What are “Third-Wave” State Economic Development Efforts? From Incentives to Industrial Policy

“Third-wave” state economic development strategies have been widely acknowledged to reduce high-stakes incentives and promotions and have shifted emphasis from firm-based programs to broader regional programs. Although the change is well documented, less consensus has emerged about what has taken their place. Based on analysis of economic development programs in 16 states competing for high-technology industry, the study documented that the emerging third-wave economic development efforts—especially leadership, information, and brokering—are the essential tools by which states can establish their industrial policies. These policies are based on extensive strategic planning, public-private partnerships, foundations of technology, human resources and capital, and the development of strategic industrial clusters. The report concludes that the third wave is a state policy direction that focuses rather than replaces earlier strategies and that downplays expensive programs by mobilizing many established state programs to build strategic advantages in industry clusters that will stimulate the entire state economy.