In the era of globalisation, local areas face an increasingly competitive future. Building institutional capacity, emphasising collaboration and marketing local areas are the visible responses to such global pressure. Local contexts and national environments are adjusting to the changes whilst continuing to influence the way opportunities are perceived and utilised. The LODIS project, funded under the European Union's RECITE II initiative, aims to use local distinctiveness as a factor in local economic development. The purpose of the project is for six European urban localities (Chester - the lead partner, Valima, Gotland, Salerno, Catania and Limerick) to work together to preserve and enhance their locality for the benefit of the local economy. Each locality is working in partnership with local government, business, voluntary and community agencies to produce a local distinctiveness strategy. The experiences from this process are being used to assist in the development of a common methodology that could be used elsewhere in Europe. Developing a common methodology across national boundaries is significant when placed in the context of global processes and the development of the European Union (EU). Whilst the Commission focuses on competitiveness and economic cohesion there is an increasing awareness of widening territorial disparities, a result of these competitive forces. The LODIS project is a useful insight into such issues. The following thesis develops an understanding of local distinctiveness as a policy for developing local areas and promoting a sense of place. It uses the LODIS initiative to inform the debate on the development of the European Union and focuses on the institutional structures in place at a local and European level. Local distinctiveness is positioned as an intangible factor in promoting innovation, using social and network capital. The experiences of the LODIS project reinforce the importance of local areas and the relevance of the distinctiveness approach.