Just an idea when I was looking at my mozrank.. it fell quite a lot when I removed a link to a competitor site (selling the same as me) I was wondering if you link to a site like a newspaper article that was releavnt to your site, would it have any benefit? Or would it be of no benefit because PR is lost...
The benefit would not be from PR gained, but adding a outbound link to a website that is relevant to yours would be a good idea to help with search engine placement. You do not want to have too many outbound links, but adding a few is always a good idea.
I agree... Where linking out helps from an SEO perspective is with domain trust. At some point a few years ago Google decided to include domain trust in their ranking algorithm and the domain trust ranking factor supposedly takes into account both trusted domains that link to your domain and trusted domains to whom your domain links. Someone posted a good video on domain trust and domain authority the other day from seomoz. If you have no clue what they are then I would suggest checking it out. It does a decent job explaining it.
By linking out to other websites you improve your “hub score†and become a resource for a particular search term in search engine placement as explained by others Its One of the questions that bothers : does outbound links help you rank, and if they do what is the best way to structure the outbound links. Personally i have trust in outbound links, not only do I support and endorse an interconnected web, but linking out helps you make friends. However if the question is from a purely algorithmic standpoint then its based on Hilltop algorithm http://en.wikipedia.org/wiki/Hilltop_algorithm
And conversely, be careful of linking out to irrelevant or "bad neighborhood" content. I explain the theory of "linking out" to clients as the "halo effect". You want to be near what Google likes. This is why you see really successful blogs like Avinash Kaushik's that have immense blogrolls. Those outbound links aren't hurting him in the SERPs.
I agree that is a good idea to link out to some quality websites in your niche. If they are a direct competitor, it is probably best to avoid linking to that site. Instead link to your manufacturers, government resources for that niche, informational resources and so on. I wouldn't get carried away and create a huge blogroll or link list. Start slow and monitor the effects of just linking to several related sites. You would still be sending some of your internal PR to those sites instead of to your own internal pages.
When you link to a quality site, you help your users to reach to that content and in turn gaining some respect from that point also. Your user may want to visit you to check any new information that you have..
Linking to relevant, authority sites is good. It helps a site achieve better ranking, but remember not too put too much links.