Entrepreneurship and Local Development: how to build a cohesive model towards competitiveness

1. University of Rome “Tor Vergata” Entrepreneurship and Local Development:how to build a cohesive model towards competitiveness Maria Prezioso EuropeanSummerUniversity on Entrepreneurship (ESU) 2009 8 - 13 September 2009 Università del Sannio di Benevento Italy

2. What are we talking about? • Demand & Supply of economic and social cohesion to support analysis of economic and social disparities in the enlarged EU (Bristol, 2005; Territorial Agenda, 2007; Cohesion Report, 2008; European Chart for SMEs, 2009 ) • Recent developments of competitiveness in sustainability and their impacts on the bottom-up territorial development by the entrepreunership’ssubsidiarity and the trans-national co-operation (UE Territorial Agenda, 2007; Lisbon, 2008-09) • Identification of enterprise investments localisation models and influence factors • Policy perspective, to identify regional key-mesures to have a positive impact for the models application

3. DRIVING THEMES from literature review Scientific/political documents and data collection at Regional, National and European level obtaining: • Cohesion, Competitiveness, Subsidiarity and Sustainability as key-words of new European polycentric entrepreneurship • Citizens and citizenships (i.e. enterprises) bottom-up participation as the way to realize a social and economic cohesion by appropriate governance’s rules But also: • polycentric co-operative territorial structures based on multilevel integrated programmes by a planning action • EU entrepreneurship re-interpretation of indicators for the territorial sustainable government to be competitive • a common territorial dimension/vision/definition for understanding enterprise phenomena

4. Some suggestions from Literature • Orthodox perspective • Localisation of economic activities • Hedging costs • Neoclassic school • Technology as hexogen element • All economics growth at the same rate in balanced conditions • Convergence • Heterodox perspective • Development (sustainable development) • Multidisciplinary and multilevel • Territorial and regional development • Convergence vs. divergence, top-town and centre-periphery; external economies vs internal economies

5. Different schools of regional growth/development Theory Main Source of Growth and Productivity Export-base theories productivity of a region’s tradable base Endogenous (or ‘new’) growth theory accumulation and attraction of educated and skilled human capital Neo-Schumpeterian theory innovation, technological advance and entrepreneurialism Cluster theories clusters of specialised export-orientated industries, and associated supporting supplier and institutional networks Evolutionary theory adaptive capabilities of a regional economy to respond to shifts and changes in markets Institutionalist theory well-developed and regionally embedded set of informal and informal institutions Cultural theory cultural diversity and tolerance and favourable cultural amenities and infrastructure

8. ENTERPRISES’ COMPETITIVENESSIN TRADITIONAL TERMS (Kok Report, 2004) • there is no unique definition of enterprises’ competitiveness • productivity is the key to competitiveness of European economies and enterprises • domestic factors are less dominant determinants of the enterprises competitiveness • the concepts from neo-classical, new growth theory and cost competitiveness apply equally well to regions as to nations • knowledge and innovation, and localisation/specialisation effects are critical factors in regional competitiveness • regional competitiveness is an empirically concept across both regions and time

9. New Terms of TerritorialCompetitiveness in Sustainabilityfor EU entrepreneurship • “high and rising standards of living of a nation with the lowest possible level of involuntary unemployment, on a sustainable basis” (European Competitiveness Report, 2003; ESPON, 2006) • regional competitiveness factors include issues such as innovation, information and communication technologies (ICT), and environmental protection • The regional and national territory cannot treat/discuss as undifferentiated space of the social and economic action but as a physical place where receive and check the territorial capability of the competitiveness • the territory becomes a parameter to measure virtuous solutions supporting the regional entrepreneurial structure in terms of both environmental sustainability, improvement of cohesion and integration levels between different territorial actors (institutional and not institutional)

10. Enterprises’ Competitivenessis a multidimensional concept It is changing in time and space The choice of a definition and a measure invests a political-social dimension (no-competitiveness may become a cause of exclusion from the mechanisms of setting-up collective decisions). The approach more appropriate is therefore an approach of territorial-multidimensional type that revolves around three key objectives/principles: • sustainability • cohesion • integration They constitute the foundations for the activities of various actors who interact on a given territory and define their inter-relations with other territorial dimensions

11. Factors influencing territorial competitiveness of enterprises • territorial attractiveness • continuous qualitative improvement • cultural and social heritage valorisation • sustainable use of resources (natural, economic, social) • preventive assessment of policies, programs and projects

12. Human Resources Global/local interaction Quality (process, environmental, production, service) Local demand Regional cluster Efficient use of resources and funds Innovation & Research Strategic localization Main competitiveness determinants: A Porter’s Diamond revision (Prezioso, 2006)

13. New Territorial dimension of the entrepreneurship • medium-high and distributed standards of living • lowest possible level of unemployment • sustainable basis • regional factors including issues such as innovation, information and communication technologies (ICT), and environmental protection • the regional and national territory cannot treat/discuss as undifferentiated space of the social and economic action but as a physical place where receive and check the territorial capability of the competitiveness • the territory becomes a parameter to measure virtuous solutions supporting the regional structure in terms of both environmental sustainability and improvement of cohesion and integration levels between different territorial actors (institutional and not institutional)

14. Conceptual framework • Economy based on knowledge and innovation • Slow growth cycles with low growing rates of the productivity and the demand • Economic attractiveness more and more linked at specific places /contexts • Contexts focused on externalities (post-fordism) and not only on internalities (fordism) • Fiscal and ideological restrictions • Public policy oriented to indirect investments by the creating of externalities • Increasing importance of regional resources • Remetropolitisation and reconcentration of economic activities in areas with right framework conditions

15. The Innovation and Technology weight

16. The Innovation and Technologyweight(continue) • Regional competitiveness, Innovation and Technology • Neo-Schumpeterians approaches, Regional systems of innovation, learning regions (integration bettween quality, innovation, sustainability)

17. ConceptualFramework of link betweencompetitiveness/SMFs(ESPON, 2006)

18. Entry-exit models of development vs growth A right infrastructural organisation is a necessary but not sufficient condition for the development, particularly in a more and more international and competitive context Entry walls • Economies of scales • Advantagesformonopolisticacquisitions • Productivediversity (fedelium premium, patents,….) • Finance/credit • Prices war • Laws, normes, regulations Entry-Exitpotentialdeterminants • Localdemand • Professional skills • Richness • Entrepreunership

22. Location of Forbes 2000 company headquarters in Europe (sorce: ESPON, 2006)

23. Hypotheses on regional effects of current policies price stability as absolute priority reduces the adjustment opportunities available in the past => immediate competition, even for lagging regions with low productivity globalisation and deregulation policies create competition for jobs, thus exerting pressure on direct and indirect wages and on working conditions lagging regions specialise in those economic sectors where wage level important competition factor very limited redistribution of productivity gains towards salaries => regressive specialisation increased difficulty for lagging regions to catch up but: empirical evidence concerning convergence is very ambiguous

24. The weight of riskson the enterprise planning

25. Regional policies

27. A New MethodologicalApproach A new geographical methodological approach for analysing the territorial dimension of the regional and sub-regional competitiveness is a territorial-multidimensional processin accordance with a multi-level and multi-actor approach It is named STeMA (Sustainable Territorial/Environmental/Economic Management Approach) and it is organised by 10 scientific simplified hypothesis

28. How does STeMA work? STeMA has five key objectives/principles based on a subsidiary territorial vision: • competitiveness • sustainability • cohesion • integration • polycentrism • convergence • STeMA consideres the indicators’ qualitative and quantitative relationship in a continuous confrontation and updating to increase the levels of awareness and participation in development choices.

29. STeMA application has demonstrated (Bencardino, Prezioso 2009) that the concept of territorial competitiveness is composed by some determining factors or determinants that can be further decomposed to arrive at indicators level • to (territorially) contextualise the measurement or, in statistical terms, to normalise/standardise the polycentrism in order to compare the different territories • to standardise the single indicators • to link enteprise competitvenessin sustainability to the EU regional typologies (i.e. the urban-rural typologies or MEGA-FUA-PIA or polycentric territorial typologies) • to weigh the various indicators (in this respect, a fundamental support is represented by the case studies), • to control in real time: static data/phenomena and dynamic data (to monitor the changes in time)

30. EU regionaltypologiesforSTeMA Class 1 - High urban influence, with Mega functions Class 2 - High urban influence, with Transnational or National functions Class 3 - High urban influence, with Regional/Local functions Class 4- High urban influence, with no special function Class 5- Low urban influence with Transnational or National functions Class 6 - Low urban influence with Regional/Local functions Class 7 - Low urban influence with no special functions

31. Polycentric territorial base at NUTs 2 and 3 (from: ESPON 3.3 project)

32. List of new regional policies. An Example

34. STeMA

38. Policies recommendations with regard to Innovation & Research • common measures directly dedicated to the countries showing very low I&R profiles, with respect to the national plans to invest in an appropriate technological base (I&R exchanges and growth about ICS) • improving the share of population and firms “surfing the web” in Eastern countries and Mediterranean area to sustain internationalisation • common education as a base of the ICS (from the tertiary education level by life-long learning projects) putting attention towards the medium age population and their possible re-involvement into the productive system with new responsibility positions • innovation and restructuring of the knowledge structures and R&D infrastructures (new telecommunication systems and dedicated technologies by European patents) to sustain exchanges between research products and their applications • a better link between I&R and local job market, opening new Structural Funds at the SM firms-regional institutions-educational/research system joint; - the SF participation in the public-private cooperation about education (Mediterranean and North Sea regions, Baltic ones including Estonia, Latvia, Lithuania, Eastern European regions) balancing the EU offer and mobility of Human Capital towards the Eastern regions; - the actualisation of the tertiary education level to the international needs (Mediterranean regions) in order to realise more telecommunication, horizontal structural connection and integration, over taking the design of the positive ‘Y’, using especially new technologies contributions.

39. Policies recommendationswith regard to Global Local Interaction • to create a common language in the global ‘arena’ of competitiveness and sustainability • to guarantee an appropriate level of security of population migration • to valorise tourism into a general territorial appeal, linking tourism to the education mobility, sustaining the family income offering a new educational and knowledge system by globalization inputs and ICS; • to launch specific environmental projects for excluded active population (new job market in the coastal or boundary countries) • to sustain a global vision into the student and researcher outbound regional mobility • to launch specific manufacturing enterprise policies • to improve polycentric models as alternatives to the capital regions • to implement G/L infrastructures involving credit institutions level and insurance companies to sustain a better general management attitude • to stress the delocalization particularly in borderline regions • to confirm the cohesion regional funds to reinforce the local social interaction, involving the manufacturing enterprises and local trade activities, by specific fiscal and financial instruments • to consolidate the internal goods and services trade using the same rules of the free EU market circuits, favoring the internationalization position of regional systems • to re-organise a balanced distribution of management attitude

40. Policies recommendationswith regard to Quality - to use more indicators than one to assess the country positions and to harmonise consumer prices index and the consumption aggregates towards a common medium level in all UE; - to connect the level of employment (employment index) and its organisation in the traditional industrial regions to the de-industrialisation process; - to change the parameters of calculation of buying power looking at EU goods of large consumption; • to stress the infrastructural variables of cohesion as significant measure of welfare efficiency, • to complete the network of physical accessibility and multimodal organisation • to consider life quality as a complex synthetic index, representative of the regional identity into EU context; - to consider government quality as a fundamental point of European integration and a measure of the common European political feeling (using the government quality as a synthetic index); - to apply the subisdiarity principle and its rules to create intra and interregional cohesive instrument; • to fix different governance rules with respect to the geographical/territorial scale • to improve citizenship confidence in some countries • to propose a common reflection about Social Quality and Cohesion • to sustain the social wellness aptitude to reinforce the cooperative regional projects

41. Policies recommendationswith regard to Resources and Funds • to balance the regional differences on the base of regional capability • to relate the Lisbon Strategy (Structure) to regionally led innovation poles • to link Human Capital Expenditure to Public Expenditure for Employment as well as sustaining more specific Human Capital Policies (for example, in Austria and Belgium) • to sustain Firms Aids, reflecting on polarisation as economic support (in Central and Eastern Europe, Ireland and Portugal) - Addressing Public Expenditure for Employment to contrast the high public expenditure along the diagonal concentration (from Ireland through to Italy, with the South-West, North-East and Central-East regions), building up the service sector in IT - To stress international exchange in I&R and cross-border activities in pollution, risk prevention and tackling environmental problems (particularly in the Eastern regions) • to improve the link between Structural Funds and Accessibility by Population by the development of corridors between urban areas • to address the policies for the Gothenburg Strategy (Structure) to contrast the lowest expenditures • about Public Expenditure for Poverty and Ageing, it’s needed to have more expenditure for labor markets including older workers • to overcome the North/South divide by a new ESDP

42. What means for enterprises the new vision 2007-2013 • To be able to sustain the market concurrence through those endogenous factors that differentiate the territorial whole/system (mix of social, environmental, economics indicators influencing the regional ranking within the enlarged Europe and in the international context) • To have some cheap raw materials linked to entrepreneurial vital and innovative factors within a stable social context • To face market competition with scenarios capable of guaranteeing environmental, social, cultural and economic sustainability • To have some management faculties (components) capable guaranteeing territorial competitiveness: awareness of its innovative capacity, organisation in networks, capacity to integrate the different sectors and levels of activities, to cooperate in and with other territories, to involve different public and private subjects and institutions, to have both a global, coherent vision respecting the use of local resources and to organise international, European, national, regional policies in a subsidiary point of view • To have confidence in internal cooperation between different subjects and UE level for the environmental protection and development It means cohesion

43. to establish a connection between economic and social progress and entrepreneurship Cohesion is typified by the behaviour of European institutions and enterprises, to whom the concepts of territorial cohesion and quality have become synonymous with success in competitiveness, as testified by the achievement of certifications like ISO or EMAS, followed by the enlarged concept of social responsibility (i.e. Territorial more than Corporate Social Responsibility) considered as a useful and necessary instrument of cohesion and competitiveness. The effects of an action towards cohesion could inspire many variations on European regions: • broadening and strengthening the internal market; • ensuring open and competitive markets inside and outside Europe (trans-border, trans-national and trans-regional co-operation policies); • improving national European regulations; • widening and improving European infrastructure; • increasing and improving investments on R&D; • simplifying innovation, TLC’s adoption and a sustainable use of the resources; • contributing to a steady European industrial fundament which would adopt certification systems and CSR (Corporate Social Responsibility) as means of cohesion and competitiveness; • increasing labour market’s attractiveness and flexibility; • increasing investments in human capital by improving education and expertise; • improving the preservation of public health and environment in the communitarian policies, as an opportunity of sustainable development