Leveraging the assets of a place
A locale’s long term economic health and vitality will be assured by attending to the four factors of place-based economic development strategy.
We know how poor economic development decisions work out over the long term. There are more losers than there are winners. Perhaps increases in traffic congestion, rises in inequality, unsuitable infrastructure, mismatches between the labour pool and workforce needs, and so on.
Conversely, we know the outcomes of well thought out and executed strategies for economic development. Among other things, there is suitable and sufficient local employment, a sense of community is built and investment flows inward.
By considering the differences in the approaches to economic development, particularly in the urban context, the structure of a successful strategy can be understood.
The different approaches to economic development
There are four different strategies for developing a local economy: 1. people-centred, 2. active regions, 3. place-blind, and 4. place-based. People-centred is just as the phrase means. The economic development strategy is wholly focused upon the needs of employees and employers. Where employee-related actions such as workforce development and social support are undertaken. And where support for market access and site selection are offered to employers.
The active regional development approach is about incentivising the relocation of enterprises to the region. It can be characterised as bringing the work to the workers. The hope here is that underperforming regions can be revitalised by importing success, and that the economy of the source locale of the enterprise will not be significantly impacted. The third approach, the place-blind strategy, is aimed at supporting the standard range of production factors. This strategy also goes by the names of spatially-neutral, spatially-blind or space-blind. While support for the local economy is neutral and without prejudice, the risk with a place-blind strategy is that pre-existing socio-economic profiles of locales are further entrenched.
The fourth approach, and one which this article is concentrated upon, is the place-based strategy. This method is not the one-size-fits-all of the place-blind strategy, rather its aim is to leverage the assets of a place. To use a locale’s unique characteristics and resources in the service of economic development.
A place-based strategy is the optimum choice to strengthen what a local economy has to offer, and to develop what it needs.
The complexity of place
For each place is unique. Each locale is complex. And one way to think about complexity, in order to create and apply appropriate strategies, is through the use of a framework. In other words, by breaking down what is complex into its components, the quality of outcomes from any set of considerations is improved. And this is true of a place and of placed-based economic development
The locale and its economy is a dynamic system
Firstly, to the complexity of place. We can use the concept of a system to help us think about, and deconstruct, the complexity of a place. That is, we can view a place as a localised, social and economic system. Going further, we can break down this “place as a system” into three sub-systems. Where the locale’s productive apparatus is one sub-system, its institutions are another, and its shared culture is the third sub-system. The sub-system of the productive apparatus is comprised of businesses, of education providers and of the workforce. Local institutions, the second sub-system, are both hard/formal ones (government and its agencies) and soft/informal ones (e.g. business groups). The third sub-system, shared culture, is the locale’s behaviour. Its values, its stories, the way it operates, the things that this locale holds true.
So, we have an understanding of what a place is. We can see that a locale has three major components: its productive apparatus, its institutions and its culture.
The place-based economic development strategy
Secondly, let us consider the complexity of place-based economic development strategy. What is the place-based approach to economic development, and what are the major factors of such a strategy?
Fabrizio Barca, a senior Italian civil servant and politician, defined place-based strategy in his major 2009 cohesion policy report for the European Union. He stated that such a strategy was:
“A long-term development strategy whose objective is to reduce persistent inefficiency (underutilisation of the full potential) and inequality (share of people below a given standard of well-being and/or extent of interpersonal disparities) in specific places”.
And that “the factors of place-based policies are an integrated set of goods and services tailored to a specific context.”
Where the four factors of this integrated set of goods and services are: 1. the local business ecosystem, 2. local institutions, 3. local innovation and entrepreneurship, and 4. knowledge and understanding of the locale by external providers of any or all support mechanisms. That is, there are three endogenous factors and one exogenous factor.
The four factors of a place-based economic development strategy
Support for the local business ecosystem is defined as that which is aimed at improving the productivity of business and the quality of life. Infrastructure, human capital, business support programs, market conditions, regulatory policy and investment all combine to influence business productivity and the population in general.
Local institutions, the connective tissue of the locale, have two separate but associated categories. They are the formal bodies of government and the informal business networking and assistance organisations. The stronger, the more dynamic, and the more relevant both of these institutions are, the better the outcomes are for the locale.
The third factor of place-based economic development strategy has to do with innovation and entrepreneurship. Innovation is defined as a new method, idea, or product. It is the carrying out of new combinations. Entrepreneurship is defined as the setting up of a new business, of turning risk into profit. It has to do with marshalling of resources in the pursuit of creating economic value. Thus, the place-based economic development strategy should have components that are geared to the discovery of economic opportunities and to the facilitation of their pursuit.
These first three factors are endogenous, that is based within the locale, the last is exogenous. It is about the support that flows into the region. Specifically, the non-local bodies that are gathering information about the targeted region (e.g its knowledge base, economic preferences and potential and spatial linkages). The risk with this factor is if any intervention or support is sub-optimal. Where there is a poor understanding of the place’s past, current and future conditions. The upside, on the other hand, is when this involvement is well targeted and well matched to the endogenous factors.
Specifically, when this external support of a locale is working well, the cost of undertaking risky new activities should be reduced. In other words, there is a greater return for those embarking on “new activities” rather than safe “old activities”.
Local prosperity: enabling the potential of place
Simply put, the vision of a place-based economic development strategy should be to mobilise the potential of a locale.
And this vision is realised when the productivity of the local business ecosystem is improving, when local institutions are upright and well connected, where the climate is conducive to ongoing innovation and entrepreneurship, and where external agencies encourage, facilitate and incentivise the locale’s own preferences and potential.
A locale with place-based economic development strategy that optimally balances each of these four factors will ensure its economic health and vitality over the long-run..
Barca (April 2009), “An agenda for a reformed cohesion policy”