Challenges to Local Government Innovation: Legal and Institutional Impediments to the Exercise of Innovative Economic Development Policy by Subnational Jurisdictions

A local government can use innovative governance practices to expand its jurisdictional capacity, thereby promoting local economic development. There are, however, legal and institutional impediments to the exercise of such innovative economic development policy. Using the subnational jurisdiction of Shetland as a case study, this paper considers how local government innovation can be a key driver of economic development. Local government innovation can nevertheless become subject to legal challenges by authorities in the higher-level jurisdictions (Scotland, the United Kingdom, and the European Union in the case of Shetland). Community concerns related to standards of good governance can compound these difficulties, resulting in a significant decrease in democratic accountability and a weakening of the local government’s de facto capacity to plan and implement policy. Before local governments can make the most of multilevel governance, local communities and high-lever jurisdictions must re-assess standards of legitimacy for local government functions and structures.