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The Competitiveness

of Cities
The Competitiveness
of Cities

United Nations Human Settlements Programme


Nairobi 2013
The Competitiveness
of Cities

The Global Urban Economic Dialogue Series


The Competitiveness of Cities

First published in Nairobi in 2013 by UN-HABITAT.


Copyright © United Nations Human Settlements Programme 2013

HS Number: HS/054/13E
ISBN Number(Series): 978-92-1-132027-5
ISBN Number:(Volume) 978-92-1-132450-1

Disclaimer
The designations employed and the presentation of the material in this publication do
not imply the expression of any opinion whatsoever on the part of the Secretariat of
the United Nations concerning the legal status of any country, territory, city or area
or of its authorities, or concerning the delimitation of its frontiers of boundaries.

Views expressed in this publication do not necessarily reflect those of the United
Nations Human Settlements Programme, the United Nations, or its Member States.

Excerpts may be reproduced without authorization, on condition that the source is indicated.

Acknowledgements:
Director: Mohammed El-Sioufi

Chief Editor and Manager: Xing Quan Zhang

Principal Author: Peter Kresl

Contributor: Xueliang Zhang

English Editor: Roman Rollnick

Design and Layout: Peter Cheseret

ii
FOREWORD

Ur b a n i z a t i o n provision of adequate housing, infrastructure,


is one of the education, health, safety, and basic services.
most powerful,
irreversible forces The Global Urban Economic Dialogue series
in the world. It presented here is a platform for all sectors
is estimated that of the society to address urban economic
93 percent of development and particularly its contribution
the future urban to addressing housing issues. This work carries
population growth many new ideas, solutions and innovative
will occur in the best practices from some of the world’s
cities of Asia and leading urban thinkers and practitioners
Africa, and to a lesser extent, Latin America from international organisations, national
and the Caribbean. governments, local authorities, the private
sector, and civil society.
We live in a new urban era with most of
humanity now living in towns and cities. This series also gives us an interesting
insight and deeper understanding of the wide
Global poverty is moving into cities, mostly range of urban economic development and
in developing countries, in a process we call human settlements development issues. It will
the urbanisation of poverty. serve UN member States well in their quest
for better policies and strategies to address
The world’s slums are growing and growing increasing global challenges in these areas.
as are the global urban populations. Indeed,
this is one of the greatest challenges we face in
the new millennium.

The persistent problems of poverty and


slums are in large part due to weak urban
economies. Urban economic development is
fundamental to UN-HABITAT’s mandate. Joan Clos
Cities act as engines of national economic Under-Secretary-General
development. Strong urban economies of the United Nations,
are essential for poverty reduction and the Executive Director, UN-HABITAT

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Contents

List of Tables, figures, acronyms and abbreviations vii

Chapter 1: Introduction 1

Chapter 2: Urban Competitiveness as a Concept and as a Policy 3


2.1 Definition of Competitiveness 3
2.2 Its Application to the Situation of Urban Economies 4
2.3 Why We Are So Interested in Competitiveness Today 4

Chapter 3: The Study of Urban Competitiveness 7


3.1 The Development of the Concept of Competitiveness 7
3.2 The Relationship between Competitiveness and Cities or Urban Regions 8
3.3 The Competitiveness of Cities is especially Important in the Contemporary
Context 9
3.4 Two Important Issues 10

Chapter 4: How Urban Competitiveness is Determined 13


4.1 Primary Determinants 13
4.2 Structures 14

Chapter 5: How to Evaluate or Analyze Urban Competitiveness 19


5.1 Benchmarking 19
5.2 Theoretical-Structural 22
5.3 Quantitative 23
5.4 The Advantages and Disadvantages of Each Methodology 24

Chapter 6 How to Promote Urban Competitiveness: Strategies for


Promoting Urban Competitiveness 27
6.1 Top-Down versus Bottom-up 27
6.2 Mobilizing Local Talents and Energies 28
6.3 The Need for Effective Governance 29
6.4 The Extent or Scale of the City 29
6.5 How to Become a Creative Place 31
6.6 Path Dependency versus a New Path 32

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Chapter 7: Good Cases of Promoting Urban Competitiveness 35


7.1 Some Cities That Could Be Emulated 35
7.2 Some Pitfalls to Avoid 36

Chapter 8 Issues and Challenges of Urban Competitiveness in


Developing Countries 39
8.1 Political Stability 39
8.2 Economic Rationality 40
8.3 Adequacy of Local Assets 41
8.4 Smaller Cities and Towns 42
8.5 Participation of All Groups in Society 45
8.6 Work Collaboratively 46

Chapter 9: Conclusions and Recommendations 49


9.1 Recommendations 49

References 51

vi
List of Tables, figures,
acronyms and abbreviations

List of Tables
Table 1 Highest African cities in the Ni competitiveness ranking of 500 cities
Table 2 Educational attainment of females and males, 2000

List of Figures
Figure 1 Competitiveness is:
Figure 2 From autarky to competitiveness, Europe and the US
Figure 3 The primary determinants of urban competitiveness
Figure 4 The industrial district of Alfred Marshall
Figure 5 The isolated cluster
Figure 6 The cluster of the multi-national firm
Figure 7 Networks
Figure 8 Agglomerations
Figure 9 Methods of evaluating urban competitiveness
Figure 10 Methods of evaluating urban competitiveness – strengths and weaknesses
Figure 11 The question of scale
Figure 12 Elements in a creative city

List of Abbreviations and Acronyms


EU European Union
OECD Organization for Economic Cooperation and Development
UK United Kingdom
US United States of America

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viii
chapter 1
Introduction

Chapter 1 Introduction

Urban competitiveness has become one of global market. Cities in the emerging markets
the central issues in public policy today. This are struggling with sometimes overwhelming
has long been the case for cities (taken to rural to urban migration, populations that
refer both to cities and urban regions) in the are dominated by young and often un-skilled
industrialized countries, especially during the workers, deficiencies in transportation and
past three decades. This increased importance communication infrastructure, inadequate
is the result of substantial changes in the housing and institutions, social practices
global economy, in the capacity of levels of that do not facilitate balanced growth and
government above the city, in the demographic competitiveness, and environmental problems
structure of most nations, in social structures that overwhelm local governments that have
and practices, and in the dynamism of not had decades or centuries to develop the
leadership at the local level in a great many necessary competences.
cities. Today and for the foreseeable future city
leaders and city economies will be challenged as Looming on the horizon are the cities in
never before; these challenges are accompanied the lesser-developed countries in Africa, Asia
by opportunities that are at least as significant. and Latin America. While they have huge
Where these challenges and opportunities are potential if they can meet the challenges of
seen and acted upon effectively, city residents our globalized economy, the barriers before
will be able to achieve the economic, life-style, them are substantial, but not insurmountable.
social and other objectives they may set for In fact, in the coming decades they will have
themselves. In cities where this will not be seen to contend with all of the problems that now
or acted upon, the future will hold stagnation, confront cities in industrialized and emerging
marginalization and disappointment for both nations. Furthermore, while their residents
leaders and residents. seek better living standards, education,
mobility and better health, at the same time
The most recent decade has shown how this they do not want to sacrifice the aspects of
combination of challenges and opportunities, their culture that may not be congenial to
and the issue of urban competitiveness, development and competitiveness but which
have become powerful factors in the lives of sustain them as citizens and as human beings.
consumers, producers and other residents C. L. R. James tells us that while he became a
in the cities of the countries classified as civil human being through numerous readings
emerging markets. The situation in these of Thackery’s Vanity Fair, his experience with a
cities may in fact be even more pressing than British public school and the game of cricket,
has been the case in cities in industrialized to be a full human being he had to immerse
countries. During several centuries the himself in his national culture (James).
latter cities have developed economic assets,
political and social institutions and practices Thus, each of the three sets of cities has
that are congenial to competitiveness in the its own path to competitiveness and its own
modern, high technology, fluid, and open set of barriers that must be overcome if
success is to be attained. The study of urban

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competitiveness is central to the achievement After a thorough examination of the concept


of the development goals each population sets of urban competitiveness, how it can be
for itself. The residents of different cities will studied, and what lessons can be learned, we
set their own objectives with regard to, among will conclude with a chapter that will offer a
other things, the work-leisure trade off, the coherent set of policy suggestions that should
degree of social inequality and exclusion that be of guidance to local leaders who choose to
will be tolerated, the participation in society take up the challenge of enhancement of the
and the work force of women and other social competitiveness of their city.
groups, what the first two decades of the lives
of their young will be like, how open they will
be to influences and ideas from other societies
and cultures, and indeed immigration itself.

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Chapter 2
Urban Competitiveness as a Concept and as a Policy

Chapter 2 Urban Competitiveness as a


Concept and as a Policy

Many concepts in daily language are far less has a desire to battle with others to achieve the
unambiguous in their meaning than would single objective. The Oxford Compact English
appear at first glance. This is because most Dictionary defines competitiveness as “having
concepts can be applied in any of several a strong urge to win” (Oxford compact English
areas of activity or discourse. A moment’s Dictionary). When planners and consultants
reflection will make this apparent to the speak of competitiveness they tend to accept
reader. So it is with competitiveness. We think an externally defined goal of the competitive
of competitiveness as having pertinence to activity and orient all policies and resources
sporting events, business, nations, the lives of toward meeting that objective. They tend to
siblings, musical and artistic prizes, admission measure their performance against that of
to educational institutions, and so forth. All others and often generate a ranking system in
of the notions of competitiveness that will which all of the participants are ranked, as in
be noted in the section that follows can be a horse race – there are win, place and show
seen in these aspects of human life. In this finishers, and one that is ‘dead last’.
chapter we will first focus on the concept
of competitiveness itself, and then we will Alternatively, if an entity exhibits a high
elaborate on its relevance to the economic lives degree of competitiveness we can also think
of cities and urban regions. that this entity can “play the game” with the
best of them, but not necessarily beat the
others. It has skill, plays hard and is respected
2.1 Definition of by the others. It will make a good showing.
Here competitiveness is a way of conducting
Competitiveness one’s activity, rather than just the result of that
The definition of competitiveness would activity.
seem to be rather straightforward. The
variety of definitions and measurements of These approaches to competitiveness have in
competitiveness are seen from a study done for common the acceptance of a single objective
the Office of the Deputy Prime Minister of selected externally and from above, so to say,
the UK (Parkinson, Hutchins, Simmie, Clark and accepted by all participants. Also accepted
and Verdonk, 28-30). We commonly think of is a set of ‘rules of the game’ according to
a number of entities offering some product or which the competition will be conducted.
participating in some activity, in which one However, there is, as we shall see later in this
is successful, or wins, and the others are not, report, an alternative means of determining
and lose. This explicitly assumes that there is the ultimate objective. This is from below, is
one clear objective and that all participants internally generated, and emanates from the
seek to gain it. However, if one has a “spirit of individual participant itself.
competitiveness” we think that that individual

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2.2 Its Application to the become more important over time since there
Situation of Urban are important aspects of a firm’s success in
producing and marketing its goods over which
Economies it has no control or authority and over which
Cities can be seen to be squarely in this only the government of the city does. This is
milieu of competition amongst themselves. recognized in the widely discussed concept of
While competition among cities goes back the triple helix (Etzkowitz and Leydesdorff),
to the ancient world and certainly to the the explicit partnership in economic
trading city states of the 16th century, during development of government-the city, the firm,
the 19th and much of the 20th centuries most and the skill development institutions (schools,
cities did not think much of international universities, and vocational programs) of
competition. Certainly cities such as New the urban region. As the importance of this
York, Philadelphia and Baltimore, in the interaction has become recognized, the study
United States, all competed for access to the of the urban economy and of the ways in
westward expansion of the country. Barcelona, which its competitiveness can be enhanced
Marseille and Genoa competed to be the have naturally taken on an importance that
primary European Mediterranean port. But has never before been so widely accepted. City
most cities were content to produce goods leaders who understand this situation and act
and services and to sell them wherever they effectively upon it can shape their cities as
could. Goods such as textiles and glassware strong competitors in global markets; those
were differentiated in terms of design, quality who do not will see their cities condemned to
and price and many of the producers did not marginalization and stagnation.
compete against one another. However, as
It is these understandings that make the
the 20th century progressed, goods became
subject of this report so relevant and so
more standardized, transportation costs and
important for city leaders and planners.
shipping time both fell, technological advances
In Chapter 3 we will examine the study of
reduced price and cities began to bump up
urban competitiveness, how this subject has
against one another. Internationalization
developed in recent decades, and how it is
and integration of markets greatly increased
important both to urban economies and in
explicit competition among cities.
the contemporary economic environment.
Firms certainly were primarily responsible
for managing competition and for surviving
in this environment, but city leaders found 2.3 Why We Are So Interested
it increasingly necessary to form partnerships in Competitiveness Today
with their principle economic actors and to
implement policies, such as infrastructure The notion of competitiveness has taken
initiatives, better education and vocational on its current importance with the growing
training systems, enhancement of urban awareness of the impacts of globalization, de-
amenities to make their city attractive to industrialization, restructuring of economic
skilled workers and company location, and, activities on a global basis, and the emergence
more recently, city marketing. Gradually the of rapidly growing economies such as
characteristics of a city became key elements in China, Brazil and India, among others, on
the competitiveness of the economic entities the international specialization of various
located in its space. economies throughout the world. Economists
and policy makers at the national and sub-
The partnership in competitiveness between national levels have tried to come to grips with
a city and its economic actors has evolved and the implications for their economies of these

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Chapter 2
Urban Competitiveness as a Concept and as a Policy

forces. While economists had been aware of specializing in urban economics. The OECD
economic specialization on a national level held a conference on “Cities and the New
since David Ricardo wrote in 1817 the study Global Economy” in Melbourne, Australia,
of competitiveness was focused entirely on in 1994, and shortly thereafter, in 1999, the
the nation as the primary actor. This focus journal Urban Studies published a special
continued during the first years of renewed issue on “Urban Competitiveness”. The initial
interest in the late 1980s and early 1990s, scholarly interest in urban competitiveness
with Michael Porter providing a model that has been reinforced in recent years by the
did much to explain the competitiveness of inability of national governments to do much
a national economy. Others, such as Paul to promote competitiveness, due to growing
Krugman, soon shifted the focus to the fiscal difficulties and to contentious political
traditional interest of economists, the firm. The gridlock, such as that in the US and the
objective of policy to enhance competitiveness EU. The responsibility for enhancement of
and the indicator of its presence were directed competitiveness has drifted or been pushed
at traditional economic objectives, such as down to the level of municipal government
productivity, per capita income, and economic and urban regional administrative structures
growth, or at the establishment of some and institutions.
structure, such as clusters, that would ensure
competitiveness. Policy makers and elected local officials have
come to understand that cities and urban
While this approach was very insightful, regions that do not study their competitive
and useful to policy makers, it was soon seen situation and implements policies to enhance
to be inadequate in meeting the needs of their competitiveness will be condemned to
actual economic agents and of the residents a future of stagnation and marginalization.
of these nations. The first alert was given by Hence, it is the importance of the issue of
the EuroCities Movement, when it declared competitiveness, and policies that attach to,
in 1991 that “now is the time of the cities”. competitiveness.
This cry opened the door to a veritable flood
of research by economists and geographers,

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Chapter 3
The Study of Urban Competitiveness

Chapter 3 The Study of Urban


Competitiveness

The study of urban competitiveness has Competitiveness Project, the Competitiveness


developed considerably during the past Institute, and Globalization and World Cities
thirty years. As cities have come to realize the support conferences and research projects on
importance of their own actions for the vitality urban competitiveness, as do the Organization
of the local economy they have understood for Economic Cooperation and Development,
that what they do in this regard can have the European Union, and the United Nations.
powerful impacts on the economic lives So by today the study of urban competitiveness
of their residents. An industry of planning has found full acceptance.
professionals and consultants has developed
that puts itself at the disposal of city leaders. In this chapter we will explore some of the
Concomitantly, academic researchers have key features of this area of study, and examine
found this to be an intriguing area in which to its relevance to both urban economies and
work and many of their advances have provided the contemporary global economic situation.
the basis for planners and consultants. So the We will also highlight two issues that deserve
operational aspects of urban competitiveness our attention: one that is often overlooked,
are composed of three distinct but interrelated smaller cities and towns, and another that is
layers: 1) academic researchers, 2) planning the result of conscious decision, the skills of
professionals and consultants, and 3) city the entire population.
leaders and decision makers.

At first, it was thought that competitiveness 3.1 The Development of the


had nothing at all to do with cities or urban Concept of Competitiveness
regions. Over two decades ago, the director
of a foundation in the US that advertised Perhaps the first important study of
itself as the primary supporter of research on competitiveness was that of a research
competitiveness said exactly this. Gradually, symposium sponsored by the Harvard Business
reality inserted itself in the thinking of those School in 1985. In the book that resulted from
concerned with competitiveness and both the symposium, Bruce Scott did two things
research funding and space in journals devoted to that set the tone for much of what followed:
economics, geography and urban studies began 1) he wrote on competitiveness at the level
to give proper attention of research on urban of the nation and 2) he asserted that a rising
competitiveness. Today, journals such as Urban standard of living was the primary indicator of
Studies, Environment and Planning A, Regional a competitive nation (Scott, 14-15). This focus
Studies, International Journal of Urban and on the nation and on the standard of living set
Regional Research, and Papers in Regional Studies the pattern for much of the work that followed;
regularly publish research papers on aspects of however, both would soon be called into
urban competitiveness, and publishers such question. First, we can question the indicator
as Edward Elgar and Routledge issue several of competitiveness. Scott and those who accept
books each year on the subject. International this assume, among other things, that all
organizations such as the Global Urban societies have the same work-leisure trade-off,

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that is, that we all work as hard as we can to the competitiveness of a nation is little more
maximize income. This may be true of South than a composite of the competitiveness of
Korea where individuals work about 2,193 its urban economies. To paraphrase a popular
hours per year, but what of Hollanders who slogan, all competitiveness is local. While
work only 1,377 hours, or the Organization Krugman said competitiveness cannot be a
for Economic Cooperation and Development, feature of sub-national territories because they
as a whole, where the work year averages about do not go out of business if they should fail,
1,749 hours (OECD). Clearly South Koreans as do firms (Krugman, 34), Roberto Camagni
seek to maximize their incomes but others countered that while this is true when they
choose to give up some income for leisure time. fail they do enter a period of decline that
Since this makes it clear that residents of all has negative consequences (Camagni, 2396).
cities are not all struggling to maximize their Research has shown that factors such as
standard of living, this cannot be taken to be a urban amenities, health care, education,
universal objective of urban economic policy or and recreational and cultural opportunities
indicator of competitiveness. are increasingly important determinants of
competitiveness, and each of these is essentially
The focus on the nation as the subject of the responsibility of the government(s) of the
competitiveness finds its origin in Adam Smith’s city or urban region. We will explore this more
Wealth of Nations and Friedrich List’s National fully below.
System of Political Economy and continues up
through Michael Porter’s The Competitive
Advantage of Nations (Porter). The Global
Figure 1 – Competitiveness is:
Economic Forum is one of several entities that
annually evaluate and rank national economies • Industrial clusters (The Competitiveness Institute)
according to some notion of competitiveness. • The nation – “Why does a nation become the home
An alternative to the nation as the focal point base for successful international competitors in an
of competitiveness is Paul Krugman’s insistence industry?” (Michael Porter)

that competitiveness is most rationally seen • The firm – places do not compete because they cannot
go out of business (Paul Krugman)
as being based in the firm (Krugman). Firms
• Productivity or trade performance (Donald McFetridge)
employ factors of production, produce goods
and services, market their products, invest • A rising standard of living (Bruce Scott)
retained earnings and borrow additional funds,
and become bankrupt if they fail to meet the
3.2 The Relationship between
test of the market. In a more recent book on
competitiveness, Sharon Oster mentions the Competitiveness and Cities or
role of government at any level, from nation to Urban Regions
city, only in reference to regulatory issues (Oster,
ch. 17). However, even in Porter’s analysis, The emergence of the city or urban region as
three of the four points on his famous diamond the focal point for policies designed to enhance
of competitiveness are at least partially under competitiveness has taken place concurrently
the aegis of government. This is explicitly the with the growth in the importance of the factors
case with “demand conditions” for the national detailed at the end of the previous sector. These
government, and with local government factors are, of course, the responsibility of local
playing a major role in two of them - “factor governments. In the 19th century it was ‘hard’
conditions” and “related and supporting factors such as capital stock, or proximity to a
industries” (Porter, ch. 4) More recently, it has port or to a mineral deposit or other natural
become clear that one can also consider that resource that were crucial, but in recent years

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The Study of Urban Competitiveness

the ‘soft’ factors have become more important urban region when it comes to enhancement
as determinants of competitiveness. To a of competitiveness.
considerable degree this is due to the fact that
the contemporary economy places a premium
on availability of educated and highly skilled 3.3 The Competitiveness
labor, and this labor is attracted to production of Cities is especially
and living locations in which these soft factors
are available in abundance. While the workers
Important in the
themselves may not be able to take advantage Contemporary Context
of cultural or recreational facilities they often Well into the 19th and even the 20th century
demand that they be available for their children. many cities that were not port cities were
While many smaller cities and towns may have quite shielded from competition from other
attractive soft factors, especially if they are host cities. The first major breech in the wall of
to one or more universities, rarely can they offer relative autarky was the coming of the railroad.
the rich variety and quality that is available in Suddenly local merchants and producers of
the large city. consumer goods and machinery had to contend
While much economic activity is organized with competition from entities hundreds of
in networks that may span the globe, most of miles distant. This presented a threat to them
it is concentrated in Marshallian industrial but it also opened to them the opportunity
districts or in the clusters that are so important of distant markets for their own output. The
in some industries. Popular structural co-mingling of threats and opportunities is a
concepts today include knowledge or learning lesson in itself to city leaders; it is best to look to
regions, research centers, logistics complexes, both sides of any development. In the United
local innovation regions, niche manufacturing States, Chicago is perhaps the primary example
centers, and headquarter cities, among others. of a city that blossomed with the advent of the
All of these concepts for city economic railroad, evolving from a minor frontier town
specialization require intelligent, inspiring, to the dominant city in the heartland of the
and forceful action on the part of city leaders. country. William Cronon has chronicled how
the railroad was integral to the city’s success
It is also the case that there is no other level in manufacturing, finance, and agricultural
of government that can undertake this task. processing, as well as in transportation
Superior levels, both the national and the sub- (Cronon). This positive impact dwarfed the
national governments, are under severe fiscal threat to local producers from goods that
stress these days. They have lost the capacity to were ‘imported’ from distant cities and the
introduce fiscal transfers to city governments, competition to horse drawn transportation.
and it is even difficult for them to participate in
joint projects. In addition to this, these levels
of government are torn between the demands Figure 2 - From Autarky to competitiveness,
of rural and agricultural areas and those of Europe and the US
urban areas. In many countries, rural electoral
• First, the coming of the railroad: Mid-nineteenth
districts are over-weighted in the legislatures century
of all levels of government. In this situation,
• Second, cost-reducing technological change: Late
cities are rather left to their own devices, and nineteenth century and twentieth century
to the leadership of local officials. Hence, for • Third, liberalization of trade in goods and services -
both positive and negative reasons, there is no Post-World War Two
alternative to the local leadership of a city or

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of Cities

plans, to ensure that the residents of the city


The second breech was technological understand what is required of them, and that
change that greatly reduced ‘cost distance’, the benefits of the suggested actions will be
reduced production costs and developed clear to, and will benefit, all. While nations
new products. Some cities were centers of can do much to facilitate these adjustments,
technological research because of the strength the primary burden of action always falls on
of their universities, the dynamism of their the shoulders of city leaders. Simply put, the
local firms, and the environment of freedom world economy can get along very nicely
that allowed clever people to do new things. if a particular city stagnates and declines -
Today we celebrate Silicon Valley in California there is always another city that will be more
as perhaps the primary example of how this positively responsive. In the 21st century
works; another would be the cities of the the pace of these changes has, if anything,
“Third Italy”, principally in Emilia-Romagna. increased, and the burden on city leaders to
In the 19th century we have fine examples of respond appropriately is all the greater. The
this in Munich, and in the cities of the Ruhr relatively autarkic city of the past centuries
in Germany, of the Mid-lands in England, and was required to produce almost all goods
of the Basque region in Spain. However, cities and services, although some access to things
not situated in such favorable regions and that produced elsewhere was always possible. But
would not generate new ways of doing things, with liberalization, internationalization and
had the opportunity to apply these new the other forces noted here, cities were forced
technologies to economic activities that were to specialize - to produce for export some
important in their local economy. goods and to import the rest. Determination
of this specialization was done by firms, but
The third breech was the liberalization of
they did this in the context and with the assets
trade in goods and services throughout much of
that were provided by the actions of the city.
the world economy. Theory preceded practice
here, as it always does, but from the mid-19th
century on mercantilist protectionist measures
have fallen through bilateral, regional, and
3.4 Two Important Issues
global trade liberalization agreements - Later in this report we will examine
increasingly so since the end of the Second two issues that have become increasingly
World War and the creation of entities such important in the contemporary world of urban
as the General Agreement on Tariffs and competitiveness. The first is one that has long
Trade, the World Trade Organization, and been ignored largely due to methodological
regional trade liberalization agreements in difficulties, and the second is one that emerged
North America, Latin America, Africa, South- as social structures and relations have evolved.
east Asia, and Europe. While these initiatives
have brought economic efficiency and higher 3.4.1 The Place of Smaller Cities and
incomes to the participants, it is true that the Towns in the Competitiveness Scene
benefits have not been equally distributed.
It is also true that while most cities have The issue that has been difficult for researchers
gained from trade liberalization, many others to treat is the place of smaller cities and towns
have not been able to adapt their economic in the analysis of urban competitiveness. For
activities and social practices sufficiently. the past two or three decades economists and
geographers have concentrated their attention
This rapidly and dramatically changing almost exclusively on large cities, global cities,
environment has meant that cities have been metropoles, and so forth. Partly this has been
forced to design effective strategic economic due to the facts that these few large entities

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Chapter 3
The Study of Urban Competitiveness

are known to other researchers and readers, aggregate income of residents is reduced.
that we all have some understanding of their
situations, that there are a limited number of In the ideal economy all groups in society
them, and that one can compare the findings would be given the opportunity to develop
of several studies of the same large entities. fully their talents and to have access to the
For example, Saskia Sassen studied three most satisfying employment of those talents.
global cities, New York, London and Tokyo Cities will never be able to achieve their
(Sassen), and several studies have treated true maximum competitiveness if they are
one or two dozen large cities in the United components of national societies in which
States (Kresl and Singh 2012; Negrey and ethnic groups and/or immigrants are subject
Zickel; Pollard and Storper) or the European to discrimination and in which women are
Union (Cheshire; Parkinson, Hutchins, precluded from gaining access to educational
Simmie, Clark and Verdonk; Carbonaro and institutions and from functioning as productive
Hay) Another difficulty in the study of the participants in the economy of the nation and,
competitiveness of smaller cities and towns thereby, of the city. For a city to realize its full
has been the difficulty in obtaining sufficient potential to enhance its competitiveness, both
data for the quantitative studies that have of these types of social groups will have to be
been possible for larger human settlements. It integrated into the urban system of economic
is possible to get some data for smaller cities in activity and production.
some countries but the grander cross-national In its report on world cities, UN Habitat
studies are quite impossible to do. stresses the negative consequences for a city of
None of this negates the reality that a its ‘divisions’. These refer to the inequalities and
substantial percentage of the population in exclusions that relate to income, the poverty
almost all countries resides in smaller cities trap, opportunities, the social divide (hunger
and towns. Thus, even though a different and health) and education (UN Habitat, Part
methodology will have to be utilized increased 02, pp. 52-119). When a city tries to compete
objective research on competitiveness as it with other cities for jobs, production facilities,
affects this long ignored population is called tourists, status, and so forth, these elements
for and is now possible to accomplish. of division give it a handicap that is often
impossible to overcome. Research has shown
us that cities that lack these divisions are more
3.4.2 The Need to Use the Skills of the
competitive than are those with them.
Entire Population – Access to
Education and Employment for
Women, as well as for Men
For an economist, the essence of
competitiveness is enhanced efficiency and
a more rational allocation and utilization
of available resources. This is achieved in
a frictionless and perfectly competitive
economy. All resources are used and are
utilized in their most productive manner.
Away from the chalkboard, real economies fall
far short of this ideal. In all economies there are
social practices that introduce barriers to the
efficient and rational utilization of resources;
total output falls short of its potential and the

11
The Competitiveness
of Cities

12
Chapter 4
How Urban Competitiveness is Determined

Chapter 4 How Urban Competitiveness


is Determined

This report is intended to be of use to urban 4.1 Primary Determinants


practitioners, that is, to be useful to those
who have to manage the economic futures of The primary concerns of planners will always
their cities and urban regions. Before they can be two-fold: 1) determination of what will be
design the economic plans they will introduce produced, that is, in what activities their city
they must have some guidance as to what will specialize, and 2) the efficiency with which
actually determines urban competitiveness. that production is accomplished. Other things
Specifically, what factors should they take into could be listed but these are the central ones.
account in the design of the plan? How can Without question, the central assets a city has
they be assured that the things they seek to are its local institutions and local practices. We
stimulate will actually have the desired impact? will argue this point in greater detail below,
Many factors are intuitively important – but looking at both phenomena.
may not be so in the reality of the individual The institutions give structure to the
city for which the plan is being designed. activities of local actors, bringing them into
The fact is that each city will have its own contact with one another. When local actors
characteristics, aspirations, and history, as well are familiar with each other, the level of trust,
as its unique strengths and weaknesses. One that is so important in any local initiative,
often finds that a peripatetic consultant has can be developed. Having trust in each other
travelled from one city or region to another means that the activity does not have to be
giving the same advice to each uniquely regulated by a dense set of regulations and
different city. This is a situation in which it rules. Coalitions can be formed on the spot,
is emphatically the case that no one strategy so to speak, and initiatives can be shaped and
will fit all situations. In a later chapter we will implemented quickly. A structure dominated
focus more closely on the specific actions that by regulations and rules is inefficient, time
city leaders must take to make the plan they consuming, and imperfect in shaping
have designed be achieved in the real world in interactions.
which their city exists.

Figure 3 – The Primary Determinants of Urban Competitiveness

Urban Competitiveness = ∫(economic determinants + strategic determinants)

Where:

• Economic determinants = factors of production + location + infrastructure + economic structure + urban amenities

• Strategic determinants = governmental effectiveness + urban strategy + public-private sector cooperation; + institutional
flexibility

13
The Competitiveness
of Cities

Practices have to do with the inclusion or specialization of local productive entities


exclusion of certain social or political groups is, of course, accomplished by individual
or individuals and the way in which local firms. There is a romantic notion in the
actors interact with each other in the local popular literature of the producer heroically
institutions. Those who have tended to be establishing a productive entity, developing
excluded, or at least under-represented, in the technology it will use, mobilizing the
the planning process are most prominently necessary resources used in production,
women, immigrants, young people, and conquering markets, expanding the
those who have some overriding value, such enterprise, and providing jobs and income
as environmentalism, or social inclusion, or a for the workers. One thinks, of course, of
specific approach to the urban space, that is to the novels of Ayn Rand. While some firms
say, a value that might ‘get in the way’ of speedy may function perfectly well in isolation
decision making. Of course, this exclusion is from other firms, in most industries firms
found powerfully in some societies and not establish mutually beneficial relationships
at all in others. But much of the strategic with other firms. Ideally, these relationships
economic planning that has been done until allow firms to share aspects of their activity
very recently has been a game for the insiders, that enhance their own capacity to produce.
power-brokers, and politically dominant In this model, entrepreneurs and their firms
individuals - often relatively wealthy men. are social entities that are in need of things
they get from each other. The structures that
Effective strategic economic planning in support this social conceptualization of the
the contemporary open and competitive firm are essentially determined by the spatial
world requires that the most competent, nature of the interaction among firms. In
knowledgeable and effective individuals this section we will examine the principal
should be included in the process. The structures.
term strategic economic planning is used to
differentiate the planning for competitiveness
enhancement from other forms of planning 4.2.1 Clusters
such as those for housing, transportation, land Clusters have one of the best pedigrees of
use, transportation, and so forth. all the structures. Their origin is with Alfred
Marshall (Marshall, 222-231). Marshall was
In addition to local institutions and practices,
an economist who was keenly aware of the
the firms that produce the goods and services
actual situation that existed in England in
in which the city economy will specialize are in
the late 19th century. He observed the dismal
many cases most productive and competitive
plight of English workers and was moved
when they function in one or another sort of
to use economics as a means of improving
operational structure. Here we will examining
their lot in life. One of the connections
three of the most promising: the cluster, the
he made with reality, rather than with the
network, and the agglomeration.
theoretical world, was in the way in which
goods were produced most efficiently in an
industrial economy. His notion was that of
4.2 Structures the ‘industrial district’, which he saw in the
The actual production of the goods and principal manufacturing cities of the English
services that will provide the jobs for local Mid-lands. An industrial district comprised
workers, the income for the urban economy, a large number of firms that were situated
and the exports that will promote the in close proximity. The firms were usually

14
Chapter 4
How Urban Competitiveness is Determined

small in size, perhaps with one larger firm However, in reality, this is not always the case.
at the center. The important point was that For example, in some industries, such as bio-
these firms were in contact with one another. pharmaceutical, the ‘cluster’ usually consists
Through this contact individuals were able to of foreign multinational firms establishing
exchange tacit information, discuss ideas with a subsidiary in a region with certain desired
each other, become aware of what skills were assets, such as labor with certain skills. The
present in the district, capture economies of parent firms have nothing to do with each
agglomeration, discuss challenges that were other and their subsidiaries are not allowed
common to all of them, discuss joint projects, to make the intra-district/cluster contacts that
and so forth. This interaction enhanced the generate so much of the benefit of the structure
competitiveness of each firm and enabled (Wolfe and Gertler). Other industries, such
the district to compete externally. Another as information-communication technology,
requirement of an industrial district has and fashion and design are famous for local
developed during the twentieth century - that interaction.
the firms in the district be open to contacts,
information, new technologies, and market
information from outside the district. In Figure 5 – The Isolated Cluster
today’s parlance, they must be internationally
connected.

Figure 4 – The Industrial District of Alfred


Marshall

The second requirement of a successful


cluster is international openness and
connectedness. Many actual clusters have been
inwardly focused, benefit only from advances
in technology, product innovation, and
management techniques that are generated
A century after Marshall, in 1990, within the cluster (Malmberg, 10). Lacking
Michael Porter transformed the industrial the information and stimulus that can be
district into the cluster (Porter). The gained from contact with the rest of the world,
Competitiveness Institute goes so far as to these ‘closed’ clusters do not survive. It is
say that “competitiveness is clusters” (The difficult to say more about these failed clusters
Competitiveness Institute). Ideally the cluster because they are no longer in existence.
should retain all of the characteristics and
the ensuing benefits of the industrial district.

15
The Competitiveness
of Cities

So a network is really a form of club, and only


Figure 6 – The Cluster of the Multi-National certain firms are able to participate (Johansson
Firm and Quigley). Membership will be extended
only to firms that can bring something
of value or benefit to the other members
of the network. The connecting tissue is
telecommunications and occasional air travel.
The benefits are similar to those of the cluster -
access to new technology, knowledge, and best
practices. Members also have to possibility
of exploring the options of joint ventures
and of coalition building. The latter may be
a valuable mechanism in having an impact
on international regulations, trade policies,
patent protection, and marketing.

Figure 7 – Networks
The concept of the cluster has become a • Exclusive membership - “clubs”
primary feature of the advice given by armies • Global rather than regional
of passport-wielding consultants who travel
• Exchange of information, new technologies, “best
the urban strategic planning circuit (Marcusen practices”
and Schrock, p. 1319). The occasional absence • Possibilities for coalition building and joint projects
of close intra-cluster interaction and of
• Beneficial for cities on the periphery
international connectedness, and the fact that
not all industries lend themselves to positive Membership in a network is of particular
cluster experience, does not seem to deter benefit to firms in smaller cities or in cities
cluster enthusiasts. The point that must be made on the periphery rather than in the center of
is that while the true cluster that realizes the the global economy, especially in being able
full interactions of the Marshallian industrial to participate in the creation and dispersal of
district can be a powerful guide to urban knowledge. While participation in a cluster
strategic economic planning, caution must can be a passive activity, being a member of a
be taken to ensure that the cluster approach network is not. If a member is too passive, the
pursued is the one that is most promising for others can simply ask it to leave the structure.
an individual urban economic situation. Clearly this is a powerful incentive to remain
an active and contribution participant. Later
4.2 2 Networks we will discuss the importance of networks to
The network is like a cluster in which each cities, rather than just to firms.
of the participating firms are not in close
proximity with others but rather are located 4.2.3 Agglomeration
hundreds or thousands of miles apart. They
The third structure we will examine is the
are global rather than local or regional. Given
agglomeration. This is the most narrowly
the distance involved, a firm has to be invited
economic of the three and is the easiest to
to participate in a network, whereas firms in
describe. It is simply the co-location of a large
clusters are simply located in the same area.
number of firms in close proximity. The benefit

16
Chapter 4
How Urban Competitiveness is Determined

from an agglomeration is that it generates 4.2.4 Two Issues for City Leaders and
certain economies, or efficiencies, as well as Planners
diseconomies such as congestion, pollution, It has already been argued that these
impersonality, and less ease in establishing structures cannot simply be resorted to by
social capital relationships. When there is a large city leaders and planners in all situations.
collection of firms in one concentrated area, They are somewhere between weeds that grow
there will inevitably be a better transportation anywhere and hot house flowers that require
infrastructure than would be the case with a very specific conditions. It should be clear
smaller set of firms. The city may become a hub from the above discussion that agglomerations
for national or international flight connections are the least condition-specific of the three
and there are many other public goods that structures; they are just a large mass of activity
are available at the same cost to all firms, large and some natural consequences that follow
or small. Except for some sprawl cities, an from this. Networks receive less attention
agglomeration usually has higher density of from the consultant industry but are clearly
population and employment, and density has the creation of the firms that participate in
been shown to result in higher productivity them. These firms are the best, and perhaps
(Ciccone). Larger cities tend to be able to the only, judge as to what can be accomplished
support better urban amenities such as cultural with the structure. However, clusters warrant
and educational institutions. more attention from us. It will be instructive
to take a moment to consider two of the
elements in the nurturing of a cluster.
Figure 8 – Agglomerations
First is the issue of which industries are most
• Agglomeration economies likely to be good cluster industries. The key to
• Positive, and negative externalities a good cluster is face-to-face contact through
• Urban amenities which knowledge and other information is
transferred. This occurs in fashion and design,
Another benefit to a firm of being in furniture, information communications
an agglomeration is the fact that positive technology, advertising, publication, cinema,
externalities can be captured from the activities and video games, among others. These
of other firms in the area. If one firm is industries also have higher than average
able, for example, to use political connections labor mobility, which has been identified
to alter the zoning and regulatory regime, then as another aid to knowledge transfer (Power
all firms in the area will probably be able to and Lundmark). Other industries, such as
share in this benefit. A final benefit is the fact bio-pharmaceutical deal almost exclusively
that each firm will be able to take advantage with proprietary information and they have
of a wider array of professional services, labor no interest in informal or casual interaction
skills, and material inputs that are available in with other firms at the level of the individual
a large agglomeration. researcher.
The agglomeration is not something that a Second is the more substantial question
city government can create through policy, but as to whether cluster growth is an organic
its leaders can initiate policies that will valorize process or is one that can be introduced
the potential benefits of agglomeration, such and stimulated by policy intervention. The
as promoting air line hub status, cultural latter would be good news for strategic
institutions, and so forth. economic planners, but the former would not.
Unfortunately, research tells us that clusters

17
The Competitiveness
of Cities

are long in development and the mechanism of Bavaria that suggest that intervention can
for their growth may be very idiosyncratic be productive. Closer examination of each of
and non-reproducible. The fashion industry these initiatives would, however, show that
in New York developed over several decades each was built upon a long-standing structure
and was aided by the efforts of a union, by of educational and research institutions and
changes in technology of communication other valuable assets. Out of this activity
and transportation, by New York’s status as a come relationships of trust and familiarity
center of culture and of publishing, and by the that greatly facilitate the cluster growth
Fashion Institute of Technology (Rantisi). The process. This opens the door to deliberative
technology cluster in Ottawa, Canada, began policy intervention by local authorities,
during the Second World War through the largely through funding and infrastructure
operations of Bell Canada, Northern Telecom development. The shorthand designation of
and Mitel. One set of authors concluded: “the this process is that of the ‘triple-helix’, the
cluster would not have developed as it did collaborative interaction of government,
in the 1990s without the core institutional universities and research institutes, and private
pattern which was initially established in the sector firms (Etzkowitz and Leydesdorf ). But
1940’s” (Harrison, Cooper and Mason, 1067). even under the most enlightened leadership
Several other studies have come to the same by local authorities, enthusiasm on the part of
conclusion that cluster development is a long public officials alone rarely leads to a viable and
process involving many social actors. competitive cluster structure, in any industry.
Nonetheless, there certainly is a role for public
Nonetheless, one can point to other examples authorities in fostering cluster development
such as initiatives of the Research Triangle in on a collaborative basis.
North Carolina, the Swedish Development
Agency for Innovation, and the government

18
Chapter 5
How to Evaluate or Analyze Urban Competitiveness

Chapter 5 How to Evaluate or Analyze


Urban Competitiveness

More promising is the work that many researchers. The approach is especially well
researchers have done with regard to the suited for the analysis of the competitiveness of
determinants of urban competitiveness. an individual city or of a large number of cities.
They do not all use the same methodology, Benchmarking is attractive for several reasons.
nor are their conclusions always in harmony. First the methodology is not challenging.
Nonetheless, it is this body of work that Second, the result gives a set of up to 40-50
will, in all likelihood, be of most interest variables that the researcher believes to be valid
and the best guidance to the city leader or as determinants of urban competitiveness.
planner. In this chapter we will review three Third, it is easy to relate this set of determinants
different approaches to ascertaining the actual to policy options for city planners.
determinants of urban competitiveness –
see Figure 9. The first is benchmarking, the First is the methodology. Essentially this
second is conceptual/structural, and the third entails little more than obtaining data for the
is statistical/empirical. Each approach has its chosen variables for the cities to be included in
advantages and its disadvantages and the city the study. This usually requires data from both
practitioner will have to study each to discern national and international sources – national
which holds the most promise for his or her statistical bureaus, the United Nations,
initiative. the OECD, and so forth. This enables the
researcher to rank each of the cities according
to each of the variables used. The GaWC and
the World Economic Forum select smaller
Figure 9 – Methods of evaluating urban
competitiveness
sets of cities. The methodology of GaWC is
essentially that of evaluating cities on their
• Benchmarking to determine how the city is ranked in “level of advanced producer services”. These
important areas. Global service centers are then graded for 4
• The city should seek to adopt a conceptual strategy aspects: accountancy, advertising, banking/
that will enable it to achieve what is assumed to be
the most appropriate competitive objective of the
finance and law (GaWC). Many, such as
contemporary economic condition. the MasterCard Worldwide Centers of
• Quantitative/statistical analysis of the city’s objective commerce Index project (recently cancelled),
competitive situation. the PricewaterhouseCoopers Cities of
Opportunity and the Japanese Global Power
Index are specifically geared toward the business
5.1 Benchmarking community. The MasterCard index uses 43
indicators and 74 sub-indicators gathered in
Benchmarking is perhaps the most widely
7 “dimensions” for 75 of the world’s principal
used methodology for the evaluation of urban
cities. The weighting of the dimensions was
competitiveness. The first exercise was done by
assigned by a panel of specialists. Cities of
the US corporation Rank Xerox in the 1980s
Opportunity uses 58 variables in 10 categories,
and has now been adopted by hundreds of firms
and includes 26 cities in its survey. They
as well as by many individual and organizational
evaluate these cities as to how they are meeting

19
The Competitiveness
of Cities

the challenges of the day, including, regional set of seven input categories, such as industrial
management, education, sustainability, structure, human resources and global
density, transportation, and preservation. connectivity, as well as a set of nine output
A recent report focused on technological categories, such as productivity, growth and
readiness. The Global Power Index is based innovation; these are comprised of selections
on 69 variables under 6 main functions for 35 of the 47 sub-categories. The two approaches
cities. It seeks to quantify the “comprehensive yield roughly the same result, with minor
power of cities to attract creative people and differences being caused by imperfections
excellent companies from around the world” in the data for the two approaches, but with
(Mori Memorial Foundation). The evaluation different interpretations being possible. The
also included input from six major categories of methodology used to gain the results is rather
actors (individuals). The ranking of these cities sophisticated – more so than is the case with
is clearly not done with a specific emphasis on other simpler benchmarking exercises that
urban competitiveness; nonetheless, they are just gather data and rank cities according to
closely related to it and their methodology is this data with a simple weighting system.
worth examining. Ni utilizes non-linear weighting, regression
analysis and fuzzy curve analysis to achieve his
However, one researcher, Ni Pengfei, has detailed evaluation for each of the 500 cities
a staff that gathers data for 105 variables for and for the ranking of all of the cities.
500 cities throughout the world and uses
a methodology that is quite advanced (Ni The following Table 1 gives the ranking of
and Kresl); and he is narrowly focused on the most competitive African cities in the Ni
urban competitiveness. The 105 variables are study.
grouped in 47 sub categories. Ni has both a

Table 1 – Highest African cities in the Ni competitiveness ranking of 500 cities

City Country Ranking


Johannesburg South Africa 224
Cape Town South Africa 280
Pretoria South Africa 322
Gavorone Botswanna 344
Algiers Algeria 352
Luanda Angola 354
Tripoli Libya 358
Durban South Africa 362
Port Louis Mauritius 365
Source: Ni Pengfei and Peter Karl Kresl.

20
Chapter 5
How to Evaluate or Analyze Urban Competitiveness

Second is the selection of the variables. unlikely to be of much of a help. Much success
Here the advantage is that the researcher is in competitiveness enhancement is derived
in control over the number of variables to from region-specific assets” (Boschma, 1011).
be included. One view is that the larger the
number of variables the more precisely it The four benchmarking exercises
will be possible to capture the competitive explicitly focus on different aspects of urban
strengths and weaknesses of each city. Another competitiveness so it is not surprising only
view is that the larger the number of variables four cities make the top ten on all of them:
the more the truly relevant ones will fade into New York, Tokyo, Singapore, and Hong
the background. This concern is somewhat Kong. London is ranked number 11 on the
mitigated by the grouping of 5-10 variables Cities of Opportunity list. Below the top cities
into a single synthetic variable that captures the rankings differ considerably, as should be
some aspect that is common to them all. In expected. What would be most interesting
the final analysis of this approach, it must be would be comparison of each of the rankings
noted that the researcher includes variables in over an extended period of time. Cities of
his or her study on the subjective basis of what Opportunity does a one-year comparison,
the researcher thinks would be of importance; and Ni Pengfei has done his study for several
or, less charitably, on the basis of whatever years. The rise or decline of a city over five or
data happens to be available. Availability of ten years would be of great interest and value
comparable data for a large number of cities to city decision-makers in evaluating their
from a large number of national economies strategic economic planning initiatives.
is often rather limited. This suggests that
There are a couple of specific weaknesses
the benchmarking approach may have
to this approach. First, the individual has to
an element of chance or randomness, no
make a subjective determination as to which
matter how committed the researcher is to
variables will be included. Often this is done
gaining an objective understanding of the
because of the mere availability of certain data
competitiveness of any city, of a set of cities,
series, without there being an objective reason
or of as many cities as is possible.
for their inclusion. Second, the researcher
Third is the value to policy makers. may be dominated in his or her thinking by
Benchmarking may give to policy makers a tour the notion that the contemporary economy
d’horizon, so to speak, of the city’s relationship values certain variables, such as education
to other competing cities throughout the or infrastructure, over others, such as urban
world or whatever geographic space has been amenities. This gives priority to a specific
selected by the researcher. The ranking of the development path, such as high technology
city by each of the variables may give good and goods, over others, such as logistics or culture
full information to city planners, but are all of and recreation, that may have more relevance
the variables of equal, or any, relevance to their to the individual city. Boschma suggests
task? In some situations a particular variable that benchmarking may be most “useful as a
may have a positive impact on competitiveness, learning tool for policymakers when it makes
in others no impact, and in others a negative them aware of the dangers of simply copying
impact (Kresl and Singh, 2012). Clearly, this best practices developed elsewhere” (Boschma,
must be sorted out somehow by the researcher. 1011). Unfortunately, there is nothing
One researcher, Ron Boschma, concluded inherent in the methodology to ensure that
that there are “no ready-made blueprints that this is part of its application.
can be universally applied to whatever local
context...(t)his implies benchmarking...is

21
The Competitiveness
of Cities

5.2 Theoretical-Structural differentiation, aspects of production, and


aspects of management. The indicator of
This second approach is essentially success they use is metropolitan employment
conceptual - examining the situation in changes. One would think that a successful
which a city finds itself and grouping it with economy would be creating total employment.
other cities in roughly the same situation so However, it might be that an urban economy
that they can be compared and analyzed in is restructuring its production away from
relation to other groupings of cities. Each labor-intensive traditional manufacturing
grouping then lends itself to a discussion as to toward less labor-intensive high technology
its suitability to current economic conditions, goods production or services. In this case, the
its prospects for the future, and the policy successful city will find that it is losing more
initiatives for that grouping to be successful traditional employment than it is gaining in the
and competitive. These studies are more expanding sectors; therefore it will experience
complex than the simpler one-dimensional declining employment. The city may in fact
approaches that assert that creativity, or be doing the proper thing, but the indicator
learning, or high technology, or corporate of success should not be total employment.
headquarters as the variable that will confer Pollard and Storper conclude that while
enhanced international competitiveness to a there is no single path to economic growth
city or urban area. A review of three of these and to competitiveness, “the most consistent
studies will make clear the strengths and pattern…is the link between specialization
weaknesses of this approach. in innovation-based employment and overall
Negrey and Zickel group 140 US cities into regional employment growth” (Pollard and
one of six ‘types of metropolitan areas’: classic Storper, 19). However they also note that
de-industrializing centers, the anomalous “general social, political, or institutional
case of Boston, stable centers in transition, conditions” can generate or make possible
innovation centers, new services centers, and a growth path that has a broad rather that a
new manufacturing centers (Negrey and narrow competitiveness or specialization.
Zickel). They then indicate the likely changes in The third study is that of Markusen who
manufacturing employment and in population, poses the question: “why certain places are
and the relationship between the two. This able to sustain their attractiveness to both
leads to a two-way flow of results. If a city finds capital and labor” (Markusen, 291). She
itself in a particular type of area, then it should offers, in place of the traditional Marshallian
have some idea as to the coming changes in the and Italianate industrial district models,
two variables. Conversely, if city leaders want to three types of industrial districts she argues
have a particular result with regard to changes in are more relevant to the contemporary US
manufacturing employment or in population, situation that is the subject of her analysis:
than certain area types will enable it to achieve hub-and-spoke districts, satellite industrial
this. For the two researchers, the study makes it platforms, and state-anchored industrial
clear that there is no single national government districts, with each differentiated according
intervention that will benefit all cities; each area to locus of decision-making, economies of
type will have different needs and responses. scale, degree of local cooperation, government
Pollard and Storper look at three types regulation and public infrastructure support.
of activity: intellectual capital industries, Her districts model will, of course, have some
innovation-based industries, and variety- relevance to urban areas in other industrial
based industries, and give the characteristics countries. Each of the three is characterized,
of each in regard to technology, product respectively, by: 1) large vertically integrated

22
Chapter 5
How to Evaluate or Analyze Urban Competitiveness

firms, 2) large externally owned forms, and and Singh 1995, 1999 and 2012). The analysis
3) large government military, educational, begins with a set of three variables that serves
administrative, or health care institutions. She as indicators of urban competitiveness: the
famously noted that “sticky places” are places change over a period of years in manufacturing
of multiple forces such as structures, strategies, value added (or, in the latest study, salaries
priorities and politics (Marcusen, 293). The per employee), retail sales, and in a subset of
final conclusion is that planners must assess the professional services. This approach explicitly
situation of their own district with regard to argues that urban competitiveness is identified
these factors and to base a strategic economic by high values for a set of general economic
strategy based on them. Thus, she moves away capability variable, rather then by success in
from any notion of a universal approach to meeting certain specific performance measures.
urban strategic-economic planning. These variable will then promote productivity
or growth, or attainment of some desired
These three studies can be of use to target such as becoming a learning region or
city planners as they highlight situational a center of high technology production. The
aspects of individual cities with the intent of validity of these indicators is verified by use of
enabling planners to chart a course for the discriminant analysis. The next step is to use
future development of their city with a good multiple regression analysis to identify a set
functional understanding of the possibilities of independent variables that are statistically
that exist for their actions and the likely verified to be determinants of urban
consequences of these actions. However, they competitiveness. That is, that will ‘explain’ the
are not sufficient in themselves as guides to results given by the three indicators. Studies
policy implementation. This approach leaves employing this methodology have generated
the decision-makers with only a general and between 12 and 15 determinants – 8 or 9 in
subjective understanding of the city’s strengths the initial analysis and then regression analysis
and weaknesses, and does not give them a set of these variables generates an additional 4 to
of objectively determined variables that should 6. From the determinants one can then derive
be the basis of a strategic-economic planning a ranking of the set of cities being studied
initiative. The decision-makers must take a leap - 23-40 cities have been included in these
of faith into a future that is rather generally and studies - from most to least competitive. But
poorly described. Success here depends on the this is not the point of the exercise - blaming
ability of the decision-maker to be flexible and some city for its poor showing is of little
to adapt to an evolving economic reality for interest. It is, however, possible to use the
that city; this may be necessary in all planning ranking of an individual city in each of the
exercises but, I would argue, more so when this determinants of competitiveness so as to reveal
approach is being utilized. its true strengths and weaknesses. The most
competitive city may have serious weaknesses
in some variables, such as transportation
5.3 Quantitative infrastructure or cultural assets or education
The third approach to evaluating urban of the labor force, as will each of the other,
competitiveness is one that is based on a less competitive, cities. Thus, the central use
statistical methodology, rather than one of of this methodology is to reveal to city leaders
massing data for a large set of subjectively the areas in which their city is objectively
selected variables or of imagining possible relatively strong or weak and to enable them
situations in which cities can be placed. This to use a strategic economic planning process to
is the approach that has been utilized by the address weaknesses and to maintain strengths,
author of this report in three studies (Kresl and to enhance competitiveness.

23
The Competitiveness
of Cities

While the results of this methodology 5.4 The Advantages and


have the advantage of being objective Disadvantages of Each
and statistically verified, not many other
researchers have adopted it. Partly this is due Methodology
to the fact that comparable data for a wide We have already alluded to the advantages and
variety of variables at the level of the city are disadvantages of each of the three approaches
not available for many national economies - to evaluating urban competitiveness, but it
the US, China, Mexico and Italy are countries would perhaps be useful to practitioners to
in which the data is available. Such data are summarize them again and to offer suggestions
not available for the EU, and even individual as to their usefulness in practice. When it
countries, such as Germany, lack good national comes to objectivity rather than subjectivity,
data sets at the city level for the variables that the quantitative approach comes out far ahead
one would want to test for inclusion. Another of the others. Statistical techniques are used
feature that may make this approach less at each step and the subjective judgment of
attractive is the fact that one does not end up the researcher is nowhere to be seen. The
with 40-50 variables for the consideration of other two approaches require the researcher
policy makers, but rather just over a dozen. to make judgments with regard to the
variables, and their number, to be included
Using data for US cities over a period of
in the benchmarking exercise, or to imagine
three decades, the Kresl-Singh studies have
a theoretical structure for sets of cities. The
been verified in three ways. They have captured
results will be as good as the researcher. With
the rise and decline in competitiveness of
benchmarking there is no way to verify the
individual cities, such as the decline of New
validity or relevance of the variables selected
York’s competitiveness following the stock
(is it perhaps just because the data is available?)
market crash in 1987. They have also confirmed
or of the results of the exercise.
the importance of location in a particular
region of the US, such as the two coasts, the Policy makers will find the benchmarking
industrial heartland, the south, and the center, approach to be of use because of the larger
with these regions showing collective rise and/ number of variables used, 40-50 versus
or decline of each over time. Finally, they 12-15 in the quantitative approach, and
have shown how the individual determinants may find this of more value in designing a
have become more or less important as the strategic economic plan. Its relation to reality
nature of the economy has changed from is, of course, the issue here. The theoretical-
the 1970s to the 21st century. One of these conceptual approach is as useful as the planner
results is statistical verification of the often is adept at characterizing or identifying the
suggested decline of hard determinants, such situation that best describes his or her city.
as proximity to a port or mineral deposit, or What is an issue for each of these approaches
the physical capital stock, and the rise of soft is the quality of the data that is available at
determinants, such as urban amenities, public the level of the city. In the US there is a great
safety and health care. This is reflective of the number of relevant statistical series that is
growth in importance of a mobile, educated available for 287 metropolitan areas and also
and technologically skilled labor force. It for smaller cities and towns. It is rare to find
should also be noted that the results of the such a wealth of relevant data series at this
studies are presented in a form that should be level. This poses the temptation to researchers
both accessible and useable by city decision- doing benchmarking studies to include
makers. variables primarily because they are available.

24
Chapter 5
How to Evaluate or Analyze Urban Competitiveness

Figure 10 – Methods of evaluating urban competitiveness - strengths and weaknesses

Method Strengths Weaknesses


Benchmarking Many variables – up to 40 or 50 Subjective Judgmental
Theoretical/structures Clear analysis of the city’s situation Subjective Judgmental
Quantitative Objective Specific guidance to planners Relatively few variables – usually 12-15 Requires
data for a large number of cities

What is an issue for each of these approaches argue, with some care of course, that results
is the quality of the data that is available at for the US should have some application to
the level of the city. In the US there is a great cities in other industrialized countries, and
number of relevant statistical series that is perhaps to those in emerging or developing
available for 287 metropolitan areas and also countries.
for smaller cities and towns. It is rare to find
such a wealth of relevant data series at this Obviously, each practitioner will have to
level. This poses the temptation to researchers determine the suitability and value of each
doing benchmarking studies to include of the three approaches to strategic economic
variables primarily because they are available. planning for his or her city. This should make
it clear that the process must essentially be that
Finally, while it is true that data that is of a bottom-up exercise in which local actors
good enough for the quantitative approach is in both the public and the private sectors must
available for cities in the US, but not for those be engaged, rather than something that is
of many other countries, in a global economy imported from the outside and simply planted
that is open to flows of goods and services, in local soil, soil that may in fact not be
and of capital, labor and firms, and with firms hospitable or nurturing for what is imported
responding to the same elements wherever and planted from the top down.
their production units are located, one can

25
The Competitiveness
of Cities

26
Chapter 6
How to Promote Urban Competitiveness: Strategies for Promoting Urban Competitiveness

Chapter 6 How to Promote Urban


Competitiveness: Strategies for
Promoting Urban Competitiveness

Thus far we have examined the concept the US when economic plans were announced
of urban competitiveness itself, how it is for each. The two plans were almost identical
determined, and how we can evaluate it. In in their prescription for initiatives that
this chapter we will focus on five aspects of were needed. The plans one sees are usually
policy to enhance urban competitiveness - why filled with the same jargon - synergies,
they are important and how they should be innovation, best practices, learning region,
approached or implemented by local decision ICT, high technology, and so forth. On the
makers. The first is the point from which one one hand, this leaves little room for cities
should engage the process of enhancement, that should specialize in logistics, or cultural
the second discusses the importance and the and recreation, or headquarters functions, or
utilization of local talents, the third notes niche manufacturing. All cities are assumed to
the importance of effective governance, the fit into one pattern. On the other hand, the
fourth recognizes the importance of creative consultant is often not on the ground long
thinking and the fifth poses the question of enough to gain a solid understanding of the
path dependence or a new path. Unless each economic and social character of the city or
of these aspects of policy is considered and region asking for the assistance. This is top-
given serious thought, it is unlikely that any down planning at its worst.
planning exercise will be successful.
A less dramatic approach to top-down
planning is when the mayor and his close
6.1 Top-Down versus Bottom-up colleagues in the city administration design
the plan with little input from the population
There is much to be said for using experts and then try to impose the plan on a rather
in strategic economic planning to help local unsuspecting public. I saw this model in a
decision-makers in the design of the initiative city in the eastern part of Germany several
to be undertaken. Local leaders need access years ago. The plan was not a success and
to the most relevant and current knowledge little positive was accomplished. A few years
in this area of public policy. It is how this later another mayor set up a structure of a
knowledge is used that is at issue. Often dozen committees representing sectors of
consultants develop an approach to urban the economic and society, with participation
economic development or competitiveness from all elements in the city. This time the
enhancement that is generalized for the plan was known by all, they accepted it and
conditions of the contemporary economy, as they were eager to participate in meeting the
the consultant interprets them. This approach objectives of the plan. This latter experience is
may then be taken to several cities or regions an example of bottom-up planning.
and presented to local leaders. The general
conditions on which the approach is based The bottom-up approach is grounded in
may not have great relevance to the particular a first-hand knowledge of the strengths and
city or region asking for the assistance. I was weaknesses of the city, of the competence of
recently in a region in the EU and a state in the various actors in the community, and of

27
The Competitiveness
of Cities

the way in which actors and institutions will, specialists will have to be brought into the
or will not, be able to work collaboratively. community to accomplish specific tasks that
The objectives of the plan are then in accord the local residents lack; however imported
with the aspirations of the residents of the city. labor and specialists are usually relatively
Turok has written that cities should develop footloose and are willing to re-locate for a
specialized activities and assets that differentiate better job or higher income elsewhere. They
them from other places, rather than emulating will also be more costly than locals with
ideas from elsewhere (Turok), even though similar skills.
expert consultants may seek to impose them
locally. Markusen and Schrock comment on The incorporation of local people in the
the “often-mindless groping for ‘best practices’” planning process will provide planners with a
in which cities adopt strategies that “try to more varied and even unanticipated set of skills
match the competition elsewhere in terms of than is the case when outsiders with specific
business climate, subsidies to attract or retain skills are brought into the community. One
business, or the provision of comparable land or team of researchers tells us that “the process
infrastructure” (Markusen and Schrock,1319). involves regional or community leaders
Each city or urban region will have its own mobilizing support for change - using a range
strengths and weaknesses, options, and of media, community and organizational
aspirations. These should form the base of any support groups to educate the community
effort at strategic economic planning. and members of organizations of the benefits
of managed change - as opposed to having
change imposed upon the community, which
6.2 Mobilizing Local Talents and often results (in) defensive or reactionary
strategies” (Stimson, Stough and Roberts,
Energies 155-158). The serendipity and spontaneity of
The most powerful asset any city has is new ideas about the ultimate objective of the
its local population. Charles Landry has planning exercise and the means of achieving it
written: “Cities have one crucial resource will do much to enhance the competitiveness
- their people. Human cleverness, desires, of the firms in the local economy. Other
motivations, imagination and creativity are researchers have concluded that: “A city that
replacing location, natural resources and promotes cooperative effort also contributes
market access as urban resources” (Landry, to the agility needed to restructure and adapt
xiii). These individuals have important skills as economic needs change” (Rondinelli,
on which the economy will be based, they Johnson, and Kasarda, 92).
have tacit knowledge of how the economy and
society function, they are connected to other In all communities there are large numbers
residents or know how to become connected, of residents who are willing to participate as
they have made a commitment of spending volunteers over an extended period of time in
their lives in the city and are not likely to move common initiatives. Often they are simply not
to another place at the slightest incentive, and invited to participate or made to feel that their
their presence will be important in convincing contribution is valued; the competitiveness
the next generation to make a commitment enhancement projects must be opened to
to the city. Nested in a set of friendships, ties them. They are an asset of which city planners
to family, and affinity for the local culture, must take advantage and which they must
food, climate, etc., most of them are eager to incorporate into the project of designing
become involved in building the city economy the city’s future economy and making it
and society to which they aspire. Clearly some competitive and vibrant.

28
Chapter 6
How to Promote Urban Competitiveness: Strategies for Promoting Urban Competitiveness

6.3 The Need for Effective others in this effort to assign tasks, monitor
Governance performance and evaluate progress. The result
has been a long period of stagnation. Many
Government is “a system by which a other cities, such as Lyon, Pittsburgh and
state is governed”, and it involves “the State Barcelona, have been able to assign authority,
as an agent” (Oxford Compact English responsibility, and accountability so that
Dictionary). It involves elected officials and the local strategic economic plan has been
bureaucrats working in government offices implemented successfully.
and agencies. Governance, in the parlance
of the urban policy community, refers to a One problem that is found in many cities
broader management of the affairs of the is the lack of consistency in the approach the
State through the collaboration between city takes to its competitiveness. As each new
government officials and agents from private mayor takes office he or she often imposes
sector entities including universities, business a personal vision of how the city can best
firms, professional associations, social service focus its resources and efforts for the rest of
entities, ethnic communities, the chamber the political term. Chicago is a good example
of commerce, and other similar entities. of this. Harold Washington wanted to make
The definition of the UN Development the city a world class and integrated city.
Programme is in conformity with this When he died in office of a heart attack, his
conceptualization. See: http//meltingpot. successor decided to focus instead on the city’s
fortunecity.com/ lebanon/254/cheema.htm. neighborhoods. Washington’s international
(United Nations). The objective of expanding staff and initiatives were dropped. A couple
from government to governance is in part to of mayors later Richard Daley moved the city
ensure the best mobilization of local talents, back to Washington’s international ambition.
as just discussed. It is also to give legitimacy to Fortunately Mayor Daley was in office long
the planning exercise itself, grounding it not enough for this ambition, in large part, to be
only in elected officials but also in the entirety realized. This is the experience of many cities.
of the community. Effective governance must An alternative is offered by Lyon, in which
be considered the sine qua non of efforts to there is a powerful and permanent entity, the
enhance urban competitiveness. Agency for the Development of the Region
of Lyon. This is a governance structure that
Governance must be effective. An example of includes the business, educational, social,
how this can fail to be realized is that of Buffalo, and infrastructure communities. When a
New York, in the early 1990s, following the new mayor takes office there is a powerful
Canada-US Free Trade Agreement. The leaders inertia that maintains a consistent approach
of Buffalo, a border city, thought they would to economic activity and competitiveness.
be able to take advantage of their location to While one does not want to freeze a city’s
boost the development of their economy. The strategic approach in the face of need for
basic idea was to go from moving goods across adaptation and modification to new realities, a
the four bridges, to transshipment to assembly purposeless lack of consistency leads to a waste
providing employment for local labor. But of recourses and missed opportunities.
when the local leaders met, there were
representatives of two counties, two airport
commissions, four bridge commissions, the 6.4 The Extent or Scale of the City
chamber of commerce, the Western New York
Development Agency, the city, and perhaps This may seem to be a trivial question but
one or two others. Unfortunately, there was when we recognize the need for effective
no single individual with authority over the governance we have to decide what entities

29
The Competitiveness
of Cities

must be included in our understanding of the


‘city’ for the plan to capture the involvement of Figure 11 – The question of scale
the necessary economic actors and economic City A legal, administrative unit.
space. Some cities are political entities unto
A narrow focus on the central business
themselves - Hamburg is a German land district
or sub-national state, and incorporation of Metropolitan Essential the commuting space
contiguous but economically connected space area
The central city and its suburbs
is difficult; Munich, on the other hand, has
In the US, the Metropolitan Statistical Area
gradually extended its reach and planning
In Europe, the Functional Urban Area/Region
space into the surrounding Oberbayern
district of the land of Bavaria. One researcher Urban Captures the economic ‘reach’ of the urban
Region area – takes into account transportation,
has given us a set of four definitions of the finanace, corporate links
urban space: the built city, the consumption
The city and its hinterland
city, the employment city and the workforce
Province The urban economy in its broadest sense
city (Parr).
Mixes urban and rural economies
We tend to think of the city as the center Provincial governments often have
of a larger urban region that encompasses the insufficient interest on the urban economy
economic activities that are integrated into
those of the city itself. In the US we have In the UK, the structure of ‘Greater X’, as in
used the Bureau of the Census designations Greater London, Greater Manchester and so
of Metropolitan Statistical Area and now forth, has been used. Three researchers argue
the Combined Statistical Area. Initially they that in the UK uncertainty as to what ‘city’
were intended to capture the commuting means “inhibits the development of strategy
area of the central city. Over time employers for cities as complete territorial entities” and
moved to the outlying areas and work and inhibits efforts to “improve quality of life
residence areas became more complex, as and economic conditions” (Vigar, Graham
did governance. Pittsburgh is a city that has and Healey, 1407). Researchers in Europe
moved through governance structures as it have studied the Functional Urban Area or
grew spatially. Initially it was the Mellon Bank Region (Cheshire). The objective here is to
and family that coordinated local activities and capture the ‘travel to work’ area of a city, but
plans, then it grew to the Allegheny County its specification is flexible in accordance with
Commission, with its Chairman being the the situation in difference countries or cities.
authority figure, and now it is the Pittsburgh The definition of the scale or extent of the
Greater Alliance, as the reach of the city moved city is clearly flexible in practice, depending
beyond the confines of Allegheny County. So on the nature of the city involved and on
the governance structure must be adaptable to its use - whether in planning for housing
change in economic space over time. or commutation or competitiveness
enhancement. Nonetheless, it is agreed by all
who work in the area of urban competitiveness
that for it to be enhanced through policy
initiatives, some specification of what areas and
towns are included in the strategic economic
planning effort must be made. Obviously, this
is something that only local planners can do
with their intimate knowledge of the sorts of
interactions that occur.

30
Chapter 6
How to Promote Urban Competitiveness: Strategies for Promoting Urban Competitiveness

6.5 How to Become a Creative respond creatively to the challenges it faces in


Place maintaining or enhancing its competitiveness
it will be necessary to integrate into the
Creativity is one of the buzzwords that one process a variety of individuals who represent
finds throughout the urban competitiveness most of these distinct intelligences. The set
community. Richard Florida has fostered the of tasks that must be faced will include those
growth of a “creativity industry” following of being able to integrate disparate entities in
publication of his The Rise of the Creative Class the same activity, the ability to project into
(Florida). His focus on creative individuals the future existing activities and initiatives,
who choose to live in specific cities has the ability to bring out the best effort from
direct relevance to our discussion of urban other individuals, the capacity to present the
competitiveness. Clearly it is better to be initiatives undertaken to funders, firms and
creative than the alternative, but what exactly talented individuals outside the community,
do we mean by creativity? And how does it and a host of other similar tasks.
relate to a complex structure such as a city?
Thinking creatively is essentially conjuring
up some new and effective way to meet the
6.5.1 Creativity – a Concept and a Policy
objectives of whatever activity it is in which
At one level, we speak of the creative one is engaged. Capability and effectiveness
industries – film, design, fashion, music, must take precedence over status and position
video, media, advertising, and so forth. Many of the individuals involved, however difficult
cities, such as Montreal, have recently tried to this may be to do in actuality.
focus their development and enhancement of
competitiveness on this sector. Other cities, 6.5.2 The Creative City
such as New York, Milan, Tokyo and Paris,
have had this focus for decades. At another For a city or urban economy to become a
level, creativity relates to knowledge-creating center of creativity it must prepare individuals
and technological-development activities. to take radical new paths to economic activity.
This usually requires the presence of high The creative individuals must be given ‘free
quality universities and research communities reign’ to go wherever their thinking takes
that carve out niches for development of them. There should be no specific objective or
excellence. Munich, Randstad, Stockholm, end specified that dominates their actions.
Silicon Valley, Boston, have been successful in
I have examined six creative urban areas:
this aspect of creativity. Unfortunately, not all
fin-de-siècle (late 19th century) Vienna, Paris
cities have the assets to create a potential to
before WWI, Berlin post-WWI, the Harlem
succeed in the creative industries or knowledge
Renaissance (the 1920s), New York during
creating centers.
the 1940s and 1950s, and Silicon Valley
The other conceptualization of creativity, during the past three decades. While each
however, is available to all cities – this is using is distinctive there are four principle factors
innate creativity to find imaginative solutions that are common to all and that may provide
to the problems and challenges that face a city. guidance to urban leaders today. First, each
The psychologist Howard Gardner has told us was open to inflows of people, whether it was
there are multiple intelligences. Not just the the Habsburg Empire for Vienna, physicists
ones we test in schools, linguistic and logical, from all of Europe for Berlin and the entire
but also bodily-kinesthetic, inter- and intra- world for Silicon Valley. Second, these
personal, musical, and spatial intelligences emerging artists, physicists, and computer
among others (Gardner). For a city to specialists had new ideas that challenged the

31
The Competitiveness
of Cities

existing order. Third, as a consequence of this, upon the path or trajectory of the past, or
they were opposed, or excluded from existing designing a new path that is a break with the
institutions, by an entrenched “old guard” that past into new territory.
was challenged or threatened by these new
ideas and ways of doing things. Fourth, each 6.6.1 Path dependency
had a “patron” that was willing to supply the
new creative people with financial resources. Path dependency is relatively safe in that
These four factors facilitated the growth of the decision maker has not put him or her
Impressionism and Abstract Expressionism in self on the line with a new direction. The
painting, post-Newtonian quantum physics, future probably will not be disastrous since
and jazz in music. Other urban economies it is following a path that has brought some
that did not have these four factors, such as the success in the recent past. But the past is often
Mid-lands in England and more recently the identified with industries of the past, such as
industrial heartland of the United States failed traditional methods of producing steel rails,
to meet the competition and suffered a decline sheet and merchant bars; textiles; furniture;
in their economic vitality. Some of the cities clothing, shoes and hats; some manufactured
in these areas have been able to reconstitute items; and agricultural products. While this
their economic competitiveness and their may appear to be a low risk strategy, in our world
vitality; Chicago is a good example of what a of rapid technological change, open borders, a
city can do to resuscitate itself from becoming transformation of transportation, and emerging
a declining manufacturing economy. economies, most traditional activities must be
assumed to be at risk. It is, of course, possible to
transform traditional activities with technology.
Figure 12 – Elements in a creative city
For example, Chicago was a power in the steel
industry when it was focused on basic steel
• First, open borders and inflows of people from other products, but this activity was transferred to
places countries such as South Korea, Brazil, China
• Second, the new creative people challenge the existing and India. Chicago’s steel industry went into a
order
rapid decline during the 1970s and 1980s, but
• Third, existing structures and institutions are closed to the slowly emerged as a world leader in production
new creative people and they have to create their own
structures and institutions of specialty steels which are embedded in a sea
• Fourth, the new creative people require patrons to
of patents on sophisticated aspects of specialty
purchase their goods and service and to provide them steel production. Similarly, as Sassen tells us,
with revenue Chicago’s current strength in commodity and
other futures was directly related to 19th century
corn and grain trading, and its transportation
6.6 Path Dependency versus a hub status is tied to its 19th century centrality
New Path for transportation throughout the entire Mid-
west of the US and its links to East Coast cities
Local leaders will have to make a decision (Sassen, p. 277-279).
in formulating their strategic economic plan
whether they should build on the strengths of
the local economy and use them as the base for 6.6.2 A New Path
a new course of specialization in production, The high risk, high payoff approach is that of
or continue into the future on a trajectory breaking direct ties with the past and charting
that is the projection of the historic strengths. a new course. This may be a wise approach in
The choice is thus between ‘path dependency’ cases in which the traditional industrial activity
according to which the future is dependent is likely to be subject to powerful challenges,

32
Chapter 6
How to Promote Urban Competitiveness: Strategies for Promoting Urban Competitiveness

as noted in the previous paragraph, over which Charting a completely new course is the more
the city leaders and local firms have no power risky choice, but with some existing industries
and to which local responses are likely to be a there may not be a natural progression to a
futile exercise. In this case, local leaders have new specialization so there is little choice. This
two options: first, they can use the principle option is also likely to bring engagement by
assets and resources of the local economy to outside firms and individuals, rather than just
develop a new specialization, or, second, they local ones. The advantage is that this brings
can encourage accumulation of new assets and new technologies, products and best practices,
resources that will sustain a new trajectory. but the commitment of the outsiders to the
The overriding criterion will, of course, have local area may be very weak and not always
to be the probability of success in each option. sustainable. If this initiative is not successful
Building on local assets and resources will in a relatively short time, the outsiders may
be the quicker of the two, and probably also abandon the city and move on to another
the less costly. It is also easier in this instance more promising place. Here the issue is not
to build on the energy and commitment whether the new activity is profitable and
of local firms and residents. In the town in viable, but rather whether it is more profitable
which I live, Lewisburg, Pennsylvania, a large than that activity placed in another location.
nationally known furniture manufacturer Once locations begin a bidding war to retain
moved its activity to China and closed the the firm, the cost rises significantly and the net
factory in Lewisburg. A few years after this the gain to the city will be greatly reduced.
area had a dozen new, small-scale producers
of specialty moldings, artisanal furniture,
wooden children’s toys, and so forth; often
started by workers who lost their jobs at the
furniture factory. All this took was a bit of
start-up capital and the transition was made,
albeit not without cost.

33
The Competitiveness
of Cities

34
Chapter 7
Good Cases of Promoting Urban Competitiveness

Chapter 7 Good Cases of Promoting


Urban Competitiveness

City leaders have much to learn from the 7.1.1 The Importance of a Good Strategic
study of the experiences of their counterparts Economic Plan
in other cities. In this chapter we will look Chengdu, China, is an example of a city that
at some examples in which city strategic has adopted a strategic economic plan with a
economic plans were successful and others in clear focus and adequate ancillary entities to
which they were not. I would suggest that the support that strategy. The central focus of
aspects of these experiences that are of interest Chengdu’s approach was the fairly common
to us are generally those I identified in another information-communications technology
study: 1) an objective examination of the city’s industry. Chengdu had the advantage of being
strengths and weaknesses in relation to other part of the Chongqing-Chendgu economic
competing regions, 2) involvement of the region, the first economic region that Chinese
general public and of all major entities in an authorities established in the interior of
exercise related to the aspirations of residents, the country. Chengdu developed an ITC
3) design of a strategic economic plan that can university, a cluster of about 100 small ITC
realize these aspirations, 4) mobilization of firms and two anchors, first Motorola and then
local human resources in the context of clear Intel. The earthquake of 2008 set things back a
responsibilities and lines of authority, and 5) bit but did not cause the initiative to fail. In a
regular monitoring and evaluation of progress state that is directed from the top, once a path
and performance (Kresl, 2007). The details of has been chosen there is a considerable, and an
each experience will be only briefly related to enviable, commitment to see it through.
these aspects, due to limitations of space.
Montreal is another city that has charted
a course with a clear focus to its strategic
7.1 Some Cities That Could Be economic planning (Tremblay). In this case
Emulated it was multimedia, audiovisual, and film.
This example shows us how the support of
The following five cities have all managed government, in this case that of the province,
their competitiveness enhancement efforts can be instrumental in getting the cluster to
successfully and in ways that should be achieve a level of activity at which it becomes
studied by leaders of other cities seeking to no longer dependent upon external support.
achieve the same objective. Each has some Tremblay stresses the importance in this
special characteristics that are not transferable example of successful planning of the social
to other cities but, nonetheless, they have used capital that develops over time in a city that,
some of the five aspects listed above to guide being Francophone in North America, is not
them in their efforts. The cities that I have as linked to other major cities as closely as
chosen for this review are Chengdu, Montreal, would be other Anglophone cities.
Lyon, Chicago and Turin.

35
The Competitiveness
of Cities

7.1.2 The Importance of a Good Mayor affairs and was the first Italian city to adopt
The next two cities have been discussed a strategic economic plan in 2000 that made
briefly in the last chapter, so they will simply the city increasingly competitive, including
be mentioned here. For Chicago its past was a successful bid for the Winter Olympics of
a powerful and effective guide to its future. 2006. Milan spent the next decade without
We saw how the three current competitive recovery. So the lesson here is that a strong
strengths of this city, transportation, and focused individual leader, such as Mayors
manufacturing and finance are all based on Daly, Barre and Castellani, can make all the
what developed in the 19the century. It may difference in competitiveness enhancement.
appear to have been an easy transition to
make from that century to today, but path
dependency may be inappropriate and a trap 7.2 Some Pitfalls to Avoid
for some city economies. In Lyon we see the The following cities have failed to manage
importance of a steady base of consensus with their competitiveness enhancement initiatives
regard to future economic development and successfully. Each shows us one glowing
the value of this inertia, if correctly designed, example of failure to adhere to the five
in avoiding short-term departures from this aspects listed above. The cities included here
long-term path because of the interest of a are Buffalo, Dresden, and, from a different
new mayor. This is not meant to be support perspective, Turin.
for constraints on democratic processes but
rather to be certain that any departure is very Buffalo, as was noted above, gives us a
well thought out and accepted by other social clear example of the consequences of a lack
partners. Both of these cities were fortunate of central authority, and the accompanying
in that they had mayors at the crucial time difficulty in assigning tasks and monitoring
who could envision the future and could also performance. The Buffalo plan was introduced
deal effectively with local power groups. In in the early 1990s, following adoption of the
Chicago it was Richard Daly whose father had Canada-US Free Trade Agreement. Little was
been a dominant mayor a couple of decades accomplished at that time, and two decades
before him. Mayor Daly was connected to later in 2011, when the State of New York called
all who had ‘clout’, as they say, in the city. In for regional plans for economic development,
Lyon the mayor was Raymond Barre. Mayor Buffalo was at the center of a Western New
Barre was a powerful and well-regarded figure York “bi-national logistics” strategy to capture
in both French national politics and the city what was identified as the central objective in
itself. He, too, had clout with the individuals the earlier initiative (Applebome). One can
who dispensed regional development funds only hope that lessons have been learned in
from the national government in Paris, as well the intervening years.
as having a solid base in Lyon.
In Dresden, the planning exercise of 1991
The final example comes from the Italian was a closed process, with the objectives and
city of Turin. In the 1980s local political tactics of implementation in the heads of
corruption blossomed into the ‘Tangentpoli’ the mayor and some of his senior colleagues.
scandal in both Turin and Milan. Local officials There was no effort to bring the residents or
were indicted and imprisoned, and economic social groups into the process, responsibilities
development became derailed. Turin was were vaguely assigned, and there was little
more successful in its recovery because it was performance to monitor. As a consequence,
fortunate in the election of Mayor Castellani. little was achieved. A subsequent effort
Turin was able to clean up its municipal in 2004 and 2005 was totally different. A

36
Chapter 7
Good Cases of Promoting Urban Competitiveness

bottom-up process replaced the previous top- of the labor of FIAT consisted of manual
down approach. The elements in the strategic workers who moved north from the south
economic plan were generated and vetted of Italy for employment. As the economy
by social partners in a dozen committees was forced to seek new activities or to
and responsibilities for carrying out the plan increase the level of sophistication of work
were clearly assigned. This latter exercise has in the automobile factories, this uneducated
brought much more significant and satisfying and low-skill workforce was poorly suited
results. to this new economy and became a source
of unemployment, of demand for social
As a cautionary note we can recall the programs and of social pathologies such as
situation in Turin, Italy, during the 1980s crime and drugs. This is a good example
and 1990s. The city was dominated during of how today’s competitive advantage can
much of he 20th century by the automobile become tomorrow’s competitive disadvantage.
company FIAT and the Agnelli family. In this case path dependency was difficult to
This was the strength of the economy, but maintain.
as the city approached the 21st century the
strength turned out to be a weakness. Much

37
The Competitiveness
of Cities

38
Chapter 8
Issues and Challenges of Urban Competitiveness in Developing Countries

Chapter 8 Issues and Challenges of


Urban Competitiveness in
Developing Countries

Much of the work that has been done on urban but, as the current situation in North Africa
competitiveness has used cities in industrialized and the Middle East makes clear, it is not stable
or emerging countries as the subject. This is in that it creates the conditions for revolution
due, in part, to the fact that comparable data and turmoil. Rigidity is not stability and only
for a large number of cities are available in stability can allow for the continual adaptation
only a small number of countries, such as the that changing conditions require. Sadly, many
US, Italy, Mexico and China. It is also due, in of the countries of the developing world are
part, to the fact that only in a few countries is dominated by juntas or by dictators, and have
there a large number of cities in situations that political and economic systems that ossify,
are in sufficiently similar situations to make stagnate and are gradually marginalized.
comparative study worth the effort. Nonetheless,
since the majority of people live in cities in the One of the negative features of dictatorship is
developing world the competitiveness of their its inability to bring forth the enthusiastic and
cities is a subject that warrants serious study. In productive initiative of the citizenry. People
this chapter we will identify some of the major feel that any departure from what is mandated
issues that confront cities in the developing world from above will be met with some form of
that seek to enhance their competitiveness. This punishment. As output stagnates, except for
should be seen as an add-on to the enormous extractive industries which are easily managed
amount of work that has been done for decades over time, the dictator will appropriate more of
on the economic development difficulties and the output of the economy to maintain his or her
prospects of economies in the developing world. standard of living and position of power through
bribes and streams of revenues at the expense of
The aspects that are discussed here are the the population at large. Inevitably, this builds
most important that confront these urban pressure for a violent overthrow of power.
economies. None of them will be new
to researchers and city practitioners, but Democracy, on the other hand, is inherently
mentioning them should serve as a reminder of accommodative and adaptable to changing
their importance. Political stability, economic conditions. Every new administration, put in
rationality and adequacy of local assets are place by an election, will have its own approach
standard issues, but the competitiveness of to the exigencies of the day and the foreseeable
smaller cities and towns and inclusion of all future. Each new set of policy initiatives
social groups in the planning process and in will, one can hope, be aimed at moving the
the economy are often neglected. national or city economy toward enhanced
competitiveness. Obviously this is not always
the case, as a new administration may have goals
8.1 Political Stability other than economic efficiency and enhanced
competitiveness. But over the long run this
By stability we mean something that can approach has the greatest promise of doing
maintain itself indefinitely. Politically, a the ‘right’ things. Clearly, some consistency in
dictatorship can maintain itself for decades, overall objectives is desirable.

39
The Competitiveness
of Cities

Planning for economic development The third mechanism is that which


through democratic institutions has the is based on markets, ideally free of any
greatest likelihood of being able to bring into aggregation of market power. The advantage
the process individuals from all social groups of this approach is that resources will be
- women, young people, recent immigrants, most efficiently allocated so that total output
professionals, and so forth. The importance of will be maximized as will both investment
this will be demonstrated later in this chapter. and consumption. Ideally there will be little
interference with this mechanism and the
Democracy also goes hand-in-hand with competitiveness of each city will have the
a legislature or council to discuss and pass potential to be maximized. In practice, this
laws, a police force to arrest criminals, and ideal is never achieved as market power and
a court system to judge and incarcerate the other distortions insinuate themselves into
guilty ones. Without these institutions and the mechanism. Of the three, it is generally
processes no real economic development or accepted by dispassionate economists that an
competitiveness enhancement is possible - economy that is based on markets has distinct
contemporary Russia is a case in point. advantages over the other two.

8.2 Economic Rationality 8.2.1 The Practice and the Potential

Economic rationality entails policy decisions Countries in the developing world have often
and the functioning of institutions that been governed by the command mechanism,
maximally enhance the efficiency with which or by some attempt to achieve a Langian
resources are allocated. The allocation of ideal of the planned economy. In actual fact,
resources can be accomplished by primarily neither has served them well in the long-run.
three mechanisms. The first is command, in The preference for a market-based approach to
which a central authority simply dictates where economic decision making should not be seen
the next ton of steel will be used or what skills as an ideological statement but rather one that
will be developed in the labor force, etc. This privileges economic efficiency and the ultimate
accepts some overriding political or social benefit of the residents of the economy. If
objective in place of efficiency. Total output a country’s production entities are to be
and competitiveness will be sacrificed and these competitive they will need to utilize available
regimes rarely endure in the modern economy. resources to the best effect, and markets provide
the best guide to this allocation.
The second mechanism is via central
planning. Oscar Lange showed us decades Market-based decision making is also
ago that it would be possible to make the transparent and open. An investor has a good
transition from a market economy to one idea of what his or her choices are and the cost
that is planned by taking the existing set of that attaches to each. For developing countries
resource and product prices and then using to attract foreign capital and foreign firms,
sophisticated mathematical techniques transparency and some degree of certainty are
to generate a dynamic approximation of absolute requirements. Command systems
free market prices over time (Lange). This may work for mineral and other resource
would give us the efficiency of a free market extraction where the activity and its course
economy, but without its cyclical instability of development are known and predictable;
and distorted distribution of income. While but in manufacturing and the service sectors
theoretically possible this has not been done uncertainty rules and an inflexible command
in practice for any extended period of time. system stifles their growth.

40
Chapter 8
Issues and Challenges of Urban Competitiveness in Developing Countries

Economic rationality goes hand-in-hand and skills. If these are not sufficient for the
with political stability as the two sini qua non of plan, education and skill training will take
competitiveness enhancement for any country, many years, but should be started immediately.
but especially for one in the developing world. Local people are more likely to stay in the city
South Korea and Brazil are two of many for a long period of time, due to family ties and
countries that make the case for markets and attachment to local amenities, and to be less
democracy, while North Korea and Zimbabwe tempted by offers of employment elsewhere.
do it for command and dictatorship. The One local skill that cannot be done without is
potential for most countries in Africa, Latin effective leadership. This means a mayor who
America, and Asia is enormous if only the can imagine a future, energize local talents
right economic and political institutions and and skills, coordinate activities and monitor
processes can be put in place. Cities cannot performance of assigned tasks.
do much to have an impact on the national
situation, but they can do much to make certain If certain skilled workers are not available
that local decision-making and interaction for locally, it may be necessary to recruit
firms and foreign investors are as efficacious skilled labor to the city from other cities or
and congenial to them as possible. If nothing countries. Here it is important to recognize
else, they can make themselves more attractive that skilled labor is increasingly attracted to
than other cities in the national economy. ‘soft’ determinants of urban competitiveness -
educational options for the children, cultural
institutions, health care, public security, and
other urban amenities (Kresl and Singh,
8.3 Adequacy of Local Assets
2012). There is much a city can do to put
As the city leaders chart a course for these features in place that does not cost
competitiveness enhancement, they will have very much. It can be the expenditure with
to take an inventory of the physical, locational, the highest return. One Japanese expert
and production assets at hand as well as the wrote that: “America manages to stay vibrant
skills and talents of the local residents. Most because it attracts people from all over the
of the former are apparent to the eye, but the world” (Tabuchi). Immigrants bring skills, but
latter are often more difficult to discern. In also new ideas and ways of thinking than can
many developing countries kinship ties may enhance the creativity with which activities
cause difficulties in the recognition of skills are conducted. City leaders can do much to
of individuals from other social groups. Some accomplish the same thing.
of these groups may be consigned to positions
that exclude them from the main structures A very significant source of skilled labor for
of governance and the high level economic cities in developing countries is the usually
activity. Lack of access to education may make substantial number of individuals who have
their exclusion a self-fulfilling prophecy; they gone abroad for their education, or were
are excluded because they have no skills, and educated at home, and who have then chosen
they have no skills because they are excluded to work abroad. Often this is due to unsettled
from education and training. On the other political and economic situations in the home
hand, it may be easier to identify individuals country. When political stability and economic
with crucial skills in an urban space in which rationality have been convincingly put in place,
there are distinct social groups each of which many of these expatriates would like nothing
is well-structured and organized. more than to be able to return home to use their
knowledge, skills and energy in the cause of
Any strategic economic plan must include competitiveness enhancement and improving
at the beginning an assessment of local talents the capacity of the city economy to produce

41
The Competitiveness
of Cities

goods and services for the world market. The experience with strategic economic planning,
case of Ireland makes this point most clearly. As professional staff and other resources, a vision
the Irish economy deteriorates there is a sizable as to what can be accomplished, and they
flow of talented people to the UK, the US, have a limited capacity to achieve economies
Canada, Australia and New Zealand, among of agglomeration. These, along with the
other places; when the economy improves the challenges from globalization, aging of the
flow is rapidly reversed. Both China and India population, technological advances, and the
provide similar examples among the developing fiscal difficulties of national governments,
or emerging countries, and are actively inducing pose real disadvantages and difficulties for
their skilled expatriates to return. them. However, smaller cities do have some
important advantages. In many countries
The point of this is to say that talented professionals are finding smaller cities to be
and skilled workers are crucial to a successful better places to work and to raise their families.
strategic economic plan’s realization, and that In many instances pollution and congestion
cities in developing countries have options for will be less of a problem, housing is cheaper,
ensuring they have these workers in sufficient and schools can be as good as they are in the
number. While local labor has certain largest cities. The growing issue of long-term
advantages in terms of long-term performance, sustainability advantages many smaller cities
it may very well be necessary for the city to as they may be more energy efficient - bicycles
make itself attractive to foreign workers. rather than cars, for example.

Effective governance may also be easier to


8.4 Smaller Cities and Towns develop since social capital - the networks of
friends, family and colleagues - is often easier
Most of the efforts to enhance urban
to develop in smaller cities than it is in larger
competitiveness are concentrated on the
ones. Glaeser and Gottlieb have written:
capital or the largest city or cities. This is
“density is associated with less- not more-
often done under the rubric of ‘global cities’
social capital” (Glaeser and Gottlieb, 1297),
or ‘world cities’ and the desire to move the
and smaller cities and towns generally have
targeted city or cities up in the rankings of this
lower population density than the largest cities
set of cities, for prestige purposes. Laudable
with their 20-40 story residential and office
as this is, in many developing countries the
buildings. Many smaller cities throughout
majority of the population resides in smaller,
the world have begun to develop their arts
provincial cities or even in small towns. If
and cultural institutions as a way to make
one seeks to improve the competitiveness of
themselves more attractive to skilled and high-
the cities in which they live, then these cities,
technology workers (Americans for the Arts).
or perhaps the provinces in which they exist,
This reduces one of the advantages that larger
must undertake competitiveness enhancement
cities have always had. While larger cities have
initiatives. China, India, Brazil and Indonesia
the world’s best universities, most smaller cities
have enormous populations who do not reside
have one or more high quality universities -
in the largest three or four cities. When all of
the trick here is that of linking the faculty and
the attention is devoted to these few cities, the
students of these institutions to the effort to
rest of the country languishes and the result
enhance the city’s competitiveness.
is the unsustainable rural to urban migration
that all of these countries are experiencing. Vibrant and competitive economies in these
smaller cities will also do much to slow down
It is clear that the smaller cities have some
the very substantial flows of rural to urban
disadvantages. For example, they usually lack
migration, especially the migration to the

42
Chapter 8
Issues and Challenges of Urban Competitiveness in Developing Countries

largest city or cities of the developing country. became concentrated in the largest cities (Arita,
This migration comes at enormous financial Iguchi and McCann). Large, internationally
cost to the national economy, both from connected cities with excellent universities
accommodating the migrants in the large city and an existing mass of economic activity have
and from the threat to the economy of the obvious attractions to these actors.
place from which they are migrating.
However, with smaller cities the range
All of this makes it clear that the of options, based on assets, history and
competitiveness enhancement of smaller cities aspirations, will be far less extensive. Planners
and towns must not be overlooked either should be able to focus their efforts more
by national leaders or by their own civic specifically on the selection of one or two areas
authorities. of specialization for development. In addition
to achieving the goals of these planning
8.4.1 Small Cities and Large Cities initiatives, it will be their task to convince
central and provincial government officials
Finally we can note that with large cities both of the feasibility of their competitiveness
such as Mexico City, Beijing, Mumbai, Jakarta enhancement projects and of the value of these
and Rio de Janiero there is a wide range of projects in their realization of the objectives of
economic activities being done and there the plans that have been set by these higher
may be no clear specialization in which they levels.
ought to become competitive. With several
universities, a labor force with a wide variety Research indicates that there is no
of skills, an international recognition, and the relationship between competitiveness and
urban amenities that make a city attractive population size of an urban region. In a study
to foreign skilled workers, there will be an done by Kresl and Singh, the three largest
existing base of financial and professional metropolitan areas in the US were ranked
services, some manufacturing, a headquarters 7th, 15th and 16th, out of 23. The populations
and administrative sector that make the typical ranged from 18.9 million (New York City)
large city well-prepared to chart its course in down to 1.6 million (Milwaukee). Rather,
any, if not several, directions of specialization. what really is of importance is the region in
Hence, the task of the strategic economic which that city is situated (Kresl and Singh,
planner is a relatively easy one. The capital Urban Studies, 2012).
and other large cities are often given priority
for funding by the central government. A related question is whether smaller
For example, in the current Twelfth Five cities have determinants of competitiveness
Year Plan, the Chinese government selected that differ from those of large cities. In this
the Beijing Circular Economic Region for same study, competitiveness was measured
special attention; several years ago it was the by a set of three variables – the changes in
Chongqing-Chengdu region in the interior retail sales, and some measure of professional
of the country that was selected for special services, and manufacturing value added
treatment. or payroll per employee (in the last of the
three periods studied) – so all metropolitan
While the rural-urban inequality in China, areas had to meet the same test, so to speak.
India and Indonesia had been declining However, as they become smaller cities of
during the 1970s and 1980s, this gap began less than 1 million residents will begin to
to increase as globalization advanced from the differentiate themselves from large cities in
1990s on because foreign direct investors and their very nature, resources, aspirations, and
corporate research and development centers capacities. So it then becomes the case that the

43
The Competitiveness
of Cities

determinants of these small cities will indeed entrepreneurial in promoting their city. This
be different than the determinants of the large final step in the planning process may be
cities. In a study of smaller Canadian cities, as important to the ultimate results of the
Lewis and Donald conclude that the focus in initiative as the initial steps of designing the
large cities on diversity, high technology and plan.
a wide array of amenities, must be replaced
in smaller cities by an appreciation of their In the 19th century, England’s Mid-lands,
attributes of livability and sustainability, and Germany’s Ruhr, and the Industrial heartland
that smaller cities must be reconceived “as of the United States were branded around
parts of regional, provincial or national urban the world as industrial districts. A century
networks, rather than direct competitors with later it was the same thing with The Third
their metropolitan counterparts” (Lewis and Italy and Silicon Valley. All had competence
Donald, p. 49). This distinctive focus of the and competitiveness, but the identities they
small city would, I am confident, be revealed were able to establish were both crucial to,
in a research study (not yet conducted) that and a consequence of, their success. The
examined the determinants of their urban same possibility is available to smaller cities
competitiveness. in developing countries. This is especially the
case if, as happened in each of these instances,
regional clusters or networks of firms in the
8.4.2 The Need for Marketing and
same sector can be created through the efforts
Branding
of local city leaders.
Smaller cities simply do not have the name
recognition and identification out of their Place branding can be seen as just promotion
immediate region that large cities have. Hence, or boosterism where one boasts of the
a small city may have a brilliant strategic attributes of a city, or as a planning instrument
economic plan and all the assets and energy that will have an impact on the way a place
it takes to realize the plan’s objectives, but the is viewed and the expectations people have of
city may still face frustration if it cannot get its a city, or as a component of “communicative
attractiveness known to venture capitalists and planning” which entails “will-shaping, identity
to direct investors, to firms and consumers out forming, and consensus creation” (Kavaratzis
of the region and to skilled labor it would and Ashworth, 3). All of this is additional to
like to bring to the city, and if it cannot the work of designing the strategic economic
excite the enthusiasm of its residents. In the plan and mobilizing local resources. It may
internationally connected world of today, seem to be quite peripheral and subordinate
all production locations are in competition to the ‘real’ work at hand, but city leaders
with each other. It is true that firms and must understand that there are undoubtedly
investors scour the world to find the next several other cities that have attributes and
‘hot’ or undiscovered spot for their activity. advantages very similar to their own city, so
As Van den Berg and Braun have written, “it no one city is indispensable. Each of them
is the abruptly changing rules of competition will be attempting to attract the same firms,
between cities and towns that explain the investors, and skilled labor, and it is this that
relevance of marketing,” and “marketing is a makes city or place branding and marketing
weapon against competition” (Van den Berg such an important component in the process
and Braun, 998). Changes in communications of realizing the objectives of the plan.
technology make it far easier for a small city in
the developing world to get its message out,
but they stress that city leaders must become

44
Chapter 8
Issues and Challenges of Urban Competitiveness in Developing Countries

8.5 Participation of All Groups greatest exclusion in the countries that can least
in Society afford this, those in Africa and the Middle East
(Newsweek). The cost of this can be appreciated
The case for inclusion of all groups in society when it is noted that women invest 90 per
in the process of designing and implementing cent of their income in the community, while
a competitiveness enhancement initiative was men invest only 40 per cent. US Secretary of
made in Chapter 4. In this section I would State, Hillary Clinton, recently stated that:
like to explore the special importance of this “When we liberate the economic potential of
for cities in the developing world. The groups women, we elevate the economic performance
who are excluded from participation include of communities” (Clinton). While there are
women, immigrants, members of some ethnic questions of cause and effect, engagement
or religions communities, handicapped, of women in the economy goes hand-in-
among others. hand with increased national productivity,
food production, improved education, and
Limitations of space do not allow discussion
political stability. These effects of excluding
of each of these groups, so I will focus only on
women can be roughly the same for the other
the consequences of the exclusion of women.
excluded groups. Talent, imagination, skill,
A recent study indicated that women had the
and creativity are not exclusively possessed by
highest rates of inclusion in the industrialized
only one gender or segment of human society.
countries of North America, the European
Union, Australia and New Zealand, with the

Table 2 – Educational attainment of females and males, 2000

Education* Age 25 and older Education* Age 15 and over


Female Male Gender ratio Female Male Gender ratio
World 6.18 7.28 84.9 6.13 7.19 85.3
All developing 4.03 5.74 70.2 4.33 5.92 73.2
Middle East/North Africa 4.09 6.06 67.5 4.69 6.17 76.0
Sub-Saharan Africa 3.14 4.45 70.5 3.01 4.04 74.4

* Educational attainment – average years of schooling.


Source: Robert J. Barro and Jong-Wha Lee, “International Data on Educational Attainment Updates and Impli-
cations”, Cambridge: Center for International Studies.

45
The Competitiveness
of Cities

Shabaya and Konadu-Agyemang show us good news is that cultures can change, and
that, at least in Ghana, Zimbabwe and Kenya, have changed in the past. Witness the changes
the access of females to education is quite in Middle Eastern countries such as Bahrain
entrenched and imposes a significant cost and Dubai that have occurred during the past
to the community, and that African women two decades.
remain the least educated females of any part of
the world (Shabaya and Konadu-Agyemang). A nation that accepts inclusion of all social
The cost of this is the fact than females remain groups will have a competitive advantage over
in largely menial jobs rather than being able those that do not. While cities are significantly
to develop to their full potential. Part of the constrained by the national culture, cities
cause of this is large families, earlier marriage everywhere create urban milieux that are quite
and birth of child, and lack of medical care, different than is found in the rest of the country.
but it is also the case that females tend to be There is always opportunity for the city to move
worse off in this regard when they live in rural by itself to some extent in this direction.
an agricultural regions of the country. The
positive message here is that with better family
planning, the economic development of 8.6 Work Collaboratively
smaller towns into cities, and improvements A city in the developing world should not
in health care fenakes have the possibility of have to work on competitiveness enhancement
gaining access to education and to developing on its own. Collaborating with other cities
their talents and skills. None of this is, of or levels of government will bring access to
course, to students of African society and best practices, to experiences of success and
economy. of failure, and, in some cases, to additional
resources, as well as to a sounding board
Friedman speaks to this issue more broadly
for ideas and possible approaches, and the
in his discussion of the importance of
possibility of cooperative or joint initiatives.
culture for developing countries, and we can
Of course, one thinks immediately of superior
use his ideas in our examination of urban
levels of government, either the national or
competitiveness in this part of the world. He
the provincial. If the economic development
asks two questions: “To what degree is the
of cities other than just the capital is in the
country’s culture open to foreign influences
national plan then this connection can be
and ideas?” and “to what degree is there trust
essential to any success. But more often than
within the society for strangers to collaborate
not, the national focus passes over the city to
together?” (Friedman, 421). Some societies
national or provincial economic development
are dominated by the desire to rid the country
(to the exclusion of cities), the superior levels
of foreign influences and/or to prohibit some
are torn between the demands of politically
groups within their country from participating
powerful rural and agricultural interests and
in government and the modern economy. The
the needs of cities, and in these troubled
former condemns the country to remain on
economic times superior levels of government
the outside of the process of development
are financially stressed and fiscal transfers to
through its lack of access to new technologies,
cities are reduced or non-existant.
products, and best practices. The latter
handicaps the economy by denying it the In the case where superior levels of
skills, talents, and enthusiasm of a significant government cannot be relied upon for
portion of the population who will become assistance, there are still options for cities. In
dependent upon, and an increasing burden on, Chapter 5, we examined the functioning of
the productive element of society. Friedman’s networks. Many countries have organizations

46
Chapter 8
Issues and Challenges of Urban Competitiveness in Developing Countries

of cities or of mayors that look after general or the World Bank can assist in identifying
needs of large numbers of cities in a variety of potential network members.
situations and usually serve as a lobby group for
these cities with other levels of government. In A good network will generate the benefits
Europe, Eurocities is one such initiative. These that were identified in the beginning of this
are valuable organizations, and they often section. It will also allow for exchanges of key
serve the general needs of all member cities officials, and for visitations by members of
such as youth employment, or transportation government, business, and social groupings to
infrastructure, or taxation and regulation, or explore successful participatory experiences. It
housing. There may be little effort given to will enable universities and other educational
the specific needs of small groups of cities that institutions to exchange faculty and students
may have a primary interest in competitiveness and for administrators to explore initiatives
enhancement, other than simply the collateral elsewhere to integrate learning institutions
impacts on it of the other activities pursued. into the fabric of the economy. This, of course,
Competitiveness enhancement for large and facilitates implementation of the triple helix
small cities will be different, as will that of structure of government-business-university
port cities, isolated cities, and agricultural cooperation and interaction.
area cities. Nonetheless, there will probably A well-structured and functioning network
be a small set of cities that confront the of actively engaged cities has the possibility of
same challenges and have roughly the same gaining access to funding from international
competitiveness potential. organizations and foundations, as well as
As was mentioned above, networks are in from their own national government. This
fact clubs of like-minded entities. Membership structured effort by effectively engaged cities
does not require close proximity, so a network dramatically increases the probability that
of cities in a similar competitiveness situation the funds will be used efficiently in successful
need not be limited to cities in the same initiatives rather than squandered through
country, or even on the same continent. The infighting amongst competing local interests
major difficulty here is in the identification or through ill-conceived initiatives. The
of potential member cities, although with structure of the network is entirely open to
internet access to information and to contacts the needs and aspirations of the participants.
this difficulty has been greatly ameliorated. It is simply up to the member cities to chart
Also organizations such as the UN Habitat their course.

47
The Competitiveness
of Cities

48
Chapter 9
Conclusions and Recommendations

Chapter 9 Conclusions and


Recommendations

It was over twenty years ago that the 1. City leaders must understand that
Eurocities Movement declared in its Manifesto the strengths and weaknesses, assets
that “now is the time of the cities” (Eurocities). and resources, history of economic
The intervening time has only demonstrated development, social structures, quality
how prescient their declaration actually was. of governance, size of the city in terms
Due to many of the phenomena that have been of population, territory and economic
identified earlier in this text, such as the reduced activity, and aspirations of their residents
capacity and participation of superior levels of are specific to their city. This means that
government, the consequences of globalization, policy prescriptions that are the most
and the impacts of technological change, recent fashion or one-size-fits-all will, in
cities and their leaders have been increasingly all probability, not be most suitable for
left to their own resources, imagination and their city’s needs.
energies. In actual practice, ‘competitiveness’
has gradually, over time, been transformed 2. Planners must remember that their most
from a policy area tied to nations and firms important and productive resource is
into ‘urban competitiveness’. In this context going to be local, skilled residents. It is
the efforts of local leaders to have positive tempting simply to import skilled workers
impacts on the economic development and the and professionals but many of the required
competitiveness enhancement not only have skills will be available locally, although it
greater potential but have become an absolute may take some effort to identify them.
necessity for a city that seeks to participate in In addition, through short term training
the global search for employment, production and internships local workers can become
of goods and services and a high quality of life suitable for the needs of the plan.
for its residents. 3. It is not necessary for the city to ‘go it
alone’, even if assistance is not available
from superior levels of government.
9.1 Recommendations Imaginative city leaders can develop
City leaders often need some guidance mutually beneficial networks and other
as to what the most beneficial policies and working arrangements with counterparts
initiatives will be for their specific city. We in other cities with which they can enter
have examined a number of these in this into collaborative relationships, and can
text. Not all of them are relevant for all learn from their experiences.
cities but in their entirety they should enable
4. Any competitiveness enhancement plan
planners to design their strategic economic
must include: a) determination of the
planning approach to urban competitiveness
ultimate strategic objective of the exercise,
enhancement. Without being overly repetitive,
b) allocation of tasks to individual
I would like to highlight some of the following
participants, c) monitoring of performance
recommendations that are generally relevant
in the accomplishment of these tasks, and
to city leaders.

49
The Competitiveness
of Cities

d) evaluation of performance periodically required to realize this success. Without


through the process of realizing the plan. strong central direction the planning
These are best accomplished with the participants will, so to speak, mount
broadest participation of residents at all their horse and ride off in all directions –
stages. One common danger is that the achieving nothing in the process.
leaders of the initiative will do too much
of this themselves, in service of expediency. 7. City leaders in the developing world
This often leads to failure of the initiative. will want to give some attention to the
observations in Chapter 9, in addition to
5. For an economy to operate at its maximum the great array of studies that have been
effectiveness, it will be necessary for done on cities in their specific situation.
individuals from all social groupings –
women, immigrants, youth and seniors, Much of this may appear to be little
all classes, and ethnic communities – to more than common sense, but in practice
be fully engaged in the initiative. Talents competiveness enhancement initiatives often
and skills are to be found in all areas of over look some or most of what has been
the population and none of them can be highlighted and stressed in the text. It usually
wasted. This, by itself, promotes the more pays to ignore much of what one has come
effective bottom-up approach rather than to understand about the strategic economic
the top-down approach. planning in practice and to construct an
approach from the ground up, basing the
6. City leaders must give serious thought initiative on the hard reality of the situation
to all of the issues raised in this text, for the city at hand. There are few things city
including path dependence, the value of leaders can do that will have a more positive
and effective use of clusters, the need for impact on the lives of a city’s residents than
effective governance structures, the actual to accomplish this successfully, as it will result
economic scale or extent of their urban in the maximization of the utilization of the
economy, and the necessity of developing talents and energies of the residents and will
creative thinking in all aspects of the enable them to achieve the economic future
economic and governance activities of the to which they collectively aspire. Nothing
city. is guaranteed in efforts to enhance a city’s
competitiveness, but failure to attempt to do
7. It should be remembered that there this will in all probably leave the city in a state
are three approaches to analyzing of decline and marginalization.
urban competitiveness: benchmarking,
conceptual/structural, and statistical/
empirical. Each should be explored for
its applicability in the situation of any
city, keeping in mind the strengths and
weaknesses of each of them.

8. It goes without saying that the most


crucial element in a successful strategic
economic planning process to enhance
competitiveness is good leadership. In
practice, this means a mayor who is
focused on what needs to be done and
who is committed to doing whatever is

50
BIBLIOGRAPHY

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The Competitiveness
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55
The Competitiveness
of Cities

56
The Global Urban Economic Dialogue Series

Due in part to the emergence of active local leaders in many


cities and in part to the fiscal weakness of most national and
sub-national governments, policies designed to enhance the
competitiveness of cities have become arguably the most
crucial element in increasing the economic vitality of urban
economies during the past two decades. The report examines
the concept of urban competitiveness, how it can be determined
and evaluated, as well as what policies have been shown to
be most, and least, beneficial in making a city increasingly
competitive. It examines the three principal approaches for
evaluating urban competitiveness: benchmarking, theoretical-
structural and quantitative.

Experience has shown that for cities to be competitive their


leadership must focus on ensuring political stability and
economic rationality; they must look to local resources,
participation of all groups in society; and they must develop
collaborative working relationships.

The report also examines path dependency, creativity, top-


down versus bottom-up strategies, the mobilization of local
actors, and the extent or scale of the urban economy. Special
attention is given to smaller cities and to the need for policies
aimed at the education, training and employment of all groups
in the urban society. The approach taken is aimed at usefulness
to both city officials and researchers.

HS Number: HS/054/13E
ISBN Number(Series): 978-92-1-132027-5
ISBN Number:(Volume) 978-92-1-132450-1

UNITED NATIONS HUMAN SETTLEMENTS PROGRAMME


P.O.Box 30030,Nairobi 00100,Kenya;
Tel: +254-20-7623120;
Fax: +254-20-76234266/7 (Central office)
infohabitat@unhabitat.org
www.unhabitat.org/publications

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