Endogenous Development
NEW HORIZONS IN REGIONAL SCIENCE
Robert Stimson
The University of Queensland, Australia
Roger R. Stough
George Mason University, USA
with
Maria Salazar
Fundacion Rafael Preciado Hernandez, A.C., Mexico City,
Mexico
Edward Elgar
Cheltenham, UK Northampton, MA, USA
Robert Stimson, Roger R. Stough and Maria Salazar 2009
Published by
Edward Elgar Publishing Limited
The Lypiatts
15 Lansdown Road
Cheltenham
Glos GL50 2JA
UK
References 133
Index 147
v
Figures
1.1 The HarrodDomar and the Solow production functions 5
1.2 The neoclassical production function 6
1.3 Production function and increasing returns to scale 9
2.1 The virtuous circle for sustainable regional development 20
2.2 The regional competitiveness performance cube (RCPC) 21
2.3 A new model framework for regional endogenous development 23
vi
Preface
Increasingly leadership and institutional factors are being seen as playing
important roles in the process in regional endogenous growth and develop-
ment. The so-called new growth theory emphasizes endogenous processes
and while some of the literature does refer to leadership and institutional
factors, including entrepreneurship, there has been little analysis of the explicit
roles that leadership and institutional factors play in the growth and develop-
ment of cities and regions, and in particular there seems to be no published
material that attempts to model and measure the impacts of leadership on
regional growth and development and limited work that considers such a role
for institutions.
In this book we set out to give explicit attention to the role of leadership
and institutional factors in the growth and development of cities and regions.
Our objective is to provide a detailed rationale for the study of leadership and
institutional factors, including entrepreneurship, in the growth and develop-
ment of cities and regions, and to demonstrate why leadership, institutions and
entrepreneurship can and indeed do play a crucial enhancing role as key
elements in the process of regional endogenous growth.
The book is organized into ten chapters and two parts. The introductory
chapter provides a brief overview of the evolution of the new growth theory in
regional economic development in which the emphasis is on endogenous
factors. We discuss leadership and institutional factors in that context.
Part I of the book contains five chapters in which we focus attention on
endogenous processes. In Chapter 2 we discuss a framework for regional
endogenous development which incorporates a virtuous circle for the
sustainable development of a region. The chapter proposes what we call a
regional competitiveness performance cube (RCPC) as a conceptual model
in which the interplay between regional resource endowments and market fit,
on the one hand, and leadership and institutional factors, incorporating entre-
preneurship, on the other hand, may interact to propel a region on a path of
enhanced growth and development. A new model framework for regional
endogenous growth and development is proposed, which explicitly incorpo-
rates these factors as mediating variables in the model.
In Chapters 3, 4, 5 and 6 we focus the discussion in turn on resource
endowments and market fit, leadership, institutional factors and entrepre-
neurship. The chapters provide a discussion of the nature of those factors and
vii
viii Leadership and institutions in regional endogenous development
how they affect and/or enhance the process of regional growth and develop-
ment. Those chapters incorporate reference to some of the key literature on
those topics.
Part II of the book contains three chapters of case studies of cities and
regions from around the world in which we highlight how leadership and insti-
tutional factors have enhanced the regional development process. Chapter 7
has case studies on places in the US, while Chapter 8 has case studies from
Europe and Chapter 9 has case studies from the Pacific Rim region. The case
studies reviewed in these chapters are from already published works, and are
chosen to explicitly demonstrate how leadership and institutional factors have
played crucial roles in the development of the particular city or region in ques-
tion and how those factors have played crucial roles in the endogenous growth
and development process, especially as catalytic factors in helping turn around
regions that were in decline.
The final chapter proposes a new operational model framework of endoge-
nous growth and development which incorporates proxy measures of leader-
ship, institutional factors and entrepreneurship as variables that mediate the
impacts of resource endowments and market fit on regional growth, placing
emphasis on the effects those endogenous factors may have on the develop-
ment of cities and regions. There is a discussion on how to operationalize the
model.
This book represents work in progress, and much remains to be done in
empirically testing the new model frameworks of endogenous regional growth
and development that are proposed. As we discuss in Chapter 10, that presents
considerable challenges because of the lack of readily available information
and data bases to generate the variables on leadership and institutional factors
that are required to operationalize the new model framework discussed.
However, we trust that this book does demonstrate the potential signifi-
cance of leadership and institutional factors, including entrepreneurship, as
key intervening or mediating factors in the process of regional endogenous
growth and development. We believe it fills a notable gap in the regional
science literature that focuses on endogenous growth within the context of the
new growth theory.
ix
1. A new perspective on regional
endogenous development
This, in turn, will enhance the capacity and capability of the region to posi-
tively adjust to changing circumstances, attain a good fit with market condi-
tions, and harness its resource endowments in order to maintain and improve
its performance and to achieve sustainable development as a learning region
and to be one that is competitive.
In this book we outline a new framework to conceptualize regional
economic development that explicitly encompasses this perspective. Theories
1
2 Leadership and institutions in regional endogenous development
commit growth to take place, or prevented it from occurring. These are the concerns
of regional development, whether examined at the national, sub-national or local
scale. (p. 7)
While that definition is far from perfect, it does reflect a shift in economic
product and process thinking. Stimson et al. (2002) say this:
breed of economists who recognize that regional economic development can occur
on a more sustainable basis. This is not to suggest that neoclassical theory ideas
should be dismissed far from it. Rather, they need to evolve to accommodate those
changing values that society holds on expected gains from economic development.
(p.7)
Y= f (K, L) (1.1)
production process. Audretsch and Keilbach (2005) and others are driving the
debate in new directions.
The HarrodDomar (HD) growth model in the 1940s assumed that K and
L are used in constant ratios and always used in fixed proportions to produce
different levels of output. Over short periods and in the absence of severe
economic shocks the model predicts growth pretty well. However, that model
is very rigid since it requires that the capitallabor ratio must always grow at
the same rate.
In the mid 1950s, Robert Solow (1956, 2000) recognized the problems that
arose from the rigid production function in the HD model, which did not
allow for substitution between factors of production. Solows answer was to
drop the fixed coefficients production approach and replace it with a neoclas-
sical production function that allows for more flexibility and substitution. The
difference is illustrated in Figure 1.1.
Two influential studies by Abramovitz (1956) and Solow (1956) presented
a major challenge to the then conventional view that capital and labor are the
main engines of economic growth. While examining different time periods
and using different methods, those studies reached the important conclusion
that no more than 15 pe cent of the measured growth in US output in the late
19th century and the first half of the 20th century could be accounted for by
the growth in measured inputs of capital and labor. A prime candidate account-
ing for the residual was technological change (T), although the residual
captured or served as a measure of all the growth in input that could not be
attributed to growth in measured inputs of capital and labor.
Y (HarrodDomar)
Y (Solow)
K
Source: Adapted from Bretschger (1999: 26).
Y= F (K, L, T) (1.2)
Technical Progress
that type of empirical study, and the attempt to incorporate those mechanisms
into theory led to the emergence of what is called the new growth theory.
Work in new growth theory does separate endogenous and exogenous
factors for analytical purposes. However, the importance of endogenous
factors through which growth is a product of factors within the region is
viewed as being fundamental, arising from the knowledge base of a region and
how it is enhanced through learning to become a continuous process (as
proposed early on by Arrow, 1962) and an internally created source of compet-
itive advantage (Romer, 1986, 1990; Lucas, 1988). The driving force of
regional economic development is the endogenous capability of a region to
learn and innovate (Saxenian, 1994; Jin and Stough, 1996). While somewhat
eclectic in nature and still evolving, the new growth theory represents the
contemporary thrust in development theory (Todaro, 1994: 889).
Advocates of new growth theory seek to explain technical progress as it
generates economic development as an endogenous effect rather than accept-
ing the neoclassical view of long-term growth being due to exogenous factors.
In new growth theory, models of regional economic development allow for
either agglomeration effects or market imperfections. And they also allow for
both convergence and divergence through the development process.
In this new approach those cumulative processes which self-reinforce
continuous growth or decline in a region assume a new significance through
the explicit recognition of additional endogenous change processes, including
entrepreneurship, learning, education, acquiring institutional capacity, the
adoption of new technologies, as well as recognizing exogenous processes,
such as the migration of firms and households (Karlsson et al., 2001: 4).
Thus, the production function is expanded to include research and devel-
opment (R) and human capital (H) development through education:
Y= f (K, L, T, R, H) (1.3)
These variables are seen as endogenous growth conditions, and are supposed
to generate spillovers and externalities, including economies of scale
(Malecki, 1998a: 434). The term endogenous implies that economic growth
is influenced by the use of investment resources generated by the economy
itself, in contradiction to the reference made to exogenous factors in the Solow
model (Johansson et al., 2001: 3).
Models of endogenous growth bear some structural resemblance to their
neoclassical counterparts but they differ considerably in their underlying
assumptions and the conclusions drawn (Todaro, 1994: 89). The most signifi-
cant difference is that these models assume that the national economy is
subject to increasing returns to scale; that is, a doubling of capital, labor and
A new perspective on regional endogenous development 9
other factors of production leads to more than a doubling of output. For exam-
ple, investment in research or education not only will have a positive effect on
the firm or the individual making the investment but also may have a positive
spillover effect on others in the economy. This beneficial effect on others
called a positive externality results in a larger impact from the investment on
the entire economy. This interaction constitutes the externality. Since growth
can perpetuate in these models without relying on assumptions of exogenous
technological change they often are referred to as endogenous growth models.
The production function may be represented as illustrated in Figure 1.3.
What is significant about endogenous growth theory is that it places empha-
sis on the importance of local factors in creating and maintaining sustained
development as opposed to ones external to the region. That is, models of
endogenous growth suggest an active role for public policy and domestic
actors in promoting economic development (Stimson et al., 2002: 277;
Johansson and Karlsson, 2001: 3).
A considerable focus in the new growth theory literature has been on the
notion that:
have been fundamental in explaining the rapid growth of some regions, and in
10 Leadership and institutions in regional endogenous development
Skills make possible the accepting and interpretation of information, for improve-
ment and enhancing technology, and for generating new knowledge. They ulti-
mately determine economic outcomes. (p. 320)
Evidence from developed countries show that skilled people are the key
element in the networks that tie a place to other places and keep innovative-
ness alive (Malecki, 1991: 272). The contrary is also true, with the lack of an
adequate base of skills preventing or complicating technology transfer and
making it more difficult for learning capabilities to take place (ibid.: 275).
A new perspective on regional endogenous development 11
governmental agencies
education institutions
innovative firms and entrepreneurs.
What is the role for national policy and for regional policy?
Are top-down policies appropriate, desirable and effective?
Are bottom-up policies capable of impacting locations beyond the region
and in what ways?
What should be the combinations of top-down and bottom-up policies?
A new perspective on regional endogenous development 13
What are the roles of culture and values, and how do they vary from place
to place?
Can policies be created and implemented that will effectively and effi-
ciently induce self-organizing adjustment processes?
The latter is seen in much of the current policy dogma in local or commu-
nity development (see, for example, Ife, 2002), which argues that enhanced
self-reliance amongst an empowered local population has the potential to bode
positive social and economic change, with local integration into national and
international economies occurring through local regions exploiting their
competitive advantage and fostering economic diversification (OECD, 1993),
aided and abetted by free market, enhanced competition, efficiency and effec-
tiveness policies (DArcy and Giussani, 1996; Stillwell, 2000). Herbert-
Cheshire and Lawrence (2001) draw attention to the link in these arguments to
entrepreneurship and the role of the entrepreneur as an innovator (Kurato and
Hodgetts, 1998), an issue to which we return later.
Stimson et al. (2002: 277) state that:
what is significant about endogenous growth theory is that it emphasizes the impor-
tance of local factors in creating and maintaining sustained development as opposed
14 Leadership and institutions in regional endogenous development
to ones external to the region [it] provides a way to see a broad array of
community and institutional and non-traditional economic variables including
learning, leadership and social capital as major inputs to a successful regional
economic development process Endogenous growth theory embodies the notion
that it is possible for regional economic growth and development to be sustained by
local internal forces.
Stimson et al. (2002) refer to the importance of the following in that process:
1.4 CONCLUSION
There have been criticisms of the new growth theory. For example:
Thus, while new growth theory has made important contributions to our
understanding principal sources of endogenous growth, it has not as yet
provided a specific model for measuring their impact. And nor has it
developed an operational procedure demonstrating how to incorporate
those endogenous factors and processes into models of growth and
productivity.
But what endogenous growth theory does do is to make it abundantly clear
that, in addition to factor costs or price differentials, factors such as those
discussed in this chapter are important in regional economic development.
Regional economic development thus cannot be reduced to a narrow set of
economic factors; rather it will be influenced by a range of social and cultural
factors as well. That includes leadership and institutional factors. The ability
of a region to effectively address these endogenous factors will significantly
A new perspective on regional endogenous development 15
19
20 Leadership and institutions in regional endogenous development
The REM dimension may be split into (a) resource endowments, and (b)
market fit, to produce a four-dimensional RCPC hyper cube. However, for
simplicity we use the three-dimensional representation as our focus in this
book is more on the L and I dimensions of the cube.
At any point in time a citys or a regions economy will locate somewhere
within the sphere of the RCPC. Regions will vary greatly on the REM dimen-
sion, particularly concerning the magnitude, quality and mix of their resource
A new conceptual framework for regional endogenous development 21
I The most
desired or
optimal
M
RE
RE
position for
a region
I
Strong
L
L
L
Leadership (L)
M et s
Fi d M wm e
RE rk nt
an ndo urc
t( a e
E eso
R
d
oo
I
G
M
RE
Weak
r
o
Po
The least
desired or
sub-optimal Ineffective Institutions (I) Effective
position for
a region
Source: The authors.
endowments, and also with respect to the prevailing market circumstances, the
competitiveness of their industries and the effectiveness of their institutions in
seeking to achieve a fit with prevailing market conditions. Those in turn
affect the capacity of a region to tap into market opportunities and facilitate
entrepreneurship. Our proposition is that the performance of a region on these
three dimensions L, I and REM in the RCPC will condition a regions posi-
tion at a given point in time within the RCPC and its path or trajectory over
time through the RCPC.
Few, if any, cities or regions will have a perfect fit because markets and
market demand are dynamic due to the changing circumstances of both
endogenous and exogenous factors. Our proposition is that at all times a
regional economy needs to be trying to adjust its institutions and productive
organizations so as to maintain and enhance market fit by efficiently and effec-
tively harnessing its resource endowments to be competitive, and thus to
sustain itself. Some regions do this better than others; and how well a regional
does it can change dramatically over time, for better or for worse.
Thus, the trajectory over time of a city or region through the performance
space represented by the RCPC will be dependent on the evolving interactions
between the efficiency and effectiveness with which L and I provide catalytic
22 Leadership and institutions in regional endogenous development
23
(L) Leadership
The crucial dynamic depicted in Figure 2.3 is how the intervening variables
(L, I and E) interact to create catalysts for more effective and efficient utiliza-
tion of a city or regions resource endowments and how effectively it captures
market opportunities. In other words, the interaction of L, I and E become the
crucial catalytic factors in shaping not only the performance of a region
especially in influencing how effectively the REM factors are utilized and
tapped but also in enhancing the capacity and capability of a city or region
to efficiently, effectively and successfully address the challenges and contin-
gencies it faces over time in dealing with uncertainty and risk and in coping
with change.
2.4 OVERVIEW
Our proposition is that regions inevitably are influenced by their institutions,
leadership, social composition, economic structure and the degree of entrepre-
neurial activity all of which interact and evolve in a unique manner over time
and display a unique set of circumstances and a particular outcome state at
specific times. The conceptual model framework developed above stresses the
dynamic uncertainty of reality that confronts regions in the contemporary
world. Regional economic development over time is the outcome state of
those independent and mediating factors and processes that affect regional
economic development. In the model in Figure 2.3, RED may be measured and
evaluated through performance indicators which relate to:
A way to conceptualize that outcome state for a city or region at any point
in time, and its progress in economic development and its performance
through time, is to envisage its path through the regional competitiveness
performance cube (RCPC) as proposed in Figure 2.2.
In the four chapters that follow we elaborate on the components of the
model framework that represent the independent and mediating variables
REM, L, I and E and explain why they are such crucial interrelated factors
shaping the competitive performance of a region (RED), the dependent vari-
able in the model.
3. Resource endowments and market fit
3.1 INTRODUCTION
This chapter considers the REM dimension in the model discussed in Chapter
2, namely resource endowment and market fit.
It is widely recognized that economic growth and performance are related
or tied to the resource endowments of a region and also to market conditions
and the markets a region serves and which it potentially might tap what we
refer to as market fit. Thus, as stated by Stough et al. (2001: 178): The better
endowed a region is in terms of resources the better it should perform ceteris
paribus.
The capacity of local leaders to act and the capacity of institutions to be
effective will be considerably dependent on the resources available to them;
but conversely the effectiveness and efficiency of leadership and of institu-
tions in a region can act to enhance its resource endowments and its capacity
to tap markets.
materials
manpower
management
markets
money
25
26 Leadership and institutions in regional endogenous development
The resource endowments of regions are diverse and differ markedly from
place to place. They include:
and Stough (1999) propose that slack exists at varying levels and at various
times in all organizations, representing excess resources that may be mani-
fest as sources of voluntary contributions to civic activities, or locally-based
and focused community efforts by public, private and non-profit organizations
and foundations. Such allocation of excess resources to those types of organi-
zations and activities may be seen as enhancing both the leadership potential
and the institutional capacity of a region. The De Santis and Stough (1999)
study demonstrates that local regional leadership factors do enhance the
resource base and are critical in explaining the strength of regional economic
performance.
Special importance is now also being placed in those resources that the
public, private sector and non-profit sectors (NGOs) can direct towards
community economic development or community problem-solving (Stough et
al., 2001). The degree to which such actors and decision-makers commit
resources into the community as well as the availability of resources for
economic development will determine the scope and scale of local action, thus
potentially enhancing the resource endowments of a region.
1991). With increasing returns as a basic explanation, trade was seen as devel-
oping because there are advantages in specialization among regions with simi-
lar resource endowments; thus specialization and trade are driven by scale
rather than by comparative advantage, with the gains from trade arising
because production costs fall as the scale of output increases. Johansson and
Karlsson (2001) also show how the internal market potential of a functional
region is the prime home market which, together with increasing returns to
scale, may give rise to processes of endogenous growth (or decline).
Of course scale factors relating to the size and to the industrial diversity of a
city or region and the market opportunities it represents, as well as its external
markets and their size and scope, will also affect a regions potential and the
feasibility of it to tap markets and that will be of considerable importance in
impacting the nature and rate of economic development and growth that might
be achieved in a city or region.
Maier (2001: 132) points out that new growth theory places increased
emphasis on agglomeration effects. Patten (1991) argues that re-agglomera-
tion of economic activity is occurring with the shift towards more flexible
production modes. The scale effects of agglomeration do suggest that larger
places particularly large metropolitan cities are likely to have a combina-
tion of resource endowments, market fit and other factors that provide them
with an important advantage vis--vis smaller places. It is evident also that
industry diversification is associated with urban scale, and that the role of new
technologies such as ICTs is acting to enhance those effects (Duranton and
Puga, 2000).
Thus, we are not underestimating the effects of scale and agglomeration in
our model of regional endogenous growth and development outlined in
Chapter 2. Indeed, as seen in much of the recent work in theories of endoge-
nous growth, local externalities (Scott, 1988; Feser, 2001) are key factors in
the regional economic development process.
Johansson and Karlsson (2001) propose a simple model that emphasizes the
role of the functional region vis--vis:
location
trade
industry specialization
Resource endowments and market fit 29
3.5 CONCLUSION
From the foregoing discussion it is evident that resource-based and scale-
based mechanisms combine to impact regional development. Regional market
size is also important as it extends market potential. When a region has both,
its competitive advantage increases, and there will be an increased possibility
of a region growing a wide range of industry sectors, many of which may be
exported to other regions. The recently popular concept of industry clusters is
largely based on such premises.
The challenges of globalization and other exogenous forces means that
cities and regions or even locations within them need to create a favorable
set of conditions among the intervening variables in our model. Those regions
that do offer a favorable set of conditions derived not only from their resource
endowments but also through enlightened leadership and effective institutions
and which encourage and facilitate entrepreneurship will be more likely to
become places with a competitive advantage (McGuirk et al., 1998: 110).
4. Leadership
4.1 INTRODUCTION
This chapter focuses on the L dimension in the model discussed in Chapter 2.
As we will see in the discussion that follows, leadership is a complex issue. It
can occur in many ways and it can assume many different forms. It can have
a profound effect on institutions. Also it can exhibit aspects of entrepreneur-
ship. However, leadership warrants special attention because of the catalytic
effect it can have as an explicit factor in the regional endogenous development
process.
the capacity to create stable and durable mechanisms and alliances that promote
economic regeneration and identifies a range of micro-level skills and macro-level
resources that can generate that capacity. (p. 241)
And Stough et al. (2001) suggest that leadership might be thought of as:
32
Leadership 33
Despite our attempt above to bind the concept with a definition we think fits
the context of regional economic development, it is important to review the
range of definitions that have been used in other contexts. By way of illustra-
tion, we take a number of definitions of leadership that reflect the diversity
of approaches and focuses that researchers from a variety of disciplinary
perspectives have taken.
Burns (1978) defines leadership as:
[the act] of persons with certain motives and purposes to mobilize, in competition
or conflict with others, institutional, political, psychological, and other resources so
as to arouse, engage, and satisfy the motives of followers. (p. 19)
invents and creates institutions that can empower [individuals] to satisfy their
needs, chosen purpose and visions that are based on key values of the work force
and creates a joint architecture that supports them, and, finally moves followers to
higher degrees of consciousness. (p. 218)
an influence relationship between leader and followers who intend real changes that
reflect their mutual purposes. (p. 102)
Heenan and Bennis (1999) point out that, in the new economy of increasing
interdependence and technological change, collaboration is not just desirable;
it is crucial.
In a previous era, influence, power and decision-making often depended on
single individuals or very small groups and leadership was based on a tradi-
tional hierarchical authority relationship between a leader figure(s) and
followers. But in todays world, power, influence and decision-making are
34 Leadership and institutions in regional endogenous development
leadership for regional economic development will not be based on traditional hier-
archy relationships; rather, it will be a collaborative relationship between institu-
tional actors encompassing the public, private and community sectors and it will
be based on mutual trust and cooperation. (p. 279)
It will be about:
shared power
flexibility
entrepreneurialism
hard work performer by people who are presented with opportunities to lead every
day in their organization. It is not just the leader at the top who leads, but also indi-
viduals at all levels throughout organizations who are presented daily with oppor-
tunities to make a difference. (p. 37)
Heifetz and Linsky (2002) place importance on the need for leaders to
consciously build effective personal relationships, find partners, keep close to
their opposition, accept responsibility and acknowledge losses when neces-
sary. Leaders need to orchestrate conflicts by controlling the temperature,
holding steady and pacing when new work needs to be done. Of course
there are always situations where leaders may need to take exception with the
general view of colleagues or followers in order to move a process along.
Badaracco (2002) focuses on the ordinary as opposed to the heroic
leader, who moves quietly, patiently and incrementally. He calls them the
quiet leaders, exercising modesty and restraint, focusing on solving big prob-
lems through a long series of small efforts, which, he claims, often turn out to
be the best and quickest way to make an organization a better place. Badaracco
provides a tool kit of approaches for quiet leaders busy time, drill down
to uncover new information and seek compromises, not total victories!
38 Leadership and institutions in regional endogenous development
Kotter and Cohen (2002) emphasize eight steps for successful change.
These are:
increase urgency
build the guiding team
get the vision right
communicate for buy-in
empower action
create short-term wins
dont let up
make change stick.
visionary
coaching
affiliative
democratic
pacesetting
commanding.
The first four styles tend to build a positive emotional environment within
organizations, while the last two frequently create a negative environment.
the agents who initiate new combinations of means of production [and] who
supplied the will and the action necessary to disrupt the position of production and
establish the new. (Schumpeter, 1934; High, 2002).
become dependent on the ability of motivated individuals to find their place in the
global economy by becoming more inventive, business-like and risk-taking in creat-
ing new opportunities for value-adding and niche marketing. (p. 4)
highly unequal in its impact. In some contexts, however, such as we see in part
of East and Southeast Asia, the existence of entrepreneurs could not have
created the externalities their actions led to without the right or supportive
policies and the right environment. In that case leadership at a collective
(community) level, rather than individual entrepreneurs, has steered or guided
power stakeholders to organize themselves for development (Leipeizeger,
1997; Rowen, 1998). Community leadership, rather than individual entrepre-
neurs, has forged horizontal and collaborative relationships which have been
crucial to the innovative milieu and the technological advantage of places such
as the Silicon Valley in the US (Saxenian, 1994).
Take Australia as an example. Over the last couple of decades the efficacy
of entrepreneurship has become a feature of government policy, particularly as
it relates to research and regional development (Beeson and Firth, 1998;
Kenny, 1999) as seen, for example, in the views and policy recommendations
encompassed in a series of federal government reports, including: the Hilmer
Inquiry of 1993 into national competition policy; the 1995 Karpin Report into
industry, leadership and management skills; and the 1994 McKinsey and
Company report into how to unlock the growth potential of regions. Those
reports advocate improvements in economic performance through the
improved performance of firms and institutions (Hilmer Inquiry) and the
adoption of more appropriate attitudes and behaviors more widely across soci-
ety (Karpin and McKinsey Reports). Wright (1998) discussed how entrepre-
neurship now involves a whole range of enterprising qualities associated with
self-reliance, autonomy and accountability; it involves active citizenship
(Cruickshank 1994; Kearns 1995), whereby individuals are expected to
become entrepreneurs of themselves, acting in a responsible and self-reliant
manner to improve the conditions of their own existence (Rose 1989, 1993).
And according to Day (1998) it involves the fostering among local populations
of a new cultural trust through changes in attitudes and behavior to: free the
spirit of competition, initiative, self-reliance, risk-taking and so on (p. 92).
In the context of rural and regional development in Australia, Herbert-
Cheshire and Lawrence (2001) state that the emphasis on competition, self-
interest and personal advancement is: inherently individualistic and lies at
odds with the rhetoric of community spirit and social capital that characterizes
the bottom-up approach to local development (p. 5). But the implicit assump-
tion seems to be that the entrepreneurs motivation is no longer self-interest
but the facilitation of community initiatives and the empowerment of others
through what Herlau and Tetzschner (1996) refer to as the provision of lead-
ership, motivation, passion and vision (p. 116).
In the UK, Boyett and Findlay (1997) refer to these as community entre-
preneurs, while in the US Henton et al. (1997) refer to them as civic entre-
preneurs. In this work there is a focus on capacity building of skills for
Leadership 41
Heenan and Bennis (1999) claim that in the new economy of increasing inter-
dependence and technological change, collaboration is not simply desirable. It
is crucial.
In earlier times, leadership tended to be based on traditional hierarchical
authority relationships between leader and follower, with influence, power and
decision-making dependent more on individuals. But today the more common
view is that these are shared among stakeholders working together towards a
common goal. It is through collaboration and collective processes that a region
will have the sufficient flexibility and knowledge to adjust to shocks and
continuous changing conditions (Saxenian, 1994; Stough, 2001). In this sense,
leadership might be seen as the vehicle that steers that adjustment process
(Stough et al., 2001), operating by targeting and guiding adjustment in institu-
tions (social rule structures) that enable a region to change in ways that help
to sustain regional economic development.
5. Institutions and institutional factors
5.1 INTRODUCTION
This chapter focuses on the I dimension in the model discussed in Chapter 2.
Institutions and institutional factors have for a long time been seen as playing
crucial roles in the process of regional endogenous growth and development,
and have been widely discussed in the regional economic development litera-
ture as well as in the general literature on economic development. Institutional
factors cover a wide range of issues concerning governance and government,
and may refer not only to the role of the public sector but also to private sector
and NGO and community actors and structures, and as well to the contempo-
rary notion of publicprivatecommunity partnerships. And they encompass
notions of social capital, and networks and alliances of collaborative arrange-
ments.
The discussion of institutions and institutional factors that follows provides
a comprehensive overview of their nature and roles with respect to regional
development and indicates why they can be important enhancing or detracting
forces influencing the growth and development of cities and regions and how
they affect regional competitiveness. It will be evident that leadership in
particular, and also entrepreneurship are interrelated to institutions, and some
scholars do not draw the explicit distinctions which we choose to do in this
book. However, institutions and institutional factors warrant specific and
detailed consideration.
43
44 Leadership and institutions in regional endogenous development
factor at one level of spatial scale (such as the nation or a state or province)
becomes an exogenous process at another level of scale (such as a local area
or city).
Rule structures are about the:
principles
standards
laws
regulations
within which a society and economy operate and actors function. They are the
structures and processes which govern or inform:
These may facilitate or influence the interactions between the public and
private sectors and the community in either a positive or a negative way. It is
self-evident, thus, that there will be a symbiotic relationship between institu-
tions and leadership.
Blakely (1994) refers to the necessity of having appropriate institutional
Institutions and institutional factors 45
In economics, one of the most significant contributors to the debate on the role
of institutions and institutional change and its impact on economic perfor-
mance is Douglas North (1990), who defines institutions as the rules of the
game, stating that they: define and limit the set of choices of individuals.
They are the humanly devised constraints that shape human interaction (pp.
36). Those constraints can be formal (designed and enforced by political
authority) or informal (evolved as a result of custom or tradition as codes of
conduct). According to North (1990): The major role of institutions is to
reduce uncertainty by establishing a stable (but not necessarily efficient) struc-
ture to human interaction (p. 4).
A distinction is made between institutions and organizations.
Organizations, while being similar to institutions, are seen by North as:
groups of individuals that have a common purpose, let it be economic, polit-
ical or social (p. 4). He says that what organizations come into existence and
how they evolve will be: fundamentally influenced by the institutional frame-
work, that is, organizations are the players, and institutions are the rules
(p. 4). North goes on to say that:
Policy choices derived from institutional constraints at one point in time may result
in path dependent development. Once a particular path is taken, it might be costly,
if not impossible, to move local government policies in a dramatically different
direction. Local government institutions may constitute self-reinforcing mecha-
nisms in that they bolster the power of key interests advantaged by the existing set
of institutions. (p. 126)
It is thus widely argued that securing economic growth at the local level
cannot be reduced to a set of narrow economic factors, with institutions
along with social and cultural factors being of great importance.
Amin and Thrift (1995: 10) refer to what they call institutional thickness,
which is a combination of features including the following:
All these serve to constitute the social atmosphere of a particular locality. Thus,
broadly conceived, institutions include not only formal organizations but also
informal conventions, habits and routines which are sustained over time. Amin
and Thrift (1995) say that the notion of thickness is conceived to: stress the
strong presence of both institutions and institutionalizing process, combining to
constitute a framework of collective support for individual agents (p. 10).
While institutional thickness is a strong indicator of their ability to offset
transaction costs, too much thickness will increase time involved in meeting
them and thus transaction costs. Thus, it is more appropriate to think of the
relationship between transaction costs and institutional thickness as a U-
shaped relationship rather than as a monotonically decreasing one.
In a study of total factor productivity growth and economic performance in
East and Southeast Asia, Rodrick (1998) says: differences in the quality of
government agencies are a plausible source of the variation in economic
performance in the region (p. 79). He concludes that: the quality of govern-
mental institutions matters for growth (ibid.). He found that the association
between institutions and growth is remarkably close:
Taiwan, Japan and Singapore have the best institutions, and the highest growth
rates; the Philippines and Indonesia have the worst institutions and the lowest
growth rates; and Thailand, Korea and Malaysia are intermediate. (p. 32)
Thus, along with economic resources, important factors that create competi-
tive advantage are the existence of local mechanisms and alliances, or what is
generally called local governance.
48 Leadership and institutions in regional endogenous development
As most cities or regions are a part of a larges de jure entity it is inevitable that
they will be influenced by the decisions of higher levels of government. Thus,
centrallocal relations have important implications for the responsibilities of
sub-national or sub-state governments on how regional development is
managed (Bentley, 2002: 33). Rigid controls hinder the flexibility necessary
for innovation and creative thinking (Brooklyn et al., 2002). Decentralization
of power can enable community leaders to make their own decisions accord-
ing to the specific needs of a city or region. That is, they have wide-ranging
authority or are part of the key decision-making group (Fainstein, 1983: 44).
According to Jessop (1998), it can be said that the extent of local action and
access to funds will depend on the amount of institutional decentralization
existing within a nations urban system (p. 2292). Thus the focus needs to be
on the degree to which the city or region has a wide-ranging authority to make
decisions.
The ability of elected officials to achieve their preferred goals depends substantially
on their ability to control line departments [and on] their ability to influence strate-
gic stakeholders. (p. 13)
Hambleton (1994: 62) cites the example of Chicago where the former Mayor
Daley used the party and informal networks to build up enormous power in the
mayors office.
the form of local government structures defines the rules concerning how political
power is obtained, maintained, exercised and shared. Institutions set up how politi-
cal power is constituted. (p. 79)
Thus, incumbent mayors, for example, will fill that office in different ways
depending on their personal characteristics and political forces and other
conditions within specific cities (ibid.). Mouritzen and Svara (2002) say that
mayors can provide leadership in three areas. They can be:
Clingermayer and Feiock (2001: 32) note that the form of local government
can also determine the ability of officials to deal effectively with external
actors and provide the local executive with the ability to speak for the city
and act as an entrepreneur for economic development in dealing with private
sector elites. In the US, case studies have shown the importance of a politi-
cally powerful mayor for economic development efforts, citing the examples
of Mayor Lawrence in Pittsburgh, Mayor Daley in Chicago and Mayor
Schaeffer in Baltimore as strong mayors who exercised internal control over
city agencies and dealt effectively with external actors in the business commu-
nity and in the state or federal government (Fosler et al., 1982; Clingermayer
and Feiock, 2001: 15; Mouritzen and Svara, 2002: 2889). It is argued that
city managers cannot provide political leadership as they are not elected.
The form of government and system of representation a city chooses will
influence its ability to pursue certain kinds of policy options, and institutional
factors that strengthen the executive may enhance the grantsmanship of a city
government (Clingermayer and Feiock, 2001: 19, 33; Pollitt and Bouckaert,
2002: 50).
local leadership turnover affects transaction costs and policy choices involving
long-term objectives and future commitments [and that the resulting uncertainty]
affects the ability of the municipality to negotiate contracts, make credible commit-
ments to suppliers, and faithfully uphold and enforce contacts once they are in
force. (p. 73)
52 Leadership and institutions in regional endogenous development
Fairholm (1994) says that leadership is not so much a function of the individ-
ual leader as it is a function of collective action, of association and coopera-
tion it is an expression of community. Thus, according to Amin and Thrift
(1995), the involvement of key community institutions (for example, local
chambers of commerce, development agencies, trade associations, financial
institutions, firms, political parties, government agencies, business service
organizations, and so on) in the local area provides a basis for the growth of
particular local practices and collective representations of social networks (p.
102). Those institutions need to be actively engaged with and conscious of
each other, displaying high levels of contact, cooperation and information
interchange that may lead, in time, to a degree of mutual isomorphism (ibid.).
Such high levels of interaction should lead to the development of what Amin
and Thrift (1995) refer to as:
Institutions and institutional factors 53
1. The Rechtsstart model, where the state is a central integrating force with
a focal concern on the enforcement of laws. Here the instinctive bureau-
cratic stance is one of rule-following and precedent, and the actions of
both individual public servants and citizens is set in that context of
correctness and legal control. France and Germany are cited examples of
this model.
2. The public interest model, where the state has a less extensive and domi-
nant role within society, with government being regarded as something of
a necessary evil and where ministers and officials must constantly be held
to account. While law is an essential component of governance, its partic-
ular perspectives and procedures are not as dominant, and the process of
government is seen as one of seeking to obtain public consent (or at best
acquiescence for measures devised in the public (general, national) inter-
est. It is recognized that different interest groups will compete with one
another with government playing referee. Fairness and independence are
key values, with pragmatism and flexibility as qualities prized above tech-
nical expertise. The US is cited as an example of this model.
3. A complex mixture of the above two models exists in societies such as the
Netherlands, Finland and Sweden, where the administrative culture is
mixed, with a communal approach and open attitude that brings a range
of experts and groups into the policy-making process. It is interesting that
the examples of this are mostly for countries that are relatively small. So
scale may be an important variable in building and maintaining a success-
ful complex mixture model.
Each of these models affects the process of administration, with its own
pattern of values and assumptions. The Rechtsstart system would be charac-
terized by stickiness and slowness when reform or implementation of new
ideas comes into play. Pollitt and Bouckaert (2002) say:
This is because change would always require changes in the law, and culturally,
because senior civil servants highly trained in administrative law may find it more
difficult to shift to a managerial or performance-oriented perspective. (pp. 534)
At the same time, the public interest model may also face impediments to
adjustment depending on multiple stakeholder or interest group negotiation
and collaboration.
56 Leadership and institutions in regional endogenous development
education and R&D facilities, and cultural facilities and services smart infra-
structure is seen to comprise:
Increasingly networks and alliances are being seen as part of the infrastructure
not only for business operations but also for regions enabling them to success-
fully compete. For example, the Silicon Valley Joint Venture Network
(SVJVN) in California in the US is a strategic partnership initiative created in
1995 to help develop new enterprises. And Cooke and Morgan (1998) tell how
the development of networks in the UK and Europe are important instruments
of economic infrastructure for regional and local development, with networks
of association involving learning, and enhancing capacity building to improve
knowledge, production and industry development.
Networks and alliances involve collaborative effort, and are seen by Jarillo
(1988) as providing the strategic infrastructure for supporting regional devel-
opment, creating a catalytic effect in technology-based development, as seen
in Italys Tuscany region (Bianchi 1996). What we are seeing is the notion of
collaborative advantage (Huxam, 1996) emerging as an attribute for a region
to attain in addition to it possessing competitive advantage. Stimson et al.
58 Leadership and institutions in regional endogenous development
(2002) note that: it is this new thrust toward collaborative advantage and how
to achieve it that will be a focus of new methods in regional economic devel-
opment strategy formulation, planning and implementation (p. 12).
Addressing networks and network infrastructure is particularly important in
fostering innovation. Thus, Tijssen (1998) proposes a network as an:
The analogy discussed by Bolton (1999) thus leads him to the proposition
that there will be a positive correlation between the level of place surplus, and
thus the propensity to use voice, and the quality of a sense of place defined
by tangibles and intangibles that incorporate attributes such as good neighbor-
hoods and school districts, low crime rates, clean streets, civic amenity, and so
on. Loyalty is achieved through fostering of tolerance, trust and reciprocity.
Boltons attempt to analyse social capital within the traditional concept of
consumer surplus being extended to aggregate surplus or place surplus is a
promising step to better link the notion of social capital to institutions in the
context of local economic development and enhancing community perfor-
mance. Thus Bolton, in his various writings, stresses how policymakers need
to take account of the distribution of place surplus, of the costs of creating and
monitoring it, and to encourage voice.
Governments make investments through place-based policies and programs
that have the intentions of building community and attracting investment. This
might be thought of as network-augmenting capital, ranging from community
facilities to ceremonial occasions to institutions that improve the political
process. Governments develop pricing and subsidy schemes to attract firms to
expand the tax base load, increase employment opportunities and maintain and
grow population. Often that is done in selective and targeted ways, with
governments acting as entrepreneurs and taking risks, internalizing externali-
ties with the objective of enhancing place prosperity. This is just the same as
private groups (business or community) developing and augmenting networks
to achieve benefits (economic and otherwise) external to each member of the
group, with those benefits also becoming internal to the group, taking advan-
tage of what are known as the adoption externalities of networks which
Liebowitz and Margolis (1994: 1416) refer to as the tragedy of the commons
turned on its head.
Strategies for social capital development will involve support for continu-
ous life-long learning, initiatives to improve community awareness important
to social and economic well-being, encouraging the development of commu-
nity and professional organizations and building trust amongst different
groups that comprise a local community (Stimson et al., 2002: 349).
5.7 IMPLICATIONS
Institutions do have a powerful influence on how organizations and regions
adjust to change and stressors. They can be powerful positive or negative
endogenous influences on how the impacts of exogenous forces are managed.
It is not the nature and structure of institutions per se that is necessarily impor-
tant, but rather the capacity of institutions to be fast and flexible to adjust
62 Leadership and institutions in regional endogenous development
Blakely (1994: 58) points to a change in emphasis that is occurring from firm
attraction policies and mechanisms in local economic development strategy to
attracting and generating entrepreneurial people and skills, and in improving
and promoting amenity and other quality of life attributes of communities. It
is now about building institutional capacity and capability, enhancing network
development and facilitating publicprivate community partnerships. It is
about the way place prosperity can be enhanced through flexible innovative
institutional development and through strong and effective leadership to
generate an improved resource endowment of a region.
Furthermore, enhancing network development is crucial as today, accord-
ing to Powell (1990), increasingly in a network mode of resource allocation,
transactions occur neither through discrete exchanges nor by administrative
fiat but through networks of individuals or institutions, engaged in reciprocal,
Institutions and institutional factors 63
the shift to knowledge-intensive capitalism goes beyond the particular business and
management strategies of individual firms. It involves the development of new
interests and a broader infrastructure of the regional level on which individual firms
and production complexes of firms can draw. The nature of this economic transfor-
mation makes regions key economic units in the global economy. (p. 531)
That represents a major challenge for both the institution of government and
for leadership in ensuring that appropriate infrastructure is provided and avail-
able within a region and for the region to link into in terms of national and
international networks (physical, electronic and knowledge).
In an overview of successful regional development initiatives, Stough
(1995) identifies five attributes that communities that have successfully under-
taken regional economic development have and the implications for institu-
tional arrangements:
In their later work, De Santis and Stough (1999) note that local economic
development effectiveness is related to:
64
Entrepreneurship 65
receive profits above those that would be achieved if she entered into the
production of known items or adopted known processes.
Later, Kirzner (1973) stood Schumpeters argument, at least in part, on its
head. He argued that economic systems by their nature experienced disequili-
brating effects due to cyclical forces, and natural and man-made disasters. In
this view the entrepreneur perceives opportunities in the market place to create
new goods and services that would help drive the disequilibrated system
toward equilibrium. In short, Kirzners entrepreneur was an equilibrating force
in contrast to Schumpeters entrepreneur.
In many ways Schumpeter and Kirzner agreed in that they both see the
entrepreneur as discovering and acting upon opportunities in the market place
and being motivated to this end by the anticipation of pure profits. And they
both argue that economic systems are not by their nature stable and thus, at
best, are moving toward and/or away from equilibrium conditions. They differ,
however, in their view of the effect of the entrepreneurs behavior:
Schumpeter seeing the effect as disequilibrating, and Kirzner as it being equi-
librating.
This discussion is of interest because it lays out the basic foundations of entre-
preneurship as it evolved in a profit-making context and how it may relate to
the behavior of large-scale economic systems. As such, it provides a platform
on which to erect a view of the entrepreneur in non-market situations.
Entrepreneurial behavior on the part of a region is only partly analogous. The
entrepreneur in this context is a fuzzier construct and raises questions such as:
Is the entrepreneur a government economic development organization or is it
a non-profit or community development corporation or some ad hoc group?
While it might be argued that such groups perceive the opportunity for the
region to improve economic performance with increased job and wealth
creation in aggregate, it is seemingly clear that the motivation on the part of
such group agents is not just for the pursuit of pure profits. In fact, the pursuit
may be for improvement in the aggregate social welfare of the region. So
where does the motivation for this come from? To answer this question it is
necessary to expand the notion of individual and group motivation or goal-
driven behavior to a broader frame that goes beyond the pursuit of exceptional
individual gain. At the same time, however, communally or group-directed
entrepreneurial behavior may be viewed as:
Before finalizing the above line of thought it is important to return to the leader-
ship construct. As noted in Chapter 4, there are a number of theories of leader-
ship. Further, elements of these have been reviewed and assessed. Here, however,
the focus is on the contingency theory of leadership because it provides a strong
basis for exploiting and deepening our understanding of the link between leader-
ship and entrepreneurship. Contingency theory argues that leadership is evoked
by an event, occurrence or perceived opportunity that threatens an actual or
perceived status quo or in the above referenced terminology, equilibrium. Such
contingencies or events may be natural (earthquakes, tsunamis, hurricanes,
droughts, famines) or man-made (economic cycles, wars, new technology, new
social theories, large-scale theft, misguided public policies). While this theory
may be applied to explain incremental acts of leadership motivated by minor
opportunities or threats, our concern here is with regard to major leadership
processes where whole regional systems are directed in a new or modified direc-
tion due to a major disequilibrating event (physical or man-made).
Contingency theory may be used to bridge, explicate and define the rela-
tionship between leadership and entrepreneurship:
Entrepreneurship 69
major contingencies evoke or beg for change and breaking with old
traditions and processes
such contingencies may be viewed as the catalyst or pre-conditions for
the emergence of significant new leadership
that leadership must be energized by a different vision of how the
regional economy can evolve and offset the conditions causing poor
performance such as job loss and wealth stagnation or degeneration
in discovering or creating a new model for economic growth and devel-
opment, that leadership is entrepreneurial
however, implementing such a model also requires discovery of new
techniques, methods, products, industrial sectors, finance, and so on
this is where entrepreneurship is fundamentally important in the leader-
ship-driven adjustment process of regional economic development.
Contingencies are thus seen as the primary catalyst evoking the leadership that
guides the redevelopment process and in turn evokes entrepreneurial
responses to implementing that process. In our view, leadership is the critical
mover that may play a catalytic role in redevelopment initiatives, and entre-
preneurship is the critical process for discovering and creating the methods,
processes and products/services that propel the movement of the old economy
to the new.
6.4 CONCLUSIONS
This chapter has shown the relationship between leadership and entrepreneur-
ship and has laid out the nature of entrepreneurship in the context of leader-
ship-driven regional economic development. It used contingency leadership
theory to further elaborate on the nature of regional economic development
leadership and to draw an analogy between such leadership and both
Schumpeterian and Kirznerian theories of entrepreneurship. This served to
illustrate that the concepts of leadership and entrepreneurship are related so to
speak at the hip but are different in that leadership is most often catalyzed by
disequilibrating contingencies and entrepreneurship (taking here the
Kirznerian view) is driven by discovery and opportunities in response to such
72 Leadership and institutions in regional endogenous development
In this chapter we present five case studies from the US. These are for:
Pittsburgh, Pennsylvania, Houston, Texas, Austin, Texas, the State of
Colorado and Indianapolis, Indiana
The collapse of the steel industry in the early 1980s hit Pittsburgh so forcefully
that, in the period from 1979 to 1988, the region suffered a decline of 44
percent in manufacturing jobs (Clark, 1989: 41; Sbragia, 1990: 534). Such a
decline caused the region to lead the nation in population loss during those
years. However, by the late 1980s, Pittsburgh was rising from the debris of a
collapsed steel industry, towards a city of standing in cultural offerings, with
one of the best public education systems in the country, and very livable neigh-
borhoods. Such an urban renaissance was not only due to the fact that
Pittsburgh possessed potential sources of new employment and therefore was
able to develop new exports, but also because it was the result of private and
public leaders concerned with the regions economic development (Sbragia,
1990: 534).
In Pittsburgh, there has been a long history of cooperation. The culture of
cooperation between the public and private sectors has been so sustained that
it has given Pittsburgh policymaking a distinctive character. The recent
prominent involvement of the non-profit sector in the citys economic devel-
opment strategy has also been noteworthy. The politics of consensus
describes Pittsburgh politics more accurately than it does that of many other
eastern and mid-western cities in the US (Sbragia, 1990: 589). In the back-
ground has been strong leadership on the part of the many Fortune 1000
companies in Pittsburgh through the Allegheny Conference organization.
This organization played an important role in Pittsburghs regeneration and in
building the culture of cooperation that has resulted in Pittsburghs economic
regeneration.
75
76 Leadership and institutions in regional endogenous development
The process of regeneration in Pittsburgh may be divided into phases. The first
two phases, Renaissance I and Renaissance II, describe the strategies intro-
duced by private and public leaders who were concerned about the regions
future. In both phases, public and private leaders implemented projects that
were directed towards the regeneration and the renewal of the city.
Despite the fact that traditional industries were unable to remain competitive,
Renaissances I, II and III all helped the city address unemployment by diver-
sifying its economy. Pittsburghs subsequent economic growth derived mainly
from the educational and advanced technology industry sectors. While it is
true that the economy did not recuperate entirely from the 1980s crisis
particularly when compared with neighboring counties it is clear that local
leadership was the crucial variable in determining how the city responded and
readapted to economic changes (Sbragia, 1990: 53; Judd and Parkinson,
1990b: 298). The involvement of the private, public and non-profit sectors in
Pittsburghs economic development made the city better off than if no such
effort had been made. The absence of such partnerships would have exagger-
ated and exacerbated the economic decline.
Between the late 1930s and early 1980s, the city of Houston was known for its
remarkable record of economic progress. Urban Reaganomics and urban
entrepreneurialism were concepts pioneered in Houston long before they
were given those names (Parker and Feagin, 1990: 216). Houston was charac-
terized as having a modern weak government and being an unplanned and free
enterprise city (Parker and Feagin, 1990: 21718). Houstons economic
success was rooted in its oil industry, the value of trade through its port, its
federally subsidized space-defense complex, and its evolution into a national
medical center. The combination of such diverse economic resources allowed
Houston to become known as the city that never knew the Great Depression
(Parker and Feagin, 1990: 221).
7.2.2 A Recession
Nevertheless, by the mid-1980s, the oil recession, along with many bank fail-
ures and considerable out-migration, generated more hardship in the city than
was the case in the nation at large. In the face of growing economic downturns
and despite the obvious need for action Houstons elites were slow to respond
to economic decline and they were slower to recognize the full range of its
causes (Parker and Feagin, 1990: 221).
In 1982, Houston was spending 11 cents per capita on economic develop-
ment while states such as Louisiana or Arizona were spending 94 and 68 cents
respectively (Parker and Feagin, 1990: 221). Parker and Feagin argue that the
78 Leadership and institutions in regional endogenous development
reason for such a relaxed approach was that prior to the 1980s Houstons
economic development seemed to take care of itself, and thus business elites
concentrated on creating and perpetuating a good business climate (ibid.).
As was the case with many cities in the sunbelt areas of the US, Houston has
been characterized by its aggressive entrepreneurial elites. Houstons business
elites have been particularly successful in creating private-public partnerships
in which the governments are little more than sycophants and servants of busi-
ness interests. Since Houstons founding, the power structure of the city has
been dominated by a succession of leaders from the business community and
more specifically high-level corporate executives. Entrepreneurial groups
such as the Suite 8F Crowd or The Greater Houston Chamber of Commerce
were deeply involved in Houstons development. Virtually without interrup-
tion, the local business elites have been able to exercise dominance over
governmental decisions, use public expenditure to support business goals, and
limit the scope of government regulation (Parker and Feagin, 1990: 2279).
This is partly due to a weak civic tradition and limited involvement of other
non-business stakeholder organizations such as unions, voluntary groups, and
so on. Thus, in Houston: business leadership towers over almost everyone
else (Savitch and Kantor 2002: 77).
In 1984, the leaders of the Houston Chamber of Commerce established the
Houston Economic Development Corporation (HEDC) in an attempt to help
Houstons economy diversify. However, few of the nine pivotal areas regard-
ing diversification and economic development had firm roots in the Houston
economy. Besides such diversification attempts, the HEDC tried to maintain
Houstons reputation as a city with a favorable business climate in order to
bring money into the city. Ironically, some argue that such an advantage is at
the root of Houstons downturn since the tax giveaways led to minimal impact
and a general lack of local and state services, and thus the impoverishment of
many (Parker and Feagin, 1990: 229). In fact, according to Savitch and
Kantor (2002: 86) the civic gospel in Houston is that the city government
should be managed like a business corporation and thus, limit public expendi-
tures and maximize personal revenues.
Parker and Feagin (1990) argue that Houstons incapacity to exercise alterna-
tive options for economic development is rooted in the fact that there is no
active arena for political debate through an organized opposition to contest and
challenge the status quo. Therefore:
Case studies from the United States 79
Houstons leaders operate in a reactive mood, trying to hold off the worst effects of
economic downturns. Much of the HEDC focus has been on narrowly drawn busi-
ness concerns. (p. 229)
According to Miller (1999), the Austin success was the result of several actors
working together to create a new economic base; that is, Austins high-tech
80 Leadership and institutions in regional endogenous development
face the competition that Japan posed to the domestic US sector. Sematech is
regarded as responsible for the revival of the US semiconductor industry. The
experience that Austin gained with the establishment of MCC made the job of
recruiting Sematech much easier. Recruiting Sematech involved virtually the
same cast of players with the addition of US Representative J.J. Pickle, who
represented Austin in Congress. Using his influence, Congressman Pickle,
along with the aid of the rest of the Texas congressional delegation, ensured
that Sematech would receive sufficient government funding to exist. UT
provided the site to create the facility and build a 92-acre university research
park around it (Miller, 1999: 5).
During the period 199398, technology-based industries added almost
130,000 to the regional employment base, representing a growth rate of 4.7
percent per annum over this period (Miller 1999: 1). In 1998, the economy of
Austin grew at a rate of 4.6 percent and created 26,200 jobs, the highest
growth rate in 1998 for any metro area in Texas. The unemployment rate in
1999 for Austin was the lowest (2.2 percent) when compared to 4.6 percent for
the state of Texas, and 4 percent for the US. Per capita GDP also grew from
about US$9,000 in 1980 to about US$18,000 in 1996 (Miller, 1999: 1).
1. Economic resources and positive business climate: States can foster and
attract economic activity by offering a business friendly regulatory and
tax environment. For example, the state of Texas has no income, business
or property tax and the regulatory burden is considered low (European
Commission, 1999: 8). The state of Texas also offers a number of incen-
tive programs designed to make capital more available for business
expansion and relocation. These incentive programs, along with the
adequate supply of venture capital, have fueled technology growth in the
Austin region. For example, Austin Venture is the largest venture capital
firm in Texas and one of the largest in the US. More than 40 percent of the
firm funds are invested in Austin and typically on activities related to
information technology (Miller, 1999: 9).
2. Educated workforce/training: The Austin area is well known for its high
level of education, which is a result of a solid primary and secondary
education system, strong community colleges, and an accomplished
research university (UT-Austin).
In the State of Colorado, the traditional emphasis on mining, oil and gas, and
agricultural industries has been replaced by an emphasis on greater industrial
Case studies from the United States 83
A strong Federal presence, good research universities, a highly educated and well
trained workforce, a State government focused on fostering a positive business
climate, an exceptional environment, a superior quality of life, and the opening of
Denver International Airport, all contribute to attract venture capital to Colorado.
(Snow, 1999:1)
However, this level of success did not always exist. In fact Colorado was
characterized by a boom and bust economy with its dependence on tradi-
tional sectors, such as agriculture, mining, and oil and gas. In the mid 1980s,
as the state was in the midst of a severe depression and Denver was seemingly
becoming an economic ghost town, the new Governor, Roy Romer, took
seriously the urgent need to diversify Colorados economy:
By 1998, the Development Report Card for the State an economic bench-
marking report prepared annually by the non-profit Corporation for Enterprise
Development rated Colorado highly among all states in the US (Snow, 1999:
1). It was rated:
2nd place for business vitality, measured by the number of new busi-
nesses formed each year, and the competitiveness of existing businesses
3rd in the nation for development capacity, measured by the quality of
its human technology, financial and infrastructure resources
4th for economic performance, as measured by employment growth,
earnings and job quality, equity, social and health conditions.
Indianapolis is located in the State of Indiana in the heart of the Mid West of
the US. It was part of the US Manufacturing Belt that extended from Chicago,
Illinois and Milwaukee, Wisconsin eastward to New York and Boston. In the
1960s and 1970s this was the heartland of US manufacturing producing nearly
two-thirds of US value added in the 1950s, much as the Golden Triangle in
Europe that extends from the Midlands in Great Britain across the English
Channel through Paris to Turin and Milan in Italy and then northward to the
North Rhine-Westphalia region (lower Rhine river valley) and the Randstad in
the Netherlands. Indianapolis was a mid-level center of the Manufacturing
Belt with an urban region population of less than one million. Its primary
economic activities ranged from pharmaceuticals (headquarters of Lilly
Pharmaceuticals, Inc., one of two or three of the largest companies in that
sector in the world), a variety of automotive-related plants, for example
Allison Diesel, Inc. (engines and transmissions) and the state capital of
Indiana.
As Japanese production methods gained acceptance and demonstrated that
such methods could produce superior products, both more efficiently and with
86 Leadership and institutions in regional endogenous development
At this time in the mid-1960s senior business and community leaders, facing
the growing reality of economic decline, began to understand the threat and to
discuss how to address it. One of the first acts was to form the Greater
Indianapolis Progress Committee (GIPC pronounced gipsy). GIPC was
composed of CEOs of major corporations such as Lilly (the Lilly Foundation;
at that time one of the largest if not the largest foundation in the US), various
auto components-related firms and the Indianapolis Water Company (an old
organization that had for over 100 years been led by senior community lead-
ers). There were several reasons why the membership of this club was only
CEOs. First, these were the heads of organizations that were historically
rooted in Indianapolis. Second, CEOs usually play a minor or no role in such
broad-based private sector organizations as Chambers of Commerce.
Consequently, the broader and more diverse and thus representative organiza-
tions did not have the senior leadership needed to drive the development of a
new and different economic strategy. Third, these were heads of organizations
that provided a major portion of regional employment. Fourth, CEOs more
than any other persons controlled the slack resources (Cyert and Marsh,
1963) of their companies. This was important because any initiative to counter
the economic competitiveness would require resources and many of these
would have to come from outside government. CEOs were the persons who
controlled the slack. Slack resources are those that are available to be used
at the discretion of senior leadership and historically have been deployed for
community and philanthropic purposes deemed important by such leaders.
The size of slack tends to vary with level of performance. Fifth, persons who
head established corporations in a region most likely have their lives and
livelihood, their families and associates embedded in the region and thus will
have, for lack of a better term, love and thus commitment to the health of
Case studies from the United States 87
their region. In short, they will care a great deal about the maintenance of the
region as the home of their family, employees, associates, friends and
company and thus will have a high level of motivation to find a solution to
threats.
GIPC, with the services of a major think tank, developed a strategy to
stabilize and regenerate the economy. The heart of the strategy was targeted to
the service sector. Under this strategy Indianapolis would initially become the
amateur sports capital of the United States and then the primary center for
association headquarters in the middle part of America. It is important to note
here that the leadership for the Indianapolis response to the extreme competi-
tiveness threat came primarily from the private sector in the form of CEO lead-
ers. For sure then mayor Richard Lugar was soon to join in and back the effort,
but the prime movers came from non-government sources (see City of
Indianapolis, 2007; Hudnut, 1995 for more background on the development of
a strategy).
example, by the mid-1980s Indianapolis had been selected as the site for the
1987 Pan American Games (one of the pre-competitive events leading up to
the Olympics), had attracted a premier team from the National Football
League (The Baltimore Colts), and other professional sports teams as well as
an increasingly wide diversity of associations of all kinds. This part of the case
study draws on works by the City of Indianapolis (2007) and Hudnut (1995,
1998).
By the late 1980s the economic development strategy created in the late 1960s
had achieved success and was recognized as a model for the redevelopment of
other city regions in the US and abroad. Its mayor, William Hudnut, who
followed Richard Lugar in the early 1970s and remained in office for more
than 15 years, became one of the most sought after city mayors in the US for
speaking engagements with requests to explain how Indianapolis achieved
such extraordinary revival. While much of the success was due to continued
and focused leadership on the part of Mayor Hudnut, it is important to recog-
nize that initially the leadership came from the private sector and resources for
the major investments that were needed to make the vision a reality came from
the private sector as well as the public sector at the state and local level. In
short, the private sector played an initial major leadership role and provided
critical resources that could not have been amassed otherwise. Also, it is
important to recognize that significant stakeholder involvement occurred with
the State of Indiana, Indianapolis and private sector organizations like the
Lilly Foundation partnering to create success. Further, it is not difficult for
organizations like GIPC to create strategies for their region; what is difficult
is to build broad stakeholder participation of those who were not members of
the organization. It may be claimed that GIPC was and is an elite organization
and that is true. However, it worked carefully to market the strategy concept
and to attract diverse stakeholders into the strategy development process. So
while it was elite in nature it also used its leadership to attract other partners
and to incentivize their commitment and participation. This of course was
easier once senior public sector leadership committed to the strategy. This
discussion on achievements and outcomes draws again on such works as the
City of Indianapolis (2007), Hudnut (1995, 1998) and Stough (2007).
It is important to recognize pattern elements that appear to be characteris-
tic of leadership in the US that evolve out of the US case studies. First, there
are more than a few cases where private sector leadership provided catalytic
leadership for a redevelopment strategy and its implementation. The role of
the Allegheny Conference in Pittsburgh (see above) is a case in point. Another
case that supports this claim, not reported here, is that of Baltimore, Maryland.
Case studies from the United States 89
Baltimore experienced industrial and port decline in the 1960s due mostly to
the same competitiveness forces that so negatively impacted the economies of
places like Indianapolis and Pittsburgh, namely de-industrialization. Baltimore
formed the Greater Baltimore Committee (GBC) with a membership of 100
CEOs from the region and adopted a strategy to rebuild Baltimore from its
harbor outward. This was the same model Baltimore had used to rebuild the
region and its economy following a conflagration that destroyed most of the
city in the 19th century. The strategy was implemented with great success and
Baltimore became another model of urban region regeneration in the face of
de-industrialization-driven competitive forces. The Baltimore case represents
another pattern related to success and that is that regions that have achieved
successful regeneration in the past often adopt anew the strategy used at an
earlier time(s). Some of the European cases presented in the next chapter illus-
trate this thesis, for example, Rennes, France and Birmingham in Great
Britain.
8. Case studies from Europe
In this chapter we present seven case studies from Europe: Birmingham, UK;
Liverpool, UK; Rennes, France; Lille, France; Freiberg, Germany; Tampere,
Finland; and Rotterdam, the Netherlands.
8.1 BIRMINGHAM, UK
8.1.1 Background: Adjustment Through Entrepreneurship and Strong
Municipal Leadership
8.1.2 Vulnerability
Throughout most of the nineteenth and twentieth centuries, the economy of the
city was based on manufacturing. However, that overdependence made the
city vulnerable to the structural changes in the national and global economy,
particularly during the recession of the 1980s. Within a decade, the West
Midlands region was transformed from being one of the nations most
90
Case studies from Europe 91
The manufacturing base was particularly devastated, with the city losing 46
percent of total manufacturing employment between 1971 and 1987 (Loftman
and Nevin, 1998: 134).
Reflecting the City Councils tradition of pragmatic politics and cross-party
cooperation, a broad consensus emerged between the citys major players in
the 1980s to respond to the collapse of the citys manufacturing industry. The
Council sought to broaden the citys economic base through the promotion of
the service sector and the creation of a new image for the city (ibid.: 135). This
consensus emerged despite frequent changes in the political control of the
Council over that period. Birminghams political and business leaders were
able to adopt a non-ideological and pragmatic approach by working in close
collaboration with local political opponents and the private sector (ibid.: 134).
In the transformation of Birmingham, it is important to mention the success
of the city in attracting both private sector and European Community funds,
which were to be a key element in carrying out the pro-growth strategy. For
example, the Council established the Economic Development Committee in
the 1980s to focus on tackling the citys economic problems. Under the charis-
matic leadership of Sir Richard Knowles and the efforts of Councilor Albert
Bore, the power of this committee grew considerably, allowing Birmingham
to succeed in its application to central government Assisted Area status, gain-
ing access to essential European Community funds to support its economic
development activities (ibid: 139).
Another example was the Councils use of two quasi-public sector compa-
nies Hyatt Regency Birmingham Ltd and NEC Ltd to finance and raise
money to secure funds for the projects (ibid.: 139). In addition to securing
funds for carrying out the projects: the city council also sought to engage the
private sector in the formulation of policies aimed at re-imaging and promot-
ing Birminghams city centre (ibid.).
In 1988, a City Centre Challenge Symposium was held to debate the future
development of the city. The 1988 symposium resulted in the formulation of
the strategies for revitalizing the city (Beazley et al., 1997: 188). Some of the
projects in this strategy were:
8.2 LIVERPOOL, UK
8.2.1 Background: Industrial Decline and Lack of Capacity to
Respond
Despite the need for urgent intervention, it was not until 1987 that a stream of
policy documents came from the City Council advocating the need to diver-
sify the economic base of the city and, in particular, the need to regenerate the
city center as the center of a regional market. Moreover:
the city commissioned a variety of consultancy studies to examine the tourist poten-
tial of the city, the problem of the citys image and city marketing, the economic
potential of the design industry, and most significantly, the merits of creating a part-
nership between the public and private sectors to guide economic development.
(Parkinson, 1990: 253)
Since the turn of the 21st century, things started to change and Liverpool
is now showing some signs of regeneration. The economic collapse of the
early 1980s has been arrested. Its docklands are going through some degree
of renaissance, and new housing and tourist attractions are being built.
Furthermore, there has been some growth taking place in modern sectors of
the economy that show potential. The political complexion of the city has
changed, and many of the internal divisions of the recent past seem to be
lessened. However, many old perceptions linger, and the city still bears the
reputation of riot city, with high levels of public employment, an under-
qualified and unskilled workforce, and a high rate of unemployment. As a
result, the city is still at a loss for investment, with much of its land being
vacant or derelict (Parkinson, 1990: 305; Savitch and Kantor, 2002: 57,
85).
His time in office is recognized as one of the most innovative eras in the
citys history as he was able to bring together virtually all local actors (the
university, the Chamber of Commerce, trade unions, young entrepreneurs, and
so on) to be involved in the development of the city (ibid.: 72). Furthermore,
Freville was able to secure a close network of high-powered civil servants who
supported development projects. The Freville regime also gained strength by
building strong ties with various local agencies (public financial institutions,
developing agencies, and so on) that contributed the resources necessary to
facilitate the projects (ibid.: 79).
Yet, by the end of the 1970s, an economic crisis hit Rennes. The negative
growth rates experienced in the traditional sectors of the economy and the
closure of a series of plants brought significant job losses to the city (Le Gales,
1990: 79). In 1981, the increased pressure from the population to revitalize the
economy brought a leftist government to power for the first time in 23 years.
This new government brought considerable change to Rennes that resembled
the years during Frevilles regime. Such changes turned the city again into one
of the most dynamic cities of France (ibid.).
The new government strategy was characterized by the creation of a plan for
development where the consultation process was very broad. Eight working
groups headed by union leaders, business organizations, academics, public and
voluntary sectors were established to decide policies for each of the main
important economic areas of the city. The major theme of the policy was based
on the assumption that job creation in Rennes could be achieved by the mobi-
lization and development of scientific research capabilities (Le Gales 1990:
96 Leadership and institutions in regional endogenous development
By the end of the nineteenth century, the city of Lille in northern France was
the second largest textile region in the world after the ManchesterLancashire
region. Its growth was enhanced by canal access to the ports of Flanders,
Ghent and Antwerp. However, during World War I, the city suffered enormous
deprivation, and then like other cities during the 1920s, it experienced reces-
sion and unemployment (Fraser and Baert, 2003: 87).
Although some economic prosperity returned to Lille after World War II,
the lack of urgency to restructure or change old patterns of industrial manage-
ment further decreased investment. As a result, Lille started to experience
social and physical decay typical of many former prosperous industrial cities,
including those of the Nord regions (ibid.: 88). However, Lille was hit espe-
cially hard as the city area was considered peripheral and remote from the
countrys economic and cultural life. It is estimated that over the period
19451996, the Lille area lost approximately 294,000 jobs in its traditional
industries of textiles, agriculture, mining and related sectors. The coal indus-
try lost all its labor force (approximately 90,000), and there were important
losses in the chemicals, metalworking and service sectors. The economic
decay of Lille was evident by the abandoned and decaying factories through-
out the area (ibid.: 88).
Case studies from Europe 97
The fist initiative to reverse the economic decay of Lille came from the central
government in the late 1960s with its strategy to divert growth away from
Paris to other regions in France. The strategy, called Metropoles dEquilibre
was designed to divert investment to provincial city regions (Fraser and Baert,
2003: 93). However, a major influence in the recovery of Lille was the high
quality of its political and technical leadership that led restructuring in the city
over the 25 years (ibid.). Of particular importance was the role played by the
Prime Minister, Pierre Mauroy. He was responsible for pushing and incen-
tivizing the construction of the Channel Tunnel, and later on as a Mayor of
Lille he pushed for the city to link up to the new European transport infra-
structure network and reap the associated benefits (ibid.: 91).
After hard lobbying by the authorities in Lille, it was agreed that the city
would be the link between London, Brussels and Paris. This link greatly
impacted the economic regeneration of Lille. The economic revival of the city
was further assisted by local forces which gathered together to form the
Comit Grande Lille, a body of some 300 people representing a cross-section
of Lilles society. That group still meets every two months to discuss issues
and problems of current importance (ibid.: 1023).
The economic revival of Lille may be seen in two major projects that signal
the process of the regeneration of the metropolitan area:
1. The first was Euralille. According to Fraser and Baert (2003), securing the
Eurostar link through Lille was the first step to drive the citys economy
forward into the post-industrial era. The link led to a reconstruction of a
vast area of the city including the creation of shopping centers, the station
that links the city of Lille and neighboring areas, office complexes, a park
area, and so on (ibid.: 102).
2. The second was the regeneration of Roubaix, the second city of the Lille
metro region that signaled the process of regeneration in the region. In the
1990s it was a city in decline, with unemployment rates of approximately
27 percent and declining services and shopping facilities. Furthermore, the
city was poorly connected to other parts of the metropolitan area (ibid.:
106). As with the city of Lille, it was a new mayor, M. Rene
Vandierendonck, who brought a remarkable change to the unpromising
situation of Roubaix. That change started in 1994 when the new mayor
attracted the private sector and other actors together and formed them into
an integrated team that in turn proposed a strategy based on the investment
in three major public assets:
98 Leadership and institutions in regional endogenous development
the first was the improvement of the city image by upgrading those
public facilities that had fallen into decay
the second was the improvement of the transportation links both
within the city and between the other centers of the metro region
the third was the physical redesign of the city.
The dramatic economic revival of Lille has greatly altered the perception and
image of the region. For example, according to Fraser and Baert (2003: 102),
Euralille is hailed as one of the largest and most stimulating projects in
contemporary Western Europe. Furthermore, the regeneration of Roubaix
represents a flagship project for the metropolitan area. In the case of both Lille
and Roubaix, their respective mayors, backed by the Comit Grand Lille, had
a vision of how the metro area of Lille could reinvent itself. In both cities the
mayors and their staff had the necessary:
skills to negotiate, coordinate and assure [that the] finance [was available] to make
things possible, and not to have to wait on that initiative coming from somewhere
else. (Fraser and Baert, 2003: 106)
The city of Freiberg in Saxony (in the former East Germany) has been
analysed by Musyck (2003) as an example of regional development based on
capturing new industry activity in the field of recycling and environmental
technologies and services. This case is viewed as a relatively successful
process of economic renewal resulting from a combination of endogenous
assets and exogenous impulses (p. 273), which helped the creation of new and
innovative firms.
It appears that there are three distinct but interlocking factors that under-
pinned success in the Freiberg case (ibid.: 271):
Case studies from Europe 99
Until the middle of the 19th century, the mining and metallurgical industries
dominated the economy of the Freiberg region through a sustained growth
supported by continuous efforts in science, education and technological devel-
opment. However, from then onwards, the mining industry entered a steady
decline, which led to the closure of many of the mines (Musyck, 2003: 277).
Thus, the need to restructure and diversify the economy of the region towards
other economic activities started in the middle of the 19th century. This
process was driven by the creation and expansion of indigenous small and
medium enterprises.
According to Musyck (2003), at the turn of the 21st century, about half of
the inhabitants of the city were engaged in other industrial activities for their
livelihood. Most of the newly created firms engaged in chemical, metallurgi-
cal, electrical, electronic, scientific instruments, and mechanical engineering
industries. The research potential of Freiberg was also significantly boosted
with the creation and expansion of several institutes of fundamental and
applied research. These institutes were seen as necessary complements to the
existing industrial activities (p. 277).
The demise of the communist system at the end of the 1980s brought to
East Germany significant economic problems that stemmed mainly from the
non-competitiveness of the regions firms. As a result, a large number of firms
disappeared, which translated into the collapse of production and massive
unemployment (ibid.: 273). However, the sudden dismantling of the German
Democratic Republic, while precipitating a deep crisis in the local labor
market, allowed, within a few months, large numbers of qualified scientists to
became available. This formidable body of immediately available expertise
allowed for the creation of the eco-sector in Freiberg (ibid.: 274).
The Freiberg case demonstrates how a range of historic, economic and socio-
cultural factors such as the accumulation of skills and the tradition of entre-
preneurship may predispose a region to embark on a process of industrial
transformation based on indigenous entrepreneurial potential of SMEs. Added
to these factors, the presence of a radical shock to the economy in the form of
the fall of communism, turned out to be a catalyst for a renewal of the regions
industrial structure. When radical shocks do occur, they might prompt local
actors to act and rediscover a common identity, appreciate the role of their
social networks and realize the extent of their collective experience and skills.
In the case of Freiberg, publicprivate co-operation and strong social capital
were fundamental factors in the initial success of the eco-sector (Musyck,
2003: 2812).
Case studies from Europe 101
The lack of data makes it difficult to document the size and development of
the eco-sector in Freiberg. However, different strands of data converge to
indicate that the sector has been growing steadily to become a substantial clus-
ter of activity in the region (Musyck 2003: 287). But overall, it is estimated
that the number of eco-sector firms in Freiberg in the year 2000 was around
106 firms. That figure represents a substantial increase from the 57 firms that
were identified in 1994. Furthermore, during the second half of the 1990s, the
eco-sector in the region was recognized as a center of excellence for recycling
and environmental technologies. This highly localized centre of excellence
for recycling is considered to be unique in Germany (ibid.).
As this case study by Musyck (2003) shows, the development of the eco-
sector in Freiberg, is the result of a combination of endogenous potential and
constructive policies (p. 293). It demonstrates how:
Shortly after Tampere was chartered, the towns administrative system began
to change. The existing administrative system, broadly used to govern the
countryside, was gradually transformed to a system for governing a town. In
1802, a steward was hired to manage Tampere and plans were made to build a
town hall (Tuulasvaara-Kaleva, NDb: 2). In 1809, Finland passed from
Swedish rule to Russian rule, but Tampere remained relatively undisturbed. In
the 1830s, the steward was replaced by a mayor and Tamperes wealthier
merchants were invited to city administrative court meetings to negotiate town
issues (Tuulasvaara-Kaleva, NDc: 1).
The families who controlled the early industrial institutions of Tampere were
central actors in the development of the town. They filled the roles of employ-
ers, as well as of town administrators (Tuulasvaara-Kaleva, NDc: 2; Kostiainen
and Sotarauta, ND: 1011). They were politically influential and obtained priv-
ileges for the town through personal connections with the Tsars court
(Tuulasvaara-Kaleva, NDc: 2; Kostiainen and Sotarauta, ND: 1011). In 1875,
a new municipal law was passed making an elected town council the new deci-
sion-making body of Tampere, but this did not diminish the industrialists influ-
ence over town affairs: votes were calculated based on the amount of taxes
individuals paid and people who worked for others were not allowed to vote
(Tuulasvaara-Kaleva, NDc: 2). Consequently, Tamperes factory owners and
wealthier merchants were those who elected the town council. The power to
vote a council member in or out afforded Tamperes leading families continued
authority over town affairs and influence in the towns development.
In the early years, the owners of Tamperes factories took care of their
workers basic needs through the provision of housing, schools, libraries and,
in the case of Finlayson, a church and a hospital as well (Kostiainen and
Sotarauta ND; Tuulasvaara-Kaleva NDd). The industrialists also cared for the
Case studies from Europe 103
As the overall number of industrial jobs in Tampere began to decline, the citys
leaders realized that they had to develop a means of offering more local educa-
tional opportunities to young people in order to stave off a brain drain
(Kostiainen and Sotarauta, ND: 15). In 1960, while more than half of
Tamperes population still relied on industry for its livelihood (Martinez-Vela
and Viljamaa, 2004: 9), city leaders succeeded in having the School of Social
Sciences transferred from Helsinki to Tampere. The School of Social Sciences
suited Tampere, because it had been developed to offer educational possibil-
ities to people with limited means who had not graduated from high school
(Kostiainen and Sotarauta, ND: 14). The institution opened new possibilities
both for Tamperes residents, as well as for the city itself. By attracting the
School of Social Sciences, Tampere expanded its institutional base and
became more than simply an old industrial center it became a city that could
provide young people with a higher education. Tampere prized the School of
Social Sciences, financed it, and nurtured its growth. In 1966, the school was
renamed the University of Tampere (Kostiainen and Sotarauta, ND: 15). The
citys postindustrial image began to evolve.
Just as King Gustav had sensed the potential of the Tammerkoski rapids in
developing an industrial center, so did the leaders of Tampere sense the poten-
tial of bringing institutions of higher education to Tampere as its industries
declined, so much so that even as they were developing the University of
Tampere, city leaders were already working to bring a second university to
town. The second university would be oriented toward technology. In 1965,
city leaders persuaded the Helsinki University of Technology to open a branch
in Tampere (Tuulasvaara-Kaleva, NDe), and then, without delay, they concen-
trated their efforts on separating the branch from its parent university in order
to form an independent university of technology in Tampere (Kostiainen and
Sotarauta, ND: 15). Tamperes efforts succeeded; in 1972, the branch broke
off, and began operating as the Tampere University of Technology (Kostiainen
and Sotarauta, ND: 15). Within the span of twelve years, Tampere had gained
two local universities and changed its own destiny. Instead of accepting the
inevitable fate of an industrial town brought about by industrial decline,
Tamperes leaders had identified and assembled resources that would both
increase the productivity of its existing resources and would position Tampere
for success in the future.
Tamperes University of Technology emphasis on cooperation with indus-
try and its dedication to transferring expertise to companies rapidly established
it as a pioneer in research services in Finland (Kostiainen and Sotarauta, ND:
1516). This allowed the town to push forth quickly onto the cutting edge of
innovation and to gain respect as a research center. As respect for Tampere
106 Leadership and institutions in regional endogenous development
grew within the research community, the town became a magnet for knowl-
edge workers. Sensing this, the Technical Research Centre of Finland (VTT)
established its own laboratories of medical and occupational safety and health,
as well as a textile laboratory in Tampere (Kostiainen and Sotarauta, ND: 16),
expanding the towns institutional base. By the mid-1970s, ten years after the
transfer of the School of Social Sciences from Helsinki, Tampere was no
longer known only for its industrial capacity, but for its academic and research
prowess as well (ibid.). Its post-industrial image was gaining strength.
Industrial job losses in Tampere continued to accelerate from the mid-
1970s until 1995, leaving Tamperes industrial employment reduced from
more than 35,000 to 20,000 workers (Kostiainen and Sotarauta, ND: 13;
Martinez-Vela and Viljamaa, 2004: 910). Job loss numbers increased signif-
icantly in the early 1990s, when all of Finland experienced a major recession
due, in part, to the collapse of trade with the former Soviet Union (Kostiainen
and Sotarauta, ND; Rice and Shadur, ND; Rantala, 2001). At that time, many
of Tamperes industries which had been dependent on exports to the Soviet
Union collapsed, unable to offset their losses in the export market through
domestic sales since all of Finland was in an economic slide. During the
course of 199093, Finland suffered a 10 percent drop in its GDP and overall
unemployment rose to almost 20 percent (Kautonen et al., 2002; Rantala,
2001: 64; Rice and Shadur, ND: 8).
The recession devastated Tamperes existing economy. Its weaker indus-
tries disintegrated, surviving industries downsized, and unemployment
skyrocketed. As the recession subsided, Tamperes mechanical engineering
industry emerged as the citys strongest surviving industrial sector (Kostiainen
and Sotarauta, ND: 14; Martinez-Vela and Viljamaa, 2004: 10). Tamperes city
leaders resolved to put an end to the citys unemployment problem through
education and a new kind of entrepreneurship (Tuulasvaara-Kaleva, NDf).
They decided to reinvent Tamperes waning industrial economy as a knowl-
edge economy. This proved possible due to the long history of cooperation
between public and private leaders, as well as the educational resources that
Tampere had developed over the years; Tamperes business, educational and
public sectors worked together to bring about the desired change.
In the years following the recession, knowledge transfers from Tamperes
universities strengthened the citys mechanical engineering industry and auto-
motive innovations fortified what remained of the manufacturing sector.
However, overall, the citys industrial base continued to decline and Tamperes
workforce was increasingly employed in services. By 1999, only 28 percent of
the citys workforce remained in secondary production, while 70 percent of its
workforce was employed in services (Lapintie et al.: 71).
As many of Tamperes traditional industries became obsolete, Tamperes
leaders developed a strategy to restructure the empty industrial floor space
Case studies from Europe 107
By 2001, city leaders had developed a vision for Tamperes future and had
determined that, among other things, Tampere would become a citizens infor-
mation society and a center of expertise growing in a sustainable manner by
2012 (Tampere, ND). At that time, Tamperes leaders envisioned a society in
which the research and education community would have close relations with
the local business community and more educated people would be moving in,
rather than moving out of the city (ibid.). Instead of seeking to draw industries
into town as King Gustav III of Sweden had done in an effort to develop
Tamperes industrial economy, the citys leaders in the 21st century sought to
draw and retain educated minds that would concentrate on generating research
of global value through academic and industrial networking and make
Tampere a leading center of the knowledge economy. Interestingly, both the
strategists of the 18th century and those of the 21st century made use, in part,
of the same natural resource to attract the entrepreneurs they sought the
Tammerkoski rapids. Touted as a free source of power to the industrialists of
the bygone era, they are now used to generate inexpensive electricity for
Tampere, keeping both the cost of business and the cost of living in Tampere
down and making it an attractive place to work and live.
Today, two-thirds of all Finns live within a 200-kilometer radius of
Tampere, 34,000 students attend Tamperes two universities and polytechnics,
and cooperation between companies and universities has expanded the
competitiveness of Tamperes industry (Tampere International Business
Office, 2005). Tampere currently boasts several innovative development
programs including: BioneXt Tampere a development and investment
program which focuses on research, product development, clinical application
and international commercialization of biotechnology; eTampere a program
which seeks to make Tampere the worlds leading information society; and the
Region Centre of Expertise Programme which concentrates on helping exist-
ing companies to expand and new businesses to emerge. Tamperes selected
fields of expertise are: mechanical engineering and automation, information
and communication technology, and health technology (Tampere International
108 Leadership and institutions in regional endogenous development
omy. It has a population of over a million (including the city and its immedi-
ate surrounding municipalities), it is one of the worlds largest ports, and it is
a major center for petrochemicals, commerce and corporate services.
However, more than any other city in the Netherlands, Rotterdam directly
experiences the ups and downs in the international economy (Harding et al.,
1994: 23). The reason for this is due to the fact that Rotterdam relies heavily
on some sectors which are failing or being restructured. For example, the
collapse of the ship-building industry, and the restructuring of the oil and
petrochemical sector along with port technology development has led to
important job losses (Hajer, 1993: 61; Jacobs, 2000). This uncertainty and
risky environment has forced the city planners to act in an: entrepreneurial
fashion and to work hard to protect its position as the worlds biggest port
(Harding et al., 1994: 41). Recently, as world trade has been revived, it is
expected that strong trade through the port will pick up. However, there is also
the belief that for the port to have bigger local effects, it needs to develop
greater added value, and it needs to remain competitive, especially when other
competitors (such as the port of Antwerp) are performing better (Jacobs, 2000:
38).
Thus, it has been necessary for the city to constantly adapt itself to remain
competitive and capture new markets (Jacobs, 2000: 657). In order to achieve
this, policymakers in Rotterdam have developed and demonstrated the follow-
ing characteristics:
1. Innovation and flexibility: With the increase in global competition the city
of Rotterdam needs to remain competitive. In order to do this, policy-
makers have supported the development of local labor skills and the
connection of the local community to expanding regional economies.
Furthermore, the Rotterdam City Development Corporation (OBR) has
implemented changes to put greater stress on publicprivate partnerships
and new flexible roles and structures for public institutions (Hajer, 1993:
61).
2. Publicprivate partnerships: According to Hajer (1993), publicprivate
partnerships are not new in the city of Rotterdam. Jacobs (2000) tells how:
In order to protect its position as the worlds biggest port, [the city] has
always had to work hand in hand with business (p. 19). However, since
the beginning of the 1990s Rotterdam has been strongly promoting
publicprivate partnerships as a way to improve competitiveness,
economic development and urban regeneration. These networks and part-
nerships have produced shared visions that bring corporate and
110 Leadership and institutions in regional endogenous development
According to the author, Mayor Peper and the Aldermen recognized that
Rotterdam and its port were facing intense competition in the world market
and that a consensual approach to policy was needed. Thus, the city developed
a range of policy initiatives that involved extensive consultation with commu-
nity and business groups (Jacobs, 2000: 149). Other cases of leadership in
Rotterdam were also present. Such is the case of the director of Rotterdam
City Council, Riek Bakker, whose regeneration plans and dramatic change of
institutional norms allowed the council to be a key player in the process of
revitalizing the city (Couch, 2003: 118).
Case studies from Europe 111
The characteristics mentioned above could be seen in the Kop van Zuid
Project (South End) in Rotterdam. This project was intended to improve the
economic base and marketability of Rotterdams port (Fraser and Baert,
2003: 867). The Kop van Zuid area lies on the south part of the city, known
as the old south. By the 1970s, that part of the port was redundant, with
docks, adjoining warehousing and transshipment areas vacant and derelict.
However, in 1987, the city council began a master plan for the area that
consisted in creating a metro station, a public galleria, retailing, tax offices,
customs offices, the court of justice and further office space for commercial
letting (Couch, 2003: 120). The project also contained some social housing
and private housing, supermarkets and other facilities that serve local need
(ibid.: 124). This redevelopment project is credited with bringing great
economic resources to the city. It is said that the project yields property tax
revenue equal to about 5 percent of the citys total property tax income
(Couch, 2003: 124).
Furthermore, the Kop van Zuid project has been important in promoting the
city as a leading hub for foreign investment and for its emphasis in creating
market and business opportunities for the city (Jacobs, 2000: 163).
The case of Rotterdam highlights the ability of the city planners to engage in
collaborative and innovative projects. Rotterdam is also a case where impor-
tant efforts have been made to adapt the city to a changing environment. Not
only has Rotterdam showed its capacity for extensive consultation, but also it
has engaged in positive administrative changes and reforms (Jacobs, 2000:
147, 174).
9. Case studies from the Pacific Rim
This chapter presents case studies from the Pacific Rim. They are: Newcastle,
Australia, Hong Kong, Singapore and Chihuahua, Mexico.
112
Case studies from the Pacific Rim 113
Despite the fact that Hong Kong is a city-state with very few natural resources,
it has emerged as one of the richest economies in Asia (Chuen-Chau, 1997:
41). Hong Kongs phenomenal growth can be related to its unique character-
istics that have been man-made. Such characteristics derived from a sound
macroeconomic environment, a good policy mix and the presence of local
institutions, all of which were conducive to a commerce-based development.
For example, Hong Kong is considered as a place where one can find:
Those unique characteristics have attracted outside capital to the region, which
was a key factor for the citys economic development.
According to Jessop and Sum (2000), Hong Kong is also a city that
embraces the practice of entrepreneurial strategies and political alliances
based on publicprivate partnerships that have allowed it to successfully
adapt itself to such radically changing circumstances as its incorporation into
China. More specifically, Hong Kongs success can be attributed in great part
to two important factors:
From the 1970s, the presence of these two factors could be seen as crucial
institutional catalysts for growth. Chuen-Chau (1997: 70) argues that the
government of Hong Kong provided an environment conducive to private
enterprise including respect for property rights, low taxes, free and equal
Case studies from the Pacific Rim 115
However, the open door policy of China, and the later transfer in 1997 of Hong
Kong from British rule to absorption in China, opened many questions and
concerns about the economic and institutional future of Hong Kong. This is
especially true since China had the advantage over Hong Kong in low labor
and land costs, putting the Hong Kong manufacturing base at danger.
These new horizons of action show certain features of Hong Kongs entrepreneur-
ial and/or governance capacities that are socially embedded on the interpersonal,
institutional and societal levels. (p. 2302)
According to Jessop and Sum (2000), one way to understand the success-
ful implementation of entrepreneurial strategies in Hong Kong is to look
beyond city dignitaries. Despite the fact that strong leadership roles are seen
in many dignitaries (for example, the Chief Executive of Hong Kong, Tung
Chee-Hwa), it is argued that besides city dignitaries there was a wide range of
factors and institutional actors that helped to consolidate the strategies that
were pursued (Jessop and Sum, 2000: 2291). For example, the strategic
alliances among actors in the region were consolidated not only by their
linguistic affinities and kinship ties, but also through the socio-cultural prac-
tices of guanxi (relationship) (ibid.: 2308). In the strategy to base Hong Kong
as a gateway city, the guanxi helped to build the mutual relationships needed
to establish subcontracting partnerships and joint ventures. That is the ability
to consolidate in collective action allowed economic actors to share risks and
cope with uncertainty through dense social and institutional networks (Jessop
and Sum, 2000: 2308).
Ultimately, one can see in Hong Kong strategies that: envisage complex
array of privatepublic partnerships and networks co-operating under Hong-
Kongs leadership to promote the overall competitiveness of an emerging
multi-centered city-region, not only in economic terms but also in cultural and
community matters (Jessop and Sum, 2000: 2308).
9.3 SINGAPORE
9.3.1 Background: Ingredients for Success
In November 1990, Lee Kuan Yew handed over the prime ministership of
Singapore to Goh Chok Tong. In the three decades following self-rule in 1959,
the first-generation leaders as epitomized by Lee Kuan Yew, Goh Keng Swee
and S. Rajaratnam had transformed the island-state from a basket economy
into one of Asias four newly industrializing mini-dragon economies. As
outlined by Soon and Tan (1997: 213), between 1959 and 1990, the second
prime minister set out an agenda that placed human resource development at
the center of the development effort. Also, he outlined a science, technology
and R&D-based strategy to transform Singapore into a developed nation.
These two ingredients have been crucial to Singapores economic performance
(ibid.: 21819).
In the 1960s, Singapore was characterized by the absence of an agricultural
Case studies from the Pacific Rim 117
Although government intervention does not always lead to the desired results,
in the case of Singapore they were designed so effectively that they created the
preconditions for success (Soon and Suan Tan, 1997: 221). Among some of the
reasons for this successful intervention were the following:
1. The government always took a flexible approach to planning; one that did
not depend on a rigid time frame (Soon and Suan Tan, 1997: 226, 229).
Policy initiatives were always under continued change and revision
according to the necessities of the country (ibid: 223). It was recognized
by the government of Singapore that policies are unlikely to be effective
without good governance and appropriate institutional frameworks.
Therefore, strong institutions were established at an early stage, including
the two statutory boards, the Economic Development Board (EDB) and
the Housing and Development Board (HDB). Such boards had ample
funds and strong powers to promote industrial activities and grant loans
and incentives (ibid.: 221, 233). Institutions in Singapore have been
recognized for being efficient and dedicated. As Rodrik (1998) points out:
the quality of governmental institutions matters for growth Taiwan,
Japan and Singapore have the best institutions and the highest growth
rates (p. 97).
2. A key element in Singapores public policies is that they were built around
consensus. The government usually ensured that any major modifications
to its development strategy were thoroughly explained, well examined
and coordinated among government, industry, businessmen and labor
stakeholders (Soon and Suan Tan, 1997: 246).
3. The influence of Singapores leaders: According to Soon and Suan Tan
(1997):
At this time and in response to this perilous state of economic decline a group
of businessmen (called Grupo Chihuahua) met in the late 1980s to plan a strat-
egy that would lead Chihuahua out of the crisis. The intervention of the private
sector in Chihuahua was clearly ignited and supported by Francisco Barrio, the
new Governor of Chihuahua, who believed strongly that the involvement of
the private sector was the key to economic development offering the initiative
and much needed governmental support (Avila, 1998; Ruiz Duran, 2000).
Those factors gave rise to the creation of publicprivate partnerships,
which up to this point were a rare occurrence in Mexico. Chihuahua Siglo XXI
(Chihuahua 21st Century) was an entrepreneurial initiative launched in 1990,
first in the city of Chihuahua in Mexico, and later on throughout the entire
State of Chihuahua. This initiative had the purpose of redesigning Chihuahuas
economy to make it highly competitive as it entered the 21st century (Ruiz
Duran, 2000). Also, the strategy sought to elevate the quality of life of the
population, attract foreign direct investment and generate more and higher
quality jobs (Ruiz Duran, 2000; INEGI, 2003).
The idea for the private sector was to find a strategy that would help the
capital city of Chihuahua develop those economic sectors for which there was
a comparative advantage. Therefore, the private sector along with state author-
ities started a process to explore possibilities to redesign Chihuahuas econ-
omy. From this partnership it was agreed to form the Economic Development
Association. This agency (formed by a group of businessmen, the government
and the two main universities of the city) was in charge of creating
Chihuahuas economic strategy (Avila, 1998; Ruiz Duran, 2000).
9.4.3 Objectives
The main objective of the strategy was to promote the integration and the
creation of industrial clusters to increase linkages, learning and competitive
advantages in the locality. Following the identification of the strategic sectors,
the Development Economic Association formulated several strategies to
120 Leadership and institutions in regional endogenous development
promote and augment the comparative advantages of the region. Two require-
ments were put in place:
1. The first was that the strategies should aim for the increase in investment
in the region; that is, strategies should look for ways of making the region
more attractive to foreign and national investors.
2. The second was that the strategies should aim for the improvement in the
competitive position of the main sectors of Chihuahua (Avila, 1998).
In 1998 elections took place in Chihuahua. Here, a candidate from the tradi-
tional party (PRI) won the elections. As a result and very unfortunately, the
initiative has been almost stopped by this winning candidate (from the oppo-
sition political party) who considered the initiative as inheritances from past
administrations. Today, Chihuahua Siglo XXI has continued operations
(although at a very small scale) since the new government came to power, by
demands from the different actors that have participated in the process (Avila,
1998: 9). However, some of the initiatives were able to survive, hidden in the
working plans and programs of some state agencies (that is, the technology
development program, which was aimed at strengthening the economic infra-
structure of the main clusters). Moreover, there is an initiative (the Economic
Promotion Law) in front of Congress, which attempts to deny the right of new
administrations to stop further development of the implemented programs.
There are some lessons that can be learned from this strategy analysis:
10.1 INTRODUCTION
In this book it has been our proposition that regions inevitably are influenced
by their institutions, leadership, and the degree of entrepreneurial activity as
mediating or intervening variables that may enhance or detract from their
capacity and capability to maximize the effectiveness and efficiency with
which they utilize their resource endowments and achieve market fit. All of
these factors interact and evolve over time in a manner specific to a city or a
region, for the city or region to display a unique set of circumstances and to
have achieved a particular outcome state at any point in time and to influence
the changing competitive performance of a region over time.
The conceptual model framework depicted in Figure 2.3 in Chapter 2
stressed the dynamic uncertainty of reality that confronts regions in the
contemporary world. Regional economic development (RED) over time, and
the outcome state of those factors and processes that affect RED, might be
measured and evaluated through performance indicators relating to:
122
Modeling endogenous regional economic development 123
Stimson et al. (2002: 345) have argued that a regional economic develop-
ment strategy needs to have three important functions, these being to:
Stimson et al. (2002) also note the importance of identifying and describ-
ing those change agents who are anticipated to influence both the develop-
ment and future management of regions. These include considering
processes of change relating to economic, technological, societal, environ-
mental, legislative and governance considerations (p. 347). A regions lead-
ership and institutional capacity building needs to be of a nature appropriate
for agile responses to managing regional risk factors, both exogenous and
endogenous.
10.3.1 Difficulties
It would also be useful to use variables that measure the degree to which the
regions products fit with changing demand and related markets, to ascertain
the degree to which supply fits the local market, and to evaluate the extent to
which the local infrastructure provides the necessary linkages to export
markets.
government fragmentation
level of regional organizations (number and budget level)
index of social capital
E = entrepreneurship, measured by sets of variables such as:
churn rate or business start-up rate
number of small firms as a proportion of all firms
venture capital activity
corporate venturing activity
patents issued per 10,000 workers
Location Quotient of employment in symbolic analyst occupations.
We would argue that RED is positively related to RE, M, L, I and E, but that
there are likely to be lead and lag effects in the short to intermediate run, and
perhaps cyclical effects in the longer run. Thus,
We have added lags to the independent variables of 1 and 2 years and have
taken a ten-year average for the institutional variable. For sure these lags do
exist but further research and sensitivity analysis is needed to determine the
proper lag periods. For example, there is some literature which suggest that the
appropriate lag for E is at least 5 years.
The challenge remains as to how best to test such a model of endogenous
growth and development, and to develop appropriate data sets for a number of
regions and/or nations in order to do so.
The first attempt was a study by Stimson, Robson and Shyy (2004) that was
exploratory in nature (not theory driven) in that measures of a wide variety of
variables (including both stock and flow measures) were used in a backward
removal stepwise regression analysis of the endogenous regional growth of
local government areas of the major states of Australia. The regional shift
component from shiftshare analysis was the dependent variable. The study
period was 19912001. The analysis was run on data for non-metropolitan
Local Government Areas in each of the five mainland states of Australia sepa-
rately, thus fitting a model for each state and then for the aggregate of all
states.
The results of these analyses may be summarized as follows, first for the
state level models:
The findings from the Australian study produced some findings that relate
to existing theoretical perspectives on economic development, however, the
study as much as anything underscores some of the huge measurement issues
involved in empirical work in regional endogenous growth research.
The metropolitan regions of the US are the units of analysis used in a North
American study of regional endogenous growth conducted by Stough et al.
(2007). This study, while employing the same methodology as the
Australian study, was driven by the theoretical framework that has been
evolved in this book. In short, variables (often very crude) that depict the
130 Leadership and institutions in regional endogenous development
1. Large regions:
Population change positive
Income and unemployment negative
Location quotients manufacturing and government negative
Local government size and change positive
Social capital positive
Entrepreneurship capital negative [enterprises employing 59
workers]
2. Medium regions:
Population change positive
Bachelor education level negative; doctoral positive
Personal services positive
Local government employment strong positive
Entrepreneurship capital negative [self employed and enterprises
employing 14 workers]
3. Small regions:
Population size negative!
Bachelor degrees negative; doctoral positive
Location quotient manufacturing negative
Personal services negative
Change in local government employment positive
Entrepreneurship capital positive [enterprises employing 14 work-
ers]; change in [enterprises employing 59 workers] positive.
Modeling endogenous regional economic development 131
10.4.2 Implications
While the US study application discussed above provides findings that are
more specific with respect to the theoretical framework developed in this
book, it does leave more questions than it answers. The largest one is that the
operationalization of the variables is questionable in a number of cases and
thus substantive conclusions at this time are little more than working hypothe-
ses. At the same time, the Australian and the US study applications, while
different in a number of ways, are also quite similar in that they use spatial
units of analysis, the same methodology and the same dependent variable. So
it is useful to ask what if any similarities there are in the two studies and what
the differences are.
The similarities include:
10.5 CONCLUSIONS
This book has outlined a new approach to examine the processes of endoge-
nous growth and how regional development may be influenced by, and facili-
tated through, leadership, institutional factors and entrepreneurship as
132 Leadership and institutions in regional endogenous development
133
134 Leadership and institutions in regional endogenous development
Bennis, W.G. and B. Nanus (1991), Leaders: Strategies for Taking Charge,
New York: Harper and Row Publishers.
Bentley, J. (2002), New Wine in Old Bottles: The Challenges of Developing
Leaders in Latin America, in B. Derr, S. Rousillon and F. Bournois (eds),
Cross-cultural Approaches to Leadership Development, Westport, CT:
Quorum Books.
Bianchi, G. (1996), Galileo used to live here: Tuscany hi tech, the network
and its poles, Research and Development Management, 26(3), 199213.
Blakely, E.J. (1994), Planning Local Economic Development: Theory and
Practice, 2nd Edition, Thousand Oaks, CA: Sage Publications.
Bolton, R. (1992), Place prosperity vs people prosperity , Urban
Studies, 29(2), 185203.
Bolton, R. (1999), Place surplus, exit, voice, and loyalty, Uddevalla
Symposium on Evaluation of Regional Policies, Fiskebackkil, Sweden,
June.
Bower, I.L. (1983), The Two Faces of Management, New York: Mentor Books.
Boyett, I. and D. Findlay (1997), The pillar of the community: back to entrepre-
neurial basics?, Entrepreneurship and Regional Development, 7(2), 10518.
Bretschger, L. (1999), Growth Theoy and Sustainable Development,
Cheltenham, UK and Northampton, MA, USA: Edward Elgar.
Brooklyn, C., S. Bousillon and F. Bournois (eds) (2002), Cross-cultural
Approaches to Leadership, Westport, CT: Quorum Books.
Bryson, J.M. and B.C. Crosby (1992), Leadership for the Common Good and
Tackling Public Problems in a Shared World, San Francisco: Jossey Bass
Publishers.
Bunch, C. (1987), Passionate Politics, New York: Harper and Row Publishers.
Burns, J.M. (1978), Leadership, New York: Harper and Row Publishers.
Castells, M. and P. Hall (1994), Technopoles of the World: The Making of 21st
Century Industrial Complexes, London: Routledge.
Chakrabarti, Alok K. and Richard K. Lester (2005) (ND), Regional Economic
Development: Comparative Case Studies in the US and Finland,
Massachusetts Institute of Technology Industrial Performance Center
Special Working Paper Series on Local Innovation Systems, http://ipc-
lis.mit.edu/LIS02-004.pdf.
Chuen-Chau, L. (1997), Hong Kong: A Unique Case of Development, in
D.M. Leipziger (ed.), Public Policy and Economic Development: Lessons
from East Asia, Ann Arbor: The University of Michigan Press, pp. 3581.
City of Indianapolis (2007), Indianapolis Regional Center Plan 2020, City of
Indianapolis.
City of Tampere Industrial Heritage Tours (NDa), Frenckell Rags to
Riches, Woods to Wealth, http://www.tampere.fi/matkailu/perinne/
english/frenckell.htm, accessed 31 March 2005.
References 135
New South Wales, in T. Hubbard and P.M. Hall (eds), The Entrepreneurial
City: Geographies of Politics, Regime and Representation, Chichester:
John Wiley & Sons, pp. 10728.
Miller, J. (1999), Regional Case Study: Austin, Texas of How to Create a
Knowledge Economy, Washington, DC: European Commission
Delegation.
Moore, J.E. (1996), The Death of Competition: Leadership and Strategy in the
Age of Business Ecosystems, New York: Harper Press.
Mouritzen, P.E. and J.H. Svara (2002), Leadership at the Apex: Politicians
and Administrators in Western Local Governments, Pittsburgh: University
of Pittsburgh Press.
Musyck, B. (2003), Institutional endowment, localized capabilities and the
emergence of SMEs: from mining to recycling, the case of Freiberg
(Saxony), Entrepreneurship and Regional Development, 15 (October
December), 27398.
Myrdal, G. (1957), Economic Theory and Underdeveloped Regions, London:
Duckworth Press.
Nelson, R.R. and S.G. Winters (1982), An Evolutionary Theory of Economic
Change, Cambridge, MA: Harvard University Press.
Neustadt, R.E. and E.R. May (1990), Thinking in Time: The Use of History for
Decision Makers, New York: Free Press.
North, D. (1990), Institutions, Institutional Change and Economic
Performance, Cambridge: Cambridge University Press.
OECD (1993), What Future for our Countryside, Paris: Organisation for
Economic Co-operation and Development.
OECD (2000), Learning Regions and Cities: Knowledge, Learning and
Regional Innovation Systems, Paris: Organisation for Economic Co-
operation and Development.
Ohmae, K. (1995), The End of the Nation State: The Rise of Regional
Economics, New York: Free Press.
Osborne, D. (1988), Laboratories of Democracy, Cambridge, MA: Harvard
Business School Press.
Osborne, D. and T. Gaebler (1963), Reinventing Government: How
Entrepreneurial Spirit is Transforming the Public Sector, New York:
Penguin.
Oskamp, S. and P.W. Schultz (1998), Applied Social Psychology, 2nd edition,
Upper Saddle River, NJ: Prentice Hall.
Park, S.O. (1995), Networks and Competitive Advantages of New Industrial
Districts, Paper presented to Pacific Regional Science Conference
Organisation, 14th Biennial Conference, Taipei, July.
Parker, R.E. and J.R. Feagin (1990), A Better Business Climate in
Houston, in D. Judd and M. Parkinson (eds), Leadership and Urban
Regeneration, Newbury Park, CA: Sage Publications, pp. 21638.
142 Leadership and institutions in regional endogenous development
147
148 Leadership and institutions in regional endogenous development