Regional development involves the growth of production, employment, and income in regions understood as subnational territories. It also involves the improvement of social and environmental conditions within those regions. Economic development is often facilitated by government policies that provide incentives and tax breaks for businesses that want to invest in their local communities. Some governments even create organizations made up of multiple countries that work together to address common problems.
The study of regional development has been historically divided into two dominant strands. One, known as allocative efficiency, is concerned with the optimal spatial-economic use of scarce inputs such as labor, capital, physical resources and information. The other, referred to as the institutionalist perspective, is focused on the creation of institutional arrangements that support local economic growth.
Many scholars have argued that the understanding of regional development should be modified to include more considerations of power and politics. A recent strand of literature, for example, has highlighted that firms, especially in less developed regions like RISs, play a central role in shaping the evolution of economic landscapes. However, it has largely ignored how the institutional environment shapes and constrains these firms’ behaviour.
A more holistic approach is needed to understand how regional development processes can be better coordinated and accelerated. This can involve the inclusion of noneconomic factors such as culture and institutions that have a profound influence on the trajectories of regional development processes. By including these elements, we can develop a more comprehensive understanding of the way that value is created and enhanced in regions.