Voluntary cooperative arrangements are being established among local governments for economic development purposes. However, there is a lack of empirical research that explains the conditions under which cooperative joint ventures are formed. Extending the Institutional Collective Action framework to the policy area of economic development, this dissertation explores how local government units overcome transaction costs that pose barriers to acting collectively. Survey research methods are used to collect data on intergovernmental relations from 425 local governments with a population of 10,000 or more in 12 metropolitan areas. A logistic regression model is used to test the extent to which a combination of community characteristics and intergovernmental network resources influence voluntary cooperation. The findings suggest that among the factors that influence the formation of joint ventures is frequent communication among economic development officials and planners, cooperative norms and trust, and the competitive development activity of local governments.