A Strategic Knowledge and Research
Agenda on Economic Vitality of European
Metropolitan Areas - Towards a Smart
Specialisation Strategy
1
A Strategic Knowledge and Research Agenda
on Economic Vitality of European Metropolitan Areas
Economic Vitality of European Metropolitan Areas
Towards a Smart Specialisation Strategy
European Metropolitan network Institute
Laan van N.O. Indië 300
2593 CE Den Haag
Postbus 90750
2509 LT Den Haag
telefoon +31(0)70 344 09 66
fax +31(0)70 344 09 67
email: info@emi-network.eu
website: www.emi-network.eu
Authors:
Dr. Cees-Jan Pen
Dr. Ruud Dorenbos
Marloes Hoogerbrugge, MSc
September, 2012
The responsibility for the contents of this report lies with European Metropolitan network
Institute. Quoting numbers or text in papers,
essays and books is permitted only when the
source is clearly mentioned. No part of this
publication may be copied and/or published in
any form or by any means, or stored in a retrieval system, without the prior written permission of EMI.
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on Economic Vitality of European Metropolitan Areas
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Content
Executive Summary 9
1.Introduction
1.1
1.2
1.3
1.4
1.5
13
Cities as Motor of the Economy Trends and Patterns in Europe Towards a Policy-Driven Research Agenda
Research Methodology Structure of the Agenda 2. Economic Vitality of Metropolitan Areas
2.1
2.2
2.3
2.4
A Focus on Metropolitan Areas: why? Economic Vitality Determinants of Economic Vitality Europe’s Economic Strategy 3. Themes of Economic Vitality 3.1
3.2
3.3
3.4
3.5
Knowledge and Innovation Entrepreneurial Economy
Labour Market and Education Modernising and Adaption Conclusion 21
21
23
24
25
31
31
35
39
43
48
4. Case studies
4.1
4.2
13
14
16
18
20
49
Gathering insights from practice Case study selection 49
49
5. Case study Munich
53
5.1Introduction
5.2
Economic vitality of Munich
5.3
Insights from practice 5.4
Munich, a glimpse in the future
5.5Conclusions
53
53
58
64
68
6 Case study Madrid 71
6.1Introduction
6.2
Economic Vitality of Madrid
6.3
Madrid’s problematic labour market situation
6.4Conclusions
5
71
71
76
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7 Case study Poznan
85
7.1Introduction
7.2
Urban development of Poznan
7.3
Economic Vitality of Poznan
7.4
SWOT analysis
7.5Conclusions
85
88
91
96
96
8 Case study Bucharest 101
8.1Introduction
8.2
Institutional Structure of Bucharest
8.3
Economic Vitality of Bucharest 8.4
SWOT analysis 8.5Conclusions
9. Conclusion
9.1
9.2
9.3
9.4
117
Results Case Studies Research Challenges Research Questions Next Steps
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103
109
111
111
117
117
119
120
6
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A Strategic Knowledge and Research Agenda
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Executive Summary
Metropolitan areas are seen as engines of
the national and European economy. As
Europe is currently facing a huge financial
and economic crisis, the economic importance and vitality of metropolitan areas
should be widely and increasingly acknowledged. Although the European Commission
launched the “smart specialisation platform”
recently, to support cities and regions in
better defining their research and innovation
strategies, it is striking that the EU still pays
little attention to metropolitan areas in general and their important role in economic
recovery in particular. Instead, the EU focuses at the role of national policies.
However, governments find it hard to develop effective public-private economic
strategies to stimulate the economic vitality.
On the upside, it seems that local and regional levels have acknowledged the economic importance of metropolitan areas. It
is on this level where numerous debates are
taking place on how to address economic
challenges.
In this Knowledge and Research Agenda
‘Economic Vitality of European Metropolitan
Areas’ – drafted by the European
Metropolitan network Institute (EMI) – the
main economic challenges of metropolitan
areas across Europe, in the form of research
and knowledge questions, are addressed.
The agenda discusses the economic vitality
of metropolitan areas in Europe from both a
scientific and practical point of view. The
aim of this agenda is to strengthen
European metropolitan areas by means of
integrated, coordinated and overarching
knowledge for policy makers and regional
and urban economy scientists. The agenda
should inspire people to work on effective
economic strategies and have them ask
themselves some fundamental economic
questions.
This agenda helps cities and regions
across Europe to reflect, question, discuss
and finally define their smart specialization
strategy, as requested by the European
Commission. To address the economic reality in urban daily life, four case studies –
Bucharest, Munich, Madrid and Poznan –
have been drafted. Together with a scientific
part and an overview of European policies,
these case studies lead to the formulation of
the most relevant research and knowledge
questions addressed by both policy makers
and scientists.
The Knowledge and Research Agenda
makes clear why it is of great importance to
analyse the determinants of the economic
vitality of metropolitan areas. Without analysis into and knowledge about these determinants as well as the way they affect the
economic structure, developing and implementing policy measures geared towards
strengthening the economic vitality of metropolitan areas is impossible. As the
Knowledge and Research Agenda is based
on EMI’s guiding principle ‘research based,
practice led’, results from academic research
as well as concrete insights and questions
from urban practice were used.
Consequently, both extensive desk-research
and consultations with urban practitioners,
researchers, experts, etc. led to the choice
to address four economic themes in particular: (1) knowledge and innovation, (2) entrepreneurial economy, (3) labour market
and (4) modernisation and adaption. For
each theme the main current challenges are
discussed resulting in the definition of five to
ten knowledge and research questions per
theme. These questions are important from
a practical point of view and/or scientific
point of view. In any case, the lessons
learned will be of relevance for the daily
urban practice and policy in metropolitan
areas focussing on stimulating the economic
vitality of metropolitan areas.
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A Strategic Knowledge and Research Agenda
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Themes
Knowledge and Innovation are key elements
in a knowledge-driven economy. This explains, for example, the relatively high investments in R&D and higher education
across Europe. Whether these investments
pay off in attracting innovative, high-technology companies, will be one of the central
questions within this theme. The geographical focus is on the western European innovative hot spots; what explains the success of
these areas and what can other metropolitan areas learn from them in developing
their own regional innovation strategy? The
degree and dynamics of entrepreneurial
activity is one of the main determinants of
the level of competitiveness of metropolitan
areas. Therefore, this theme addresses the
role of small and medium-sized enterprises
(SMEs) in the local and regional economy.
The (dis)advantages of both economically
diversified and economically specialized
metropolitan areas will also be discussed.
From a policy point of view, the main question to be answered is how metropolitan
areas can develop the right conditions for
entrepreneurial activity and what (hard and
soft) location factors create an entrepreneurial economy that is diverse, robust and
competitive. To answer both practical and
scientific questions, adequate data on metropolitan level must be available and reliable. For example, metropolitan areas
should have accurate information about the
location, dynamics and economic structure
of both SMEs and larger firms within their
territory.
stitutions and a mismatch between demand
for and supply of labour. Recently unemployment has risen to even higher levels because of the economic decline and the associated national cuts. Consequently, metropolitan areas in southern Europe house a
growing group of young workers with little
or no working experience. This could lead to
social-economic problems, frustration and
destruction of human capital. Low participation rates have a negative impact on labour
productivity and, thus, on urban competitiveness. The scientific focus of this theme is
particularly on the relationship between labour productivity and competitiveness at the
metropolitan level. From a policy point of
view it is essential to determine how cities
and regions, together with employers and
schools, can deal with labour challenges
such as a high percentage of youth unemployment and a high representation of migrants in the labour market.
Metropolitan areas in the newest EU Member
States are facing a period of economic
change. There are major differences – as
compared to northern and southern Europe
- in the way how metropolitan areas are
transforming from an economic perspective
in central and eastern Europe. For example,
some Polish cities recovered relatively quickly from the recent economic crisis while other cities – for example in the Baltic States
– are lagging. This agenda discusses the
challenges of the economic transformation
process of the new EU Member States and
the path to recovery and growth these cities
follow.
Many European metropolitan areas are currently dealing with rising unemployment
percentages, particularly the areas located
in southern Europe. Unemployment figures
have always been high in southern Europe,
mainly the result of rigid labour market in-
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Case studies
cation to bridge the gap between labour
demand and labour supply and by facilitating SMEs better to maintain and create local
and regional jobs.
The city of Poznan faces other challenges
since their economic performance is impressive, even during the current crises: low
unemployment, relative high standards of
living and a diverse economic structure. One
of the explanations of Poznan’s success is
the existence of tight relationships between
government, local business representatives
and university researchers. However, Poznan
needs to anticipate on a number of challenges in order to keep pace with European
economic developments. For example, the
service sector currently depends heavily on
small, local enterprises. It is therefore necessary to attract more (foreign) high-tech
companies and Poznan needs to reinforce
the integration of knowledge into the business sector.
Finally, the economy of Bucharest has rapidly transformed from an industrial-based
economy into one that is service-based and
driven by consumption. This transformation
resulted in a boost of the urban economy
and, driven by the construction sector, the
city thus expanded drastically these past
years. This rapid expansion led to various
problems such as a lot of pressure on the
social and physical infrastructure; public
services such as hospitals, dentists and
schools having difficulties dealing with the
increased amount of inhabitants and finally,
the insufficient capacity of the physical infrastructure for day-to-day travel in the city.
The city of Bucharest particularly struggles
with the question how to deal with the negative external effects that are associated with
its rapid expansion towards a metropolitan
area.
Besides the four case studies, an interactive workshop was organised for urban prac-
For a more in-depth analysis of the determinants of the economic vitality of metropolitan areas, four study-visits to European cities – Bucharest, Madrid, Munich and Poznan
- were arranged. During various meetings,
on-site visits, roundtable discussions and
face-to-face consultations, the main challenges in the economic field of these cities
were collected and analysed. This, together
with additional desk-research, resulted in
case studies on the economic vitality of the
four cities. During the visits many questions
came up at to how to work on effective regional and urban economic strategies.
Furthermore, it appeared that there is a
strong need for exchange of knowledge and
sharing of experiences so as to learn from
other European cities.
For Munich it became clear, among other
things, that a brain gain is needed in order
to keep pace with the (expected) economic
growth. Besides, more emphasis needs to
be put on the establishment of ‘communities
of knowledge’ as well as of ‘communities of
practice’. This competitive city has many
questions on how to achieve this. For example, should they intensify the cooperation in
their own region, should they intensify cooperation with other metropolitan areas or
should they do both?
Until 2008 the metropolitan area of Madrid
was one of the strongest performing economies within the European Union. However,
Spain was one of the European countries
that was hit hard by the financial and economic crisis. This resulted in a very high
unemployment rate. Although unemployment in Madrid has, as compared to other
Spanish cities, not reached dramatic levels,
the city considers improving the functioning
of the labour market as its main challenge.
For example, by enhancing the level of edu-
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titioners and scientists in Brussels. The
workshop – with the aim to connect academic research with urban practice – resulted in a valuable list of relevant topics and
questions addressed by urban practitioners
as well as academics. It was striking to see
that many urban practitioners had a clear
economic objective - such as becoming a
creative city – but did not have the tools and
knowledge to implement a sound economic
analysis.
Research challenges and next steps
The metropolitan economy should be examined based on a wide range of factors; both
quantitative assets (economic facts and figures) as well as qualitative assets (concepts
as quality of life and cultural diversity).
Research should establish links between
these different sets of assets and the economic vitality of metropolitan areas. In this
way, a more comprehensive and empiricallyinformed understanding of the economic
performance of cities can be obtained. By
addressing relevant questions for metropolitan areas, research will be demand-driven
and useful for urban practitioners who are
dealing with these questions in their daily
work. After all, metropolitan areas are facing
the future challenges (and threats) related
to economic vitality and are therefore also
expected to develop strategies to stimulate
this vitality. More evidence-based research
is required to understand the underlying
mechanisms in and between metropolitan
areas. This knowledge forms the basis for
effective public and private regional and
urban economic strategies.
of ranked cities. Many questions about the
role of cities and regions in the economic
field remain unanswered. There is a high
level of support amongst metropolitan areas
for initiating a long-term, in-depth research
project analysing and explaining economic
vitality. They are interested to understand
how other cities are enhancing their economic vitality. By monitoring these cities for
several years, interesting outputs about effective economic policies and clear-cut explanations behind economic success and
failure will result.
Together with the European cities, the
European Metropolitan network Institute
(EMI) aims to take up the challenge to fill
the research lacunas with practice-led research projects and programs. EMI proposes
to create and build a multiannual knowledge
and research program of, for and by cities
and regions and their urban stakeholders.
The ultimate goal and ambition is to invest
in the future by further developing innovative knowledge and creative solutions to
current and future metropolitan challenges.
In this way cities will have a stronger voice
on national and European decision-making
levels. With a robust and committed programme, a consortium of cities together
with EMI, will be able to apply for further EU
(co-)funding. As this consortium is based on
actual and concrete metropolitan challenges,
the underlying research is focused on useful
and practical results.
Cities and regions across Europe indicate
that there is a need for comparative research on a long-term basis. At this moment, policy and comparative research is
often based on methodologically weak lists
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1.Introduction
1.1 Cities as Motor of the Economy
awareness that national economies are increasingly dependent on the cumulative performances of metropolitan areas and cities.
The growing awareness that the economic
vitality of national economies depends on
the economic vitality of metropolitan areas
and cities leads to new questions and issues
for researchers and practitioners alike. Even
when setting aside (for the moment) the
problem of defining what a ‘metropolitan
area’ actually is, looking at the relationship
between metropolitan areas and the economy, raises a multitude of complex questions.
For example, what does economic productivity and competitiveness of metropolitan areas actually mean? How do we measure it,
and if we measure it, what does this knowledge actually mean to the strategy and impact of different actors? What is urban economic policy and in what way can it be effectively applied? How can the cooperation
between certain actors contribute to the
regions’ economic vitality? And with (urban)
planning shifting towards an integrated approach of promoting economic development,
environmental quality and social integration
all at the same time, is it possible to structure broad urban strategies and their impact
on the competitiveness of metropolitan areas? Are we able to determine which strategy works bad and best in which context?
How can metropolitan areas make a valuable contribution to the success of the
European Commission’s new ten years
growth strategy: Europe 2020?2 How can
formulating all these questions and the answers to these questions, contribute to the
European governing level? The list of ques-
Given today’s economic climate, it is not
surprising that EMI’s knowledge and research agenda is named Economic Vitality of
European Metropolitan Areas: Towards a
Smart Specialisation Strategy. The global
economic crisis has a major impact on
Europe. For Europe’s recovery it is important
to acknowledge the role of metropolitan areas; there must be more focus on the motors of the European economy. The performance of national economies – and even the
EU in general – is increasingly dependent on
the cumulative performance of metropolitan
areas. With around 80 percent of Europe’s
population living in cities, it is no wonder
that cities are often referred to as the motors of the economy. London, Paris, Milan,
Munich, Stockholm, Warsaw, Prague, and
Budapest are all vital cogs in their country’s
economic wheels. It is therefore all the more
curious that economic policy debates are, by
and large, still focused on the national level,
even though developing and implementing
policy geared towards metropolitan areas,
could potentially play a key role in creating
sustainable national economic growth. In his
most recent seminal book ‘Triumph of the
City’ Glaeser clearly states that regional,
national and world wide economic development depends on economic vital sustainable
cities.1
Many economists tend to identify tasks
relating to the economy as purely a concern
for national governments; economic stabilisation by means of monetary and fiscal policy, redistribution of income by means of taxing and social security, or the provision of
public goods and services. The role of local
and regional governments, as well as institutions working in the public-private sector,
is seemingly underestimated. In the academic world, however, there is growing
1 Glaeser, E. (2011) ‘Triumph of the City’, London:
Macmillan
2 European Commission (2010) ‘Europe 2020 – A
European Strategy for Smart, Sustainable and
Inclusive Growth’, Brussels
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tions is endless; high time to prioritise, analyse, find and fill in the missing blanks.
1.2 Trends and Patterns in Europe
Various trends are apparent in European
metropolitan areas: Europe’s average
growth rate has been structurally lower than
that of its main economic partners, largely
due to a productivity gap that has widened
over the last decade. Some of these trends
and patterns can be named worrisome as
seen from a perspective of future economic
growth. Obviously, these trends and patterns have been observed by the European
Commission as well. Some of these trends
and patterns have been important input for
the Europe 2020-strategy. In this strategy,
the European Commission defined serious
challenges for Europe’s future economic
growth strategy. The following discusses
some of the trends and challenges in Europe
related to the economic vitality of cities
across Europe:
Rigidity of the European labour market
Many European metropolitan areas are currently dealing with high unemployment percentages, particularly the regions located in
southern Europe. These high unemployment
figures can often be explained by the rigidity
of labour market institutions and a mismatch between demand for and supply of
labour. Low participation rates have a negative impact on labour productivity and, thus,
on urban competitiveness. A rising employment rate is one of the Europe 2020-targets, including a higher involvement of
women and older workers and the better
3 European Commission (2010) ‘EU Industrial R&D
Investment Scoreboard 2010’, Brussels
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integration of migrants in the work force.
We have to keep in mind that the European
labour market is also an important achievement because of its job security and welfare
system.
Low levels of innovation and R&D
expenditures
Alarm bells should be ringing when looking
at the situation in Asia. Asian economies
have continued to invest heavily in research
and development (R&D) with growth recorded in many countries. The continuing rapid
rise of Asian-based companies highlights the
innovation emergency that Europe is facing.
As compared to Asia, in the EU there is a
lower level of investment in R&D and innovation. According to the European
Commission much of this is due to differences in business structures combined with
lower levels of investment in R&D and innovation and communication technologies,
reluctance in some regions to embrace innovation, barriers to market access and a less
dynamic business environment. Although
the overall trend in the US is far less positive – there has been a 5,6 percent reduction in investment in R&D in the US in 2009
– there is a wide gap with top US companies
especially in areas like software and biotechnology. Europe’s persistent deficit in R&D is,
to a large extent, the result of its failure to
promote the emergence and growth of innovative businesses in new sectors, technologies and services.3 Besides, private sector
R&D is increasingly outsourced to emerging
economies and thousands of Europe’s best
researchers and innovators have moved to
countries where conditions are more favourable.
One of the Europe 2020-targets is to improve R&D and innovation intensity. Hereby
the focus is put on the impact of the R&D
14
investments rather than the input. European
education should be improved at all levels,
from nursery school to university. This will
enhance productivity, support vulnerable
groups and contribute to the fight against
inequality and poverty. Metropolitan areas
find it hard to position themselves in this
field and to formulate effective strategies
and actions. The so-called triple helix – cooperation employers, education and government – is popular at the moment, but roles,
scales and responsibilities are not always
clear.
telecommunication infrastructure. Not only
the worldwide exchange of persons and
goods represents an important metropolitan
function but also the exchange of knowledge
and information. Connectivity and accessibility is one of the main determinants of a location decision. Infrastructural problems,
e.g. congestion or transport bottlenecks,
strongly affect the competitiveness of a region. Multifunctional nodes are regarded as
the economic and real estate hot spots of
the future.
Two dimensions determine the connectivity
and accessibility of metropolitan areas. The
internal dimension – that is the connection
within a metropolitan area - influences the
spill-over effects of companies and employees. This determines to what extent businesses and people can make use of the agglomeration advantages of a region.
Through congestion or an insufficient transport system within a region it is possible
that they face disadvantages of a certain
location which might result in the departure
of companies, employees and capital. The
external dimension - the connections with
other metropolitan areas by motorway, (high
speed) train, plane or ship – determines the
attractiveness of a region too. For example,
the competitive city of Munich has an outstanding external accessibility but the internal accessibility (e.g. connection between
inner city and airport) is problematic.
Because it frustrates the economic advantages of the whole metropolitan area, the
Lack of entrepreneurial mentality
Compared to other developed economies,
the entrepreneurial activity in most
European countries is low. The European
Observatory for small and medium-sized
enterprises (SMEs)4 states that major problems are perceived in the access to finance
and lack of skills (particularly relevant for
technologically driven new services). Also
obstacles to sales activities and administrative burdens are often mentioned. For young
potential entrepreneurs there are some important obstacles, such as a lack of selfconfidence, weak support of surroundings
and wrong beliefs about entrepreneurship.5
By taking away these obstacles, Europe may
enhance the rate of entrepreneurial activities. Local governments are working hard
(entrepreneurial desks, account management, enterprise zones) to improve the local
entrepreneurial climate. More research, expertise and (best) practices are needed to
create more entrepreneurial friendly and
therefore competitive metropolitan areas.
4 European Commission (2000) ‘The European
Connectivity and accessibility
Observatory for SMEs’, Brussels
In today’s network economy, global exchange processes, division of labour and
networking require that metropolitan areas
are involved in a high-quality transport and
5 European Commission (2004) ‘Helping to create an
entrepreneurial culture, a guide on good practices
in promoting entrepreneurial attitudes and skills
through education’, Brussels
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Figure 1
improvement of the problematic internal
accessibility is one of the main challenges
for Munich. It is acknowledged that infrastructural investments and strategies should
focus more on the impact and relevance for
the metropolitan economic vitality.
1.3 Towards a Policy-Driven
Research Agenda
The European Metropolitan network Institute
(EMI) aims to strengthen European metropolitan areas by means of integrated, coordinated and overarching knowledge. The
Knowledge and Research Agenda ‘Economic
Vitality’ addresses the main economic challenges of cities and metropolitan areas
across Europe. It is the aim of this agenda
to bridge the gap between academic re-
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search and urban practice. This is a challenge in itself. The scientific world and daily
reality of cities seem to be two separate
worlds, often speaking different languages.
This means that they are only weakly intertwined.
With respect to economic vitality, across
Europe numerous benchmark activities and
‘best practices’ between cities exist. Many
policies are based upon these evaluations
leading to cherry-picking, superficial analyses and hasty copying of experiences from
one specific urban context to another. Many
metropolitan areas are striving to create, or
maintain, a knowledge-intensive economy
that attracts innovative enterprises. In practice a majority of these cities have difficulties to achieve this goal. Many cities are
developing science parks to stimulate a
knowledge-based innovation driven econo-
16
my. It is, however, questionable whether
these science parks are actually stimulating
the urban economy and creating jobs for the
local working forces. Many cities are ‘copy
pasting’ urban policies to their own situations, almost leading to the creation of
hypes-type behaviour in the policy-making
world. Europe has, for example, policies to
promote creative industries and to attract
highly skilled workers. Before implementing
policy, cities should really look into what the
underlying problems are that these cities
want to resolve. In other words, what do
they actually want to achieve with these
policies? Hasty copying of experiences from
one specific urban context to another is not
always a good manner. The path-dependency of cities often makes it difficult to copy
paste successful urban policies in city A to
city B. The different path-dependent trajectories of urban systems limit the comparability of cities6, since the specific local situation requires a more evidence-based policy
that fits within the broader picture of a city.
A deeper understanding of the problems,
economic structure and structural mechanisms involved is often lacking. How can the
economic performance be explained beyond
the well-known ranking lists of cities?
Further questions to be addressed are: what
kind of policy actions and instruments do
cities and metropolitan areas use to deal
with the economic situation and to improve
their competitive position? Which strategies
and actions are effective and which concrete
results are known?
At the same time researchers and knowledge institutions have insight into processes
shaping European cities, but fail to get this
across to urban practitioners and policy
makers. This shows a potential for solid research and improvement of the link between
knowledge and urban policy in Europe. This
agenda aims to analyse the competitiveness
of European metropolitan areas via a comparative case study research, defining the
main threats and challenges concerning the
economic vitality of urban areas. It is driven
by the input of regions and cities with the
aim to identify ‘best’ and ‘bad’ practices
across Europe.
Generally, the aim of this agenda is to
strengthen the innovative capacity of metropolitan areas and help these areas get to
grips with complex economic – i.e. productivity- and competitiveness related - issues.
Main challenge is therefore that the questions
addressed in this agenda are as concrete,
relevant and directly applicable in metropolitan areas as possible. The aim of the agenda
is to assess the challenges (and threats) of
the urban economy of metropolitan areas.
Moreover it aims to elaborate on existing
urban knowledge and make academic studies
on urban competitiveness applicable for urban practice by listing knowledge and research questions that are of interest for both
researchers and urban practitioners. By setting up the contours of a research framework
on economic vitality the gap between academic research and urban practices can be
bridged by means of a policy-driven research
agenda. This agenda is a first step to bridge
this gap since relevant and actual policy
questions form the basis. By connecting academic researchers with urban practitioners it
is possible to create a significant added-value
for both worlds. This added value however is
only sustainable when researchers and practitioners organize their research activities in a
consortium facilitated and monitored by institutes such as the European Metropolitan network Institute.
6 Storper, M. and A.J. Scott (2009) ‘Rethinking
human capital, creativity and urban growth’,
Journal of Economic Geography, 9, pp. 147-167
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A Strategic Knowledge and Research Agenda
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The ranking lists of competitive cities are
based on very doubtful analysis. More urban
research is needed to gather more insights
in economic mechanisms and future urban
economic policies, especially those that underlie the ranking lists of competitive cities.
How can the causalities between certain
coefficients be explained, and more important, how can cities use the results of academic research effectively? The challenge is
on one side how to make academic research
more applicable for the daily practice of urban practitioners. On the other side the
challenge is how to achieve better academic
research by using more actual empirical
data and knowledge.
According to Cheshire there is a lack of
understanding how policies have an impact
on the urban system, on economic productivity and hence even on the competitiveness of
urban economies.7 For local policy makers it
is important to understand the urban economy, since they want to keep the working
class – which are their voters - satisfied.
Cities must determine which urban problems
they wish to tackle and, at the same time
look into the effects of their current urban
policies. In other words, are they implementing correct policy measures in order to face
the most important urban challenges? In a
way it is irresponsible to be imposing policies
without knowing better what the effects of
those policies will be or even whether they
are treating the real problems. For cities it is
important to discover what role they can play
in enhancing urban competitiveness. For ex-
7 Cheshire, P.C. (2006) ‘Resurgent Cities, Urban
Myths and Policy Hubris: What We Need to Know’,
Urban Studies, Vol. 43, No. 8, pp. 1231-1246
8 Begg, I. (1999) ‘Cities and competitiveness’, Urban
Studies, Vol.36, No. 5/6, pp. 795-809
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ample, in order to create and implement correct policy measures to tackle market failures
(one of the main reasons why urban policies
are required) policy makers must be wellinformed. What can cities do to create a
knowledge economy that drives innovation
and urban competitiveness? Although urban
competitiveness is partly beyond the control
of urban policy-makers, they need not be
passive actors. According to Begg, ‘good’
policy can equip cities to adapt and to foster
a dynamic economy.8
1.4 Research Methodology
This knowledge and research agenda addresses the main economic themes based
on analysis on input from practitioners, experts, decision makers and scholars. The
agenda discusses four sub themes of economic vitality: knowledge and innovation,
entrepreneurial economy, labour market and
the transforming economy (modernisation
and adaption). Different steps have been
taken to draft this agenda. The first step of
the process entails desk research on scientific articles, papers, reports and studies
conducted and written by the World Bank,
the OECD and the European Commission. A
quick scan of all these documents revealed
general topics and issues prominent in urban economic policy. This agenda is developed in close cooperation with urban practitioners, researchers, experts, Member
States and European institutions. Another
important aspect, on which the agenda is
based, are numerous thematic discussions
with urban economic experts and so-called
practitioners. In a scientific workshop the
agenda was discussed with lead partners to
guarantee the scientific value of the agenda.
To mention just a few (but this list is by no
means exhaustive) Professor Cheshire of
18
Figure 2
Lecture by Professor Paul Cheshire during EMI Economic Vitality workshop
London School of Economics and Professor
Thierstein of Technical University Munich.
But also urban experts at the European level
have been consulted, such as Mrs.
Madeleine Mahovsky, Senior Economist at
the European Commission, Directorate
General (DG) for Regional Policy.
Furthermore, face-to-face interviews and
roundtable discussions with representatives
of a region were initiated (e.g. municipal
councillor, policy makers, regional and local
urban strategists, scientific researchers).
The EMI-vitality team is advised by lead
partners from universities all over Europe.
In the second step EMI organised roundtable discussions in four cities across Europe:
Munich, Bucharest, Madrid and Poznan.
These discussions made it possible to define
the main urban challenges of cities with regard to economic vitality. Face-to-face interviews are especially of importance because
– in contrast to questionnaires – more open
questions can be asked to explore specific
regional circumstances into more detail. In
addition, an interactive workshop was initiated for urban practitioners in Brussels (see
Figure 1). By actively involving urban practitioners in an earlier phase of the research,
the agenda is actually practice-led. Cities
and metropolitan areas leaded the way in
defining the scope and focus of the agenda.
For this agenda, EMI has invited urban experts and scientific partners to participate in
the open thematic network of suppliers and
users of urban knowledge on the economic
vitality of metropolitan areas.
19
A Strategic Knowledge and Research Agenda
on Economic Vitality of European Metropolitan Areas
Figure 3
Source: Shutterstock 81496981
1.5 Structure of the Agenda
The agenda discusses the economic vitality
of European metropolitan areas from both
an academic as well as a policy point of
view. The aim is to address and discuss the
competitiveness of metropolitan areas and
to identify the underlying trends, interlinked
drivers, possible impacts and policy challenges of urban economies. The case studies
on the economic vitality of four metropolitan
areas across Europe (Munich, Bucharest,
Madrid and Poznan) are an important part of
this research agenda. The input of these
cities played a role in defining and testing
the scope and focus of the agenda.
The agenda has the following chapters.
A Strategic Knowledge and Research Agenda
on Economic Vitality of European Metropolitan Areas
Chapter two discusses why it is interesting
to analyse the economic vitality of metropolitan areas across Europe, including the
future economic challenges. Chapter three
discusses the four selected themes of economic vitality (knowledge and innovation,
entrepreneurial economy, labour market and
modernising and adaption). Chapter four
discusses the case study selection followed
by the four case studies (chapter five till
eight). Subsequently, chapter nine discusses
the main findings of the case studies and a
list of research and knowledge questions,
including an explanation of the next steps of
the process.
20
2. Economic Vitality of Metropolitan Areas
Economic vitality is a broad concept, which
includes various themes; such as sustainability, accessibility, business districts, hightech science parks, creative economy and
labour market. These themes obviously vary
in scale and scope. This chapter discusses
the economic vitality of cities or regions in
Europe from a scientific and practical point
of view. First, paragraph 2.1 explains the
focus of this agenda on metropolitan areas.
Subsequently, paragraph 2.2 defines economic vitality from both a scientific as practical point of view. Subsequently, paragraph
2.3 describes different determinants of economic vitality defined on the basis of deskresearch. Paragraph 2.4 finally discusses the
European strategy to foster the future economic vitality of Europe, hereby focusing on
Europe’s smart specialisation strategy.
of production. The firms are connected
through chains of production with often geographically separated sub-activities. Cities or
metropolitan areas are often considered as
the best spots to businesses. This is especially true for knowledge-based industries in
which the agglomeration advantages of cities or metropolitan areas come to the fore.9
Cities all around the world are increasingly
competing, since they are interconnected
with each other in a network of criss-cross
relations between firms and institutions.
Generally, the emergence of new global
market players, especially many Asian cities,
has changed the economic relations between cities. However, simultaneously with a
process of globalisation there is a process of
localisation whereby there is an increasing
interest for the local level. These processes
together are termed as glocalisation. As a
result of this process, there is less attention
for the national scale since the attention
shifted both upwards – to supra-national or
global scales – and downwards - to the scale
of local or regional configurations.10
2.1 A Focus on Metropolitan
Areas: why?
Growing importance as an economic
power……
……strong contribution to the national
economy……
Metropolitan areas have become crucial economic actors in today’s highly integrated
world. Not only do they play an increasingly
important role of growth poles in their countries, but they function as essential nodes of
the global economy as well. Metropolitan
areas are seen as outstanding locations for
the international flow of trade and as nodes
for financial and information transfers.
Globalisation of the world economy, under
the influence of structural and technological
changes, creates increasing interdependence between places. Firms become footloose since they are able to choose more
flexible where they locate specific processes.
Consequently, they are in the position to
select the locations that best suit each stage
The ‘balance of power’ between national
states and metropolitan areas has shifted to
the latter. One possible explanation is that
especially economic control potentials have
been strongly concentrated in these regions.
These metropolitan areas have gained such
a strong control of industrial production,
9 Begg, I. (1999) ‘Cities and Competitiveness’,
Urban Studies, vol.36, no.5/6, p. 795-809
10Swyngedouw, E. (2004) ‘Globalisation or
Glocalisation? Networks, Territories and Rescaling’,
Cambridge Review of International Affairs, vol.17,
no. 1, pp. 25-48
21
A Strategic Knowledge and Research Agenda
on Economic Vitality of European Metropolitan Areas
financial flows and information that their
weight has become much stronger than that
of national states. Consequently, metropolitan areas are often conceived as the motors
of the national economy. Research carried
out by the OECD shows that the contribution
of metropolitan areas to the national GDP is
significant. For example, the urban economies of Budapest, Copenhagen, Dublin,
Helsinki and Brussels account for around
half of the national GDP whilst in the case of
Oslo, Prague, London and Stockholm this is
one third. Most OECD-metropolitan regions
have a higher GDP per capita and a higher
labour productivity than the national average and many of them tend to have faster
growth rates than their countries.
Although the contribution of metropolitan
areas to the national GDP is high and increasing, little is known about the relationship between economic growth and the degree of urban concentration. The contribution of urban economies to national GDP
might be significant for countries with one
dominant (capital) city or region, but it is
questionable if the relation between national- and urban economy is similar for countries with multiple metropolitan areas (e.g.
Germany, Poland, United Kingdom).11 The
relation between the national economy and
the urban economy will be an important
element within this knowledge and research
agenda. Questions that can be raised are: Is
a metropolitan area capable to be self-reli-
11Another important question is whether the
dependency between urban and national economy
is higher in countries with one or two dominant
ant or is there a strong dependency on the
economic performance of the national economy? How important is a metropolitan area
for the national GDP of a country – and vice
versa? Differs the interdependency of metropolitan area on their national state from
case to case?
……but still underrepresented in academic
literature
Whereas in the United States metropolitan
areas have been subject to extensive policy
and academic debate, in Europe the rise of
metropolitan areas in public and academic
debate is a rather new phenomenon. In contrast to the metropolitan areas in Europe,
considerable research has been carried out
on the levels of competitiveness of metropolitan areas as well as on the performance
of polycentric regions in the United States.
In Europe academic research on metropolitan areas and polycentric regions is still in
its infancy. Since the United States has a
longer research tradition, many of its results
have been published in international refereed journals by authors such as Glaeser,
Hall, Castells, Taylor, Sassen, Florida, Scott,
Gordon and McCann. These studies reveal
practical results and suggest recommendations on how metropolitan areas can deal
with matters such as agglomeration power,
(labour) productivity, (effects of) scale, diversity, polycentricism and governance. In
Europe little is known on the economic aspects, economic strategies and local, regional and national economic impact of metropolitan areas. This suggests that much important work – from which cities and metropolitan areas will benefit – needs to be
done.
cities or regions than countries with multiple
metropolitan areas. In another EMI knowledge and
research agenda –polycentric metropolitan areas this question will be addressed.
A Strategic Knowledge and Research Agenda
on Economic Vitality of European Metropolitan Areas
22
2.2 Economic Vitality
al industrial networks, financial markets,
producer services industries and other associated service industries (Sassen, Castells,
Friedman). The awareness of the significance of urban economy of metropolitan
areas is slowly increasing. Metropolitan areas have become crucial economic actors in
today’s highly integrated world. Not only do
they play an increasingly important role of
growth poles in their countries, but they
function as essential nodes of the global
economy as well.
The POLYNET study of Hall and Pain introduced the mega-city region of as a new urban phenomenon in the most urbanized
parts of the world.17 During the coming halfcentury many European cities are likely to
develop large surrounding mega-city regions
(Hall, 2009). Metropolitan areas are seen as
outstanding locations for the international
flow of trade and as nodes for financial and
information transfers. In today’s global
economy cities are increasingly competing
with each other.18 Competitiveness is defined
The economic competitiveness and the economic vitality of a city are often used interchangeable. An urban economy is considered as ‘vital’ when it is able to compete
with other cities and regions in a sustainable
way. A competitive region is a region that is
able “to attract and maintain firms with stable or rising market shares and the distribution of that wealth and creation of higher
standards of living for all citizens.”12
According to Porter, governments must, first
and foremost, strive to create an environment that supports rising productivity.13 A
nation’s standard of living is determined by
the productivity of its economy, which is
measured by the value of its goods and services produced per unit of the nation’s human capital and natural resources. In short,
an economic vital city is a city that is able to
compete with other cities in term of productivity and in terms of sustainability and quality of life.
In Porter’s ‘clusters of competitive advantage’ cities are defined as vital resources for
competitive advantage, from proximity to
markets and various factor inputs to economies of agglomeration. The shift towards a
knowledge economy takes place with information, advanced services, and innovation
as important markets.14 Within the knowledge economy cities play an important role
since cities owns access to markets and customers. The new urban professionals prefer
to live in attractive and creative cities as
Florida described in his book ‘The Rise of the
Creative Class’.15 According to Parkinson
(1994) ‘businesses are attracted to cities
since they depend on good quality higher
education institutions to provide the skilled
labour and the technological innovation that
can feed into local economies’.16 Cities are
centres of command and control within glob-
12COMPETE network (2008) ‘Messages for
Competitive European Cities’, Brussels
13Porter, M.E. (1996) ‘Competitive advantage,
agglomeration economies and regional policy’,
International Regional Science Review 19, pp. 8590
14Boddy, M. and M. Parkinson (eds.)(2004) ‘City
Matters. Competitiveness, cohesion and urban
governance’, Bristol: The Policy Press
15Florida, R.L. (2002) ‘The Rise of the Creative
Class’, New York: Basic Books
16Parkinson, M. (1994) ‘European cities towards
2000: The new age of entrepreneurialism?’
Mimeograph, European Institute for Urban Affairs,
Liverpool, United Kingdom, John Moores University
17Hall, P. and K. Pain (2006) ‘The Polycentric
Metropolis: Learning from Mega-City Regions in
Europe’, London: Earthscan
23
A Strategic Knowledge and Research Agenda
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as an indicator of the drivers and dynamics
of economic success. There are different
theories that explain the competitiveness of
cities, but one accepted comprehensive definition of competitiveness is missing. There is
a range of quantitative measures to assess
the competitiveness of cities in term of productivity (GDP), import/export and employment. But academics have stressed the role
of a wider set of urban assets such as quality of life, capacity to attract urban capital
and the accessibility and connectivity of a
city. “It is important, therefore, to go be-
yond descriptive economic measures, such
as income per capita or employment trends,
to explore the underlying sources of improved economic performance (Turok, p.
1070).”19 But what are the actual determinants of urban competitiveness? Why are
certain cities always high in ranking lists
while other cities are lagging behind? Which
factors determines the economic success of
cities? Is it the presence of an international
airport, a financial business district, or innovative high-tech clusters? The list of (hard
and soft) determinants of urban competitiveness seems to be endless and there is
not much known about the actual correlation
between the determinants and the competitiveness of a city.
The Global Metro Monitor analyzed the
path to economic recovery of 150 metropolitan economies.20 This monitor lists the progress of recovery for these metropolitan
economies. The economic performance of
cities across Europe strongly differs from
each other. Where the southern European
metropolitan economies are still in decline
(Greece, Italy, Spain) the Polish metropolitan areas (Krakow and Warsaw) seems to be
the only European metropolitan area that
are hardly affects by the recent economic
recession. What explains the strong differences between the economic performances
of European cities?
18OECD (2006) ‘Competitive Cities in the Global
2.3 Determinants of Economic
Vitality
Figure 4
Source: Shutterstock 94488721
Economy’, Paris
19Turok, I. (2004) ‘Cities, Regions and
Competitiveness’, Regional Studies, Vol. 38.9, pp.
1069-1083
20Brookings Institute and LSE Cities, London School
of Economics and Political Science (2010) ‘Global
Metro Monitor, the Path to Economic Recovery, a
Preliminary Overview of 150 Global Metropolitan
The economic vitality of metropolitan areas
is determined by a list of factors which have
an impact on the economic performance of
metropolitan areas. However, the pursuit of
competitiveness in terms of high economic
growth alone – i.e. of gross domestic product (GDP) or gross regional product (GRP)
Economies in the Wake of the Great Recession’.
A Strategic Knowledge and Research Agenda
on Economic Vitality of European Metropolitan Areas
24
- is no longer adequate. This is in line with
the on-going debate about whether economic growth is an adequate indicator of the
welfare of citizens. The European
Commission has published a report on the
possibilities to close the gap between the
known macro figures (growth, inflation) and
the day-to-day experience of well-being of
citizens.21 According to the citizens’ income
per household, consumption and property
are better indicators of the material living
standard than the economic production as a
whole.
Various determinants drive the economic
vitality of metropolitan areas. The OECD
lists, for example, a range of factors that
determine city’s competitiveness, such as
infrastructure and accessibility, industrial
and economic scale and structure, human
capital and labour force. There have been
many different attempts to identify factors
that are associated with competitive
strength or critical to competitiveness. There
is a range of quantitative measures to assess the competitiveness of cities in term of
productivity (GDP), import/export and employment. Other publications have stressed
the role of a wider set of urban assets such
as quality of life, capacity to attract a high
urban capital and the accessibility and connectivity of a city. This knowledge and research agenda identifies four comprehensive
sub themes of economic vitality: knowledge
and innovation, entrepreneurship, labour
market and education and modernisation
and adaption.
There is increasing attention for sustainable economic growth rather than economic
growth in terms of productivity, inflation and
import/export. Sustainability is a broad concept and it can not only be related to environmental quality conditions (such as air or
water quality) but has also to do with general quality-of-life conditions in cities. In this
regard, the income per household, consumption and property ownership are better
indicators of the material living standard
than the economic production as a whole.
The transformation to a more sustainable
economic system can lead to new economic
activities and to an increased export of sustainable products and services. A role for
government, as launching customer, can
contribute to accelerate these economic activities and export possibilities.
Quality of life is crucial to create and retain a vital economy. Soft location factors
are becoming increasingly important in differentiating one city from another. It determines the attractiveness of metropolitan
areas and consequently the urban and regional economic structure. Cities with the
assets of a good environment, distinctive
architecture, cultural facilities, a diverse
housing stock and access to natural amenities are attempting to preserve and improve
them. Quality of life is a decisive factor in
people’s choice where they want to live,
work and recreate. Culture is of special importance to metropolitan areas, since it can
be an important destination for international
tourism and it reflects the cultural life of
cities.
2.4 Europe’s Economic Strategy
“Europe needs to get back on track.
Then it must stay on track. That is
the purpose of Europe 2020. It is
about more jobs and better lives. It
21Stiglitz, J.E., A. Sen and J. Fitoussi (2010)
‘Report by the Commission on the Measurement
of Economic Performance and Social Progress’,
Brussels
25
A Strategic Knowledge and Research Agenda
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shows how Europe has the capability
to deliver smart, sustainable and
inclusive growth, to find a path to
create new jobs and to offer a sense
of direction to our societies” – José
Manual Barroso, preface Europe
2020 strategy 22
This paragraph discusses Europe’s policies
and strategies focus on enhancing Europe’s
urban and regional economy. First Europe’s
2020-strategy will be discussed followed by
the Smart Specialisation Strategy and Smart
Cities.
2.4.1 Europe 2020 strategy
The Europe 2020 strategy aims to strengthen the European Union, facilitating its recovery with the ultimate goal to turn the EU
into a smart, sustainable and inclusive economy by 2020. The European Commission
defines serious challenges for Europe’s future economic growth strategy. According to
the European Commission, time is pressing
for Europe as Europe’s average economic
growth rate has been structurally lower than
that of its main economic partners, largely
due to a productivity gap that has widened
over the last decade. Many European metropolitan areas are currently dealing with high
unemployment percentages, particularly the
regions located in southern Europe. These
high unemployment figures can often be
explained by the rigidity of labour market
institutions and a mismatch between demand for and supply of labour. Low partici-
22European Commission (2010) ‘Europe 2020 – A
European Strategy for Smart, Sustainable and
Inclusive Growth’, Brussels
23Smart Specialisation Platform (2012) ‘Guide to
Research and Innovation Strategies for Smart
Specialisations’, Brussels
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pation rates have a negative impact on labour productivity and, thus, on urban competitiveness.
The Europe 2020-strategy emphasizes the
interrelation between education and the
knowledge economy. In two of the strategy’s
three priorities – smart growth (based on
knowledge and innovation) and an inclusive
high- employment society – as well as in
three of its seven flagship initiatives
(Innovation Union, Youth on the Move, and
An Agenda for New Skills and Jobs) it is
pointed out that there is a strong relation
between education and knowledge for
Europe’s future growth. Generally, innovation is needed if the cities’ objective is to
create smarter, cleaner and greener jobs
into the future.
The European Commission defines competitive regions as regions that are able to anticipate and successfully adapt to internal
and external economic and social challenges. During the past decade, the European
Commission has introduced and supported a
variety of programs and instruments that
are directly or indirectly aimed at enhancing
regional economic capacity.
2.4.2 Smart Specialisation Strategy
The Smart Specialisation Strategy is relevant to all three priorities of Europe 2020:
smart, sustainable and inclusive growth.
Smart specialisation matters for the future
of Europe because the development of an
economy based on knowledge and innovation remains a fundamental challenge for
the EU as a whole. By concentrating knowledge resources and by linking them to a limited number of priority economic activities,
countries and regions can become – and
remain – competitive in the global economy.23 This type of specialisation allows re-
26
gions to take advantages of scale, scope and
spillovers in knowledge production and use,
which are important drivers of productivity.
Furthermore, strategies that combine innovation with specific strengths of the national
or regional economy offer a much greater
chance of success.
-- They focus policy support and
investments on key national/regional
priorities, challenges and needs for
knowledge-based development (including
ICT-related measures)
-- They build on each country’s/region’s
strengths, competitive advantages and
potential for excellence
-- They support technological as well as
practice-based innovation and aim to
stimulate private sector investment
-- They get stakeholders fully involved
and encourage innovation and
experimentation
-- They are evidence-based and include
sound monitoring and evaluation
systems.
In order to strengthen the innovation capacity of regions and cities, the European
Commission encourage the Member States
and regions to define a ‘smart specialisation
strategy’ (S³). The S³ promotes an efficient,
effective and synergetic use of public investments and support. The strategy is built on
a sound analysis of the assets of the region
and clear regional cooperation strategies.
This includes an analysis of potential partners in other regions to avoid unnecessary
duplication, fragmentation of efforts and
oversupply.
The Guide to Research and Innovation
Strategies for Smart Specialisations conceived a methodological guidance for policymakers and implementing bodies on how to
prepare for and how to design, draft and
implement national/regional research and
innovation strategy for smart specialisation
(RIS3). Smart specialisation strategies will
usually require some sort of structural
change like the transition from an existing
sector to a new one, the technological upgrading of an existing industry (modernisation) and the potential synergies which are
likely to materialise between an existing
activity and a small new one (result of diversification).
“The idea is to build a vision of what
works locally, to engage all stakeholders in the process, and then to
drive the policy processes with this
long term vision. However, this also
requires urgent, careful and longterm thinking and an absolute commitment to prioritising and concentrating funding on long run resultoriented policies” – Philip McCann,
Special Adviser to EU Commissioner
for Regional Policy, Johannes Hahn,
April 2012 24
-- According to the Smart Specialisation
Platform the RIS3-report should include
the following steps:
-- Analysis of the regional context and
European structural funds are being reorganised in order to allow regions and
Member States to bundle different funding
streams together in smarter ways. The national and regional research and innovation
strategies for smart specialisation are integrated, place-based economic transformation agendas that do five important things:
24Smart Specialisation Platform (2012) accessed
online: http://s3platform.jrc.ec.europa.eu/home In
2011 the European Commission
27
A Strategic Knowledge and Research Agenda
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potential for innovation
-- Governance: ensuring participation and
ownership
-- Elaboration of an overall vision for the
future of the region
-- Identification of priorities
-- Definition of coherent policy mix,
roadmaps and action plan
-- Integration of monitoring and evaluation
mechanisms
2.4.3 Smart cities
The Innovation Union (part of Europe’s
2020-strategy) announced European
Innovation Partnerships (EIPs) which are
designed to mobilise actors across the innovation cycle and across sectors around an
overarching target in order to speed up innovative solutions to societal challenges,
including major energy and transport challenges in cities and communities. In July
2012 the European Commission launched a
Smart Cities and Communities EIP (SCC),
aiming to boost the development of smart
technologies in cities. The partnership is
dedicated to the demonstration of innovative
urban solutions at the interface of energy,
transport and ICT.25 The budget earmarked
for the SCC has been increased from 81
million euro in 2012 to 365 million euro in
2013.
25European Commission (2012) ‘Smart cities and
Communities – European Innovation Partnership’,
Brussels
26Smart Cities Stakeholder Platform (2012),
accessed online: http://eu-smartcities.eu
27European Commission, DG Region (2011) ‘Cities of
tomorrow, Challenges, visions and ways forward’,
Brussels
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The focus on cities and communities is
clear: across Europe they are forerunners in
the transition towards a low carbon and resource efficient economy. The Smart Cities
Stakeholder Platform set up three thematic
expert (technical) working groups on energy
supply networks, energy efficiency in buildings, mobility and transport) and two horizontal cooperation groups (finance and
roadmap).26 The main stakeholders will be
technical experts, allowing the platform to
draw in expertise from those experts who
are directly involved within developing, testing, demonstrating new technologies.
2.4.4 Cities of tomorrow
The ‘Cities of tomorrow’ report of the
European Commission Directorate General
(DG) for Regional Policy discusses the current and future threats for Europe with regard to sustainable urban development.27
The report is based on the input of 60
European experts identifying challenges
faced by the cities in the 21st century. The
report provides inspiration for policymakers
and practitioners involved in urban development, whether at local, regional, national or
European level.
The administrative boundaries of cities no
longer reflect the physical, social, economic,
cultural or environmental reality of urban
development and new forms of flexible governance are needed. Besides that the report
also contains opportunities and solutions
that new forms of governance can provide.
Some of the threats identified in the report are:
-- Demographic changes such as ageing
populations, shrinking cities or intensive
processes of suburbanisation
-- Economic stagnation: Europe is no longer
in a situation of continuous economic
growth and many cities face the serious
28
Figure 5
Source: Shutterstock 95286871
threat of economic stagnation
-- Growing income disparities and the poor
getting poorer in terms of housing, lowquality education, unemployment and
difficulties or inabilities to access certain
services, like health, transport and ICT.
should look like. In addition, horizontal and
vertical coordination is required as cities
have to work with other governance levels
and reinforce their cooperation and networking with other cities in order to share investments and services which are required at a
larger territorial scale. Also new governance
models based on citizens’ empowerment,
participation of all relevant stakeholders and
innovative use of social capital are needed.
In response to these threats, cities have to
work across sectors and not let mono-sectoral visions set the agenda of what urban life
29
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30
3. Themes of Economic Vitality
This chapter discusses the four comprehensive themes of economic vitality of metropolitan areas: knowledge and innovation,
entrepreneurship, labour market and education and modernisation and adaption. These
themes are identified on the basis of intensive desk-research of academic books and
articles in journals as Urban Studies and
Journal of Economic Geography. Besides
literature, urban policy document, studies
written by World Bank, OECD and European
Commission were analyzed as well. A quick
scan of all documents outlined the themes
of urban economic policies across Europe.
After discussing the four themes, paragraph
3.5 identifies the relevant knowledge and
research questions.
lix’. The innovation capacity of metropolitan
areas is important to urban competitiveness.
Innovation-intensive sectors strongly drive
current economic changes, including high
technology industries and services.
Moreover, innovation enhanced signification
of product innovation that will force cities to
a quality-based competition. Cities with a
high percentage of innovative-intensive sectors are attractive for businesses and for
high skilled people. In the shift towards a
more knowledge-based economy, the innovative character of a region is often seen as
the key to economic vitality. The geographical focus is here on the Western-European
innovative hotspots: how can the success of
these areas be explained and what can other metropolitan areas learn from these successes? Scandinavian cities are highly innovative cities with innovative hotspots as
Helsinki, Stockholm and Oslo. But also
German cities – for example Munich,
Stuttgart and Frankfurt - have strong innovative and high-technology clusters (e.g.
automobile, life science, biotechnology, micro-electrons). How are these cities attracting these innovative clusters? First, knowledge and innovation will be discussed as
drivers of urban competitiveness.
3.1 Knowledge and Innovation
Innovation and education are key elements
in a knowledge-driven economy. This explains the relatively high investments in research and development (R&D) and higher
education across Europe. It is expected that
these investments should pay off by attracting various innovative, high-technology
companies. Education can be seen as a driver of economic vitality since it is strongly
related to the human capital of a region. A
high degree of human capital attracts innovative and knowledge-based firms. By improving the level of education there will be a
high-skilled labour force. The education system is, however, mainly the result of national state policy. Consequently, metropolitan
areas have often fewer possibilities to influence the system. Nevertheless, there are
opportunities for additional training programmes initiated by local policymakers.
Moreover, cities can intensify the relations
between college universities and the public
and private sector; the so-called ‘triple he-
3.1.1 Drivers of urban competitiveness
Modern economies increasingly depend upon
knowledge intensive sectors and – therefore
– both policy makers and business leaders
believe that these sectors drive the future
competitiveness of cities. The growth of the
knowledge intensive economy has been
driven by an increasing demand for higher
value added goods and services. The ability
to produce, use, share and analyse knowledge has become increasingly important as
a source of economic growth and wealth
creation in all sectors of the European economy. The knowledge economy is commonly
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defined in terms of technology and knowledge-based industries reflecting R&D intensities, high ICT usage and the deployment of
large numbers of graduates and professional
and associate professional workers.28
Knowledge and innovation are considered
to be the key to urban competitiveness and,
thus, to economic prosperity in the future.
Innovation involves the introduction of a
new or significantly improved product, process or method that is needed to drive
growth and employment and improve living
standards.29 Innovation is essential for creating new jobs in both high-tech and traditional sectors. On the one hand innovation
generates new jobs in high-tech and advanced manufacturing sectors as diverse as
aerospace, nanotechnology, life sciences,
and alternative energy. On the other, innovation also creates jobs for workers installing broadband networks, manufacturing
biopharmaceuticals and building advanced
infrastructure.
An increasing number of cities position
and ‘sell’ themselves as knowledge cities, as
a skilled workforce is essential in making the
status of a knowledge city realistic.
Currently, only 20 to 30 percent of the
European working population has enjoyed
higher education and works in knowledgeintensive occupations.30 This is worrisome
because comparative data on cities underline the relationship of skilled workers to the
innovation and GDP levels of cities and,
28Brinkley, I. and N. Lee (2007) ‘The knowledge
economy in Europe’, a report prepared for the
2007 EU Spring Council, the Work Foundation
29OECD (2010) ‘The OECD Innovation Strategy:
Getting a head start on tomorrow’, Paris
30Winden, van W. (2010) ‘Knowledge and the
European city’, Tijdschrift voor Economische en
Sociale Geografie (TESG), Vol. 101, Issue 1,
thus, their level of competitiveness. Studies
observed that knowledge-based employment has increased across most European
cities and regions. This can be explained by
an employment growth in sectors such as
professional services, education and healthcare and creative industries. Europe has
made great strides in building science parks,
incubators, research networks and educational exchanges in specific research area.
Moreover high amounts of money are spent
on the creation and exploitation of knowledge and other intangible assets such as
research and development, software, marketing, training and design increased sharply. Nevertheless, the European market is
fragmented and insufficiently innovation
friendly. The services sector, for example,
accounts for seventy percent of the economy but knowledge intensive services are still
under-developed. Europe’s open innovation
system must be based on the power of networks and the access to knowledge across
Europe and world-wide. Another concern is
the social inequality that knowledge and
innovation policies might cause. A case
study of Bremen (Germany) is illustrative in
this respect. The appearance of high-skilled
jobs in economic growth sectors has created
good prospects of the middle classes. The
low-skilled, however, have considerable
problems in accessing the labour market.
Bremen, like many other cities, has difficulties in trying to be both economically competitive and social integrative.
The EU acknowledges the importance of
knowledge and innovation for the competitiveness of Europe. Innovation has been a
central EU priority over the last decade, repeatedly supported by European leaders and
backed by numerous strategies, funding
programmes and assessments. However, the
2.1 percent of GDP that the EU-27 devoted
to R&D in 2009 remains almost 1 percent
pp. 100–106, February 2010
A Strategic Knowledge and Research Agenda
on Economic Vitality of European Metropolitan Areas
32
point below the 3 percent target set for
2010 by the Lisbon strategy. Within Europe
significant differences in innovation intensity
can be observed. Data from Eurostat show
that only Finland, Sweden and Denmark
have reached this target (in 2009); Austria
and Germany are nearing this target.
Recently it became known that European
companies reduced their investments in R&D
activities by 2.6 percent in 2009 lagging
behind the global average of 1.9 percent.
However, considering how seriously the crisis impacted companies’ net sales (-10 percent) and profits (-21 percent) it can be
asserted that R&D remains a top priority for
the largest R&D investors.31
GDP and, finally, the percentage of R&D personnel as a share of total labour force. As
for R&D expenditures in absolute terms, six
German regions featured among the top 15
EU regions, together with two French regions, a region in Belgium, two Swedish
regions, two Italian regions, one region in
Finland and Spain.32 In terms of total R&D
intensity as a percentage of GDP the top
fifteen positions are filled by regions in
Northern Europe. Seven regions were located in Germany, four in Sweden, two in
Finland and one in France and Austria respectively. In terms of R&D personnel as a
share of total labour force, Vienna (Austria)
was the leading region with almost 4.6 percent. In absolute terms, this was equal to
over 19 thousand workers in R&D. Vienna
was followed by the regions of Prague
(Czech Republic) (4.5 percent) and
Trøndelag (Norway) (4.4 percent). Also regions in Germany and Finland had a high
score in this ranking-list, with three regions
each.
It is striking that mainly Northern
European areas have a high score on these
ranking lists. One of the salient features of
the top 15 regions in relative terms is that
nine of them are capital regions. According
to BCI (2008), the most knowledge-intensive regions, Munich and Zurich, lead the
ranking for technology and know-how. This
is mainly due to the relatively high amount
of R&D spending as a percentage of GDP
(which is above the Lisbon target of 3 percent), high number of registered patents
3.1.2 Knowledge and innovation across
Europe
There is a significant difference between
innovation intensities across Europe. Firstly,
differences at the national level will be discussed by looking at the geographic spread
of private and public R&D (divided into three
sectors: business enterprise, government
and higher education). Subsequently, indicators of innovation will be discussed at the
local or regional level. The business enterprise sector accounted for the highest R&D
expenditure at EU-27 level - 64 percent of
total expenditure - followed by the higher
education sector (22 percent) and the government sector (13 percent). The business
enterprise sector accounted for the bulk of
R&D expenditure in most of the countries.
The fact that major EU firms have largely
maintained their R&D investment during
times of crisis shows that they recognise
R&D as key in their recovery from the crisis
(and emerging stronger).
Although various indicators of innovation
can be discussed, this section focuses on
three indicators: R&D expenditures in absolute terms, R&D intensity as a percentage of
31European Commission (2010) ‘EU Industrial R&D
Investment Scoreboard 2010’, Brussels
32Eurostat (2010) ‘Science, technology and
innovation in Europe, Statistical Yearbook’,
Brussels
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A Strategic Knowledge and Research Agenda
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and overall high innovative performance.
Stuttgart, Stockholm and Karlsruhe follow in
second, third and fourth position.33 Although
R&D is critical to innovation and is the main
focus of public support, innovation is more
than just R&D. Innovation also involves the
interaction of a system wherein business
and governance are collaborating with each
other in an integral and multidisciplinary
way. In the next section local innovation
models of cities will be discussed wherein
the collaboration between business and governance is addressed.
3.1.3 Challenges for metropolitan areas
It is interesting and relevant to analyse
knowledge and innovation at the local level
rather than the national level since the actual dynamics are taking place within cities.
Cities can provide the required conditions for
(the exchange of) knowledge. Through the
geographical concentration of firms within a
city they are likely to interact with each other via subcontracting, joint ventures or other collaborative means. Across Europe many
metropolitan areas are striving to create, or
maintain, a knowledge-intensive economy
that is attractive for innovative enterprises.
In practice, a majority of these cities have
difficulties to achieve this goal. It is important to look at the role of cities: what can
cities actually do to create a knowledge
economy that drives innovation and urban
33See Buck Consultants International - BCI (2008),
Index Measures Metros’ Tech-nicity’, in: Site
Selection Magazine, July 2008
34Fischer, M.M. and A. Varga (2001) ‘Production
of Knowledge and Geographically Mediated
Spillovers from Universities. A Spatial Econometric
Perspective and Evidence from Austria’ paper
presented at European Regional Science
Association
A Strategic Knowledge and Research Agenda
on Economic Vitality of European Metropolitan Areas
competitiveness and how can cities improve
the impacts of the public and private R&D
expenditures? R&D expenditures are mainly
national investments and the influence of
cities on the higher education system is
rather limited.
A major challenge for cities is to benefit of
the knowledge and innovation available in
the city. Local innovation system can be
seen as the key for an optimal use of knowledge and innovation within a city. Within the
literature three possible models of local innovation can be distinguished. A first model
is that local innovation is driven by the market with little control from outside. The second model is the so-called network model in
which multi-level networks are established
seeking agreement between firms, banks,
education institutions and different layers of
government. The third model is one in which
innovation is mainly initiated by the government rather than the market. The local innovation systems of the most innovative
cities (in Germany and the Scandinavian
countries) are based on the network model;
the different (public and private) institutions
are jointly working together.
Knowledge institutions (e.g. universities
and research institutes) are important players within the local innovation system.
Knowledge spill-overs from universities can
occur when graduates - who have the requisite levels of scientific and technological
knowledge - leave the university and take a
job at a firm or start their own. But it can
also occur between academic researchers
and industry sector researchers.34 For cities
it is a challenge to optimally benefit from
the spin-offs of innovative firms and knowledge institutions. For example by paying
more attention to exploring which local innovation system is most appropriate – given
the specific local (and regional) circumstances – and what the existing barriers to suc-
34
cess are. It is the task of cities to take these
barriers away and create the right conditions
for a knowledge-based economy that drives
innovation and that can compete with other
metropolitan areas. To keep up with the
growing competition, cities must invest in
the skills appropriate to the key economic
sectors within the region.
Knowledge and innovation is highly concentrated in private enterprises and, therefore, local policies have a limited influence
on their innovation intensity. Therefore innovation policies of cities or metropolitan areas
are focused on facilitating the right conditions for a knowledge-based economy driving innovation and competitiveness. One of
the main aims of this theme is to gather
more insights into the relationship between
knowledge and the urban competitiveness of
a city or region. It is important to know
what local policy can do to improve the innovation intensity.
-- How to develop a balanced economy
that contains some knowledge intensive
industries but also (employment in) other
industries reflecting the existing skills
mix?
-- What can be the added value – in terms
of human capital and competitiveness
- of collaboration between universities,
knowledge- and research centres and
local governments? How can cities
establish a network model wherein the
institutions are intensively working
together?
-- To what extent are R&D expenditures and
the innovation intensity of a metropolitan
area correlated? Do high R&D
investments turn out in higher innovation
intensity?
-- How can agglomeration benefits –
skills, size, proximity, connectivity – be
optimalised to develop a knowledgebased economy?
Knowledge and research questions:
-- What explanation can be given for
the regional differences in innovation
intensity across Europe? Why are areas
in Northern Europe generally more
innovative than areas in southern Europe
and central- and eastern Europe?
-- To what extent do innovative economic
sectors drive urban competitiveness
and what are the general characteristics
of these sectors? (e.g. high-skilled
employees, cluster of highly innovative
companies, spin-off of knowledge
institutions)
-- What strategy or policy do cities use to
make the city attractive for innovative
enterprises and how successful is this?
-- How can cities improve the impact of
public and private R&D expenditures in a
way that it actually enhances innovation
intensity?
3.2 Entrepreneurial Economy
According to the EU “competitive regions”
are regions that are able to anticipate and
successfully adapt to internal and external
economic and social challenges. During the
past decade, the EU has introduced and
supported a variety of programmes and instruments that are directly or indirectly
aimed at enhancing regional economic capacity. Cities which are dependent on a single sector – whether old-fashioned coal,
steel, shipping or new-fashioned financial
services, mobile telephones, culture or computers – are the most vulnerable to fluctuations in global economic forces. Moore and
Begg analysed that cities which have a
broad industrial base rather than being dependent on a single sector or small number
of related sectors tend to be more success-
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A Strategic Knowledge and Research Agenda
on Economic Vitality of European Metropolitan Areas
ful in responding to economic change and in
reinventing themselves economically, over
time. They suggest that cities should be
constantly seeking to push into new areas of
economic activity rather than simply seeking
to specialise or lack in their existing culture.
The degree of entrepreneurial activity is one
of the main determinants for the level of
competitiveness of metropolitan areas. The
role of SMEs is important for the local and
regional economy as well as the (dis)advantages of both economically-diversified and
economically-specialised metropolitan areas.
From a policy point of view, the main question to answer is: “How can cities develop
the right boundary conditions for entrepreneurial activity and what types of (hard and
soft) location factors create a diverse, robust and competitive entrepreneurial economy?”
3.2.1 Drivers of Competitiveness
The emergence of the entrepreneurial economy is a response to two fundamental aspects of globalisation. The first is the advent
of low-cost but highly skilled competition in
central and eastern Europe as well as in
Asia. The second is the telecommunications
and microprocessor revolution, which has
greatly reduced the cost of shifting standardized economic activity out of the highcost locations, such as Europe, and into lower-cost locations elsewhere in the world.
In today’s network economy cities are
increasingly competing with each other and
the entrepreneurial economy is one of the
main determinants of competitiveness. The
economic performance of metropolitan areas
strongly depends on its economic sector
structure. Despite the extensive effort devoted to characterise entrepreneurship there
is little consensus about the most appropriate metric. This section discusses determinants of an entrepreneurial economy and
A Strategic Knowledge and Research Agenda
on Economic Vitality of European Metropolitan Areas
discusses the possibilities of local policies to
stimulate entrepreneurship and the start-up
of SMEs.
Entrepreneurship is likely to be driven by
the availability of knowledge. Knowledge is
an important determinant of the entrepreneurial economy. The traditional production
factors – labour and capital – were not sufficient anymore in explaining economic
growth and knowledge has become the vital
factor in economic growth models. Academic
studies have predicted that the emergence
of knowledge – as an important determinant
of growth and competitiveness in global
markets – would have a positive effect on
new and small firms. The increasing attention to entrepreneurship in Europe and
North America has shifted the comparative
advantage towards knowledge-based economic activity.
Another determinant of the entrepreneurial economy is location. The location decision
of business and people depends on a range
of factors and can been divided in hard and
soft location factors. Hard location factors
include, among others, the accessibility of
the region, local rate of taxes and duties,
availability of real-estate (offices) and relevant production conditions. In recent years,
a greater role is accorded to soft location
factors, which are important for the service
capability of companies with knowledgeoriented jobs. Soft location factors include,
among others, a good environment, distinctive architectures, cultural facilities and diverse housing stock. These factors are typically viewed as determinants for the quality
of a locality and influence the decision where
businesses settle and where qualified personnel decides to offer their services (human capital). Both hard and soft location
factors have become increasingly important
in differentiating one city from another and
for attracting and retaining skilled workers.
36
It is a challenge for cities to create an entrepreneurial economy that is attractive for
innovative, highly technological, enterprises.
Although economic growth is an endogenous
process local policies can influence economic
growth in various aspects: efficient public
administration, reducing uncertainty and
making decisions transparently and quickly,
more effective co-ordination between public
and private investments, providing relevant
and effective training and ensuring that land
use policies are flexible and coordination of
infrastructure provision and demands of the
private sector investors. The aim of these
policies is to enhance economic growth within a city or region. National and local policies
focus on attracting (inter)national headquarters or multinationals since these large companies are seen as the catalysts in attracting
new companies and/or creating job openings. There has been a shift towards a more
diverse economic policy whereby there is a
focus on SMEs as well as on large (inter)
national companies in the urban economy.
Between 2002 and 2008 the percentage of
SMEs in the EU has increased with 13 percent whereas the number of large enterprise
increased by only 5 percent. A cluster of
innovative SMEs is able to attract large multinational firms to a city since these companies are strongly interlinked with each other.
Economic growth is highly correlated with
the presence of many small, entrepreneurial
employers and therefore cities are increasingly focused on supporting SMEs. In an
entrepreneurial economy, innovative SMEs
create economic value by launching innovative products and services. New firms are
often established by relatively young people
who have new ideas and are keen to introduce new innovations. SMEs seem to respond to the new competition and globalisation by creating experimental, risk-taking
activities in a variety of niches of industry,
trade, business and personal services. They
are often highly specialised companies that
are focused on the development, design and
marketing of new products and services and
experimenting with new ideas. SMEs have
been characterised as having, on average, a
relatively low tendency to export since large
enterprises are more involved in distribution
activities whereas SMEs are more focused
on (international) trade. The role of SMEs is
not at all constant across industrial sectors.
For example, the added-value of innovative
highly technological enterprises strongly
differs from SMEs in the construction sector.
A diverse economy is able to react in a
dynamic and flexible way on continuously
changing market situations and therefore
both specialisation and diversity should be
enhanced by public authorities.
Entrepreneurship generates economic output by providing diversity among firms by
enhancing a greater number of enterprises
and increasing the variety of enterprises in a
certain location. The degree of diversity versus specialisation may account for differences in rates of growth and technological
development. Where specialisation of industry activities is associated with lower transaction costs and, therefore, greater (static)
efficiency, the diversification of activities is
said to facilitate the exchange of new ideas,
and therefore, greater innovative activity
and (dynamic) efficiency. SMEs are believed
to serve as an engine of economic growth
since SMEs increase the diversity of urban
economies which may, in turn, generate
productivity increases in existing enterprises.
The role of SMEs in the European economy
has been repeatedly acknowledged at the
highest political level. The European Council
strongly supports the further strengthening
of SMEs’ sustainable growth and competitiveness. The ‘Europe 2020’- strategy places
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A Strategic Knowledge and Research Agenda
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a special emphasis on entrepreneurship by
stimulating (old and new) Member States to
remove measures that discourage self-employment. In recent years a number of
European policies and programmes have
been put in place to support self-employment and SMEs such as the European Small
Business Act. This act recognises the role of
entrepreneurs and SMEs in contributing to
the future prosperity of the EU. The aim of
this act is to create a level playing field for
SMEs. According to the act ‘dynamic entrepreneurs are particularly well placed to reap
opportunities from globalisation and from
the acceleration of technological change.
Vibrant SMEs will make Europe more robust
to stand against the uncertainty thrown up
in the globalising world.’
3.2.2 Entrepreneurship across Europe
The dynamic development of the SME sector
in 2002 to 2008 was a widespread phenomenon across the EU. During this period the
old and new Member States convergence;
the remaining differences appeared to be
increasingly less significant. Although the
economic crisis has caused an abrupt discontinuation of the upward trends in the
number of SMEs in the EU-27, this number
of enterprises is expected to resume its upwards trend when the economic growth
picks up again.
Much of the well-known literature on SMEs
and many of the examples of local economic
development concerning SMEs relates to
Italy, particularly the industrial districts of
central and north-east Italy. The relative
importance of SMEs for the Italian economy
far exceeds the EU average, as illustrated by
the above-EU average share of persons employed and value added accounted for by
the SMEs. In Italy there are approximately
65 SMEs per 1000 inhabitants, a figure that
lies substantially above the EU-27 average
A Strategic Knowledge and Research Agenda
on Economic Vitality of European Metropolitan Areas
of circa 40. Moreover 81 percent of the labour force is employed by a SME which is
significantly higher than the EU-24 average
of 67 percent.
Germany is another example of a country
in which SMEs play an important role within
industrial clusters. This can be explained by
the fact that this country used to have a
strong support infrastructure for SMEs. A
successful example of an entrepreneurial
German city is Munich metropolitan area.
Munich has a diverse economic profile with a
mix of large, global-orientated, firms and
more local-orientated SMEs. Munich constantly tries to diversify its economic base
by pushing it into different sectors. The
Munich case teaches other cities that there
is a need to diversify and to deepen existing
strengths. The trick is to work with what you
have and to modernise.
3.2.3 Challenges for metropolitan areas
The start-up of enterprises is something that
takes place in cities and therefore local policies are highly important for improving entrepreneurship and stimulating (start-up)
SMEs. Through a process of globalisation
and European integration there is increasing
interest in the economic performance of
cities. Consequently, local policy efforts are
more and more focused on enhancing economic growth of cities. As stated before,
entrepreneurship and the role of SMEs in the
urban economy are seen as important determinants for the creation of jobs and (related) economic growth. In the period 2002
to 2008, 83 percent of the total employment
growth is attributed to SMEs rather than
large firms. The annual employment growth
within SMEs is with 1,9 percent higher than
the employment growth within large enterprises (0,8 percent).
Local policymakers are increasingly recognizing entrepreneurship as the key to build-
38
ing and sustaining economic growth. There
are various examples of local policies that
primarily affect entrepreneurs by easing
business formation, ensuring access to finance and appropriate protection of intellectual property. For a city it is a challenge to
create a unique selling point that distinguishes them from other cities. The creation
of an entrepreneurial economy usually involves local levels of government and formal
business associations.
For local policy makers it is important to
understand the dynamics behind today’s
network economy as cities are increasingly
competing with each other. The entrepreneurial economy can be seen as an important determinant of urban competitiveness.
Local policies can stimulate the start-ups of
SMEs by providing attractive hard and soft
location factors. This theme discusses why
some cities are more successful in creating a
highly attractive entrepreneurial economy
than others. The following research questions will be addressed in the agenda:
-- To what extent do SMEs contribute to
urban competitiveness?
-- How can cities facilitate the right (hard
and soft) location factors?
-- How can a city distinguish itself from
other cities? Is specialisation the key in
establishing a unique selling point of a
city?
-- How can policy makers maintain – and
ideally accelerate – the continuing
transition towards a more entrepreneurial
economy? How can cities attract SMEs or
support the number of start-ups or, more
in general, encourage entrepreneurship?
-- How can local policies influence the level
of entrepreneurial activity?
-- Which factors determine the
attractiveness of a dynamic and
entrepreneurial urban economy?
-- Are policies for innovative high-growth
SMEs different from general SME policy?
And if so, how? Is there a trade-off
between both types of polices?
-- What about the path-dependency of
the cities: should cities focus more on
attracting new enterprises or should they
better build on the present enterprises?
3.3 Labour Market and Education
The focus of this sub theme is specifically on
the relation between labour productivity and
competitiveness at the metropolitan level.
Moreover, from a policy point of view this
sub theme discusses how cities can deal
with urban labour challenges such as a high
percentage of youth unemployment and a
high representation of migrants in the local
labour market. Especially in the largest cities in Spain, Greece and France the percentage of (youth) unemployment is high caused
by major problems of the traditional economic sectors as for example the construction sector in Spain. Low participation rates
have a negative impact on labour productivity and, thus, on urban competitiveness on
the metropolitan level. In the Baltic States
there is a striking high percentage of
(youth) unemployment too which can be
explained by a strong decline of the economy caused by the financial crisis. Although
the percentages of (youth) unemployment
are quite similar for these regions (between
30-40 percent) the underlying causes might
strongly differ.
3.3.1 Drivers of Competitiveness
The European labour market is often characterised as rigid and inflexible with high unemployment, low mobility and a mismatch
between labour supply and labour demand.
Although there is some truth in this generalisation, the European picture is not uni-
39
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on Economic Vitality of European Metropolitan Areas
form but very varied. However, as for some
aspects there is general agreement. For example, in most European countries workers
on permanent contracts are strongly shielded. In Spain, economic dismissals are routinely challenged in Court; employers lose in
three-fourths of the time. One of the consequences is high youth unemployment.
Generally, European Governments made
substantial efforts to reform labour market
institutions. Since the eighties, there were
some 200 reforms of employment protection
in the EU-15 countries, increasing labour
market flexibility in over half of cases. The
reforms mostly entailed changing the rules
only for new hires and introducing a wide
array of new flexible, fixed-term, contractual
types or expanding their scope where they
already existed. There were almost no
changes in rules on regular, open-ended,
contracts. This created two parallel labour
markets – a labour market largely insulated
from shocks (workers with permanent contracts) and a labour market of temporary
workers, where all risks are concentrated.
These developments have to be bear in
mind when the urban labour market is taken
into consideration. After all, it tells us that at
the local and regional level it is hard to influence certain institutional aspects of the labour market – because it is national policy.
Consequently, from a labour market perspective it is hard for local policy makers to
affect the level of competitiveness of a metropolitan area.
When we zoom in on urban labour markets some observations can be made, such
as a great demand for highly educated labour, a high supply of migrant workers and
a higher productivity than in rural areas.
Research shows that a doubling of population density leads to about 6 percent increase in productivity. Since labour productivity is considered one of the underlying
A Strategic Knowledge and Research Agenda
on Economic Vitality of European Metropolitan Areas
drivers of competitiveness, this has important policy implications. In fact all of the
other drivers of competitiveness - innovation, education, investments and participation - have an effect on labour productivity,
as was shown by numerous studies. This led
the European Commission to acknowledge
productivity as the key factor to competitiveness. Therefore it is important to further
explore which factors mostly drive local productivity growth and what the relation is
between local (labour) productivity and
competitiveness at the level of metropolitan
areas.
When the relation between local (labour)
productivity and level of competitiveness is
proved to be strong, the future does not
look good for the EU-25. Projections regarding labour productivity in the long run suggest a significant slowdown in potential
growth rates in the EU as a whole, with the
EU-25 growth rate projected to fall from
around 2,5 percent in 2006 to half that rate
over the period 2041-2050. While the decline in the growth rate of living standards is
less dramatic, it is nevertheless significant,
with EU-25 GDP per capita growth rates
expected to decline from 2¼ percent at
2006 to 1½ percent in the 2040’s. The expected GDP per capita drop is particularly
strong for Spain, Italy, Portugal and Malta.
Low labour productivity leads to less economic growth and, thus, a decline in employment. Although there are also other
explaining factors, a high or increasing unemployment rate can be seen as a sign of a
low or declining labour productivity. When
labour productivity is low and declining, and
the prospects for recovery are not good,
long-term unemployment may arise.
Preventing high rates of long-term unemployment should be combated strongly.
Usually, the substantial effects of early unemployment on subsequent labour market
40
and social outcome are mostly temporary.
However, for disadvantaged youth lacking
basic education unemployment spells may
create ‘scarring’ effects. This means that the
mere experience of unemployment will increase future unemployment risks and/or
reduce future earnings. The longer the unemployment spell lasts, the more individual
productivity will be affected and the lower
the level of initial qualification, the longer
the scarring effects are likely to last.
percent) youth unemployment is relatively
high. Zooming in on NUTS-2 level the highest youth unemployment rates can be found
in regions located in Spain, France and
Italy: three regions in both in Spain and
France and one region in Italy show youth
unemployment rates above 40 percent.
The causes behind these eye-catching
differences vary from country to country. For
example, in Spain the high unemployment
figure is partly due to the continued rise in
the number of economically active population, especially migrants. Besides, a large
percentage of workers are on temporary
contracts which make it employers easy to
lay off staff. Last but not least, the last decade the economic success was mainly ascribed to the construction and related sectors. Because of the direct effects of the
credit crunch demand has declined dramatically. Consequently, the construction sector
accounts for over 60 percent of the fall in
employment. Given the nature of these
causes, it is interesting to examine what
local authorities and policy makers could
have done to prevent the strongly rising
unemployment and what their instruments
are to combat a further rise.
3.3.2 Local labour market and
unemployment
Often youth unemployment rates are more
than double or triple those for the population as a whole. A combination of supply
side variables (union density, employee benefits etc.) and demand side variables (restructuring from manufacturing to a service
industry, the introduction of new information
technologies, and escalating international
competition etc.) have led to high rates of
youth unemployment in Europe (and worldwide). The recent global economic crisis has
hit youth very hard. In the OECD area, the
youth (15-24) unemployment rate rose by 6
percentage points in the two years to the
end of 2009, to reach almost 19 percent.
There are currently nearly 15 million youth
unemployed in the OECD area, about four
million more than at the end of 2007.
When we focus on the labour market for
youth (15-24 years), youth unemployment
rates in 2009 varied substantially between
countries within the EU. For example, in the
Netherlands (6,6 percent), Austria (10 percent), Germany (11,2 percent) and
Denmark (11,2 percent) youth unemployment is relatively low whereas in countries
like Spain (37,8 percent), Slovak Republic
(27,3 percent), Hungary (26,5 percent),
Ireland (24,2 percent), Greece (25,8 percent), Italy (25,4 percent) and France (23,3
3.3.3 Challenges for metropolitan areas
Unemployment rates tend to be higher in
cities. Across Europe, the unemployment
rate was higher than the national rate in two
out of three Urban Audit cities in 2001.
Usually unemployment rates also differ between the core cities and the wider urban
area, as well as between neighbourhoods,
but there is no clear pattern. Within cities,
very large differences in unemployment
rates can be observed between neighbourhoods. In 2001 neighbourhood disparities in
unemployment were particularly large in
France, Belgium and south Italy, but are
also significant in the cities of eastern
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Germany, larger Spanish cities and the
North of England.
Since cities often act like magnets for
youth the share of youth in the total population of cities is above average. Besides,
Urban Audit data suggests that, in general,
the cities with the fastest population growth
are those with the lowest share of elderly
people and, correspondingly, the highest
share of children and young people.
Examples of fast growing and young cities
are London, Dublin and Madrid. Although
having a young population may seem positive from a labour market perspective, it has
some dangers in it as well. For examples,
many European cities have increasing concentrations of young people who have
dropped out and are no longer in education,
employment or training. Especially during
times of economic crisis when more and
more companies find themselves having to
downsize and dismiss qualified workers from
their jobs, more and more young people
looking for first employment or vocational
training placement will find themselves
standing before closed doors. The situation
in many cities is bad enough to begin with,
due mainly to an educational system illadapted to the changed needs of a multicultural society, shaky family structures and a
falling demand for low skilled people. The
problems tend to concentrate in the neighbourhoods, especially those where the less
well-off people live. It is here that help is
most needed. Giving more attention to the
educational requirements of children and
young people in these urban areas seems
straightforward. If more than one half of
young people in these deprived neighbourhoods leave school without any qualifications, there are bound to be problems in the
future. Eventually an insecure job situation
may lead young people to refrain from or to
postpone starting a family, thus having an
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impact on demographic developments. It
can be asserted that unemployment is often
an element of a vicious circle with poverty,
low education and human capital, health
disease and social and political marginality.
All things considered, there are many reasons why cities should do its maximum to
improve the quality of their labour force in
order to minimize unemployment.
The concept of local labour productivity is
just as hard to grasp as the notion of local
competitiveness. When a city or metropolitan area has a lower than average labour
productivity, this does not have to be a sign
of low competitiveness, as long as labour
costs are also lower. From the production
side of competitiveness, lack of labour productivity growth is not necessarily a signal
that something is wrong with that city or
metropolitan area. When a city is activating
all social assistance beneficiaries to find a
job, this will likely have a lower productivity
growth path, particularly when long-term
unemployed, whose productivity is (too) low
to find a job. The trade-off is then one between lower competitiveness and productivity against less unemployment (or vice versa).
One of the main aims of this theme is to
find out what the most important factors are
that drive local productivity growth and,
strongly linked to this, what is the relation
between local (labour) productivity and
competitiveness at the level of metropolitan
areas? Besides, it is important to know what
the implications are of high labour productivity respectively low labour productivity. As
for the latter, in the foregoing we already
linked low labour productivity with high
(youth) unemployment but the opposite
may be true as well.
-- What are the most important factors that
drive local productivity growth and what
is the relation between local (labour)
42
--
--
--
--
--
--
productivity and competitiveness at the
level of metropolitan areas?
How are differences in labour productivity
and competitiveness of cities and
metropolitan areas affected by differences
in sector structure, skill and educational
level of the workforce?
To what extent are differences in labour
productivity due to internal factors of
firms? To what extent are differences in
labour productivity due to institutional
arrangements and facilities provided by
the government?
What policy instruments are available
(and what measures can be taken) at the
local level to increase labour productivity
and combat (youth) unemployment?
What is the impact of local (and regional)
policy measures on youth unemployment?
What will be the consequences of
(rising) youth unemployment for the
competitiveness of cities (in the short and
in the long run)?
How can local labour market policy
increase the participation rates of those
with limited access to regular jobs (due
to lack of skills, work rhythm, social or
mental disorder etc.)?
Is it necessary to have measures for
all groups, e.g. is a special intervention
only necessary in few marginal cases
of particularly weak young people
(drop-outs or those with low levels of
education)?
transforming. For example, some Polish cities recovered relatively quickly from the
recent economic crisis while other cities, for
example in the Baltic States, are lagging
behind. This sub theme discusses the challenges of the economic transformation process of the new European Member States
and the path to growth these cities will (or
should) follow. The aim of metropolitan governance is to manage urban growth and to
implement policy actions and strategies in
pursuing competitive objectives.
3.4.1 Drivers of Competitiveness
The world is changing constantly and, as it
sometimes seems, every day more rapidly.
From an economic point of view particularly
the process of modernisation and adaption
from an industrial-based to a service- and
quaternary based economy is interesting.
Literature has particularly touched upon the
issue of de-industrialisation. The term deindustrialisation can have two meanings,
either a relative decline in the importance of
manufacturing, or an absolute decline bringing with it the problems of job losses. The
loss of traditional industries is sometimes
partially offset by the creation of new industries. Europe-wide there has been a shift
towards the service- and quaternary sector
away from older industrialised areas such as
urban economies depending on steel, mines
and textile. Overall, the share of manufacturing in the European Member States has
declined drastically in the last decade and
the share of service has grown as many
manufacturing firms have closed or moved
towards lower-cost locations. Moreover,
through outsourcing and off-sourcing of industrial activities the economic focus is increasingly service-oriented and knowledgebased. However, this does not mean that
cities or metropolitan areas that are still
manufacturing oriented cannot belong to the
3.4 Modernising and Adaption
Metropolitan areas, especially the new
European Member States, are currently in a
period of economic change. From an economic perspective, there are major differences in the way how the various metropolitan areas in central and eastern Europe are
43
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Figure 6
Source: Shutterstock 89254516
most dynamic and economically robust metropolises in Europe. In the traditional industrial cities in transition, manufacturing is not
the driver of growth but it stays an important economic sector, with significant links
to other sectors. In these cities, the transition towards a service- and quaternary
economy will continue but manufacturing is
likely to remain resilient. This means that
de-industrialisation is not a prerequisite to
become a modern urban economy.
The aim of this theme is, however, broader than a focus on the economically adaptation from an industrial-based to a servicedbased economy. Cities worldwide constantly
go through periods of intense growth or decline, innovation or decay. Recently a new
phenomenon can be added: demographic
decline. Estonia, parts of eastern Europe,
A Strategic Knowledge and Research Agenda
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the eastern part of Germany and some areas in Spain already experienced strong
population declines since the nineties.
Recently also some peripheral areas in
Scandinavia, the UK, Italy, Greece, the
Netherlands and Belgium experienced a
population decline. Lithuania, Germany,
Estonia, Hungary, Poland, Slovenia and
Slovakia are expected to have a lower population by 2030. Old industrial metropolitan
areas are often associated with demographic
decline. That is true for Leipzig, North-Rhine
Westphalia, Ostrava, Liverpool, Manchester
and Lille. These cities were built on dominant industrial tradition and experienced a
dynamic economic growth until the 1960s.
Already since the 1970s, these regions have
experienced big problems and lost the ability
of economic regeneration. Consequently,
44
these areas were characterized by high unemployment and a population with obsolete
skills. Nowadays, these cities are in the
midst of their recovery process. Academic
research has touched upon the question
what policy options would be appropriate
but it proves that only few can be offered in
this respect.
In summary, this theme aims at (1) examining what are the decisive factors explaining
urban decline and recovery and (2) what the
policy options are at the local (and regional)
level. For example, when a city or metropolitan area is in the transition process towards
a knowledge-based economy, it needs
enough qualified people to work in knowledge-oriented companies. Consequently, for
cities it becomes increasingly important to
answer questions like – for example – how to
invest in skills appropriate to their (new) key
sectors, how to strengthen the cities’ capacity to diffuse knowledge across the totality of
the economy, how to capitalise upon public
knowledge intensive industries - such as education and healthcare - to develop spin-offs
etc. Besides, since most cities are transforming towards a service- and knowledge based
economy, the question arises to what extent
their economic structures will converge. For
example, urban economies are increasingly
focusing towards high-tech sectors, financial
services, tourism and the creative industries.
An important question for cities in this respect is how to create a unique-selling point.
The role of small and medium-sized enterprises (SMEs) is important here. In particular
the economic competitiveness of the German
SMEs may be an interesting casus. The
transformation towards a service- and quaternary based economy goes hand in hand
with the current process towards a more ‘entrepreneurial economy’. In an entrepreneurial
economy the smaller SMEs create economic
value by launching innovative products and
services. The small, innovative companies
specialize, serve niche markets, are focused
on development, design, directing and marketing new products and services and experiment with new ideas. These companies are
also regarded as most fit to compete with
countries with lower wages.
3.4.2 Modernisation patterns across
Europe
There are different modernisations patterns
across Europe. Many Western European cities are transforming from an service economy towards a modern economy which is
more and more focused on advanced services and products. Well-known examples
are Liverpool, Glasgow and Rotterdam.
Some cities have experienced a quick and
successful transformation while other cities
have difficulties to adjust to a new economic
profile. Although economic transformation is
relevant for all cities, perhaps the most interesting examples of economic transformation can be found in Central and Eastern
European (CEE) cities. After all, these cities
have first made a transition from a centrally
planned economy to a market economy followed by a transition towards becoming a
full-fledged EU Member State. Still, for
many CEE cities it is a challenge to catch-up
with the richer countries of the EU.
Worldwide experience shows that economic
catching-up requires high saving and investment ratios, constant upgrading of educational standards and of the work force and a
steady improvement of competitiveness.
Although CEE cities vary in many aspects,
they also share some common characteristics originating from their historical past and
from the state-system that they had during
the common Soviet regime.
Case studies from across CEE suggest that
some privatized firms have engaged in stra-
45
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Figure 7
Source: Shutterstock 61876528
tegic restructuring and thereby developed
competitive advantage and sustained positive performance despite international competition. These studies suggest that CEE
local firms may be able to compete effectively without support from foreign investors. At the same time transition economies
have been running sometimes large current
account deficits. The reason for this is that
investment needed for catching-up growth
could not be fully financed by domestic savings. Capital inflows including large FDI,
attracted by bright domestic growth prospects and providing long-term financing of
current account deficits, can be reflected in
a real appreciation of the domestic currency.
Poland has established itself as one of the
most successful transition economies in CEE.
Large cities are the main drivers of Polish
growth. Gross domestic product in urban
areas is more than double that in rural areas. Besides, the eight largest urban areas
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in Poland are 20 percent more productive
than the average Polish sub-regions.
Examples of transforming cities are the
three largest cities in Poland: Krakow,
Poznan and Warsaw. Past years these cities
have experienced a strong economic growth
that can be explained by a range of factors.
The robust economic growth reflects large
flows of foreign direct investments and the
dynamics of small private enterprises. Also
in the Global Metro Monitor the Polish cities
are highly ranked. It is interesting to analyze the main explanatory factors (e.g. the
facilitating role of national and/or local policy, foreign investments etc.) behind the outperforming of these cities. Rather than analysing “best practices” it is also interesting
to discuss metropolitan areas that have difficulties with the economic transition.
3.4.3 Challenges for metropolitan areas
The relevance for cities and metropolitan
46
areas is self-evident. Since the world is becoming increasingly urbanised - since 2007
more than 50 percent of the world population is living in urban areas - cities and metropolitan areas play crucial economic roles.
Consequently, cities and metropolitan areas
can be considered as the frontrunners in
responding to (new) global challenges.
Ultimately the objective of the transforming
process – with periods of urban decline and
recovery – of the urban economy is to become more competitive which means more
tailored to (new) national and global changes and at the same time able to make necessary adaptations quickly. Although many
of the explanatory factors for urban decline
and recovery are exogenous for local authorities and policy makers (macro-economic forces, state of the art of technology etc.),
some local policy instruments may be useful
and effective. Some CEE cities are also dealing with the adverse consequences of the
transition. Several transforming cities suffer
from spreading poverty and diminishing social cohesion, high inflation and fragility of
financial systems. Nevertheless, CEE cities
– like Warsaw - may serve as an example to
other European cities and metropolitan areas of how a city became tailored to (new)
national and global changes and at the same
time able to make necessary adaptations
quickly. Warsaw was one of the few
European metropolitan areas that did not
experience a decline in either GDP per capita
or employment during the recession. One of
the explanatory factors is Warsaw’s diversified economic base. Warsaw, but also Poland
as a whole, depends less on particular industry sectors than other CEE cities and
countries. Besides, its large share of highly
flexible SMEs rely more on Poland’s internal
market than exports and international expansion. This structure has ensured that
there is no major economic orientation
around cyclical industries.
-- What measures are/were metropolitan
areas using to make a successful
transition towards a post-industrial
economy (i.e. more service- and
quaternary oriented)? What specific
progress is made as a result of these
measures (and what explains this
progress)? What are the remaining
challenges?
-- What strategies do cities choose to
transform towards a modern economy
(and on what grounds)? Do they
focus on specific economic sectors?
Do they choose for specialisation or
diversification of the economy? Is the
economic structure of metropolitan areas
converging?
-- What are the available strategies to
adjust the economy of a metropolitan
area to a changing demographic structure
(for example to demographic decline)?
-- How to create the right boundary
conditions for small, innovative
companies serving niche markets (i.e.
SMEs focused on development, design,
directing and marketing new products
and services and experiment with new
ideas)?
-- What can cities undertake to match
(future) labour supply with the new
labour demands of the developing key
sectors? How should cities strengthen
their capacity to diffuse knowledge across
the whole economy? How to capitalise
upon public knowledge intensive
industries - such as education and
healthcare - to develop spin-offs?
-- With regard to the different patterns
of economic transition: what can cities
learn from each other? For example,
what explains the quick successful
transition of some Central- and Eastern
European cities – like Warsaw - while
47
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Table 1: Observations and policy-related questions for each subtheme
Academic observations
Policy questions
Knowledge &
innovation
• Shift from manufacturing towards a
service-based economy.
• Outsourcing of economic activities to
low-cost countries
• Emergence of new economic sectors
(for high-tech technology)
• How should a shift towards a
knowledge economy be stimulated
effectively (e.g. through attracting
human capital and/or high-tech
clusters)?
• What is the success formula behind
‘innovation hotspots’?
• What is an effective regional innovation
strategy?
Entrepreneurship
• Shift from a more standardized
economy towards a strongly
differentiated economy.
• Higher percentage of small and
• medium-sized entrepreneurs (rather
than big industrial platforms).
• Do cities need to support specialization
or differentiation of the urban
economy?
• Can urban policies stimulate
entrepreneurship or start-ups of SMEs
within a city?
Labour market &
education
• Demand for high-skilled employees
• High percentage of unemployment
• Increasing gap between low-skilled and
high-skilled workers
• How can cities deal with urban
labour challenges, such as youth
unemployment?
• How can cities close the gap between
low-skilled and high-skilled workers?
(e.g. training, high investment in
education)
Modernisation &
adaption
• Many Central- and Eastern European
cities are quickly transforming from a
socialist planned economy towards a
capitalist economy.
• How does the economic profile of cities
in transition look like?
• Will cities in Central- and Eastern
Europe follow similar pathways as the
Western European cities did?
other cities are lagging behind? How
did these cities attract huge amounts
of foreign investments? What new
(modern) institutional arrangements were
introduced and what were the following
results?
-- How are cities dealing with
possible adverse consequences of
the transformation process (e.g.
unemployment, mismatch labour market,
identity-crisis and physical costs of
transformation)?
-- Which metropolitan areas experience
or will experience in the near future a
decline in population and household
numbers?
A Strategic Knowledge and Research Agenda
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-- How do local and regional governments
deal with demographic decline (or a
changing demographic structure)? What
policy options are available, which policy
efforts proved to be successful?
3.5Conclusion
Table 1 lists the academic observations and
urban policy-related questions for cities
based on the four subthemes addressed in
this agenda.
48
4. Case studies
4.1 Gathering insights from
practice
tions and strategies in pursuing competitive
objectives.
Local economic policy is increasingly seen
as important since cities are coined as the
engines of the national economy. The role of
local governments is, however, rather limited because a formal government authority
is hardly ever developed at the scale of the
metropolitan area. Cities can play a more
important role when they start to cooperate
at a regional scale. Economic co-operation is
regarded as an important strategy to stimulate urban competitiveness and to implement urban policies. The increasing intensity
of local and regional competition goes hand
in hand with an increased mobility and flexibility of businesses and highly skilled labour,
which in turns impacts the importance of
local and regional factors of a location. In
general cities are more likely to co-operate
when they are located in each other vicinity.
It is important that the different partners do
know who is responsible for which themes.
What can be arranged local and what can be
done at a regional scale? What is the role of
private partners?
Metropolitan developments are stimulated
by global trends operating through economic, social and cultural networks. The economy of metropolitan areas is largely driven by
global economic forces and cities may
strengthen the urban economy. Many of the
factors that influence urban performance
have a strong link to national or supra-national economic trends. As a result, there is
little that the individual city can do to affect
these variables. Still, there are some aspects that a city may control and where policy can have a role in influencing the urban
economy from ‘bottom-up’.
Since the economic performance of important competitors outside the EU seems to be
more prosperous, time is pressing for
European cities and regions. It is therefore
urgent to analyse and formulate effective
strategies and action to stimulate the economic vitality of cities. Cities should be put
high on the European agenda and cities
should focus more on effective economic
strategies.
To gain further insights in the economic
policies of metropolitan areas, we analysed
four areas in more detail. How can local and
regional policy makers create and advance a
vital urban economy? It is the role for policy
to provide the delivery of hard and soft location factors. It is now widely accepted that
the local context matters in terms of competitive strength since some cities clearly
offer a better mix of attributes for business.
In strict economic terms, it may be correct
to argue that businesses are competing with
each other, not cities or regions as such.
Cities, however, can have significant impact
on the capacity of businesses to compete
effectively. The aim of cities is to manage
urban growth and to implement policy ac-
4.2 Case study selection
The cases are selected on a practical approach. Therefore, besides number of inhabitants and geographical spread it may also be
of relevance to include metropolitan areas
which have either a strongly service-based
economy or a strongly industrial based economy. Also a balance between new and old
member states of the European Union needs
to be considered. By including several
Eastern European metropolitan areas the
question can be addressed how (if) the main
cities in the newest EU Member States follow
the economic patterns of northern-, westernand southern European cities. For example,
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do they copy past the economic profile of
other European cities, or do they follow their
own path of economic growth? Following a
practical approach seems even more appropriate when data availability and data reliability is taken into consideration. For example, the economic vitality of countries can be
defined by indicators such as gross domestic
product, employment, investments in R&D
and innovativeness. Although there is data
available for EU Member States (e.g.
Eurostat)35, there is a lack of data at the level
of metropolitan areas since they are in-between the national and local level, and even
the formal regional boundaries do not suit
the daily urban systems of metropolitan areas. The collection of statistical data at the
level of metropolitan areas – in order to acquire knowledge of their economic structure
– is problematic. These areas, which are defined functionally and technically, only coincidentally correspond to existing administrative
or census boundaries.36 For example: in
quantitative data analysis the data used for
the London metropolis is sometimes only the
data for Greater London and sometimes the
entire South-East region of England. Both
scales do not correspond with London’s metropolitan level.
Consequently, metropolitan areas cannot
be compared well in a quantitative way which
35Eurostat is the statistical office of the European
Union. Eurostat provides the European Union
statistics at European level that enables to make
comparisons between countries and regions.
At the regional level Eurostat set up the NUTS
classification in order to produce regional
statistics. The NUTS regulation defines minimum
and maximum population thresholds for the size of
the three NUTS regions.
36OECD (2006) ‘Competitive Cities in a Global
Economy’, Paris, p.80
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limits the scope of what can be learned from
an international comparison of metropolitan
areas across countries. To compare metropolitan areas only on the basis of some basic
quantitative data – added with qualitative
data - is not sufficient. This often leads to
so-called ‘ranking lists’ research - with
London, Paris and Frankfurt often high
ranked. These lists are lacking – if any – reliable explanations for the underlying mechanism. In the knowledge and research agenda
the lack of adequate data - to make comparisons between metropolitan regions possible
- will be one of the topics. An interesting development in this respect is that some national planning bureaus have developed – or
are in the process of developing - their own
‘Europe-covering’ database. Some of these
databases may contain useful data on the
level of metropolitan areas.
In Europe there is not a comprehensive
database for cities and this makes it difficult
to do comparative research among European
cities. In the USA there is a database which
enables scientists and policy makers to compare and analyze different cities with each
other. The collection of statistical data at the
level of European metropolitan areas – in
order to acquire knowledge of their economic structure – is problematic. Although there
is data available for Member States of the
EU (e.g. database Eurostat), there is a lack
of data at the level of metropolitan areas
since they are in-between the national and
local level, and even the formal regional
boundaries do not suit the daily urban systems of metropolitan areas. These areas,
which are defined functionally and technically, only coincidentally correspond to existing administrative or census boundaries. The
lack of data at the metropolitan level limits
the ability to compare cities with each other.
There is not one general definition of a city
or metropolitan area either. Sometimes re-
50
Table 2
Explanation of the case selection of four European metropolitan areas
Munich
Innovation and knowledge driven economy – German cities, together with the larger Polish
cities, survived the recent financial crisis without too much damage (Brookings Institute and
LSE Cities, 2010). The German metropolitan areas are often seen as ‘innovative hotspots’
with strong traditional sectors (as for example the automotive branch) and new economic
sectors (such as high-tech clusters as nanotechnology and bioscience). Munich is selected as
case study in order to define the secrets behind its outstanding economic performance and
its strongly driven knowledge economy.
Madrid
Labour market and education – In the southern European countries the percentages of
unemployment are high; especially amongst youth and migrants. Many cities in Greece,
Italia, Spain and Portugal have a weak competitiveness position due to high percentages
of unemployment and local economic downturn. Madrid is one of these cities dealing with a
problematic labour market situation – a high percentage of unemployment – and declining
economic growth.
Poznan
Entrepreneurial economy – Despite the financial crisis the economic figures have shown
an economic growth for the larger Polish cities. Poznan, one of these strongly growing
metropolitan areas in Poland besides Krakow and Warsaw, is therefore selected as case
study. Poland quickly transformed from a socialist planned economy towards a more
capitalist economy. Poznan is an interesting case study due to its entrepreneurial economy
and the role of entrepreneurs (SMEs) within this urban economy. How do the new
entrepreneurial economies of Polish cities actually function?
Bucharest
Modernisation and adaption– Romania is one of the newest EU Member States and is currently
transforming from an industrial-based economy to a more service-based and quaternary-based
economy. But how does this transformation process take place? What is the new economic
focus of Bucharest’s metropolitan area? The case study analyses how the capital city is
transforming from a communist planned economy towards a market-driven economy.
searchers are using data on city-level while
for other indicators the data is only available
for the administrative borders of the regions. With as a result that data on metropolitan areas have no relation with the actual daily urban systems of these regions.
The area of institutions is perhaps the most
complex and least well-explored aspect in
the explanation of regional economic development. According to Djankov (et al., 2003)
it is easier to analyze comparative national
growth processes, because national boundaries describe relatively distinct institutional
structures and national data on politics and
legal structures, as well as international survey data, allow for comparison. For the metropolitan scale these data are rather limited.37 To conclude, the question which met-
ropolitan areas will be subject of analysis
and advise will not be answered now. It may
differ by theme, dependent on whether the
issues at hand are relevant in the respective
metropolitan areas.
Each metropolitan area is linked to one sub
theme which makes it possible to analyse
the themes in-depth. Table 2 discusses the
case selection of four metropolitan areas
across Europe: Munich, Bucharest, Madrid
and Poznan.
37Storper, M. (2010) ‘Why Does a City Grow?
Specialisation, Human Capital or Institutions?’,
Urban Studies, 47 (10), pp. 2027-2050
51
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52
5. Case study Munich
5.1Introduction
address the threats and challenges which
the Munich metropolitan region is facing. In
this case study the questions and opinions
of urban practitioners and scientists are
leading.
The Munich Metropolitan Region (MMR) has
been – from an economic point of view –
very successful. Even during the financialand economic crisis, the MMR showed good
economic figures and survived without any
serious damages. What makes the MMR
special and what explanations (e.g. specific
policies, economic sectoral structure, geographic location etc.) may be given for its
economic success? The City of Munich is
placed high on the European urban competitive lists, but what is the story behind this?
Besides, what are the prospects for further
economic growth in the future and on what
grounds are these prospects based? These
questions will be at the centre of this case
study. In line with EMI’s principle ‘research
based, practice led’ also a few good practice
examples will be described briefly to give
further insights into the backgrounds of the
economic vitality of MMR.
5.2 Economic vitality of Munich
Table 3 shows some demographic and economic figures for the metropolitan region
and city of Munich as well as for the state of
Bavaria of which Munich is the capital. It can
be observed that the region of Munich has a
population of over 5,4 million. The city of
Munich has over 1,3 million inhabitants
which makes Munich the third largest city of
Germany. Economically, Munich is one of the
strongest performing cities in Germany. With
a Gross Domestic Product (GDP) of 54.598
euro per capita it is even one of the leading
cities in Europe. Between 2001 and 2009
the GDP of Munich increased sharply from
63.411 euro to a (estimated) GDP of 72.640
euro in 2009, an increase of almost 15 percent.
This case study has been carried out by a
combination of desk research and interviews
with practitioners from the public and private sector in MMR. Also a roundtable discussion has been organised to - on the one
hand – collect information and to discuss
possible explanations for the current economic situation and – on the other hand – to
Table 3
Export and foreign direct investments
Traditionally, the urban economy of MMR is
strongly export-driven. During the years
from 2000 to 2008, Bavaria’s export went
up by about 75 percent; from 90 billion to
Some demographic and economic figures,
Munich 200938
Area
Population
GDP in
€M
GDP per
capita in €
Bavaria
12 510 331
429 862
34 361
MMR
5 382 651
218 282
40 482
City of Munich
1 330 440
72 640
54 598
1 324 286
52 020
39 282
Periphery
53
38City of Munich (2010) ’Munich. The Business
Location. Facts and Figures 2010’, Department
of Labor and Economic Development.
A Strategic Knowledge and Research Agenda
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nearly 156 billion euro. But in 2009, the
global economic crisis triggered a sharp
slump in Bavarian export by 20 percent. The
enlargement of the EU proved to be the
driver of Bavaria’s export business with the
countries of Central and Eastern Europe.
Bavarian exports to the new EU Member
States have nearly doubled just in the period from the EU enlargement to the East in
2004 to the global economic crisis in 2008.
Many foreign companies have either their
German or European headquarter in MMR or
are represented there. About 90 large companies are headquartered in the city of
Munich, which is the home of global players
like Allianz, BMW, Infineon, MAN, Siemens,
Microsoft Germany and many others.
Innovation and research and development
(R&D)
The city of Munich is considered as an ‘innovation hotspot’. The city is an important centre of modern industries such as information
and communication industry, media and
finance. The number of employees working
in research & development (R&D) in the
MMR is very high with a proportion of about
3.3 percent of employees in R&D. Munich is
only topped by the region of Stuttgart with
3.4 percent. The same is true for the expenditures on R&D in relation to GDP. Only the
enterprises of the region of Stuttgart invest
more in R&D than the enterprises in the
MMR which invested over
4 percent of the GDP.
39German Patent and Trade Mark Office, ‘Annual
Report 2009’.
40City of Munich (2011) ‘Munich. The Business
Location. Facts & Figures 2011’, Department of
Labor and Economic Development.
A Strategic Knowledge and Research Agenda
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In the year 2009, German companies and
inventors filed almost 48 thousand patent
applications. With 32,5 percent of the applications, Baden-Wurttemberg again came top
and was able to extend its overall lead. It is
followed by Bavaria – that had occupied the
top position from 1996-2006 – with 12.641
applications (26,4 percent of the total).39 By
analysing the number of applications in relation to the size of the population, Bavaria
filed 101 applications per 100 thousand inhabitants. This is much more than the average amount of 58 patents for each German
Lander.
Standard of living
The Munich Metropolitan Region has a high
standard of living. On the one hand, this can
be observed from an economic point of view
as the city of Munich as well as the MMR have
a high GDP per capita (see Table 3). In addition, Munich has the highest purchasing power rate of Germany (24.879 euro)40. This is
considerably higher than - for example Frankfurt (almost 22 thousand euro),
Stuttgart (21 thousand euro) and Hamburg
(20 thousand euro). The high standard of
living in MMR can also be observed by looking
at more qualitative aspects. For example, the
green and relatively clean environment, the
location between the Danube and the Alps
and the relatively new density of housing all
contribute to a high standard of living. Due to
the general situation on the labour market
and the magnetic attractiveness which leads
to a high influx of workers, the social situation of immigrants is much better than in
other European cities. The city of Munich has
the reputation for being one of the safest big
cities in Germany and in Europe. Despite the
fact that Munich has one of the highest proportions of immigrants in Germany and social
inequalities exist, Munich has so far rarely
seen significant social unrest.
54
Figure 2
Emplyment growth in selected growth sectors in Munich in the period 2007-2009
Employment and unemployment
42
4,7 percent. The unemployment rate in
Munich is also lower than the unemployment
rates in nearby cities such as Nurnberg
(6 percent) and Stuttgart (5,6 percent).
Munich presents itself as an attractive ‘employment centre’ with a varied supply of
high- and low skilled jobs. Figure 2 envisions
the employment growth in five selected
growth sectors in Munich in the period
2007-2009. The employment growth in the
‘health services’ is striking with almost 4
thousand extra jobs in two years. Also ‘education and teaching’ envisions an employment growth what can be explained by
Munich’s function as an innovation and
knowledge city.41 Figure 2 also envisions the
high contribution of ‘finance and insurance
services’ to Munich as employment centre.
Next to Frankfurt, Munich seems to be an
important financial centre as well.
Figure 2 Employment growth in selected
growth sectors in Munich in the period
2007-200942
Table 4
Unemployment rates, Germany,
Bavaria, Munich 2008-2010 (in %)43
Region of Munich
2008
2009
2010
Germany
7,8
8,2
7,7
Bavaria
4,2
4,8
4,5
City of Munich
4,4
5,0
4,7
41Munich as an innovation and knowledge city will be
discussed in section 2.3
The city of Munich has a low unemployment
rate in comparison to other German cities.
For example, in 2010 the unemployment
rates in Berlin and Hamburg were respectively 13,5 percent and 8,2 percent whereas
in Munich the unemployment rate was only
42City of Munich (2011) ‘Munich. The Business
Location 2011. Fact and Figures 2011’, Department
of Labor and Economic Development.
43City of Munich (2010) ‘Munich. The Business
Location. Facts and Figures 2010’, Department of
Labor and Economic Development.
55
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Explanations
Although the number of economic indicators
described in this study is limited and no
strong conclusions can be drawn, many
agree that MMR is an economically vital region which has even more potential for the
future. From literature three explanations
for the economic prosperity in the city of
Munich and its surrounding metropolitan
area can be given: innovation- and knowledge city, the so-called ‘Munich Mix’ and
‘institutional thickness’.
Innovation and knowledge city
Economic power is concentrated in MMR.
Munich’s importance as a knowledge region
is based on two pillars: the concentration of
public and private research institutions - after World War II – and a developed brand of
a high emerging technology and innovation.
Furthermore, Munich’s main resource is human capital and as a capital city of Bavaria
State and former kingdom, it has developed
historically some central functions and cultural heritage.
The economic success of Munich is directly
related to a strong innovation system. The
city of Munich is well ahead on critical hightech innovation such as biotech, ICT and
clean-tech activities.44 The innovation system is – to a great extent - underpinned by
factors such as a high human capital and a
substantial mass of public research activity.
With 16 universities and colleges, Munich
44LSE Report, 2010.
45City of Munich (2005) ‘Munich – City of
Knowledge’, Department of Labor and Economic
Development.
46City of Munich (2005) ‘Munich – City of
Knowledge’, Department of Labor and Economic
Development.
A Strategic Knowledge and Research Agenda
on Economic Vitality of European Metropolitan Areas
and its surrounding metropolitan region represents one of Germany’s leading centres of
higher education. Together with the numerous non-university research institutions,
scientific institutes, private-sector research
undertakings, museums and libraries, the
knowledge infrastructure is exceptional.
These institutions collectively form a stable,
growth-oriented knowledge cluster.45 With
16 universities and colleges, Munich and its
surrounding metropolitan region represents
one of Germany’s leading centres of higher
education. Together with the numerous nonuniversity research institutions, scientific
institutes, private-sector research undertakings, museums and libraries, the knowledge
infrastructure is exceptional. These institutions collectively form a stable, growth-oriented knowledge cluster.46
The ‘Munich Mix’
One other prominent explanatory factor behind MMR’s economic success is the so
called ‘Munich Mix’: a very diverse industrial
structure which covers a range of sectors,
global players and SMEs. The advantage of
the ‘Munich Mix’ is the diversity of its economic base. This ‘resilience’ is impressive,
which could be experienced particularly during the financial and economic crisis following the year 2008 onwards. MMR has more
than one pole of development, which is especially of importance during economic
downturns. The diversity of economic output
makes the region stronger.
The MMR economy is characterised by
strong (international) companies such as
Audi AG and BMW who provide jobs for
more than 30 thousand high skilled workers.
But there is more than only the automotive
industry. For example, there are also major
enterprises in other economic branches with
important (inter)national headquarters in
56
Munich such as insurance company Allianz
and engineering company Siemens AG.
ments in place, and in addition can profit
from Bavaria’s overall interconnectedness of
interests. However, it is often asserted that
‘institutional thickness’ can be extremely
helpful to the economic development of a
metropolitan area, but only under the right
circumstances.49 So what has made the difference in Munich? According to the LSE
report (2010, p. 9) the following key ingredients have made the difference in Munich:
-- Political stability: Despite the fact that
the political colour of the State of Bavaria
(conservative) differs from the City of
Munich (social-democrats-green party
coalition) there is a certain amount of
political stability in the region. This can be
caused by Munich’s economic prosperity
which give not any reason for political
unrest;
-- Strong interventionist tradition and strong
technology-led development by the City
of Munich and the Bavarian State;
-- Critical mass: city of Munich has a rich
mix of high-value economic activity,
high-quality universities and a network of
public research intermediaries, focused
on both blue-skies and applied research;
-- Connected elites: There are multiple
connections between heads of the
business, university and public research
communities. They repeatedly use their
influence to promote Munich’s wider
standing. The concept of ‘triple helix’
seems to have a positive influence on
Munich’s branding as economic and
innovative centre of Europe.
There are almost 650 thousand medium-sized
businesses in Bavaria, forming the backbone
of the state’s economy. Together they account
for more than 41 percent of the total turnover
and more than 50 percent of the total investments in Bavaria. 75 percent of the employees and 83 percent of the trainees are employed by small and medium-sized companies. A major role is played here by the more
than 175 thousand skilled crafts and trades
firms of Bavaria which employ almost 900
thousand people. Medium-sized businesses
are represented in many sectors, occupy
market niches, and are especially strong on
innovation.47 Their diversity and flexibility
mean that they can respond quickly to new
developments on the market and make good
use of opportunities for the future.
The number of people in Bavaria who are
self-employed and who found new business
is above the national average. Bavaria is at
the head of the national start-up statistics.
In this way new jobs with a secure future
are created, particularly in the high-tech
field, in the new media, in ecology and in
the health sector.
‘Institutional thickness’
The London School of Economics (LSE) defines ‘institutional thickness’ as a highly interactive mix of private, public and researchoriented actors that induce economic growth.
The economic geographers Ash Amin and
Nigel Thrift refer – as for ‘institutional thickness’ - to the ‘ensemble of local social and
cultural conditions conducive to economic
growth’.48 The key elements are: strong institutions, high levels of interaction, a sense of
common purpose and co-ordinating activity.
The city of Munich has all of these ele-
47Bavarian Ministry of Economic Affairs,
Infrastructure, Transport and Technology (2011)
‘Initiative for Medium-Sized Businesses’.
48See LSE (2010) and Amin and Thrift (2001).
49For example, in other German regions, the RheineRuhr region for example, ‘institutional thickness’
has been obstructed innovation (see LSE 2010).
57
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Combined these four factors have helped
Munich and its metropolitan area to become
a powerful policymaking machine that is
characterized by strong and stable public
institutions, productive public-private relationships, a commitment to technology and
a common purpose and flexibility.
However, it is not completely clear how ‘institutional thickness’ works. For example,
questions that remain open are how the
informal way of doing business works and
how the collaboration contributes to the economic vitality of the Munich Metropolitan
Region. Also, it is not determined yet to
which extent - in terms of ambitions/challenges, scale and duration - the collaboration is effective.
5.3 Insights from practice
This paragraph presents the main outcomes
of the interviews and the roundtable discussion, both carried out and held in Munich. The
session - attended by public and private
stakeholders/professionals operating in the
Munich Metropolitan Region, with different
backgrounds and responsibilities - was hosted
by EMI in collaboration with the Technical
University of Munich (TUM). The main objective of the interviews and the roundtable discussion was to address the threats and the
challenges related to the economic vitality of
the MMR and to discuss a variety of issues
from different perspectives (private, public
and scientific). Obviously, also the knowledge- and research questions that are of particular importance for Munich and its metropolitan area were discussed extensively.
Discussion
To get an idea of what kind of research- and
knowledge needs there are in the Munich
Metropolitan Region, the participants of the
A Strategic Knowledge and Research Agenda
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regional roundtable in Munich were confronted with the question what their strongest irritations were about Munich. The answers varied considerably:
-- Munich is not open-minded enough;
-- The costs of housing in the city of Munich
are (too) high;
-- A critical approach is not appreciated;
-- A rapid train connection between the City
of Munich and the international airport
is missing. The potential of the corridor
airport-city is neglected;
-- There is a deficit in the use of innovation
network structures (like ‘Wiki’, forums,
electronic platforms);
-- The need for collaboration among
communities is evident. Nevertheless,
there is competition between
municipalities and territorial
organizations;
-- The ‘heart’ of the city is still facing
southwards towards the Alps, but the
mindset (economic connections) is
heading northwards.
During the roundtable discussion, the participants were asked how they would spend
50 million euro on policy measures to
strengthen the economic competitiveness
of the region. Some of the participants decided to invest the money in improving the
cooperation between the cities within the
broader region. Others decided to invest in
improving the infrastructure within the region, thereby acknowledging that 50 million
euro is not enough to make any difference. Other ideas and suggestions were
related to the ‘mentality’ of Munich. The
city is highly self-centred and not really
open-minded. By spending the money on
developing and reinforcing networks, new
platforms may arise where people - from
various backgrounds and professions - can
exchange ideas to create new opportunities
for (knowledge) spill-overs and innovative
58
Table 5
Overview of strong and weak point
Strong points
Weak points
A powerful knowledge economy driven by
innovation
Migration of high skilled workers to other regions
mismatch between demand and supply of high skilled
workers (low level of education of young migrants –
migrants high % of population.
Economy is strongly depending on human capital (which
might be a threat on the longer term)
Major incentives by the State of Bavaria
(political stability)
Conflicting institutional interests of municipalities within
A diversity of economic sectors, global players
and the presence of many SMEs (Munich mix)
Mismatch between labour demand and vocational
education (lack of knowledge workers on the longer term)
Quality of life: green and high quality of the
environment
Inadequate infrastructure system (bad connection
between city of Munich and Airport or to neighbour
regions Stuttgart, Zurich, Vienna)
Traditional strong ‘Brand’ of Munich
Demographic changes, increasing social inequalities
External and unforeseen factors as the
Unification, The Olympic Games, institutional
thickness
Saturation/ lack of a sense of urgency
Integrated urban development planning
strategy ‘Perspective Munich’
High pressure on the land causes rising housing rents and
real estate prices, high land prices, mismatch between
urban planning principles
the Munich Metropolitan Region.51
incentives. This is likely to result in fruitful
cooperation between the international orientated multinationals and the SMEs within
the region. Regarding the current economic
position of Munich within Germany and
Europe, (maintaining) human capital is one
of the most daring challenges for the
Munich region. Invest in (vocational) education was one of the ideas to keep the
talent in Munich. Also improving the accessibility of the labour market for immigrants
(especially Turkish) and offering them a
variety of opportunities was mentioned. In
order to define a common goal for socioeconomic development of the MMR, the
suggestion was done to participate in a
benchmark award called ‘most admired
knowledge region’.
50Sources: in-depth interviews with key-actors,
roundtable discussion (including Professor’s
Thierstein scientific review in appendix two), desk
research.
51Bavaria’s planning regions operate between
the district and the county level. Municipalities
are relatively autonomous, particularly when it
comes to planning and delivering public services.
The system in Germany gives municipalities
relatively much freedom to develop their own
economic infrastructure, like industrial parks and
retail centers. Despite this freedom of act, local
authorities have to take into account the plans of
higher authorities. It means that municipalities,
like Munich, should obey the planning guidelines
defined by the regional planning authorities, the
development program of the State of Bavaria
and the federal government’s spatial principles.
Another aspect of the administrative structure is
Strong and weak points
that municipalities, due to the unique German-tax
Based on the regional roundtable discussion,
an overview of elements is given which
makes the Munich Metropolitan region economically strong (or weak).50 Table 5 assesses the strengths and weaknesses of
system, have the possibility to develop commercial
and industrial areas. Municipalities will benefit
from strong incentives to develop such sites,
because of the trade-tax. The city of Munich is one
of those cities that is highly dependent on trade.
59
A Strategic Knowledge and Research Agenda
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MMR urban economy. Based on this overview the conclusion can be drawn that MMR
seems to be able to anticipate to certain
economic changes and find new opportunities to be a part of the economy even when
this brings less economic security. Exploring
new opportunities might be one of the major
economic challenges. The roadmap towards
sustainable economic success is depending
on the strength of innovation which relies on
the presence of a critical mass of R&D.
Practice examples
Practice examples originating from similar
situations, cities or countries are becoming
increasingly important as input for policy
recommendations. As Professor Paul Cheshire
from the London School of Economics states
it “Because there is a need for careful analysis and evidence-sifting before we impose
supposed cures for perceived urban ills ...it is
increasingly important to have knowledge of
bad and best practises to judge empirically if
policies have effects and fulfilled the targeted
objectives”.52 Following this recommendation,
some of the success factors behind the economic prosperity of the Munich Metropolitan
52P.C. Cheshire (2006), Resurgent Cities, Urban
Myths and Policy Hubris: What We Need to Know,
Urban Studies, Vol.43, No.8, pp. 1231-1246, July
2006.
53These examples were collected during the
interviews and the roundtable discussion as well as
by desk research.
54City of Munich (2010) ‘Munich. The Business
Location. Facts & Figures 2010’, Department of
Labor and Economic Development.
55Bavarian Ministry of Economic Affairs,
Infrastructure, Transport and Technology (2010)
region will be discussed (on the basis of practice examples).53
Powerful knowledge environment
The most powerful incentives for economic
strength and growth are knowledge and
innovation. Creating the right circumstances
and conditions to achieve both is crucial. In
Munich and its surrounding metropolitan
area this has been done successfully as can
be seen via:
-- The presence of several (international
operating) public and private research
institutes which make the Munich
Metropolitan Region a centre of
knowledge;54 In Munich, education and
training is not only a public task of the city;
-- Various incentives that undisputedly
contributes to the development of
new products. The automotive, the
biotechnology and the ICT are the main
important economic innovations clusters.
Investing in high technology not only
requires knowledge and manufacturing
(by migration of high skill workers) but
also feeds the supply chain industry with
new challenges and opportunities.
The State of Bavaria undisputedly played an
important role in creating the right conditions for research- and knowledge institutes
to flourish. For example, the State of
Bavaria can be seen as the main factor behind what has become an important and
economically strong cluster in the metropolitan region of Munich: Biotechnology.
Through an international tender the State of
Bavaria invited companies (large, medium
and small) to start or move their activities
to the region of Munich.55
‘Invest in Bavaria. First in Biotech’.
56City of Munich (2005), ‘Munich – City of
Knowledge’, Department of Labor and Economic
Development.
A Strategic Knowledge and Research Agenda
on Economic Vitality of European Metropolitan Areas
In 2005 the City of Munich defined an action
plan for the future development of Munich
as a city of knowledge.56 The action points
60
are focused on:
-- supporting growth industries, which
implies getting young and innovative
firms to settle in the region as driving
forces of regional economic development;
-- attracting and keeping talented people in
Munich Metropolitan Region, for example
by giving more attention to students as a
group of the municipal population;
-- supporting the generation of new
knowledge, for example by accompanying
the application of knowledge across the
full chain of utilization.
clustering of high-value activity in the metropolitan area. The innovation policy of the
State of Bavaria is focused on 19 clusters.
In 2012 the cluster policy will be evaluated
and some changes will be made (if necessary). It is their objective to create a ‘corporate density’ by stimulating co-operation
between research institutes, business and
public institutions (triple helix). State of
Bavaria gives subsidies for technological
development. Exports form traditionally an
important pillar for the Bavarian industry.
They make a substantial contribution to both
economic growth and jobs. For Bavaria, foreign trade policy largely means an SME policy designed to compensate for the sizerelated disadvantages experienced by small
and medium-sized enterprises.58 The state’s
policy towards medium-sized businesses is
specifically geared to supporting their
growth.59 To encourage investment in medium-sized companies, Bavaria has a programme of loans for medium-sized firms
with attractive financial offers, for example
to stimulate start-ups. According to the
Economic diversity
Despite the fact that the federal government
indirectly supported the automotive industry
during the economic crisis and thanks to
some labour measures, the MMR survived
the crisis successfully mainly by its economic diversity. Munich has more than one pole
of development which is especially importance during economic downturns. The diversity of economic output and acting on a
global scale makes the region stronger. In
addition, the number and growth of Small
Medium Enterprises (SMEs) operating in the
surrounding area of the city of Munich, provide the capital city of Bavaria economic
strength and stability. Due to innovation, the
variety of manufactures and the demands
for supplies and knowledge on different topics (ICT, biotechnology and food), the economy emerges rapidly and still there is no
horizon appearing for starting up new SMEs.
57Bavarian Ministry for Economic Affairs,
Infrastructure, Transport and Technology (2011)
‘Bavaria’s Industry Cluster Initiative’
(www.bavaria.org/industry_clusters.php)
58Bavarian Ministry of Economic Affairs,
Infrastructure, Transport and Technology (2007)
‘Successful abroad; the foreign trade services
offered by the State of Bavaria’.
59In Perspective Munich, a leading document for
The State of Bavaria encourages - through
incentives – the development of life sciences, information technology and green technology.57 The State has led the process of
promoting innovation and stimulating a
long-term growth. The economic development activities of the State disproportionately affect Munich, because of the spatial
the City of Munich defined by the Department
of Urban Planning and Building Regulation, it is
stated that the diversity of the economy must be
maintained and developed especially by promoting
and stimulating new sectors of the economy. In
this context, particular priority is given to SMEs
in the craft trade sector, as well as to high-tech
enterprises with future potential.
61
A Strategic Knowledge and Research Agenda
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Figure 9
Headquarter of BMW in Munich
Source: Shutterstock 96505379
State of Bavaria, the policy has resulted in
more than 47 thousand new jobs being created in Bavaria. The technology transfer of
the universities and research facilities in
Bavaria encourages more innovations by
medium-sized businesses. In addition, the
Bavarian ‘cluster initiative’ for networks between research and businesses throughout
the state is specifically tailored to mediumsized companies. To allow more scope for
independent activity by medium-sized firms,
60Bavarian Ministry for Economic Affairs,
Infrastructure, Transport and Technology (2011)
‘Bavaria’s Industry Cluster Initiative
(www.bavaria.org/industry_clusters.php)
A Strategic Knowledge and Research Agenda
on Economic Vitality of European Metropolitan Areas
Bavaria is aiming at less bureaucracy and
fewer regulations. In this way new ideas can
be put into practice quickly and simply.60
The brand ‘Munich’
Several organisations have been investing in
- and selling - the brand called ‘Munich’. This
started in 1972 with the Olympic Games.
Due to this major sporting event Munich
placed itself into the international spotlight.
With the unification in the early nineties,
Munich developed itself further to an important centre of economic vitality in Germany
and started playing a significant role in the
European economy. During the past 40
years the City of Munich became a brand for
economic success. In a monocentric eco-
62
nomic environment the city of Munich plays
a dominant role, but there is a significant
change - or call it mentality-shift - going on.
Efforts are being undertaken to develop the
surrounding cities (Ingolstadt, Augsburg,
Landshut, Rosenheim) of Munich to make
them attractive for investments. The brand
Munich - a combination of various economic
opportunities, good public-, social-, educational- cultural- and sports facilities and
events (such as FC Bayern and Oktoberfest),
a green and clean environment, a relatively
good infrastructure of accessibility and mobility - expands to the whole metropolitan
region and reinforces its economic strength.
clearly visible to a wide extent externally.62
Although MMR tries to stimulate regional
cooperation between the City of Munich and
the surrounding cities and the rural areas in
the region, it is not always easy. This can be
explained by the competitiveness about issues such as company, people, capital, land
and trade tax. In an evaluation of
Perspective Munich in 2007, the researchers
stated that two principles of the strategy
were not (yet) being sufficiently implemented or achieved; (1) improvement of co-operation in the region and the enhancement
of the competitiveness of the economic area
and (2) developing ecological standard and
safeguarding national resources.63 With regard to the general goal of countering urban
sprawl, the former of the two principles are
obviously very much dependent upon the
cooperation with neighbouring communities
of Munich in order to achieve a significant
diminishing in the consumption of surface
and land. Based on this evaluation report,
regional cooperation within the Munich
Metropolitan Region can be considered as
one of the main challenges for the future
urban and economic growth of Munich.
Munich’s Triple helix
Due to Munich’s institutional thickness there
are close and intensive collaborations between the private partners, public institutions and universities/research institutions.
In other words, the ‘triple helix’ seems to be
fruitful within the Munich Metropolitan
Region. For example, the Chamber of
Commerce of Munich, in cooperation with
universities, is investing in ‘re-training’ programs.
Regional Cooperation
The Association called ‘Munich Metropolitan
Region’ (MMR) plays an important role in
reinforcing the Munich brand and to achieve
a common mentality to establish - on a metropolitan level - an attractive region for investing, working, living, commuting and
recreation.61 MMR is an open and interdisciplinary discussion and cooperation platform.
Under the MMR’s leadership actors from the
worlds of the economy, science, politics and
society, get together in order to work together - voluntarily but bindingly – to attain
a positive development within the MMR. A
central goal is to network the Munich
Metropolitan Region internally and make it
61Munich Metropol Region (MMR) (2008) ‘The
economic location. Munich Metropolitan Region’, p.
6.
62See Appendix 2: ‘Scientific Review Thierstein’,
review written on the outcome of the roundtable
discussion held in Munich the 30th of March.
63Thierstein, A. and S. Reiss-Schmidt ‘Urban
Development Management in Munich, Germany’,
ISOCARP Congress 2008, Dalian/China.
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A Strategic Knowledge and Research Agenda
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5.4 Munich, a glimpse in the
future
Does MMR have the strength and the possibilities to maintain its current economic
position? If the current economic situation of
MMR is analysed, there seem to be - in the
short term - no major significant problems
which may affect the economic growth dramatically. On the contrary, a recent publication shows that until 2014 more than 420
thousand professionals on the labour market
are needed to fill the open vacancies.64 Even
a light economic decline in the coming years
does not seem to affect the demand for labour. A forecast shows that until 2022 620
thousand highly qualified workers are needed. For example, Audi, one of the global
automotive enterprises in the Munich
Metropolitan Region, needs 2 thousand extra
highly skilled workers for the coming years
to maintain its innovation strength. A brain
gain is needed to establish a high level of
powerful knowledge and innovation. SMEs
carrying out R&D are mainly found in new
dynamic sectors such as biotechnology, environmental technologies, automotive industries and medical technology.65
The ‘Zukunftsrat’
The State of Bavaria is aware of the fact
that the economic strength of the metropolitan region of Munich is not a given fact.
64Bayerschen IHK (2011), Fachkräftemonitor Bayern,
Without specific (policy) measures there is
always the danger that the metropolitan
region will lose its current strong economic
position. To address the threats and the
challenges of Munich Metropolitan Region
and to develop a strategy for the future, the
State of Bavaria installed the ‘Zukunftsrat’.
The ‘Zukunftsrat’ defined three scenario’s for
regional development to reinforce the economic competitiveness of Bavaria:66
-- Focus purely on one Megacity (Bayern
becomes Munich);
-- Networking of existing centres
(integration and expansion);
-- Focus purely on rural areas/equivalent
lively hoods.
Based on criteria as competitiveness, quality
of life and environmental sustainability, the
‘Zukunftsrat’ chose the second scenario as
the most optimal strategy for a sustainable
development. In other words, the scenario
implicates to reinforce the connection between Munich and the surrounding cities and
due to this bond, the cities become powerful
(economic) centres. The ‘Zukunftsrat’
stressed that it must be insured that cities
keep on pace with the economic size of
Munich and closely intertwined with the surrounding rural area. According to the advisory committee of the State of Bavaria the
Munich Metropolitan Region should be developing from a monocentric to a polycentric
area in order to create the best circumstances for enhancing the economic vitality of the
region.
March 2011.
65Duell, N. (2006) ‘Ideopolis: Knowledge City
Region. Munich Case Study’, p. 15
66During the roundtable discussion it became clear
that the results of the ‘Zukunftsrat’ were received
very critically. Until now it is not clear yet what will
be done with the recommendations made in the
report.
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The ‘Zukunftsrat’ emphasized a strategy
that surrounding cities (like Augsburg,
Ingolstadt) play a key role in strengthen the
competitiveness of the region. From a
monocentric metropolitan region (with
Munich as the dominant city) the region
should develop to a polycentric metropolitan
64
area (with economic corridors between the
cities). By connecting these centres and to
reinforce integration and allow expansion
(holding suburbanisation along the highways) the area will operate as one (re-concentrating) economic region.
some other possible obstacles to a continuing economic growth. For example, despite
the presence of ‘institutional thickness’ –
and its seemingly positive effects on the
economy - its power is limited when investments are needed in enhancing the infrastructure and transportation in the MMR. In
terms of infrastructure and transportation
the MMR seems not to invest enough in its
north-east corridor that links the city with
the international airport. The absence of a
direct high-speed train (the ICE) connection,
that links the city with the airport, may become - on the supra regional level – an important obstacle for future development.
According to the ‘Zukunftsrat’ the State of
Bavaria policy should follow a basic principle
that every citizen of Bavaria spends no more
than 60 minutes travelling time between
home and labour, in order to contribute to
and participate in the prosperity of the centre in which they live. The Zukunftrat is aiming for a dynamic daily-urban–system which
operates on a metropolitan scale and contributes to strengthen the economic growth
of the MMR.
Figure 10 Airport of Munich
Challenges
Munich’s main challenge is to maintain its
economic position in the long run. What
needs to be done to stay in the European
frontrunners group? First of all the city of
Munich has to deal with the adverse consequences of its economic growth as discussed
in the previous paragraph. The lack of housing – in quantitative and qualitative terms
- is a major challenge for Munich. The city of
Munich needs to cooperate with the surrounding neighbourhoods to prevent urban
sprawl and to realise a more sustainable
growth of the broader region. The high costs
of living can also cause social inequalities
within the city. What will happen if the poor
people cannot move away, and are forced to
stay in the city, while the rich people can
chose for greener, saver and quiet suburbs?
The economic pressure on the city can cause
tensions between the different income
groups.
Coordinated infrastructure investments
Besides a necessary ‘brain gain’ there are
Source: Shutterstock 78041065
65
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This is particularly worrisome because of
Europe’s thrive for linking the main economic hubs via a high-speed train. From the
positive side however, the state of Bavaria
considers public transport in the Munich
Metropolitan Region a major issue. If infrastructure within the Munich Metropolitan
Region will not be improved, the pressure on
the city will be too high, especially on the
longer term. To maintain the attractive character of Munich, with green spaces and cultural amenities, an organic growth of the
city is desirable.
Maintain Munich’s economic position
To keep Munich in its position as a leading
economic metropolitan region and maintain
its attractiveness for foreign direct investments, it needs to keep an eye on innovation and networking to proceed and reinforce the typical “Munich Mix”. More emphasis has to be put on the establishment of
‘communities of practice’ as well as of ‘communities of knowledge’. Investing in education and interaction between different cultures is important to attach human capital
– the talents – to the city. On top, Munich
should tap much more the brain pool and
the capacity of the second generation of
immigrants, for example people with Turkish
background. Well-qualified people have
started migrating back to their country of
origin. There seem to be better outlooks for
67Another challenge is to make more use of female
employees by offering more facilities for crèches
and/or kindergarten. Nowadays, most mothers are
working part-time.
68For example, a mid-term evaluation of Perspective
Munich in 2007 stated co-operation in the region
needs to be improved to, among other things,
enhance the competitiveness of the economic
professional careers and more tolerance
within society. Thus brain gain not “brain
drain” is one of Munich’s key challenges in
order to being a global location in business
as well as in scientific research and development.67
Improve regional cooperation
Another observation that can be made in the
case of Munich is the lack of economic cooperation between the municipalities in
Munich’s Metropolitan Region.68 The traditional borders of the city of Munich do not fit
with the ‘daily urban systems’ of people and
business in the broader metropolitan area.
There is no formal governmental authority
whereas informal economic cooperation is
also missing. As long as the economy is doing well, there is not much urgency for the
municipalities to start economic cooperation.
However, informal cooperation initiatives
(such as the MMR-association) can be of
significant added-value for the region.
Inner-regional competition is a risk for the
future economic growth of the Munich
Metropolitan Region. In particular, in the
case of industrial development areas and
out-of town shopping complexes, the competition between local authorities is often
counter-productive to the interests of the
region as a whole. At the same time, the
City of Munich is becoming more and more
closely integrated with its surrounding areas
to form a single, functional residential and
economic unit. The process of establishing a
shared identity between Munich, Augsburg,
Ingolstadt must be actively pursued. Efforts
must be made to cooperate closely with
business associations, Chambers of
Commerce and trade unions in all corresponding activities and aspects of concept
design.
area.
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Due to the positive economic performance,
there is a lack of urgency for economic cooperation between the municipalities in the
Munich Metropolitan Region. It is a challenge
to define a so-called ‘win-win’ situation that
stimulates economic cooperation between
the municipalities. It is questionable, to
what extent cooperation is required in order
to stimulate the urban competitiveness of
the region, and to what extent is competition not any problem. The association of
MMR tries to stimulate cooperation between
municipalities in the region, but this institute
has not (yet) the formal power to force the
municipalities. However, starting with more
voluntary, informal, collaborations might be
a good step in the right direction.
to live in a green environment with low
housing density;
-- The increase of the population may
become even more worrisome when
the trend towards smaller households is
taken into consideration. There is a lack
of space within the city of Munich and
there are only limited possibilities with
regard to urban development (vertical
and horizontal). This development makes
it (more) difficult to maintain the high
quality of environment in Munich;
-- The population- and employment growth
– and the related demand for space (for
offices and for houses) – may result in
rising land prices and, consequently, in
rising real estate prices and/or higher
housing rents. Munich may become too
expensive for lower income groups (and
causing increasing poverty, an increase
of social inequalities and an increasing
income gap between low and high skilled
workers);
-- When the supply of housing will not
keep pace with the growing demand
and housing becomes too expensive,
people are forced to move to the cheaper
surrounding areas of Munich. This causes
a larger distance between home and work
which increases more commuting and
traffic which leads to an increase load
on public transport. Caused by a lack of
a metropolitan government authority,
there is not any policy yet to deal with
the expansion of the daily urban system.
There is a chance that Munich will grow in
a highly unsustainable way, with strong
commuting patterns between the city and
the surrounding municipalities.
Adverse effects of economic growth
Economic growth is often seen as positive in
the sense that it – for example - creates
employment and attracts foreign direct investments. However, also the possible adverse effects of economic growth need some
attention. Some of these adverse effects are
already appearing on the surface and when
no policy is developed the effects may cumulate to – for example – an increase of
unemployment, social inequality or migration of highly skilled workers towards other
regions in Europe. Perhaps the main risk
factor – linked to the economic growth – is
the high population (and employment)
growth. Although an increasing number of
inhabitants is not by definition negative,
some unwanted developments may be related to it. For example:
-- Due to a greater demand for (highly
skilled) workers and a substantial growth
of new SMEs, an increasing number of
people may move towards Munich which
leads to increasing use of space in the
city region. This may contradict with the
desire of many highly skilled workers
In Munich there is already awareness of the
possible adverse effects of the economic
growth. For example, in the 5th housing program the municipality is taking the problems
67
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- such as lack of social housing, rising prices
of living etc. - into account. However, some
important questions remain to be answered,
such as: What are the instruments the municipality of Munich may use to deal with
these adverse consequences of growth?
Which policy actions is the city of Munich
taking to deal with the adverse consequences of economic growth? Is the 5th housing
program sufficient or does the city of Munich
need to take other policy actions as well?
5.5Conclusions
Munich and its surrounding metropolitan
area are economically vital and its economic
prospects look good. The city- and the metropolitan region of Munich are innovation
hotspots. Two – interrelated – types of explanations for the economic success of MMR
can be given:
-- The Munich mix: i.e. its economic
diversity and strong firms, plus
investments in infrastructure and human
capital;
-- Institutional thickness: i.e. an effective
‘active state’ and the right kind of
institutional thickness, especially at
State- and metropolitan region level.
When the economic prospects for the future
are taken into consideration, the general
impression is that these look good.
Nevertheless, Munich and its metropolitan
region are facing numerous challenges. For
example, improving the infrastructure of the
North-East corridor or finding a balance between economic growth and a clean and
green environment. For some of these - and
other - challenges the route to achieve them
is clear. For others new knowledge and research is essential.
The economic policy of the State of Bavaria
is strongly focused on clusters, especially
high-tech clusters. Taken into account the
high number of patent applications and a
high amount of money spend in R&D, the
cluster policy seems to be fruitful. For future
research it is interesting to analyse the selection criteria of these clusters and the ‘tailor-made’ policies that the State of Bavaria
defines for each specific cluster. Perhaps
these tailor-made policies are the secret
behind Munich’s economic success?
69Although it falls outside the scope of the ‘economic
vitality’ research- and knowledge agenda,
Thierstein and Reiss-Schmidt formulated two
interesting research questions regarding landuse: (1) Which preconditions are necessary in
decentralised federalist nation states in order to
get a core city and its neighbouring suburbanised
communities interested in a sustainable land use
policy? (2) What win-win situations are conceivable
that make autonomous municipalities deliberately
give away some of their planning competencies in
exchange for overall benefits of more sustainable
land use? (see Thierstein, A. and S. Reiss-Schmidt
‘Urban Development Management in Munich,
Germany’, ISOCARP Congress 2008, Dalian/China).
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This case study leads to the following knowledge- and research questions:69
-- The economic resilience of the Munich
Metropolitan Region is impressive. Munich
survived the financial and economic crisis
in 2008 without any serious damages so
far. Because of the current EURO-crisis,
the financial crisis is not endured definitely.
One of the unique elements characterizing
the city (and metropolitan region) – and
contributing to its economic success of
Munich – is the Munich Mix. Regarding to
its success could there also be a ‘Madrid
Mix’ or a ‘Bucharest Mix’ or etc.?
68
-- How should (inter)national networks
operate to disseminate knowledgeenhancing innovation?
-- Does another – or a new - spatial
scale provide new and better economic
opportunities?
-- What are the right circumstances and
conditions (governance, education,
spatial, infra-structure) for a city (or
metropolitan region) to achieve a ‘brain
gain’?
-- Why does ‘institutional thickness’ pay
off in the Munich Metropolitan Region
and which motives and/or (economic)
circumstances have led/or leads to this
informal collaboration between public and
private partners?
-- Formal politically binding at the
metropolitan scale is not (yet) successful,
within the metropolitan region of
Munich. Nevertheless, the metropolitan
region of Munich is characterized by
high sustainable economic growth.
This raises the question how a region
can be economically attractive without
a politically institutionalized regional
association but with many informal
networks, platforms and cooperation
forms.
69
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6 Case study Madrid
6.1Introduction
is mainly based on academic articles written
by several academics of different universities in Madrid71 but also on reports written
by private and international organizations.
Besides desk-research, the case study is
based on in-depth interviews with urban and
economic experts in Madrid. The interviewees represent both the public and the private domain.
The real estate bubble, together with the
recent financial and economic crisis has
meant that Spain has become an economically weak and vulnerable member of the
European Union. This is especially evident
when one looks at the unemployment percentages. These are, like in many other
southern European countries, very high in
Spain. Youth and migrants have especially
been hit hard by the effects of the crisis.
Madrid, the capital city of Spain, is one of
those cities dealing with a problematic labour market situation; 40 per cent of the
youth is currently unemployed.
6.2 Economic Vitality of Madrid
Madrid is the biggest and most populated
metropolitan area of Spain (see Table 6).
Madrid’s population has grown substantially
over recent years, particularly due to a high
influx of foreigners. Foreign citizens currently account for around 18 per cent of the
city’s total population. The largest group of
immigrants originates from South American
countries. Madrid’s metropolitan area can be
easily separated into two parts: the more
industrial/lower income per capita Southern
and Eastern part and the more prosperous
Western and Northern communes. The
Madrid Metropolitan Area can be typified as
a solar system including a huge city in its
centre. The municipality of Madrid is the key
actor in the politics of the area, in a con-
Madrid is an interesting case study for EMI’s
Economic Vitality Agenda given the stark
change of situation it has undergone; the
urban economy has been strongly affected
by the recent financial and economic crisis
whereas before it was seen as one of the
promising growth poles within the European
Union. Madrid is, with approximately 3.3
million inhabitants, by far the biggest city in
Spain. The City of Madrid accounts for 51.2
percent of the population of the Autonomous
Community of Madrid. This metropolitan
area, with almost 6.5 million inhabitants,
represents the third largest metropolitan
area in Europe after Île-de-France and
Greater London. This case study discusses,
in the light of the current economic situation, the economic performance of the
Madrid Metropolitan Area.70 Particular attention will be given to the question what the
city of Madrid can do in response to the crisis and the huge problems of its labour market.
70The Madrid Metropolitan Area corresponds with the
administrative boundaries (Autonomous Region of
Madrid or Comunidad de Madrid).
71These articles, composed by José Luis García
Delgado from the Complutense University of
Madrid, are published in the book ‘Madrid, the
Economy of a Global Region’. It was published by
the ‘Comunidad de Madrid’ in 2009. Although the
book was published just before Spain was hit by
This case study is based on desk-research
and in-depth interviews with key-actors in
the Madrid Metropolitan Area. Desk-research
the financial and economic crisis, the interviewees
considered the articles as an important summary
of Spain’s economy.
71
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Table 6 Spanish Metropolitan Areas
Metropolitan area
Total population
Number of
municipalities
Central city population
(as % of total)
Madrid
5.135.225
52
2.938.723 (57%)
Barcelona
4.391.196
165
1.503.884 (34%)
Valencia
1.359,743
45
738.441 (54%)
Sevilla
1.160.241
24
684.633 (59%)
Source: Ministry of Housing (2005)
stant power struggle with the ‘autonomous
community’.72 The tension between the two
72Spain is divided into 17 regions or ‘autonomous
institutions is a structural condition, which
cannot be mitigated by the fact that the
same political party (the conservatives) has
been governing the city and the region for
over a decade.
communities’ which have competences over a
wide range of issues, including housing and urban
Some economic facts and figures
and spatial planning. In addition, Spain has more
Until 2008 the Metropolitan Region of Madrid
was one of the strongest economies within
the European Union. The national economic
growth at the start of the 21st century was
exceptional and it turned the city of Madrid
into the most dynamic region of Spain.
If one thing is to characterise Madrid’s
economy over the past few years it must be
the strong, dynamic and sustained economic
growth helping Madrid to become the
leader of Spain’s economy and to become
a member of select group of regions that
enjoy the greatest economic development
within the European Union.73 Madrid’s
economic performance was impressive
during the period 1990 to 2006, particularly
between the years 1996 and 2006.74
Population, employment and Gross Domestic
Product (GDP) rose substantially. Moreover,
this growth was more robust than in Spain
and West-Europe, and the Metropolitan
Average.75 In terms of population growth
(annually 2.1 per cent) and employment
growth (annually 3.7 per cent), Madrid
was one the best performing metropolitan
regions in Europe.76 Thanks to the
than 8 thousand municipalities. The ‘autonomous
communities’ can choose to set up a metropolitan
area. This is a voluntary mechanism in order to
better structure its territory. The idea behind it
is that co-ordinated action among municipalities
leads to a more effective and efficient delivery of
outputs, because these localities are interlinked.
Very few ‘autonomous communities’ have set up
a metropolitan area since the actors responsible
to initiate the process have no incentives to do so,
see EUKN (2010), Urban Development in Europe,
A survey of National Approaches to Urban Policy
in 15 EU Member States; see also C. Navarro
(2010), Spanish metropolitan areas and the case
of Madrid.
73José Luis García Delgado (2009), Madrid The
Economy Of A Global Region.
74Madrid International Benchmarking rapport
(2007).
75The Metropolitan Average is based on the
economic figures of the following cities: London,
Stockholm, Dublin, Helsinki, Munich, Boston,
Stuttgart, Barcelona, Vienna, Rome, Frankfurt,
Lisbon, Milan, Paris, Athens.
76Population growth can be mainly explained by the
large influx of migrants.
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Table 7
Annual growth of GDP in percentages
2005
2006
2007
2008
2009
2010
Madrid
4,3
4,3
3,4
1,0
-3,3
- 0,6
Spain
3,6
4,0
3,6
0,9
-3,7
- 0,1
Source: Madrid Economy 2010, Observatorio Económico.
impressive number of jobs created during
the period 1996 to 2006, Madrid was able
to solve social problems that were related
to the previously high unemployment rate.
Between 1996 and 2006 the unemployment
rate in Madrid fell by more than 13 per cent
to a level of 6.4 per cent. Moreover, during
the same period, the GDP rose by almost 4
per cent per year, whereas the expansion of
the GDP for the Metro Average amounted
to 2.5 per cent per year. In this period,
the Metropolitan Region of Madrid enjoyed
important and solid business growth; the
entrepreneurial spirit was in actual fact the
true motor of economic activity.
-- the lack of agrarian, energy and mineral
primary resources
-- the distance from the main ports of the
peninsula
-- the absence of direct access to river and
sea transport77
In the OECD Territorial Review - published in
2008 just before the crisis actually started
to affect European urban economies - several concerns regarding Madrid’s economic
growth on the longer term were addressed.
These main challenges include:
-- a relatively low productivity level
-- an insufficient specialization in high
value-added manufacturing activities
-- a low innovation capacity
-- job-skills mismatches (especially for
migrants)
-- a shortage of rented housing
Since Spain opened up to outside markets
and joined the European Union, Madrid has
become one of the main links between the
national economy and international markets.
It has become the prime location for many
Spanish companies, a large number of multinationals based in Spain and the majority
of financial institutions operating in the
country. Madrid is, due to its geographical
location, also a bridge between Europe and
Latin America as well as between Europe
and North Africa for the movement of people
and the transport of goods. The main three
factors explaining Madrid’s economic makeup (location, status as capital and being the
crucial centre of a transport and communications network) will together more than
compensate for the unfavourable foundation
of Madrid’s economy:
-- a poor immediate rural environment
A relatively low labour productivity is a concern across the country, but since 2011, the
growth in labour productivity in Madrid has
been below the Spanish national average .
According to the OECD, this can be explained by certain structural bottlenecks on
the labour market such as an overuse of
short-term contracts. Besides, Madrid is
characterized by a mismatch between edu-
77Miguel Carrera Troyano & José Luis García Delgado
(2009), Determinants of the evolution of Madrid’s
economic structure, in: Madrid The Economy Of A
Global Region.
73
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cation and the labour market (i.e. the required job skills). As one of the consequences insufficient specialization in high valueadded activities has limited the increase of
the productivity level.78
Figure 11 Gross Value Added (in percentages)
The impact of the crisis
Table 7 illustrates the Gross Domestic
Product (GDP) of Madrid and Spain from
2005 to 2010. The impact of the crisis is
evident. In 2009 the annual GDP growth
of Madrid was minus 3.3 per cent. This
negative growth rate mirrored the overall
Spanish GDP rate, lying at minus 3.7 per
cent. Although 2010 is showing first signs
of recovery in Madrid (annual growth of
minus 0.6 per cent) the situation is still
not altogether promising. For 2011, the
forecasts point to a positive growth figure;
about 1 per cent in the City of Madrid and
0.8 per cent for Spain as a whole.
In comparison with the average GDP per
capita of other metropolitan areas across
Europe, the GDP per capita in Madrid is 7
percentage points lower. Madrid should also
be concerned about its labour productivity,
which is currently 25 per cent lower than
European metropolitan area average. This
negative productivity gap is partially compensated by an above-average number of
hours worked (9 per cent above the average).
78OECD (2008), OECD Territorial Reviews: Madrid,
Spain.
79La Economía de la Comunidad de Madrid:
Diagnostico Estratégico, 2011
80La Economía de la Comunidad de Madrid:
Source: Madrid Economy 2010, Observatorio
Económico.
GDP per capita and labour productivity are
important measures of a region’s economic
strength. Based on these measures, it can
be argued that the Metropolitan region of
Madrid - after years of growth – is now facing a dramatically decreasing economy. The
GDP per capita from a 2.1 per cent positive
growth figure in 2006 to a negative 4.1 per
cent growth figure in 2009, which of course
constitutes a huge gap of 6 percentage
points.79 Simultaneously, whereas the demand for employment still increased by 4
per cent in 2005, it decreased by 6 per cent
in 2009.80 Between 2006 and 2010 the unemployment rate increased dramatically,
from 6 per cent in 2006 to 16 per cent in
2010.81 Recent data show that the unemployment rate in the first quarter of 2011 is
hovering around 21 per cent, which is currently the highest unemployment rate in the
developed world.82 Section 2.3 will further
discuss the labour market situation.
Diagnostico Estratégico, 2011
81Instituto de Estadistica, The Region of Madrid in
figures.
82The Economist (June 2011).
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6.2.1 Economic structure
Figure 6 illustrates Madrid’s strong orientation towards its service economy. About 85
74
per cent of the value added of the economy
comes from the service sector and almost
78 per cent of the region’s workers are employed in the tertiary economy.83 Services
such as banking, real estate and business
services, transport and communications are
the strongest sectors within the urban economy of Madrid.84 Madrid is also working hard
on further expanding sectors that have a
promising outlook such as biotechnology
(see box 1) and renewable energies. Madrid
has various characteristics that make it an
ideal region for services. Many (head)quarters of important (inter)national companies
are located in Madrid. The bulk of Spain’s
global investor flow is concentrated in
Madrid. In 2009 the Madrid region accounted for 32.4 per cent of incoming investments to Spain and 69.7 per cent of outgoing investments.
Madrid’s international airport especially has
boosted tourism numbers. New runways and
a new terminal (opened in 2006) have increased the capacity of Barajas Airport considerably; it can now accommodate 70 million travellers on an annual basis, making
the airport fit for use for the next 15 years
at least.
The region of Madrid has a high level of urbanisation bringing with it many advantages
such as cultural events, a high level of education (14 public and private universities),
scientific and health facilities. Madrid’s urban
infrastructure, the concentration of its economic activities and its varied offering of
public and private services, creates a very
advantageous environment which helps actors make the most of the economics of agglomeration that feed economic growth.85
Madrid is also Spain’s heaviest investor in
Research & Development (R&D). In 2008
the metropolitan area of Madrid invested
3.892 million euro in R&D, representing 26,5
per cent of total national investment. Private
companies are responsible for 57,7 per cent
of total investments in R&D.
Location as a determining factor
The fact that Madrid is the capital of Spain is
a determining factor in deciding on the location of those services that need to be close
to decision-making and information flows
within the central public administration.
Madrid is the point of entry and exit for
many services; a large number of serviceorientated multinationals have an office located in Madrid. They are either following
the international expansion movements of
their clients or have decided on their own
account that the region is strategically advantageous. Madrid is considered to be an
attractive location when it comes to setting
up commercial ventures with a more global
outlook such as linking to the Iberian
Peninsula, Latin America and North Africa.
The region and capital city of Madrid have
been very distant from the main axes of
European development. Their privileged position in the centre of the peninsula was
clearly limited when the perspective was
increased to the whole territory of the EU.
83The ‘tertiary economy’ refers to the group of
different economic activities that does not fit
within the sectors of agriculture or industry.
The service economy – together with its
excellent network of infrastructure – is an
important asset for the Metropolitan Region
of Madrid in the way of attracting tourism.
84Based on data from 2005.
85Francisco Javier Sáez Fernández (2009), Madrid
within the territorial structure of Spain and Europe,
in: Madrid, The Economy Of A Global Region.
75
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Box 1 Best practice
Biotechnology in Madrid87
The largest biotechnology cluster in Spain
is located in Madrid; Madrid is leading in
the number of companies, turnover and
private investment in Research and
Development (R&D) at national level and
is fifth in the European ranking of patent
applications. Madrid’s Bio Region comprises about 400 companies, providing
direct employment for 24.000 people and
an annual turnover of 4.000 million euro.
The cluster also has a public R&D system
which consists of thirteen research centres recognised at international level, five
universities and more than 5.000 researchers employed and investing more
than 500 million euro a year.
However the consolidation of its industrial
sector based on high technology industries,
the development of its transport and communications infrastructures, its role as capital of the fifth most populated country in the
EU and its strategic geographical position
(as gateway to Africa and Latin America)
have made Madrid a prosperous region and,
on the side-lines of the great axes of expansion, one of the centres with the highest
growth rates within the EU.86
the biotechnology cluster, for example by
improving the infrastructure and by financing international promotion, technical assistance and training. The most recent effort to
boost the sector include the creation of
Madrid Biocluster with partners such as
Madrid Development Institute, PromoMadrid,
Madrid City Council, through its department
Madrid Emprende, Madrid Science Park, the
National Centre for Biotechnology, and also,
more than twenty companies among which
there are some of the largest and most active in the sector.
Based on the economic facts and figures
presented above, it can be concluded that
Madrid has been hit hard by the recent financial and economic crisis. The bursting of
the real estate bubble or housing bubble - in
combination with the economic crisis worldwide - has had (and still is having) an enormous impact on the economic competitiveness strength of Spain in general, and the
Metropolitan Region of Madrid in particular.
Currently, Spain has difficulties in fulfilling
its financial obligations and the country
might have to consider requesting financial
support from the EU. In a period of three
years, Spain lost its position as one of the
leading and strongest economies of Europe.
Up until the year 2009, the economic performance of the Metropolitan Region of Madrid
strongly increased but due to the crisis, the
situation changed dramatically.
Both the central, regional and local government offer support for the development of
6.3 Madrid’s problematic labour
market situation
86Francisco Javier Sáez Fernández (2009), Madrid
Unemployment rates tend to be higher in
cities. Moreover, cities often act like magnets for youth and therefore the share of
youth in the total population of cities is
above average. Urban Audit data suggests
within the territorial structure of Spain and Europe,
in: Madrid, The Economy Of A Global Region.
87Barometro de economia de la ciudad de Madrid 25,
third Trimestre 2010.
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that, in general, the cities with the fastest
population growth are those with the lowest
share of elderly people and, correspondingly,
the highest share of children and young
people.88 Madrid is, amongst others, a typical example of a fast-growing and young
city. Although having a young population
may seem positive from a labour market
perspective, it has some dangers in it as
well. For example, many European cities
have increasing concentrations of young
people who have dropped out and are no
longer engaged in education, some form of
employment or training. Especially during
times of economic crisis when an increasing
amount of companies find themselves having to downsize and dismiss qualified workers, more and more young people looking
for first-time employment or vocational
training placements will find themselves
standing in front of closed doors.89
people are currently jobless. This dramatic
situation on the labour market situation
strongly affects the competitiveness of
Spanish cities. Although instruments to
stimulate the labour market are mainly in
the hands of the national government, cities
can (and should) play a role as well. Cities
should play a role in stimulating the local
economy and in creating jobs for their inhabitants. This is not an easy task especially
because of limited financial means. A first
necessary step in defining a role for cities is
to take a closer look at the unemployment
situation.
Sharp increase in unemployment
88The Urban audit data collection system provides
Youth
In Spain there is a very high unemployment
rate among young people, in particular
those between 15 and 24 years old with a
After steady employment growth since the
1990s, Spain has experienced the sharpest
increase in unemployment during the crisis
of all OECD countries amplified by structural
problems of the labour market. The current
labour market situation has resulted in
a rigid dual labour market with adverse
effects on unemployment and productivity.
The large drop-out rate concerning lower
secondary education is an important factor
explaining the high unemployment rates
among young workers. One effective tool
of keeping young people out of a depressed
labour market is making sure they have
better access to training. Besides this,
the matching of people to jobs in general,
notably through the public employment
services, must be made more efficient.90
information on different aspects of the quality of
urban life in a cross-section of Europe’s cities. The
Urban audit is the result of a joint effort by the
participating cities, the statistical offices belonging
to the European statistical system (ESS) and the
European Commission’s Directorate-General for
Regional Policy.
89It is interesting to analyse the relation between
labour market and economic performance both
from a scientific and an urban practice perspective.
For example, a question that comes up often is
which policy instruments are available at the local
level to increase labour productivity and combat
(youth) unemployment? Another interesting
research objective is the relation between the
formal and informal economy. There is less
information about the functioning of informal
economies and it is interesting to analyse the
relation between informal activities and a crisis.
Spain is dealing with the highest number of
unemployed in recent history; five million
90Wölfl,S. and J.S. Mora-Sanguinetti (2011)
‘Reforming the Labour Market in Spain’, OECD.
77
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Figure 12 Demonstration of youth against budget cuts of Spanish government
Source: Shutterstock 77966464
very low level of education. The high level of
youth unemployment in Spain, as compared
to other countries, reflects to some degree
the weak employability of early school drop
outs and may also relate to a high incidence
of temporary contracts among young workers.91 The official registration of youth unemployment in Spain is well over 40 per cent.
This number includes only those individuals
who are officially registered as unemployed.
It is good to point out that many people do
not officially register as being unemployed
as they have no incentive to do so. A high
share of the youth is employed ‘badly’; either in part-time work or in temporary contracts lasting only a few months. This often
results in a ‘yoyo’- effect where they con-
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tinually fluctuate between employment and
unemployment. Some even say that this
situation on the labour market constitutes
an actual change in the definition of youth
itself; de facto adolescence lasts for increasingly longer periods of time as youth are
unable to make the transition to regular
working life.
The situation for migrants is particularly
dire as they are often among the first to
have to leave their jobs when the first job
cuts take place. What’s more, they generally
have much less, or no, family support network to fall back on for basic survival. Plus,
the present economic-social climate is not
exactly conducive to pro-immigrant attitudes
and politics.
78
6.3.1 Economic sectors
September 2010, aims to reduce the duality
in the Spanish labour market by implementing several measures. Besides reforms of
employment protection, the 2010 labour
market reform aims also to improve the
adaptability of the labour market to
shocks.94
The effects of the crisis on employment are
spread across sectors, with construction and
some manufacturing sectors being hit hardest. The significant loss of employment in
the construction sector and in financial and
real estate services reflects, among other
things, the sharp loss of jobs that had earlier been created due to and during the
housing boom.92
What should Madrid do?
In order to recover from the economic
downturn, Madrid should tackle various urgent problems. One example is supporting
employment-programmes and/or training
facilities to improve the qualifications and
skills of the labour force. By doing so, the
gap between demand and supply of labour
can be bridged and unemployment in the
Madrid region can be reduced. However, one
of the main problems is that Madrid’s municipality is lacking enough (financial) incentives to open up the locked labour market.
Close cooperation with the private sector
and universities might be one of the solutions to improve the situation on the labour
market. From an academic point of view, the
relation between labour market and productivity and the economic performance of a
city is highly interesting.
According to the OECD, one possible solution for this problem is to allow wages to
become more flexible helping the labour
market to absorb and reallocate workers
more effectively. The idea is that this would
lead – on the one hand - to lower wages in
sectors where there is an oversupply of
available workers whereas – on the other
hand - the wages would increase in those
sectors where demand for labour exceeds
the supply of labour. In due time this would
– ideally – reduce the mismatch between
workers and available jobs which – for example – may facilitate the shift towards
more export-led economic growth.
Some measures
The Spanish government has approved a
series of measures to stimulate the economic recovery and to alleviate the negative
burden of the crisis on the labour market
from April 2008 onwards,. These include:
-- wider unemployment benefit entitlements
-- subsidies for hiring targeted groups
of unemployed workers on permanent
contracts and promoting the creation of
jobs in strategic sectors
-- financial incentives to promote selfemployment
-- the extension of the resources of the
public employment services93
How does Madrid attempt to reduce youth
unemployment? To name one example; the
introduction of tailor-made local training
programmes. These programmes focus on
the upcoming needs of a specific area. For
91Wölfl,S. and J.S. Mora-Sanguinetti (2011)
‘Reforming the Labour Market in Spain’, OECD
92Wölfl,S. and J.S. Mora-Sanguinetti (2011)
‘Reforming the Labour Market in Spain’, OECD, p.6
93Wölfl,S. and J.S. Mora-Sanguinetti (2011)
‘Reforming the Labour Market in Spain’, OECD
94Wölfl,S. and J.S. Mora-Sanguinetti (2011)
The labour market reform, approved in
‘Reforming the Labour Market in Spain’, OECD
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example, when a hotel is being opened, the
programme (re)focuses the training to ensure that a suitable number of young people
in the relevant skill sets gain the necessary
qualifications. However, the main challenge
facing Madrid is how to create jobs and/or
new enterprises. These jobs need to be
quality jobs which give access to stable and
higher incomes. In the short-term it is also
an option for the city of Madrid to focus on,
for example, firms such as call centres,
gaming industry, ICT, tourism offering
(mainly) jobs for younger people. These
jobs could perhaps function as stepping
stones towards more stable, highly paid
jobs.
6.4Conclusions
Madrid can be considered as a strategic and
vital cog in Spain’s economic structure.
Besides, Madrid constitutes the basic platform for the accentuated internationalisation
of Spain’s economy.95 Although the Madrid
Metropolitan Region makes up less than 2
per cent of the national territory, the region
is still home to 14 per cent of the total population and provides 18 per cent of the total
Gross Domestic Product (GDP). Moreover,
the Madrid Metropolitan Region is leading in
terms of the creation of employment and its
income per capita lies over 30 per cent
above the national average and the average
of the EU-25.
Madrid has highly-developed communication infrastructures, making the city the
95José Luis García Delgado (2009), Madrid The
Economy Of A Global Region.
96Luis Rubalcaba & Gisela Di Meglio (2009), The
service sector, in: Madrid The Economy Of A Global
Region.
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leading logistics hub for both Spain and all
of southern Europe. Madrid’s role as a great
logistic centre and Spain’s capital of telecommunications is without a doubt reinforced by its status as political and administrative capital. The service industry not only
plays a major role in Madrid’s economy, but
the diffusion of its benefits to the rest of
Spain has to be taken into account as well.
It is important to note that the region is a
centre of economic wealth that spreads to
the whole of Spain, through income and
services.96
Although the above still stands, the Madrid
Metropolitan Region has been hit hard by
the economic crisis. It can be asserted that
the crisis has illuminated the vulnerable
parts of the economy. Besides it has – once
again – shown that the functioning of the
labour market is weak and needs strong
reforms.
6.4.1 SWOT-analysis of the urban
economy
This paragraph discusses the strengths and
weaknesses, opportunities and threats of
four main features of Madrid’s urban economy. These features have been selected on
the basis of desk-research and interviews
with key actors in the city-region. The SWOT
is defined in light of the current economic
situation of Madrid. The results are displayed in Table 8.
As became clear in the previous chapter,
the situation on the labour market is considered as the most urgent issue. High unemployment figures, especially among youth
and migrants, a strong mismatch between
demand for and supply of labour and a fiscal
system discouraging entrepreneurship are
all ingredients that have culminated in a
large unemployment pool consisting of people with very limited chances to escape their
labour market situation. Although this is a
80
Table 8SWOT-analysis
Labour market and education
Strengths
Large human capital environment reinforced by high rates of R&D investments.
Capacity to provide good (living) circumstances (reinforced by an excellent operating
daily urban system) for immigrants/expats in order to fulfil the demands of highly skilled
workers.
Weaknesses
High level of unemployment, especially amongst youth.
High percentage of lower educated people.
Mismatch between employment supply and demand.
Less professional training for employees.
Fiscal system discourages entrepreneurship and self-employment; no credit market
(anymore) to stimulate it.
Laws obstruct flexible labour market.
No universities from Madrid in the international ranking.
Opportunities
Enhance the level of education in order to bridge the gap between education (supply) and
the labour market (demand).
Stronger focus of the universities on market demands.
Increases the percentage of employees with secondary education to improve innovation
potential.
Improve the knowledge of the English language.
Reduce regulations to enhance a flexible labour market.
Enhance the skills of the second and third generation of migrants.
Threats
Expansion and increasing importance of the informal (black) market.
Increase in corruption.
Lack of (financial) incentives to improve the current labour market situation and to make
high investments in education.
Economic structure and infrastructure
Strengths
Strong entrepreneurial mentality combined with open mindedness and high level of
education.
A diversified economic structure (particularly in the service sector).
Dominant trade fair centre in Poland.
New economic spin-off due to EURO 2012 European Football Championship Tournament.
Weaknesses
Relatively few global investors and enterprises in the high-tech sector.
Lack of integration of knowledge into the economy, partly due to large number of small
enterprises.
Suburban phenomenon resulting in declining inner city population heavily based on
motorized transport.
Insufficient and undeveloped daily urban system, due to a lack of an efficient system
connecting the region and the airport.
Opportunities
To become an international centre for congress, culture and sports (emphasized by the
EURO 2012, the UEFA European Football Championship)
Improvement of the Airport capacity and completion of the Berlin-Poznań-Warsaw
motorway can work as leverage for economic growth.
Create more economic spin-off from operating as a gateway between northern/southern
and western/eastern Europe, due to its geographical location.
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Economic structure and infrastructure
Threats
Continuing exodus of companies and inhabitants to suburban areas, damaging economic
potential of the central city. A strong central city is vital for metropolitan ambitions. It also
causes a decrease in tax income for the city, which hinders the development of important
(economic) projects
A decreasing quality of the environment, due to increased and denser car-oriented traffic
producing more carbon emissions and noise pollution.
Public transport infrastructure investments not in pace with urban sprawl in the Poznan
metropolitan area.
Poznan may not profit from the increasing global importance of high-tech, innovative
sectors due to its current emphasis on traditional, small SMEs
Box 2
Best practice: Madrid’s renewable
energies sector97
The renewable energies sector in Madrid
(and Spain) has recorded significant
growth in recent years. Despite the uncertainty arising from the present crisis,
the outlook for the future remains favorable. The sector has promoted job creation, which amounted to over 32 thousand people employed in the renewable
energies sector in 2008, representing 1,7
per cent of the total employment in the
city. The main renewable energy subsectors where Madrid companies work are
photovoltaic solar technology and solar
thermal energy, followed by wind power
and biomass energy.
very gloomy picture, there may be some
possible solutions. Perhaps the most important ones focus on education and training
and a reduction of the labour laws and regulations. Whereas the labour market can be
considered the weakest element of the
economy in Madrid, so can accessibility and
infrastructure be considered the strongest
elements. Madrid has invested strongly in a
sophisticated public transport system and a
modern international airport. Moreover,
there are opportunities to make better use
– also as for economic profitability – of
Madrid as a gateway to Latin-America and
North-Africa. Another challenge concerns
the involvement of private partners to start
public-private constructions for investments.
Last but not least, Madrid is also known for
its renewable energies sector. The promising
outlook of this sector – as well as the promising outlook of the biotechnology sector
– may serve as examples and inspiration for
other sectors (see box 2).
Four of the world’s seven leading wind
turbine manufacturing companies have located their corporate and operational headquarters in Madrid. Madrid has also significant factors which can boost the development of the sector in the city such as the
availability of highly qualified human capital,
a high level of concentration of potential
clients’ headquarters, and proximity to institutional and administrative decision-making
centres.
6.4.2 Knowledge and research questions
97Based on Madrid Economy Barometer 22nd Edition
(October 2009).
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Less than three years ago, the economic
forecast of Madrid was characterized by
82
Table 9
Observations of the case study translated into challenges, research questions and policy
implications.
Observations
Challenges
Knowledge and
research questions
Possible policy
implications
Productivity of Madrid’s
Increase the labour
productivity and reduce
unemployment
What is the correlation
between labour
productivity and the
local sector structure of
a city?
Transform the urban
economy from low
quality service towards
a more high quality
service sector
Madrid’s labour market
is locked
Create more flexibility
and dynamics in the
labour market
Which measures
maximize flexibility and
dynamics
More and intensive
collaboration between
local, regional and
national government
with regard to labour
market policy
The crisis strongly
affects Madrid’s urban
economy (in terms
of GDP, FDI and
productivity)
Recover from the crisis
by achieving economic
growth and by creating
a more stable urban
economy
What opportunities
do deprived urban
economies have to
recover from a crisis?
Create a more
integrated and stable
urban economy with less
interference from the
government
Family structures in
Spain seem to play
an important role
in stabilizing the
social climate within
communities
Make optimal use of
these family structures
which can function as a
‘safety net’ in times of
crisis
What is the added value
of family structure in
stabilizing the social
climate?
Support of these family
structures in order to
avoid social unrest in
the city
The current ‘credit
market’ is locked for
new entrepreneurs
Develop a new
and sustainable
credit market in
order to encourage
entrepreneurship and
start-ups of SMEs
Which financial
incentives are attractive,
accessible and
sustainable in order to
enhance the start-up (or
expansion of current)
SMEs?
Municipality should
give more initiative
to the private sector
and, at the same
time, try to stimulate
entrepreneurship
The informal (black)
market plays an
important role in
the current declining
economy
Get more control on the
informal economy and
enhance the accessibility
to the formal economy
What is the role of the
informal market in a
declining economy, and
how is it interrelated
with the formal
economy?
Municipality should try
to get more grip on
the informal economy
and try to decrease
corruption
labour force is low99
growth of R&D investments, growth in
Foreign Direct Investments (FDI), growth in
GDP per capita and growth in available jobs.
At that time, there were genuine expectations that Madrid might develop as one of
the leading financial sectors of Europe. Due
to the crisis, the current economic situation
of Madrid is less positive. The construction
sector collapsed as a result of the burst of
the real-estate bubble, and Madrid’s rela-
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tively high share of low-productivity sectors
turned out to be less profitable. Many construction workers became unemployed and
were not able to adjust to the new economic
situation. In addition, due to the economic
downturn, the supply chain market (hotels,
restaurants, food sector) was forced to fire
employees. The demographic expansion of
Madrid, mainly due to immigration, has had
a negative impact on GDP per capita and
productivity. The growth of the labour force
turned out to be uneven concerning the
amount of available jobs.98
Madrid is facing numerous challenges in
dealing with the city’s economic downturn.
The previous chapter already summarized
these challenges according to specific
themes. As noted in the introductory chapter, the aim of this case-study is to indicate
what knowledge and research is needed to
deal adequately with these challenges. For
some of these challenges, the route to
achieve them is clear whereas for other
challenges (more) scientific research is required. Scientific research can provide useful
insights into the causalities between various
economic indicators and impose policy recommendations to cities.
This paragraph defines research questions
that are of interest for academics and urban
practitioners. By defining research questions
and policy implications it is possible to combine ‘research’ with ‘urban practice’. Table 9
translates the main observations on Madrid’s
economic vitality into future challenges of
the urban economy, into fundamental research questions and into policy implications.
98Madrid, The Economy Of A Global Region, Urs
Müller & Marc Bros de Puechredon BAK Basel
Economics, 2009
99The GDP per capita is 7 per cent lower than the
Metro Average and the productivity of Madrid’s
labour force is 25 per cent lower than the Metro
Average.
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84
7 Case study Poznan
7.1Introduction
Europe and is an important junction for both
interregional and international routes. This
is important because according to the
European Spatial Development Plan, economic development should be equally
spread throughout Europe, thereby reducing
the influence of the so-called Pentagon area
(Europe between London, Paris, Milan,
Munich and Hamburg) on Europe’s competitiveness.101 Poznan can act as the corridor to
connect the whole of Poland with Europe’s
economic centre.
This case study discusses the economic vitality of Poznan in Poland. As one of the oldest and largest Polish cities, Poznan is the
historical capital of the Wielkopolska Region
where the Polish State was born over 1000
years ago. In 2009 Poznan counted 554.000
inhabitants (fifth largest city in Poland), with
another 319.000 living in its conurbation.100
Since Poland’s economic transformation
from 1990 onwards and its accession to the
EU in 2004, new economic opportunities
have emerged for Poznan and Poland as a
whole. In comparison to the Western part of
Europe, Poland became an attractive country for investors and business due to its low
labour costs. Poznan is a city of international
fairs and conferences; the 2008 UN Climate
Change Conference is a good example of
this. The city is an important national and
European centre of industry, trade, culture,
higher education and science and is one of
the leading Polish cities in terms of its economy.
Poznan’s booming economy
Poznan and Poland as a whole can be characterized as a new economy with emerging
opportunities, due to the Poland’s post-communist transformation of government and
by it becoming a member of the EU in 2004.
Whilst combing data from the city of Poznan
and Eurostat, Poznan’s leading role in the
economy becomes evident: Poznan accounts
for 3 per cent of Poland’s Gross Domestic
Project (GDP) whilst the city only accounts
for 1,45 per cent of the total population
(2009), making it roughly twice as productive as Poland in general.102 Combined with
the current unemployment rate, which hovers around 3,7 per cent (the lowest rate in
Poland and Metro average) one can conclude
that the economy of the Poznan region in
general is doing rather well. The low unemployment rate suggests that Poznan, in
terms of available jobs, is suffering less
7.1.1 Poznan: three characteristics
Poznan’s gateway function
Poznan’s geographic location in Europe and
in the country provides the city with a privileged position. The city sees itself as the
meeting place of West-East and North-South
transportation routes, including the panEuropean transport corridors from Berlin to
Moscow and from Gdansk to Prague. The
city is situated half way between Berlin and
Warsaw; 160 km from the Polish-German
border. Poznan’s location within the sphere
of impact of Berlin, one of the largest agglomerations in Europe, is a vital factor in
the formation of mutual contacts important
for the city’s development. The city operates
and reinforces itself as a gateway to Eastern
100 City Development Department (2010)
Development Strategy for the City of Poznań to
2030
101 European Commission (1999) European Spatial
Development Plan
102 Data derived from website Eurostat and website
City of Poznan (facts and figures) (online
accessible: www.poznan.pl)
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Figure 13 Impression of the roundtable discussion in Poznan
from the current financial and economic crisis in Europe.
Poznan: Eastern Energy, Western Style
Poznan is an open-minded city with big ambitions, highlighted by its own slogan:
Eastern Energy, Western Style. The slogan
envisions a city with a strong entrepreneurial spirit, since the inhabitants have a strong
‘can do’ mentality. The city is really dedi-
cated to offer the best of both worlds and to
offer a sort of ‘fusion’ culture. The EU accession gave Poland many new economic opportunities to its mayor cities and provided
Poznan with new funds, projects and energy.103 Both the Region of Poznan and
Poland as a whole were able to enjoy significant and solid business growth. Poznan’s
efforts and planned investments are geared
towards its ambition of becoming an important economic centre of Poland and reinforcing the economic axes West-East en NorthSouth.
103 Presentation by Mr T. Kayser, Deputy Mayor of
Poznan, during the EMI roundtable discussion in
Research methodology
Poznan
This case study is based on desk research
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86
Figure 14 Impression of the roundtable discussion in Poznan
and a roundtable discussion in Poznan. Desk
research is mainly based on the
‘Development Strategy for the City of
Poznan to 2030’ written by the City
Development Department of Poznan in
2010.104 This development strategy describes, among other things, the present
condition of the city. It also provides a panorama of Poznan’s metropolitan character and
draws a vision to the year 2030. It was created in collaboration with a body of university scientists and local government officials.
Poznan’s inhabitants and businesses were
also consulted at various stages during the
conception of the Strategy about various key
elements. Besides the strategy, other scien-
tific articles and policy studies were taken
into account.
The roundtable discussion, hosted and organised by the city of Poznan and supervised by
EMI, was attended by urban experts from the
public, private and scientific sectors, all operating in the metropolitan area of Poznan.
During the discussion, the Deputy Mayor of
Poznan, Mr Tomasz Kayser, gave a
PowerPoint-Presentation about the state-of-
104 City Development Department (2010)
Development Strategy for the City of Poznan to
2030
87
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the-art of the economic vitality of the city
(see Figure 8 and 9 for an impression of the
roundtable discussion). The roundtable discussion was divided into two sessions; one
session focusing on reflection and the second
session focusing on the future.
Reflection:
-- Distinctive competitiveness strengths/
weaknesses of Poznan compared to other
cities or regions in Poland and Europe
-- Best practices and policies of Poznan over
the past years
-- Positive and/or negative effect of
becoming a member of the EU
-- The main objective of every city/
metropolis is to become an area of
economic vitality and competitiveness.
What are the main incentives of
urban policy for Poznan to establish
(or maintain) economic vitality and
competitiveness?
Looking ahead:
-- Prioritization of the objectives and/
or strategic program mentioned in the
Development Strategy for the City of
Poznan to 2030.
-- Which challenges/developments
(governance, education, social, others?)
need to be overcome to execute these
objectives and programs?
-- Use of research: what knowledge is
needed to underpin economic policies and
tackle the challenges and developments?
Structure of the case study
This case study discusses the economic performance of Poznan by analysing the local
economic structure of the city and its surrounding region and by focusing on the future challenges and threats to the city’s
competitiveness. In light of the current financial and economic crisis, Poznan’s urban
economy seems to be very dynamic.
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However, does this mean that Poznan has a
high degree of economic competitiveness
and that it (still) has the potential, in the
economic sense, to become one of the leading cities in Europe? Which policy ingredients is Poznan using to complement and
establish a balanced economy? The aim of
this case study is to define research questions that are of particular interest for academics and urban practitioners alike.
Scientific research can provide more insights
into the causalities between economic indicators and, combined with input from practitioners, also propose policy recommendations to cities based on this research.
7.2 Urban development of Poznan
Poznan’s urban development has been (and
still is) very much dependent on the opportunities derived from European funds.
Following Poland’s accession to the EU in
2004, the city of Poznan, as well as companies and organisations operating in Poznan
obtained over 1.6 billion Polish Złoty (PLN)
from the EU (± 370 million Euro). Poznan
has definitely benefited from these new opportunities. The greatest part of these
European resources has been dedicated to
the expansion of the infrastructure, the
transportation and sewage systems, scientific base, research and didactic programmes. Poznan is characterized by a
strong collaborative approach between various stakeholders. In other words, local government, business and key researchers from
various universities form a strong network,
or so-called triple helix, that has shown to
be stable over time.
7.2.1 Towards Poznan Metropolitan Area
As the capital of the Province of
Wielkopolska, Poznan plays a dominant role
88
in the development of the region as being the
administrative centre of the Province. The
Poznan metropolitan landscape stretches
further than the administrative boundaries of
Poznan. Poznan is surrounded by smaller
communities close connected to the city.
Poznan Metropolitan Area is characterised by
highly urbanised outlying areas; the urbanisation process has led to an increased developed area, which is 3,5 times as big as the
area was in 1945. In recent years, urban
sprawl has meant (economic) growth of suburban areas, but has, at the same time, also
contributed to population decline in the city
of Poznan itself. Infrastructural developments
have been mainly car-oriented and public
transport investments have been unable to
keep up with the pace of urban sprawl.105
ers, most notably the surrounding municipalities, so it remains unclear whether such
an integrated metropolitan approach is regarded as urgent by all stakeholders.
7.2.2 Urban plans and policies
The city of Poznan is aware of its potential
due to its strategic position in Poland and
Europe and is aiming to play an active and
substantial role in the new European open
market. In 2010 the City Development
Department defined the ambitions in the
‘Development Strategy for the City of
Poznan 2030’. The timeframe for this document spans over two decades, which corresponds to the period of time which has
elapsed since Poland’s post-communist
transformation of government. The goals of
Poznan’s city strategy are encompassed by
four general developments:106
-- Creation of an innovative modern
economy
-- Increasing Poznan’s importance as a
centre of knowledge, culture, tourism and
sports
-- Improvement of the quality of life of the
city’s inhabitants
-- Development of Poznan’s metropolitan
functions
Poznan is putting effort in thinking and acting on a metropolis scale in order to enhance its competitive strength and create
the right circumstances for economic
growth. The city of Poznan has chosen to
create the Poznan Metropoly by starting to
organise informal meetings between the city
and its surrounding municipalities. This has
led to more advanced institutional forms of
cooperation including inter alia the creation
of the association of the Poznan Metropoly
and integrated policy making in areas like
transport, tourist promotion and waste
economy. Eventually these meetings (attended by government representatives on a
voluntary basis) should further develop into
an internally integrated metropolis providing
advanced services for the region and the
country. This achievement should result in
Poznan gaining an important position in the
network of metropolitan cities, allowing it to
successfully compete in the national and
international arena. The scope of this case
study does not include an in-depth analysis
into the views and positions of all stakehold-
With regards to these four developments,
the strategy describes 14 major challenges
including problems and issues that need to
be tackled in order to provide the city with a
new impetus for development. The challenges are defined in four strategic goals, 16
objectives and finally elaborated in 21 differ-
105 Radzimski (2009), Residential and urban
planning in transition, case study of Poznań
106 City Development Department (2010)
Development Strategy for the City of Poznan to
2030
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Figure 10 Economic facts and figures of five Polish cities
employmentunemployment
persons in economic
national
rate economy
entities
foreignper
ineconomic
'000
1000
GDPpopulation
per
entities
capita
per€ 10'000 population
y ear
2009
2009
2009
2009
2008
Poznan
408,0
3,2
171
49
16,1
Gdansk
308,0
4,9
136
31
12,5
Krakow
372,0
4,2
146
34
10,0
Lodz
306,0
9,5
114
22
12,4
W arsaw
366,0
5,0
154
48
23,8
Source: Facts and Figures, available at www.Poznan.pl
ent strategic programmes. In 2030, Poznan
is aiming to operate as “a functionally integrated metropolis, by extending and tightening the cooperation with neighbouring
municipalities”.107 In addition, it is aiming to
be externally connected by means of numerous and strong links in the European network of metropolitan cities. The main fields
of actions include: improvement of the spatial, infrastructural, legal and administrative
conditions for enterprises, increases in enterprises’ competitiveness and innovativeness and enhance the collaboration between
Poznan universities and scientific research
institutions. In addition, Poznan will
strengthen its position as a European scientific and academic centre and create conditions for the development of highly-qualified
human capital in order to achieve a competi107 City Development Department (2010)
Development Strategy for the City of Poznan to
2030, p. 19.
108 Comment on a draft report by Mr Bogdan
Frackowiak, Director of the City Development
Department
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tive economy (based on the development of
highly specialised services).
All the 21 strategic programmes have one
common goal; to achieve a better Poznan
for inhabitants, entrepreneurs and visitors
by investing in different fields of interest.
The strategy has a long-term character. To
make sure the individual projects will also
be adequately executed in the longer run,
the municipality has passed laws that link
the development strategy directly to the
city’s budgetary planning. The above-mentioned projects will be developed further in
separate documents.108 Not every program
of the ‘Development Strategy for the City of
Poznan to 2030’ carries the label ‘new’. The
majority of the strategic programmes (13
out of 21) are included in various forms in
the ’Development Plan for the City of Poznan
for the years 2005-2010’. Some of these
measures and projects that have been executed have been verified and supplemented
with new proposals. The category of ‘new
programmes’, a total of eight, are mainly
focused on improving the public space of
90
Table 10 Indicators of Poznan in 2004 and 2010
2004
2010
Population
570.800
552.300
Number of students
122.600
135.900
7,0
3,5
GDP per capita (€)
12.200
16.800
Registered business entities
88.100
98.100
650
950
381.000
1.400.000
Unemployment rate (%)
Average gross wage in enterprise sector (€/month)
Passenger traffic at Poznan Lawica Airport
Source: Presentation by Mr Tomasz Kayser, Deputy Mayor of Poznan
7.3 Economic Vitality of Poznan
Poznan and the development of social capital, creation of (social) cohesion, spatial and
functional integration and counteracting social exclusion. The programmes ‘Socially
Sensitive Poznan’ and ‘Metropoly Poznan’
are examples of the new goals. Strategic
programmes, such as Academic and
Scientific Poznan, Knowledge for Business
and Digital Poznan, emphasize how important it is to develop the city based on knowledge. By presenting several programmes
(such as the new programme ‘Spaces for
Business’), the city shows that it is aware of
the threat of losing its attractiveness for
(foreign) investors and that reforms on (labor)legislation and enlarging the spatial and
administrative scale are required.
Poznan’s development strategy does not
contain a financial and/or an implementation
paragraph. The commitment to the strategy
can be lost during the time being. Another
weak point in this respect is the fact that none
of the programmes and projects is prioritized.
Most programmes (or parts thereof) focus on
improving the quality of life. Various investments (such as transportation, recreation,
safety, ICT environment, housing, sports, social cohesion/exclusion, and education) should
ensure the achievement of the objectives.
Poznan has a balanced economy which is
dominated by trade, financial services, education and the property market. Last decade
the following sectors: automotive
(Volkswagen), furniture, telecommunications
services (including IT outsourcing) and logistic services have developed. As the capital of the Province of Wielkopolska, Poznan
plays a dominant part in the development of
the region. The most important factors of
economic development, such as scientific
and research potential, business environment institutions, foreign capital and entrepreneurship are all concentrated in Poznan.
The Poznan International Fair also plays an
important role as well as (the provision of)
supra-regional services related to education,
culture, healthcare and sports.
In comparison to other Polish cities,
Poznan has a strong economy. Statistics109/110
(see Figure 10) show that Poznan is ranked
109 Website City of Poznan (facts & figures)
110 Presentation of Mr T. Kayser, Deputy Mayor of
Poznan, during the EMI roundtable discussion in
Poznan
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highest in employment in national economy
and number of (foreign) economic entities.
It has the lowest unemployment rate (3,2
per cent in 2009) and comes in second place
after Warsaw regarding 2008 GDP figures
(16,1 Euro for Poznan against 23,8 Euro for
Warsaw).
Since 1995 Poznan has gradually strengthened its urban economy. Statistics (GDP, FDI
per inhabitant, and number of business entities) show a gradual upward trend in economic activity, but never a large peak. The
city has a buoyant and developed labour
market, dynamic economy, rich natural environment and a high level of attractiveness
for tourism.111 Table 10 below lists some
indicators and the development from 2004
to 2010.
Labour market
Although the unemployment rate is low,
Poznan encounters labour market problems
concerning particular groups. Data of 2008
show that people aged 25 to 34 are having
the most difficulties in finding employment.
The number of job-seekers in this group
considerably increased at the end of 2009,
when the attractiveness of occupational emigration to West European countries decreased. Among those who were looking for
employment, 1/3 did not have any professional experience or had worked for less
than one year. Every fourth unemployed
person had secondary or primary school
education, and every fourth had a degree.
Graduates, especially those from secondary
technical schools, often have to deal with
relatively long periods of unemployment.
The can be explained by the mismatch of
professional qualifications of the graduates
and the expectations of the (potential) employers. This mismatch can be resolved by
verifying educational programmes of secondary schools and universities.
Mentality & entrepreneurship
From the mid-1990s onwards, Poznan has
experienced a dynamic development of entrepreneurship. In the years 2002-2008
there were 9.400 new economic entities
established (mainly natural persons conducting business activities and micro-enterprises) primarily in the market services sector. The greatest figures have been noted in
the ‘real estate and business services, education’ section with 4.600 employees. A high
percentage of the businesses (94 per cent)
are so-called micro companies that employ
up to nine people. Poznan has a high and
growing saturation of the economy with enterprises of diversified sectorial structure.
Up till 2009 the financial results of Poznan
companies were good.112 In comparison to
other Polish cities, Poznan enterprises stand
out because of their high profitability indicators. The economic condition of Poznan enterprises started to worsen in 2009 due to
the influence of the economic crisis on the
global markets.113
111 City Development Department (2006) Socioeconomic analysis of the city of Poznan
112 Kochalksi (2009) Preliminary assessment of
Poznan enterprises activities in comparison to
other cities
113 City Development Department (2010)
Development Strategy for the City of Poznań to
2030
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There are several explanations for an increasing amount of entrepreneurship in
Poznan. Many SMEs only have one or two
employees. For many companies it is more
efficient and cheaper (with regard to tax,
legislation) to involve SMEs in implementing/
executing their objectives and tasks. In addi-
92
tion, many graduates (who find it particularly
hard to find a job in the Poznan region because of surplus supply) start new small
companies in the hope of getting assignments from companies. Despite the lack of
evidence it might be that the Polish mentality
(which is similar to the German and reinforced by the significant influence of Berlin
on Poznan) can explain the strong growth of
SMEs.114 Other stimuli for entrepreneurs to
locate their businesses in Poznan include the
diversified local economy, a major government campaign stimulating the setting up of
SMEs, the highly developed labour market
and the presence of well-established companies. Barriers include weak integration of
local businesses, low availability of bank
loans, complicated administrative procedures
and unsatisfactory levels of innovativeness
and high-tech companies.115
certain extent financed by foreign investments, against 2,3 per cent in 2000. The
largest foreign investor is the German concern Volkswagen. Other sectors with significant foreign investments are commerce, and
services and financial brokerage services.
The office space rental market is growing
particularly quickly.116
Human capital and innovation
Over 140.000 students attend 26 Poznan
universities (including 8 state universities).
Nearly ¾ of the students come from outside
the city. There are 251 students per 1000
inhabitants and this ranks Poznan at the top
of the list of Polish cities regarding relative
number of students. Poznan universities
struggle to keep talented scientific employees, as these regularly receive attractive
employment offers from commercial companies elsewhere and foreign scientific centres.
From 2007 onwards the number of students
rose quickly, but since 2010 it has stabilized.
This can be explained by a drop in the number of young people (negative demographic
development) and the attraction of foreign
universities. Every year 30.000 students
graduate from Poznan’s higher education
establishments.117
From the mid-1990s onwards, Poznan attracted a high level of investment. These
investments were a main incentive for especially foreign investors, who have undertaken numerous ventures at that time.
Between 1990 and 2009 the accumulated
value of investment expenditure was USD
6.6 billion or USD 11.900 per inhabitant.
The high investment attractiveness of
Poznan, which continuously holds a top position in all the nationwide rankings, has encouraged foreign investors who have established numerous companies in the city. The
foreign capital which has been invested in
Poznan constitutes about 5 per cent of all
the direct investments in Poland. Despite
the high percentage, the city believes that
foreign direct investment (FDI) should be
stimulated.
Although FDI has grown over the years,
the amount of economic entities financed
through FDI is still quite low. In 2010, 2,8
percent of all economic entities were to a
114 Interview with Monica Matusiak (PhD) Poznan
University of Economics Department of Spatial
and Environmental Economics
115 City Development Department (2006) ‘Socioeconomic analysis of the city of Poznan’, Poznan
City Hall
116 Website City of Poznan (facts & figures);
Presentation by the Deputy Mayor of Poznań
during the EMI roundtable discussion in Poznań
117 City Development Department (2010)
Development Strategy for the City of Poznań to
2030
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Table 11 SWOT analysis
Governance structure
Strengths
The success of implementing new economic opportunities due to the governance
transformation and Poland’s accession to the EU.
Pragmatic, efficient and open-minded attitude, high level of executing policy.
High degree of civil participation and professional collaboration with private and public
stakeholders such as scientific institutes and companies (triple helix).
Awareness that the future competitiveness of Poznan needs the involvement of the
whole urban area (including neighboring municipalities).
Weaknesses
Weak political connections with Warsaw (Capital of Poland) and the EU.
Metropolitan area is not well represented at the regional level (Wielkopolska).
No fully autonomous authority over land-use.
Opportunities
Achieve a clear Poznan-profile by reinforcing current and future (inter)national
political contacts.
Threats
No priorities or ranking in strategic programmes to 2030, every program seems
equally important, and lack of financial strategy. May impede decision-making process
and consequently harm implementation.
Hindered cooperation with neighboring municipalities because of differing socioeconomic developments.
Suboptimal management of certain areas of the metropolitan area.
Economic structure and infrastructure
Strengths
Strong entrepreneurial mentality combined with open mindedness and high level of
education.
A diversified economic structure (particularly in the service sector).
Dominant trade fair centre in Poland.
New economic spin-off due to EURO 2012 European Football Championship
Tournament.
Weaknesses
Relatively few global investors and enterprises in the high-tech sector.
Lack of integration of knowledge into the economy, partly due to large number of
small enterprises.
Suburban phenomenon resulting in declining inner city population heavily based on
motorized transport.
Insufficient and undeveloped daily urban system, due to a lack of an efficient system
connecting the region and the airport.
Opportunities
To become an international centre for congress, culture and sports (emphasized by
the EURO 2012, the UEFA European Football Championship)
Improvement of the Airport capacity and completion of the Berlin-Poznań-Warsaw
motorway can work as leverage for economic growth.
Create more economic spin-off from operating as a gateway between northern/
southern and western/eastern Europe, due to its geographical location.
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94
Economic structure and infrastructure
Threats
Continuing exodus of companies and inhabitants to suburban areas, damaging
economic potential of the central city. A strong central city is vital for metropolitan
ambitions. It also causes a decrease in tax income for the city, which hinders the
development of important (economic) projects
A decreasing quality of the environment, due to increased and denser car-oriented
traffic producing more carbon emissions and noise pollution.
Public transport infrastructure investments not in pace with urban sprawl in the
Poznan metropolitan area.
Poznan may not profit from the increasing global importance of high-tech, innovative
sectors due to its current emphasis on traditional, small SMEs
Governance structure
Strengths
The success of implementing new economic opportunities due to the governance
transformation and Poland’s accession to the EU.
Pragmatic, efficient and open-minded attitude, high level of executing policy.
High degree of civil participation and professional collaboration with private and public
stakeholders such as scientific institutes and companies (triple helix).
Awareness that the future competitiveness of Poznan needs the involvement of the
whole urban area (including neighboring municipalities).
Weaknesses
Weak political connections with Warsaw (Capital of Poland) and the EU.
Metropolitan area is not well represented at the regional level (Wielkopolska).
No fully autonomous authority over land-use.
Opportunities
Achieve a clear Poznan-profile by reinforcing current and future (inter)national
political contacts.
Threats
No priorities or ranking in strategic programmes to 2030, every program seems
equally important, and lack of financial strategy. May impede decision-making process
and consequently harm implementation.
Hindered cooperation with neighboring municipalities because of differing socioeconomic developments.
Suboptimal management of certain areas of the metropolitan area.
In addition, Poznan holds an important position in Poland’s science sector, particular in
such fields as molecular physics, applied
chemistry, biochemistry, genetics, new technologies and materials. However, this research and educational potential of the city’s
scientific institutions does not translate into
the concrete development of a high-tech
economy. This is confirmed by the small
number of patent applications and license
and implementation contracts, as well as
low levels of innovativeness of Poznan enterprises. Poznan is therefore focusing on
attracting high-tech companies. Foreign investments are thought to be necessary,
since Poland itself does not have many hightech companies. High-tech companies could
also help bridge the gap between knowledge
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en entrepreneurship: medium-sized, hightech companies seem to have more contact
and relationships with research institutes
than traditional sector enterprises.118
7.4 SWOT analysis
This paragraph discusses the strengths and
weaknesses, opportunities and threats of
the Poznan urban economy in a so-called
SWOT-analysis. The current global financial
and economic crisis is affecting Poznan and
Poland as a whole, but significantly less than
in other European metropolitan areas.
Poznan is, however, facing several challenges which could (on a longer term) affect
economic growth. The SWOT-analysis covers
three features of the urban economy: labour
market and education, governance economic
structure and infrastructure.119
7.5Conclusions
This section translates the main observations on Poznan’s economic competitiveness
into future challenges of the metropolitan
area, related research questions and policy
implications (see Table 12). By defining research questions and policy implications it is
possible to link ‘research’ to ‘urban practice’
and vice versa. The challenges in order to
improve the economic vitality of a city depend on various factors. For example, a
competitive environment for global hightech companies depends on the labour mar-
118 Mizgajska, H. & L. Wsciubiak (2011)
Collaboration with science as a source of
innovation for SMEs in Poland
119 These features are selected on the basis of deskresearch and the roundtable discussion in Poznan
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ket as well as on good connections between
business and science and an attractive ‘quality of life’ for the employees of these firms.
A range of factors can often influence the
actual performance of economic indicators.
This chapter discusses the main observations influencing the economic vitality of
Poznan.
Governance structure and sense of
optimism
Poznan’s slogan ‘Eastern Energy, Western
Style’ envisions a city with a strong entrepreneurial spirit and big ambitions. The city
was able to increase current assets and, due
to the economic reforms, develop new economic opportunities. On top of that, Poznan
has very stable and well-connected elite of
government officials, business representatives and scientists from the various universities and research institutes (triple helix).
In other words, the institutional thickness of
Poznan is very high. Poznan has been able
to formulate coherent policies that are widely accepted, also among the population.
Moreover, these relations have proven to be
very stable over time; many key figures
have held the same positions for a substantial of time. This encourages the decisiveness of local governance, but also forms a
threat; the danger of relying too much on
past successes and embedded relationships
that do not formulate a correct answer for
new challenges.
Strong economic performances, but limits
within sight
The data on the economic competitiveness
of Poznan show an impressive picture: very
low unemployment, a high standard of living
and a high level of entrepreneurship. Poznan
is aware of its economic potential. Despite
uncertainty about the effects emerging
economies (e.g. India and China) may or
96
may not have on Poland and, the uncertain
future due to the financial and economic
crisis, there is a widely held confidence in
the Poznan future economy. However, there
are some aspects that need to be addressed
in order for Poznan to stay competitive.
Poznan’s service sector is already well developed en well-endowed with many SMEs.
Currently, the city is facing the challenge to
attract larger, predominantly foreign companies to accommodate growth in high-tech
sectors. This is especially important given
the fact that nowadays many young graduates remain unemployed because - despite
their high education – there are very little
suitable job opportunities for them. The absence of global players and high-tech companies can be seen as a weak point of the
urban development of Poznan. If Poznan has
the ambition to become a city in which hightech economic sectors flourish, than the
whole local economy needs to be oriented
towards that goal. This means the reform
and strengthening of the educational system, but also a reduction of the dependence
on small SMEs (currently the case in
Poznan). Despite growth in the past, the city
is currently not attracting a high amount of
FDI. In order to maintain its competitive
strength and subsequently attract mediumsized companies to the city, Poznan should
provide the services which the large scale,
high-tech companies’ demand.
tion will systematically decrease over subsequent years to reach the level of 506.500
inhabitants in 2030, that is 8,2 per cent less
than in 2011.120 However, in the suburbs the
population will continue to grow. Together
this will probably result in a stable population but due to processes of ageing, the productive age categories remains to decline.121
The population of the city of Poznan is already in decline, and for the urban region
the population is expected to remain stable
until 2030. The population is also ageing,
which means that the productive age categories will decline even more than the total
population.
Cooperation at European, national and
regional level
Poznan strongly focuses on integration within Europe since the city is fully aware of its
strategic location in the heart of Europe. Its
location on infrastructural lines (motor- and
railway) between Berlin and Warsaw/
Moscow makes Poznan an ideal place where
East and West Europe can meet. Poznan’s
ties with Warsaw and the EU are not that
strong, and the city realizes that many advantages can be obtained if good (lobby)
connections are maintained with both national and EU-institutions. As well as cooperation at the European and national level
needs to be improved, the cooperation between the city of Poznan and the surrounding municipalities is lagging behind. In order
for Poznan to become a recognized
Labour market and demographic forecast
The labour market is beginning to show
signs of under capacity. This is partly due to
the fact that the demographic potentialities
of the city and the region will be exhausted
in the near future. Demographic statistics
show a negative birth rate and the migration
balance increased from –1 per cent in 2002
to –6 per cent in 2008. According to the
demographic forecast, the Poznan popula-
120 City Development Department (2010)
Development Strategy for the City of Poznan to
2030’, Poznan City Hall, p. 24 (online accessible:
www.poznan.pl/strategia
121 Presentation of Mr T. Kayser, Deputy Mayor of
Poznan, during the EMI roundtable discussion in
Poznan
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European player, it strategically needs to
integrate its surroundings. It will be difficult
for Poznan to compete with Western Europe
if the population keeps declining, because
Western cities are growing again after several decades of suburbanization. Poznan is
lagging behind 30 years in that respect. The
only way to tackle this problem is to cooperate with the surrounding (growing) municipalities. These municipalities need to understand that a healthy population development
in Poznan is to their advantage too.
Major infrastructure investments
Poznan is aware of the fact that, if the city
wants to maintain or even enhance its attractiveness and competitive strength, investments in infrastructure are necessary.
The European Football Championship, EURO
2012, generated major investments in the
(road) infrastructure and improved the connectedness of the city. The new motorway
between Poznan and Warsaw is a good ex-
ample of such an investment. The further
development of the road network is still a
challenge and the present situation is far
from satisfactory. Good connections between
Poznan and other cities in the Wielkopolska
region are lacking as well as the connection
with Wrocław.122 In order to establish an
integrated transport within the agglomeration and a high functionality of the collective
transport system, Poznan planned several
major infrastructure investments. Overall, a
well operating integrated infrastructure and
its catalytic role in improving economic
growth and competitiveness is important. In
this light, it is conceivable to choose for
speeding up realizing the main transport
routes. In addition, the public transport connection between the airport and the city
centre needs to be improved as well as the
public transport connections covering the
entire region. The high speed train linkage
between Berlin, Warsaw and Moscow is also
subject to heavy debates.
122 Comment of Mr Bogdan Frackowiak, Director of
the City Development Department, during the
roundtable discussion in Poznan
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98
Table 12 Observations of the case study translated into challenges, research questions and policy implications
Observations
Challenges
Research questions
(Possible) policy
implications
Strong entrepreneurial
spirit and sense of
optimism.
Combine this spirit with
simultaneously opening
up for high-tech and
foreign FDI?
How to successfully
combine SME potential with
influx of high-tech, foreign
FDI?
Balance stimulation of local
SMEs and FDI influx.
Stable, well-connected
governance network.
Maintain the energy
without taking things for
granted.
How can the Poznan triple
helix be strengthened/
further stimulated?
Extend or change the existing
network.
Labour market is
coming under strain.
Combine rising wages
with stable supply of
labour.
How can the labour market
be expanded in the light of
population decline?
Plan for immigration.
Relatively few
global and high-tech
companies.
Create a competitive
environment that is
attractive for global,
high-tech players.
What pros and cons
does Poznan have to
attract global, high-tech
companies?
Create amenities or attractive
financial packages for global
players.
Integration between
enterprises and
research is lacking.
Stimulate the
connections between
enterprises and research
institutes.
Do larger, high-tech
enterprises indeed connect
better to research institutes
than smaller traditional
ones?
Which strategy works
better, creation of business
parks or network platforms?
Attract larger, high-tech
companies;
Create business parks;
Create network platforms.
Focus on becoming a
hub between East and
West.
Answer to large
(institutional and socioeconomic) differences
between Eastern and
Western EU states.
What can Poznan learn
from other European cities
pursuing similar strategies?
Learn from other best
practices of Western and
Eastern European cities.
Poznan is cooperating
regionally on a
voluntary basis.
Extend regional
cooperation into a more
formal framework.
Is a more (powerful) formal
regional cooperation both
feasible and beneficial?
Extend regional cooperation
into a more formal
framework.
Investments in
infrastructure are high
on the agenda.
Prioritize investments
in infrastructure
(both regionally and
internationally).
What investments
in infrastructure
contribute most to urban
competitiveness?
Invest in those methods
that add most to the urban
competitiveness.
Poznan has weak
political connections
(nationally and within
Europe).
Invest in building
relationships with
national and EU
institutions through
lobby efforts.
What effects does (inter)
national networking have
on the local economy?
If positive, invest in lobby
nationally and on EU-level.
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100
8 Case study Bucharest
8.1Introduction
This case study discusses the economic vitality of Bucharest, the capital of Romania.
Bucharest, with almost 3 million inhabitants,
is the sixth biggest city of Europe. The city
is by far the biggest urban agglomeration in
the country. Bucharest can be considered as
a strong monocentric region; the remaining
Romanian cities cannot compete with the
capital. As the political and administrative
centre of Romania, the city is an attractive
location for companies. Many headquarters
are based in Bucharest while the production
activities are located in other, more rural,
parts of Romania. Bucharest is an interesting case study for EMI’s Economic Vitality
knowledge and research agenda as its economy faced a quick transformation from an
industrial based economy towards a servicebased economy. It is a city with a strategic
location within Europe which encounters
some strong institutional, accessibility, economic and physical challenges. The economy
largely dependent on the economic situation
in the EU; for example, the structural funds
absorption is two per cent in four years.
Moreover the economy is highly sensitive to
economic cycles; resulting in higher than
average peaks and lower valleys.
This case study is based on desk research
and in-depth interviews with key actors in
Bucharest. There are only a few studies
written in English on the urban competitiveness of Bucharest. This study is mainly
based on academic articles written by academics of the Bucharest Academy of
Economic Studies and the ‘Ion Mincu’
University of Architecture and Urbanism
(UAUIM). The Faculty of Urban Planning of
UAUIM have conducted several studies for
the city of Bucharest, including the General
Urban Plan of Bucharest. Further to these
articles and studies, reports from the World
Bank and European INTERREG Projects were
extensively consulted. Besides desk research, this case study is based on two
roundtable discussions with urban experts in
Bucharest. During the roundtable discussions the main economic challenges of
Bucharest Metropolitan Area were discussed
with the urban practitioners of the local
planning department (CUMP), academics of
the ‘Ion Mincu’ University of Architecture
and Urbanism, and members of the
Romanian Urban Planning Register. Other
in-depth interviews include those with representatives of the Ministry of Regional
Development and Tourism, Department of
Territorial Development and the BucharestIlfov Development Agency. The focus of this
case study is based on the questions and
information provided by Bucharest’s urban
experts.
Figure 15 Bucharest General Urban Plan (2000)
Source: Bucharest City Council (2000)
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This case study addresses the economic
performance of Bucharest as well as the
future challenges and threats to the city’s
competitiveness position, by analysing the
local economic structure of the city and its
surrounding region. It remains unclear how
Bucharest will mature after its quick transition towards a more knowledge-based economy. Is the economic structure of the city
sustained enough to be competitive on the
longer term? The aim of this case study is to
define research questions that are of particular interest for academics and urban
practitioners alike. Scientific research can
provide more insights into the causalities
between economic indicators and propose
policy recommendations to cities.
8.1.1 Bucharest: five characteristics
1. Bucharest as a new European
metropolis
Romania has been a Member State of the EU
since 2007. As a European capital city,
Bucharest plays an important role within
Central and Eastern Europe. The accession
process involved undertaking a vast array of
political and economic reforms and the harmonization of national legislation, in order to
guarantee the four basic freedoms which are
fundamental to EU policies; the free movement of goods, services, capital and labour
within the common market. Romania must
adhere to the same European conventions
as the other Member States. Romania has,
however, been placed under severe observa-
123 Interreg 3C (2007) ‘North-South Interface’, by
the EU and Metrex, p.87-110: chapter Bucharest,
written by Dr. Arch. Victoria-Marinela Berza,
on behalf of the Interdisciplinary Centre for
Advanced Research on Territorial Dynamics and
Prof. Dr. Ioan Ianos, University of Bucharest,
tion, due to its insufficient institution building and, at times, an inadequate mechanism
for justice control. This problem is similar to
the experiences of other former communist
countries entering the EU. Romania’s main
challenge, however, is to function within the
EU given its severe economic disparities. It
is a challenge for Bucharest to catch up with
the richer cities in the EU.
2. Bucharest as transport node
Bucharest is an important transport node in
Central and South-Eastern Europe. Romania
is located at the intersection of the main
Pan-European transportation corridors.
Bucharest, for example, is an important
node within the INTERREG 3C-program
‘North-South Interface’. According to this
report ‘the identification and promotion of
polycentric city-regions is essential in order
to create a long term vision of better territorial balance within the European Union.’123
The ‘North-South Interface’ connects
Helsinki, Vilnius, Warsaw, Bucharest, Sofia,
Thessaloniki and Athens with each other. Up
till now, it is one the poorest connected areas of Europe, and therefore, the INTERREG
project aims to create a better transnational
connectivity in this area. Cities located on
these nodes will profit from an improved
connectivity.
3. Bucharest as a city in transition
Although economic transition can be considered as relevant for many European cities,
the most interesting examples can be found
in Central and Eastern European cities. In
the 1990s, these cities underwent the transition from a centrally planned economy
towards a market economy followed by a
Romania’s transition towards becoming a
full-fledged EU Member State. Bucharest is
currently experiencing a period of transition
from a central-planned economy towards a
Romania
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market-led economy. It is therefore all the
more interesting to see how Bucharest’s
urban economy is transforming; is there a
focus on specific types of economic clusters,
areas or market segments? Is the transition
process of the central and eastern European
countries comparable to the process western
and southern European countries experienced some decades ago? The shift from
communist times with a dominant public
sector, towards market-led private developments, has a strong impact on Bucharest
urban economy. Due to this shift, Bucharest
underwent a period of strong economic
growth resulting in a relatively strong regional competitiveness of the city. It is the
aim of this case-study to discuss the competitiveness of Bucharest, and to define the
public and private challenges in order to
give insight into possible ways to enhance
the economic vitality of the city, and its
broader metropolitan area.
4. Bucharest as a reconstruction city
The current transit period to a market economy favours the spontaneous process of
urban developments in Bucharest. Urban
developments are mainly market-driven;
meaning that they are strongly determined
by the private sector and with less restrictions of public spatial planning. This had led
to a more or less spontaneous northwards
development with booming competitive service sectors and trade areas. The more chaotic development of the 1990s is followed by
a more politically driven image in the beginning of the 21st century. In the last years,
the city of Bucharest has invested in infrastructure and built many new housing and
business areas. Many existing buildings and
public and private infrastructure were neglected as a result. It is important; therefore
that Bucharest changes the focus from expansion to regeneration and renewal during
the next decades and connects the newly
built areas. Due to the Bucharest spatial
expansion, the actual transformation has a
great impact upon the urban quality of life in
the city. It is a challenge to generate a proper balance between the quality of the development of the traditional centre, on the one
hand, and the expanding of the new peripheral growth centres on the other.
5. Bucharest as an undiscovered city
Quality of life, atmosphere, culture and heritage increasingly determine the competitiveness of metropolitan areas. Bucharest is
discovering its urban strengths and weaknesses and the city is facing the challenge
improving the quality of life and keeping and
attracting highly skilled workers and wealthy
people and entrepreneurs. Many Romanian
people, especially the highly skilled persons,
are currently leaving the country and
Bucharest is very much burdened by this
brain drain phenomenon. On the other hand,
there is a growing civil society that is increasingly aware and involved in decisionmaking processes and seeking dialogue with
other stakeholders for better policies regarding urban life. The struggle between new
infrastructure and the existing urban fabric,
just as the struggle between new buildings
(abusively built) and heritage have fostered
significant (yet incomplete) redefinitions in
the professional and social strategies over
the past years. Bucharest is trying to find
the correct balance between urban development and preservation.
8.2 Institutional Structure of
Bucharest
The shift from communism towards capitalism has a strong impact on the institutional
structure of Bucharest. During the commu-
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nist period, no general urban plan for the
whole of Bucharest was drawn-up and/or
applied. Since the introduction of marketoriented economic policies, it is the market
that determines the actual urban and economic growth of the city. This does not
mean, however, that there are not any studies, visions and strategies being written for
Bucharest. In the year 2000 the General
Urban Plan of Bucharest was approved by
the city council. But generally, politicians are
experiencing difficulties in actually implementing these types of strategies and studies. The pressure of the market on politicians is high, and the instruments to implement the visions and strategies are weak.
Moreover, planning is culturally connected
with the communistic period. Paragraph 2.1
describes the governance structure and the
current national, regional, local urban plans
and policies that are of relevance for
Bucharest. Paragraph 2.2 subsequently discusses the initial steps towards the
Bucharest Metropolitan Area, arguing that a
polycentric development of the Bucharest
Metropolitan Area is required, but that there
is still a lack of ‘metropolitan thinking’.
National government
The ‘Strategic Concept of Territorial
Development, Romania 2030’ is a strategy
to foster Romania’s balanced development
and to strengthen its role as a Member State
of the EU in a spatially integrated way.124 To
124 Ministry of Development, Public Works and
Housing (2008) ‘Strategic Concept of Territorial
Development, Romania 2030. Romania a
competitive, balanced and prosperous country’,
DG for Strategies and Policies for Territorial
improve the competitiveness of Romania,
the national strategy formulates the ambition to develop a competitive economy by
supporting and developing research, innovation activities related to new, high-quality
(business) services.
The national policy focuses on three key
concepts:
Polycentrism
Strengthening a polycentric
and more balanced system
of metropolitan areas, city
clusters and settlements
network.
Complementarity
Strengthening a balanced
settlements structure by
building dynamic, attractive
and competitive cities and
urban regions.
Connectivity
Developing the
national transport and
telecommunications system
integrated in the European
network.
The Department Territorial Planning of the
Ministry of Regional Development and
Tourism has acknowledged the cross-border
economic relations of cities in a broader region. The national policy aims for a more
polycentric development of Romania, by
developing seven so-called ‘urban growth
poles’. This policy is focused on the development of seven cities across Romania in order to create a better balance. These urban
growth poles actually represent (with one
exception) the former ‘secondary cities’ in
Romania.125 Bucharest has not been selected
as an ‘urban growth pole’ but has instead
been designated a special status.
Cohesion
125 Register of Romanian Urban Planners (2010)
‘Urbanismul. The Growth Poles in Romania’,
4/2010
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Regional government
Bucharest is part of the Bucharest-Ilfov
Region; a non-administrative development
104
region built on the partnership between the
local administration authorities of the city of
Bucharest and the local administration of
the Ilfov Country. It is the deliberative body,
without legal status, that is built on and
functions on the basis of the partnership
principle at the level of each development
region.126 The Regional Development Agency
Bucharest-Ilfov (ADRBI) is responsible for
developing and updating the Regional
Development Plan. Moreover, the agency is
responsible for an operational program (financed by the EU) in order to increase the
economic competitiveness of Romania. It
coordinates the drafting and monitoring activities that derive from the regional development policies. The ‘Regional Operational
Programme (ROP) 2007-2013’ is financed by
the European Regional Development Fund
(ERDF). The ROP is focused on five objectives:
-- Support of the sustainable development
of the towns potential growth poles
-- Improvement of the regional and local
transport infrastructure
-- Improvement of the social infrastructure
-- Strengthening of the regional and local
business environment
-- Tourism sustainable development and
promotion
The general objective is to increase
Romanian companies’ productivity in compliance with the principles of sustainable development, and reducing the disparities
when compared to the average productivity
of the EU. The ROP is expected to boost the
creation and the development of enterprises, mainly SMEs. One of the priority axes is
‘research, technological development and
innovation for competitiveness’. The aim is
to increase research capacity by investing in
the development of research and development (R&D) infrastructure and attracting
young researchers and high-level specialists
both in R&D institutions (universities and
research institutes) and in companies with
research departments. Another priority axes
is focused on the creation and reinforcement
of high-tech firms and the development of
poles of excellence and competitiveness.127
Local government
Bucharest City Council can be seen as a regional authority, since the city is divided into
six administrative units functioning as local
governments. Decentralization of the administrative structure of the centralized
Romanian government is a difficult process.128 The structure has not changed for
40 years, although it is in need of re-organization. The capital’s organization is often
difficult to manage, with the city government headed by a general mayor. Decisions
are approved and discussed by a general
council made up of 55 elected councillors
from different parties. The powers of local
government are shared between the
Bucharest City Hall and the local sectorial
councils, each having specific areas of competence. The Bucharest City Hall is responsi-
126 The regional development board is made up of
the mayor of the Ilfov Country Board, the general
mayor of the city of Bucharest, a representative
of each local sector board and representatives
of the local boards within Ilfov country, at parity
with the representatives of the sectors of the
city of Bucharest. (Source: website of Ministry of
Tourism and Regional Development)
127 Ministry of Economy, Trade and Business
Environment (2007) ‘Romania, Operational
Programme, Increase of Economic
Competitiveness’, Regional Policy, European
Union
128 Nica, M. and A. Gravis (2009) ‘Public Policies in
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the Bucharest Metropolitan Area – Inertias and
Challenges for Local Administration’.
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ble for citywide utilities such as the water
system, the transport system and the main
boulevard, while sectorial councils manage
the contact between residents and local government, secondary streets, parks, schools
and cleaning services. A significant problem
of the six administrative sectors is the large
heterogeneity of the sectors. Each of them
must deal with all the problems facing
Bucharest; from challenges relating specifically to the city historic centre to the particular problems related to the suburbs.
Smaller sectors, which are more homogenous and more manageable, have been
proposed, but this initiative faded in the
light of the political fight for power. A referendum was initiated to ask the residents
their opinion about the re-organization of
the local administration and the development of the city. The question was whether
the residents want to keep the current six
decentralized sectors along with a central
administration, given their overlapping roles.
In the end, the referendum was abandoned
since it increasingly became a polarized political discussion. It is unclear if the current
and future government structure stimulates
or hinders economic development.
Bucharest ‘General Urban Plan’ (GUP) is
the strategic urban planning tool of the City
of Bucharest.129 The plan was adopted by the
General City Council of Bucharest in 2000,
but was never really put into practice. The
plan refers to the time horizon of 2025 and,
even though it has of yet not been applied,
the validity of the plan has been prolonged
to 2013. The GUP is orientated to stimulate
the economic, social and spatial growth of
129 General City Council of Bucharest (2000)
‘General Urban Plan Bucharest’, Urban and
Metropolitan Planning Centre, City of Bucharest
130 Interrreg 3C (2007) ‘North-South Interface’.
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the city and its metropolitan territory. It lists
the following objectives:130
-- An attractive, liveable and sustainable
environment having high density
connections over the metropolitan
territory
-- Clean air, green and secure spaces,
an attractive city centre and high
quality services, including cultural and
recreational amenities
-- A high quality of life, also relating to the
environment in the city, which will attract
mobile and skilled knowledge workers and
high value activities
-- Redevelopment of the brown field sites
and public spaces, an improvement of the
local services, adding a plus-value to the
city and the city-region
-- An efficient urban structure and
administrative management of the city,
resulting in an efficient consumption of
public resources.
8.2.1 Towards a Bucharest Metropolitan
Area?
As written before, the development of
Bucharest is primarily a market-driven development with less public spatial planning
restrictions. This led to the possibility for the
private partners to obtain authorizations,
often informed by political interest, by
means of bribery. In some cases, it was
even possible to initiate the development of
a project without even having prior authorization. In short, it is the private sector that
determines the urban developments within
the metropolitan area. For example, the
market determines the pace of real estate
developments resulting in a quick development of commercial real estate (housing,
business parks, and shopping malls). The
less profitable developments (such as public
schools, public hospitals and infrastructure)
are lagging behind or not being built at all.
106
They are not being developed at the same
pace as the rapidly expanding city.
Moreover, new neighbourhoods are being
developed adjacent to existing villages
around the city. However, the new neighbourhoods that have appeared are not yet
sufficiently integrated into a regional public
transport network. Public infrastructure and
public services continue to be weak in these
areas. This has resulted in an imbalanced
development of the Bucharest Metropolitan
Area, including a more or less spontaneous
northwards development with booming competitive service sectors and trade areas. One
of the main drivers of the growth in the
northern part of the city is the existence of
the airport.
The existing urban structure of the city of
Bucharest is a radial-concentric one, almost
a monocentric one, which is in complete
contradiction to its actual urban flows. The
administrative borders of the city of
Bucharest do not correspond with the daily
urban systems of the broader region. There
is a need for a more polycentric development strategy for the Bucharest
Metropolitan Area for different reasons. With
a polycentric development of the Bucharest
Metropolitan Area the politicians want to
achieve:
-- Increasing diversity of the metropolis
-- Decreasing traffic congestion and the
investment pressure
-- A more balanced urban structure of the
metropolitan area
-- A new modern urban image and the new
urban landscape
cient, the social and economic disparities are
higher in comparison with the capital. In the
proximity of Bucharest these areas underwent a period of rapidly urbanisation simultaneously with a progressive abandonment
of agricultural activities.131
The idea of ‘metropolitan thinking’ started
already in 1994 by conducting a first study
for a master plan. In 2000 the municipality
approved the ‘Bucharest Master Plan’; a plan
with a strong focus on a polycentric development of the metropolis.132 In 2003
Bucharest administration decided to finance
a complex research with the purpose to
make a final document which (1) will approve the Bucharest Metropolitan Areas and
(2) will offer a legal framework for regional
and local cooperation. One of the results is
the development of eight regional parks,
around some of the most important urban
poles of Bucharest Metropolitan Area (see
box 3).
Despite the various initiatives and plans it
turns out to be difficult to plan the
Bucharest Metropolitan Area. This can be
explained by a lack of a culture for cooperation; urban practitioners are not used to
cooperate with each other. This limits the
process of metropolitan thinking and act-
131 Zolin,M. B. (2007) ‘The Extended Metropolitan
Area in a New EU Member State: Implications
for a Rural Development Approach’, Transition
Studies Review, 14 (3), p. 565-573
132 Nica, M. and A. Gavriș (2009) ‘Public Policies in
the Bucharest Metropolitan Area – Inertias and
The expansion of Bucharest comprises an
urban area with growing levels of pollution
and living costs, as well as dramatically
shrinking green areas. In the more rural
areas where the infrastructures are insuffi-
Challenges for Local Administration’, no. 27,
proceeding of the 5th Administration and Public
Management International Conference Bucharest,
Research Centre in Public Administration and
Public Services, Bucharest
107
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Box 3
Bucharest’s Regional Parks of Activities
In order to stimulate a more polycentric development of Bucharest, eight ‘regional parks
of activities’ are identified. These parks will comprise some of the smaller villages and will
attract the attention for actors interested in infrastructure and development. These parks
were created by means of a mutual agreement between urban actors involved and they
are located in the surrounding areas of the city centre. It takes the pressure off the overstrained real estate market of Bucharest as well as the villages can profit more of the
capital’s urban facilities. The concentration of economic, research or entertainment activities around the territories of these administrative centres transform the areas into future
metropolitan poles of development, and thus contribute to the balance of the development process in the entire metropolitan area. Every ‘regional park of activities’ has a different development plan based on specific existing resources and future potential. In the
Bucharest Metropolitan Area thirteen metropolitan regional parks are defined as ‘urban
development poles’.133 In reality, these development poles seem to be mainly ignored by
the local authorities.
ing.134 Over the past couple of years, there
have been several proposals made to
change the Romanian administrative organization, but not one of these proposals has
actually been implemented.135 In fact, the
national government remains the only one
capable to support a polycentric develop-
133 General City Council of Bucharest (2003)
‘Regional Territory Arrangement Plan’, Urban and
Metropolitan Planning Centre, City of Bucharest
134 Tuclea, C.E., G. Tigu, D. Popescu (2008)
‘Economic, social and legal arguments for the
foundation of the Bucharest Metropolitan Area’,
International Journal of Economic Policy Studies,
vol.3, article 6, pp. 119-136
135 ALMA-RO Association (2006) ‘The Bucharest
Metropolitan Area – a challenge for public
administration’, in partnership with the Institute
for Public Policy
136 Transportation Master Plan is approved by the
city council in 2000, and updated in 2008.
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ment of the area and by attracting both actors and finance for the development of
Bucharest Metropolitan Area. One way in
which this can be accomplished is by creating a transport system that strives for a
compact structure of the city.136
To sum up, urban practitioners in
Bucharest have less influence on actual
decision-making processes. Local policymakers lack adequate fiscal and/or juridical
instruments to help them determine and
steer urban developments. The planning
instruments of the city of Bucharest are
seen as weak and have little influence on
the current imbalanced and uncontrolled
development of the broader city-region.
Despite several initiatives to establish the
Bucharest Metropolitan Area, the (political)
focus is still very much on the city of
Bucharest rather than on the city and its
surrounding region. A more polycentric
development of Bucharest might support
108
the development of the Bucharest
Metropolitan Area. But as long as the six
local administrative units continue to act
against initiatives such as the development
of ‘regional parks of activities’, the
Bucharest Metropolitan Area will also continue to only exist on paper.
old economic and financial structures transformed and adapted slowly as well as the
bureaucratic culture inherent to many old
institutions. During the last years, the overall business climate has constantly improved
and economic indicators are looking much
healthier. The transition resulted in a boost
of the urban economy of Bucharest and the
city rapidly expanded.
8.3 Economic Vitality of Bucharest
8.3.1 Bucharest urban economic structure
Since the early 1990s, Romania has shifted
towards a free market economy. Like in
many countries in Eastern Europe and the
former Soviet Union, turning a command
economy into a market economy has proved
to be a challenging process. Successive governments in Romania have found it difficult
to turn the economy around because of a
lack of a hard currency and the inability to
secure external funds due to the country’s
high budget deficits. These high budget deficits had been largely accumulated by the
financing of inefficient state industries. The
Figure 16 Composition of Bucharest’s economic
structure
Today’s economic structure
Bucharest’s economy transformed into a
service-driven and consumption-orientated
economy; 70 per cent of the economic activities is service-related (see Figure 14).
The tertiary service sector is important with
a strong contribution of advanced ICT, telecommunication, services, as well as the
banking sector (finance). Due to a high tempo of real estate development, the city faced
a strong urban growth resulting in an increasing pressure on the urban fringe of
Bucharest. This was caused by the rising
standards of living and the increased availability of credit for automobiles and housing.
The rising living standard resulted in a high
consumption of luxury goods, such as cars,
televisions and mobile phones. Shopping
centres, as a new concept of leisure, turned
out to be very popular. The current generation living in Bucharest has more opportunities to spend their money in comparison
with the previous generation(s). The industrial activities reduced to 20 per cent of the
economic activities of the city, which can be
explained by the outsourcing of industrial
companies to other, more peripheral parts of
the country.
The real estate sector highly profited of an
increasing demand for new apartments in
Bucharest, and its surrounding region. New
neighbourhoods have been built in the outskirts of the city, and especially in the north-
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Figure 17
Source: Shutterstock 102237562
ern part of Bucharest new business districts
are built by private developers. The construction sector contributes with 10 per cent
strongly to the urban economy and is one of
the major growth sectors of Bucharest’s
economy.
The urban economy is also strongly driven
by foreign direct investments (FDI). The
National Bank of Romania (BNR) stated that
FDI is unevenly distributed in Romania.
According to BNR data for the years 20032006, the region Bucharest-Ilfov recorded
over 60 per cent of total FDI, with the other
seven developmental regions in Romania
sharing the rest. In the first quarter of 2011,
FDI in Romania dropped with 22 per cent
compared to the same period of 2010.
137 Website BUC online: http://www.buconline.ro/
Analysts say that investors lost interest in
the local market, with exceptions for companies in the automotive industry, mainly due
to the global economic crisis.137 Of all East
European cities, Bucharest is in the top
three of highest FDI after Moscow and
Prague. Many foreign companies invest in
Bucharest because of the low wages of
Bucharest’s work force. The rising land prices of Bucharest, however, might make the
city less attractive for companies. The prices
of the surrounding areas are noticeably lower in comparison to the prices in Bucharest.
Bucharest and the crisis
Despite steady economic growth since 2000,
Romania started to show signs of recession
in the fourth quarter of 2008, in line with
the economies around the world. The effects
of the recession became deeper in 2009 and
the decline of the economy has continued in
foreign_investments_romania.htm
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2010. Since Romania’s main export partner,
the European Union, is still facing consequences of the recession, the industry is
experiencing a significant contraction.
During the coming years, the city has to
deal with a lack of investment capital of the
private partners and major government
cuts. The purchase of homes is slowing
down as loans become more difficult.
Development projects are likely to be postponed, or even never be realized. Despite
this situation, there is a clear need to catch
up on infrastructure. A new airport rail link
is now operating from the city centre and
new metro extensions are planned.138 Public
investment, especially in infrastructure but
also in refurbishing public spaces or historic
areas, seems to have taken the lead because 2011 is a pre-electoral year. Through
investments the local government is trying
to obtain citizens’ votes. But perhaps the
crisis saved Bucharest from a real estate
bubble since the crisis slowed down the pace
of real estate development. The crisis took
off the pressure on the real estate market
and slow down the quick, and uncontrolled,
urban growth of Bucharest. The crisis might
cause a more stable and sustainable growth
of Bucharest on the longer term.
8.4 SWOT analysis
This paragraph discusses the strengths and
weaknesses, opportunities and threats of
the urban economy in a so-called SWOTanalysis. The urban economy of Bucharest is
competitive in South-East Europe, but it is
uncertain whether the city can maintain its
competitive position in the long-run. The
SWOT-analysis (see Table 13) covers five
features of the urban economy: labour market and education, accessibility and infrastructure, government structure, urban de-
velopment patterns and economic structure.139
8.5Conclusions
This paragraph discusses the main observations of Bucharest’s case study by translating the observations into future challenges
(and threats) facing the urban economy of
Bucharest. For some of these challenges the
necessary way to achieve them is clear,
whereas in the case of other challenges
(more) scientific research is required. By
defining research questions and policy implications it is possible to connect ‘research’
with ‘urban practice’. Table 14 discusses research questions which require more indepth and fundamental academic research.
After a period of strong economic growth,
caused by the transition towards a service
economy under a capitalist regime, the economic growth of Bucharest slowed down due
to the financial and economic crisis of 2008.
During the coming years, the private sector
will have less investment power and the
government will have to make major financial cuts. European funds will most likely be
the only stable form of income. These
streams are mainly invested in regional projects in order to, for example, stimulate a
polycentric urban development within
Romania. One of Bucharest’s main challenges is how to improve its urban competitiveness. Bucharest risks becoming a so-called
American ‘donut-city’, in which all rich peo-
138 Nae, M. and D. Turnock (2011) ‘The new
Bucharest: Two decades of restructuring’, Cities,
nr. 28, p. 206-219
139 These five features are selected on the basis of
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desk research and interviews with key actors in
the metropolitan area.
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Figure 18
Source: Shutterstock 97474199
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112
ple are moving out the inner-city to the surrounding municipalities. How to determine
and create an institutional advantage for
local entities if and when they decide to
work together?
initiatives such as the development of ‘regional parks of activities’, the Bucharest
Metropolitan Area will also continue to only
exist on paper.
The research questions posed in table 14
are mainly focused on Bucharest’s economic
transition process. When analyzing the economic vitality of Bucharest it is important to
take a city’s path-dependency into account.
The future development pattern of
Bucharest’s economy is uncertain. Given the
current situation, it is likely that the city will
transform into a European metropolis with a
more Western European economic profile,
dominated by knowledge economy and advanced services production. But on the other
hand, sustainability, quality of life, and creative industries – typically Western European
topics – are not (yet) on the political agenda. What will the future hold with respects
to this? Will the politicians realize that the
current urban economic growth of the
Bucharest Metropolitan Area is not sufficiently sustainable? Will they realize that
changes are needed if Bucharest wishes to
maintain its competitive position in the longrun?
In any case, scientific research on the economic challenges facing Bucharest is necessary and will be especially interesting to
analyse in Central and Eastern European
cities, as little known about the economic
development patterns of these cities. Too
often a Western European view is used for
analyzing and assessing these cities.
Therefore, further research on the challenges and questions addressed in this case
study can be highly valuable.
This case study is mainly focused on the city
of Bucharest rather than the Bucharest
Metropolitan Area. As there is no such thing
as a the Bucharest Metropolitan Area as of
yet, this is understandable. Despite several
initiatives to establish the Bucharest
Metropolitan Area, the (political) focus remains on the city of Bucharest rather than
on the city and its surrounding metropolitan
region. A more polycentric development of
Bucharest might support the development of
the Bucharest Metropolitan Area. But, as
was stated earlier, as long as the six local
administrative units continue to act against
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Table 13 SWOT Analysis
Labour market and education
Strengths
Bucharest labour market is characterized by a pool of good employees; (1) a majority of the employees have
a university degree140, (2) the wages of the work force are relatively low, and (3) the working ethos of the
employees is attractive for (foreign) companies. Romanian people are eager to learn and they pick up new
languages quite easily. Impact of the new ‘teaching law’ concerning the continuity to produce highly skilled
specialists.
Weaknesses
The brain drain of highly-skilled young professionals illustrates a weakness of the Bucharest urban economy,
namely the inability to keep the ‘first class’ students in the city. After graduation many young professionals
move away to more attractive career opportunities abroad.
Opportunities
The main opportunity is to create more jobs for highly-skilled people in Bucharest, for example, by investing
in innovative enterprises. There is, however, only a limited budget available for innovation and Romanian
entrepreneurs are not so much focused on invest in research and development (R&D). Nowadays, there are
not enough jobs available for highly-skilled people, which cause a mismatch in the labour market. Young
professionals with a university degree often have low-skilled jobs. Bucharest should make optimal use of the
Romanian young professionals abroad.
Threats
The quick transformation of the economy has resulted in a mismatch in the labour market. This necessitates
the re-training of employees having to change their career focus. Since it is unclear which main economic
sectors in Bucharest will prevail in the long run, it is also unclear what kind of training programs is required
(now and in the future).
Accessibility and infrastructure
Strengths
Trucks are not allowed in the inner city of Bucharest. The trucks have to transfer their goods and products
to smaller vans in order to reduce the CO²-emission. Bucharest has a good metro-system, but more metrolines are needed to connect the neighbourhoods with the city centre.
Weaknesses
Bucharest’s infrastructure is strongly orientated towards car traffic. There are only a few restrictions to car
parking; often car parking facilities are free of charge or extremely cheap. Footpaths and public spaces are
often filled with cars blocking the way and/or making a mess of public space. Local politicians are hesitant of
introducing unpopular measures (in order to reduce car traffic) in case of losing voters. Instead, increasing
numbers of parking spaces are being planned as well as high-speed roads cutting the city.
Opportunities
The development of a new inner ring road in Bucharest can be a solution to reduce the congestion, as
well as enlarging sections of the outer ring. This ring road could improve the accessibility of the city and it
could connect the city with the new neighbourhoods. The accessibility of the city can only be improved in
combination with investments made in public transport and cycling lanes.
Introduce higher prices for paid parking and road pricing to reduce car use. By introducing a parking tariff in
the city centre, people might choose public transport over the car as use of the latter would become more
expensive.
Threats
A threat for the accessibility of the city is the lack of attention for public transport. The attention is focused
too much on road-infrastructure, rather than on improving the accessibility by investing in public transport
(new metro-lines) or cycling lanes in order to support cycling in the city. For example, the materials used for
the cycling lanes are not fit for use, resulting in damaged bike tires. There is also great discontinuity between
and fragmentation of existing bike lanes. All this points to the fact that Bucharest’s government authorities
are underutilizing the opportunities to learn from other cities’ experiences and practices.
140 Some of these degrees were obtained by the
so-called ‘university plants’; private universities
which attracted people because they provided
easy obtainable diplomas.
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Government structure
Strengths
Strong link between ‘public sector’ and ‘universities’. Universities often participate in public tenders together
with private companies. Due to low costs of students, universities can offer attractive prices in these tender
procedures and often win assignments made by various authorities. This explains the strong link between
the public sector and universities.
Weaknesses
Politicians, under pressure of the private sector, have a strong influence on urban planning decisions.
This governance structure can result in arbitrary planning decisions and missed opportunities for a more
balanced, and integral, development.
Opportunities
Create more balanced public-private partnerships by giving the public authorities more instruments. Up
till now, the power of the public sector has been limited since they do not have the instruments to actually
implement the plans they are making.
Threats
Lack of a formal government authority at the metropolitan scale limits an effective cooperation between the
city of Bucharest and the villages in the surrounding region. Moreover there is a lack of experienced people
in the key positions in local authorities responsible for implementing the strategies and policies defined by
academics and policy-makers. Despite a lot of good studies, there is lack of implementation, monitoring and
controlling leading to a lack of results.
Urban development patterns
Strengths
There is a growing acknowledgement that the urban development pattern of Bucharest needs to be
changed. Several studies are pointing towards the unbalanced and non-sustainable changes of the
metropolis. Since last year there is a new law which improves the conditions for public-private partnerships.
In addition, first steps have been made towards a true dialogue between public authority and civil society.
Weaknesses
Bucharest has developed in an unbalanced way; there is a (strong) difference between the northern and
southern parts of the city. Moreover, the new neighbourhoods, and some of the old neighbourhoods as well,
are lacking public services (i.e. public hospitals, green spaces, and public schools) and are poorly connected
to public transport facilities. This makes people increasingly dependent on the car. Another weakness is the
unsuccessful development of eight ‘regional parks of activities’ in the Bucharest Metropolitan Area.
Opportunities
The redevelopment of brown field sites is a good opportunity for a future urban (and economic) growth of
Bucharest. This can result in a more compact and sustainable development of the city, and an optimal use
of available land.
Threats
There is a threat for ‘free-riders’ behaviour of private actors since the public authority cannot enforce them
to develop neighbourhoods in a more integral way. It explains why the development of public services is
staying behind. It is a challenge to confine the private partners to invest in the ‘quality of life’ of Bucharest,
by investing in green space or heritage.
Economic structure
Strengths
The strength of the Bucharest economy is its ‘gateway function’ within Central and Eastern Europe. Logistics
and transport activities are an important part of the ‘service-profile’ of Bucharest. The improvement of the
physical connection with port-city Constanta will give a new boost to the urban economy of Bucharest.
Weaknesses
Lack of transparency and legitimacy of Romanian rules and regulations for business. Especially for SMEs the
procedures are difficult to understand and are very time-consuming.
Opportunities
Bucharest has a high investment potential. The dynamics of the urban economy attracts many investors
and the economy provides various money-making opportunities. Main opportunity for Bucharest is to make
a shift from a service-based economy towards a more knowledge-based economy. Moreover, the city should
profit more of the city’s historical values in order to enhance the quality of life in the city. Instead of mere
solution-based policies, a real vision for Bucharest with proactive strategies should be developed.
Threats
Bucharest has attracted many foreign companies with its low costs (which explain the high percentage of
FDI). Strong dependency on FDI, and low cost companies, can be a threat for the economic situation of
Bucharest. It is a challenge for Bucharest to keep these companies in the city –especially given the rising
prices (for land and labour).
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Table 14 Observation of the case study translated into challenges, research questions and policy
implications
Government
structure
Challenges
Research questions
Policy implications
Bucharest is a highly
congested city.
Improve the
accessibility of the
city by discouraging
car ownership and
stimulating new ways of
sustainable transport.
What is the impact
of paid parking/road
pricing on the economic
vitality of the city?
Taking into account the
negative externalities
of congestion, the
politicians must take
unpopular decisions in
order to discourage car
use.
Urban developments
in Bucharest are
dominated by the
market.
Initiate public-private
partnerships in order
to stimulate a more
controlled urban and
economic growth.
Division of tasks
between public and
private actors within a
market-driven economy:
what kind of governance
model works? Which
instruments should be
used
Start with more
informal public-private
collaboration and
support bottom-up
initiatives.
Many foreign companies
– attracted by low
labour costs- are located
in Bucharest (resulting
in a high % of FDI).
How to keep these
foreign companies in
Bucharest given rising
labour costs and the
fact that other countries
are becoming more
attractive for low cost
companies?
How can an economy –
that strongly depends
on FDI – mature
towards a more modern
and stable economy?
Maintain the
attractiveness of the
economy for (foreign)
companies, for example
by enhancing the
relationships between
the foreign companies
and local suppliers.
Brain drain of highly
skilled people caused
by a lack of high-skilled
jobs.
Creating more highskilled jobs by changing
‘low quality’ services
into ‘high quality’
service requiring more
knowledge, experience
and skills.
How did former
industrial cities make
the shift towards a
knowledge economy?
Which conditions are
required for this shift?
Public-private
investments in
technology parks
or research centres
to stimulate a more
knowledge-based
economy.
Inhabitants have low
expectations regarding
the quality of urban life.
Empowering people
and aiding community
development
should result in
more accountable
and responsible
administration.
How to raise the
awareness and the
urban culture of
inhabitants facing
difficulties in their daily
lives?
The growing civil society
in Bucharest could be an
opportunity to enforce a
real implementation of
the participation law of
2010.
Suburbanization: rich
people are moving
out of the inner city
resulting in a daily
commuting pattern of
half a million people.
Create a balanced
development of the
city and reducing
commuter patterns by
a more integral urban
development.
How can the negative
effects of urban, and
economic, growth be
reduced by public and
private partners?
Suburbanization requires
collaboration between
the city of Bucharest
and surrounding
municipalities.
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9. Conclusion
This chapter discusses the main research
challenges identified by researchers and
urban practitioners and describes the next
steps towards a fully-fledged multiannual
demand driven research program. The relationship between metropolitan areas and the
urban economy raises a multitude of complex but actual questions. This agenda
translates academic research into more concrete policy-driven economic questions relevant for cities and identifies economic challenges (and threats) for metropolitan areas
in the near future. The aim of this agenda is
to list the structural questions that cities
would like to address. Future European research programmes could use the building
blocks from this agenda to stimulate practically driven scientific research. In this way
researchers and practitioners work together
on effective economic strategies for vital
metropolitan areas.
9.1 Results Case Studies
The negative influence of the financial and
economic crisis is visible in the case studies.
Especially Madrid is strongly hit by the crisis
resulting in high unemployment figures,
especially amongst youth and migrants. The
city should make a shift from a traditional
urban economic strategy (focused on infrastructure projects and traditional economic
sectors) towards a strategy in which humans
are the central focal points. In a knowledgebased economy it is all about attracting and
maintaining human capital. Quality of lifeindicators, such as a green, safe, and quiet
living environment and a diverse offer of
high-end amenities and services, are gaining
importance. This might be one of the main
reasons why Munich is such an attractive
city for knowledge workers. Munich offers a
good quality of life and is lucky to have the
Alps on a short distance for recreation facilities. The competition between metropolitan
areas is likely to be dominated by qualitative
indicators rather than the traditional quantitative indicators since all cities want to attract new knowledge workers. The availability of good education for the children of the
expats is gaining importance.
It is crucial that economic vital metropolitan areas have an attractive and diverse
central inner city with culture, monuments,
leisure, and quality of public space.
Metropolitan regions need an inspiring heart
which attracts highly skilled workers and the
creative class. In this respect, the ideas of
Richard Florida are crucial. Quality of life is a
fundamental quality of competitive metropolitan areas.
The case study Munich shows the importance of a long-term strategy and focus on
entrepreneurship and R&D. There are identical experiences in innovative regions as
brainport Eindhoven, Helsinki and
Stockholm. Economic vitality demands a
long-term focus and continuity in economic
policy. This continuity is missing in the case
study of Madrid where there is an instable
urban and national economic situation.
9.2 Research Challenges
The case studies illustrate that the metropolitan areas struggle in defining their (research) questions and challenges. This
might cause the ‘copy paste’ behaviour of
metropolitan areas, since they do not know
how they actually should enhance the urban
economy. Cities are stimulating the development of science parks and are formulating
policies to attract the creative class without
knowing whether these policies are effective. They often ignore to pose the fundamental question if this policy is supported by
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economic analyses. In other words: whether
these policies are actually solving the more
specific urban problems remains unknown.
Metropolitan areas face the dilemma of investing in practical short term solutions on
the one hand or to execute economic analyses and formulate long-term strategies on
the other hand. The current political climate
is, however, mainly focused on short term
solutions. By defining a Smart Specialisation
Strategy (S³), regions are stimulated to focus on a selected number of economic sectors. The idea being that it is easier to develop (inter)national competitive economic
clusters if your priorities your expenses.
importance of metropolitan areas.
Therefore, metropolitan areas, scientists,
national research councils and the European
Union should work on a long-term economic
metropolitan research agenda. The triumph
of the city continuous worldwide and Europe
with its attractive and diverse cities has to
invest in metropolitan areas to benefit from
the attractiveness many cities have.
All urban practitioners underlined the importance of metropolitan areas for the national
and European economy. This, however, does
not mean that national governments prioritize their policy efforts on these areas.
Some governments focus on regions that
underperform, whereas other countries intensify the regional government or mainly
invest in these metropolitan areas. The urban practitioners indicated that they are in
need for tools, information and evidence to
convince other governments with facts and
figures and effective strategies of the importance of urban economies.
There is a quest for further research on
the economic vitality of metropolitan areas.
More evidence-based and policy-driven research is needed to define the underlying
structural mechanisms. So far, remarkably
little research has been carried out on the
economic aspects, effective economic strategies and local, regional and national economic impact of metropolitan areas within
the EU. This confirms the observation that
metropolitan areas are neglected in
European economic debates. Metropolitan
areas should be put high on the European
agenda and at the same time cities find it
hard to quantify and qualify the economic
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The urban economy can no longer be analysed by only taking into account purely economic facts and figures; it is about quantity
and quality. The urban economy is too diverse, dynamic and complex. Many aspects
influence the economic vitality of a metropolitan area: from housing policy, city marketing, quality of public space and green
areas to regional governance towards accessibility and connectivity. Integral and coordinated policies and strategies based on sound
economic analyses are needed. The urban
reality of cities has turned out to be much
more complicated and persistent than initially expected. Even the selected four sub
themes of competitiveness: knowledge and
innovation, labour market and education,
entrepreneurship and modernisation and
adaption do not include the main challenges
observed in the four case studies. Policy
makers and politicians seem to lack sufficient knowledge of urban reality and are not
able to organise the exchange of knowledge.
They often do not have sufficient knowledge
of actual outcomes of their policies on particular areas. For example, clear evaluations
are scarce. Moreover, cities have difficulties
to prioritise their objectives and do not know
whether they should invest in sector A, B or
C? During times of recession cities are often
forced to make hard choices. Is it better to
choose for only one specific sector or large
project, or do all economic sectors deserve
the same amount of attention (and money)?
Especially in times of major cut offs of gov-
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vitality of metropolitan areas. Therefore the
research programme or other European programmes should reserve budget and space
for knowledge exchange and learning within
and between metropolitan areas.
ernment expenses, these questions are
highly relevant for cities. What can cities
and regions effectively do for the urban
economy within a limited budget?
Cooperation is essential and public and private partners should focus on preventing
overlapping policies and projects.
The economic vitality of metropolitan areas
includes a broad range of qualitative and
quantitative assets. There is, however, a
lack of methodology and data to analyse
qualitative assets of urban economies such
as quality of life. The lack of a metropolitan
database limits the possibilities of quantitative research. To obtain clear evidence on
the economic performance of European cities, more quantitative research is required.
The future research agenda therefore should
have enough budget for sound and transparent data collection, analyses and metropolitan comparisons.
Metropolitan areas indicate that they have
strong needs for comparative research on a
long-term basis. They are interested in the
way in which other cities are enhancing their
economic vitality. By monitoring these cities
for several years, interesting outputs about
effective economic policies can result. So
there is a high level of support amongst
metropolitan areas for initiating a long-term,
in-depth research project analysing economic vitality. Many questions about the role
that cities play are still unanswered and various metropolitan areas indicate that they
have strong needs for comparative research.
The research should focus on quantitative
and qualitative indicators of the urban economy in order to explain the underlying dynamics of the urban economy and to gather
insight in the meaning of the quantitative
rankings and benchmarks. Research should
then try to establish links between these
different sets of assets and the economic
For cities and regions it is a challenge to
remain economically vital and have a sufficient quality of life, be able to compete with
other cities and regions and results in actual
jobs, profits, and wealth for their people and
business. The degree of entrepreneurial activity is one of the main determinants for
the level of competitiveness of metropolitan
areas. The of small and medium-sized enterprises (SMEs) in the local and regional
economy is essential as well as clear cut
information on the (dis)advantages of both
economically diversified and economically
specialized metropolitan areas. A crucial
question in this regard is how cities can actually develop the right conditions for economic activities in order to create an entrepreneurial economy that is diverse, robust
and competitive at the same time. This
agenda is a discussion and inspiration document in the current process of metropolitan
areas to structurally strengthen the regional,
and even national, economy. Although the
agenda is supposed to be carried out by
scientists and practitioners, the main focal
points are firms and entrepreneurs within
the metropolitan areas.
9.3 Research Questions
Further research should first investigate the
urban economy from a wide range of factors; both quantitative assets (economic
facts and figures) as well as qualitative assets (concepts as quality of life and cultural
diversity). Research should then try to establish links between these different sets of
assets and the economic vitality of metro-
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politan areas. In this way, a more comprehensive and empirically-informed understanding of the economic performance of
metropolitan areas can be obtained. By addressing questions that are of high relevance for metropolitan areas, research will
be demand-driven. After all, metropolitan
areas are actually facing the future challenges (and threats) of economic vitality.
More evidence-based research is required to
fully understand the underlying mechanisms.
-- What is the relation between productivity
and competitiveness of metropolitan
areas?
-- How can urban economic policy be
defined? In what way can it be applied
effectively?
-- How can cooperation between certain
(public and private) actors contribute
to the economic vitality of metropolitan
areas?
-- Which financial incentives are attractive,
accessible and sustainable in order to
enhance the start-up (or expansion of
existing) of SMEs?
-- How can metropolitan areas make a
valuable contribution to the European
Commission’s new ten year growth
strategy: Europe 2020?
-- Which (policy) interventions may
strengthen the competitive position of
metropolitan areas?
-- How to organise, strengthen and define
smart results for the triple helix structure
in a city or metropolitan area?
-- What explains the differences in economic
growth patterns between European
metropolitan areas?
-- What is the multiplier of attracting highly
skilled knowledge (creative) workers?
-- What is the impact of a liveable highly
qualitative inner city on the urban
competitiveness?
A Strategic Knowledge and Research Agenda
on Economic Vitality of European Metropolitan Areas
-- How can the negative external effects of
urban, and economic, growth be reduced
by public and private actors?
9.4 Next Steps
The European Metropolitan network Institute
(EMI) is willing to take up the challenge to
fulfil the research lacunas with practice-led
research projects and programs. EMI proposes to create and build a multiannual
knowledge and research programme of, for
and by cities and region and their urban
stakeholders. The ultimate goal and ambition is to invest in the future by further developing knowledge on creative and innovative solutions to current and future challenges. In this way cities will have a stronger voice on national and European decisionmaking levels. With a robust and committed
programme, the consortium will be able to
apply for further EU (co-)funding.
Investing in the further establishment of a
joint multiannual programme on economic
vitality will ensure that individual efforts of
cities and their stakeholders are multiplied
(both content-wise and financially). This
programme, facilitated by EMI, builds on
existing research and knowledge and brings
together cities and other important stakeholders, such as business, together. The aim
is to create a strictly ‘research-based, practice-led’ programme firmly rooted in a solutions-oriented approach. This Knowledge
and Research Agenda is the first step towards a multiannual research programme.
Based on this agenda, EMI will identify the
possible opportunities to take the agenda to
a higher level. Preferably within a divers
consortium of partners varying from cities to
universities to (semi)-public and private
organisations.
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