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Policymakers concerned with regional economic development would do well to consider the growing importance of the services-producing sector of the economy. Although, services producers historically have not been targets for basic development, this paper provides evidence that some services producers could contribute as much to the local economy as the manufacturing sector. A survey of selected manufacturers and services producers in the Upper Midwest yielded four major conclusions. Firms in selected services-producing industries make a large proportion of their sales to extraregional customers; although the services-producing firms studied have lower annual sales than the selected manufacturers, their relative impact on regional economic growth is potentially larger than that of many manufacturing firms because of strong backward linkages to the local economy; services-producing firms which are active exporters tend to be larger and to be regional offices or headquarters; and many selected services producers are able to export from rural locations.

The basic premise of this article is that the historic location determinants literature is unduly pessimistic regarding the economic prospects of rural areas. Most historic location research has treated rural areas as homogeneous regions. This study demonstrates that rural counties should be treated as differentiated sets of economic environments rather than as an aggregate. The locational potential of specific industries differs dramatically among differentiated rural regions. When examined in this way, a number of high-growth industries surface as having development potential under specified rural conditions. In addition this work raises serious questions about the adequacy of product life-cycle theory (Erickson 1976) and hightechnology filtering-down theory (Glasmeier 1991) in identifying the variables critical to industrial location. This work indicates that neither small size nor remoteness is as limiting as suggested by earlier research.

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