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CONTENTS

VII I
List of pi ates
List offigures ix
XI
List of tables
X III
List of examples
X IV
Ackn owledgements
List of abbreviations xv i

PART 1 lntroduction 1
1 Jntroducti on: local and regional development 3
2 Wh at kind of local and regional development and for whom? 23

PART 11 Frameworks of understanding 59

3 Concepts and theories of local and regional development 61
4 Jnstituti ons: govemm ent and govem ance 123

PART 111 Jnterventions: instruments and policies 153

5 M obilising indigenous potential 155
6 Attractin g and embedding exogenous resources 175

PART IV ]ntegrated approaches 195

7 Local and regional development in practi ce 197

8 Conclusions
253

Selected websites
273
275
References
299
lndex
1
1

1
CONCEPTS ANO
THEORIES OF LOCAL 3
ANO REGIONAL
OEVELOPMENT

lntroduction

Despite ever increasing integration oflocal economies into global ftows oftrade
and capital, ... local economic differentiation remains endemic to capitalism,
and may even be intensifyin g as tran spon and communications costs fall.
Despite the numerous glossy predictions of the death of distance and the end
of geography, local and regional differences in growth may be intensifying
across the industTialized world the search for simple trends in urban and
regional di sparities has been confounded by the new complexity and unpre-
dictability of local economic changes. In the developing world too, regional
and urban inequalities ha ve reached unprecedented scales. Thus, it seems
more impo11ant than ever to understand the processes causing local economic
growth .
(Sunley 2000: 187)

Connecting with the growing impo11ance and profoundly changing context of local and
regional development introduced in Chapter l , this chapter addresses this challenge for
concepts and theories: to provide frameworks to understand local and regional devel-
opment. Concepts and theories are developed to help us interpret and make sense of
how and why things work out in the ways that they do. They should provide us with
usable definitions of concepts, an understanding of the main causal agents and rela-
tionships and how these may be al1iculated in mechanisms and processes. Concepts and
theories are developed to help us understand and explain local and regional develop-
ment across space in place and over time. The kinds of concepts and theories we might
use for interpretation are closely linked to our answers to the questions of what kind of
local and regional development and for whom discussed in Chapter 2. This chapter
reviews the most impo11ant and intluential concepts and theories of local and regional
development. lt provides an accessible and critica! discussion of the main frameworks
of understanding and explanation. Each approach is reviewed, its limitations discussed
and connections are made to the substantial literature on theories of local and regional
development for further reading and reftectíon.
The chapter is organised around the different schools ofthought and types of approach
to understanding and explaining local and regional development. Different theoretical
 FRAMEWORKS OF UNDERS TANDIN G CONCEPTS OF LOCAL ANO REGIONAL DEVELOPMENT

tradition s take different starting points and make a variety of assumptions. Th eir regions in comparison with other regions. Ou tput growth per capita relates growth to
epistemology - thcory of the method or grou nd s of knowledge - and ontology - essence the population of a reg io n and illustrates the relative leve] o f eco nomic and social welfare
of things or being in the abstrae! often differ. New approaches can develop o n the in th e region .
bas1s of criticism and the rejection of existing frameworks of understanding. Theories In the neo-c lassical model , regional outpu t growth is dependen! upon the growth of
evo lv e over time in respon se to critique and their own conceptual developmcnt , oftcn three factors of production : capital stock , labour force and technology. Figure 3.1 illus-
in the light of ongoing empirica l resea rch and changing political circumstances. trates th ese detenninants of regional output growth. Technological progress is seen as
Concepts and theories are not set in stone; they are constan tl y evo lving in parallel with a key contributor to growth due to its influence upon productivity growth rates in the
the world they seek to understand and explain. long run (Armstrong and Taylor 2000). lnnovation and technology have the potential
Each sec tion in thi s e apter examines how particular theories address coJTIJnon ques- to increase output growth per worker. In this basic version of the neo-classical theory ,
tions . These comprise, first , what are the conceptual building blocks used by the theo-
ries and how are they llled? How do they conceptualise localities and re gions and
their ' development '? Sec~ what is_thc..Q!!_rpose and focus of the theories? What are
they seekin g to understanc(;;'nd explain? For so me, this may in clude fundamental ques-
tion s of regional growth: w_hy do some regions grow mQre rapidly than others? WhaJ. lnvestment Regional
by region's
«---- savings
are the dynamics of ~na l conyergence and di...:.~~nceJ Why are local and regional residents rate
disparities in soc ial welfare persisten! o ver time ?~· what are the constitu ~ nt elements
- causal agen ts, relationships, mechanisms a~ocesses - of the theories.? Fou3), what
kinds of exp lanat1ons dothe th~()vide? Fi ~w do the concepts and theories Net inflow Rate of
relate to local and regional development_policy? Last , hat are their criticisms and limi- of capital .,___ return
into the relative to
tations? We begin our review by focusing upon one of the earliest and most inftuential : reg1on other regions
the neo-classical approach to local and regional development.

7) The neo-classical growth theory of local and

regional convergence
Net
m-migration
«----
Regional
wages rale
relati ve to
of workers other
regions
In the tradition of the classica l economics of David Ricardo, John Stuart Mili andAda m
Smith, neo-classical economics is characterised by microeconomic theory developed to
examine static rather than dynamic equi librium within economic systems. Disparities Population Birth and
growth
«----
in regional growth are a traditional concem of neo-classical approaches to local and death rates
regional development (Borts and Stein 1964; Williamson 1965). In this approach,
regional growth determines regional income and economic and social welfare. Local J
and regional 'devel~ment' within thi s theory i ~ focuse.d upon the long-run reduction
of geographical disparitiesjn income per.capüa._ami..Putput. l]¡uaus.almechanisms__in ( lnflowof
the_theory _predict that..5JJch .spatiaLdisparities wi~J-~educe-and mov-e. towards. or conv~e technical
knowledge
up2!2 an economically uptimal~uilihrjum in Lhe_lang_nlll- (Martin and Sunley 1998). from other
The theory seeks to explain where and why such convergence does not occur and why reg ions

di sparities continue to grow or diverge between regions. 'Regions' are understood as

subnational teJTitorial units and have been the main geographical focus of the theory. lnvestment
Conceptually. measures of regional growth are severa! in neo-classical theory in education

(Armstrong and ~ 2000). Output growth refers to the expansion of productive

and skills

capacity within a re gion and illustrates ~e nt to which the region is attracting the
key fa ctors of production capital and Jabour. Output growth per worker is a measure of
productivity and reveals how efficiently resources are being used within a regional t::: Figure 3 .1 The determinants of regional output growth
econom y. Thi s measure relates directly to the relative competitiveness of specific Source: Adapted from Armstrong and Taylor (2000: 72)

11111
MEWORKS OF UNDERSTANDING
1echnolo ~ical change as well as other imponant detenninants such as hu~an capital ,
savl ngs and population g_r~w th rat es are ' di se mbodied' or tTeated independentl¡- of
capítal and Jabour inputs . Hence, this theory is often refe~s ex()genous growth
¡ ~ R_!gio.nal growth dj sparities are explai~d in the neo-classical approach by vari-
ations 111 the growth of the main factors of production: the rate of technological progress
and the relation ship between capital and Jabour - the capital/labour .ratio. Productivtty
_ output per worker - will increase only if capital per worker increases (Figure 3.2).
This is a positive relationship , often referred toas 'capital deepening' (Clark e1 al. 1986).
Huweve r, thi s productiviry increase occurs at a falling rate due to diminishing marginal
returns. This is a central concept in neo-cla ssica l economics: beyond a specific leve] of
input funher input will result only 111 decrea ses in the additional marginal output of the
product per unit input. When the additional or marginal product of labour reaches zero,
then an equi librium position is achieved. At thi s point , there is no incentive to increase
th e capital/ labour ratio.
Neo-classical growth theory has evolved to understand changes over time. lt focu ses
upon the supply of factors of production and assumes their perfect mobiliry across and
between region s (Barro and Sala-i-Manin 1995). The theory assumes perfect knowledge
about factor prices and the economically rational and e fficient choices of buyers and
suppliers in response to market signals Economic retums to the increasing scale of
eco nomic ac tivities are assumed to be c~nstan'-'. Perfectly functioning markets are seen
as capable of ameliorating or reducing rather than exacerbating or increasing geograph-
Output per worker(y ~ \'IL)
-----:--------- YI L = f(KIL)
OL._ -
Capital per v1orker (k = KIL)
- Rgure 3.2 The capital/labour ratio
Source: Adapted from Armstrong and Taylor (2000: 68)
CONCEPTS OF LOCAL ANO REGIONAL DEVELOPMENT
--------------------------
ical di spa rities in economic and social conditions. Under the strict cconomic rationality
and market-based conceptualisations of the neo-classical model , the perfect mobility of
factors of production of capital and labour m ove to regions afJering_the hig)lest relative
r~etum. Firrns look for the most profitable locations and Jabour seeks the highest
wages. The adjustment mechanism works because region s with high capJtalllabour ratios
have high wages and a low retum or yield on investment. Capital and labour therefore
move in opposite directions . High wage regions lose capital and attract labour
Conversely, regions with low capitalllabour ratios have low wages and high retums on
investment. Low wage regions lose labour and attract capital. This market adjustment
mechani sm works over the long run to reduce reg10nal disparities in the capital/Jabour
ratio and regional growth. Regions with less capital per unit of labour tend to have
higher relative rates of retum and higher initial growth rates than regions with higher
level s of capital per worker (Barro and Sala-i-Manin 1995).
In the neo-classical theory , regional disparities are only ever temporary since spatial
inequalities set in motion the self-correcting movements in prices, wages, capital and
Jabour to underpin the eventual convergence of economic and social conditions betwecn
regions (Martin and Sunley 1998). In concert. technology diffuses across regions to
allow 'catch-up' and geographical equalisation in levels of technological progress
(Malecki 1997). In theory , convergence in output growth between region s occurs and
an equilibrium pos1110n is achicved.
The neo-classical approach describes different types of regional convergence.
Conditional convergence refers to movement towards a steady state growth rate re sulting
in constant per capita incomes, consumption levels and capital / labour ratios between
regions. lt is conditional because the savings rates , depreciation rates and populatiun
growth rates that influence regional growth but are treated as externa] to the neo-
classical growth model can differ across countries. Conditional convergence does not
necessanly result in equal per capita income levels across countries. Absolute conver-
gence results when the growth model parameters are equal. R.icher countries will tcnd
to grow slower than poorer countries which start from a lower leve] of development.
For absolute convergence , the neo-classical model suggests that per capita incomes will
become equalised across countries over time. The model has different measures ofspatial
conve rgence between regions. ~ (!3-conve~) measures the speed of convergence.
lt occurs whcn poor regions grow faster than richer regions. Over the long terrn , per
capita incomes equalise across economies. In this measure there is a negative relation-
ship between the growtb of per capita income and the leve] of per capita income at the
sta11 of the period. ~gm~(a-convergen~ s a measure of income inequaliry and is the
dispersion or spread of per caj)ila income between regions at a given point in time.
Convergence occurs when thc dispersion of perca pita in come between regions, although
not necessarily between people within regions , falls over time; 13-convergence can occur
without a-convergence.
Another importan! ne1lc.classicaLapproach that addresses inter-regional convergence
is the theory of comparative advanta~strong and Taylor 2000). Jn this approach ,
nations and regions specialise in economic activities in which they hold a comparative
advantage, principally in industries that utilise their abundan! factors of production. This
 FRAMEWORKS OF UNDERSTANDING CONCEPTS OF LOCAL ANO REGIONAL DEVELOPMENT
-- - - ---- ----- - -----
can include labour, land , capital and narural reso urces. Trade between nations and regions
is based upon di fferences in such fa ctor endowments. Trade is a positive sum game in As Table 3. J illustrates, the European Commission (2004) interprets some convergence
which tradin g partners benefit. In a static rather than dynamic framework , specialisation tn GDP per head across the European Union. Using one of the key measures discusse
and trade promote e ffici ent resource allocation and ínter-regional convergence. above, Beta (f3-convergeru;4 ~tb.e inverse relationshi.Q_ between gr_owth and initial GDP
¡:>er head - is evident for each of the time periods from J 980. Regions with the Jowest
initial levels of GDP per head ha ve, on average, the highest growth rates. In particular, the
The evidence Objective 1 regions - with growth under 75 per cent of the EU 15 average- experienced
strong growth between 1988 and J 994, driven by high growth rates in the new Liinder
Empirical examinations of neo-classical grmvth theory suggest regional convergence is
following the unification ofthe former East and West Germany. The role ofregional policy
often a slow and discontinuous process (Barro and Sala-i-Martin 1991 ; Martin and
in this convergence process through the Structural Funds is recognised and promoted by
Sunley 1998: Armstrong and Taylor 2000). Considerable variations exist in the speed
the European Commission. On the other measure, Sigma _0--convergence) - the dispersion
and extent of co nvergence over different time periods in different places (Armstrong
of per capita income between regiQ!lS_a~ given point in time - is also evident in the
and Vickerman 1995 ; Scott and Storper 2003). Convergence afien fi.uctuates with the
European Union b;tween J980 and 2001. Regional disparities remain an importan! issue
economic cycle, increasing faster during the upswing of growili.than..in th(\-{jownswing
for the European Union, however, particularly in the context of the enlargement of the
periods of rece ssio n_ a lthough converg.enc.e.in generaLappear.s- to.-have-slowed coll&id
European Union and the accession of ten new Member States in 2004. Cyprus, Czech
erably since the early 1980s (DunfQrd l9_2l)-' While interpretations differ, Example 3.1
Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia each
shows how the European Union appears to be experiencing na tional leve] convergence
has lower levels of GDP per head than most existing Member Sta tes and, in some cases,
between Member States and regional leve) stability or divergence. Club convergence is
similarly marked regional disparities (Rodríguez-Pose 2002a). The European Commission
often evident where the growth performance of countries with similar structural char-
estimates that even if growtb in the Accession Countries (plus applicant countries Bulgaria
acteristics and initial conditions converge. The relatively more prosperous and devel-
and Romanía) can be sustained at 1.5 per cent abo ve that in the rest of the European Union
oped OECD countries_ developing and underdeveloped countries form three distinct and
- for example growth of 4 per cent per year relative to 2.5 per cent in the EU J 5 - average
se parate convergence clubs without any necessary convergence in economic growth
GDP per head in the twelve countries would still remain below 60 per cent of the enlarged
í between th em (Martín and Sunley 1998). At the regional leve! , geographical clustering
1 EU27 average until 2017. Regional convergence in the European Union, then , is a long-
of growth rates is ev ident in the United States and Europe with spatially proximate
tenn issue.
grouping of fast and slowe r growth regions (Annstrong and Vickerman 1995).

Table 3 .1 Regional growth disparities in the European Union, 1.980- 2001.

No_ of regions GOP per head Beta convergence

(% growth rate) rate per year (%)
Example 3.1 Regional convergence and divergence in the 1980-1988
European Union All EU15 regions 197 2.0 0.5
Objective 1 regions 55 1.9 0.4
Despite using a common neo-classical approach lo regional growtb, different interpreta- Other regio ns 142 2.0 2.1
tions exist of the changes in regional disparities over time in the European Union. Often
1988- 1994
the analyses differ because of the use of a particular technique, data set or time period
All EU15 regions 197 1.3 0.7
used. Research using econometric models has concluded that the regional convergence Objective 1 regions 3 .1
55 1.4
evident across Europe will continue (Mur 1996). Otber analyses suggest that, des pite Other regions 142 1.2 0.8
increasing expenditures on regional policy, regional disparities in Europe have not
1994-2001
narrowed substantially. Indeed, sorne measures suggest sucb inequalities bave widened
All EU15 regions 197 2.3 0.9
(Puga 2002) and the impact of regional policy has been at best marginal for growth in the
Objective 1 regions 55 2.6 1.6
periphery (Rodríguez-Pose and Fratesi 2004). At the national leve], income disparities
Other regions 142 2.1 0.0
between Member States have fallen . However, income and unemployment inequalities
have risen between regions within Member States. lntemational convergence has been
accompanied by regional divergence (Rodríguez-Pose 2002a). Source: European Comrnission (2004: 146)

...
 FRAMEWORKS OF UNDERSTANDING CONCEPTS OF LOCAL ANO REGIONAL DEVELOPMENT
- - -- - ·- -

The neo-classical approach to regional policy unemployment disparities (Am1strong and Taylor 2000). Perfecrinfonna.t.iorL.i..LgQes-
ti~le. lnvestors and workers are not perfectl y infom1ed and able to respond ratio-
Neo-classical theory and its explanation of regional growth disparities are highly intlu-
nally to price signals. Co.mpe.titiOLLis often imp..erlec.woo_with many markets for goods
ential for regional po licy. Detailed in Table 3.2, regional policy underpinned by neo-
and services not retlecting the ideal of many buyers and sellers each without significant
classica l growth theory has been described as a ' free-market ' approach. This view c laims
market power (Robinson 1964). The limitations of the CQmparative advantage tbeory
that conver_gence wi ll happen reg_ard less of intervention due to the causa l mechanisms
comprise its static framework based on inherited fac tor endowments and its neo-cla s-
ot:_the growth model t~at move reg!~s towards equilibrium or that intervention wi ll
sical assumptions of diminishing retums and technological equiva lence between regions
e1ther hinder or increase the speed of convergence. In the European Union , for example,
anana!Jon s (K1ts0n e 1 al. 2004). Howes and Markusen ( 1993: 35, cited in Martin and
the output measure of GDP per ca pita is used in the geographical ana lysis of the e ligi-
Sunley 1996: 274) go further in challenging the Ricardian mode l of comparative advan-
bility of regions for regiona l policy (European Commission 2004). The focus has been
tage and the soc ial welfare imp lications of the free trade model: ' there is sorne danger
the determinants of regiona l per capita income levels and how low-income regions can
that the unfettered pursuit of free trade will actually depress wages and employment and
converge or 'ca tch-up ' with re latively higher-income region s. ldentifying the interven- lower world living standards '.
tions to correct market failures and ' speed-up' convergence has been central to regiona l
Second, the externa! or exogenous treatment of technology and labour weakens the
policy. Local and regional development po licy is discu ssed in more detail in Part 111.
~1. T~gmo.logieal-rm:lgfess-i.s-p.rofuund l y u neven ge.Qg@JJhical ly and technology dif-
fus ion exhibits strong distance-decay effects (Ma lecki 1997). Shifts in the technologica l
The critique of the neo-classical approach fron ti er have questioned the assumption of constant returns to scale and the productiv-
ity re lationship described by the capital/labour ratio . Such issues have stimula ted the
Cri ticism s of the neo-classica l growth model have focu sed on seve ra! issues . Firs(, its
deve lopment of endogenous growth theory - discussed be low - which seeks to embody
mam assumptions are interpreted as unr~tic (Martin and Sunley 1998). Factor
or interna lise techno logy and human capital. l ndeed , Armstrong and Taylor (2000)
mQ.Qility is less than penect t Armstrong and Taylor 2000). The access to and availabífity
suggest the long-run pers istence of disparities in reg ional growth rates may be due to
of capital is markedly uneven geographically (Masan and Harrison 1999). While capita l
the differential ability of regions to genera te their own technology and adap t technology
is relatively mobile, labour 's economic position , for instance in the housing market. and
from elsewhere. Linking to the notion of stages of development unfolding over time , the
ti es of social reproduction, for instance throu gh family and the education of children,
like lihood of inter-regiona l convergence has been linked to the later stages of nationa l
form attachrnents to places that can often militate against geographical mobility . lndeed ,
development (Wi ll iamson 1965 ; Richardson J 980). Thi s convergence is explained by
neo-classical approaches ha ve focused upon such issues in explaining persisten! regional
the eventual equalisation of labour migration rate s, capital market development, reduc-
tion of pub lic po li cy bias towards core regions and the growth of inter-regiona l linkages
Table 3.2 Neo-classícal regional po/ícy: the 'free-market ' approach T hird, ev idence suggests the neo-c lassical adjustment mechanism typ ica ll y fails to
Oimensions Characteristics work or operates on ly in the very _IQ_ng_f!!!!...a ncllor in specific time periud<;. Fingleton
Theoretical approach Neo-classical economics a"ffiíMcC:ombie (1997) even suggest that observed convergence is consisten! with expla-
Supply-s 1de flexibility nations other than that provided by neo-classical growth theory, in particular techno-
Correcting market failure
logical diffusion and regional policy . In explaining the dynamics ofregional disparities,
Causes of regional economic disparities Market failures
Armstrong and Taylor (2000: 85) suggest that : 'The neo-classical adjustment mecha-
lnefticiency problem in regions due to labour
market rigidities nism may play a re latively minar role'. Fundamentally, the very determinants of neo-
Lack of entrepreneu rial 'cu lture ' classical growth theory - capital stock, labour force and technology - are inherently
Excessive state intervention
geographically variable (Martin and Sunley 1998). Yet neo-classical theory still predicts
Political ideology New Right / neo-liberal
conditional convergence even given labour and capital ' s heterogeneity across space
Popular capitalism
Deregulation / liberalisation (Barro and Sala-i-Martin 1995). Despite these criticisms, the neo-classical approach is
Privati sation still highly intluential in local and regional development as we explore throughout the
Small state sector remainder of the book.
Enterprise culture
Approach to reviving disadvantaged regions Correct1on of market failures

~
Deregulation of regional labour markets
Tax incentives to promote efficiency Keynesian theories of local and regional divergence
Regional policy Minimal expenditure
Selective assistance Keynesian economics takes its name from the eminent economist John Maynard Keynes
Sources: Adapted from Martin (1989); Armstrong and Taylor (2000) whose distinctive approach focused upon the under-employment of resources, the

L
 FRAMEWORKS OF UNOERSTANOING
demand-side of the economy and the role of the statc in mana g in g aggrega te demand.
Although his work focus ed on national economies, hi s 1deas have bcen taken up by
Ff
regional economists. Keynesian theories focu s upQn the reduct.i9JL oi regional growth
di sparities in their approach to local and regional development. Building upon the
critique of neo-class ica l approaches, the emphasis is upon undcrstanding and explaining
r!!gig_naL.divergence; tbe reasons why regional growth disparities persist and are repro-
duced-Gvcr time . Similar to the neo-classical approach. 'development ' is equated with
the reduction ofregional disparities and 'regions' are the geographical focus. In contrast,
the theories emphasise the medium rather than the long run. The adju stment mechaui.sm
in the Keynesian model focuses upon the role of demand rathcr than factor <;upply.
Markets are seen as potentially exacerbating or increasing rather tl1_an ameliorating or
reducing disparities in economic and soéi-al conditions:
because market force s. if left to their own devices , are spatially disequilibri-
ating. Economies of sca le and agglomeration lead to the cumulative concen-
tration of capital , labour, and outpu t in certain regions at the expense of others:
uneven regional development is self-reinforcing rather than self-correcting.
(Martin and Sunley 1998: 201)
Drawing upon the ideas of John Maynard Keynes ( 1936), Keynesian theories use the
approach and language of neo-classical economics to reach contrary conclusions.
Export base theory
Export base theory typifies the Keynesian emphasis upon dcmand. Differences_ Jn
regional growth are explaincd by re&_ional differences in the growth of the region's
exports - the goods and services that are sold outside the region. Externa! demand for
the region '~output detennine~:!2_e region' s g:owth r~~- In contras¡-¡;-¡¡:;; eñdogenous
approaches discussed below , regions are seen to develop from 'without" rather than from
'within' (Arrnstrong and Taylor 2000). lnitially focu sed upon the exploitation of natural
resources and thc integration of resource-based regions into international trade (lnnis
1920; North 1955), the expo0 base approach developed theories of regional specialisa-
tion _and adaptation for continued growth as well as decline. Regional specialisation
in specific export commodities was explained using the neo-classical comparative
advantage theory discussed above. Regions specialise in the production and export of
commodities that use their relatively abundant factors intensively - whether they are
raw materials, labour, capital and/or technology (Arrnstrong and Taylor 2000). As illus-
trated in Figure 3.3, the region's response to externa! demand stimulates growth in the
basic or export sector and in the subservient 'residentiary' or non -basic sector. Multiplier
effect52Ee tri&&!:!!_d as - income and expemiiture chains are stimulated within local and
regional economies. Multipl.ier.s can be positive or negative.
While an oversimplification and ham strung by the assumption of the relative
immobility of factors of production, export base theory established the importance of
CONCEPTS__?F_ LOCAL ANO _!..':_GIONAL DEVELOPMENT •
Expend1tures
G -- ~-~ Basic ac tiv 1tes 1 1 <:====J
by the export
sector in the
local sector
~
[-N~~-~ba;kactivites 1
Expenditures
trom within
lhe local
sector
- Figure 3 .3 Export base theory
Source: Authors' own research
specialisation and the impact of externa! demand for a region 's products upon its growth.
Demand is determined by the price of the region's exports, the income levels of other
regions and the price of substitutes in externa! markets. The international competitive-
ness of the region 's export sector relative to those in other regions determines its growth. •
•
Product qua lity and after-sa les service inftuence demand too. On the supply-side, pro-
duction cost factors , including wages, capital, raw materials, interrnediate inputs and
technology , inftuence the region 's export competitiveness.
and income is critica!:_ Demand for inputs from other regions is al so importan!. With
favourable demand and supply, the region 's export sector grows, demand for factor
inputs bids up their prices relative to other regions and induces inflow of capital and
labour. Regional disparities result. The duration of any such growth differential depends
upon factor s hortages, subsequent inftationary pressures and competition from alterna-
tive suppliers in other regions. Adaptation may require improved competitiveness
through cost reduction and/or productivity increases and the development of new export
markets, depending upon the degree of factor mobility between regions. The export-led
growth process can be cumulative with positive multiplier effects upon regional income,
an induced accelerator effect on investment, increased labour inftow and demand for
local goods and services and the growth of subsidiary industries and extemal economies
(Armstrong and Taylor 2000). A cumulative reversa! of the process and relationships
may also set in, however, for example through shifts in the demand for exports, tech-
nological change a nd competition. Example 3.2 examines how an export-based approach
has been used to explain the pronounced disparities in growth and income in the regions
of China.
 -----·--
CONCEPTS OF LOCAL ANO REGIONAL OEVELOPMENT
Ell
1
lnland
Regional disparities in China Shanxi 2,372 199 1.8 0.42 0.8
lnner Mongolia 2,685 289 1 .5 0.17 0.4
dramatic economic growth in recent decades in China has been accompanied by pro- Jilin 3,182 284 2.0 0.84 0.6
regional disparities. As part of economic reforms to open up the economy Heilongjiang 3,844 213 3.5 1.09 0.8
intemational trade, China's national development policy has prioritised investment in Anhui 2,362 345 3.6 0.88 0.8
-oriented processing activities to exploit its comparative advantage of abundant and Jiangxi 2,339 289 2.4 0.81 0.5
atively cheap labour. As Table 3.3 illustrates, during the 1990s, marked differences bave Henan 2,456 387 5.6 1.22 0.6
up in growth and income between the coastal and inland regions. Comparative Hubei 3,269 353 4.7 1.78 0.8
rates between the coastal and inland regions were similar during the 1980s. Hunan 2,562 312 4.1 1.48 0.7
govemment-sponsored liberalisation, during the 1990s the real GDP per Sichuan 2,234 306 4.5 1.54 0.6
ta increased 95 per cent in the inland regions and 144 per cent in the coastal regions. Guizhou 1,242 226 1.1 0.13 0.2
Yunnan 2,234 354 2.3 0.27 0.5
na 's coastal regions are catching up and even surpassing the otber South East Asían
Shaanxi 2,058 222 1.8 0.9 0.5
wnomies of Malaysia, the Philippines, Indonesia and Thailand. Taking a Keynesian per-
Gansu 1,851 144 1.1 0.13 0.2
recent research has emphasised the role of exports and foreign direct investrnent
Qinghai 2,340 151 0.3 0.01 0.1
in explaining these regional inequalities. Fu (2004) argues that exports exerted a sig-
Ningxia 2,245 179 0.3 0.04 0.1
positive impact upon growth in the coastal regions . FDJ-based and labour-intensive,
Xinjiang 3,247 377 1.4 0.11 0.5
· g-type exports have induced substantial growth in tbe coastal regions, attracting
Average or sum* 2,497 292 40.0* 11.8* 8.7*
mobile resources of labour from the inland regions. ln contras!, the inJand regions ha ve
benefited from any sign ifican! linkages or spillovers from the growth of the coastal National average 3,631 358
Migration of labour from the inland regions has increased regional in come inequal- Note: * Sum of column ce ll s.

es, although the growing urbanisation of the interior is acting as a counterbalance. For Source: Fu (2004)
Cbinese govemment, furtber labour migration to the capital-rich, coastal regions will
regional disparities. Regional policy is therefore focused upon encouraging the
of domestic and foreign-owned capital to the Jabour surplus inland regions.

Table 3.3 GDP, FDI and exports by coastal and inland reg ions in China, 1.999 lncreasing returns and cumulative causation
Regions Real GDP GDP% GOP% of FDI% of Exports%
national national of national Exp licitl y rejectin g the neo-classical approach , K¿dor ( 1970, 1981) exp lained regional
(PPC) (yuan change
at 1990 1978- total total total ,growth....]Je.J;..cap.ita by a.r.egio.n.:.s abiJity to.specialise-and exploiLscale economies. Sectoral
constant 1999 structure was important too. Manufacturing was interpreted as a 'flywheel of growth'
prices)
capable of fostenng mnovation and generating significan! productivity benefits and faster
Coastal growth for manufacturing specia li sed regions compared to resource-based regions.
Beijing 9,960 255 2.7 4.13 3.2 Kaldor emphasised increasing retums - rather than the neo-classical model's constan!
Tianjin 8,017 218 1.8 3.94 3.3
or diminishing retums - whereby increa~in.J!?puts generate disprop()rtionately larger
Shanghai 15,459 184 4.9 8.19 9.4
in creases in quantities of outputs. Growth processes founded upon increasing retums are
Liaoning 5,062 242 5.1 4.16 4.2
cumulative as fast growing regions steal a march on other regions and further reinforce
Hebei 3,479 339 5.6 1.99 1.4
their regional specialisation (Armstrong and Taylor 2000). Such increasing retums are
Jiangsu 5,352 472 9.4 12.13 9.5
central to the extended neo-classical theories discussed below.
Zhejiang 6,041 739 6.5 3.11 7.0
The way in which the growth process tends to feed on itself in a circular and cumu-
Fujian 5,418 812 4 .3 9.78 5.4
Shandong 4,353 533 9.4 5.9 6.3
lati,;;-way and generate unoalanced regioñi r growth is
c7ntral to Gunnar M!!,dal's
28.25 W.4 (1 957) theozy of cumulative causation. Following the Kaldorian and Keynesian
Guangdong 5,886 637 10.3
2.4 2.09 0.6 approach, this theory emphasises increasing rather than constan! or diminishing retums
Guangxi 2,082 325
411 62.4* 83.7* 90.7* to scale, agglomeration or externa] economies and the positive growth implications for
Average or sum* 5,204
localities and regions that were first to industrialise . The cumulative growth process is
FRA M EWO R KS OF UNDERSTAND I NG
------------------
outlined in Figure 3.4. Benefic ia! e ffec ts between fa ctors of producti on furth er adva n-
tage and prope l growth in deve loped reg10ns, oft en at the expense- of laggin g regions.
rowthiñ develo ped regio ns may benefit l ~g in g regions through 'spread ' effects o r
wh at Hirschman ( 1958) ca ll ed ' tri ckl e down ', in cludin_g tec hnological diffu sion and
e_!Fort markets fo r their produ cts. ¡-J owever, althou gh relati ve i:L_!J nderdevelopt;d or
peripheral regions could offer low-wage labour, thi s may be offse t by more powerful
agglomeration economi es anc:!_ th e ce!l! ri ~u:e~y_groe ra t e in attracting_ fue10rs
The Verdoorn effect and growth pole theory
of production in th e develope.d .OLC~egion s. ' Backwash ' e ffec ts could furth er rein-
forc e dispariti es throug h encouragin g capital and labour Aows from lagg ing to devel-
oped regions . Ration al respo nses to market price signals th erefore reinfo rce rath er than
r~ du~e regional ineg ualiti es. Li be rali sed trade further intensifies thi s polari sed devel op-
ment between co re and periph eral regions by ca ta lys in g growth in develo ped regions at
the expense of lagg in g rcgio ns. Ka ld or's ( 1970) elaborati o n o f cumul ative ca usa ti o n
emph as iscd how increas in g return s gave earl y industriali sin g regions advantages in
international trade:
Actual monetary wages may be th e sa me in all regions, but effi cienc y wages,
defined as m o netary wages di vided by a measure of labo ur productiviry, tend
to be lower in industri ali zed reg ions du e to scale economi es. Since reg io ns with
lower efficien cy wagcs ca n produc e more output, whi ch in tum leads to furth er
reducti ons in the effi ciency wage (and so o n), gro wth may build o n itse lf
without bound .
(Dawkin s 2003: 139)
CONCEPTS OF LOCA L ANO REG I ONAL DEV EL OP M E NT
Ei.J.
T hrough such feedbacks. cumul ati ve ~a u sa ti o n ~wo rk in a pos iti ve directi on and
crea te virtuous circles of growth and deve lopment loca ll y and reg·lonall y. Converse ly
too. nega ti ve re lati onships ca n reverse the process and crea te v icious circ les of decline
perhap s resultin g_ from a loss in th e co mpetiti ve ness of the reg io n 's exports or ex tern a!
shocks such as pri ce rises in fac to r inputs.
U nbalanced reg io nal growth and di ve rge nce are ce ntral to Keynesian theo ries of local
and reg ional deve lopment. As Figure 3.5 outlines, Di xon and Thirl wall 's ( J 975 ) ex pla-
na! ion emph as ises th e feedback effec t of th e region 's_growtb upon tbe expon s.ector 's
competiti ve ness, th e kn ock-on effect upon output , and furth er benefi cia] effects for the
export secto r's produ cti v iry and competiti veness. Di xo n and Thirlwall (1 975) empha-
stse 'The operati o n of th e Verdoo rn e ffec t wh ereby the growth in labour produc.t.i\l.ity
is partl y depend ent upon th e growth of out,pul. Positi ve and stron g g ro wt ~l;lOur
producti viry and ourput become mutuall y reinforcing . G rowth pole th eory draws upon
cumul att ve cau sati o n too, in parti cul ar th e po tential link ages between pro pul sive firm s
c;páble of ge neratin g indu ced growth through inter-i ndu stry linkages - bo th backward s
and forward s through suppl y chai ns (Hirsc hman 1958) - and loca lised industrial growth
(Perro ux J 950). Growt h ce ntres or poies may emerge, ge nerated by agglom e rati on econ-
omi es, to propel loca l and regional growt h and deve lopment. In common with export
base th eory, Friedm ann 's ce ntre- periphery model empha sises th e po tenti al for the
ex tern a] induce ment of g rowth , th e powerful ex terna] economi es of core regions and the

Cap1tal
relallve 10
[ ---- IM•al 1m pulse J
tabour
Lcosts 1

n l
Growth 1n
cap•taVIabour
Change in
wage costs
Populat•on
growth

lncreases employment
New f1rm locat•on or extshng
firm expans1on
lncreases aygtomeratlon
economies as a gro'M.h pote
rat1o
V 1
Change 1n
1
Growth al Growth of
and populat!On .; Reg•onal pnce ol
output
labour
!----> !----> reg1onal
growth
produCIIVIty regional
exports
exports
'
lncreases labour
Rate ol
,. technolog•cal -
T
Upgrades
Change m
supply and r.hange
parttcipation infrastructure pnce of
substitutes
T
lncreases demand for R&D
goods and serv1ces spendtng
Enlarges the local and
reg1011al finanoal base
and spend•ng power
Enlarges the local and Expands the serv1ce
reg10nat supply base sector

- Figure 3 .4 Cumulative regional growth 1 - Figure 3.5 The Dixon-Thirlwa/1 model of regional growth
Source: Adapted from Chisholm (1990: 66) Source: Adapted from Armstrong and Taylor (2000: 95)
FRAMEWORKS OF UNOERSTANDING CONCEPTS OF LOCAL ANO REGIONAL DEVELOPMENT

role of political and economic leaders hip and entrepreneurship in translating expon 1994). Crili cism of the Keynesian approach peakcd in !he neo-cla ss ical and free-market
demand into growth in the non-basic residentiary sector (Friedmann 1972). In a c lose ly dominatcd 1980s due to its uneven performance record. ' deadwei g hl ' effects subsidising
interdependent way, non-core regions are defined by their relationship with the core and activilies that would have happened irrespective ofpub li c suppon , uncenainty regarding
their relative dewee of autonomy , for example as ' resource frontiers ' or 'downward how to maintain growth and some dramatic failures costly in public expenditure terms
transitional' areas. (Taylor and Wren 1997). Despite such criticism. lhe experience ofrecen! decades has
questioned the strength of Hirschrnan's rrickle-down effec1s. panicularly in the most
disadvantaged and lagging regions :
The Keynesian approach to regional policy
Jn common with neo-classical theories, Keynesian th eories of regional divergence have Most contemporary policy, rhetoric aside, relies upon a mod e l of development
strongly inftuenced regional policy. The potential of markets to reinforce rather than diffusion based on the principie of benefits trickling down to lroubled targets.
reduce regional disparities has estab lished a role for lhe state, especially at the national Conventional policy has yet 10 find the key 1hat unlock s the fa les of truly trou-
leve! , and public policy intervention (McCrone 1969; Kaldor 1970). Contrastin g with bled locales.
the neo-classical and its free-market regional policy, a long history of Keynesian inter- (Glasmeier 2000: 568)
ventionist regional policy is evident (Jable 3.4). Govemment-directed growth was
considered feasible due to its potential to stiroulate _increasing retum& to. scale Funher discu ss ion of the Keynesian-inspired approaches 10 local and regional develop-
(Rosenstein-Rodan 1943). Balanced and geowaphica ll y even growth may be anainab le ment policy will be addressed in Pan lll .
through govemment intervention to establish virtuous circles of high savings and high
growth (Nurske 1961; Singer 1975).
The critique of the Keynesian approach
1nspired by the Keynesian approach , dedicated regional development agenci es and
industrial estales were pioneered under Presiden! Roosevelt 's New Deal in the 1930s Although it anempts to integrate a considera1ion of 1he demand and the supply-side,
by the Tennessee Valley Authority in the Un ited S tales. As we discussed in C hapler 1, ex pon base theo_¡y_ .has-be.e.n.-c.r-i.t~i.sed.....a.s.-CJ:.sintp 1i.s~...tgnmin&-SiSJ1ific.a.n1-faG-teFs­
during the era of 'developmentalism', growth pole experiments were evident in the 1960s within regions ~- en_l!g!reneuria.Lism,.. p.uhli.c poJicy) and ..no.L-pro>Lidiog a sys1emati.c
with then propulsive finns and industries of the day , such as chemicals and automo- expianatio-¡:;-of thejetg:¡ninan ts ofdemand for a n:giort.:s...e.x.pru:¡s..(Annstrong and IaylQr
biles, imp1anted to s timulate new econom ic growth in lagging regions (Rodríguez-Pose 2000). Dixon and Thirlwall's ( 1975) mode1 has been criticised too for failing to specify
ihetype of expons in which a region may specialise, assuming the expon sector is the
only so urce of regional growth and genera tin g controversia! empirical evidence. Jn addi-
tion , problems have been identified in the model ' s failure to clarify the complexities
Table 3.4 11/eo-Keynesian regional po/ícy: the 'ínterventionist ' approach of the Verdoom effect and exactly how the division and sp.e.c..ialisatiGn-e.C-Iabow:...aud-
Dimensions Characteristics technical chan~ fosters output wowth and productivi
Theoretical approach Reconstructed Keynesianism 2000). More genera ll y, H~an (1958) argued tha!_polarised ~ dualisti~dev~­
Demand-side stimulation me~tween developed cOFes and underdeveloped perí~ can bene~ both gro~ing
Supply-side support for industry and services
region~cir..hinte.r.lands-tlu:ough ...:trick-l1ng-do.wn' effectSJhat crea le demand for the
Causes of regional economic disparities Market deregulation and liberalisation
Structural weaknesses products and labour of lagging r.egions. A lth ough the polarisation effects identified by
Low investment cumulative causation theory can be strong stimuli to regional divergence, Hirschn1an
Drain of capital to developed regions ( 1958) argues that they are countered by such trickle-down processes. especially when
lnadequate and insufficient government
supported by interventionist regional policy. Deliberate state-led decentralisation of
participation in regional development
propulsive industries may reverse geowaphical polarisation (Townroe and Keen 1984).
Political ideology State intervention
Social democratic Whether such countervailing forces are sufficient only to keep regional divergence in
National territorial cohesion and solidarity check rather than to promote regional convergence is open to empirical question.
Approach to reviving disadvantaged regions Proactive policies at the local and regional level Evidence from the European Union suggests absolute regional differences in unem-
Public investment in infrastructure
ployment in EU countries rates tend to vary counter-cyclically. widening during reces-
Regional policy Extensive regional aid
sions and narrowing during booms (Baddeley er al. 1998; Boldrin and Can ova 2001 ).
Automatic assistance
Decentralisation of regional regeneration powers Despite such criticisms, as we shall see in Chapters 5 and 6 and in the case stud1es in
to local and regional agencies and authorities Chapter 7, the Ke_ynesian approach remains hig!:!_ly influential in understanding and
Sources: Adapted from Martin (l.989); Armstrong and Taylor (2000: 2l.l) explaining loGal...and regional déVe.Joprru:nLp.olicy.
 FRAMEWORKS OF UNDERSTANDING
~ Theories of structural and temporal ch ange
In contras! to the neo-classical and Keynesian emphases upon regional convergence or
divergence , th~es of structural and temporal change fo~us upon local and regional
development as historical and evolutionary grocesses, sometimes incorpqr~eriods
of structural or systemic change. Theories have used metaphors of stages, cycles and
w-;ves to conceptualise the geographically uneven character of local andregional devel-
opment. In contras! to the neo-classical focus upon exchange and factor prices, theories
of temporal and structural change have taken a broader view, encompassing production,
technology, consumption and institutions of govemment and govemance.
Stages theory
Stages theories of economic growth have tended to focus upon the national and regional
.,
levels and sectoral change (Perloff et al. 1960). As Figure 3.6 illustrates, through time,
"i. regions and nations are interpreted as moving through progressively more advanced
S.'!'
stages of economic growth and development, from agriculture to manufacture to services
.::.. to quaternary or knowledge-based forms of development (Clark 1939; Fisher 1939). A
'\., ratchet effect' is evident whereby growth pattems get locked in to place and guard
against future contraction, for example through densely localised linkages, specialised
public infrastructures, localised demand and labour marke ts and innovation potential
(Thompson 1968). The adap tabili ty this may afford localities and regions is developed
in the recen! approaches to innovation , knowledge and learning discussed below. Scale
diseconomies from congestion and bureaucracy may counter tbis effect.
Periods of rapid transformation are possible as a critica] mass of investment and
activity may generate a 'take-off to underpin sustained periods of growth and 'devel-
opment' (Gerschenkron 1962; Rostow 1971). This model was a ballmark ofthe devel-
opmentalism and liberal-market democracy promoted by the Uni ted States during the
post-war Cold War with the Soviet Union. Jndeed, some argue that 'development'
requires such structural change as 'Jeaps' and 'transformations' from existing states to
new, more developmental states (Cypher and Dietz 2004). Echoing the neo-classical
theory of comparative advantage, over time, specialisation and- trade replace self-
s~_!!!~cy. Diminishing returns and changes in the interna] division of labour propel
1
the transition between stages. 'Development' equates with growth and industrialisation
and constitutes transitions through each ever more advanced stage of economic activity.
Regional convergence is considered more likely in the Jatter stages of this development
11
L" 1 >1 1e==:>1•~•" 1 > a~:J
1 Socooo." 1 1
- Figure 3 .6 Stages theory
Source: Adapted from Rsher (1939)
CONCEPTS OF LOCAL ANO REGIONAL DEVELOPMENT
--- - ---
model (Wil liamson 1965). Criticism has focused upon the linear and programmatic logic
of such models: al ! nations and region s were predicted to follow the same developmental
path . Underdevelopment theorists challenged the idea of linear stages and conc luded
that there were similar national pattems of development notwithstanding persisten!
differences (Kuznets 1966). Mirroring the devclopment rrajectory of advanced indus-
trial nations and regions , this particular form and theory of 'development' was closely
associated with the national focus of post-war developmentalism summarised in Chapter
2 (Figure 2.1 ). Wi1h its...e.mphasis u pon the. conditions and req.uirements for structural
change, stages theory remains an importan!. if not readily acknowledged, influence upon
local and regional development policy .
Cycle theories
Cycle theories focus upon the temporal evolution of local and regional industrial st.!}lc-
1
tures and their relation to local and regional development. G_eographica l varia tions in •
Sj}iiiial factor costs are linked to the differential stages ofQroduct and industry Ji fe 9'cles
thfough the prodllci cycle model (Storper and Walker 1989). Building upon its initial •
micro-leve] focus upon the locational behaviour of US multinational corporations
(MNCs) (Vemon 1979), the product cycle sought to link regiona l development to the
export-oriented evolution of regional industrial structures (Norton and Rees 1979;
•
1 Storper 1985; Stemberg 1996) . As Table 3.5 describes, in~ly , innovating firms intro-
duciJ2g_Jlew products retain locational proxi~o ~suppl~rs and R&D functions.
Low elasticity or sensi ti vity of demand to price :!:anges for new products renders initial
1 regional cos t differences relatively less significan!. L<![&e urban markets _provide size-
a2.1e ~nd sophisticated markets to prove immature products. With maturity and stan-
dardisation, economi-es of scale become relatively more importan! than ftexibility.
Decentralisation to exploi t relatively cheaper labour in underdeveloped regions an_d
1
nations occurs with potential export back into the core regions that. by this stage in the
cycle, have already developed new products to restart th e process (Weinstein et al. 1985).
Criticisms of the product cycle model concem the model ' s narrow focus u pon indi-
r vidual products rather than industries and markets. its relevance to historically specific
time periods, its emphasis upon labour as the primary cost consideration, its reliance
upon a set of essential causal relationships and linkages, its emphasis upon the deter-
mining role of technology and its limited conceptualisation of innovation (Sayer 1985;
Taylor 1986; Schoenberger 1989). Product cycle theory has had a Jimited impact upon
local and regional development policy apart from highlighting the potential significance
of cycles of industrial development and the need for localities and regions to attract and
retain different kinds of industrial functions and occupations.
1
Building upon notions of Schumpeterian innovation and Marxian uneven develop-
ment discussed below, Markusen 's ( 1985) pro lit cycle theory counters many ofthe prob-
lems of the product cycle model ~ The... theory moves beyond simplistic factor cost
explanations of local and regional development by emphasising market power and corpo-
rate strategies in the closely intertwined evolution of industries and regions (Gertler
1984). The theory focuses upon the meso-leve! of industries, beneath the macro-leve]
 CONCEPT S OF LOCAL ANO REGIONAL DEVELOPMENT
Table 3 .5 The product life cyc/e
Saturation Oeclme
--------------------
lntroduction Growth: Maturity:
mass Table 3.6 Profit cycles and regional development
market
enlarges production
Stage Profit stage Locational behaviour: spatial succession
Sales Geograph1cal Employment Zero profit: the initial birth and Concentration: often arbttrary locations
concentration --- Output
vol u me design stage of an industry. related to location of inventton.
Super profit: the era of excess profit Agglomeration: proliferation and growth in
from temporary monopoly and size of the innovating firms and their
innovative edge. tendency to draw linked sectors. and a labour
force, to them at the inittal site.
111 Normal profit: the stage of open Dispersion: firms grow in size and decline in
entry, movement towards market numbers. Attempts to expand and locate in
Growing Peak Declining Steep fall -ofi satu ration, and absence of new markets. Sites of lower factors costs,
Demand Very few
buyers number of demand demand in demand substantia l market power. such as labour, become increasingly attract ive
conditions
buyers as oligopo lies break down and competition
Technology Short lntroduction Long-run product ion runs and stable increases. lncreased automatton in the
production of mass- technology production process a llows lower skil led labour
runs production Few innovations to be located and utilised. These locations
Rapidly methods are relatively remate from the 'core·.
changing Sorne variation
techniques in techniques IV Normal-plus or normal-minus profit· Relocation: certain sectors may have been
but less rapid the post satu ration stage, where spatially retarded by the centripetal torces of
change either successfu l oligopolisation agglomeration . However. during the onset of
Low High because of high rate of High because of large boosts profits again or predatory a decline in profits these sectors may
Capital
obsolescence quantity of specialised
intensity and excessive competition squeezes relocate at an accelerated rate in the latter
equipment
profit. stages. lf this dispersion occurs in
Entry is Growing Fmanc1al General stability at first.
lndustry conjunction with cuts or new plant formation,
structure determined number of resources followed by exit of
competing critica! for sorne firms then relocation will occur .
by 'know-how'
Few firms entry V Negative profit: the obsolescence Abandonment: production retirement as
competitors lncreasing Number of stage of the sector. quickly as possible either through plant
vertical firms starts
closu re or relocation to cheaper sites.
integration to decline
Critica! Scientific and Management Semi-skilled and unskilled labour Sources: Markusen {1985): Dawley {2003) . adapted from Storper and Walker {1989)

production engineering Capital Capital

factors skills
Externa!
economies
(access to of the economy and above the micro-leve] of indi v idual s and finns, and attempts to
specia li st construct a hi storically dynamic approach . Table 3.6 outlines five seq~~tages of
firms)
Agglomeration p~ofitabili!Y and competitives!~~u&h which an industry will ev!?Jve with gener-
economies alisab le pattems of employment , locati ona l behaviour and l ocal and regional develop-
Employment Employment grows along with output Productivity drives down employment
Location either \nitial plants Relocation of production to lower cost
ment implication s (Markusen 1985).
Geography
random (i.e. close to R&D peripheries is permitted by standardisation Technologically dynamic regions start with a fairly competitive stage in which ex ter-
home of in core of product and production process and
inventor) or in regions impelled by increased price competition nalities beyond the firm and industry are importan! then progTess to an oligopolistic
core region Relocation is either to less developed stage dominated by large firms as products mature and technology diffuses to o th er
close to R&D countries or \ower cost peripheral regions
and within core countries areas. lnnova tors eam monopoly rent s from the sol e suppl y of new goods and services
headquarter in the inittal period of 'super-profits'. Firm or innovation location is often th e result of
functions
historical accident such as the initial base of the founder. Co-Jocation occurs to benefit
Regional Highly Shift to mass Branch plant economy based upon low skilled
development innovative production and low wage production from the extemalities of technological spi llovers and Jabour pooling. New entrant
implications firms Modern plants Potential for rationalisation and plant closure
with new competition erodes super profits and creates normal profits and may be drawn to the si te
High rates
of R&D capital of the initial industry ' s innovation or regions favourable to the industry. Firm size
Skilled Requirements
scientific and for g rowth, concentration and consumer market orientation underpin the geographical
engineering management concentration of oligopolistic firms that exert market and poli ti ca l power.
employment and engineering
Sorne local skills as well Eventua l market saturation and destabilisation underpins the emergence of
agglomera- as semi-skilled
production oligopolistic organisational forms driven to search for additional profits , including
tions
Source: Adapted from Dawley {2003): Storper and Walker {1989); Markusen {19 85 )
 FRAMEWORK S OF UNDERSTANDING

(
------------------------
CONCEPT S OF LOCAL ANO REGIONAL DEVELOPMENT
IE'm
decentralisation in search of relatively lower labour cost inputs or more flexible , non-
union labour. 'Negative profit ' results from decline in the face of substitute product s
and/or services and imports associated with the abandonment of location-specific facil-
ities. Despite its relative theoretical ftexibility to cope with complex processes of indus- Industrial Revolution
trial change compared to product cycle theory (Schoenberger 2000), criticism of profit iron, cotton mechanisation, steam power
cyc le theory has focused upon its reliance upon a set of essential causal relationships, Late 1780s UK (Lancashire, Shropshire, Black Country} 1840s
its abstraction or genera!isation of causal process from particular temporal and spatial
empírica ! circumstances and its limited contextualisation (Storper 1985). While profit
cycle theory revealed the potential stages for intervention , its..influence.-upon local and
regional policy has been limited.

Rise of continental industry

Wave theories railways, stee/ (Bessemer), coa/, steam motor
UK (South Wales, North East England, Central
1850s Scotland, Germany (Ruhr}, Ganada (Ontario}
Originating in the late nineteenth century, macro-technological long-wave theories of 1890s
capita li st development based upon macro-leve! technologica l shifts revived following
the structural changes during the late 1960s and 1970s. Long-wave theory retains a focus
upon interna! change within regions as the explanation for local and regional devclop-
ment (Marsha ll 1987). Drawing upon Kondratiev '.s description of fifty-year long waves
1914
•
in ..f.Q.IDIDOdity price cy_<;le§. Q3amett 19.97_), Schumpeter's (1994) the01y of long waves
provides the theoreticalbasis.. Each long wave is underpinned by a progressively more
lmperialist expansion
electric power, chemicals, synthetic materials,
•
'
advanced 'techno-economic' paradigm. As Figure 3.7 illustrates, each has its own early interna/ combustion engines
1890s UK (West Midlands, Greater London},
distinctive geography of loca l and regional development - the curre nt being the fifth 1930s
Germany (Hessen}

----·-·- suc.ce.ssiv
The initially narrow focus of long-wave theory was broadened to incorpora te the social,
political and institutional context (Freeman and Perez 1988 ; Hall and Prestan 1988).
1966

The post-war boom

electrica/ and light engineering,
Long-wave theory echoes Markusen ' s (1985) profit cycle with initially competitive petrochemicals, motor industry
markets giving way to oligopoly when the retum s from innovation eventually diminish 1940s UK (West Midlands, Greater London},Spain 1970s
as the technological-economic paradigm matures. Crafts (1996) has explored a possible (Catalonia} , South Korea ( Busan}
link between Schumpeterian long-wave theories and the endogenous growth models
discussed below with transitíon between long waves as periods of local and regional
divergence. In the context of understanding local and regional development, long-wave
theory has been criticised for the determining role given to technology and its limited
and functionalist views of socio-institutional processes (Hirst and Zeitlin 1991 ; Malecki electronics, information technology
1997). The theoretical focus upon macro-leve] generali sation and abstraction as well as UK (Cambridge, 'M4 corridor'}, US (Silicon
1970s Valley}, France (lle de France}, China
the causal power attributed to the mechanistic waves neglect local and regional
(Guangdong), India (Bangladore}
complexity and differentiation. lndeed, most of the long-wave theories are aspatial and
offer a limited ability to explain specific outcomes in particular times and places
(Stemberg 1996; Dawley 2003). Given its macro-leveJ and historical focus , local and
- Figure 3. 7 Long waves of economic growth
regional development policy has drawn little from long-wave theory except attempts to Source : Adapted from D1cken (2003: 88)
promote the conditions for adaptation to emergent techno-economic paradigrns and to
encourage.-the creative destruction of innovation and entrepreneurialism .
FRAMEWORKS OF UNDERSTANDING
CONCEPTS OF LOCAL AND REGIONAL DEVELOPMENT

Marxism and radical political economy: the historical Locationally concentrated spatial structure - without intra-firm hierarchies
geography of uneven development
From the late 1960s and into the 1970s and 1980s. structural changes in the nature of
capitalism and its local and regional development implications prompted much interest
in Marxist or radical approaches. Deindustrialisation, the shift to services, heightened
intemational mobility of factors of production and growing local and regional inequal-
BAdministration
B
Administration
ities in economic, social, gender and ethnic tenns prompted radical critiques of
prevailing approaches to local and regional development (Biuestone and Harrison 1982 ;
Harvey 1982). Such issues had hitheno been dominated by objective, positivist and.
often quantitative, regional science. Marxi st approaches changed the focus of theJocal Production Production
and regional deve lopment guestion towards un\k!:s1anding_.an<Lex.plaining_p.e.riodic
industria¡;:estructuring and the changing 'spatial divisions of labour' the .geog_raph-
ically constituted organisation of tbe social relations between capital, lttbour and the Cloning branch plant spatial structure - hierarchy of relations of ownership only
state (Lovering 1989_; Massey 1995). This approach argues that aggregate growth figures
at the local and regio~mte-bical spatiaL.sti:ucl:ul:.e.s_rncl¡¡tions
with it!!Qlications for job guality and .regjQDal..functionaupecialisaLion (.Sunlcy 2000).
Through the geographical division of labour within organisations illustrated in Figure
B ~ Adm; o;,tcatioo

uaners, R&D
Administration Production

f\'""ll'"u auu ;,patialcy extended over time. For Marxian analysis, periodic
a~umulation crises inherent in capitalist development fostered new spatial. technolog- Production
ical and soc ial 'fixes' that underpinned further equally unstable configurations of local
and regional growth and dec line (Harvey 1982: Storper and Wa lker 1989). Administration
Building upon a political economy critique of neo-classical economics, Marxist
theory interpreted regional growth as episodic and capable of historical periods of both
converge nce and divergence (Manin and Sunley 1998). Tl~veJLge.o.graphical frag- Production
mentation of regional industrial Sj)ecialisation fostered a geographical division of the
ranges of corporate functions and their associated jobs and occupations between core
!!JLd _peJ:iP-he_ral localities and regions (Massey__!2.95). 'Development' constituted the
Part-process spatial struct ure- plant s distinguished and connected by relations
upgrading of regional_fu_uctionaLspecialisation to J ncorporate htgher-level activities,
of ownership and in technical division of labour
such as headqual1ers and R&D , and better quality and higher-paid jobs with more posi-

B
tive implications for local and regional development. Transitions in local and regional
development were explained by the changing position and role of localities and regions Branch Branch
within the spatial division of labour. For example, the United States experienced th e administration administration
shift of industry from the nonh eastem 'rustbelt' to the southem and westem 'sunbelt'
(Sawers and Tabb 1984). Capital accumulation and the social forces of class conflict Administration
• and control
Production
• and control
Production
are integral to Marxist political econom.x:_ and e.!!!J2hastse the cnttcal role ol externa! process process
forces in shaping economic and social change in localities and regions (D unfo-;:dand segment segment i
P~rrons 1994 ; Pe~ons 2004). Space and place are the geographical focus (Beynon and Production
Hudson 1993). At least one attempt was made to link Keynesian cumulative causation
models with this Marxist approach (Holland 1976). Policy implications ernphasised the
critica! role of the state and regional policy in progressive action to arneliorate local and - Figure 3.8 Spatial divisions of labour
regional inequality in democratically accountable ways. Source: Adapted from Massey (1995: 75)
FRAMEWORKS OF UNDERSTANDING
Amid concerns about the dominan! explanatory power given to abstract soc ial stru c-
tures and economic logics (Sayer 1985), criticism focused upon the spa tial division of
labour's attempt to ba lance the determming roles of structure with social agency. its
national intra-regional focus and demand-led view of local and regional change.
its limited conception of local labour market regulation and reproduction and its narrow
state-centred conception of institutions (Warde 1985 ; Sunley 1996; Peet 1998: Dawley
2003). Building u pon Massey 's ( 1995) pioneering early work, geographical political
Transaction costs and 'new industrial spaces '
economy remains a highly influential approach in economic geography and local and
regional development (Castree 1999; Pike 2005 , MacKinnon and Cumbers 2007).
Transition theories: the resurgence of local and
regional economies
Debate followed the fai1ure of neo-classica1 growth theory to explain whether the slow
down and even reversa! in regional convergence since the mid- to late-1970s was due
to cyclical change, ad hoc except10nal events or a more fundamental systemic tran si-
tion in loca l and regional development (Dunford and Perrons 1994). ln_QJ_e mid-1980 s,
the focus shifted away from l ong-te~ evolutions in regional growJh and dec]me (Martin
and Sunley 1998). In addition, the focus on production and techno logy of stage , cycle
and wave theones broadened. Various theories of structural change emerged that sought
to explain substantive transitions in the nature of capitalism and their implications for
local and regional development. Central to the emergent themes were specific fonns of
local and especially regional economies whose particular soc ial, technological and insti-
tutional foundations had underpinned relatively faster growth perfonnance (Scott 1986;
Becattini 1990). ' Deve~ment ' became an is.sJJe Qf the extent to whtch localitie.§...-ª.nd
regions could ape th¿-char.ilcteristics and n:lative.J:conomic su.c.c.e.ss of e.xemplar ty~es
o~_hlLiaLdistr.icts ' - whether craft based (Third ltaly ; Hollywood. Los Angeles),
high-tech (Silicon Valley, California ; Rh6nes-Alpes, France) or financia! centres (City
of London ; Wall Street, New York). ' Resurgent' regions became the focus of local and
regional deve1opment theory and policy (Storper 1995; Scott l 998).
Flexible specialisation
An early and influential institutionalist transition theory focused u pon the idea of 'i ndus-
tr~L- systemic discontinuities in the social organisation and regula¡;o;:;-of
production - between the ~-industrial era and mass production and then from the era
oi._!!Ja~roduction to ·flextbl~ecialisation' (Piore and Sabe! 1984). Each industrial
period was associated with a distinct geography of local and regional development.
Regulation theory and the transition from Fordism
Flexible specialisation heralded a retum to the 'i ndustrial di stricts ' characterised by the
regional industrial specialisation typical before the regional functional specialisation -
cap tu red in the spatial division of labour approach - of the mass production era. Concrete
examples focused upon industrial districts in Emilia Romagna , ltaly. Contrary to th e
rigid , inflexible and vertically integrated social organisation under mass production ,
densely localised networks of small firms could respond to differentiated and fast
changing markets in flexible, specialised and adaptable ways (Hirst and Zeitlin 1991 ).
-----~C_O_N_C_E_P_T_S_ OF LOCAL AND REGIONAL DEVELOPMENT
Vertical disintegration and agglomeration could reduce transaction costs, provide Aex- •
ibility and reduce uncertainty between buyers and su ppliers. In policy terms, the potential 4
of flexible specialisation for local industrial renewal for labour and against monopolistic
corporate power appea led to politically Left political administrations during the 1980s, 4
for example the Greater London Council (Best 1991 ; Geddes and Newman 1999).
e
Building upon the transaction costs and externa! economies traditions of eminent econ-
omists Coase, Marshall and Williamson, transaction costs and neo-Marshallian theories
•
of regional agglomeration and growth developed to cxplain the formation and success
of the regional resurgence of 'new industrial spaces ' (Scott l 988). In the context of the
break-up of the mass production and consumption model of F 0 rdism, increased market
uncertainty and fragmentation coupled with technological change ~re interpreted as
undermini!t_gjnternal econom ies of scale and scope (Storner and Walker l9_89l.l:!_ori-
zontal and vertical disintegrati.oiLand the.contracting-out or externalisation of production
fostered the Aexibility and adaptabili ty necessary tQ cope with fast changing, differen-
tiated demands and to avoid the rigidities of previous forms of social organisation.
Marshallian externalities - labour market pooling, specialist supplier availability and
technological knowledge spillovers - provided local economic benefits for firms in
similar industries and underpinned geographical agg lomeration. This geographical
concen tration was particularly useful and efficient for transactions that were irregular,
unpredictable and relied on face-to-face interaction. Such externa li sation and agglom-
eration la id the foundations for the formation and development of 'territorial production
complexes' or geographicall y concentrated production systems (Storper and Scott
1988). Cities and regions were interpreted as active and causal elements rathcr than
passive backdrops in the economic growth process (Scott and Storper 2003). Loca l and
regional development focused upon the extent to which localities and regions were
exhibi tin g the charactenstics of these growing and economically successful places.
The ideas of increasing returns and positive externalities central to this approach are
echoed in the extended neo-classical growth theories discussed below. Echoing the
broader conception of 'development' and its increasingly international reach across
developed, developing and transitional economies discussed in Chapter 2, agglomera-
tion has since been promoted as 'a fundamental and ubiquitous constituent of successful
development 111 economic systems at varying levels of GNP per ca pita ' (Scott and
Storper 2003: 581).
The macro-scale regulation approach interprets a transition from Fordism towards a more
flexible era called variously neo-, post- or after-Fordism or even flexible accumulation
a~stabilisation of a 'regime of accumulation ' and ' mode of social regulation'
(Scott l 988; Dunford l 990; Peck and Tickell l 995; Macleod l 997). As Tahle..l.]..details,
the different eras have markedly different economic, social , political and institutional
organisation. For regulation theory, it is the regulato!:Y.._ coupling_between ec2!lQmic

FRAMEWORKS O F UNDERSTANDING
Table 3 . 7 Fordism and flexible accumulation
Fordtsl product/On
(based on economíes of scale}
A The produclíon process
Mass produ ction of homogeneou s goods
Un1formity and standardisation
Large buffer stocks and inventory
Testmg quality ex-post (rejects and errors
detected late)
Re1ects are concea led in buffer stocks
Loss of production time because of long
set-up limes. detective parts. inventory
bottlenecks etc.
Resource dnven
Vert1cal and (in sorne cases) horizontal
mtegration
Cost reduct1ons through wage control
B Labour
S1ng1e-task performance by worker
Payment per rate (based on job design criteria)
H1gh degree of job specialisation
No or little on-the-job training
Vertical labour organisation
No 1earn1ng ex perience
Emphas1s on diminishing workers '
respons1b1lity (di sciplining of labour force)
No JOb secu rity
C Space
Functlonal spatla l specia lisation
(centralisation j decentralisation)
Spat 1al div1sion of labour
Homogenisat1 on of regional markets
(spat1all y segmented labour markets)
World-w1de sourcing of components and
suhcontractors
D State
Regulation
Rigidity
Collective bargaining
Soc1ali sation of we lfare (the welfare state)
lnternatlonal stability through multilateral
agreements
Fordist production (based on economies
of scale)
Centralisation
lntercity mtervention in markets through
1ncome and price policies
Firm-financed research and development
lndustry-led innovation
E ldeology
Mass consum ption of consumer durables:
the consumption society
Modernism
Totality;stru ctural reform
Socialisation
Source: Adapted lrom Harvey (1989b)
T
1
CO N CE PT S OF LOCAL ANO REGIONAL DEVELOPMENT
and soc ially regularise capitali s t
Just-ín-!lme productíon development despite its inherent con tradi ctions ·noO) . In the regulatiom st trame-
(based on economíes of scope) work:
Small batch production
Flexibility and small batch production of a national and regional growth rates are interpreted as depending fundamentally
variety of product types on the degree of corresponde nce between the orga ni zation of production and
No stocks
Quality control part of proce ss (immediate
the regu lat ory institutional and social structures which support and regulate the
detection of errors) economy.
lmmedi ate reject of detective parts
(Martin and Sunley 1998 : 214)
Reduction of lost time, diminishing 'the
porosity of the working day'
Demand driven (quasi-) vertical integration In this regulationi st theory , structural economic and social change has underrnined the
subcontracting
Learning-by-<loing integrated into long-term Fordist coupling of mass production and consumption regulated by national Keynesian
planning demand management and welfarism (Martín and S un ley 1997). Strong national macro-
economic management a nd a supportive welfare state have waned across nation sta tes.
Multiple tasks
Personal payment (detailed bonus system) This break-up has underpinned regiJma l gro\llt.lL.~:<lle divergeuce. Fordist industri a l
Elimination of job demarcation regio ns have declined . Post-Fordist ' flexible production complex es' have eme rged,
Long on-the-job training
More horizontal labour organisation socially and geographically distinct from the Fordi st g rowth centres (Storper and Scott
On-the-job learning 1988). lnstitutional and reg ulatory structures have shift ed tow ards a more locali sed era
Emphasis on workers ' co-responsibility
High employment security for core workers of Schumpeterian Workfarism focused upon competitiveness and innovation (Jesso p
(lifetime employment) 2002). The state's role now encourages innovation and intemational competitiveness
No job security and poor labour conditions
and subordinares soc ial to economic policy aims. As we discu ss below, national vari-
for temporary workers
ants of regulatory regimes existas different national varieties of capitalism with di stinct
Spatia l clustering and agglomeration institutional structures and histories mediate more ge neralised processes of economic.
Spatial integration
Labour market divers1fication (in-place labour
social, political and cultural change.
market segmentation)
Spatial proximity of vertically quasi-integrated
firms Transition theories and local and regional development policy
In policy tenns , the shared emphasis in tran sition th eories upon the resurgence of loca l
Deregulation; re-regulation
and regional economies has stimulated interest in ' endogenous ' - intemal or within -
Flexibility
Division j individualisatlon, local or firm-based or 'i ndigenou s' - narurally occurring - 'developmen t from below·. lnforrned by tran s i-
negotiations tion theories, a local and regional development policy repertoire has emerged. A s
Privatisation of collective needs and soc ial
security detailed in Chapter 5, policy has focused upon locall_y decentralised..m:2_duction network s,
lnternational destabili sation; increased loc a l__¡¡gglome.ra.J..ion-ec~es and lo ~ networks of trust , cooperation and competi-
geopolitical tension s
Just-in-time production (based on economies tiQ!!_ as well as the local capac.i.cy_t_o promQ.\.e_ social l¡;_aming_auclad.ap.tatlon.-inno.vation,
of scope) entrepreneurship (Stohr 1990; Pyke and Sengenberger 1992; Cooke and Morgan 1998).
Decentralisation and sharpened interregionalj
intercity competition
The industrial districts model has been promoted in local and regional development
The 'entrepreneurial' statejcity policy because such districts are sa id to be flexible enough to adapt to the shifting context
Direct state intervention in markets through
of heightened economic and technological change through their disintegrated produc-
procurement
'Territorial' regional policies (th ird party form) tion networks. As we discuss , these arguments are distinct from the new approaches to
state-financed research and development endogenons grourti:J theory. However, although the district model has attracted consid-
State-led innovation
erable attention, it has been criticis the need fo ensitJve
lndividualised consumption: 'yuppie'-cu lt ure to particular local and regional contexts ratheUhan IJlli_yersaJ.istic.....:..o.f8h,e-shel.Land
Postmodernism
'one-size-fits-a ll ' policy transfer (Hudson et al. 1997; Storper 1997). Longstandin g and
Specificity/adaptation
lndividualisation: the ·spectacle' society thomy issues about the relati ve merits of specialisation or diversification in local and
regional development continue to bedevil policy deliberation about the di strict model.
 FRAMEWORKS OF UNDERSTANDING CONCEPTS OF LOCAL ANO REGIONAL DEVELOPMENT Bl]l

The critique of transition theories
Transition theories stimulated significan! critique and debate during the 1980s and 1990s
(Genler 1992: A m in 1994). The more flexible nature of capitalist accumulation was
Jargely agreed but not its conceptual and theoretical interpretation (Harvey 1989b ). Given
their particular fonns of explanation and relatively limited repertoire of geographical
expressions, transition theories have struggled to cap_ture and explain tbe comRlexity and
diversity qf local and regional development. The value of the transition model focuses
upon shifts in the macro-structural nature of capiLalism and its geographies of local and
regional growth have been ~~;a._~l,?' undermined (Sunley 2000). Transition models have
beco revealed as ove..!:!Y rel.!.\!llLllp.on tbe determtomg role oLhroa.der-.>tructures.and unable
adequately to explain continuity and change in local and regional development (Hudson
2001). For Sayer (1989), this is because of the simplistic and dualisric - 'befare and
after ' - a~sis deployed in transition models. The idea of clear breaks with their cor-
responding geographies has become much less convincing. The real world of local and
regional development is much messier and more geographically uneven (Peck 2000).
In addition to criticising the tendency for transition models to generalise from a
limited set of successful examples (Macleod 1997), funher empirical evidence has qual-
ified and/or challenged the nature and dynamics of such industrial agglomerations. In
particular, criticism has questioned their re liance upon small firm dynamism , their rela-
tive ignorance of the role of larger firms , the geographical stretching of their social and
productive relationships, the role of externa! and interna! forces in shaping their evolu-
tion and the reality of their adaptive capabilities (Harrison 1994; A m in and Thrift 1995;
Cooke and Margan J 998). A clearer conception suggests there is a diversity of change
and experience across different types of local and regional economy (Martin and S un ley
1998). This differentiation has been reftected in the recen! development of district theory
with a wider variety of typologies. The emergen! concepts are more open to the contin-
gency of particular circumstances and to the role of large firms, state actors, local fixed
capital and skilled labour (Markusen J 996).
lnfluenced by the broader ' old' institutionalism of Polany i and Yeblen (R. Manin
1999) and the 'socio-economics ' of the ' new economic soc iology ' (Granovetter and
Swedberg 1992 ; Grabher 1993), the emergen! work has focused upon the. embedded-
ness of socia l action in ongoing ~s ai.so.cial relationS-and the-social and institu-
tíonal co~ ]~cal amLr.egi.onaJ .g¡:owth (Grabber 1993: Pike eral. 2000:-Macleod
2001; Wood and Yaller 2001; Hess 2004). Eo.onaL(e...g.. o.~:ganisatio.ns.,_.adm.inistrative
systems) and informal (e.g. traditions, customs) instirutions are interpreted as inte.sral
to reducing uncenainty and risk as well as promoting_tru st in econo;ni<:. relations. A
distinction can be drawn between instiruiíonal environments and arrangements to explain
the differing abilities of localities and regions to absorb or crea te technological progress
which ca n, in tum. underpin disparities in economic performance (R. Martin 1999)
(Table 3.8). lnstitutional context varies geographically with direct consequences for local
and regional growth perfonnance and development. As discussed in Chapter 4, institu-
tional strucrures tlow from and are inftuenced by multilevel systems of govemment and
govemance shaped by distinctive national ' varieties of capitalism' (Zysman 1996: Hall
and Soskice 2001 ).
The institutionalist approacb interprets particular fQnn §. of insütutional organisation
as the root causes and explanations of the conditions that pr2mote Q_r i}}hibit the grg_wth
and development of Jocalities and regions. More abstractly. socio-economics argues tha1
any conceprualisa1ion or unders1anding of the 'economic· is explici1ly 'social' and
cannol be understood or explained excepl wi1hin i1s soc ial con1ext (Grabher 1993) .
Taking an ins1itu1ionalis1 and socio-economic view, marke1s are no1 1he free ftoating
phenomena described in neo-classical growth 1heory. Jn s tead , marke1s are in1erpre1ed as
social cons1ructs made and reproduced 1hrough framework s of soc ially construc1ect ins1i-
tu1ions and conven1ions (Sunley 2000). Markels are 1herefore highly differen1iated
in their narure , form and local and regional development implica1ions. While markets
1heoretically provide efficien1 allocation mechanisms for scarce resources as depic1ed
Table 3. 8 lns titutional environment and arrangements

Theme fnstitutionaf regime Nature of the systems Exampfes of instituCional

1 ~ 1nstitutionalism and socio-economics expressions
lnstitutional Informal Customs, norms and
environment conventions social routines
Dissa1isfaction with 1he macro-structural transition 1heories and 1heir de1enninistic
spatial implications has forged a recen! change in focus 1owards the specific and partic-
ular anributes of localities and regions and how these relate 10 their development
over time (Sunley 2000). For local and regional development, the emphasis has shifted
10 'the contingent conditions of growth in particular regions, rather than on 1he long-
tenn evolution of the en tire regional system' (Martin and S un ley J 998: 202). Rather
rT0 Formal conventions Structures of rules and regulations
(usually legally enforced)

than focusing u pon the aggregated and descriptive statistical summaries of the outcomes
of growth, these kinds of theory seek to explain the underlying characteristics and
fonn of growth. In particular, distinctive local assets and economic capabilities - indige-
nous and endogenous - are interpreted as the basis for developmen1 and the foundations
for constructi¡¡ga;;<f establishing local and regÍo!!&PJm~titiveness (M~s~ll er al.
VJJ
lnstitutional
arrangements
Organisational forms Markets , firms , labour unions,
welfare state, city councils
1 ~98). Sources: Dawley (2003: 104), adapted from R. Mart1n (1999)

FRAMEWORKS OF UNDERSTANDING
by neo-classtcal theories, market failure is commo n as individual deci sions by atomised
agents may be individually rational and efficient but collectively irrational and ineffi-
cient. For example. from an individual perspective a finn may pay a premium to poach
a ski ll ed worker in a tight labour market but for their locality or industry such individ-
ually rational action is collectively in·ational since it erodes tbe local skills base and
creates mflationary wage pressure. Correcting market failure often requires collective
institutions, for in sta nce to underpin investment in public goods (e.g. skilled labour and
vocational traini ng). new generic technologies or patient capital markets for smaller
finns
Networks, trust and social capital
Stimu lat ed by the interest in institutionalism and socio-economics, network s have
received attention as intennediate and institutionalised forrns of social organisation tbat
are neither markets nor orgamsaiiOnál Fiierarcliieso ut are Coüperative and potentially
mutually beneficia] (Cook.e and..Mm:gan..l2.2.8.), Cooperativ;;-;nd reciproca! networks are
founded upon trust-based relationships between participants. This enables infonnation
sharing and mutually beneficia! action without the need for tightly prescribed contracts.
'High tru st' localities and regions are interpreted as more capable of the rapid innova-
tion and adapta tion amenable to development due to collaboration to share costs and
risks. exchange inlonn~tion and ~Q lve_Qroblems . (Saxenian 1994). Trust fui relation s
reduce monitoring and contractin~. costs for participants, for instancc fostering the supply
of chcap local cred it and cooperative labour relations (Sunley 2000). In contras!, ' low
uust" environments are characterised by di strustful relations and necessitate highly
formalised contracts to govem market-based exchang_es~ Tbe adaptive capabilitles and
loc al and reg10nal development prospects of such places are consequently weaker.
The ' soc ial capital' engendered by trust may underpin a local and regional collective
' intelligence· and capability to learn and adapt successfully to change (Cooke and
Margan 1998). There has been an explosion of recent writing on the topic of social
capita l and its role in development. While exhibiting a degree of common conceptual
concern (a lbeit frequently confused), social capital has been operationalised in highly
div erse ways, often reflecting differences between (and within) disciplines (includ-
mg economics. sociology, anthropology, political science, education) and diverging
norn1ative concerns. Fan has atlempted the following conceptual summary:
In a way both compact and capacious, the concept of social capital boil s down
to networks, no!Tils and trust. Upon inspection, networks prove dense and valu-
able. no!Tils pervade individual actions and social relations, and trust appears
psychologtcally complex . .. (Thus] social capital is complexly conceptualized
as the network of associations, activities, or relations that bind people toge ther
as a colllJllunity via certain n01ms and psychological capacities, notably trust,
which are essential for civil society and productive of future collective action
or goods. in the manner of other fonns of capital.
(Farr 2004: 8- 9)
CONCEPTS OF LOCAL AND REGIONAL DEVELOPMENT
:,o
The use of the term 'c~l' sugge sts the existence of an as(et. Much of the literature
on social capital suggests that this asset has substantial implications for economic devei-
QJIDl_ent, notably by helping the innovation groce.ss throughTowe ring of transactioncosts
in inter-finn networks, which can be a highly localised process involving th e develop-
ment of trust-based relationships (Maskell 2002). Such processes can ha ve a down-side
contributing~ lock-in of widel~ported, but economically inclfic.ient practices
(Szreter 2002). For this reason the accumulation of local social capital may be insuffi-
cient to aid development. For development to proceed in poor communities, the initial
benefits of intensive intra-community i_!2!.sg;ation must give way over time to extensive
extra-community linkag_es: lQ() mus_h or too lit1le of either dimensio-¡;-;1 any- given
m~~dennines economic advancement (Woolcock 1998). _.,
This p.tQblem ha s been conceprualjsed as th.e...relatjonsbjp_hti\ll.f:e.n..b.o.nding-br~_ing
and)in.ki!Ji caEital. Bonding c~ital refers to networks fonnNJi:.o.m.-perceiYe<LsbaLe.d
identity relations . Bri~g capital refers to ~orks of associations wb~re th e differ-
entiating principte'orshared social identity or status plays no necessary role in deter- " '
mining membership. Despite th e analytical clarity of tbese concepts theyhave proved ~
V •
difficult to use in empirical work. Linking capital refcrs to relationships of exchange, ~ \~~( ~
..... ~
like in the case of bndging capital, between differentlated pa11i;;s:-bulin this case pat1ies
are also characterised by power asymmetries. The significance of this analytical dis-
tinction for policy is that development becomes not simply a question of empowering
the poor, but also. of mnnag·i-ng the l.nteraction resources held by 'ex tenÍa l' ag~ie s
which are present in poor cot:;ununlties (Mo.han and Mohan 2002). Accordi;,gly. posriive
development outcomes occur:
when people are willing and able to draw on nurturing social ties (i) within
their local conununities; (ii) between local communities and groups with
externa! and more extensive social connections to civil groups with ex terna!
and more extensive social connections to civil society; (iii) between civil
society and macro-leve! mstitutions; and (iv) within corporate sector institu-
tion s. All four dimen sions must be present for optimal developmental outcomes.
(Woolcock 1998: 186- 187)
In the context of dissatisfaction with the limitations of the conventional neo-classical
theory discussed above , institutionalism and socio-economics seek to provide a means
of integrating analysis of the intangible or 'softer' factors in explanations of local and
regional growth and development. While they fonn key elements of recent economic
geography (Barnes and Gertler 1999; Barnes and Sheppard 2000; Clark et al. 2000),
sucb dimensions have remained outside the traditional focus of neo-classical approaches
to local and regional development. 'Softer', less tangible , factors are difficult to measure,
price and quantify and are often invisible to official data sources (Sunley 2000). mili-
tating against their aggregate quantitative analysis.
The economic and extra-economic approach of regulation theory discussed above has
influenced the focus upon th e institutional and regulatory supports and infrastructure of
local and regional economies. lo particular, Ami o and Thrift's ( 1995) notion of 'i ns ti-
tutional thickness ' has been influential in explaining the shaping of local and regional
FRAMEWORKS OF UNDERSTAND IN G
development trajectories. ln stitutional thi ckness refers to a strong institutional presence
locally, high levels of inter-institutional interaction, strong socia l structures and collec-
tive awareness of a comn1on local and regional en terprise. Such institutional contex t
may provide ex tema lities that, depending upon their nature, can be cen tra l to the initial
emergence, trajectory and adaptabili ty of local and regional economies (Martin and
Sun ley 1998).
Historical trajectories and path dependency
Evolu ti onary theory is central to institutional and soc io-economic approaches to local
a;d regional development (N el son and Winter 1985). In this evolutiona ry approach, .!J:!.e
ways in which places chan ge over time are understood in terms of hi storica l trajecto-
ries . This conceptuali sation is more able to address the indeterminat e, complex and
sometimes unpredictable nature of local and regional development: 'suc h gradua li sm
allows a better understanding of the types of path and place dependency through which
the historical geography of regions and cities shapes their future development ' (Sunley
2000: 192). Path dependency , in particular, has proven an influ entia l idea. lt is a biolog-
ical metaphor that refers to the ways in which the evolution of a syste m is conditioned
by its past history (Arthur 199~). Trajectories ~ predetemlined, however, in the
manner of some of the sta ge, cycle and wave theori es discussed above. Local and
regional development trajectories can be non-linear. Places can move forwards or back-
wards as we ll as remain static in econom ic and soc ial terms. Places can change paths
too, for examp le the rapid tran sition and fast growth of the late industrialising 'Asia n
Tigers ' - including Sou th Korea, discussed in Chapter 7 - from the 1970s (Storper
er al. 1998). As we discussed in C hapter 2, the legacies of place can be decisive for
local and regional development prospects and trajectories.
lnstitutionalism , socio-economics and local and regional
development policy
lnstitutionalism and socio-economics have influenced local and regional development
policy and , as we detail in Chapter 4 , goverrunent and govemance. In particular, the
approaches emphasise the in:portance of loca l and regiona l institutions and tbeir ability
to develop especia ll y indigenous assets and resources and their capability to foster
\'§)
adjustmen t to changing circumstances (Bennett et al. 1990; Campbel l 1990; Storper
and Scott 1992 ; Amin and Thrift 1995; Scott 2004). The emphasis upon recognising
the distinctive structural problems and assets of localities,_¡:e.g.io.ns._and..D.ations.. and
constructing context-sensitive deve.!QpmE!,Lrulli~~as..hist<Mieal roots (1-Jirschman 1958;
Seers 1967). The promotion of ne.!Yi.Qik.s has been identified as a¿oute to growth in both
prosperous and old industrial localities and regions (Cooke 1995; Cooke and Morgan
1998). Overlaps with the industrial district model promoted by transition theory are
evident too given the key role that intermediate institutions can play in their economic
performance. lnstitutions a re thought to shape supply-side characteristics to allow local-
ities and regions to create their own demand by gaining market share and investment
CONCEPTS OF LOCAL AND REG I ONAL DEVELOPMENT
------------
from rival places. us ing agg lomera ti on to crea te and sustain local indigenous potential
(Sun ley 2000). Such ideas borrow from Chinitz ( 1961) and, latterly, Porter's (2000)
ideas of 'competiti ve advantage ' a nd c lu stering discussed below. As Chapter 5 discusses.
typllitinter:Yentions are microeconomic and focus upon tbe .supply-side incluiliDg. en ter-
prise policy, small firm growth, innovation and ski lis development. Su eh forms of policy
-
may be necessary and helpful but not suffic ient fo r loca l and regional development.
The critique of institutionalism and socio-economics
lnstitutionalism a nd socio-economics are relatively new approaches to local and regional
development. Much work remains to be undertaken in conceptual, theoretical and empir-
ical terms to exp lore their abi lity to understand and explain local and regional devel-
opm en t and policy (Wood a nd Valler 2001). These so-ca ll ed 'heterodox' approaches are
se ldom as concep tually and th eoreti ca ll y coherent as they claim and have been subject
to critique (Lovering 200 1; Pi k e 2004). The virtues of ~o rk s for local and regional
development h 'l,v ~e;.!!. q~estioned due to their generalisation from limited case srudy
evidence (Sunley 2000), the limited attenti on given to the relative balances between
cooperation and_c.ompetiti on and riva lry between institutions within and berween
networks , and the uncertain adaptability of decentralised institutionalised structu res to
develop coordi nated responses t~nom i c change (1-Jarrison 1994; G lasmeier 2000).
The embeddedness of socia l relations in local and regional institutions can ~ '
loca lities and regions to trajectories of decline if the c lose and high-trust relationships
that once fostered thei r earli er growth and innovation now inhibit th eir future adap ta-
tion , for example the o ld industrial region of the Ruhr in westem Germany (Grabher
1993). lnstinu.ianaJ CJUltex.Lma_y...be_a n .e.c essary-bu t'"'Tlorsufficient conditien for loGal-.a.nd
re.g.io.oal..d.e:~~eo~ment. The relationships and interactions berween economic condi ti ons
and institution a l effec ts remain poorly understood. The impact of institution-building
upon economic performance is ambiguous and linle is known about the feasibility of
the geographica l transfer of institutional frameworks between successful and lagging
localities and regions (Hudson et al. 1997; Sunl ey 2000).
lnnovation, knowledge and learning
lnnovation. knowledge and leaming have recently become central ideas in explaining
and understanding contemporary local and regional development. Moving beyond the
focus in neo-classical approaches upon static cost advantages and the ' black box ' of
technological progress discussed above , the new approaches have forged a connection
to theories of innovation and, more latterly, knowledge and leaming (Morgan 1997;
Lundvall and Maskell 2000 ; MacK.innon et al. 2002). 'Qevelopment'-is interpreted as
the enhancernent of tbe Jocal.i.cy ou.egion 's ability to produce.,_abs.or.b...and utilise innQ-
vations and knowledge through leaming processes. Parallel interest in the causal role of
local and regional differentiation in technological transfer and spillovers is evident too
in the extended neo-classical growth theories discussed below (Feldman 2000).
FRAMEWORKS OF UNDERSTANDING CONCEPTS OF LOCAL AND REGIONAL DEVELOPMENT
----- ----

lnnovation : from the linear to the interactive model
Approaches to innovation in local and regional development have sought to build upon
the transition in understanding irUJovation from the linear to the interactive model
(Lundvall 1992). The linear model emphasised the one-way flow of ideas and know-
ledge within public and private organisations from initial1dea through design and devel-
opment to production and sa le . In contrast , as..Figure 3'.9 illustrates, the interactive model
highlights the interactive and iterative nature of innovation among institutions between
more closely interrelated stages of development. Jnftuenced by the institutionalist and
socio-economic theory discussed in the previous sec tion , thi s approach sees innovation
as a social process that occurs in a variety of geographically differentiated in s~
Regional innovation systems
A substantial literature has developed to understand and explain the geographical
unevenness of innovation and its local and regional deve1opmcnt implication s. National
innovation systems approaches have extended to the subnational leve! to examine the
potential of regional innovation systems emerging from sustained institutional net-
worl<.s capable of regional leamingthat cohere, endure and adapt over time (Co.Qke and
Morgan 1998; Lund;all and Maskell 2000) . Table 3.9 outlines the constituent elements
of 'strong ' and 'weak' regional innovation systems. Here, regions are~~ 'exter-
na.liz.e.d.leam~~tuüeru;.!-fGeoke-and-Morgan 1998.:..66). ln seeking to conceptualise
this phenomena of locally and regionally rooted innovation potential and performance,

---
se ttings (Wolfe and Gertler 2002).
"
-
The linear model was often mapped onto the kinds of functionally specialised hier-
archies described in the spatial division of labour approach. Certain types of regions
specialised in R&D activity with its positive knock-on implications for regional growth ,
occupa tional structure, wage levels and local and regional prosperity (Massey 1995). In
contras! , the emergen! interactive model emphasises the much clqser interacticm between
the users and producers of knowledge, through spatially proximate co-location ancllor
facilitation by information and communication technologies (Howells and Wood 1993).
Local and regional institutional contexts are therefore integral to explaining innovation
potential and performance. Some places are evidently more innovative and capable of
producing and adapting innovations than others, reftected in their differential levels of
local and regional economic dynamism (Malecki 1997; Armstrong and Taylor 2000).
The knowledge economy
Social needs and the market
other approaches ha ve identified 'innovative milieux ' (Camagni 1996), ' tec_hn.2)Jolis '
(Castells and Hall 1994) or · ~~_r_lds of production ' (Storper 1997). In exp laining local
and regional innovation, each approach shares a focus upon physical and technological
infrastructures, such as industrial and university R&D and related industries and services,
highly ski lled local labour markets, risk capital avai lability as well as the supporting
social context of ostensibly non-material factors such as regional technical cu lture
and know-how and common representational systems (Storper 1997; Gertler 2004). As 11
suggested by the institutionalist and socio-economic theories above. intermediate insti-
tutions play an integra l role in reducing uncertainty and guiding the coordination of
collective action in an explicitly social and geographical process of innovation .
The recen! emphasis upon knowledge in the economy and its implications for local and
regional development connects with the work on innovation. For so rne , echoing the
stages th eory discu ssed above, 'economic development is a process of moving from a
set of assets based on primary products, exploited by unskilled labour, to a set of assets
based on knowledge, exploited by ski lled Jabour ' (Amsden 2001: 2, cited in Cypher and

~
lnnovatton
1
Oevelopment
1
Prototype
1
Manufactunng
1
Marketing
~ Market
Table 3 .9 Supers tructural elements for s trong and weak reg ional sys t ems of innovation ( RSI)
potential

and design production and sales lnstitutions Firms Policy

......... ......... ......... ~ ¡..-..
Strong RSI Cooperative culture Trustful labour relations Inclusive
potential Associative learn ing Workplace cooperation Monitoring
'--
disposition Worker-welfare orientation Delegation
Change orientation Mentoring Consultative

"""'1 * * '~Mo'~'"* * 1/ /
Public-private consensus Externalisation
lnnovation
Networking

J Weak RSI
potential
Competitive culture
lndividualistic
Antagonistic labour relations
Workplace division
Exclusive
Reacting
' Not invented here ' 'Sweating· Centralisation
Conservative 'Sink or swim ' Authoritarian
Public- private dissension lnternalisation ·Stand-alone •
Fig ure 3.9 lnteractive model of innovat ion Adaptation
Source: Adapted from Cfark and Guy (1997: 8) Source: Adapted from Cooke el al. (1998: 1580)
FRAMEWORKS OF UNDERSTANDING CONCEPTS OF LOCAL ANO REGIONAL DEVELOPMENT

D1etz 2004: 18). lndeed, within the pyramid structure outlined in Figure 3. 1O, infonna-
tion is seen as a critica] commodity and knowledge is interpreted as the most scarce
resource (Lundvall and Maskell 2000). In this approach, the production, utilisatiQn and
transmission ofknowledge are considered integral in a mor~cenain economic context
introduced in Chapter 1 marked by rapid and often radical economic and technological
change. lnstitutions - fim1s, public agencies and so on - can play a central role in
fostering know~dge-rich loca l and regional envirOrülli:nts. For localilies and regions ,
the role lhe_y play within the knowledg_e economy and the management. of Lheir ..know-
ledge assets embodi.edjn indivj duals and institutions has implications for their devel-
opment trajectory_ and relative prosperity.
Learning and local and regional development
Ce ntral to the adaptive abi li ty of loca liti es and regions for development is the capability
to leam (Lundvall 1992). Leaming is understood as a co ll ective, social and geographical
process that effects a change in an individual or organisation ' s capability or under-
standing (Cooke and Margan 1998). Leaming is considered cen tral to the continued inno-
vation necessary in the changing_c.un.text - detailed in Chapter 1 - of the pervasive tech-
nological change, particularly in communication and infonnation systems, heightened
uncertainty and vo latility characte1istic of contemporary fonns of 'reftexive ' capitalism:
the centrality of leaming for the innovation process stems from the recognition
that the knowledge frontier is moving so rapidly in the current economy that
HIGH HIGH
Q)
e
·¡:
"'
Q)
~
lnformation
simply access to , or control over, knowledge assets affords merely a fleeting
competitive advantage . 11 is the capacity to learn which is critica] to the inno-
vation process and essential for developing and maintaining a sustainable
competitive advantage.
(Wolfe and Gertler 2002: 2)
More se lf-aware or reflexive localities and regions are thought more likely to be ab le
to adapt to economic change. often through an abi lity to recognise and discard outmoded
and uncompetitive routines and practices (Cooke and Margan 1998). lnteractive rela-
tionships are evident between knowledge production, leaming and forgetting for local-
ities and regions. Crucially for local and regional development. leaming is considered
to be enhancesi...Jbm_ugh_l.o.¡:.al psoxim!!y a~ rapid knowledge transf<.?r---and-application
g~~ositive loca ~ ex~ema liti ~_for finns and other institutions _LSunley_2DOO).
Critica] discussions about leaming ha ve animated debates about ' new regionalism' -
discussed in Chapter 4 - and its emphasis upon the 'region ' as the focus and causal
factor in economic, social and po litical change (Amin 1999; Lovering 1999). Over-
lapping with the concepts of networks and embeddedness discussed above, Storper
( 1997) has focused attention u pon the non-market interrelations or 'untraded interde-
pendencies ' between institutions as central to local systems of innovatwn, productivity
growtñand local and regional development. High leve ls of trust , tacit or uncodified
knowledge and routine behaviours underpin sets of conventions and coordinating rela-
tions that are specific to the context of panicular localities and regions. These untraded
fonns o..!:_interdependenc__y constitute 'relational assets' that provide localities and regions
with the capability to leam and to develop the unique and not easily reproducible
competitive egge? neces.sary- to,_s.tay__ahe.ML9f the forces of imitation in_an..increasingly
globa li sed economy. As ou tlin ed in Tab le 3. 1O, leaming and knowledge-creating regions
are distinguished from the mass-production regions characteristic of Fordism in the
rransition models discussed above.
Alongside ~ns , cities and cj!y-r~ions too are seen asJre.y_bases of growth in the
knowledge and learning economy rather than just examples of its manifestation (Scott
2003). Scott and Storper (2003: 581) argue that 'urbanisation is less to be reg_a.rd
a problem to be reversed than asan :ssential condition ofdurable development' . Cities

\ >
Q)
:J
o;
actas th~or agglomeration, positive extemalities and, for Florida (2002b), an emer-
gen! 'creativP. class' that some consider increasingly imponant for local , regional and
national growth (for a critique see Chattenon 2000).

LOW
Data ••...... • • ••
•• • LOW
lnnovation, knowledge and learning in local and regional
development policy
As emergen! ideas in explaining contemporary local and regional development, inno-
vation, knowledge and Jeammg currently occupy a central rol e in local and regional
development policy . New policy forrns - often described as heterodox rather than
onhodox or conventional (Pike 2004) - represen! a marked break from previous ap-
- Figure 3 .10 Data, information and knowledge proaches. As we discussed in Chapter 1, local and regional policy increasingly involves
Source: Burton-Jones (1999. 6) the combination of ' hard' infrastructures, such as broadband telecommunication links
 CONCEPTS OF LOCAL ANO REGIONAL OEVELOPMENT mi

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'•.'
FRAMEWORKS OF UNDERSTANOING CONCEPTS OF LOCAL ANO REGIONAL DEVELOPMENT

Table 3 .11 A typology of 'new' g rowth theories

The critique of innovation, knowledge and learning in local
and regional development Type of growth theory
Augmented Endogenous lntentional Schumpeterian
Criticism has accompanied the emergen! approaches lo innovation, knowledge and neo-classical broad capital human capital endogenous
learning in local and regional development. For sorne, weak and 'fuzzy' conceptua li sa- innovation
tion has compromised clear thinking, theory building, standards of evidence and rele- 'Engine of Pt:!ysical and Capital SQi.[)Qygrs f ro m Technological
v';ñce to policy (see the debate between Hudson 2003; Lagendijk 2003; Markusen 2003; growth ' human capital , investment, education and inno'Jation by
Peck 2003) . The causal power of learning and knowledge accwnulation is sti llthe subject convergence? exogenous constan! returns training oligopo listic
technical through investments by prüdüCers , with
of theoretical development and debate. For Sun ley (2000), there has been a tendency to pr2f.ress knowledge individual agents. íechnological
overlook the continued importance of conven tiona l price and cost conditions and universally spillovers. Convergence diffusion,
exchange and market relatíons as well as a failure to establi'Sh the relative position of available. Slow Cumulative dependen! on transfer and
and conditiÜnal dlvergence, but returns to imitation.
knowledge and learning as primary rather than contributory causes of economic growth . cony_ergence shaped by in'J.es![nent, Multiple steady
The suspicion is that many of the claimed benefits of agg lomeration and localised within clubs of government public policy, and states and
learning for local and regional development ha~ exaggerated and have yet to be countries with spending and patterns of persisten\
similar socio- taxation. industrial and divergence likely.
questioned beyond the narrow evidence base of their supporting empirical examples economic trade Possible club
(Amin 2000). T~ole of n~tional central government regulation as we ll as policy, for structures. spec_Lq]isation. convergence and
example defence expenditure, has not always been given a sufficiently central role catch·up.
(Lovering 200 1). The supporting role of culture has often been dealt with uncritically Source: Adapted from Martm and Sunley (1998: 209)

as a pre-given rather than something that is socially and geographically constructed and
contested (Scot1 2004). Academic c~-opti;n into the politics of policy-making;round
innovation , knowledge and learning and the 'globalisa ti on-competitiveness' rhetoric of
' new regionalism' has amacted critica! comment too (Lovering 200 1). Sin ce the produc-
tion and application of knowledge has always been historically central to capital accu-
mulation whether anything fundamentally new is happening has also been questioned
(Hudson 1999).
xtended neo-classical theories: endogenous growth theory,
geographical economics , competitive advantage and clusters
Endogenous growth theory
Dissatisfaction with the externa! or exogenous treatrnent of factors of production - popu-
lation growth, savings rates. human capital and technological change - in traditional
neo-classical growth theory discussed above has been addressed by a growing body of
work on endogenous gro~th models (Martin and S un ley 1998; Stough 1998). These
theories see~o incorporal~ forrnerly externa! and independent elements__i!2,t_o their
conceptualisation and explanation of economic growth. Connecting with the Keynesian
lnnovation , technological change and geographical spillovers
theories of cumulative causation discussed above, the dynamics of regional convergence
and divergence are the focus of endogenous approaches to local and regional develop-
ment. ' Development' is conceived as the reduction in regional .disparities. The theories
at1empt to introduce increasing retums into the neo-classical production function to
determine long-run growth rates within - endogenously - the model (Martin and Sunley
1998). The subnational entity of the 'region ' is the geographical focus. The theories
retain core elements of the neo-classical approach and language.
As Table 3.1 1 shows, different sorts of increasing retums and extema1i ti es are envis-
aged in the different models. Endogenous 'bi,:Qad capital' models either emphasise the
extema liti es generated by capi tal investment or human capital and the ' leaming by
doing ' and knowledge sPillover effects of technological cha nge (Crafts 1996; Martin
and Sunley 1998). In common with the neo-classical mode1, capital stock investment is
interpreted as a driving force of growth. Endogenous innovation models draw upon
Sc~peterian notions of innovation iu their emphasis....upon the poteAtially- monopo-
listic retums genera ted by innovations and technological developments by producers
(Arrnstrong and Taylor 2000). For these models, human capi tal investment produces
positive spillover effects that boost both capital and labour productivity. Both sorts of
models ha ve been criticised. Evidence suggests periods of rapid growth in Jocalities and
regions may be preceded rather than followed by high rates of fixed capita l investment.
T~ological progress-is eonsidered the result of deliberate choices and actions rather
than a coinciden tal effect of other activities (Romer J 994; Blomstrom el al. 1996). Both
f!lSldels struggle to convince on tbeir central argument that returns may be constan! and
increasing rather than diminishing (Martin and Sunley 1998).
Most at1ention has focused upon making technological change and innovation endoge-
nous to the economic growth model. As we discusscd above, neo-classical theory inter-
prets technological progress as necessarily driving output growth per capita but fails to
identify the causes of technological progress. The underlying explanation of growth
is not spelt out (Armstrong and Taylor 2000). En<kl.genous growtb theory explicitly
seeks to exolain the causes of technologicarprogress. lt specifi.es tbe relationsh.ips of
 C ONCEPT S OF LO C AL ANO REGIONAL DEVEL O PMENT
FRAMEWORKS OF UNDERSTANDING

technological change and innovation to the growth process . Technological progress is
seen as both cause and effect of economic growth . lt is endogenou~ rather than exoge-
nous to the growth process. Put simply. individuals and instirutions see the incentive 10
produce new ideas for sale and profit. technological progress is therefore intemalised
within the growth process : 'The economy 's technological frontier is automa ti cally
pushed outwards because of the profits to be eamed in the knowledge-producing
industry ' (Armstrong and Taylor 2000 : 76) .
Explanations of technological progress focus upon the number of workers in know-
Jedge-producing industries, the existing stock of knowledge and technologica l transfer
and diffusion (Romer 1990). Exogenous ly or extemally produced technology embodied
in capital goods can be bought-in and determines a region ' s technology by its capita l
stock vintage . In contras t, disembodied technological progress contribu tes to regional
growth di sparities independently of capital stock . As Figure 3.11 illustrates, such disem-
bodied knowledge is more likely to be produced in knowledge-rich and creative environ-
ments, vary between regions and influence regional growth rates (Annstrong and Taylor
2000) . In common with the instirutionalist and socio-economic theories discussed above,
divergence between ' leading' and ' following ' localiti es and region s with differing social
capabilities for connecting innovation and growth is a potential outcome .
Endogenous growth theory and local and regional development
Endogenous growth theory has directly influenced local and regional development
theory . The geographica lly uneven rates of regional convergence and the spatial
clustering of high- and slow-growth regions are explained by the new economic growth
Human
rl c ap ttal
1
Publte and
pnvate
tnvestment
tn educatiOfl
theories. Neo-Schumpeterian approaches emphasise the role of technological spillovers
in increasing technological mobility at the inter-regional and intemational scales
(Rodríguez-Pose 2001 ). Such mobility is not costless, however (Audretsch and Feldman
1996). Despite the partly non-rival (non-competing) and non-excludable (non-exclusive)
narure of technology and innovation (Storper 1997), the retums from the transition of
knowledge are geographically bounded and the costs of transmission increase with
distance (Jaffe e l al. 1993). In combination with the traditional agglomeration economies
and extemalities discussed above, the emphasis upon human capital and technological
leadership in endogenous growth theory suggests:
Together, these types of increasing retum~ imply that regional development is
highly path dependent; tem¡;JOrary conditions and shocks, as well as historical
' accidents ', may have permanent effects as pattems of specialisation , of eco-
nüñliCSuccessoreconomic backwardness. beco me ' locked-in ' through externa!
and self-reinforcing effects. --- - - --
(Martin and Sunley 1998: 211)
The extent to which increasing r~tums and spillover~ re_geograpl:lli;.¡ill.X-b.glsed at partic-
ular g_eomphical scales implies_a..;:ole for.j nstitutions a_!2d J?Oli9;. to captur~n~ shape
the kinds .9fj n ~tment that mig_ht influen~e these elemel)tS of local and regional growth.
Fiscal policies and public infrastructure as well as the resources and incentives for tech-
nologicall y innovative sectors have consequently received attention (Martin and Sunley
1998) . In common with the institutionalist and socio-economic theories discu ssed above
and the content of Chapter 5, emphasis upon the endogenous dimensions of economic
growth has shifted the focus back towards the mobilisation of indigenous potential at
the local and regional levels (Goddard el al. 1979). Geographica l differentiation marks
the uneven appropriability oftecho logy and innovation. Lagging regions can suffer from
a 'growth limbo ' between insufficient size and capability to generate retums and
spi llovers from investment and a limited capacity to appropriate spi ll overs from more
advanced localities and regions (Rodríguez-Pose 2001 ). The context and extra-local
connections and flows are critica!, however:

Endogenous growth theory makes the key factors to growth, in.c.luding..huiDan

capital, technology, and exÍ;;malities,Tntem~ t.2.,lhe_production functipn~not to

K
Local and
OUTPUT/ regiOf\31
LABOUA
RATIO
econorn•c and local or ev..en national ecouomies. _On the contrary, the....theory underl.ines the
soc•al networks
importance of national and intemational (global) ilows of goods and knowledge.
Technology
emboched 1n (Martin and Sunley 1998: 219)
capital stock

Reg10nal
N ew cap1tal
111vestment
k-- S8VIOQS

Endogenous growth theory and local and regional

\__ Caprtall\atx>ur
ra tio development policy
Theoretical emphasis upon releasing the development potential within localities and
- Figure 3.11 Endogenous growth theory: the determination of labour productivity regions for their own and the nati o nal good has refocused the aims of local and regional
Source: Adpated from Arm strong and Taylor (2000: 88) policy:
 FRAMEWORKS OF UNDERSTAND ING CONCEPTS OF LOCAL ANO REGIONAL DEVELOPMENT

many countries are also concentrating th eir public expe ndirures on Lheir most
dynamic agglomerations at the expe nse of b~ic eguity issue_s both within these
agglomerations and between them and other areas of the national territory.
(Scott and Storper 2003: 588)
Local and regional development policy is often no longer considered a response to the
needs of ' problem ' localities and region s that may require redistribution from a national
centre. This can be described as the donor-recipient m.odel, redirecting growth from
The critique of endogenous growth theory
growing to lagging regJons (Figure 3.12). This model has been criticised for its failure
to address strucrural problems in lagging regions , its hi gh cost and its inability to redis-
tribute growth within the national economy in the context of an intemationalising or
global economy. The new growth-oriented regional policy seeks to raise the economic
performance of growing and under-performing regions to contrjbute to tbe growth of
each region and their national economy (figure 3.12). New eco nomic policies for regions
The donor-recipient model
Lagging region
are focused on all regions within national economies (Aufllauser e l al. 2003; Scott and
Storper 2003; Fothergill 2005). 'Levelling-up' the economic performance of each terri-
tory is considered the key to enJ1anced economic outcomes at the local , regional and
national levels . This approach is often contrasted with the traditional regional po1icy
of redistributing growth from prosperous to lagging regions - latterly characterised as
' levelling down'.
Endogenous economic growth theory is not without its critics, particularly due to its
adberence to the-r~eo-cla.ssical -equilibrium-fram.e.w.ork di sc ussed above (Martin and
Sunley 1998). Endogenous theory remains wedded to the standard neo-classical assump-
tion s about economically rational agents fully knowledgeable of altemative choices and
the consequences of their decisions. The Keynesian and Kaldorian critique discussed
above is relevan! too. Endogenous theory focuses on the supply-side and gives relatively
little attention to the demand-side issues of exports and balance of payments constraints
on employment and productivity (McCombie and Thirlwall 1997). The Yerdoom
effect is largely ignored as a source of increasing rerums as rising output genera tes scale
economies and raises productivity (Kaldor 1981 ). Other problems in relating endoge-

-------
nous growth theory to local and regional development concem the limite~m_Qirical
evidence of how increasing rerums operate in specific industries and places, the inability
Growing core
region to address historical change and to account for shi fts and reversals in rates of regional
convergence (Martin and Sunley 1998). Endogenous theories can also be weak jn_
addressing the (historical) social and instirution&_c..Q!lli;;xts - conditioned by geography

-------- Lagging region

ano place - that sfiape theÜperatio;;-of economic growth processes. As we discussed
above, such concems are central to the institutionali st and socio-economic theories of
local and regional development.
(
Geographical economics
The growth-oriented model

\ 1 Drawing upon a new Keynesian critique of the neo-classical approach, geographical

...-------..... / ----------- economics focuses u pon the role of localities and regions in shaping the trading perform-

""
Under-performing ance of industries within particular nations. Geographical economics is concemed with
region
national economic prosperity and trade and their implications for uneven local and

Growing core
1 \ regional development (Meardon 2000; Brakman and Garretsen 2003). 'Dev.:_!o~' is
interpreted as increased income and prosper~~throug}l enllanced regional and na~onal
region ) compeftttveness (Kitson el al. 2004). The model critiques existing neo-classical of the
\ 1 variety di sc~ssed above approaches but relies upon its core assumptions of method-
Under-performing ological individualism, perfect information, economically rational individuals, profit-
----...___.....

/ ~
maximising firms and exchange (Dymski 1996).

1 New trade theory

- Figure 3.12 Donor-recipient and growth-oriented models of regional po/icy For geographical economics, the Keynesian and Kaldorian notions of imperfect compe-
Source: Authors · own research tition, increasing rerums and externa] economies we detailed above - combined with
FRAMEWORKS OF UNDERSTANDING
the growth in intra-industry and intra-corporate trade are interpreted as undennining
the neo-classical model of comparative advantage and trade specia lisation. Ricardo's
traditional model assumed perfect competition and the relative immobility of significan!
factors of production (Annstrong and Taylor 2000). Na ti ons spec iali sed in those
industries in which they held comparative factor advan tages, for instance quality raw
materials or cheaper labour. lnt emati ona l trade mutually benefited nations holdin g
dissimi lar advantages. lndi genous factor endowments detennined intemational trade
and specialisation.
In contrast, the new trade th eory central to geographi ca l economics emphasises how
regional industrial specialisation and concentration can influence and, in tum , be shaped
by trade (Martin and Sunley 1996) . In the context of imperfect competition , increased
specialisation has resulted from increasmg r"ctüms to scale rathértiian the exp loita ti on
of different tal nalional fac tor endowments (Krugman 1990).txtemal economies- driving
increaslng retü"ñlS"= tl1e-1-1arsbiilliao ex temal iTies of labo~arket pooling, speciali st
supplier availability and technological knowledge spi ll overs - are lik ely to be realised
at the local and regional sca les rather than the national and intemationa l levels. lndeed,
urbanisation economies from the genera l infrastructure and common ex temaliti es arise
from different industries locating in urban areas. These growth spi ll overs underpin th e
localisation of industry and shape the rela tive competiti veness of the constttuent finns
within-regional agglomerations (Krugman 1993}. Pecuniary economies that materially
affect prices in market excha nges are produced by the agglomeration of fim1s from
different industries. Geographical concen trati on makes a difference to the economics
of finns and industries. These economies underpin the growth of urban locations, with
large and diversified markets supporti ng output growth (Krugman 199 1). As Martin
and Sunley ( 1998: 207) argue, the spatial clustering of regions with similar growth
rates suggests the spi ll over effects of labour, capital, technology and other influences
on_~owth are _g_ e ographical ly localised rather th an perfectly mobile as suggested by
neo-classical growth theory. .
Echoing the institutionalist and soc io-economic approaches, trade spec iali sation is
seen as history dependent. Establi shed pat1ems of specia lisation get ' locked-in' by the
cumu lative gains from trade. These effects impart strong path dependence upon local
and regional development trajectories (Krugman 1990). Pat1ems of uneven local and
regional development , once established, can exhibit strong degrees of persistence over
time that may support or inhibit growth. Local and regional development is likely to be
characterised by geographical unevenness (Krugman 1995). The divergence of output
and income between centres and peripheries and multiple possible equilibrium positions
are likely rather than the long-run convergence proposed by orthodox neo-classical
economics (Krugman 1991 ).
Strategic trade policy and local and regional development
New trade theory emphasises how the geography of trade is shaped by states, trade
regimes and increasing intra-industry trade between similarly endowed countries
(Krugman 1986; Drache and Gertler 1991; N oponen et al. 1993). lt provides a theoretical
argument for strategic trade policy. Comparativ~tagemay be-shaped bysupporting
CONCEP T S OF LOCAL ANO REGIONAL DEVELOPMENT ,..
speciali.s.ed_e.x.port..se~;tor~ and.,...gi\Len the.ir.JJe.cessary localisa ti orJ_, localities and regions
where externa! scale economies and technological spillovers may provide sources of
m~ic_rents (Martin and S~1ley 1996). St~ategic high value or sunrise sectors and
the localities and regions in which they are concentra ted can be identified, targeted and
prioritised given their potential to raise national and regional incomes (Reich 1991 ).
Support may include trade protection often through non-tariff barriers such as technical
standards, export subsidies and tax incentives for R&D investment.
For local and regional development policy, the strategic choices made about which
geographical concentrations of regional industrial specialisation to support are critical.
lndeed, such clusters not only provide empirical evidence of externa] economies, but
also help to define which industries should be supported (Martin and Sunley 1996).
Sorne industries and places have the potential for greater growth and productivity
increases. Converse ly, other lower-value and sunse t sectors and places may receive less
or no priority. New trade theory policy debates focus u pon the relative merits of special-
isation or diversification (Gerosk i 1989). Specialisation may provide the extemalities
and potential for productivity and output growth but risks regional instability and struc-
tural changes through over-concentration in a narrow range of industrial sectors.
Diversification may not provide the dynamic externalities and boost to export growth
and productivity but may insulate the local and regional economy from adverse demand
shocks and structural crisis by widening the sec toral mix of its industrial base.
The critique of geographical economics
Alongside its emergen! contributions to exp laining local and regional development,
critiques of geographical economics focu s upon the ways in which its particular approach
tends to neglect real people and places in their real historical, social and cultural set1ings
(R. Martin 1999). An inadequate se n se of geographica l and historical context is provided.
The approach tends to reduce the region to a receptacle rather than a potential motor of
economic activity (Scot1 2004). Despite its sta ted importance, the historical grounding
of the model remains unclear and clouded in ambiguity (Martin and Sunley 1996). The
emphasis upon simplifying assumptions and formal mathematical modelling produces a
partial ana lysis of the potential diversity of the extemalities central to local and regional
growth. Geographical economics fails to consider the influence of local institutional,
social and cultural structures in facilitating or constraining local and regional develop-
ment, for example the innovation and lea ming and the role of local and regional
institutional agency di sc ussed above (Martin and Sunley 1996; Scot1 2004).
Competitive advantage and clusters
Business economist Michael Poner has developed an influential new economics of
competitive advantage to explain the role and dynamics of the geographical clustering
of industries within national economies and their potential contribution to productivity
growth and trading competitiveness (Poner 1990, 1998). 'Development' i,s understood
as the enhanced competitive advantage of fim1s , clusters and national economies
 1
FRAMEWORK S OF UNDERSTANOING CONCEPT S OF LOCAL ANO REGIONAL DEVELOPMENT
--------------------------- ------- 1!!1
within intemational market~ Jn common with geographical economics and di stinct from
traditional neo-classical conceptions of Ricardian comparative advantage based upon
Firm
initial factor endowments (Kitson et al. 2004), Po11er' s initial microeconomic analysis strategy,
argued that competiti -::_ advantage could be ac.Jively crt;,ated thro~gh the strategic structure

¿? ~
management and upgrading .of co¡porate activities or 'v ~ chains ' (Poner 1985). Thi s and rivalry
initial work concluded, however, that ' competitive success cannot solely depend on
managerial and company an!_ibutes whe~ many successful firms in a given fiéid are
concentrated in just a few locations ' (Poner 2000: 254} Such geographical concentra-
tions or clusters were interpreted as containing a nation · s most competitive industries.
Cl.l!.sters therefore became central to the theory:
Factor Demand
clusters are geographic concentrations of interconnccted companies, specialised conditions conditions
suppliers and service providers, firms in related industries, and associated insti-
tutions (e.g. universities, standards agencies, and trade associations) in partic-
ular fields that compe te but also cooperate.
(Poner 2000 : 253)

The commonalities and complementarities between cluster institutions are interpreted

as providing localised extemalities and spillovers that could make positive contributions
to the competitive advantage and trading perfonnance of cluster participants. The
competitive advantage of Jeading firms and industries could be reinforced and intensi-
fied by their geographica l concentra tion. For Poner, th~ effect of lo.cation up.on CQilJpe-
·~ Related
and
supporting
¿?
tition has four interr.eJatcl.anal)!.l.ic.al...clements. captured metaphorically in the notion of industries
the 'd.iamqnd' depicted in Figure 3.13.
The main benefits of clusters for competitiveness comprise, fir"St boosts to static
Government
productivity growth through access to specialised inJ:JUI~ and labour, information and
~Jedge , institutions and public goods as well as localised complementarities and
incentives to performance enhancement. Second, clusters can foster innovation through - Figure 3 .13 Porter 's diamond model for the competitive advantage of nations
clear and rapid perception of buyer needs as well as promoting early and consisten! Source: Adapted from Porter (1990: 258)
leaming about evolving industry trends, technologies and other knowledge vital to
ougoing com"j)eíit¡ve;:;ess. T~Iusters can promote new business formation and inno- intermediate orga.nisational form and means of coordination in the continuum between
vative inter-organisational forms through inducements and relatively lower barriers markets and hierarchies:
to entry as well as new experiments in collaboration and partnering. lncreasing r~tums
and the spillover effects of extemalities characteristic of the new endogenous growth Repeated interactions and informal contracts within a cluster structure result
theories discussed above are integral to the dynamism and growth poten tia] of clusters. from living and working in a circumscribed geographic arca and foster trust,
Successful clusters can forge 'first mover' advantages and benefit from extemalities open communication, and lower the costs of severing and recombining market
a.nd increasing retums to establish their competitive advantage at the expense of other relationships.
localities and regions. (Porter 2000: 264)
Extending from the firm level, Porter' s research initially focused upon the national
leve! and then , in search of a fuller explanation, on the local and regional levels (Porter lndeed, Porter's work forms part of an intellectual Jineage common to some of the
1990). Sorne work even explored the competitive advantage of the ' inner city ' (Poner appr.oacbes to industrial agg]omeration within econ.om.ic g~ograp!¡y and regional science
1995). Clusters can range from a city or state to a country or even a group of neigh- discussed above, including agglomeration theory using M~li.an and transaction
bouring countries in their geographical scope (Enright 1993). Echoing elements of insti- costs ~_proaches , transition tb.eo.ries and industrial districts, innovative milieux and
tutionalism and socio-economic theories, clusters are seen as capable of providing an socio-economics (Gordon and McCann 2000; Martin and Sunley 2003).
FRAMEWORKS OF UNDERSTANDING
----
Clusters and local and regional development policy
Clusters have been taken up with sorne gusto for local and regional development policy.
Jnspired - and sold - by Porter' s accessible and narrative academic work and consultancy
business, cluster policy has received considerable academic attention (Martin and S un ley
2003). For Lagendijk and Comford (2000), the practice of clusters has become some-
thing of an industry itself among policy-makers. The OECD, in particular, ha ve promoted
clusters as a means of contributing to intemationally competitive regional and national
systems of innovation (Bergman el al. 2001). Cluster policy has proved attractive as
a potential source of positive benefits for productivity growth and innovation. lt also
provides a rationale and role for local and regional institutional intervention to support
cluster creation and development. Local and regional economic development policy finds
a clear purpose in developing cluster potential and , by extension, in supporting national
industrial competitiveness. Much policy activity has focused upon identifying and
mapping clusters and seeking interventions to encourage their growth and contribution
to regional and national productivity and competitiveness. Example 3.3 describes sorne
of the ways in which cluster policy has been used for local and regional development.
The critique of competitive advantage and clusters
The popularity and influence of Porter' s clusters theory ha ve prompted substantia l reflec-
tion and crit1cism. Firs.t, the conceptua l clarity of clusters has been chal lenged and, in
panicular, its linkage to the diversity of existing theoretical approaches to geographical
agglomeration (Gordon and McCann 2000). Martin and Sunley (2003) describe the
cluster as a chaotic concept. Second, Porter's emphasis upon firm and industry-oriented
notions of competition and competitiveness has been questioned in relation to local and
regional development. lt is not clear whether and how competitiveness can be territo-
rial and defined in terrns of localities, regions or nations (Ó'Donnell 1997). To what
ex~nplaces conceive ofthemselves as b_:ing in competition with each other? More
recent analytical review has sought to identify the interrelated factors that drive local
and regional competitiveness (Gardiner el al. 2004) (Figure 3.1 4). Jndeed, given its focus
upon the existing workforce, higher levels of com_]Jetitiveness can be compatible with
job loss and greater economic inequality and contrary to local and regional development
(Sunley 2000T Although , its proponents argue , enhanced competitiveness and produc-
tivity may increase economic growth, prosperity and income .
Third, the scale and Jevels at which clusters fonn , operate and extend have not been
clearly spe~. The key geographical concepts of space, scale, place and territory intro-
duced in Chapter 2 remain underdeveloped, specifically in Porter's version ofthe theory.
§!rth, Porter's theory gives limited attention to tl}e social dimensions of cluster forrna-
tion and dynamics (Martin and Sunley 2003). k t, the Porter brand of clusters has
become tainted to a degree by commercial promotion and consultancy coupled with
fªshionable policy transfer and faddish adoption by intemational , national , regional and
local development institutions (Martin and Sunley 2003). Critica] evaluation of the
actual impacts of cluster policy upon local and regional development has been limited.
Universal models, such as clusters, may only work when adapted to particular local and
regional contexts (Hudson el al. 1997).
CON C EPT S O~~C_A L A NO RE G 10 NAL DEVELOPM E NT I!!J
Example 3 .3 Cluster policy for local and regional development
Local and regional development policy has been attracted to cluster policy as a means of
promoting national, regional and local competitiveness, growth and innovation. Many
policy frameworks have utilised Michael Porter's ideas as the standard concept in cluster
policy. As we discuss in Chapter 5, deceotralised approaches to local and regional policy
emphasising indigenous strengths and endogenous growth have reinforced this trend.
Cluster policy focuses upon the supply-side and often aims to provide public goods
forrnerly absent due to market failures. These public goods often include cooperative
networks between cluster participants, collective marketing of specialised skills and know-
ledge, local business services (e.g. finance , legal , marketing, design) and diagnosis and
responses to remedying cluster weaknesses. For local and regional development institu-
tions, cluster policy development typically comprises severa] activities. ~, the pr.a.¡;.ess
begin~J::!.. mapping and categorising clusters withi11 local and regional economies.
Mapping identifies what the clusters are and their geographies. Typologies to group similar
clusters together may link to their stage of development, for instance embryonic, growing
or declining. ~' analysis is undertaken.ofthe_regignal andlol..lllltiQnal scale arulli.gnif-·
icance oLthe..clusters, for example assessing their relative shares-of expons, employment
or R&D jnvestment. Here, cluster depth - the mix and range of industries present in
the cluster, dynamism and contribution to regional and national competitiveness - may be
assessed. Thir~ the strengths, weaknesses and needs of clusters are examined to identify
the priori~ cluster devel~pment policy by local and regional development institutions.
Despite tbe popularity of cluster policy in local and regional development circles, critics
have noted the tension between wanting to include as many finns as possible in clusters
rather than being selective and prioritising and the need for targeting for cost effective
public policy. A further problem is that similar types of clusters have often been identi-
fied in different regions as each seeks to capture the growth potential of knowledge-based,
high-tech and/or creative activities. A UK-based commentator bemoaned that rather than
seeking to identify distinctive regional assets every region now appears to be seeking to
develop the same clusters of 'ballet and biotech ' . This approach to clusters is problematic
since it underrnines the central notion of the need to build upon distinctive, indigenous
regional strengths.
Source: Martin and Sunley (2003) ; Poner (2003); Trends Business Researcb (2003)
ustainable development
Sustainable development has arguably become the central inftuence in local and regional
development in recent years (Angel 2000: Gibbs 2002: Haughton and Counsell 2004;
Margan 2004 ; Roberts 2004). Traditional forrns of local and regional development have
been challenged as overly economistic and too focused upon economic growth (Margan
2004). Amid enduring social inequalities and the increasing impact and awareness of
the ecological and environmental problems of exi sting pattems of resource use , forrns
 ~
CONCEPTS OF LOCAL ANO REGIONAL DEVELOPMENT
FRAMEWORKS OF UNDERSTANDING

well-being_ and education - and instrumentally~1 ificant things - such as job.LaJ)d

,.,.~--D
income (Margan 2004 ). Definitions of sustainable development often build u pon the
World Commission on Environment and Development·s ( 1987: 8, 43) version of 'devel-
of future
Local and regJOnal pertormance
and gross reg•onal outpul
generations to meet their own needs'. In conceptual and theoretical terms, however,

D
'
~
Aevealed
Competit1veness
<::=:>
~r-:E:l
L___j c=J
Sourcesol D
comper,,;ven•••u
Figure 3 .14 The 'pyramid model' of local and regional competitiveness
Source: Adapted from Gardiner et al. (2004: 1045- 1067)
of local and regional development have been sough t that might prove more sustai nable
- in sorne sense longer term , more durable ancl/or less damaging - in economic, social
and environmental terms.
As we discussed in Chapter 2, new metrics for local and regional development have
been sought that reftect a broader notion of 'development' encompassing health , well-
being and quality of life in localities and regions (Margan 2004). For example, local
and regional quality of life can vary substantially even when places appear to have
similar levels of GDP per capita and income:
)
the regions of the Mezzogiomo [the south of ltaly] are as poor as Wales in
terms of income, but they do not suffer from such debilitating rates of long-
term limiting illness, partly because they have access to a much healthier diet.
Poor health is both a cause and a consequence of a weak labour market in
Wales because high rates of limiting long-term illness are part of the exp lana-
tion for high levels of economic inactivity.
(Margan 2004: 884)
Moving on from the initially environment-dominated and sometimes anti-growth con-
cems in the 1970s, debate now focuses upon the fundamental questioning of economic
growth asan end in itself oras an inevitable means to achieve higher standards of living
(Sunley 2000).
Recent approaches to sustainable local and regional development seek to integrate
economic, environmental and social outcomes together rather than compromise
through trade-offs and balances (Haughton and Counsell 2004). Distinctions are drawn
te priority gjyen to intrio!iicall.y..significant-thing.s =..SU.Ch_as..l:¡ealth,
sustainable development remains difficult , slippery and e lusive (Williams and Millington
2004). As Table 3.12 illustrates, a ladder of sustainable development has been devel-
oped to identify the different elements of th e specific approaches to susta inable devel-
opment, ranging from the statu s quo ofthe 'Treadmill' through weak and strong versions
to the 'Ideal Model' (Chanerton 2002; Williams and Millington 2004).
'Weak' and 'strong' sustainable local and regional
development
,u,.auwu " ' oeye 10pment - often derided as 'shallow environmen-
talism ' - interpret nan![e jn human or antb.ropoct:ntric temJs as a resQJJrce and econom ic
growth as progress . Expanding the stock of resources through techuological solu ti ons
without cha ll enging existmg capnalist structures is central. Principies comprise the
use of renewable energy, substitutes for non-re~le s and more efficien t resource
u~ation . Ecological modemis~as gained ground as a means of promoting
more enlighteued and sensitive app roaches to sustainable economic growth and devel-
opment. Enviroru11ental justice i ~- a weakeLform of sustainable development that seeks
further economic growth but with a more equita~le redistribution of costs and benefits.
ln particular, the approach seeks- intra- and intergenerational equity (Hudson and Weaver
1997).
Stronger forms of sustainable development connect with notions of deep and polit-
ical7c0iogy_ tha.L..challellg.e ~va i.!JEg CJI.P i tal i~J _sociaLorgauisation (Harvey 1996). 1n
this approach, the p~le-narure relationship is reyersed-<rnd-int<:-J'j)r~ed..as..buma.u.adap­
tation to finjte narnre..{Williams and Millington 2004). lnd eed , 'biocentric ega litarian is m '
seeks to endow nature with biotic rights to prevent its exploitati on. Notions of wealth
are understood in a non-material way as we ll-being and harmonious co-habitation within
the biosphere. Stronger sustainable development seeks to reduce the demand and
consumption of resources.
Sustainable local and regional development policy
Of the"~ak sustainable development approaches, 'ecological modemisation' has most
influen~ local and regional development policy. Examples include the promotion of
more efficient economic growth that uses fewer natural resources, regulated markets and
using environmental practices as an economic driver (Gibbs 2002; Roberts 2004).
Concrete policy initiatives include environmental clusters (e.g. air-pollution control)
and industria ~o logy that coTUlects and utilises waste resource flows from locally
proximate industries to yield 'wea lth from waste'. Environmental justice approaches
have inftuenced local and regional development policy in seeking positive distribu-
tional outcomes, including the remediation of deg:_aded envi~ents and the recycling
 CONCEPTS OF LOCAL ANO REGIONAL DEVELOPMENT
FRAMEWORKS OF UNDERSTANDING
- - - - - - - - - --
-
Table 3.12 Principies fo r sustainable regeneration poten tia] of 'demanufacturing '. Suslainable approaches lo regeneralion ha ve overlapped
Strong 'Ideal model' and influenced discussio~ in local and regional .de.velopmenl
....__ around lhe conlrasls
Approach to Treadml/1 Weak
sustainable sustamable of sustainable belween 'top-down ' and 'grass- rools ' approaches. ~& sustainable developmenl has
sustainable
development development development promoted small-scale, decenlralised and localised fonns of social organisation lhat
development
Philosophy Anthropocentric Ecocentric and biocentric promote self-reliance and_!lli:!.!ll<ll_aid (Chatlerton 2002). Local and regional develop-
Exponential Market-reliant Environmentally Right livelihood, ment exarnples include local lrading networks and ecological laxes on energy, resource
Role of economy
growth environmental regulated market , meeting needs
and nature of use and pollution (Hines 2000). - -
policy, changes changes in not wants ,
growth
in patterns of patterns of changes in
consumption production and patterns and
consumplion levels of The critique of sustainable local and regional development
consumption
Sustainable approaches to local and regiona l development have been subject to critt-
Geographical Global markets lnitial moves to Heightened local Bioregionalism,
local econom1c economic extensive local cism. For ·~r' sustainable development , criticism focuses upon the refonnism and
focus and global
economy self-sufficiency , self-sufficiency self-suffic1ency limited contribution of such ideas to sustainability and the possibility of ;;;;uafly
minar initiatives in the context achieving economic, environrnental and socially integrated approaches lo~cal and
to alleviate global of global markets
regional development (Harvey 1996; Haughlon and Counsell 2004 ). ~er \ ustain-
market power
Replacing finite Environmental Promoting and abi lity in local and regional development has attracted cri1icism for its potentially ~­
Nature Resource
exploitation resources with management protecting al istic search for ideological punty, practica ] lack of feasibility and limited, small-scale
capital; and protection biodiversity exarnples. Given the magnitude of changes required to put local and regiona l develop-
exploitation of
ment onto a more sustainable footing , the relatively small-scale inniatives introduced to
renewable
resources date often seem hrnited relative to the scale of the problem. In 1enns of govemment and
Policies and No change Sector·dnven Environmental Holistic govemance, local and regi9nal instJ.tu\i.Qns..may lack...tb.e..poweJ:...and.J:kllQll.!:f.e~i~ a
sectoral approac~1 policy 1ntegration intersectoral mu lti level polity ~ive.L susJ.ainl\.l;¡k_Q.evel.Qpment (Margan 2004). Notwithstanding
integration across sectors integration
such issues, sustainable development is a key concem for local and regional deve lop-
Technology Capital-intensive, End·of-pipe Clean technology, Labour-intensive
technical product lite cycle appropriate ment explored throughout the book.
progressive
automation solutions, mixed management, technology
labour· and mixed labour- and
capital-intensive capital-intensive
technology technology ® Post-developmentalism
lnstitutions No change Minimal So me Decentralisation
amendments restructuring of political , legal, As we saw in Chapter 2, the notion of 'development ' has been questioned in the light
socia l and of post-structuralist debates in soc ial theory (Peet 2002). Post-structuralism is 'a theo-
economic
institutions retical approach to knowledge and society that embraces the ultimate undecidability of
Token use of Advanced use of Full range of eaning, the CO_!!Stituttve power of disCOiii-se.._ andlhe p~itiCal eftectiVil'y o.!:_ fheoryand
Policy Conventional
instruments accounting environmental sustainability policy tools, research' _illib~on-Graham 2.QQ.0.;_9j). At its heart is a_gjti_gue of_mQdem.ism and its
and tools indicators, limited indicators , wide sophisticated epistemology or theory of knowledge. For post-structuralists. modemist thinking sees
range of market- range of policy use of indicators
tools extend1ng lo knowledge as singular, cumulative and neutral. Post-structuralism interprets knowledge
led policy tools
social as multiple, contradictory and _ pow~. 'Development' is understood as a specific
dimensions d~ ~ ially cons~te<.!._Ea.!:m!i_v~mbled an2_ promoted _Ey certain inter-
Redistribution Equity not an Equity a marginal Strengthened lnter- and intra- ests - that or~anises knowled~e of e~OJ~.~~li :_c hange in a particular waY.:_ For Gibson-
issue issue generational
equity Graharn (2000: 103), 'development' is 'the story of growth a long a uE}ve ~ l social
Open-ended Bottom-up trajectory in which regions or nations characterised by "backwardness" are seen to
Civil society Very limited Top-down
dialogue between initiatives, dialogue and community progress towards modemity, matunty, and the full realization of their potential '.
state and limited state- envisioning structures and The post-structuralist critique focuses upon the modemist model of change in post-
environmental environmental control, new
approach to war developmcntalism discussed in Chapter 2 (see Figure 2.1 ). lt criticises its 'Euro-
movements movements
dialogue valuing work centrism' and representation as the 'one-best-way' route to 'development' tried and
Source: Adapted from Baker et al. (1997)
tested by the industrialised and developed North. Post-development theorists influenced
 _ _ _ _ _ _ _ _ _ _ _ _ _ CONCEPTS OF LOCAL ANO REGIONAL DEVELOPMENT
:1 FR A MEWORK S OF UNOERSTANDING I!D
by post-structuralist thinking argue that this inappropriate and extemally dete1mined
model has been foisted upon the ' developing ' South. often by internationallending agen-
Example 3.4 Capitalism, non-capitalism and community
cies such as the lMF and the World Bank . The ' development ' model is seen as inti-
economies
mately connected to the global extension of neo-liberalism through its adherence to
Gibson-Graham's (2000) 'post-structuralist' approach to local and regional economies
/aissez-faire multilateral free trade, ensuring that ' developing ' country markets remain
seeks to chall enge the waysi n which the capitalism- non-capitalism relationship has
open to the exports and investmcnts of 'developed ' world producers. The 'development'
provided an economic discourse that constitu tes capitali sm as a necessary and dominan!
discourse is interpreted as having had devaluing and disabling effects upon the 'less
fonn of the economy. They argue that non-capitalist forrns are typically understood rela-
developed' (Escobar 1995). The post-structuralist approach interprets the prevailing
tive to capitalism only as equivalen!, opposite, complementary or subsumed. In particular,
discourse of ' development ' as further reinforcing the colonial legacy of unequal rela-
non-capitalism is often seen as subservient, weaker and less reproducible. Non-capitalist
tions between the 'developed· and 'developing'.
economic practjces..may mclude the household, the informal economy, alternative economic
experiments or cooperatives. S~ activities_!!l~ coñ"stitute a substantial part of the 'eco-
Post-development in localities and regions nomy' but are currently treated as invisible - the hidden part ofthe 'iceberg' (Figure 3.15).
•
The critique of modernist 'development ' has stimulated thinking about 'post- 4
developmentalism' and is having so me inAuence u pon questions of local and regional
development (Edward s 1989; Rahnema and Bawtree 1997 ; Gibson-Graham 2000). P,Qst-
s:_ruc turalist analysis inte!Prets ' economic rationalities as socially constructed' and takes
'diver~historical fonns, have distinct gs:ographies and produce specific regional fonns
o Wage labor
produce for a market
in a capitalist firm
of development' (Peet 19.28: 2). Central to this post-structuralist approach are the
strategies _!:i d~s~ction , ~1calogy and discourse analysis to trace the historical
construction of what appear to be mainstream narratives of 'development ' . Questioning
prevailing wisdom - articulated in often competing discourses of modemity based in in neighborhoods
different social and political imaginations - then provides the ability to challenge such within families unpaid
conceptions and develop alternative constructions. The objects of 'development' might
then be repositioned 'outside a discourse that produces subservience, victimhood, and in church/temple
ecótlomi'Ciñi¡50tence' (Gibson-Graham and Ruccio 2001; see also Gibson-G raham between friends
the retired
2000: 104).
volunteer
4-~
Post-development in local and regional policy
moonriafitína children
Post-developmentalism seeks a theory of development detennined by those to be
'developed' or, cruciall y, those who choose not to be ' developed' in a particular way. íriforma( (endina illegal
Empo'::_ered, gras_;;-roots leadership and nationally, regionally and locally appropriate not for market
fonns of development are the aspiration uLthis ap.proach. As discussed in Chapter 2, sell-provisioning
rather than have a model of 'development' socially constructed and imposed by other not monetized
interests, post-developmentalism encourages localities and regions to seek their own
a~ to the question of what kind of local and regional development and for whom. under-the-toble
producercooperatñres
In local and regional development policy, post-development ideas have gained ground
consumer cooperatives
since the l990s. Example 3.4 describes Gibson-Graham ' s approach to capitalism, non-
capitalism and community economies. Anention has focused upon the potential
economic and social development benefits of ' ai~E:_native' and more 'di verse ' economies
bener connected to the social needs and aspirations of localities and regions, including
- Figure 3.15 The 'economic ' in capitallsm and non-<:apltalism
initiatives such as Local Exchange Trading Schemes, social enterprise and intennediate Source: Community Economies (http: / ; www.communityeconomies.orgj)
markets for labour, goods and services (Leyshon er al. 2003).

FRAMEWORKS O F UNDERSTANDING
-----------------------
Gibson-Graham seek to challenge or ' destabilise ' the ' mainstream ' development
discourse that focuses upon capitalism as dominant. They seek to represen! the realm of
non-capitalism positively as a potential array of di verse economic practices that cou ld be
resilient and capable of generative local and regwnal gw:wili. In policy and practice, this
ap¡;;;;;;ch has informed community-based action researcb at the regional leve! that seeks
to promote a discourse of economic diversity and economic possibility , often in localities
facing the deíñdi:iS!r iaiisation and decline of formerly dominan! capÍtalist firms and indus-
tries. Since discursive constructions are interpreted as having material and symbolic effects
in post-structuralist thinking, innovative fom1s of language and representation are deployed
to challenge the ' mainstream discourse of "deve! O'p ment" that ''had positioned the
region as entirely dependen! on investment by capitalist firms , which might or might
not be attracted by various blandishme"nts;, ~ '(Gibson-Graham 2003: l 08) . ' Destabilising '
th e existi ng identities of localities and regions in this way is seen as a means 'to produce
new models of regional development that exceed the theory and practice of capitalist indus-
trialisation' (Gibson-Graham 2000: l 08). The extent to which such altemative conceptions
can challenge and/or accommodate the broader capitalist economy and grow small-scale
experiments into sustainable and context-se nsitive local and regional ' post-development'
remains to be seen.
Source: Gibson-Graham (2000)
The critique of post-developmentalism
Perhaps unsurprisingly given their radical intent and early stage of evolution , post-
structurali st approaches to local and regional development have at1racted criticism.
Critiques of post-structuralism emphasise tls philosophical relativism . lt deliberately
lacks and rejects meta-tbeorjes such as Marxjsm, and foundational or uni ve rsal princi-
pies (Harvey 1996). Rather than any notion of trans-historical relations and processes
that endure over space in place and over time, the guiding ideas and values of post-
strucruralism are the products of particular interests, places and tim es. We return to this
very important issue of relativism in the conclusions in Chapter 8. For Scon (2004),
post-structuralist analysis displays a naive relativism , philosophical idealism and polit-
ical voluntarism that fails adequately to recognise the often determining pqwer of
externa! forces and underlying structures sha.Q.ing_J.~c!!..2.Ed region al development. Peet
( 19~ a -éounter-critique 6f ¡')o;t-structuralism ' s negati ve anitude and rejec-
tion of development, modernity and economic progress and interprets th e critique of
' development' asan attack upon the modern and progressive idea ofrational social inter-
vention for the improvement of human existence and emancipation . In bis view, the
need for a modernist theory and prac tice of development alterna ti ves to the curren! neo-
liberal order is cri ti ca!. ln addition, post-structuralist approaches often ignore or delib-
erately fail to acknow ledge their links to the more ' modernist' tradition of Comm unity
Economic Development and its core themes of local control and empowerme nt we
discussed in Chapter 2 (see Example 2.6).
CONCEPTS OF LOCAL ANO REG I ONAL DEVELOPMENT
---- - - - --· - ----
Conclusion
This chapter has reviewed the main concepts and th eo ri es that seek to belp us to under-
stand, interpret and explain local and regional development. Neo-classical theQri.e.s.focus
upon explaining d~arities. in ¡egional _gr.o~a!:!_d their long;IYll..J~.an..and conv_er-
g~e. Despite critique based upon its simplifying assumptions and contrary empírica!
evidence, this conventional theory remains intluential for 'free-market ' versions of local
and regional development policy. In contras!, Keynesian theories emphasise regional
divergence and the ways in which unfenered markets tend ~ force rather than reduce
regwnal disparities . The extent of polari sa tion between core and peripheral regions
explained by the theory remains the subject of debate and an importan! intluence for
more interventionist forros of local and regional development policy.
Theories of structural and temgoral change interpret local and regional deveiQ.Q_ment
as historical and evolutionary processes that may inc~orate penoOs of structural or
systemic change. Stag;,-cycle and wave theories use temporal frameworks to explain
regional development and its particular historical evo luti on in specific types of places.
Marxism and radical política! economy use the 'spatial division of labour' to reveal the
hierarchical relations between places and to explain regional gr_~th as episodic and
capable of periods of convergence and divergence . Transition tbeories instiOlliQDalist,
transaction costs and regulationist - interpret local and regional de.velopment in the
coñ!exlo f S.üDstaiillVe:sñiJts m t he::r;a:ru;:e..o[;;apitalism . Social , technological and insti-
tutional characteristics are central to explaining the resurge nce of specific types of local
and regional economies. Despite critique of their reliance upon macro-structural change
and their failure lo explain the diversity of local and regional development experiences,
transition theories have stimulated a resilient policy focu s upon indigenou s assets a nd
'development from below ' .
lnstitutionalism and socio-!conmp~s~phasise social and instityJionaJ conte.xt to
explain uneven locaLand regiona l- development. Specific and particular attributes of
localities and regions are central to explaining development trajectories over time, espe-
cially the role of intermediate institutions between markets and hierarchies. Theories of
innovation knowledge and ]eami¡¡g seek to open the 'black box ' of tecbnqlogical
progress integral to neo-classical explanations of local and regional growth. G_~g¡:aph­
ical unevenness in innovation, knowledge and learning is explained by djfferentj ~ ted
social and institutional structures and contexts with marked implications for local and
regional development. In response, local and regional development policy informed by
these ideas has sougnt to foster the capability of institutions to build innovation capacity
and foster collective knowledge creation, application and social learning.
Extended neo-classical theories of local and regional development seek to address
tbe problems of the conventional neo-classical approach. Endogenous theories incorpo-
rate'f'ói'iñeFly-eX"!ernaJ or exogenous fac tors - pop ulation growth , saving rate s, human
capital and technological progress- within their models to explain regional conver~nce
and divergence and th0 patial concentratJnn oLhigh and low gro~ons. Despite
criticisms, endogenous theory has reshaped the focus of local and regional development
policy towards levelling-up the economic performance of all localities and regions to
enbance local , regi onal and ultimatel y national development. Geographical economics
emphasises imperfecl_fO.[ll.Jl.elitiQn.. l. increasing returns and ex terna! economies combined
] FRAM~ORKS OF UNDERSTANDING

with intra-industry and intra-corporate trade in its conceptual and theore tical framework.
Rather than the long-run convergence focu s of conventional neo- classica l th eory, it
explains local and regional divergence in tenns of the development of multiple cores
and peripheries. Strategic trade policy seeks to SUJ)p9rt the s pecialised,jntema tionally
INSTITUTIONS:
competitive and geographically concentrated expon sec tQrS with lQca l and regj_Q nal
development implications. Competitive advantage theory explains the role. dynamics
and competitiveness ennancing potential of the geographical 'clustering· of industries
GOVERNMENT ANO 4
at the local and regional levels within national economies. Cluster policy is highl y influ- GOVERNANCE
ential for local and regional development in fostering the benefits of 'clustering' to
;;;:npetitiveness and providing a role for local and regional institutions .
Sustainable development seeks Lo understand and explain lcm.g_er te!Jll...!]lore durable
and le~iug.Jillms_oLJocaLand regional development-that...integrat.e. ec.onomic,
social and environmental concems. Sustainable fonns of local and regional development lntroduction: States and local and regional development
have become a central challenge for national. regional and local institutions and policy.
'Wea ker· fom1s of sustainability have most influenced local and regional development
The role of the state in sponsoring industrialisation can be traced back to the nineteenth
thinking and policy experimentation with concrete initiatives. Post-developmentalism
draws upon_post-st(l.lcturalist theory to Gritique_the pre:~~ailing_mainstrearn discourses of century and beyond. Such intervention in the economy was frequently a means ofnation-
' development ' and to pr()mote altemative, locally detennined. social constructions of building. Since the Second World War govemments have intervened in their economies
'development' based upon both capitali~nd non-capi talist .7conom~activities . To to ensure local and regional development, often reflecting a commitment to limit the
complete this section on frameworks of understanding, the next chapter engages with growth of ínter-regional disparities and promote the development of rural areas.
the institutions of govemment and govemance of local and regional development. Although having some success in shaping pattems of local and regional development,
as we noted in Chapter 1, centralised or top-down fonns of intervention , pursued by
Further reading national planning and development authorities, were criticised for their heavy concen-
tration on the provision of physical infrastructure and, as we shall consider in Chapter
For a cornplementary and general overview, see Annstrong, H. and Ta ylor, J. (2000)
6, an overemphasis on the anraction of mobile investment. Such an approach often failed
Regional Economics and Policy (3rd edn). Oxford: Blackwell.
For wide-ranging collections, 'see Bames, T. and Genler. M. (eds) ( 1999) The New Jnduslrial to close the development gaps between prosperous and lagging regions . The perceived
Geography: Regions, Regula/ion and lnslilulions. London and New York: Routledge; failure of such approaches, together with the challenges of globalisation, has led to a
Bames, T.J . and Sheppard, E. (eds) (2000) A Companion lo Economic Geography. growing emphasis upon bottom-u_p approac)l~s to the promotion of local and regional
Oxford: Blackwell; Clark, G.L., Feldman , M. and Genler. M . (2000) The Oxford development. Such interventions, in theory at least, tend to require strong institutions
Handbook of Economic Geography. Oxford : Oxford University Press.
For critica! reviews of recent conceptual and theoretical approaches, see Scon. A.J. (2004) of local and regional govemance and to be based on local and regional panicipation and
'A perspective of economic geography', Journal of Economic Geography 4: 479-499; dialogue. As we discussed in Chapter l , bottom-up approaches are concemed with inte-
Scon, A.J. and Storper, M. (2001) 'Regions, globalization. development '. Regional grated territorial development, focusing upon the mobilisation of local resources and
SIUdies 37(6--7): 579- 593; Sunley, P. (2000) 'U rban and regional growth'. in T.J . Bames competitive advantages that are locally owned and managed.
and E. Sheppard (eds) A Companion lo Economic Geography. Oxford: Blackwell.
The concem of this chapter is the govenunent and govemance of local and regional
For synoptic reviews of key conceptual developments in local and regional development, see
Martín, R. ( 1999) 'Jnstitutional approaches in economic geography'. in T.J. Bames and development. That is, the developm~of ;nstitutions wW are tesponsible for the
E. Sheppard (eds) A Companion 10 Economic Geography. Oxford: Blackwell: Manin, R. deslgn, ímprementa!Ionana monitoring of strategíes of development. This involves the
and Sunley, P. (1996) ' Paul Krugrnan's geographical economics and its implications for vertical and horizQDlaJs.oordination o.!jlifferent ~veis Qf govemment and lQcal public
regional development theory: a critica] assessment', Economic Geography 72: 259- 292;
and prívate actors and raises importan! issues of govemance that need to be ~~ed
Martín, R. and Sunley, P. (1998) 'Siow convergence? Post neo-classical endogenous
growth theory and regional development" , Economic Geography 74(3): 201-227; Martín, by-ñew institutional fonns. ·Local and region;l- development is typically subject to
R. and Sunley, P. (2003) 'Deconstructing clusters: chaotic concept or policy panacea?' , increasingly complex govemance systems often involving new fonns of cooperation and
Journal of Economic Geography 3( 1): 5-35. coordination. Such developments can serve to empower populations and assist individ-
On the conceptual linkages to local and regional development policy and practice, see uals and communities to develop their own syntheses of what kind of local and regional
Glasmeier, A. (2000) 'Economic geography in practice: local economic development pol-
development and for whom that we discussed in Chapter 2. Potentially, new fonns of
icy', in G.L. Clark, M. Feldman and M. Genler (eds) The Oxford Handbook ofEconomic
Geography. Oxford: Oxford University Press; Cooke, P. and Morgan. K. ( 1998) The govemance can also foster the mobilisation of civil society and promote the fonnation
Associalional Economy: Firms, Regions and innova/ion . Oxford: Oxford University Press. of networks and partnerships that can provide a basis for economic and social progress.