One of the greatest challenges for economic developers is to be tasked with developing their communities in times of economic recession. As large companies lay off workers, small businesses close, and money for investment becomes tight, tax receipts dwindle as well. This causes government to tend to use its remaining resources to ensure the continuation of basic services rather than expending them on development efforts. Existing companies are less likely to expand their operations or contemplate opening branch plants or offices; thus, government intervention is less likely to influence their investment decisions in any case.

All this would seem to leave few if any options open to economic developers. However, there are actions that can and should be taken:

• Engage in economic development strategic planning
• Find partners and build networks
• Invest in entrepreneurship
• Engage in bootstrapping
• Make investments in economic good times with foresight.

These strategies are discussed in the following sections.

Engage in Economic Development Strategic Planning

All too often public and private organizations faced with fiscal or financial challenges stop planning, arguing that it is a luxury they can no longer afford or that they must apply their precious financial resources to their “core business.” This is unfortunate and very shortsighted. Of all the times that planning can be highly valuable, difficult economic times rank first.

One of the main functions of strategic planning is to help organizations achieve their goals within the limitations of the resources available to them. Thus, an economic recession is a prime time for engaging in economic development planning. It not only can help the community weather the storm but also takes advantage of the slack time created by a slowdown to prepare for times of economic boom ahead.

Find Partners and Build Networks

For many economic developers, the globalization of the economy means intense competition. While this is true, it does not necessarily mean that this competition must be undertaken alone. In fact, it makes considerable sense to share the risk with others. This is particularly true in economic hard times.

Each community is part of a regional economy. Each regional economy is a component of the national economy, which in turn is a player in the global economy. This suggests that communities that share boundaries and economic realities and build social capital among themselves can benefit from what Brandenburger and Nalebuff call “co-opetition,” or collaborating to compete.(1) Sharing economic development resources can actually increase the impact and reach of those resources. The impacts of economic development are not constrained by jurisdictional boundaries; why should human, financial, or physical resources be?

It is important to understand, however, that the development of social capital (i.e., networking) among economic competitors requires the building of trust. It also requires a clear understanding and commitment to the mutual benefit of the parties entering the partnership. Trust is built over time when the parties act with integrity. Mutual benefit can be reached only when each party knows what it wants and why and can express that clearly to the other parties in the partnership. This becomes the basis for negotiating an agreement that is effective and will last the lifetime of the partnership.

Invest in Entrepreneurship

Economic hard times bring challenges and hardships, but they also bring opportunities when viewed with the proper mindset. Among many opportunities, they afford the chance to reinvent and rebuild the local economy.

Entrepreneurs create the new companies—in their garages, basements, and barns—that become the corporations of tomorrow. They create wealth by building business assets. These are not merely assets to themselves and their families but to the entire community as well. In this way, a community’s entrepreneurs collectively create community wealth. Entrepreneurs contribute jobs and tax revenue to the community.

Entrepreneurship can be a low-cost, bottom-up strategy for fostering economic development. It is economically sustainable because it is small scale, draws largely on local resources, and produces home-grown businesses that tend to be loyal to the community in which they were spawned.(2) These qualities help make entrepreneurship assistance, or enterprise development, an attractive economic development strategy for hard times.

Engage in Bootstrapping

Entrepreneurs not only can help build economies but also can be role models for how to do more with less. In the world of entrepreneurship, this is called bootstrapping.

By definition, entrepreneurs are not constrained by the resources they have in hand when they pursue business opportunities.(3) They understand that they do not have to own resources to make good use of them; they need only have control over them. Thus, bootstrapping involves a variety of techniques for attracting and utilizing other people’s resources to help entrepreneurs accomplish their goals.

Translating this approach to economic development, planners need to attract investors who will provide resources that the entrepreneurial economic developer can control and use to achieve the community’s development goals. The investor may be a private company that has a vested interest in the community’s development. It may be a government agency or ministry at a higher level. It could be a foundation—national or community—that can be convinced that the community’s economic development strategies are in keeping with its mission.

Of course, it is important that entrepreneurial economic developers demonstrate they have “skin in the game”; that is, they have made an investment in their own efforts. Prospective investors look for this. The investment could be financial (i.e., some percentage of the total cost) or it could be sweat equity (i.e., human capital and time invested in the effort). Thus, economic developers are leveraging larger investments with their own.

Bootstrapping strategies need not involve elaborate or large financing deals. They can be composed of simple arrangements. For example, a small rural community in the midwestern United States wanted to start a kitchen business incubator, but the community could not afford to buy a building and outfit it with the kitchen equipment needed by the clients who were in the food-processing industry (e.g., bakers, confectioners, salsa makers). Community planners negotiated with the local high school to give their clients access to the school’s home economics lab when school was not in session.

Make Investments in Economic Good Times with Foresight

Sometimes the best defense against the hardships of an economic downturn is a good offense. Rather than waiting until the economy takes a turn for the worse and reacting to that, it is far better to look forward in good times and make the kinds of investments that will cushion the blow of a recession. This might involve investing in both hard and soft infrastructure when resources are plentiful so that a support system is already in place when hard times hit. Of course, this requires the kind of long-range anticipation that only planning can provide, which brings us full circle. Planning ahead is absolutely the best way to manage hard economic times.

Summary

Difficult economic times should not be used as an excuse to abandon planning efforts. Planning that maximizes the attainment of economic development goals within resource constraints—economic development strategic planning—becomes even more valuable under recessionary conditions. Thinking and acting in an entrepreneurial way can also be helpful to finding resource solutions a community might otherwise miss.

Notes

1 Adam M. Brandenburger and Barry J. Nalebuff, Co-Opetition: A Revolutionary Mindset that Combines Competition with Cooperation (New York: Currency Doubleday, 1997).

2 Thomas S. Lyons, The Entrepreneurial League System: Transforming Your Community’s Economy Through Enterprise Development (Washington, D.C.: Appalachian Regional Commission, 2002).

3 Jane Wei-Skillern et al., Entrepreneurship in the Social Sector (San Francisco: Sage, 2007).