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Regional Economic Development


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Presentation delivered by Prof Mike danson to the STUC's Decent Work, Dignified Lives Conference on 15 October. Presentation considers history of regional development institutions, imperatives for change and distinct nature of Scottish institutions.

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Regional Economic Development

  1. 1. “REGIONAL ECONOMIC DEVELOPMENT” Mike DANSON, Professor of Enterprise Policy, Heriot-Watt University Decent Work, Dignified Lives Hilton Glasgow Hotel Wednesday 15 October 2014
  2. 2. • I was struck by the statement yesterday by Graeme Smith of the STUC. I suspect he captured the feelings of many people in Scotland. • “The vast civic movement for meaningful and progressive change that has built up in the last two years is impatient for change and will not accept minimalist proposals developed in a pre-referendum context handed down on a take them or leave them basis… • “They are not going to be passive participants in the process or tolerate political obfuscation or compromise. The sooner the politicians recognise this and get down to working with civil society and the communities and people of Scotland to deliver a comprehensive new devolution settlement the better.' • First Minister Alex Salmond, Scottish Parliament, Edinburgh, Tuesday, September 23, 2014
  3. 3. Why and how promote regional economic development? • ‘Most’ unequal OECD economy; 2nd highest levels of low pay; massive and unsustainable private and public debt • But Scotland’s strengths, its globally recognised research, development and innovation, its universities and skills offers a brighter sustainable future. • Done properly, regional economic development policies work. If Scotland is content to continue with an unproductive, low-pay economy, doing nothing would be an effective strategy. If we want a high-pay productive economy we must accept the need for a democratic intervention.
  4. 4. Principles of a regional economic policy Three key aims of a Common Weal economy : • to create and sustain high wage, high quality jobs • to produce socially useful goods and services • to create sustainable industry sectors which achieve these two goals without social or environmental harm • There is no trade off between democratic participation and economic growth [FM, today]
  5. 5. Why a Sector Focus? • More accurate reflection of the specialism of need in each sector and which can differentiate different kinds of social and economic outcomes • Balance and coherence • Smart specialisation • Innovation sector-specific and often enterprise-specific – almost always driven by employee innovation
  6. 6. How regional economic development policy developed? • Sector forums – collective, inclusive, plans • MNEs, SMEs, supply chain industries, employee representatives and trade unions, universities and research experts, vocational education providers, and many more • Build into set of national strategic plans and requirements. • Local, regional and national balances
  7. 7. UNIDO and EURADA ~ SE/HIE; OECD ~ SDS; EU ~ partnership; THE ~ Universities Triple helix
  8. 8. Economic Development Agencies • Scottish RDAs ~ “models” for everywhere (UN and EURADA) • SDS ~ “global leader” (OECD) • European Partnership ~ model for integrated approach across EU • Need to recognise expertise and experience and to recapture strategic leadership • Democratically accountable, hub and spoke
  9. 9. Core theories and policies • Clusters (Porter) • Creative and cultural capital (Florida) • Institutional capacity and thickness • Endogenous growth • Triple helix • Agglomeration economies, proximity, .. • Social capital, strong and weak ties • Capital and core regions – appropriate for periphery and margins? • Shadow towns and places; backwaters; laggards?
  10. 10. 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
  11. 11. 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 • 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?
  12. 12. EU Member States’ innovation performance Innovation leaders: Denmark, Finland, Germany, Sweden all show a performance well above that of the EU27 average
  13. 13. Scotland does well but London dominates
  14. 14. Loss of RDAs in English regions London’s gain
  15. 15. Thinking on regional economic development Strategies and policies informed by and consistent with: • ‘territorial innovation models’ (Moulaert and Sekia 2003) • ‘learning regions’ (Morgan 1997; Rutten and Boekema 2007) and • ‘regional innovation systems’ (Braczyk et al. 1998; Cooke et al. 2004) • Institutional thickness and capacity (Jones and Macleod, 1999; Danson and Lloyd, 2012) • RDAs across Europe and beyond. Scotland and Ireland led and offered the ‘model agency’ goal for regions and agencies (EURADA) • => integrated and indispensable organisational vehicle for bottom-up regional development policies across Europe?
  16. 16. RDA: a ‘Model Agency’ • based in region and is in a semi-autonomous position vis-à- vis its sponsoring political authority • supports mainly indigenous firms by means of ‘soft’ policy instruments • a multifunctional and integrated agency, the level of which may be determined by the range of policy instruments it uses. Halkier and Danson, 1997
  17. 17. The Broken Model • But by early 2000s, policy-makers no longer looking towards large integrated arm’s-length bodies as their preferred way of organising economic development policies at the regional level, and thus the model had been broken (Danson et al. 2005). • a temporary ‘institutional fix’ (MacLeod and Jones 1999) that for nearly two decades has been useful both in guiding policy activities and for creating the analytical ideal types underlying much previous academic work on RDAs (Halkier et al. 1998; Danson et al. 2000).
  18. 18. Drivers for Change • globalisation processes and new knowledge economy (Castells 2000; Cooke and Laurentis 2010) => international linkages and access to knowledge sources paramount (Crevoisier and Jeannerat 2009; Halkier et al. 2010): cf. regionally based policy practices focused on mobilisation of intra-regional resources and networks (Lagendijk and Cornford 2000; Asheim et al. 2006). • new multi-level patterns of governance, from above [EU Structural Funds] (Bachtler 1997; Halkier 2007), and from below [cities and local authorities] in economic development (Deas and Ward 2000; Healy 2009) => RDAs not sole bodies and need partnerships (Cameron and Danson, 2005).
  19. 19. Institutional Capture and Narrowing • public and private actors both involved so ‘clients’ of RDAs have become ‘partners’ (Östhol and Svensson 2002; Jones 2003) so embedding semi-public RDAs more firmly among the private economic actors of the region, private co-funding of regional policy activities, partnership working => RDAs captured by vested economic interests and not objective? (cf. Ireland) • Decentralisation and devolution - political accountability, environmental sustainability, and social inclusiveness [Europe 2020 strategy for ‘smart inclusive growth’, EC 2010)] – narrowing scope of RDAs to decide on strategic matters
  20. 20. Research Institutes e.g SABRIs Universities Colleges Upgrading & Innovative Institutions Training Providers Fish Farming Auction Marts Farmers Critical linkage - strong Critical linkage - weak No presence Weak Medium Strong Feed Basic Imported Commodities/ Processing Customers Key driver End Users Raw Materials Value Added Fish Processing Markets Consumers Infrastructure/services Fish Red Meat Dairy Vegetables Legislation Marketing/ Market Design Intelligence Bodies Industry Equipment Suppliers Transport and Distribution Packaging Rendering/ By Products Scotland’s Food & Drink Cluster 1999 Abattoirs Specialist Growers Multiple Retailers Food Brokers Food Service In Mkt Agents/ Distrib’s Specialist Consultants Overseas Value Added Markets Ingredients Cereals Prepared Meats & Fish Ready Meals Gourmet Foods Snacks Bakery & Confectionary Non-Alcoholic Drinks Beer Whisky Fishing Industry Breeding Co’s Poultry Wholesalers Distributors Discounters Independent/ Speciality Retailers Further Processing Outwith Scotland Critical linkage - medium
  21. 21. Conference and Publication • Pressure on typical RDA to become more international, more knowledge oriented, more networked, more than just enterprising engines of growth within its region.
  22. 22. Revisiting the Next Generation of RDAs: Success • continuity, substantial diffusion, articulation and consolidation of RDA approach. RDA presence is pervasive, much beyond traditional aim of reducing territorial disparities. RDAs take responsibility for transformative agendas within regions adding to (or substituting for) agendas based on disparities between regions (Hall) • positive role: regional innovation agencies (Fiore et al.), investment promotion agencies (Levi Sacerdoti et al.). European response to crisis (Budd) need for regional intermediation in policy delivery
  23. 23. New Aims, Delivery Modes, Organizational Patterns and Governance • Main drivers for change => complexities and uncertainties (even in definitions) of regional policies • Tools that good or bad - ability to be instrumental in developing strategies and political grand designs, as well as to steer successful adaptations to these global challenges (Rončević). • No clear new model emerging. Fit for purpose.
  24. 24. RDA Activities ~ knowledge and innovation • add relevant knowledge to regional learning (Estensoro & Larrea). • practise knowledge-explicit policies - software and orgware of the territorial economies (Halkier) • deliver knowledge dynamics in contemporary territorial economies (Dahlström et al.) • ‘open innovation’ platforms and competitive advantages (Asheim, et al. 2011) impact on role of RDAs’ policy practice. Platform governance requires matrix management and RDAs must play new kind of intermediary role, focused on aggregating related varieties (Cooke & Porter).
  25. 25. Innovation • Open networks => RDAs ‘gatekeepers’ for regional economies. Outward orientation more important and engaged in managing the difficult balance between threats and opportunities of opening their regional economies (Steiner). • decline of multi-functionality (large, general purpose, stand alone agencies) but sometimes rebuilt from core businesses, through evolutionary paths (Bramanti & Rosso) • end of the monopoly of the meso (i.e. regional) level => need for a bottom-up approach to guarantee specificity, proximity and ‘capillarity’ in policy delivery and => experimenting and innovating (Teräs & Alatossava; Estensoro & Larrea)
  26. 26. Decline and Undermining • England out of step – again (Pike & Tomaney). • Efficiency in designing and managing multilevel modes of governance (Halkier) • Return to local dimension of development policies outlines a ‘post-regionalist’ perspective - collaborative, entrepreneurial and mostly metropolitan localism (Herrschel), threatening marginalization and exclusion for spaces and agendas ‘in between’ [rural areas, small cities etc.] when these are not supported by ad hoc (regional?) actions (Herrschel 2012). • Partnership or even looser modes of networking substitute for formal organizations such as RDAs (Larsen, and Johansson & Rilander).
  27. 27. Funding, Resources and Power • instrumental role played by RDAs now subject to revision, leading to different outcomes (Bramanti & Rosso) • Captured in regressive coalitions of established interests and power relations and policies locked-in both politically and cognitively? • Alternatively RDAs might evolve towards some kind of ‘in-house’ status [Wales]?
  28. 28. Scotland • Global respect for Scottish approach to economic development • Networks and partnerships • Elements of triple / quadruple helix • Inclusive, innovative and competitive => TUs, SMEs, consumers, Business for Scotland ... • Industrial forum for key sectors : all sectors ( • National investment bank • Food & Drink – exports 43% in 5 years
  29. 29. Conclusions • Need to think about the economic and business concepts and theories underpinning successful economy/society in location • Institutions, players, industrial structures and ownership • Sustained effects but limited (RDAs, EZs, ...) • Need public sector intervention to plan and develop strategy, package, resource, market and promote, encourage supply chain and support linkages • Manufacturing and high value added employment (ubiquitous). (renewables – quadruple helix issues) • Different approaches to recognise different environments e.g. market v integrated, coherent and aligned with economic strategy?