Dan Johnson: Economic development: Theory and practiceWritten by Dan Johnson | | email@example.com
Recently, I had the very good fortune to spend a week with some of the nation’s most advanced scholars of economic development. It was a week of lectures, group discussions and team projects sponsored by Harvard University. The theme for the week was “Leading Economic Growth” and the lecture/discussions were led by eight faculty members who teach and do research on economic development at Harvard’s Kennedy School of Government. There were 45 of us in the group representing 30 countries. It was a stimulating and diverse group of national and regional leaders interested in learning more about the global dynamics of economic growth and development.
One of the things that made the week particularly interesting was the rich backgrounds of the group members. Many were directly involved in their national government’s programs to grow their economies; others came from international organizations working to encourage the economic growth of regions, nations and the global economy. All were professionally engaged in economic development.
I thought I would share a few of the week’s highlights and insights that may relate to our own efforts here in Northwest Ohio to grow the region’s economy.
Appearing to do vs. actually doing
One of the many traps common to economic development is mistaking appearances of development for actual development. Many organizations may look like they are doing economic development but the results do not support the appearances. Many organizations manage to comply with expectations of what they should look like — often based on best practices in some other place — but fail to produce positive economic outcomes in terms of new jobs, new companies and economic growth. The emphasis on form (what an organization looks like) over function (what it actually does) is a trap many communities and countries face. The consumption of scarce development resources without demonstrated improvements in economic performance is often very costly.
Top-down vs. bottom-up
It was clear from the lectures, readings and discussions that building a successful state or regional economic development capability is not exclusively or even predominantly a “top-down” process. Successful development comes when it involves a broad set of organizations and agents engaged and working together to design and implement solutions to local problems. It is difficult — perhaps impossible — to achieve long-term success and growth without institutionalized collaboration. Top-down approaches rarely achieve the degree of genuine adoption to be successful beyond the short term. When the top people leave, the top-down projects usually disappear. Commitment to broad-based inclusiveness will increase sustained growth.
There is no substitute for effective clusters
Those who have been engaged in economic development for any time are likely familiar with the work of Harvard professor, Michael Porter, and his cluster approach to economic development. A cluster approach to development calls for firms in similar and related industries to work together on common concerns, such as attracting a talented workforce, branding a location and learning from one another. A decade or more of experience and research now clearly shows the critical importance of clusters in promoting successful, effective economic development. Communities and regions that ignore the value of clusters are less likely to be competitive than those that embrace a strong cluster approach to economic development.
Go with your strengths
Highly detailed studies of economic growth clearly show the importance and effectiveness of building on the strengths of a region or nation. Communities and regions — such as ours here in Northwest Ohio — develop the “know-how” to create certain products. The accumulation of this know-how is what economists call “productive knowledge.” Places that learn to recombine the bits and pieces of this knowledge can attract new and exciting products that can bring innovation, talent and investment. But product knowledge alone is not enough; putting this knowledge into useful product development requires teams, organizations and markets. Building on your strengths to achieve economic growth is a collective enterprise and there are few, if any, shortcuts.
Importance of evaluation
One of the keys that helps unlock the doorway to economic growth is learning from experience — both positive and negative. Those communities, regions and even nations that have adopted a learning approach to economic development are more likely to succeed. In other words, they routinely ask, “What works?” And, equally important, “What doesn’t work?” Organizations engaged in economic development need “feedback loops” to inform their policies, planning and actions. These feedback loops provide the information with which an objective evaluation of a project can be conducted. The learning from such evaluations, done consistently, will help guide future projects to a higher level of success.
The most important lesson I took from my week with this interesting and diverse group of international leaders was clear: The rapidly increasing complexity and competitiveness of regional and national economies, combined with the growing sophistication of development strategies, requires a learning approach to economic development that embraces both a sound understanding of development theory as well as practical experience.
We are on the right track but, as I was reminded, economic development is a journey, not a destination.
Dan Johnson is director of global initiatives, president emeritus and distinguished professor of public policy and economic development at the University of Toledo. Email him at firstname.lastname@example.org.