Why Economic Development Must be Regionally-Based

In regional economic development there has been an increasing recognition that top-down approach to local development does not work. Consequently, there has been a shift away from central government responses to market failure as top down programmes have often failed to lead to the anticipated trickle down effect from improving infrastructure or trying to support declining sectors. (Bennett and McCoshan, 1993; Demaziè and Wilson 1996; Pecquer 1989).

The Grow the Bay project initiated in the Hawke’s Bay is intended to mirror this emphasis, utilising the local knowledge, expertise, commitment, and enterprise of local businesses and local people. The governing philosophy is that those who live there are committed to its development and have available the best and most reliable networks for initiating change. Though external validation, support, and input is necessary, local actors assume control and direction for their independent economic and social prosperity. A bottom-up approach, like this has been shown to support long term development for

• Entrepreneurship
• Improvement of human capital 
• Improvement of social capital 
• Spreading innovation 
• Building and strengthening local institutions 
• Improving firm networks

Consider the example of Jerez, Spain. In the late 1980s, the region’s Sherry industry failed to respond to changing consumer tastes. Demand for its products declined and employment in the wine industry plummeted from 10,000 to 3,500. Unemployment skyrocketed to 42 percent, one of the highest levels of unemployment in the European Union, and population numbers fell as families left the region. The response was a raft of activities based around creating wealth from new ideas and all regionally-based and controlled initiatives.

Regional leaders built a new business school so that ideas might more readily transfer from intellectual knowledge into industry application. New enterprise schemes were started to promote the development of new firms, and existing businesses underwent business training so they could apply new techniques and knowledge to improve productivity. A transport hub was developed to speed up deliveries, saving time and money. The region invested in urban renewal, promoted conventional tourism and diversified into viti-tourism. Over six years, the number of visitors increased 120,000, 4,600 new jobs were created in small and medium-sized enterprises, and unemployment dropped 40 percent. The effective delivery of innovation and the stimulation of enterprise had transformed – and rescued -- the region. The message is clear: while some external support and validation of initiatives is useful, action by local actors assumes ownership and direction for their economic transformation. The seeds of economic renewal are released within.