Three distinct but interrelated theories of development, innovation, and growth compete to explain innovation and the appropriate role for the state. The earliest and most popular among policy-makers is that the pursuit of policies that create "special places" where "agglomerations" of firms and industries generate economies of scale and traded interdependencies. In the 1980s, the "special processes" approach to systemic innovation emerged, positing that economies of scope generate untraded interdependencies between people and firms that colocate. At the turn of the millennium, a new hypothesis emerged that "special people" working creatively are at the core of the innovation process. Each theory offers different policy prescriptions for governments seeking to shape their local economic futures. The dominant implicit counterfactual is the theory of comparative advantage held by economists, that economic activity is inexorably driven to match relative endowments with the production function, with the result that proactive economic development is futile at best or damaging at worst. This session will present the results of a 10-year, multi-community, critical empirical test of the competing theories in the pan-continental Canadian economy and offer lessons from the theory and practice.