are attempting to gain economic development opportunities at their expense.

Overall, the literature suggests that it is this sense of ongoing competition that most hinders cooperation on economic development (Olberding 2002; Peterson 1981). A robust economy is desirable from a municipal standpoint for two main reasons. The first is that more jobs can attract more residents, leading to further population growth and perhaps even an enhanced reputation amongst nearby municipalities. The second relates to taxation. More businesses can increase the fiscal health of a municipality. Private actors can prey upon this sense of competition, as "the mobility of capital reinforces this sense of competition between local governments to promote development and growth" (Hawkins 2010). It is for these reasons that communities vigorously pursue economic development and why municipalities are often at odds over development.

Despite the challenges experienced in cooperation on economic development, evidence suggests that joint ventures--with a degree of institutional integration--have increased success (Clarke 1998; Clarke and Rich 1985; Goetz and Kayser 1993; Neiman and Fernandez 1999). However, these findings arise from American case studies, where fragmentation and governmental density is high. Whether similar patterns are present in Canada is unknown.

Economic development cooperation in Canada

To examine EDA dynamics, 20 officials were interviewed in 14 alliances that were formalized and had a significant degree of institutional integration. Table 1 provides background on the ED As. (6) All had an elected board and Chair, and staff, ensuring some separation between the EDA and the municipalities they represent.

Despite the variation we see in EDA size, each was formed under similar conditions: voluntarily entering into an arrangement to provide for regional economic development. This variation is beneficial because it allows control for size and geographic variables when analyzing findings. Some EDAs have board representation and membership beyond municipalities. Table 2 presents the range of membership of the EDAs, showing non-municipal members. Most only have municipal members, but some variously include First Nations, postsecondary institutions, private sector partners, and federal and provincial agencies. (7)

The scope of EDAs also varies. Most have a very general mandate, focusing

on attracting investment for regions, and do not differ in strategies for attracting investment: they pursue any interested industry. Other EDAs, however, are task and sector specific.

Interviews were conducted with high-level officials (for example, executive director or board chair) in January and February of 2014. Semi- structured interviews engaged respondents about the operations, focus, scope, capacity, formation and organizational histories of their EDAs. Interviews also sought respondent's opinions of competition, other regional partners and communities, other EDAs, provincial and federal actors, regional economies and the challenges of organizational formation.

EDAs face operational constraints. Municipalities in Canada are subject to a broad range of provincial legislative restraints that restrict their powers and scope of actions. (8) Economic development is no different (Kitchen 1985; Wolfson and Frisken 2000). Ontario's Municipal Act prohibits municipalities from giving bonuses to private firms, in conjunction with tight controls on borrowing activity, capital expenditures, budget procedures and providing economic benefits to private firms (Arku 2014; Tassonyi 2005). (9) The Development Charges Act exempts the first 50% of existing industrial building expansions from municipal development charges, (10) and municipalities can exempt areas from applying the development charges bylaw (Ontario 2000). (11) In Manitoba, municipalities are equally limited providing inducements to attract investments. The City of Winnipeg has separate legislation governing its operations, including economic development. It is permitted to cancel any taxes, debt or monies owing to the City (Skelly 1995). (12) Other municipalities in Manitoba cannot provide financial incentives to private businesses (Skelly 1995). (13) Municipalities have the power to establish industrial land banks and can acquire property for development and resale, as well as donating property to private businesses, although this is subject to ministerial approval (Skelly 1995).

Alberta has the most permissive municipal economic development framework of the three provinces in this study. Municipalities can create business revitalization zones, exempt non-profit organizations from property taxation, lend money to non-profit organizations, establish land banks for industrial parks, and enter into investment funds (Skelly 1995). Alberta provides significant financial leeway to municipalities, but ministry officials closely monitors municipal activities (Skelly 1995).

Due to the restrictions placed upon financially incentivizing development, municipalities often sell the competitiveness of their jurisdiction, such as emphasizing infrastructure investment to stimulate development, special events, site development, marketing policies, and lower rates on industrial and commercial properties than rates in nearby jurisdictions (Gertler 1990; Reese and Sands 2007; Wolfson and Frisken 2000; Hawkins and Feiock 2011). Recent research has found that municipalities also often emphasize quality-of-life factors to attract and retain businesses, such as improving local environments, promoting culturally diverse communities, and investing in local services (Arku 2014).

Cooperation and economic development

This section reports on the key findings from the confidential interviews of board members and executive directors from selected EDAs. The findings are shared using the key theme and variables arising from the literature.

Organizational formation, group composition and member size

Why municipalities enter into EDA arrangements is a central research question for this study. Each EDA made conscious decisions about who to include and who not to include in the cooperative process. The three major factors in deciding which municipalities to cooperate with were size, mandate and density.

In more rural areas, the decision about whom to cooperate with depended highly on past patterns of cooperation and interaction and followed "natural boundaries," even including the municipalities involved in minor hockey leagues. Some respondents indicated that the boundaries of cooperation simply "felt right" and were within a natural "catchment area" for economic activity. This sort of decision-making was largely applied in areas with general mandates to attract economic activity.

A focused mandate affects which actors get included in cooperative arrangements. In EDAs focused on specific industries, such as the Ontario Clean Technology Alliance, members have local economies focused on certain industries. In such cases, communities without a major focus on those industries would not be considered for membership.

In regions with larger populations, however, a different strategic logic is involved with selecting members. In the Southern Ontario Marketing Alliance (SOMA), for example, great consideration was given to the size of municipalities. SOMA's members are fairly homogenous, namely mid-sized urban and rural communities. Despite serving as a regional hub for investment, the City of London was not included in the arrangement, and never considered for membership. Much of this had to do with the disproportionate size of London compared to the other SOMA members. "We compete with London," said one respondent, "working with them isn't in our best interest--they'd take a lot of investment off our plates."

In Alberta, the opposite strategy was taken: each EDA was built around one "anchor city." For example, the Central Alberta Economic Partnership includes the City of Red Deer, considerably larger than the other partners. Similarly, the Palliser Economic Partnership includes the City of Medicine Hat, which again, is much larger than the other partners. Guiding these arrangements is a belief that economic activity emanates from these areas in a concentric pattern. The economic health of the central areas is seen as beneficial for the rest of the EDA members.

However, this presents a challenge for governance. Respondents from some "anchored" ED As argue that a great deal of time and effort is geared towards satisfying these larger actors. They are not only the largest EDA members in terms of size, but also the largest financial contributors. If they were to leave, the resources of the group would be depleted. Additionally, these larger members are better known outside of the region and often referenced by economic development officers when trying to attract international and out-of-province investment. Without them it would be more challenging to define the region to these groups. Because of their importance, policy and decision-making often caters to their demands. They set the policy and priority agenda of these groups, much to the chagrin of smaller members. Some larger members also have their own economic development capabilities. Many smaller EDA members who do not also have individualized economic development efforts often resent these parallel economic development efforts, believing they undermine the ED As goals.

Finally, some EDAs include universities, colleges and private sector members. Respondents from these EDAs report that these members have a stake in their efforts and enhance their organizations. This is consistent with past research which indicates that local governments often establish relations with community-based organizations, chambers of commerce and private actors to accomplish a range of local economic development goals (Goetz 1994; Olberding 2002). In these cases, it is believed that networks can facilitate interaction, decision-making, cooperation and learning based on exchange relations (Arganoff and McGuire 1998; Provan and Milward 2001). Some organizations, however, believe that these groups can skew the governance of EDAs, in that some private sector partners can be parochial about attracting new business within their sector, fearing competition.

Why cooperate? Why keep cooperating?

The literature identified four main factors why do municipalities choose to enter into EDAs: reduce duplication in economic development efforts, become more visible internationally, provide better access to provincial and federal grants, and fill gaps in current economic development efforts. What do the interview findings suggest?

Avoiding duplication. A great deal of economic development efforts centre on industry trade shows. Many practitioners saw representatives of neighbouring and regional municipalities at these shows and soon discussions began about avoiding duplication. Attending trade shows and establishing meetings with industry officials is time-consuming and costly. Most respondents indicate that their municipality could only attend five to ten trade shows a year on their own, largely because of shortages in resources. By participating in an EDA, their municipality can be represented at close to thirty to forty different trade shows, thereby increasing their organizational efficiency, without increasing their budget. This type of decisionmaking was primarily found in organizations with focused mandates, as much of their efforts focus on a single or few industry sectors.

More international visibility. Much of the investment sought by EDAs is international. The problem is that few communities in Canada are known to international industries, and these are largely major cities or regions. Places such as Aylmer, Ontario or Russell, Manitoba are generally not well known to companies outside of the country, or even those outside of their provinces. Through participation in an EDA, these communities are able to better market themselves internationally. A company may not immediately recognize the benefit of the particular community, but may recognize the region, allowing the EDA to advertise regional benefits prior to discussing site selection with member municipalities. Respondents believe that this regional focus has allowed them to attract investment they would not have alone.

Attracting provincial and federal grants. Senior levels of government often make funding available for community and workforce development projects as well as economic development efforts. Competition for these funds is quite high, and federal and provincial governments prefer to see coordination between municipalities. Participating within EDAs allows communities to better access this funding. Several respondents noted access to funding as a prime motivator for entering an EDA.

Filling gaps in economic development efforts. Consistent with American literature (Hawkins 2009), the interviews suggest that many small communities do not have any individual economic development policies or staff. (14) Simply put, some municipal councils do not view it as budget priority, especially if the community is small and the chance of attracting new employers is low. Participating in an EDA requires a fraction of the financial resources necessary for an individual economic development effort. Some communities would not be active within economic development without their EDA. Table 3 provides a summary of the factors which led to creating each EDA.

Perceptions of economic conditions

How municipalities view local and international economic conditions also greatly affects their desire to cooperate and the governance of the EDA. Consistent with past research (Lackey, Freshwater and Rupasinga 2002), information gained from respondents indicates that the perception of economic conditions dictates the course of economic development cooperation.

Poor economic performance as motivator. As mentioned, some smaller municipalities do not have individual economic development initiatives. In a buoyant economy, officials from these areas are more likely to continue this course. In a lagging economy, they are more determined to stabilize and enhance their local economic health. As conditions improve, however, the membership of certain groups can waiver. As one example, the Southwest Economic Alliance (SWEA) was formed because of economic distress in southwestern Ontario and as conditions improved, members slowly removed themselves from the group, believing the costs of cooperation to be too high. (15)

Perceptions of economic conditions. Areas with poorer local economic conditions exhibit more competition for investment, while regions with more robust economies exhibit lower levels of competition. When an EDA attracts the interest of a firm, there is competition for which municipality the firm may locate. Each EDA member tries to sell their individual benefits and the firm decides based on site selection, transportation access and a variety of other factors. Where economic conditions are better, individual municipalities do not demonstrate much competition at this later stage of investment attraction. Areas with poor local economies do compete more at this later stage, putting much more effort into persuading a firm to invest in their jurisdiction, as opposed to those of other EDA partners.

Provincial and private sector members

Some of the EDAs studied include federal and provincial members. Economic development has vertical and horizontal dimensions in the United States (Arganoff and McGuire 2003), but little is known about this dynamic in Canada.

Where EDAs have provincial and federal representation, the members are generally agencies. For example, the federal Department of Foreign Affairs, Trade and Development Canada, the Ontario Ministry of Economic Development, Trade and Employment and the provincial Ministry of Research and Innovation sit on the board of the Ontario Clean Technology Alliance. In these cases, respondents indicate that these agencies are passive partners. They do not direct the group and generally leave the decision-making to municipal partners. In the case of Alberta's regional economic development groups, the province does not interfere with EDA affairs. In fact, their participation was limited to the granting of yearly resources--both staffing and yearly grants--prior to a budget curtailment in 2009. Today, the provincial government provides very little support to the groups and certainly does not involve itself with the direction or scope of EDA activities.

Two EDAs have private sector members. Much like the provincial and federal members of EDAs, these actors are best described as "passive." In each EDA, private sector actors are included in a different class of membership and generally do not hold decision-making power. Respondents indicate that these members fulfill a consultative role, providing information about how decisions would impact the business community.

Division of gains

One reason why municipalities often view economic development cooperation skeptically is that gains might be distributed unevenly. There is no guaranteed return on investment and several exogenous variables can dictate the distribution and dispersion of investment. Primary among these are geography, population, access to transportation routes, post-secondary institutions, workforce composition and existing sector mix. Some of these variables are outside the control of municipalities. To overcome many of these challenges, EDAs often implement both formal and informal rules to govern the competition between members and distribute gains for evenly.

Some formal arrangements exist to distribute investments in certain communities. Consider the Joint Economic Development Initiatives (JEDI) agreement, part of the Central Alberta Economic Partnership. (16) In this arrangement, the costs and gains are split based on population. The tax revenue garnered from any new industrial investment is split between the partners. The smallest member--the Town of Millett--only contributes 10% of the organization's funding and only receives 10% of the tax revenue from industrial development, while the largest partners split the remaining costs and tax revenue at 45% each (JEDI 2006). (17)

This arrangement was reached to end internal competition over development. In the past, if a company expressed interest in the region, JEDI members would compete quite vigorously for the investment, sometimes limiting the EDAs ability to complete negotiations with certain companies. Respondents indicate that the JEDI arrangement has ended this internal competition, but created another problem. Since the transaction costs associated with completing an arrangement with a new investor are not included in the agreement, some partners are not interested in directly gaining investment since they receive the tax revenue from the arrangement regardless of their level of involvement. If a site selected by an investor requires new roads or emits pollution, the costs to construct transportation routes or mitigate externalities is covered by the municipality directly involved in the arrangement. None of those costs are the responsibility of the other municipalities benefitting from the tax revenue received by the new investment, which in turn limits their incentive to try to bring investment to their own communities.

These sorts of arrangements are not the norm, however. Most EDAs operate under informal guidelines that govern the competitive process. Most EDAs included in this study have representatives or staff that attends industry trade shows or make individual contact with certain industries interested in locating to their region. At first, these individuals "sell the region," highlighting the benefits of the general location and amenities at a regional scale, with little discussion of the characteristics of individual municipalities. Once a party confirms interest, each municipality can approach the firm and "sell the community." Internal competition begins at this point, (18) but members are expected not to disparage other partners and only sell their own community. If these rules are violated, member municipalities could be asked to leave the arrangement.

Member withdrawal

Each EDA has demonstrated a degree in fluidity in membership. Partners do leave EDAs and this study has identified two main incentives to withdrawal. The first relates to the fit of the relationship. For example, the municipality of Middlesex North left the Southern Ontario Marketing Alliance (SOMA) a year after joining, mainly because they did not have enough available industrial land to benefit from cooperation. As another member mentioned, "they didn't have a product to offer." As SOMA was focused mainly on international, industrial development, the EDA was ill-fitting and did not serve Middlesex North's needs.

The second motivation relates to EDA governance and assigned division of gains. For example, the Palliser Economic Partnership has seen several smaller municipalities opt out, largely in the belief that development was directed to the larger, more populated members. They felt that decisionmaking centred on the urban areas and not enough investment was directed towards their communities.

Some EDAs proactively ensure members see value in the arrangement. Periods of political turnover after elections are seen as key in recapturing support from individual municipalities. For example, Alberta Southwest Regional Economic Development's executive director contacts all candidates for mayoral and council positions during election periods to discuss the EDA's work. They also hold information sessions for candidates and distribute information to those who might pull the municipality away from the EDA. Alberta Southwest Regional Economic Development has also increased the costs of re-joining if a member leaves. Re-joining is not automatic and requires compensation for other members, essentially increasing the transaction costs of leaving and re-joining and potentially making those thinking about leaving to reconsider.

Discussion and conclusion

The study of inter-local cooperation in Canada is in its infancy. However, we are slowly expanding our understanding of why and how municipalities cooperate (Spicer 2013; Nelles and Alcantara 2011; Nelles 2009). Economic development cooperation does not neatly adhere to our theoretical understanding of why municipalities enter into cooperative arrangements with other communities. Inter-local cooperation on a range of policy areas tends to be intuitively beneficial. Economic development is usually seen much differently. The benefits are seen as selective, rather than general. When one area "wins," another naturally "loses." These perceptions are not always accurate, but are still held within the municipal sector (Johnson and Neiman 2004; Feiock, Steinacker and Park 2009). Despite the notion that participation in economic development may not necessarily have direct returns for the community, municipalities do enter into EDA agreements. This study has asked why and under what conditions municipalities choose to voluntarily enter into EDAs in Canada.

By examining the formation and operation of 14 EDAs, four main factors influencing a municipality's decision to enter into a cooperative arrangement for economic development were identified: reducing duplication, increase international visibility, fill service gaps and allow for greater access to federal and provincial grants. Another factor is the perception of the local and national economy. A weak local economy can motivate municipalities to join an EDA. Economic conditions can also dictate the course of cooperation. Areas with poorer local economic conditions exhibit more competition for investment, while regions with more robust economies exhibit lower levels of competition. Other factors were also identified as significant in dictating the governance of EDAs, such as member size, mandate and methods of dividing gains.

We have also uncovered some interesting provincial trends. The EDAs in Alberta and Manitoba not only appear to be quite smaller, but they also tend to have a less diverse membership structure. The mandates of Ontario EDAs also tend to be more focused on specific sectors, while those in Manitoba and Alberta tend to be more general in nature.

Overall, the results of this study indicate that economic development is still viewed as a competitive exercise and that competition is an important motivator for EDA cooperation. EDAs provide a venue for cooperation, but emerge and persist from desire to compete more broadly. EDAs make smaller municipalities more internationally recognizable, while allowing members to attain a greater reach in certain industries and sectors. They also provide smaller municipalities with the ability to compete with larger regional actors. A weak local economy can motivate municipalities to join an EDA, but at the same time increase internal competition for investment. Each of these organizations has experienced challenges due to weak internal binding. Because of the competition inherent with economic development, it is incredibly challenging to find consistent organizational strength.

This study of Canadian EDAs in Canada also has implications for the broader study of inter-local cooperation. It indicates that competition is a variable that should be explored at greater length in the study of inter-local relationships in other policy areas. Reducing costs and improving services are generally thought of as the main motivators for entering into a cooperative servicing relationship with another municipality, but wanting to compete for residents and assessment base through the improved production and provision of services should also be considered.

Notes

(1) Municipalities are free to determine property tax rates.

(2) There is a significant amount of variation in Canada as well. Each province has different regulations for their municipalities. Past studies have looked at one province (see Arku 2014). My approach broadens understanding of economic development cooperation by comparing efforts in different provinces.

(3) Ostrom (2005) argues that rational choices schools of thought can be divided into first- and second-generation models. She contends that first generation theories are based on "rational egoist assumptions," such as the assumptions that individuals have perfect information, consistent preferences regarding outcomes and seek to maximize material benefit (2005, 100). Second generation models, on the other hand, acknowledge the role that contextual factors, such as differing institutional structures and regional networks, play in shaping agents' incentives structures (Vanberg 2002; Feiock 2007).

(4) This, of course, is not to say that the ICA framework is the only theoretical lens available to view inter-governmental collaboration and cooperation. Other frameworks have demonstrated considerable promise in this task, such as collaborative governance theory (Ansell and Gash 2007; Newman et al. 2004) and network theory (Skogstad 2008; Atkinson and Coleman 1992). While each framework demonstrates considerable strength in understanding the nature of collaborative relationships, especially in explaining the health of arrangements including the private and third sector, the ICA framework provides more context in understanding the motivations and incentive structure for individual actors to joining others in collaboration.

(5) As a rational-actor approach, the ICA framework ignores cultural or normative variables that may also affect cooperation. Instead, the framework is concerned with identifying factors that could tangibly affect the nature of cooperation between two (or more) municipalities.

(6) Information on membership in each EDA is available in Appendix 1.

(7) This represents only core members of the EDA. Private sector members are often listed as "associate members." If so, they were not included in Table 2.

(8) See Sancton 2000; Reese 1992; Gertler 1990.

(9) In Ontario, the Municipal Act (2001) prohibits municipalities from giving or lending any property of the municipality, guaranteeing borrowing, leasing or selling any property of the municipality below fair market value, and giving a total or partial exemption from any levy, charge or fee. Municipalities can provide incentives for heritage development, brownfield redevelopment and other projects specified in a community development plan and waive development charges for businesses in certain areas of their jurisdiction and provide serviced land at a competitive market price (Tassonyi 2005).

(10) Municipalities can use this section to wholly or partially exempt new industrial development and larger expansions of existing industrial buildings from imposing local development charges and impact fees. Section 28 of the Planning Act allows municipalities to establish tax increment equivalent grants, which provide property owners grants equivalent to a deemed tax increment through the community, similar to tax increment financing practiced widely in the United States (Ontario 2000).

(11) Ontario's legislation does not allow for the creation of tax increment financing.

(12) Sections 138 and 242 of the City of Winnipeg Act, however, are not meant to act as inducements for business.

(13) Municipalities can help non-profit organizations working to stimulate the economy by grants to regional or community development organizations (Section 380 of the Municipal Act).

(14) An official from a small Ontario municipality noted that their main economic development official prior to participating in their EDA doubled as the Director of Public Works, with economic development efforts given a low priority.

(15) Representatives from SWEA indicate that this is a constant challenge and that they must constantly sell the benefits of the EDA to local political officials.

(16) The JEDI arrangement was signed between the County of Wetaskiwin, the City of Wetaskiwin, the Town of Millet, and the Society of Joint Economic Development Initiatives.

(17) Similar arrangements have been established in the United States. The best example may be The Twin Cities Fiscal Disparities Program, which distributes tax revenue throughout the seven more Minnesota counties in the Twin Cities Metropolitan Area.

(18) Respondents indicate that not every partner in the EDA will compete for the business. In most cases, it is clear where the business would be best located and other members will focus their efforts elsewhere.

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Appendix 1: Organization Members

Organization                               Members

Central Alberta         Municipal: Red Deer, Wetaskiwin, Bentley,
Economic Partnership    Blackfalds, Carstairs, Castor, Coronation,
(AB)                    Didsbury, Eckville, innisfail, Millet, Olds,
                        Penhold, Ponoka, Rimbey, Rocky Mountain
                        House, Stettier, Sundre, Sylvan Lake, Three
                        Hills, Trouchu, Alix, Big Valley, Caroline,
                        Clive, Cremona, Delburne, Donalda, Elnora,
                        Halkirk, Clearwater County, County of
                        Paintearth, County of Stettier, County of
                        Wetaskiwin, Kneehill County, Lacombe County,
                        Mountain View County, Ponoka County, Red Deer
                        County Maskwacis First Nation
                        Associate Members: Canadian Home Builders
                        Association--Central Alberta, Community
                        Futures Central Alberta, Community Futures
                        East Parkland, Dennis Roszell--Sutton
                        Landmark Realty, Joint Economic Development
                        Initiative, Olds Institute for Community and
                        Regional Development, Paintearth Economic
                        Partnership, Persons with Developmental
                        Disabilities--Central Region Community Board,
                        Red Deer Airport, Red Deer Chamber of
                        Commerce, Red Deer College, Red Deer Regional
                        Economic Development

Asessippi Parkland      Binscarth, RM of Russell, Town of Russell, RM
Region Economic         Shellmouth-Boulton, RM Silver Creek
Development
Corporation (MB)

Northeast Alberta       Cold Lake, Bonnyville, Elk Point, Smoky Lake,
Information Hub (AB)    St. Paul, Two Hills, Vegreville, Vermillion,
                        Lamont, Mundare, Andrew, Glendon, Innisfree,
                        Kitscoty, Mannville, Marwayne, Myrnam, Vilna,
                        Willingdon, Chipman, Bonnyville, Lac La Biche
                        County, Lamont County, St. Paul County, Two
                        Hills County, Smoky Lake County, Buffalo lake
                        Metis Settlement, Cold Lake First Nations,
                        Elizabeth Metis Settlement, Fishing Lake
                        Metis Settlement, Kehewin Cree Nation, Kikino
                        Metis Settlement, Whitefish Lake First
                        Nation, Portage College, Lakeland College,
                        Blue Quills College, EMW Group, RJV Field
                        Services, Cenovus Energy

Southwest Economic      Bruce County, County of Duffrin, Elgin
Alliance (ON)           County, Grey County, Huron County, County of
                        Lambton, City of London, Middlesex County,
                        Oxford County, Perth County, St. Mary's,
                        Stratford
                        Non-Municipal Members: Fanshawe College,
                        University of Guelph, University of Waterloo,
                        University of Windsor, Western University,
                        Bell Media, Bruce Power, Libro Credit Union,
                        Elgin Middlesex Oxford Workforce Planning and
                        Development Board, Four County Labour Market
                        Planning Board, Ontario's Southwest

Economic Development    Medicine Hat, Redcliff, Cypress County, Bow
Alliance of Southeast   Island, County of Forty Mile
Alberta (AB)

Southwestern Ontario    Aylmer, Ingersoll, St. Thomas, Stratford,
Marketing Alliance      Woodstock
(ON)

Alberta Southwest       Claresholm, Crowsnest Pass, Fort Macleod,
Regional Alliance       Granum, Nanton, Pincher Creek, Stavely,
(AB)                    Cowly, Glenwood, Hill Spring, Cardston County
                        No. 6, MD of Pincher Creek No. 9, MD of
                        Ranchland No. 66, MD of Willow Creek No. 2,
                        ID of Waterton Lakes No. 4

Palliser Economic       Medicine Hat, Bassano, Bow Island, Hanna,
Partnership (AB)        Oyen, Redcliff, Cereal, Empress, Foremost,
                        Rosemary, Youngstown, County of Fort Mile No.
                        8, County of Newell No. 4, Cypress County, MD
                        of Acadia No. 34

South Central           County of Brant, Elgin County, Middlesex
Ontario Region (ON)     County, Norfolk County, Oxford County

Ontario Automotive      Waterloo Region, Windsor-Essex, City of
Communities             London, City of Hamilton, Durham Region,
Alliance (ON)           South-western Ontario Marketing Alliance,
                        Ontario Ministry of Economic Development,
                        Trade and Employment

Southgrow Regional      Cardston, Coaldale, Coalhurst, Milk River,
Initiative (AB)         Picture Butte, Raymond, Taber, Vauxhall,
                        Vulcan, Carmangay, Champion, Coutts, Lomond,
                        Milo, Nobleford, Stirling, Warner, Cardston
                        County, MD of Taber, Blood Tribe

Ontario Clean           Guelph, Hamilton, Durham Region, Halton
Technology              Region, Ottawa, Southwestern Ontario
Alliance (ON)           Marketing Alliance, Waterloo Region,
                        Windsor-Essex, Department of Foreign Affairs,
                        Trade and Development Canada, Ontario
                        Ministry of Economic Development, Employment
                        and Infrastructure

Greater Toronto         Ajax, Aurora, Mississauga, Newmarket,
Marketing Alliance      Oakville, Oshawa, Pickering, Brock, Brampton,
(ON)                    Burlington, Caledon, Richmond Hill,
                        Clarington, Scugog, Region of Durham,
                        Toronto, Invest Toronto, East Gwillimbury,
                        Georgina, Uxbridge, Region of Halton,
                        Vaughan, Whitby, Halton Hills, King,
                        Whitchurch-Stouffville, Markham, Region of
                        York, Milton, Foreign Affairs, Trade and
                        Development, Ministry of Economic
                        Development, Employment and Infrastructure,
                        Centennial College, University of Ontario
                        Institute of Technology, Durham College, York
                        University, German Chamber of Industry and
                        Commerce, Italian Chamber of Commerce of
                        Toronto Private-Sector Partners: Compass
                        Promotions, Lette LLP, DTZ, Marriot Downtown
                        Eaton Centre, GE Capital, Metrolinx, Cowling
                        Lafleur Henderson, Miller Thomson, Green and
                        Spiegel Barristers & Solicitors, National
                        Bank, Herman Miller Canada, Ontario Power
                        Generation, PricewaterhouseCoopers, HSBC,
                        Scotiabank, Ian Martin Limited, Syntrropy
                        Group, Toronto Pearson, TSI International
                        Group, INSIXmedia, Isabelle Bertani Chartered
                        Accountant, KPMG

Ontario Food            City of Brantford, City of Hamilton, London
Cluster (ON)            Economic Development Corporation, County of
                        Elgin, County of Middlesex, Greater Toronto
                        Marketing Alliance, Guelph, Niagara Region,
                        Ontario East Economic Development,
                        Southwestern Ontario Marketing Alliance,
                        Waterloo Region, Windsor-Essex, Agriculture
                        and Agri-Food Canada, Department of Foreign
                        Affairs, Trade and Development Canada,
                        Ontario Ministry of Agriculture and Food,
                        Ontario Ministry of Rural Affairs

Table 1. EDA Members

                                         Year              Population
Organization                            formed   Members     (2011)

Asessippi Parkland Region Economic       2005       5           3,943
Development Corporation (MB)

Alberta Southwest Regional Economic      2007      15          32,953
Development (AB)

Southgrow Regional Initiative (AB)       2004      20          49,916

Economic Development Alliance of         2003       5          78,168
Southeast Alberta (AB)

Palliser Economic Partnership (AB)       2000      18          97,293

Northeast Alberta Information Hub        2000      36         133,000
(AB)

Central Alberta Economic Partnership     1998      40         274,862
(AB)

Southwest Ontario Marketing Alliance     1999       5         122,419
(ON)

South Central Ontario Region (ON)        2010       5         364,993

Ontario Automotive Communities           2009       6       2,512,521
Alliance (ON)

Southwest Economic Alliance (ON)         2006      27       3,443,484

Ontario Clean Technology Alliance        2009      10       3,653,118
(ON)

Greater Toronto Marketing Alliance       1997      60       5,583,064
(ON)

Ontario Food Cluster (ON)                2008      15      10,294,606

Table 2. Non-Municipal Board and Membership Composition

                                        Private     Post-
                                        sector    secondary   Federal

Asessippi Parkland Region Economic
Development Corporation (MB)

Alberta Southwest Regional Economic
Development (AB)

Southgrow Regional Initiative (AB)

Economic Development Alliance of
Southeast Alberta (AB)

Palliser Economic Partnership (AB)

Northeast Alberta Information Hub          X          X
(AB)

Central Alberta Economic Partnership
(AB)

Southwestern Ontario Marketing
Alliance (ON)

South Central Ontario Region (ON)

Ontario Automotive Communities
Alliance (ON)

Southwest Economic Alliance (ON)

Ontario Clean Technology Alliance                                X
(ON)

Greater Toronto Marketing Alliance         X          X          X
(ON)

Ontario Food Cluster (ON)                                        X

                                                      First
                                        Provincial   Nations

Asessippi Parkland Region Economic
Development Corporation (MB)

Alberta Southwest Regional Economic
Development (AB)

Southgrow Regional Initiative (AB)                      X

Economic Development Alliance of
Southeast Alberta (AB)

Palliser Economic Partnership (AB)

Northeast Alberta Information Hub                       X
(AB)

Central Alberta Economic Partnership                    X
(AB)

Southwestern Ontario Marketing
Alliance (ON)

South Central Ontario Region (ON)

Ontario Automotive Communities
Alliance (ON)

Southwest Economic Alliance (ON)

Ontario Clean Technology Alliance           X
(ON)

Greater Toronto Marketing Alliance          X
(ON)

Ontario Food Cluster (ON)                   X

Table 3. Summary of Case Variables

                                             Avoid       International
                                          duplication     visibility

Asessippi Parkland Region Economic                             X
Development Corporation (MB)

Alberta Southwest Regional Economic                            X
Development (AB)

Southgrow Regional Initiative (AB)             X               X

Economic Development Alliance of                               X
Southeast Alberta (AB)

Palliser Economic Partnership (AB)             X               X

Northeast Alberta Information Hub (AB)                         X

Central Alberta Economic                       X               X

Partnership (AB) Southwestern Ontario          X               X
Marketing Alliance (ON)

South Central Ontario Region (ON)              X               X

Ontario Automotive Communities                 X
Alliance (ON)

Southwest Economic Alliance (ON)                               X

Ontario Clean Technology Alliance (ON)         X

Greater Ontario Marketing Alliance (ON)        X

Ontario Food Cluster                           X               X

                                                            Greater
                                          Fill service      access
                                              gaps         to grants

Asessippi Parkland Region Economic             X               X
Development Corporation (MB)

Alberta Southwest Regional Economic            X
Development (AB)

Southgrow Regional Initiative (AB)             X               X

Economic Development Alliance of               X
Southeast Alberta (AB)

Palliser Economic Partnership (AB)             X

Northeast Alberta Information Hub (AB)                         X

Central Alberta Economic                       X

Partnership (AB) Southwestern Ontario          X               X
Marketing Alliance (ON)

South Central Ontario Region (ON)              X               X

Ontario Automotive Communities                                 X
Alliance (ON)

Southwest Economic Alliance (ON)               X               X

Ontario Clean Technology Alliance (ON)                         X

Greater Ontario Marketing Alliance (ON)

Ontario Food Cluster                                           X