The RESER Survey of 1998-2003 Literature on Services and Regional Development: A Synthesis Based on
National Reports
SVEN ILLERIS
The European research network on services and space RESER annually organizes conferences on special themes
connected with services, accompanied by surveys of recent research within these themes. Its members are asked
to provide lists of relevant publications in their countries and to discuss the research activities. On the basis of
the national contributions, a synthesis is presented and discussed at the conference.
The theme of the 2003 conference is ”Services and Regional Development”. National surveys have been
carried out in:
1. The French Language (Louis Boulianne, Lausanne),
2. Germany (Markus Scheuer, Essen),
3. Norway (Peter Sjøholt, Bergen),
4. Poland (Ewa Nowosielska, Warsaw),
5. Spain (Teresa Fernández Fernández, Alcalà de Henares), and
6. The United Kingdom (John Bryson and Peter Daniels, Birmingham).
It should be noted that the Norwegian report is the only one to quote other synthetic efforts.
As in earlier years, the topics discussed in the national reports and the ways in which they have been approached
vary a good deal. In this synthesis, first the changing importance of the theme will be discussed. It will then be
attempted to identify a number of questions which are treated in the national reports. On this basis, future
research priorities are suggested, and some approaches which could be fruitful are indicated.
HOW IMPORTANT IS RESEARCH ON SERVICES AND REGIONAL DEVELOPMENT?
- When RESER was created in the late 1980s, the relationships between service development and regional
development was an important question in the research on services, as witnessed by the inclusion of the word
”space” in the name of the network. This may be seen in the light of the broad interest in regional development
which accompanied the dramatic increase of the European Regional Development Fund from 1989, combined
with the search for regional policy tools that were more appropriate in the emerging service and knowledge
economy than the traditional subsidies to manufacturing investments.
- It seems that in a number of countries, the priority given to research and regional development has decreased
over the 1990s. At least, this point of view is expressed in the French language report which finds the main
explanation in the economic globalisation and says that this process leads to concentration and hence breaks the
link between services and regional development. The British report notes that the balance has shifted away from
description of regional distribution of services towards efforts to understand their operational dynamics (though
this shift does not in itself mean that research on the relationships between services and regional development be
taken off the services research agenda). The modest number of national reports points towards a decreased
priority of the theme. In Denmark, there has been so little research recently that it was pointless to write a
national report.
- On the other hand, the German report informs us that service activities in their regional context still attract
much research. The Norwegian report states that up to the late 1990s, services had low priority in regional
research and in the rurally based regional policy, but now services as driving development forces are given room
in the official research programme. The French language report argues that the ”fall of the New Economy” gives
the service activities the opportunity to return to the regional development as providers of strategic concepts. The
Polish report describes how services were consciously neglected during the period of planned economy.
However from the late 1990s, governments seem to become aware of the role of services in national and regional
development, especially in connection with globalisation, innovation and competitiveness. Services play a
considerable role in the 2000 Polish National Strategy for Regional Development and the regional strategies
elaborated by the regional governments. Undoubtedly, similar ideas are considered in other Central and East
European countries.
The big number of papers presented at the 2003 RESER conference may also be taken as evidence of an
increased priority of the theme.
Anyhow, it is clear that priorities have changed differently in different countries.
SERVICES SOLD OUTSIDE THE REGION
- In most of the national reports, the main focus is naturally on the question of how services contribute to
regional economic development, understood as increasing production, incomes, and employment in the regions
which are weak in these respects.
Some services contribute to the development of their region by selling their products elsewhere and thus creating
incomes and jobs which are independent of the local demand - as agriculture and manufacturing do. ”Elsewhere”
of course includes selling services internationally, a topic already covered by the 1999 RESER conference and
survey and the book which was the result of the conference (Cuadrado-Roura, Rubalcaba-Bermejo & Bryson
2002).
- This is for instance how tourism contributes - an expanding activity which is mentioned in several national
reports. In Spain, tourism is an important activity, and research has i.a. focussed on demand, qualifications,
productivity and competitiveness. In Poland, many regional and local governments see tourism - in particular
agro-tourism - as a panacea, but many researchers conclude that in most areas this is wishful thinking and that
growth in tourism only in exceptional cases can substitute for the reduced employment in agriculture. This
observation may be generalized: From nature´s hand, some regions have more scope for tourism than others.
Some regions are rich in man-made attractions, and imaginative entrepreneurs may create new attractions in
others. But there is not so much tourism that all regions can develop on this basis - an observation which
undoubtedly is true in many countries.
- New information and communication technologies have recently created opportunities to sell a number of
services over long distances - sometimes internationally. Especially routinized, so-called back office services can
be transmitted in this way, often accompanied by other innovations in work and organisation. Examples have
already been surveyed in connection with the 2001 and 2002 RESER conferences on ”New Information
Technologies and Service Activities” and ”Innovation in Services”.
- This year´s British report adds new examples, in particular that of call-centres which have attracted
considerable British research recently. Call-centres usually produce simple, but sometimes quite sophisticated
services. They are reported now to employ 400,000 persons in the UK (just less than 2 per cent of the work
force). While in 2000 75 % of the new centres were located near to the firm´s existing offices, the rest are
established in small towns and rural areas with good broadband connections, where both labour and premises are
cheap. Regional development agencies eagerly try to attract them. However, they now tend to relocate to India
and other countries where English-speaking personnel can be recruited at much lower wages.
- Relocation of civil service agencies (serving the whole country) from capitals to locations which need
development is another example. The British report mentions that new provincial job opportunities created in
this way are predominantly for lower grade civil servants. However, it is known that in some countries - e.g.
Sweden - also higher grade agencies have been relocated. In other countries a devolution of tasks from central to
regional governments (serving their own area) has contributed substantially to the development of regions
outside the capital.
- Thus, not only simple, but also sophisticated services are delivered to distant users. But while routinized
services primarily use telecommunications and can be located in many places, sophisticated services in many
cases need face-to-face contact with the users and for several reasons tend to concentrate in big cities and
immediately adjacent areas, as discussed in some of the national reports.
- Public services delivered to whole countries (national government services) are - with the above-mentioned
exceptions - produced in the national capitals, which in most countries are the biggest cities. This seems not to
have attracted research.
Business services, on the other hand, have been the object of much research (as in previous periods). As noted by
Illeris (1994), large customers make extensive use of distant, even global networks of service providers, while
small firms primarily use local or regional suppliers. However, the Norwegian report mentions an example
where (small) customer firms deliberately buy services over long distances (”dislocated”) in order to avoid their
own social milieu.
- The British report highlights the extreme concentration of sophisticated business services in the so-called
global cities (especially New York, Tokyo and London) which has recently been a major topic of investigation.
These cities are simultaneously global centres of innovation of investment capital, of specialized expertise, and
of management for corporations and non-governmental organisations. The locational factors behind the
concentration of such services are both large local markets and unrivalled global transport and communication
infrastructures. As additional factors, the easy access to key information from many sources has often been
stressed, and undoubtedly the large supply of highly qualified staff should be added.
- One aspect of the concentration of business services in big cities is the tendency of similar or related firms to
form clusters where collective learning processes, knowledge acquisition and sharing develop. The British report
- which ascribes the interest in this phenomenon to Scott (1988) - warns that as regards producer services,
clustering is under-researched and that face-to-face networking may be over-estimated. The Norwegian report
discusses to what degree clustering of business services is conducive to innovation, and points out the urban bias
of Porter (1990) - who certainly also is biased in favour of large corporations.
SERVICES AS A CONDITION FOR REGIONAL COMPETITIVENESS
- Most of the national reports stress the indirect role of service activities in regional development, in the sense
that they serve only users in their own region, but constitute necessary conditions for the interregional
competitiveness of the user firms and hence for the incomes and employment created in the user firms. The
understanding of the role of the knowledge services, learning processes and innovation taking place within
regions has been an outstanding research preoccupation in recent years, according to most of the national reports.
However, it would probably be fruitful to dig still deeper into these mechanics - not least with the purpose of
being able to fine-tune relevant policies.
- The individual interactions between the service producing firms and the service-using firms are often modest
and may seem unimportant. What lends importance to the phenomenon is the considerable total amount of
external - often local - contacts which taken together has changed the nature of even the simplest firms from
rather isolated units to units with many external linkages. This is - as discussed by Giddens (1990) and Illeris
(1996) - a consequence of the ever growing complexity of technology, knowledge requirements, markets and
surrounding societies in which the firms operate.
Clustering of services may be observed in this connection, but more due to the need for proximity between
service producers and service users than to the mutual proximity between service producers discussed above.
- The terms infrastructure or business environment are sometimes used about these conditions for development.
Infrastructure may consist of purely physical structures such as transport and communication equipment. But the
word is also used about soft elements, namely such service activities as financial or consulting firms, transport
activities. Some services contribute even more indirectly to regional development by improving or restoring the
labour force, for instance education, health and welfare services - or by attracting it, such as cultural and leisure
services. Some of the infrastructure aspects have already been explored in connection with the 2001 and 2002
RESER conferences and research surveys already mentioned.
- Most national reports explicitly or implicitly assume that the firms selling outside the region may be service
firms, public service institutions, manufacturing or even agricultural firms. The German report reveals a different
perception, when it says that several studies see manufacturing as the base for the development of local business
services. This must be understood on the background that services disconnected from material goods have
traditionally been weak in Germany (which has been a preoccupation of German research for a number of years).
- The national reports have primarily focussed on the indirect contribution of private producer services to
regional development, but some reports also discuss how a region´s public services contribute to its
competitiveness. For instance, the Spanish report mentions transport infrastructures and public business services,
the French language report education and health services. The Polish report discusses the need for transport and
communication services, financial and business services as well as universities that may contribute to the
regional innovative systems. Most of these sectors already grow rapidly in Poland, financial intermediation thus
by 176 % from 1992 to 1998. The number of private universities reached 156 in 1999; most of them are in big
cities, but some have ”filtered down” to smaller towns (where they are short of qualified staff, however).
Upskilling in foreign languages is stressed as an important condition for development. National and regional
governments are conscious of the key importance of education, but lack financial resources to restructure the
educational system (as well as the regional economies in general). In Norway - and undoubtedly in many
countries - centres of higher learning have been decentralized as a result of a deliberate policy.
SERVICES WHICH SERVE REGIONAL NEEDS
- The national reports have something to say about research on private and public service activities which only
serve the population, the firms and - not least - the public sector in their own region. Such studies may be purely
descriptive, but as mentioned in the British report, this is a declining kind of research. They may focus on only
one service activity, on several or on the whole sector. The German report indicates that local and regional
governments often have commissioned studies of services in their areas, but these studies include services which
directly or indirectly contribute to selling products outside the region. The studies may be structured by
traditional central place theory, briefly mentioned in the Norwegian report; many such studies were previously
made in Germany.
- This research is not inherently relevant for regional development. However, structural changes may lead to
increases in the incomes and employment created in those service activities that serve the regional demand.
Structural changes may also favour the development of some regions more than others. But such structural
changes in the various service activities have rarely been studied from a regional development point of view.
- The changes may have their causes on the demand side: Due to increasing demand, services may spread to
regions where they were not previously found. Or decreasing demand may force them to concentrate in fewer
regions. Or the demand may change differentially, e.g. for demographic reasons. The causes may also be due to
supply factors such as increasing economies of scale. Some examples are mentioned in the national reports, but
undoubtedly a systematic search would reveal many more, which have not focussed on the regional development
implications.
- In Poland - as well as in other previously planned economies - the service activities have grown rapidly in the
transition period, where a previously suppressed demand became manifest. In the early stages, most of the
growth took place in sectors serving regional needs, e.g. in trade, repair, restaurants, administration and real
estate. But no research on the regional distribution of the growth is reported.
- The Norwegian report mentions that household services were dispersed in the 1970s. Most producer services
tend to centralize, though a project in progress studies whether knowledge-intensive business services may
decentralize from the big cities. Unfortunately, it is not clear whether the project distinguishes between such
factors of location as growth in local demand or the possibility of distant sales. The report also discusses public
services (post, health) where economies of scale in big units clash with the political wish to offer equal coverage
everywhere. Public services are important sources of employment in low-density regions, but transfer payments
(pensions etc) play a large role in their economies, too.
- The British report indicates that the not-for-profit sector (charities, voluntary organisations etc) - until recently
somewhat neglected by research - has come into political prominence. As a new way of meeting service needs, it
has the problem that its regional distribution is very uneven.
SPECIAL PROBLEMS IN TRANSITION COUNTRIES
- The transition from planned to market economies in Central and Eastern Europe has had special effects for
services in some regions.
- The Polish report discusses the considerable transborder trade and other service deliveries - only partly
registered in official statistics - which have emerged due to the increased openness of Poland´s borders, to the
improvement of transport to and from the frontiers, and to differences in incomes, prices and supply and demand
in the different countries. These activities both along Poland´s western and especially its eastern frontier
contribute in a direct way to regional development. Various studies agree that the effects are concentrated in
largest, already relatively well developed cities of the border regions (and in a few ”bazaars” in central Poland).
- In Germany, much research focusses on the transition problems created by the low priority given to services in
the former ”Deutsche Demokratische Republik”, now the ”Neue Bundesländer”.
POLICY REQUIREMENTS AND RESEARCH PRIORITIES
Some of the national reports discuss priorities in future research on services and regional development.
- The British report finds a lack of investigations into the changing macro geographies of service activities,
which makes it difficult to situate the micro or meso studies. It also deplores the lack of taking non-AngloAmerican literature into consideration.
- The Norwegian report finds that research is needed on relationships between services and other industries,
relationships between public and private services, relationships between services and entrepreneurship, and
relationships between services and urban areas.
- The survey has revealed other questions which, in the eyes of the reviewer, deserve increased attention in
future research on services and regional development. Some have already been mentioned above. The following
ones may be added:
- First, as already mentioned most research on services and regional development has in the last two decades
focussed on the role of producer services. This is natural, given the spectacular growth rates in producer services
and their immediate importance in regional development. But household services cannot in the long run be
neglected. This is still where the bulk of service employment and incomes are created, some structural changes
occur, some activities show substantial growth, and in a contemporary economic system where all sectors to
some degree depend on all others, even more indirect relationships should be studied more closely. The recent
French focus on so-called proximity services is a step in this direction.
- Second, organisations and agencies which are responsible for regional development have an obvious need to
know, as precisely as possible, what the impact is of various development policies and tools. The European
Commission has in recent years done much to promote evaluation of the effects of the ERDF programmes and
projects. This is no easy task, the large number of forces that influence regional development makes it extremely
complicated, and some of the factors can hardly be measured quantitatively in any meaningful way. It is
worrying, however, that except for the Norwegian one, the national reports do not mention any research on
methods to assess the impact of services on regional development. The economic base model (to be discussed
below) can in principle make it possible to estimate multiplier effects of basic activities, and this has been done
for decades. When we argue that the model must be modified, it follows that the traditional estimates of
multipliers are too simplified. There is a challenging need to improve these methods.
- Third, even if the Norwegian report observes an increasing theoretical clarification in service research, the
national reports do generally not indicate much theoretical research on the role of services in regional
development. Neither are they structured by any comprehensive theoretical framework, which has been a
problem for the structuring of this synthesis. However, theoretical research is necessary for the understanding of
the relationships between services and regional development, and for the practical application of regional policy
tools involving service activities.
In this attempt to write a synthesis in a structured way, the unifying conception applied is a modified version of
the traditional economic base model (mentioned briefly in the French language report), which is based on the
existence of distance barriers to service provision. This simple model states that the economic base of a region or
city is constituted by those economic activities which are able to sell their products elsewhere, namely
agriculture and manufacturing industries. The incomes brought into the region then circulate there as wages and
profits to households, which buy services (that can only be sold locally and hence are called ”non-basic”) and
create new household incomes, which again circulate and create multiplier effects. Explicitly or implicitly,
regional policies have been based on this model and have assumed that only growth in agriculture and
manufacturing could lead to regional development. Service activities would then follow automatically. Hence
policies have primarily stimulated manufacturing.
- The original economic base model has increasingly been criticized for being too simple. The present survey
shows that it can only be applied today if modified in several ways:
- Some service activities are able to sell their products outside their own region, over long distances, and thus to
be included in the ”basic” category. Several examples have been quoted above.
- A new category of service activities must be defined which, while selling their products only within their own
region, constitute a necessary condition for the competitiveness of the basic sector of the region. These service
activities may be called ”indirectly basic”.
- Even within the category of non-basic service activities which only serve households in their own region,
changes occur which differentially influence incomes and employment in the regions.
Undoubtedly, other theoretical models could be conceived and contribute to our understanding of the
relationships between services and regional development.
CONCLUSION
Service activities are important for regional development in a number of ways. Recent research has explored
some of these. But on the whole, research in this field has in recent years been modest on several questions, and
not least on comprehensive theoretical understanding of the relationships. Regional development policies
increasingly should and do involve service activities, but we need to improve our understanding of how and with
what effect this can be done. It is time for vigorous research to meet these important challenges!
REFERENCES
Cuadrado-Roura, J.R., Rubalcaba-Bermejo, L. & Bryson, J.R. (eds) (2002), Trading Services in the Global
Economy. Cheltenham: Edward Elgar.
Giddens, A. (1990), The Consequences of Modernity. Cambridge: Polity Press.
Illeris, S. (1994), Proximity between Service Producers and Service Users. Tijdschrift voor Economische en
Sociale Geografie, 85, 4, 294-302.
Illeris, S. (1996), The Service Economy: A Geographical Approach. Chichester:Wiley.
Porter, M. (1990), The Competitive Advantage of Nations. London: Macmillan.
Scott, A.J. (1988), Metropolis: From the Division of Labor to Urban Form. Berkeley & Los Angeles: University
of California Press.