Institutions, institutions, institutions…

Posted by Andy Pike, 3 June 2013

Growing recognition of the role of institutions in academic and policy circles has invigorated discussion about what they are, how they work and what they might bring and detract from effective local and regional development. Simplistic arguments that institutions are necessarily bureaucratic hindrances to the free and fair operation of the market economy have been questioned. Similarly, the case for institutions as a kind of ‘magic dust’ capable delivering successful economic development in any circumstances has been challenged.

 In defining institutions, many studies fall back upon Douglas North’s idea of institutions as the ‘rules of the game’ within a society that shape how actors – public, private and civic – relate and behave. Making this a bit more concrete, we can identify two main types of institutions – formal and informal (Figure 1). Formal institutions are ‘hard’ or codified, typically written down and documented. They include things like charters, constitutions, laws, regulations, rules and requirements. They are manifest in contracts, legal statutes and property rights. Informal institutions are ‘soft’ or tacit, often existing in the minds and practices of the actors involved rather than being formalised and codified. They include things like conventions, habits, norms, routines, traditions and values. We see them manifest in phenomenon like trust, social capital and networks.

Figure 1: Types of institutions

Formal

‘Hard’ – Codified

 

Charters, Constitutions, Laws, Regulations, Rules, Requirements

 

e.g. Contracts, Legal statutes, Property rights

 

Informal

‘Soft’ – Tacit

 

Conventions, Habits, Norms, Routines, Traditions, Values

 

e.g. Trust, Social capital, Social networks

 

Defining institutions and distinguishing their different kinds only brings us so far. Integral to the debate has been the question of their role and contribution to development regionally and locally. As countries across the world wrestle with the challenges of economic development, particularly in the wake of the global financial crisis and in some countries state austerity, questions of institutional design, purpose and contribution have come to the fore.

In theory, institutions can play a positive role in providing public goods, addressing ‘market failures’, reducing uncertainty, reducing transactions costs, promoting efficiency and tailoring policy to regional and local contexts. These potential roles are manifest in a range of things institutions actually do on the ground:

  • diagnosing and interpreting regional and local economic growth issues
  • leading and decision-making
  • formulating strategy and priorities to articulate courses of action and paths of development
  • providing voice for regions and localities in multi-level and multi-actor systems of government and governance
  • co-ordinating, integrating and mobilising actors to facilitate dialogue and negotiation
  • fostering linkages between public, private and civic sectors
  • generating, pooling and directing resources
  • setting the framework and incentives that shape the individual and collective choices and behaviours of economic actors.

But the role of institutions is not always and everywhere positive. There are a number of potentially negative contributions institutions make that can inhibit local and regional development. These include: unfunded mandates when they are given or accept responsibility without resources; bureaucracy, lock-in and sclerosis hampering flexibility and responsiveness; duplication and fragmentation stimulating competition for resources; capture by elite actors and rent-seeking by particular interest groups; and, corruption. Indeed, recent work by the OECD on Promoting Growth in All Regions identified a number of ‘institutional bottlenecks’ that can trap regions and localities in low growth trajectories:

  • poor mobilisation of stakeholders
  • lack of continuity and coherence in the implementation of policies by institutions
  • institutional instability
  • lack of a common and strategic vision
  • lack of capacity
  • gaps in multi-level governance frameworks.

Central to shaping institutions for local and regional development, then, is a sharper understanding of what they can and can’t do as well as moulding their features to work effectively within particular regional and local contexts.

The state of the LEPs

Posted by Andy Pike, 19 March 2013

Two and half years on from the invitation to local councils and business leaders to form Local Enterprise Partnerships (LEPs) in England we have now reached a critical juncture in their development. The 39 sets of local actors across England have been busy building these new institutions and forging and nurturing partnerships since 2010. In the wake of Lord Heseltine’s review In Pursuit of Growth in late 2012 and its central call for more decentralisation of resources and responsibilities to LEPs, Government is shortly to announce its response in next week’s Budget.

LEP logos

A montage of all 39 LEP logos

Researchers in CURDS have undertaken the first national survey of all 39 LEPs as part of their involvement in the national Spatial Economics Research Centre (SERC) and the study sought to take stock of the current position and prospects for the LEPs. In early March 2012, CURDS hosted a seminar on ‘The State of the LEPs to disseminate the preliminary findings and to engage in discussion about the issues with academics, analysts and policymakers from across England.

Several questions and issues critical to the current context were identified in the research and animated debate:

“What is the LEP?”

This fundamental question prompted some reflection on the specific nature and purpose of LEPs. For some in the CURDS research, the LEP constituted the Board while for others it was the locus of the local partnership for economic growth. Clarity on the aim, purpose and role of the LEPs remained a central issue on which LEPs were developing their own local views and they are were increasingly keen to better understand what Government has in mind for the longer term.

Are LEPs too small and fragmented really to add value and make a difference to local growth?

The size and scale of the LEPs and the fragmented character of the institutional arrangements was a very real concern to local and national economic development actors. Unflattering comparison was drawn with European and other regions whose more substantial and “heavy-weight” institutions and resources for regional and local economic development left the LEPs looking rather limited and under-powered in the competition for the investment, jobs and innovation to generate local growth. The CURDS research revealed a diverse picture of varied capacity and resources amongst the LEPs.

Establishing the staff and finances of the LEPs is complex. Staff contributions are direct, indirect and pro bono and in-kind from partner organisations. Finances comprise a range of funding streams – European, central and local – with some allocated and some won in competition. Direct staffing ranged from up to 40 to less than 1. Finances stretched from an estimated £40m to under £5m. In this kind of resource environment, it rang very true that for local economic growth the “LEPs were only as strong as their partners”.

How can central Government provide the advice and guidance on what the longer-term vision and plan is for LEPs in ways that don’t challenge the idea of ‘localism’ and undermine the autonomy local actors?

This issue is especially thorny. The CURDS research found that LEPs were crying out for a sense of where Government policy is heading and what further responsibilities and resources are coming over the horizon. Yet mixed and unclear messages were emerging from different Ministers and Departments. LEPs want a steer and direction – rather than prescription – on where Government would like to see institutional arrangements to facilitate local growth heading.

Are LEPs competitors and/or collaborators?

While the 39 LEPs were – in numerous cases – bottom-up entities, the CURDS research and discussion at the seminar focused on the issue of how the LEPs relate to each other within the broader network or system. There is evidence of chasing investments, firms and people for individual LEP areas. There are examples too of collaboration on issues of shared concern, whether with neighbouring LEPs or those further afield for example on MoD and the defence estate. Given the national centralisation of key policy areas important to local growth in inward investment and innovation, the CURDS research revealed an uneven set of relationships between specific LEPs and the key national institutions. In a competitive model, the more capable and better connected LEPs will forge ahead leaving others in their wake. In a collaborative model, the benefits of knowledge exchange and learning might be spread out across LEP-land. If rebalancing is still a serious government concern then some thought on how the overall system inter-relates and works would be timely.

How can LEPs maintain their streamlined organisations with growing responsibilities and resources to manage?

The fear articulated here was about “bureaucratisation” and losing the agile and focused ways in which LEPs are trying to do more with less. Balancing this concern was the need to be accountable for the decision-making and disbursement of public funds. Indeed, the CURDS research revealed many LEPs were uneasy and seeking advice on appropriate governance arrangements to address these concerns and assuage the anxieties of private sector board members. Engaging the private sector by giving them a real say was seen by LEPs as critical to sustaining their meaningful input. But how can it be done in ways that are accountable and transparent?

How much decentralisation and for whom?

In the wake of Lord Heseltine’s review, further decentralisation of responsibilities and resources are expected to be heading the way of the LEPs. Local actors expressed concerns about exactly how this would work. Would there be decentralisation in waves? Would an initial tier of more capable and strong LEPs with recognised economic opportunity and potential to contribute to local growth emerge at the front of the queue for further resources and responsibilities? Where this left the less capable and weaker LEPs was less clear.

Even given the history of flux in the governance arrangements for economic development in England and the alphabet soup of acronyms of the institutions of previous eras, it was felt that LEPs were likely be around for a while with little prospect of further change whatever the outcome of the General Election in 2015. Amongst the local actors there was little appetite for further institutional change and upheaval, the costs of which were still being felt by many in the wake of the dismantling of the regional tier. Fundamentally, local actors were trying to get on with the job of growing prosperity locally. “LEPs may come and go but the rationale for the local partnerships remain” as one participant put it.

As the LEPs await the announcements in next week’s Budget, rumination centred upon whether or not a collective voice for the “LEP family” could or should emerge. Two and half years in LEPs have been largely reactive to the changing landscape of economic development governance policy emanating from the centre. In the next two and half years, LEPs might decide that their shared concerns and interests would be better articulated in a collective and proactive way. This is especially the case if the current government’s predilection for the ‘deal-making’ of “asks” and “offers” continues to shape centre-local relations in England.

LEP participants

Participants from the seminar’s closing panel are pictured (left to right): David Marlow (Third Life Economics), Gillian Roll (North East LEP), Linda Edworthy (Tees Valley LEP), Paul Hackett (The Smith Institute), Lorna Gibbons (The LEP Network) and Andy Pike (CURDS, Newcastle University)

Whither the local and regional role of universities?

Posted by John Goddard, 4th March 2013

The Lord Dearing Lifetime Achievement Award prompted me to look back to his 1997 report and reflect on where the sector is now in terms of one of his chapters- the local and regional role of HE.

Professor John Goddard

Professor John Goddard

As evidence to the Dearing review, the CVCP (the precursor to UUK) asked the Centre for Urban and Regional Development Studies at Newcastle University to undertake a review entitled ‘Universities and Communities’ based on submissions we received from most universities. Drawing on this and other evidence Dearing noted that “HE is now a significant force in regional economies as a source of income and employment, a contribution to cultural life and in supporting regional and local economic development… As part of the compact we envisage between HE and society each institution should be clear about its mission in relation to local communities and regions”. Dearing clearly recognised that this ‘compact’ was wide ranging, had a strong local dimension and was one where the university’s contribution to ‘the economy’ could not be separated from the wider society in which it is embedded.

Some of what Dearing recommended has to come to pass in the ensuing decade. Universities came to play a key role in the regional governance architecture of England. Through regional associations universities from different mission groups worked together with RDA and HEFCE support to respond to regional needs and opportunities – for example combined efforts through Aim Higher to deliver widening participation in HE. Joint working not only with RDAs but other public bodies like regional local authority associations and the regional Arts Councils recognised mutual interests and the fact that the regional impact of universities was maximised when the knowledge supply and demand sides were operating in tandem across a broad front.

Much of this regional architecture, including most of the regional associations of universities, has now been dismantled to be replaced by a new emphasis on localism and a singular focus on the contribution of universities to the economy nationally and locally. For example HEFCE has just invited bids to its Catalyst Fund for projects “to enhance the economic anchor role of universities and colleges within their localities”.

University and the City book cover

Most universities in England are located in a city. In our new book The University and the City, Paul Vallance and I demonstrate that universities are much more than economic actors. Location in cities means that universities must perforce have relationships with other institutions that inhabit the city and play a role in its physical, social and well as cultural development. Urban location also raises normative questions for academic practise – how to be of relevance to the place in which the practitioners live and work as citizens. The public good question frequently raised by Chris Brink, Vice Chancellor of Newcastle University of not only what are universities ‘good at’ in terms of research and teaching but also what are they ‘good for’ has real resonance at the city level. In response to this question, we see individual academics and whole institutions like UCL and Newcastle viewing the city as a ‘living laboratory’ as they respond to such global challenges as sustainable development, an ageing population and inter-cultural interaction, challenges which also have a local dimension.

Significantly these grand challenges also provide business opportunities – for example in the development of technologies and services delivery innovations to enable older people to remain in their homes.

  • To what extent will the deep and broad relationships that we observe have been built-up between universities and their cities survive the turbulent times and era of public austerity confronting both cities and universities?
  • Will universities and local authorities pull up the drawbridge and concentrate only on their core teaching and research functions or statutory responsibilities?

We argue that there are strong incentives for universities to strengthen partnerships with local civil society in order to deliver widening participation, to enhance the student experience and employment outcomes and to demonstrate the impact of research. Likewise local authorities and Local Enterprise Partnerships with tight budgets will need to look to universities in their area as key actors able to connect the global and the local across a broad front. Indeed, those universities like my own that fulfil this civic role will be truly anchor institutions in the broadest sense of the word.

John Goddard is Emeritus Professor of Regional Development Studies and formerly Deputy VC at Newcastle University. His book with Paul Vallance on The University and the City was published by Routledge on 31st January.

Recovering local economic development

Posted by Andy Pike, 8th February 2013

Few more difficult contexts exist for local economic development than the aftermath of conflict. Destruction and irreplaceable loss create conditions of fear, uncertainty and instability for people and places. As conflict situations end or begin to work towards resolution, the importance of recovering local economic development becomes pressing. Restarting economic activity and especially employment plays a critical role in contributing to stability, reintegration, livelihoods and sustainable peace. Creating jobs helps people and communities to cope and survive in the short term by addressing their basic needs. Revitalising local economic potential, reinstalling social safety nets and mending broken infrastructures become the focus of medium and longer term efforts.

Andy Pike (2nd row, far right) with delegates at the Istanbul Chamber of Commerce

Andy Pike (2nd row, far right) with delegates at the Istanbul Chamber of Commerce

Getting local economies back on their feet following conflict is no easy or straightforward task. The United Nations International Labour Organisation (UN-ILO) Programme on Crisis, Response and Reconstruction has been actively involved in post-conflict states internationally. Critical has been its establishment of an integrated approach to local economic recovery and development. The framework uses what the ILO describe as ‘one programme on three concurrent tracks’ to work through the phases of peace negotiation, stabilization, reintegration and transition towards the ultimate aim of sustainable employment creation and the ILO’s particular vision of ‘Decent Work’ (Figure 1).

Figure 1: Programmes for post-conflict employment creation, income generation and integration

Figure 1: Programmes for post-conflict employment creation, income generation and integration. Source: ILO (2010) Local Economic Recovery in Post-Conflict: Guidelines, ILO: Geneva

As part of this programme, CURDS has been contributing to the ILO’s work in developing guidelines to advise regional administrations in local economic recovery and development in Iraq and assessing the experiences of the pilot areas. The provinces and regions of Iraq are engaged in the task of recovering local economic development following the conflict in the 2000s. Several key issues have emerged from this research:

  • Addressing the questions of ‘what kind of local economic development and for whom? – Central to the rebuilding of local economies in post-conflict situations is the need for a vision of what sort of economy local communities aspire to and desire. Prior to conflict economic structures may have been dominated by specific sectors and labour markets may not have been producing sufficient jobs. Planning in the post-conflict context offers an opportunity to think through how the local economy structures might be reshaped and modified in ways more beneficial to the particular form of development required by local communities.
  • (Re)building capacity – Destruction of physical, social and intellectual assets during conflict creates substantive gaps in the capacity actually to undertake local economic development and its planning. Bringing together the remaining expertise and nurturing new talent become critical tasks in enabling regional administrations to follow the process. Crucially this involves learning by doing and engaging local stakeholders as part of an inclusive and participatory set of activities.
  • Decentralisation – As government and governance structures are renewed in the aftermath of conflict, formerly centralized states have to address the issue of decentralization. New political settlements often require greater recognition of autonomy and the decentralization of responsibility and resources. But it is often hard for central national states to let go and for sub-national institutions to develop the confidence and capacity credibly to deliver. This conundrum is not helped by the mixed evidence and uncertain causal link between decentralization and growth especially in transition contexts:
    Decentralisation Outcomes: a review of evidence and analysis of international data  (PDF: 1MB)
    Do you first need decentralized governance to generate growth? Or should growth be the first priority and then governance reform?
  • Progressive social and economic reform – The conclusion of conflicts can create opportunities for social and economic change as part of the transition to peace. The key issue is engaging local communities to ensuring reform is progressive and inclusive, serving to address existing social and economic problems and inequalities such as gender inequality and youth unemployment. Critical is the need to avoid the kind of damaging reforms described in Naomi Klein’s ‘shock doctrine’ of wholesale marketization and the reinforcement of social and economic disparities and tensions.
  • Sensitivity to context – In developing a general framework and set of guidelines to help local actors, there is a central need to adapt and tailor broadly based approaches to particular conditions. In the stakeholder engagement element of the planning process, for example, the key stakeholders at the regional level may differ with agriculture more important in one Province compared to another and trade unions elsewhere. In this sense, planning for local economic recovery and development in the post-conflict context is an explicitly place-based approach and benefits from adaptation to particular local circumstances.

What have we learnt about commuting?

Posted by Mike Coombes, Monday 10 December 2012

There has been research in CURDS on commuting patterns for much of its 35 year history and the policy relevance of this work continues to grow, as recent studies show.

The coalition government has rolled out its predecessor’s plans for Local Economic Partnerships (LEPs), together with the policy that each LEP should cover a “functional economic area” such as a city region. Here lies the research problem: the generally acknowledged template for such areas is provided by the Travel to Work Areas – defined in CURDS using commuting data – but most of these are too small to be LEPs. The government chose to let LEPs define their own areas and when these are ‘tested’ against commuting patterns many are found to not be real local economic market areas (PDF).

Of course the geography of the labour market revealed by commuting patterns is a not a complete picture of a local economy, and yet it often reflects wider issues of accessibility and interaction. One recent study of the recently opened second Tyne Tunnel showed how quickly this new facility affected commuting and, in similar ways, brought benefits to the local economy more generally.

Within a year of its opening over 70% of local businesses considered that reduced commuting times for employees using the tunnel raised their productivity due to, for example, improved punctuality and morale.  Recruitment practices changed to exploit the effective increase in labour catchment areas to more areas across the river (as anticipated by spatial economic theory). Just over half the businesses recognised real financial benefits which could also arise from reduced vehicle operating costs. This is seen as a ‘concrete’ example of how investment in transport in the North – which is minimal in comparison to that in London – could help the region contribute more to economic growth.

In various ways then, the changing geography of commuting patterns reflects how Britain’s local economies adjust over time. Yet each commuter has made choices about where to live and work which are the result of the unique circumstances of themselves and their household. As a result, there are some commuting patterns whose key drivers may not be economic. One example in recent CURDS research was the finding that migrants to rural areas had some of the longest commuting journeys in England. They commute further than would be expected even after other factors are taken into account, reflecting decisions made for what may be ‘lifestyle’ reasons that will be difficult to change by policies aiming to reduce the environmental impacts of such long commuting.

The link between commuting patterns and migration patterns was also seen in CURDS research on urban areas in the North where few journeys to work are lengthy, however it seems they might have been shorter still if people there were less ‘rooted’ to their local towns.

Thus in commuting patterns we can learn much about the geography of local economies, as well as seeing reflections of more social dynamics which also drive migration patterns. This research will soon be renewed with data from the 2011 Census: only the Census provides this vital information on flows of commuters and migrants between every locality in Britain so it will be an immeasurable loss to future geographical research if there is no reversal of the government proposal to hold no future Censuses.

Russian lessons

Posted by Andy Pike, Friday 9 November 2012

Enhancing our understanding of the ability of places to bounce back and rebound from disruptive economic change has become part of the zeitgeist in academic and policy circles across the world. A burgeoning debate has rumbled on about what constitutes and explains the ‘resilience’ of places in the face of financial crises, dangerous climate change and extreme weather events – CURDS has been actively contributing to the theory and practice of such issues:

Novosibirsk – a city of 1.5m people – in the Siberian region of Russia has demonstrated its ability to rebound from a close to 5% hit on its output following the global financial crisis which impacted the Russian economy hardest in 2009. The city has already bounced back to 5-6% GDP growth in 2012. Current CURDS research suggests several elements appear to have contributed to Novosibirsk’s resilience:

  • ‘Mixed’ economy – following the collapse of the Soviet Union in the early 1990s and transition toward capitalist forms of economic organisation, Novosibirsk’s economy has evolved from the domination of the centrally planned command economy and the military-industrial complex toward a much more ‘mixed’ economy in which the state – federal, regional and municipal – remains key and the private sector has flourished with a diversified mixture of sectors (primary, secondary, tertiary and quaternary) and economic actors especially SMEs
  • Geographical advantages – Novosibirsk’s location at the bridge between Europe and Asia – the old geographical centre of the Soviet Union – has underpinned its position as a transport hub, historically connected by Trans-Siberian road and rail routes and more latterly supporting its growth as a logistics centre linking its emergent and transition economic neighbours such as Kazakhstan.
  • Innovation – in undergoing transition from the centrally-planned to the mixed market economy in Novosibirsk, the key economic actors have emphasised the importance of innovation both in parlaying the scientific and technical resources of the military-industrial complex into new avenues of growth and building a support infrastructure of technical centres, ‘technoparks’ (pictured above), business incubators and the like to embed and nurture innovation as part of the city’s economic growth model
  • Crisis-hardened – the difficult days of transition during the early 1990s and the currency crisis in the late 1990s appear to have bred in the people and institutions in Novosibirsk a knack of coping with fragile and uncertain economic conditions and an ingenuity that seems capable of underpinning repeated recovery and reinvention.

CURDS is currently contributing to a review of entrepreneurship and small and medium-sized enterprise (SME) policy in Russia led by the OECD Local Economic and Employment Development (LEED) for the Ministry of Economic Development of the Russian Federation and the Russian Vnesheconombank. This follows the greater emphasis placed upon the critical role of new start-ups and SMEs in economic growth following President Putin’s aspiration for 60-70% of employment and 50% of GDP to be accounted for by SMEs by 2020.

Local and regional development international

Post by Andy Pike on 22nd October 2012

Local and regional development has traditionally focused upon localities and regions in the historically industrialised and urbanised higher-income countries across the world – especially in Europe and North America. Development Studies has been concerned with more recently industrializing and urbanizing nations particularly in Africa, Asia-Pacific and Central and Latin America. Such strands of work have tended to run in parallel with limited interaction and cross-fertilization historically. Each has been marked by evolving concepts, theories and language: ‘First’, ‘Second’ and ‘Third World’; ‘Developed’ and ‘Less Developed Countries’; ‘High’, ‘Middle’ and ‘Low Income Countries’; ‘Less Favoured’ and ‘Disadvantaged Regions’; ‘Emerging economies’; ‘Transition economies’; and, ‘Post-socialist economies’. The terms ‘global North’ and ‘global South’ have emerged more recently as a way of capturing these broad groupings of countries.

Yet there is growing recognition that such enduringly disconnected approaches are limiting in an increasingly globalised and inter-dependent world, creating gaps in our understanding and fragmenting our collective knowledge. The traditions of disciplinary and sub-disciplinary demarcations continue, reflecting academic culture, institutionalization and the political economy of the academic publishing business. They shape our perspectives but risk constraining explanation, policy formulation and praxis in addressing global development challenges including prosperity, livelihoods and wellbeing, demographic shifts, equalities, food and energy security, climate change, financial system instability, poverty and socio-spatial inequalities.

To begin to bridge these boundaries, our recent work on local and regional development with Andrés Rodríguez-Pose and John Tomaney  has sought to develop a more international outlook and focus. In putting together the Handbook for Local and Regional Development  – recently awarded the Best Book Award 2012 by the Regional Studies Association’s international membership  – our aim was deliberately to bring together leading voices to address the challenges of development regionally and locally in an international context. In a Local and regional development in the global North and South (PDF: 206KB), we argue for much stronger connection and deeper interaction concerning local and regional development within and between the global North and South.

Conversation can benefit research across different camps by encouraging challenge and reflection upon prevailing ways of thinking to identify and frame new research questions, problems, gaps and contradictions, and innovative ways of tackling them. Our research outlines the basis for such dialogue in several shared concerns:

  • Challenging ‘one-best-way’ and ‘one-size-fits-all’ universal models of ‘development’
  • Asking ‘what kind of local and regional development and for whom?’
  • Addressing common issues including socio-spatial inequalities, spatially imbalanced growth, inter-territorial competition, sustainability and government and governance.
  • Developing greater sensitivity in handling the contexts of particular places and more general and broadly-based understandings.

There are no doubt other areas of potential discussion. But we see these issues as cross-cutting concerns of relevance across (sub-)disciplines capable of encouraging conversation. Rather than providing any kind of singular framework, attempting to answer all the questions or prematurely concluding what we envisage as an ongoing dialogue, our intention is to encourage discussion on these connecting themes better to tackle vital issues of local and regional development within and between the global North and South.