The City Regions Project

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1 The City Regions Project Synthesis report: Paths to growth in medium-sized European cities with particular emphasis on the role of city collaboration

2 The project was carried out by DAMVAD and commissioned by the Danish municipalities of Aalborg, Aarhus and Odense and the North Denmark Region, the Central Denmark Region and the Region of Southern Denmark. April 2011

3 Preface As the big city in each of their regions, Aalborg, Aarhus and Odense all play a central role as hubs for growth, wealth and welfare now and in the future. The three cities are unique in their respective regions, but in a larger context they are merely three among a very large number of comparable, medium-sized European cities. This prompts the question of how the three West Danish cities perform compared with similar cities in other countries, and what they can learn from other cities. For example, how do these cities perform as core cities for a functional city region? How do they collaborate with other core cities? These are the fundamental questions that the municipalities of Aalborg, Aarhus and Odense and the North Denmark Region, the Central Denmark Region and the Region of Southern Denmark have joined forces to investigate. The idea behind the project was to carry out qualitative case studies of cities selected based on analyses of quantitative data on city growth in various European countries. This was a very ambitious starting point too ambitious, as it turned out. It is relatively simple to identify cities that are comparable with Aalborg, Aarhus and Odense in terms of size and performance. However, it is not possible to generate in-depth insights into these cities strengths and weaknesses based on the available, internationally comparable data. Put differently: The internationally available quantitative data on cities growth alone does not allow for an analysis that explains why different cities exhibit different levels of economic performance and growth. Therefore, the case descriptions of the individual cities do not focus on the individual strengths and challenges of the cities. They act more as general examples of how cities that are comparable with Alborg, Aarhus and Odense work to promote growth and development. Based on these case descriptions, we have identified a number of lessons learned that we believe to be relevant and important for cities and city regions and their development. The report should therefore be seen as an inspiration catalogue that communicates ideas, insights and lessons learned as to how medium-sized cities like Aalborg, Aarhus and Odense and their city regions can promote growth and strengthen their position and influence in the national and international city landscape. As such, the report is relevant for a broader range of medium-sized cities across Europe. Nonetheless, we hope that this report will contributely positively to the various planning and development strategies of the three West Danish cities, and not least help strengthen their intercity collaboration. We hope that the report will also inspire the ongoing work on the regional development plans in the North Denmark Region, the Central Denmark Region and the Region of Southern Denmark.

4 Contents Executive summary 5 1 Introduction About the project Main results of the project Knowledge foundations for the project 10 2 On cities and their growth potential Cities are growth engines for the economy Medium-sized cities have big growth potential Growth is created not within the municipality but within the city region Growth is based on the quality of and interaction between the city s resources Intercity collaboration creates growth There is no one size fits all strategy for growth 21 3 From clusters to related diversification and integrated growth policies The cluster perspective does not focus on value creation Focus on business development through related diversification Build niche-based strongholds Establish strong platforms for growth and collaboration Work with integrated strategies for growth and urban development 29 4 Create good conditions for collaboration within the city region Collaboration can create growth in the entire city region Bring key actors together on a burning platform Clarify and communicate incentives for collaboration Define ambitious and long-term visions and show active leadership Create good conditions for collaboration 39 5 Organising and anchoring collaboration within the city region Champions are great but collaboration must be anchored Establish independent organisations with their own mandates and means Find the right balance between bottom-up and top-down initiatives Strengthen and support growth initiatives via public involvement Support the social infrastructure of the city region 47 6 Support the city s growth through intercity collaboration Collaboration can support the city region s growth and adaptability Use knowledge bridges and informal collaboration to encourage innovation Find the right balance between cooperation and competition Create a strong, united front through formal intercity collaboration Ensure a professional organisation and management of the collaboration Active leadership leads to greater influence 55 Appendix: Overview of the case study cities 57

5 Executive summary Large and medium-sized cities are important engines of growth in the international knowledge economy because they act as gathering places for businesses, labour and investments. However, cities differ significantly in their economic performance and development. This project focuses on a particular category of large cities, namely the so-called medium-sized cities with 100,000 to 500,000 inhabitants. Previous studies show that medium-sized cities face particular challenges because their limited size makes it harder for them to attract new citizens and economic activity, compared to capital cities and other co-called metropolises. Many medium-sized cities therefore have a relatively poor economic performance; yet, a number of medium-sized cities perform extremely well. However, very little is known about why some medium-sized cities stand out from the crowd, or about what cities can do to promote growth. This report summarises the results of a project initiated by the municipalities of Aalborg, Aarhus and Odense and the North Denmark Region, the Central Denmark Region and the Region of Southern Denmark. The aim of the project is to learn about how mediumsized European cities can use their resources more effectively in order to encourage economic growth and to investigate whether intercity collaboration can help support growth. The report presents the results of the project in the shape of an inspiration catalogue, which contains ideas as to how mediumsized cities can promote growth. These ideas have primarily been identified through case studies of nine European medium-sized cities that have experienced a positive economic development and performance in recent years. The idea behind the report is thus to communicate insights and lessons learned from the project, and to provide inspiration for growth policies and initiatives in mediumsized cities and their regions. The primary contribution of the project can be summarised as follow: The project generates valuable insight into growth initiatives and economic performance in medium-sized cities, a category of cities that we know relatively little about. A good connection and a productive interplay between the city s resources, actors and growth initiatives the combination of which makes up the urban growth system of that city is widely held to support city growth. This project identifies a number of examples of how medium-sized cities aim to promote and strengthen growth by developing a more coherent growth system. Moreover, the project shows that cities can encourage growth through strategic collaboration with other cities. The project focuses on how cities can interact with their surrounding area (the functional urban region around a core city) and with other cities through national and international networks. The project offers valuable insight into the importance of such collaborations for growth and into how such collaborations should be organized and managed. The report takes the form of an inspiration catalogue that communicates ideas, insights and lessons learned about how mediumsized cities like Aalborg, Aarhus and Odense and their city regions can promote growth and strengthen their position and influence in the national and international city landscape. As such, the report is relevant not just for Aalborg, Aarhus and Odense but also for a broader range of cities. It is our ambition that this project will make a positive contribution to the planning and development strategies of the three West Danish cities and contribute to strengthening their intercity collaboration. We hope that the report will also inspire the ongoing work on the regional development plans in the North Denmark Region, the Central Denmark Region and the Region of Southern Denmark. 5

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7 1 Introduction 1.1 About the project This report summarises the results of The City Regions Project, carried out by DAMVAD and commissioned by the municipalities of Aalborg, Aarhus and Odense and the North Denmark Region, the Central Denmark Region and the Region of Southern Denmark. The project was launched in recognition of the fact that cities are diverse and perform very differently when it comes to growth. Some cities exhibit strong economic growth while others struggle to hold on to citizens and businesses. But how do you create growth in a city? Many growth policies focus on improving the conditions for growth in a city by strengthening the resources that the city s economic activities are based on. But good preconditions alone are not sufficient to attain strong economic performance: It varies widely how well cities perform even though most mediumsized cities have many of the same resources for growth, such as well-educated citizens, a local business sector, research and education institutions, a good infrastructure etc. Moreover, the business and growth strategies of most cities are relatively similar and contain many of the same elements, e.g. a focus on building business clusters, strengthening interaction between industry and knowledge institutions, establishing science parks, and a focus on growth sectors such as biotech, IT, climate and/or creative industries. So why are some cities more successful in creating value from their resources than others? The key to economic growth is not only having access to resources for growth, but knowing how to make efficient use of these resources. This raises the central question that is investigated in this project: How can cities best combine and use their resources in order to attain growth? The project focuses on a particular category of cities, that is, medium-sized cities with 100,000 to 500,000 inhabitants. These cities are important engines for growth in their region and in their country. Medium-sized cities such as Aarhus, Aalborg and Odense differ from metropolises like Copenhagen in their preconditions and opportunities for growth, as it is generally easier for metropolises to attract businesses and well-educated labour. This project examines how medium-sized cities seek to overcome these challenges and make the most of their resources and potential for economic growth. The City Regions Project builds on both previous research and analyses as well as independent analyses carried out during the course of the project. The heart of the project consists of nine indepth case studies of medium-sized European cities that have have experienced a positive economic development and performance in recent years. The purpose of these case studies has been to identify and examine initiatives and projects aimed at strengthening economic growth, which may therefore inspire growth policies or initiatives in other medium-sized cities. The main report summarises the results of the project in an inspiration catalogue that presents a number of ideas as to how mediumsized cities can promote growth and strengthen their position and influence in the national and international city landscape. Overall, the project identifies a number of promising opportunities and inputs to future growth policies and initiatives for the three West Danish cities and their regions. 1.2 Main results of the project In order to answer the question of how cities can best combine and make use of their resources in order to achieve growth, this project has investigated a wide range of factors that influence the growth and performance of cities. The project has especially focused on how cities interact with their surrounding city region, and on how they collaborate in national and international networks. The focus on intercity collaboration is explained by the fact that most growth initiatives launched in a city involve some degree of collaboration between actors in or outside the city. The project thus gives valuable insight into the importance of such collaborations for growth, and into how they can be organized and managed more efficiently. Among other things, the case studies indicate that the case 7

8 Introduction cities are very good at building on existing strengths and thus making the most of their growth potential. They do this, among other things, by striving to achieve as much complementarity and interplay as possible between the resources, actors and growth initiatives of the city. The project also shows that the case cities seek to strengthen their economic performance through strategic cooperation with other cities, both within and outside the city region. Intercity collaboration can be a way of working strategically with resources by connecting resources more effectively within or between cities. The case studies indicate that intercity collaboration can support parallel growth among all the partners in a collaboration. Moreover, such collaboration often lead to other benefits such as knowledge exchanges and learning between cities, interaction between actors in the cities, increased coordination of growth policies, and a strengthened visibility in the urban hierarchy that makes it easier to attract citizens, businesses and investments. The project also underlines a point made in previous analyses of city growth, namely that innovation and renewal occur when people meet and exchange experiences and ideas. As such, innovation indicates that there is a high level of social capital in the city. Social capital is valuable because it is through exchanges and interaction between individuals that knowledge sharing, new ideas and innovation occur. Strategies for strengthening growth should therefore aim at creating the best possible conditions (i.e. inspiration, resources and incentives) for interaction and collaboration among actors. The overall results of the project are summarized and presented in this main report, which is structured as an inspiration catalogue for use by the West Danish cities and regions or by other mediumsized cities. It is, however, important for any city to consider which lessons are relevant in view of its particular situation and growth challenges. Cities should also consider how the strategies described in this report may interact with each other if implemented at the same time, by considering how they might overlap or reinforce each other, or even cancel each other out. Figure 1.1 on the next page presents an overview of the lessons learned from the project and summarises the structure of the report: Chapter 2 presents fundamental insights into the growth of medium-sized cities, based on the results of previous analyses and studies. Moreover, the chapter presents key results of The City Regions Project. Among other things, the analytical framework of the project is described, as well as main conclusions regarding the importance of interaction and complementarity between resources within the urban growth system, and the impact of intercity collaboration on city growth. Chapter 3 presents a number of general lessons learned from the project. These lessons primarily spring from the case studies, but also from other parts of the project, including the review of prior studies and analyses of city growth. Chapters 4 and 5 both present lessons learned, focusing on how cities can encourage or support growth through collaboration within the city region. Chapter 4 focuses on how to estavlish a good framework for collaboration between actors and cities in the same region. Chapter 5 takes a closer look at how this kind of collaboration can be organised and anchored in order to promote sustainable economic growth. These lessons learned spring primarily from the nine case studies, but also from other parts of the project. In chapter 6, we shift our focus away from collaboration within the city region to collaboration across or between city regions. The chapter presents lessons learned, focusing on how cities can promote or support growth through intercity collaboration, and how this kind of collaboration can be organised and anchored. These lessons learned are drawn mostly from the case studies, but also other parts of the project. 8

9 Introduction Figure 1.1 Overview of lessons learned Chapter 4 and 5: On collaboration within the city region Chapter 6: On collaboration between city regions Chapter 4: Establishing good conditions for collaboration Chapter 5: Organizing and anchoring the collaboration 6.1 Collaboration can support the region s growth and adaptability Lessons learned - about intercity collaboration 4.1 Collaboration can create growth in the entire city region 4.2 Bring key players together on a burning platform 4.3 Clarify and communicate incentives for collaboration 4.4 Define ambitious and long-term visions and show active leadership 4.5 Create good framework for collaboration 5.1 Champions are great - bur collaboration must be anchored 5.2 Establish independent organisations with their own mandates and means 5.3 Find the right balance between bottom-up and top-down initiatives 5.4 Strengthen and support growth initiatives via public involvement 5.5 Support the social infrastructure of the city region 6.2 Use knowledge bridges and informal collaboration to encourage innovation 6.3 Find the right balance between collaboration and competition 6.4 Create a strong, united front through formal intercity collaboration 6.5 Ensure a professional organisation and management of the collaboration 6.6 Aktiv ledelse giver større indflydelse Chapter 2: Fundamental insights into city growth Chapter 3: General lessons learned Lessons learned - generally speaking 2.1 Cities are engines of economic growth 2.2 Medium-sized cities have big growth potential 2.3 Growth is created not within the municipality but within the city region 2.4 Growth is based on the quality of - end interaction between - the city s ressources 2.5 Collaboration between cities create growth 2.6 There is no one size fits all strategy for growth 3.1 The cluster perspective does not focus on value creation 3.2 Focus on business development through related diversification 3.3 Build niche-based strongholds 3.4 Establish strong platforms for growth and collaboration 3.5 Work with integrated strategies for growth and city development Source: DAMVAD

10 Introduction 1.3 Knowledge foundations for the project This report summarises the results of a project that has had an international focus and approach to generating inspiration for growth policies and initiatives for the three West Danish cities and their regions. The project has, among other things, included insights and inputs from four international experts on city growth. The project has also been based on an extensive analysis of the international literature and undertaken original analyses of growth in European cities. The City Regions Project consists of five sub-projects that are described in five separate sub-reports (which are available in Danish). Together, these five sub-projects they form the basis for the results presented in this main report. Sub-report 1, A literature study of cities preconditions and possibilities for growth, presents an extensive analysis of results from previous studies of city growth. Thus, this part of the project provided a solid knowledge foundation for the project as a whole. Moreover, it generated important inputs to the development of the analytical framework in the project and to the identification of data sources and indicators used in later parts of the project. Sub-report 2, The analytical framework of the project, draws an overview of central preconditions for and drivers of city growth. The aim of this part of the project was to develop a framework, which is easy to operationalize, so that it could function as the underlying framework in each of the subsequent parts of the project. Sub-report 3, A screening of approximately 100 European cities, presents the results of an analysis of 95 European cities economic performance and development. The aim of this screening was to undertake an overarching analysis of these cities position within their national urban system and of their economic performance and development, to strengthen the empirical basis for subsequent parts of the project. The analysis took as its starting point the three West Danish cities as well as comparable cities in six other countries: Norway, Sweden, Finland, Holland, Germany and England. The 95 cities were chosen on the basis of their size and the availability of internationally comparable data on the city. The screening included data on the cities ability to generate economic value, their recent economic development, the development of the population, the educational level of the workforce, commuting patterns, the city s ability to attract labour from abroad, as well as the unemployment rate. The results of the screening draw a picture of the growth and performance of medium-sized European cities that put the performance of the three cities of Western Denmark into perspective. These results also formed the basis of the subsequent selection of case cities. Based on data from the screening, nine cities were chosen for in-depth analysis. The primary criterion was a good economic performance and an average or above average growth over the last decade, compared with similar cities in the same country. Moreover, the cities had to have a relative size and position within their national urban hierarchy that was comparable to those of the three West Danish cities. This additional criterion was included to ensure that the cities could provide lessons and inspiration that is relevant for the Danish cities. As a result, potential candidates for case cities were excluded if they had significant, special preconditions for growth that are difficult or impossible for other cities to emulate or compensate for (e.g. if their economic growth was primarily based on an oil economy). Through this process, which is described in more detail in Subreport 4, the following nine cities were chosen for in-depth case studies: Gothenburg (Sweden), Turku (Finland), Eindhoven and Groningen (The Netherlands), Nottingham and Manchester (England), and Saarbrücken, Freiburg and Karlsruhe (Germany). Sub-report 4, Quantitative city profiles of 12 European cities, presents in-depth quantitative profiles of the three West Danish cities and the nine European case cities. 10

11 Introduction The city profiles are based on international data on city level and regional level. They include a wide range of indicators of growth, development and preconditions for growth in the twelve cities. The aim of the city profiles was to contribute to the knowledge foundation for the nine case studies by identifying the cities relative strength and weaknesses. Originally, it was our intention to use the data gathered for the city profiles in a comparative analysis of economic performance and drivers for growth in the three Danish cities and the nine European case studies. The analysis of the collected data has however revealed a number of fundamental problems with the available international data on cities and regions, for instance due to differences in procedures for data collection and data availability across countries. These problems include a lack of data on city level, poor representativity and insufficient data coverage for the indicators that are available, plus a generally insufficient quality of data. In view of these limitations, it was our assessment that it was not possible to carry out meaningful comparisons across borders. However, the available data do enable us to carry out analyses of the cities performance and preconditions for growth relative to other cities in the same country. The project confirms the results of previous studies, which show that the preconditions for growth of economically strong cities are not necessarily very different than for other cities. This becomes apparent in the screening of 95 European cities presented in Sub-report 3, but also in the closer quantitative analysis of twelve medium-sized cities describes in Sub-report 4: There are no special resources or preconditions that differentiate the cities that are economically strong from other cities. So economic growth in our case cities is not the result of inimitable, favourable conditions for growth. Sub-report 5, Case studies of nine European cities: Inspiration for growth and intercity collaboration, presents the nine in-depth case studies. The aim of these case studies was to identify initiatives with the aim of furthering or supporting growth in the cities that could form the basis for lessons and inspiration for the three West Danish cities and their city regions. The project was carried out in cooperation with a project group commissioned by the municipalities of Aalborg, Aarhus and Odense and the North Denmark Region, the Central Denmark Region and the Region of Southern Denmark, as well as four experts of city growth and development. In particular, Associate Professor Mark Lorenzen, Copenhagen Business School, has contributed to the shaping of the project, workshops and discussions of the results and conclusions of the project. Moreover, three experts from the United Kingdom have made valuable contributions to the design of the project and its analytical framework, and to workshops held in connection with the project: Paul Hildreth, Visiting Policy Fellow at The Centre for Sustainable Urban and Regional Futures (SURF), Salford University Naomi Clayton, Senior Researcher, The Work Foundation Lena Tochtermann, Analyst, Centre for Cities. On the contrary, the case studies indicate that the positive performance of the nine cities is the result of effective, long-term investments that build on the particular strengths, resources and growth potential of each city. 11

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13 2 On cities and their growth potential 2.1 Cities are growth engines for the economy Cities are key engines of economic growth in the regional, national as well as international economy. By creating gathering places for labour, business and investments, cities supply the framework for innovation and economic development. However, not all cities are equally skilled at exploiting this framework. As a result, there are large differences in their economic performance. Cities play a central role in the knowledge economy because they are home to universities, well-educated labour and knowledgeintensive businesses, as well as to capital and public authorities. Numerous analyses show that cities are important for economic growth because they offer a good framework for economic development by providing gathering places for people, business and economic activity 1. For example, people move to cities because they give access to a large variety of jobs, shopping options, and cultural and leisure activities, as well as a diversity that helps attract qualified labour to cities. At the same time, cities concentration of labour, knowledge institutions, authorities and infrastructural hubs such as airports and railway stations are attractive features for companies and for educational institutions. They differ, however, in their ability to exploit this capability. As a result, there is a high degree of variation in cities economic performance. A city that performs well is a city with sustainable economic growth. Economic growth indicates that a city is well-functioning, as growth is both a consequence of and a catalyst for growth in other important parameters such as innovation or growth in the business sector, in welfare, in education and in culture. Economic growth and innovation alone are not enough, however, to characterise a city as successful. For that, it is essential that the foundation of the city s growth is sustainable, that is, that it cannot be easily eroded. In a global economy, where people, businesses and economic activity can easily move to a more attractive base, competitive advantages can quickly be reduced or disappear. Cities are thus vulnerable to the international development of capital flows, the development of other cities, and citizens demand of their work life and social life. A well-functioning city is therefore a city that knows how to adapt to possibilities and challenges in the global knowledge economy, and whose performance builds on sustainable competitive advantages. This means that the growth strategies of cities ought to be long-term and take the development of the global knowledge economy into consideration. The importance of cities is underlined by the fact that their job creation, growth and productivity are typically higher than for the rest of the country. Much innovation springs from cities because they supply gathering places where businesses, scientists and entrepreneurs can form networks and exchange and develop new ideas. Cities also attract investors with venture capital, which is necessary in order to realise new ideas and thereby spur renewal and innovation. Cities thus supply the best framework for economic development. 1 See e.g. Van den Berg & Van Winden. (2004). Cities in the knowledge economy. Report to the Ministry of the Interior and Kingdom Relations; OECD. (2001). Cities and Regions in the New Learning Economy; OECD. (2006). Competitive Cities in the Global Economy. 13

14 On cities and their growth potential 2.2 Medium-sized cities have big growth potential Medium-sized cities in particular have considerable growth potential, but we need more knowledge on how possibilities and challenges of growth in medium-sized cities differ from the preconditions for growth in capitals and other metropolises. Medium-sized cities with good economic performance are not necessarily characterised by having easier or better access to valuable resources than other cities. They do however appear to be very good at making the most of the growth potential that they do have, for example by ensuring the highest possible degree of complementarity and interplay between the city s resources, and by supporting growth initiatives through strategic cooperation with other cities both within and outside their region. Because of cities importance for economic growth, there are many studies, analyses and reports on cities and on how to create the best possible conditions for city growth. However, most of these analyses focus on metropolises, that is, capitals and other cities with millions of inhabitants. But the major part of the global population and economic activity is found in medium-sized cities, not metropolises. The medium-sized cities are fully functional cities with a population of less than 500,000 in the core city. In a Danish context, Aalborg, Aarhus and Odense can thus be characterised as medium-sized cities, while Copenhagen can be characterised as a metropolis. Metropolises generally attract more businesses, public authorities, knowledge institutions and highly skilled labour. They are, however, also characterised by higher living and business expenses. Mediumsized cities, on the other hand, offer many of the same advantages as metropolises (although on a smaller scale), which makes them attractive to businesses, workers and students. Moreover, it is generally cheaper to live and do business in medium-sized cities, where you can get the benefits of living in a city but at a lower cost. 2 Medium-sized cities also benefit from an increasing political and economic influence on regional and national growth, as there is a tendency towards moving the responsibility for regional and local development from the national level to regional and local authorities. In the last decade, a growing recognition of the economic importance of medium-sized cities has led to an increased focus on these cities and their growth. While we know a lot about metropolises, we lack similar insight into the preconditions and potential for growth in medium-sized cities. There is therefore an urgent need to increase our knowledge of the particular challenges and possibilities for growth faced by medium-sized cities, and that is exactly the purpose of The City Regions Project. Medium-sized cities can be defined in two ways. The first is by population. A medium-sized city is often defined as a city with approximately 100,000 to 500,000 inhabitants. However, medium-sized cities can also be defined according to their position in the national urban hierarchy. In all countries, there is a network of cities, a so-called hierarchy of cities, which is more or less defined by the relative size of each city and its influence on the national economy. For example: Based on its population, Aarhus is comparable to the British city of Leicester, as both cities have a population of approximately 300,000. Based on its position in the national hierarchy, however, it makes more sense to compare Aarhus with a city like Manchester, even though the population of Manchester is significantly larger. This second approach is particularly interesting because previous analyses show that a city s position in the national urban hierarchy is often a more important determinant of its growth potential than its size relative to cities in other countries. As described previously, cities have good preconditions for attracting economic activity. But economic growth does not happen by itself. For instance, previous analyses show that a city s size matters: metropolises generally perform well because their size alone is enough to attract citizens, businesses and economic activity. In contrast, small towns are generally characterised by a 14 2 Clayton & Morris. (2010). Recession, recovery and medium-sized cities. Report from The Work Foundation.

15 On cities and their growth potential relatively weak economic performance as there is a natural limit to how much economic activity they can attract and generate. Thus, the size of cities and their economic performance can be said to be proportional. This tendency does, not however, hold for medium-sized cities, as illustrated by figure 2.1: Previous analyses show that some mediumsized cities perform far better than one would expect from their size, while others perform far more poorly than expected. 3 The bad news is thus that medium-sized cities face special challenges compared with metropolises that do not have to work so hard to attract business and labour. Meanwhile, the good news is that the much higher degree of variation in the economic performance of medium-sized cities shows that there is a considerable growth potential in medium-sized cities. But how do medium-sized cities attain above average economic performance? Figur 2.1. The relationship between cities economic performance and size The city s economic performance Strong performance Weak performance The size of the city The City Regions Project explores what characterises medium-sized cities with strong (as in above average) economic performance. The project confirms results from previous analyses, which show that the preconditions for growth of economically strong cities are not necessarily different from those of other cities. Being above average is therefore extremely important. Most medium-sized cities share similar preconditions for growth: well-educated citizens, a business sector, one or more research institutions and science parks, a well-functioning infrastructure etc. So why are some cities capable of creating more value from these resources than others? Previous analyses show that some cities are particularly good at making the most of their growth potential by combining their resources more effectively. This project generates a number of examples of how cities strive to do this by maximizing the complementarity and interplay between the city s resources, and by supporting growth initiatives through strategic collaboration with other cities. This is described in more detail in the subsequent chapters of this report. Small cities Medium-sized cities Metropolises Source: DAMVAD N.B. The figure is not based on empirical data. For an empirical basis for the figure, see Lorenzen & Andersen. (2009). Centrality and Creativity: Does Richard Florida s Creative Class Offer New Insights Into Urban Hierarchy? Economic Geography, 85(4): See e.g. Lorenzen & Andersen. (2009). Centrality and Creativity: Does Richard Florida s Creative Class Offer New Insights Into Urban Hierarchy? Economic Geography, 85(4):

16 On cities and their growth potential 2.3 Growth is created not within the municipality but within the city region Economic growth is not created within the administrative boundaries of a city, but within the functional city region, defined as the area around a core city that shares living spaces, jobs and services with the city. This implies that growth policy and initiatives should consider not just the core city, but the city region as a whole. In our definition of a city we not only include the central municipality that gives the city area its name, but also the immediate surroundings that border on the city and exchange living spaces, jobs and services with the city. This area is called a city region. City regions are also called functional urban areas because they often draw a more accurate picture of a city than the administrative borders of the core municipality. People do not limit their activities to the geographic borders of a city; they live, work, shop and use the cultural and leisure activities on offer within a larger geographic area around the city they live in or close to. Likewise, businesses choose their location and their partners without looking at the administrative borders of the city. The functional city is thus defined by how people live and work, and how the economy works between a core city and its surroundings. The city region can include independent cities as well as rural areas and suburbs. The city region s importance for city growth implies that growth policies and initiatives must be take the city region and not just the core city into consideration. 2.4 Growth is based on the quality of and interaction between the city s resources A city s growth potential is either supported or stunted by the resources that are available to it. These include the city s industry base and knowledge base, but also its access to highly skilled labour ( talent ) and the general conditions for growth in the city (e.g. its growth policy, business climate, and infrastructure). The quality of the city s urban growth system that is, the sum of its resources depends on how well the city s resources complement and interact with each other. Figure 2.2: The city region The city region City city The economic performance and growth potential of cities is based on the preconditions for growth that is available to the city, meaning primarily the city s resources. A city does not grow by itself: Its performance and position relative to other cities is to a large extent based on the resources available to the city as well as the quality and degree of complementarity between these resources. These resources include the businesses and knowledge institutions located in the city, but also other important resources such as human capital ( talent ), financial capital, social capital and the infrastructure in the city. City City Core city Source: DAMVAD 2010 The combination of resources is important and can form the basis of sustainable competitive advantages. For instance, it does not create value to have many entrepreneurs with good business ideas, if these entrepreneurs do not have access to financial capital in the shape of venture and start-up capital with which to realise those ideas. Likewise, a concentration of well-educated citizens is less valuable if there is not also a high degree of social capital, 16

17 On cities and their growth potential that is, relationships and trust between individuals that make them exchange ideas and knowledge and cooperate with each other. In this project, we distinguish between four categories of resouces: The industry base refers to the city s businesses, that is, the main engine of economic growth in the city. This resource includes the city s performance, measured by productivity and value added and its business structure (i.e. the number and size of companies in the city). Here it is also relevant to consider the degree of specialization of the city s industry, meaning which sectors companies are located in. Last, but not least, it is interesting to look at the inflow of new business through entrepreneurship and new firm formation. The framework conditions cover the general conditions for growth in the city and thus include national, regional and local policies, e.g. focusing on growth, business development and innovation. The framework also includes the quality of the general business environment and the quality of life that the city can offer. Last, but not least, it is relevant to look at the city s infrastructure, including the quality and price of public transportation, but also the city s accessibility by plane, car and train from the city region, other cities and from abroad. The knowledge base refers to the city s knowledge foundation, that is, its research and educational institutions. In this context, it is also interesting to see which areas the city has specialised in. It is also relevant to look at the degree of internationalisation of research and education, e.g. in international research collaboration and in the exchange and recruitment of scientists and students. Last, but not least, this resource also includes the research and educational institutions orientation towards and collaboration with industry. Talent refers to the city s citizens and labour. In this context, it is interesting to look at the demography and employment of the city (e.g. the age distribution, and work places for the city s inhabitants). Human capital covers the qualifications and educational level of the labour force, while social capital refers to the presence of trust and personal networks between. Moreover, it is relevant to look at the city s ability to attract and retain labour, including the sought-after creative class, that is, knowledge workers whose primary job function is to innovate. 4 4 See e.g. Lorenzen & Andersen. (2008). Den Danske Kreative Klasse: Hvem består den af? Hvor bor den? Hvad betyder den for det danske samfund? Aarhus: Klim. 17

18 On cities and their growth potential All these resources are important to the city s economic performance and are therefore relevant to work with in order to promote growth, either to ease the city s challenges or to further strengthen a good economic performance. As the full value of a resource is only realised when it is brought into play in a productive interaction with other resources, it is, however, important to assess these resources in the context of the city s urban growth system, that is, the city s overall set of resources. The productivity of the growth system depends on two things. Firstly, it depends on how complementary the resources are, that is, how well they support each other. Secondly, it depends on the level of interaction between complementary resources, that is, how much and how efficiently these resources interact in order to unleash growth potential. The key to growth in a city does not, therefore, lie in the resources available to the city as much as it lies in how these resources are managed and relate to each other. Later in this report we look at a number of examples of how medium-sized cities in other European countries seek to strengthen their econo- mic performance by creating connections and interaction between their business sector, their knowledge base, their labour force, and the general framework conditions for growth in the city. It is relevant to point out that certain resources are more expensive to build than others. For example, educational and research institutions require large public investments, while others (such as grassroots, and many culture and leisure activities) are relatively inexpensive investments for the municipality. In addition, some resources take a very long time to build up or lose, while others are fast. This is also related to the fact that some resources are more mobile than others. For instance, labour is by far the most mobile resource and can therefore be attracted (or eroded) the most easily. The most risky public investments are of course investments in expensive resources that take a long time to build, but which may be quickly eroded. Figure 2.3: The city s resources and the urban growth system The city s growth system Degree of complementarity between the city s ressources Degree of interplay between the city s ressources The industry base Productivity and value added Industry structure (size and scope of firms) Specialization (sectors, technologies etc.) Entrepreneurship and new firm formation The knowledge base Research institutions Educational institutions Internationalization of research and education Orientation toward/collaboration with industry The talent base Demographics and employment Human capital Social capital Attraction and retention of labor Framework conditions National, regional and local policy The business environment The livingg environment and quality of life Infrastructure Source: DAMVAD

19 On cities and their growth potential 2.5 Intercity collaboration creates growth Cities can enter into more or less formalised collaborations with other cities. Formal intercity collaborations might for instance focus on strengthening the business sector, carrying out joint research and education initiatives, strengthening infrastructure or attracting highly skilled labour or cultural events. Moreover, cities can cooperate on marketing or on political lobbying in order to strengthen their national or international visibility, bargaining position or access to capital. The case studies indicate that cities that do well are also good at cooperating with other cities, both within and outside their city region. These collaborations can support and increase growth for all involved. But intercity collaborations do not automatically lead to benefits. In subsequent chapters, we will therefore take a look at factors that affect the impact of intercity collaboration on city growth. Cities do not exist in isolation. As previously mentioned, they are a part of a national and international urban hierarchy. The whole network of cities is said to constitute an urban system. Within this system, cities can interact with each other to a smaller or larger extent. Interaction between cities can, among other things, occur through interaction between individuals, businesses and knowledge institutions, or among city councils. In The City Regions Project we raise the question: How important are intercity collaborations for the growth potential of cities and their position in the urban hierarchy? Medium-sized cities compete with each other and with metropolises in order to attract labour, businesses and financial capital. However, the results of this project indicate that collaboration between cities is a more efficient means of achieving growth than competition is. 19

20 On cities and their growth potential For instance, the case studies indicate that growth in a city region can be strengthened through cooperation with other cities. The economic performance of cities is thus not only influenced by the degree of complementarity and interplay between the city s resources, but also by how effectively the city cooperates with other cities. In addition to distinguishing between formal and informal collaboration, we also (cf. figure 2.4) distinguish between two kinds of city collaboration: Collaboration within the city region (which we will take a closer look at in Chapters 4 and 5) and collaboration between city regions (which is the focus of Chapter 6). Intercity collaboration can either be informal (such as networking and exchange of experiences) or formal. Examples of formal collaboration in the case studies can be seen in Box 2.1. Box 2.1. Examples of types of formal intercity collaboration Business: Cooperating on attracting businesses or creating more coherence between related sectors in order to strengthen the whole business sector Research and education: Cooperating on research in selected fields or on offering educations Talent: Cooperating on attracting talent or strengthening the mobility of labour between cities Infrastructure: Cooperating developing infrastructure Culture: Cooperating on attracting and implementing high-profile cultural and sporting events Marketing: Joint marketing and city branding Political: Joint political lobbying and applying of funds for financing growth initiatives, explorative projects and/ or intercity collaboration 20

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