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Recent Research: Is Bigger Better in Economic Development?

October 16, 2014

Over the past decade, two ideas have become more and more popular among innovation and economic development leaders. First, that maximizing collaboration between institutions, interest groups, stakeholders and communities is pivotal in building an innovation ecosystem that can succeed and grow over time. Second, that proximity matters, and by focusing on innovation networks at the regional or metro scale, rather than at the national or state level, initiatives can have a real, measurable economic impact. Though they seem complementary, these ideas are frequently in tension. The first suggests that increasing the number of partners leads to more successful initiatives. The second suggests that, at least in terms of geography, there should be some kind of limit on the scope of innovation initiatives in order to tailor them to the needs of a specific region.

Several recent studies explore this balance between inclusiveness and specificity. In the Stanford Social Innovation Review, author Pankaj Ghemawat urges those committed to solving global problems to dismiss vague talk about global solutions, which he dubs “globaloney.” These solutions tend to become “bigger and blander.” When strategies to address global problems take on a global scale, smaller partners are often left out of the problem-solving process and not used to their fullest potential. Though his study focuses on social and environmental problems rather than innovation in particular, Ghemawat’s observations also apply to large-scale efforts to enhance national, state or even regional competitiveness. In recent years, the focus in tech-based economic development has shifted to regional solutions because larger-scale efforts are difficult to tailor to the needs of different regions and underuse smaller partners. It can also be difficult to devise reliable success metrics for these larger efforts.

How then to gauge the proper geographic scope of an innovation initiative and its economic impact? Ghemawat provides a useful framework for evaluating the scale that initiatives and partnerships should take based on five design principles.

  • Devolution holds that solutions should defer to the more local level where possible, only scaling up when doing so addresses a vital need.
  • Distance-sensitivity applies most directly to international cooperation, but also holds value for regional development. Since neighboring regions tend to share problems and economic relationships, when initiatives expand their first priority should be to expand to adjacent regions.  
  • Distance-directedness dictates that when choosing between regions for inclusion, preference should be given to regions with shared interests and interconnectedness. Ghemawat included several definitions of distance that clarify how to make such a decision.
  • Distinctive-competence suggests that expanding the geography of a partnership must add significant value to the project.
  • De-biasing tilts in the other direction, positing that wider partnership may add some value by creating trust and breaking down barriers that stand in the way of economic prosperity.

Again, Ghemawat intends this as a framework for international cooperation over global issues, but the model he sets out could be used for decisions about innovation initiatives at any level, from multi-national university research partnerships to neighborhood-based community development efforts. Such an approach would default toward smaller, more focused efforts, expanding to include additional regions and partners when expansion would add value.

Read Global Problem Solving Without the Globaloney

Comparing the effectiveness of smaller, more focused economic development efforts against more expansive partnerships is difficult, but a recent master’s thesis by Brittany M. Bruce of the University of Waterloo explores the value of geographic scale. The thesis provides an in-depth profile of regional collaborations in New York’s North Country and the Four Counties region of Ontario, along with 34 interviews about the challenges of regional economic development. These regions are large, primarily rural and agricultural, but include several innovation-focused organizations and efforts to promote economic growth by building strong institutional support networks and resources for new businesses.

Bruce finds that regional collaborations face a number of barriers, which may make smaller, more focused economic development strategies more desirable. In fact, interviewees suggested that creating boundaries and limiting efforts to a specific geographic area is a key step in creating effective initiatives. Bruce concludes that collaboration at the intra-country scale was often preferable to approaches that included the whole region.

 Barriers that stand in the way of successful collaboration include limited communication technology and stakeholders who have little shared motivation or regional identity. Overcoming these obstacles can increase a regional collaboration’s odds of success, but also point to the advantages of more limited efforts.

Read Collaboration and Regional Economic Development: A Comparison of North Country, New York and Four Counties, Ontario

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