Can Service-Producing Industries Provide a Catalyst for Regional Economic Growth?

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Abstract
State and local economic development policies are typically targeted toward manufacturing enterprises. In this article, it is argued that state and local officials interested in economic growth should identify and implement policies to stimulate employment in service-producing industries as well as in manufacturing industries. Reluctance to target service-producing industries specifically in economic development policy is partly due to a belief that only manufacturing industries can drive regional employment growth. The fundamental thesis of this article is that service-producing firms can also provide a catalyst for regional growth. Four specific processes by which service-producing industries are a catalyst for economic expansion are discussed: (1) attracting dollars from outside the local economy, (2) import substitution, (3) strengthening the local business infrastructure, and (4) employing resources that are available locally. The article also points out specific research needed to facilitate the development of effective policies to stimulate growth of service-producing industries in local area economies.

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