This article examines the extent to which local governments in North Carolina embrace innovation in their economic development activities. The study makes a distinctive theoretical contribution by examining the relationship between innovation in how economic development policies are administered and implemented (using concepts associated with governance and NPM), and innovation in what is substantively done (policy innovation). An analysis of the results from a statewide survey of local governments in North Carolina finds that certain governance/management variables are significant determinants of economic development policy innovation. An implication of this finding is that new ways of doing economic development may go hand-in-hand with new ways of governing and managing. Many of the governance/management variables are also positively associated with the use of a greater number of traditional economic development strategies and tools. This suggests that local governments may find it helpful to be innovative in how they implement economic development irrespective of the substantive policy orientation of particular strategies and tools.