Glossary of terms of territorial economic development

International Link and Services for Local Economic Development Agencies for a fair, human, sustainable and inclusive development

Glossary of terms related to territorial economic development

Giancarlo Canzanelli

October 2007

ILS LEDA paper n° 08

INDEX

ABC o o o o o

Business Centers Business Cluster Business Innovation Centers (BIC) Collective Learning Comprehensive Territorial Service System for LED

DEFGHI o o o o o o o

Disadvantaged people Focus Group Foreign Direct Investment Incubators Industrial District Industrial Zone or Park Innovation

LMNOPQR o o o o o

Local Economic Development Agencies (LEDA) Local Partnership One stop-shop for businesses Participatory Action Research (PAR) Relational Capital

SW o o o o o o o o o o o o o o

Scientific and Technological Park (STP) SME Social Capital Social Inclusion Stakeholders Strategic Economic Territorial Resources (SER Sustainable Development Technology Technology Transfer Territorial (Sustainable) Competitive Advantage Territorial Animation Territorial Marketing Territorial Pact Territorial Value Chain

GLOSSARY OF TERMS RELATED TO LOCAL ECONOMIC DEVELOPMENT Business Centers Structures, that offer technical assistance, consultancy, commercialization services, access on the credit, support for the use of regional, national or international government laws or measures, etc. Some of them are generalist multi-service centers, other ones are specialized centers Business Cluster

It is a geographic concentration of interconnected businesses, suppliers, and associated institutions in a particular field. Clusters are considered to increase the productivity with which companies can compete, nationally and globally. There generally are four type of clusters: 1 - The Geographical Cluster (as stated); 2 - the Sectorial Clusters (a Cluster of businesses operating together from within the same commercial sector, such as the England; Cowes and now Solent, and photonics in Aston, Birmingham, and it is very close to the Italian industrial district model); 3 The Horizontal Cluster (interconnections between businesses at a sharing of resources level e.g. knowledge management); 4 - the Vertical Cluster (i.e. a supply chain cluster). The combination of clusters 1,3 and 4 is very close to the concept of value chain.

The important thing about a cluster is that the industries within the cluster are economically linked, they both collaborate and compete and are, to some degree, dependent upon each other; and ideally, they take advantage of synergies.

Business Structures, similar to incubators, but orientated to support innovative Innovation Centers businesses, and often linked to some university or research center.

(BIC) Sometime they include a physical incubator, sometime they are limited to provide services for the business start-up.

Business Retention Strategies (BRS):

Collective Learning

Comprehensive Territorial Service System for LED

Disadvantaged people

BRS are systematic efforts designed to keep local companies content at their present locations within the city area. Strategies include helping companies cope with changing economic conditions, addressing new markets and even assisting with internal company problems. Business Start-up Support: Business support includes the full range of services available to people starting in business for the first time. Initiatives include: training, business advisory support, business networking and mentoring and financial assistance (grants, loans, interest rate subsidies are traditional methods; a more innovative approach to financial support is to try and attract as much private sector investment as possible, rather than public sector.

It is the process of integrating the tacit or implicit traditional knowledge, which is bound to the local context and local actors, with the codified knowledge available at the world level, in order to stimulate cognitive synergy as collective capacity to carry out common actions based on a shared interpretation of reality and its potential for change.

It is the a system that includes different services provided to the institutions and the population in order to support local economic development: territorial animation, assistance for business start-up or business improvement, financial support, training, commercialization, quality assessment, marketing, internationalization, etc. Although these services often exist in a certain territory, they may be not coordinated among each other. Nevertheless coordination and integration are needed for avoiding mismatching (for instance if a new entrepreneur want to establish a new business and he/she has capacities but not access to credit, or vice versa, or if territorial marketing is lacking and the small entrepreneurs cannot afford it individually.

People with reduced possibilities of accessing to the economic circuit: they are women alone with children, people with different abilities, refugees, immigrants, displaced people, fired workers, young unemployed people, etc.

Focus Group

Group of people, generally representatives of groups of interest, aimed at detecting and defining shared problems and solutions. The Focus Group (FG) is one of the instruments used in the participatory Research–Action process. It is based on the same principles of “brain storming”, and goes over by assembling opportune subjects (usually from five to fifteen people), constituting the FG panel, to discuss about a topic. The panel should be constituted by actors, in various senses logically related to the topic. Good and effective definitions of FG topic and panel depend on researcher’s experience. FG’s topic is sometimes divided in single aspects, and is collectively discussed and deepened thanks to a succession of participants’ interventions. During this time, the researcher has to drive the debate, to deepen the clearness of progressively emerging contents. Those contents are recorded and successively analyzed by researcher itself, to elaborate next FG’s topics and panels, until the completion of the analysis and the definition of the solutions, approved by the FG.

Food Security

Food Safety Activities are those activities aimed to assess, communicate and reduce all the health risks associated with the nutrition and food chain

Foreign Direct Investment (FDI)

FDI is investment that is attracted from abroad. It can mean either Greenfield investment (i.e. investment in building new facilities on hitherto undeveloped sites) or portfolio investment (i.e. buying into an established business). Generally the investor is attracted by comparative advantage factors (geographic strategic location for exploiting natural resources or for markets), governmental incentives, labor cost, favorable legislation, etc.

The impact of FDI on local economy and long-term development is often very weak.

Incubators

Structures that support the entrepreneurial process, helping to increase survival rates for innovative startup companies, by offering a specialized menu of support resources and services, such as provision of physical space (offices, laboratories); common facilities (conference room, show room, travel agency, translations), management assistance; assistance in preparing an effective business plan; administrative services; business networking. They have particular success in urban developed areas, where the real estate cost is quite high for a starting up small business.

Sometime there are "virtual" incubators, that provide services for the business start-up, without disposing of the physical space for the location, but helping to find it out for the entrepreneurs

Industrial District

It is a modality in which economic specialization arises through clustering in a particular industry-zoned urban area. Since the 1980s, the term has become an important element of dynamic industrial development in Central and North-Eastern Italy, where in the post-WW2-era clusters of small and medium-sized enterprises (SME) experienced strong growth.

Industrial districts in Italy have a coherent location and a narrow specialization profile, e.g. Prato in woolen fabric, Sassuolo in ceramic tiles or Brenta in ladies' footwear. The success of SME-based Italian districts was one of the factors that motivated economic development organizations across the world to adopt cluster promotion as an approach to stimulate growth and job creation.

Dedicated infrastructure in a delimited area to reduce the per-business expense of that infrastructure. Such infrastructure includes roadways, railroad sidings, ports, high-power electric supplies (often including threephase power), high-end communications cables, large-volume water supplies, and high-volume gas lines. Its aims are to be able to attract new business by providing an integrated infrastructure in one location; to set aside industrial uses from urban areas to try to reduce the environmental and social impact of the industrial uses; to provide for localized environmental controls that are specific to the needs of an industrial area.

Industrial Zone or Park

Innovation

Local Economic Development Agencies (LEDA)

Local Partnership

It is the act of introducing something new: a new idea, method or device, either using new original ideas or exploiting the ones coming from outside the context, in order to realize changes or improvements, and increasing value, (customer value, or producer value).

The term innovation may refer to both radical and incremental changes to products, processes, services, and their management.

Legal, no profit structures, generally owned by the public and private entities of the territory. Through the LEDA the local actors plan and activate, in a shared way, initiatives for territorial economic development identify the most convenient instruments for their realization and enhance a coherent system for their technical and financial support. The LEDAs provide several services to the population and institutions, such as territorial promotion, economic dynamization, credit, technical assistance to businesses, entrepreneurial training, with the objectives of supporting productive competitive development and economic innovation. The LEDA promoted by the United Nations support economic development within the perspective of an equitable, ecologic, and human development.

It is the formal agreement between the most representative actors of a certain community, which commit themselves to cooperate and to pursue common goals. It is the result of an effective local social and relational capital.

One Stop-Shop for Businesses (OSSB)

It is a center, where business persons can go to obtain advice and support to help them establish and expand their business. Sometimes these centers also issue licenses and permits needed by businesses to start-up, operate or expand. These centers improve the local business environment by reducing the number of separate agencies and offices a business may need to approach for advice or to apply for various licenses and permits

Participatory Action Research (PAR)

Participatory action research is a recognized form of experimental research that focuses on the effects of the researcher's direct actions of practice within a participatory community with the goal of improving the performance quality of the community or an area of concern. Action research involves utilizing a systematic cyclical method of planning, taking action, observing, evaluating (including self-evaluation) and critical reflecting prior to planning the next cycle. It is not simply an exotic variant of consultation. Instead, it aims to be active co-research, by and for those to be helped. The "research" aspects of PAR attempt to avoid the traditional “extractive” research carried out by universities and governments where “experts” go to a community, study their subjects, and take away their data to write their papers, reports and theses. Research in PAR is ideally BY the local people and FOR the local people. Research is designed to address specific issues identified by local people, and the results are directly applied to the problems at hand. PAR proceeds through repeated cycles, in which researchers and the community start with the identification of major issues, concerns and problems, initiate research, originate action, learn about this action and proceed to a new research and action cycle. This process is a continuous one. Participants in Action Research projects continuously reflect on their learning from the actions and proceed to initiate new actions on the spot. Outcomes are very difficult to predict from the outset, challenges are sizeable and achievements depend to a very large extent on researcher’s commitment, creativity and imagination Is a methodology aimed at favoring problem setting and problem solving, including all the actors involved in the problem. There are different level of participation practices: 1) Consultative (through forums, meetings, referendum, etc.) in order the decision makers can obtain more precise input for the decisions they at the end make; 2) Prioritizational (through stakeholders grouping) in order to establish clear priorities for the decision makers; 3) Budgetary, in order to establish also the assignment of budget on the priorities; 4) Comprehensive, in order to define also the instrument and the methodology of implementation of the decisions.

Participatory approach

Relational Capital

It refers to the quantity and quality of consolidated formal and informal networks existing in a certain community, between this and networks of other external communities. More this capital is high, more the community is able to manage development issues, because it improves its social capital and opportunities.

Scientific and For the Association the International of Technological Parks (International Technological Park Association of Science Parks - IASP) a Technological Park is an (STP) organization, whose main target is to increase the wealth of its community promoting the culture of the innovation and the competitiveness of the companies and generating knowledge institutions installed in the park or associated to it. To such aim, a Technological Park stimulates and manages the flow of knowledge and technology between the universities, institutions of investigation, companies and markets; it impels the creation and the growth of innovating companies by means of mechanisms of incubation and centrifugal generation (spin-off) and provides other services of added value, as well as spaces and facilities of great quality.

There are different models from STP, some including physical spaces (generally very pleasant) to attract high technology company investments, other ones gives more importance to intelligent support functions.

SME This is the acronym for ‘small and medium-sized enterprises’. There is no definitive delineation between a small and medium sized business. As a general reference in developed countries, small is often from 5 to 20 employees, medium from 20 up to 200. Businesses with fewer than 5 employees are usually called micro-enterprises.

Currently also the revenue is taken as reference, because a business with very few employees can make large revenue and profit, due to technology and outsourcing. Any way the classification depend much on the national context. In depressed areas an enterprise with 50 employees can be considered a large enterprise Social Capital Social Capital refers to the norms and networks that enable collective action. It encompasses institutions, relationships, and customs that shape the quality and quantity of a society's social interactions. Social capital, when enhanced in a positive manner, can improve socio-economic sustainability by building the community’s capacity to work together to address their common needs, fostering greater inclusion and cohesion, and increasing transparency and accountability.

The concept of Social Capital is broken down to five sub-categories for operational purposes. The five dimensions of social capital include: Groups and networks; Trust and Solidarity; Collective Action and Cooperation; Social Cohesion and Inclusion; and Information and Communication.

Social Enterprise

It includes all the enterprises whose business is the delivery of goods and services of social utility and general interest. The Italian law 118/05 introduces a remarkable difference between the entrepreneurship and its lucrative aim; it recognizes the possibilities of enterprises with different aims but profit. These enterprises are characterized by producing goods and services useful to the communities and local development and by an organization that prioritizes social inclusion of vulnerable people, equal opportunities, direct participation of workers in the management, and the reduction of inequalities.

Social Inclusion

It is a process for favoring the active participation and inclusion of the most disadvantaged population in the mainstream economy, combating marginalization and inequality.

Stakeholders:

Individuals and groups who have an interest in the issues in hand. They normally represent their own interests as stakeholders.

Strategic Economic Territorial Resources (SER)

A SER is a resource that better contributes to achieve the territorial economic development goals, defined as the maximization of sustainable, permanent and decent jobs and enterprises. A SER has at least one of the following characteristics: - It is a typical resource of the area, with recognizable differences (competitive advantage) with respect to similar ones of other areas (national, international) - It is a resource quite spread in the territory and with consistent employment - It is a resource with high potential of producing added value if linked with other economic activities (value chain) - It is a resource that introduces innovation

Sustainable Development

Development process aimed at pursuing development objectives in a permanent way. It has to do with different and inter-related sustainable issues, such as social sustainability (the way for assuring social cohesion and participation); economic sustainability (the way for assuring constant income and job generation, and economic added value); institutional sustainability (the way for enabling effective governance); and environmental sustainability (the way for preserving the natural and environmental resources).

Technology is a broad concept that deals with the use and knowledge of tools and crafts, and how it affects a specific ability to control and adapt it to its environment. Technology can refer to material objects of use to humanity, such as machines, hardware or utensils, but can also encompass broader themes, including systems, methods of organization, and techniques. The term can either be applied generally or to specific areas: examples include "electronic technology", "medical technology�, but also to “waste collection technology, etc.

Technology

Technology Transfer

Territorial (Sustainable) Competitive Advantage

Territorial Animation

Territorial Comparative Advantage

Technology transfer is the process of developing practical applications for the results of scientific research, or of applying already used technologies in organizations, which lack of them. This process includes the implementing strategies for how to exploit or adapt it.

The technology transfer generates innovation. In this sense a technology can be transferred, while an innovation not.

It consists of all those peculiar characteristics of products, attractions, and services, that make the difference, distinguish a place from others, provide uniqueness and are not easily imitable. This provides sustainable competitive advantage (SCA), as M. Porter defines "the value-creating processes and positions that cannot be duplicated or imitated by other firms and considers it different from a competitive advantage (CA) in that it provides a long-term advantage that is not easily replicated". To be sustainable, the advantage must be: distinctive, and proprietary (through brands) It is a technique aimed provoking a change in the dynamic of social or economic behaviors of the people in a certain territory. It is very much related with the Participatory Action Research methodology that is used for this technique, and for upgrading social and relational capital. The technique consists of carrying on a set of organized actions able to improve awareness, self-confidence, skills, capacities of acting in cooperation, and of pursuing together the same goal.

It is the advantage that investors recognize for maximizing profits, when they compare all the type of facilitations or support coming from national and local opportunities, such as cheap labor, access to natural resources, taxes, use of the land, etc. National and local governments play to improve regulations in favor of the local and international investors, but -attention! always there is someone able to offer better conditions.

Territorial Marketing

Territorial Pact

Territorial Value Chain

It is the strategy for promoting a certain territory, mainly valorizing its attractiveness. It is based on three main components: 1) identity or cohesion (what are the specific common values that people and resident have with respect to their territory; 2) image (What is the image the population want to give to others; 3) Communication (How this image is communicated).

An initiative initiated by the European Union to facilitate the territorial development in weak areas. The local actors decide in a shared way the plans and the initiatives to be implemented in order to favor the best use of the local resource, the productive reconversion of areas in crisis, its territorial specialization, the innovation, etc. The Pact implements their decisions and action through a Committee or Forum of the local actors.

Many of them have generated Territorial Economic Development Agencies for facilitating attraction or financial resources and sustainability.

A chain of the territorial value is a sequence of interrelated economic activities around a strategic resource for the territory. The chain includes: A focal resource; The inputs and the necessary technology for its handling; The activities that transform the primary product; The necessary inputs and the technology for this last activity; The services of support (commercialization, qualification, transport, information, control of quality, etc.); The investigation and the innovation; The financial services; Complementary activities to arrive at the final consumer or to add value to the resource.