The role of_business_networks_in_regional_economic_development_-_mike_danson

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The role of_business_networks_in_regional_economic_development_-_mike_danson

  1. 1. The role of business networks in regional economic development Mike Danson Professor of Scottish and Regional Economics University of the West of Scotland + 44 (0)141 848 3936; michael.danson@uws.ac.uk “Entrepreneurial Networking and Learning within Regional Economies”Centre for Enterprise Development & Regional Economy (CEDRE) Waterford Institute of Technology, Ireland 7th & 8th December 2011
  2. 2. Presentation structure Introduction – research background Learning, regions and institutions Importance of SMEs Clusters, networks and partnerships Agencies and support Some research findings Discussion Conclusions
  3. 3. Research and knowledge• Expect focus should be on business networks• Much of academic literature is theoretical or rarefied• A few case studies – but mostly in high tech, media or sectors dominated by MNEs• But texts and policy approaches stress networking• Strong research and policy lead from Nordic countries, and latterly certain Asian economies• Lot of articles, policies and prescriptions about institutions, especially around 2000• Fashions and models• Similar to employer engagement?
  4. 4. Learning, regions and institutions Learning organisation : learning region Performance, Best Practice, Best Value ~ benchmarking Institutional thickness and capacity Catalyst and cooperation Networking ~ 1980s, external, passive Partnership ~ 1990s, internal, active engagement, formalised, routinised
  5. 5. Importance of SMEs in economy• Jobs, enterprise, dynamism, innovation, ...• Excluded from many oligopolies, large capital sectors• e.g. Scotland: electronics, whisky, petrochemicals, oil & gas. Local firms on the periphery of these sectors, low value added, low wage, low skill, ... But may be better than rest of local economy.• In this periphery of these sectors and in wider economy: benefits of cooperation, networking, industrial district or cluster
  6. 6. Externalities and SMEs• Competitive external economies = internal economies• Exogenous external economies = agglomeration economies• Cooperative external economies = benefits of belonging to a network, industrial district, industrial cluster.• Trust and cooperation = essential => belonging• Promotion of networks, networking, devt of trust and cooperation.• Across agencies in Scotland = very successful.• SMEs?
  7. 7. Networking and the small firm• Industrial ]• Support ] dyadic focus ignores the social• Personal ]• Important role in formation, growth & development• But requires lot of effort; maintenance and devt require considerable investment• => market failure? => interventions to encourage and support• Improve with age• Membership, linkages, transactions, function, morphology, geographical .... Significant in success
  8. 8. Agencies and strategic support• Much of official support and some textbooks focus on development agencies ...• And networking between them, and between them and the firms• Also encouragement of networking with consultancies, business angels, chambers of commerce, ...• Most SMEs rely on accountants, banks, solicitors, ... Low Pay Unit, TUs, etc
  9. 9. Experience of networks and networking • Third Italy • Marshallian industrial districts • Clusters (Porter) • Scotland: large sectors – poor understanding and support • Small sectors – not a happy history e.g. textiles • Experiments with clusters • Learning process through 1990s and 2000s
  10. 10. 1990s : clusters and policies
  11. 11. Scotland’s cluster development approach (SE, 1998)
  12. 12. Scotland’s Food & Upgrading & Innovative Research Institutes No presenceDrink Cluster Institutions e.g SABRIs Universities Training Providers Weak Medium1999 Imported Commodities/ Raw Materials Colleges Strong Key driver Fish Rendering/ Farming Basic By Products Processing Customers Food Value Added Brokers Fishing Fish Processing Multiple Industry Markets Fish Retailers Prepared Meats & FishBreeding ReadyCo’s Poultry Meals Discounters Gourmet End Users Foods Auction Red Independent/ Farmers Abattoirs Meat Speciality Marts Snacks Consumers Wholesalers Retailers Bakery & Distributors Confectionary Dairy FoodFeed Service Non-Alcoholic Drinks Further Specialist Vegetables Processing Beer Outwith Growers In Mkt Scotland Whisky Agents/ Distrib’s Cereals Overseas Critical linkage - strong Value Added Markets Critical linkage - medium Ingredients Critical linkage - weak Infrastructure/services Equipment Packaging Transport and Legislation Marketing/ Market Industry Specialist Suppliers Distribution Design Intelligence Bodies Consultants
  13. 13. 2000s and 2010s: modified and key sectors
  14. 14. • Scottish Enterprise – Quick LinksStart your business Fund your businessEnterprise Fellowships Innovation and R&D grantsHigh Growth Start Up Grants for investment projectsProof of Concept Programme Scottish Investment Bank Sector fundingInvestment opportunities Other fundingInvest in early-stagetechnology Grow your businessInvest in growing businesses Find new marketsCommercialisation Operationsopportunities LeadershipOther investment Innovationopportunities Enabling technologies
  15. 15. Textiles strategyTextiles Scotland industry strategy 2011-2015 ... vision to create aflexible, innovative and efficient industry, characterised by world classreputational excellence and a collaborative approach to new products andprocesses sets out clear objectives and actions.Under the Textiles Scotland name the entire industry in Scotland comestogether to focus on promoting the very best design, innovation andquality. Working with partners such as Higher Education, Sector SkillsCouncil and Highlands and Islands Enterprise, the industry will focus on:ProfileBuilding the Textiles Scotland profile in key marketsSkillsStrengthening the world class workforceInternationalisationDeveloping globally competitive businesses
  16. 16. Textiles•Overview Strategy How we can help Networking•Find companies Partners and investors News Contact usFind partners and investorsThe Scottish Textile Industry Association (STIA)STIA assists Scotland‟s textile design and manufacturing sector to build on itsstrengths in a rapidly changing global industry. The STIA benefits membersthrough interaction and collaboration with industry partners and colleagues, provideaccess to information and assistance, and promotes Scottish textile products andcompanies to buyers, suppliers and interested parties.Textiles Scotland brings together industry members to focus on promoting thevery best design, innovation and quality. Scottish Enterprise works with thetextiles industry to encourage innovation, optimise the workforce and enhance itsglobal profile.Find investment partnersThe Scottish Investment Bank can help Scottish companies with the ambition andability to grow to find funding through private sector investors
  17. 17. Networking opportunitiesThe textile industry advisory group invites any textile-relatedorganisation to meet and discuss the future of the textilesindustry in Scotland and the activities that will support itsgrowth. The advisory group informs the National TextilesForum, a group that includes members from the ScottishGovernment, Scottish Textile Industry Association, ScottishTrade Union, Higher Education and Scottish Enterprise.The textile industry advisory group discusses topics such as;international markets, skills development, innovation andworkforce development. It is through these discussions thatwe build a strategy to support the sector.If you would like to attend any future textile industryadvisory group meetings then please contact the ScottishTextiles team
  18. 18. Collaborate for successlack some of the critical skills or capacity. formal collaboration ~ in research,marketing, production or procurement.Benefits from joint marketing/ selling, collective purchasing, sharing premises orother resources. outside the UK.Finding a partnerstrong business case that relies on seeking a partner, SE networks work on behalf.Enterprise Europe Scotland can:work with you to define what type of partner you needcarry out a searchhelp you assess potential partnersfacilitate negotiations with a likely match.Partners already identified?Collaborate to achieve scale (eg joint selling/ buying, sharing premises etc), andhave already identified partners, a consortium co-operative structure may providethe perfect platform. This low risk, non beurocratic approach preserves theindependence of members, and decisions are make on an equal basis.Co-operative Development Scotland offers support and advice to help establish aconsortium co-operative
  19. 19. Co-operative business modelsFour co-operative models :Consortium co-operatives - collaborating with other businessesrun on a shared and equal basis by, and for the benefit of, members.Members may be businesses, partnerships or individuals. The co-operativemay be for buying, selling, marketing, sharing facilities or joint bidding forcontracts.Employee ownership - transferring part or whole ownership to employeesthe employees hold the majority of the shares either directly or through anemployee benefit trust. Employee buy-outs are customised to the needs ofthe vendor and the employees.Community co-operatives - sharing ownership of a community serviceprovide for shared ownership and control of services or assets, such asshops or utilities. This can be vital in areas where external investment is notreadily available.Mutualisationowned and controlled by their members, who may be employees, users orother stakeholders. The opportunity to boost productivity, together withthe pressures on government budgets, is fuelling interest in mutualisation.
  20. 20. Internationalisation of SMEs in Scotland• Importance of Global Companies• Contribute disproportionately to the Scottish Economy:High value added employmentHigh levels of innovationOperate in networksProvide a magnet for foreign investment into Scotland
  21. 21. Power in clusters/industries• Economic power determines strength of advantages and spillover effects in regional economies• Weak Chamber of Commerce system /dual economy excludes most indigenous entrepreneurs from decision making within trade and employer associations => interests of the mass of locally owned concerns are muted in local clusters and industry networks.• Without strong local presence among the commanding heights of the economy and in the leading sectors especially, efforts to promote improved networking and clustering have not been very successful.• Geographically distant from the core of the cluster =>practically insurmountable obstacles to effective involvement• i.e. geography matters and the neglected backwash effects of Myrdal‟s thesis dominate.
  22. 22. Clusters and cluster strategies for regional development• Focus on the potential advantages of agglomeration economies to regions and for their central places• Relatively limited attention given to the implications for areas outwith the core: for rural and peripheral economies• Barriers to involvement by firms and other actors in areas which are geographically peripheral• Aspatial policies and strategies• Territories attempted to adopt networking and cluster building as a defensive strategy
  23. 23. Core – periphery wider issues• Costs of capital may be lower in larger economies though rural enterprises do not report finance access problems as such• Transport costs lower• but labour costs generally lower in rural and smaller communities, though complex forces here• Continuing concentrations of population and labour in “megalopoles” strongly suggest that the agglomeration economies dominate higher labour and land costs• In-migrants to core of Europe and metropolitan areas based on capital cities - consequent expansionary economic effect• Spirals of out-migration from distressed peripheral regions, feedback for public service costs and provision, scarcity of labour and skills, haemorrhaging of talent and enterprise – all raising social and private costs further
  24. 24. SMEs and competitiveness in the periphery• Competitiveness agenda dominates• Flexibility and downgrading of EU funds• Competition for finance capital, HQs, arts & cultural – cumulative causation• Focus on Paris, London, Dublin, Helsinki ....• Creation of “shadow towns”: towns in „the shadow of a cluster‟ or at „the tail end of a cluster‟ . . . (where there are) „incomplete‟, „thin‟ or „damaged networks‟
  25. 25. E-business to business• Fillip to literature and prognosis in 2000s from e-business revolution• Same basic relations but some nuances• Markets wider – global?• Trust and cooperation still important but more problematic?• Agencies able to support?• Broadband accentuate peripherality
  26. 26. Summary• SMEs important• Overcome some of disadvantages through networking, cooperation and partnerships• Trust and cooperation critical• Coordination and strategic planning ~ project and policy levels• Knowledge – learning• Strong centripetal forces in industries, geographies, technologies, occupations• Need for countervailing powers• Networks not enough but have role• B2B key to acceptance of change

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