The Virtuous Cycle of Regional Growth

Over the past two decades, it’s become widely accepted that regions are the basic units of global competition. Correspondingly, a lot of effort has gone into building new economic development organizations at the regional level. However, there appears to be a limit to what even the best of these regional organizations can accomplish in the absence of strong and effective partners at the local level.

The key to growing good jobs and expanding opportunity turns out to be a good ground game (as I’ve explained in an earlier blog). A good ground game involves finding the businesses that have the most untapped potential to grow good jobs, working with them to unlock their growth potential, and helping people prepare for and gain access to those jobs. It requires a lot of personal interaction with individual businesses and a lot of coordinated effort in particular communities, which is a compelling argument for smaller regions.

But that runs counter to the conventional wisdom that bigger is better, for which there are equally compelling arguments. One is the economies of scale that can be realized by pooling local resources for marketing the region to attract jobs and talent. Another is the additional assets that can be leveraged across a more broadly defined region to support innovation in strategically important industry clusters. And a third is the opportunity to work around dysfunctional politics and systems at the local level.

So, it’s no accident that most of the regional economic development organizations that have sprung up over the past decade have ended up focusing on marketing the region and supporting the growth of targeted industry clusters. Those efforts have clearly made a difference. But they are at best a supplement, not a substitute, for an effective ground game.

That’s because the biggest impediments to growth are often specific to an individual business and require services tailored to the needs of that particular business. Those services are best delivered at the local level. In addition, businesses with high growth potential are spread across a wide range of industries. So, even though focusing on one or two industries can be helpful at the regional level, it can miss important opportunities for growth and leave communities vulnerable to the loss of a major employer at the local level.

Similarly, even though working around local political systems can sometimes be helpful at the regional level, it can handicap the development of a good ground game, since many of the resources and policies individual businesses need to unlock their growth potential are under their control of local governments.

In short, what works at the regional level doesn’t necessarily work at the local level, and can sometimes even get in the way.

That’s why regional organizations need strong and effective local partners. When those partners are in place, regional organizations can make better decisions about which clusters to focus on, what kind of interventions would make the biggest difference, who to target for recruitment efforts, and where there may be opportunities to strengthen supply chains.

In turn, regional organizations can add value to local efforts by creating more favorable conditions for business growth, connecting local businesses to regional clusters, capturing and sharing lessons learned about what’s working and what’s getting in the way at the local level, collectively addressing issues of common concern across localities, providing technical assistance and shared services, and making strategic investments to improve the performance of the overall system.

That kind of interplay between the regional and local levels can create a virtuous cycle, which is what drives an effective regional economic development system.

However, an overemphasis on building infrastructure at the regional level over the past decade has left the ground game weak and disorganized in many regions, impeding the virtuous cycle. As a result, many regional organizations may now need to spend the next decade shoring up critical infrastructure at the local level to realize the full potential of the regional structures they’ve been working so hard to put in place.

Pete Carlson is president of Regional Growth Strategies