Understanding Horizontal and Vertical Relations in the Context of Economic Development Joint Venture Agreements

Abstract

A joint venture agreement is one type of governance mechanism that can be adopted by local governments to address collective action problems. While much of the current research discusses the importance of regional cooperation, few studies explore the type of relations formed with institutional actors in the context of interjurisdictional agreements. The authors address this gap in the literature by investigating the association among the transaction costs of forming an economic development joint venture agreement and two types of relations formed by local governments: horizontal and vertical. The results of a survey of local officials in 12 large metropolitan areas indicate that, depending upon the extent to which coordination, division, or defection problems are perceived to make joint venture agreements difficult to establish, local governments have horizontal and vertical relations. The findings highlight challenges and opportunities for addressing collective action problems and facilitating regional cooperation for economic development.