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THE EUROPEAN COMPETITIVENESS INDEX: CONCEPT, MEASUREMENT, IMPLICATIONS AND LINKS WITH RESILIENCE Robert Huggins The Management School University of Sheffield.

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Presentation on theme: "THE EUROPEAN COMPETITIVENESS INDEX: CONCEPT, MEASUREMENT, IMPLICATIONS AND LINKS WITH RESILIENCE Robert Huggins The Management School University of Sheffield."— Presentation transcript:

1 THE EUROPEAN COMPETITIVENESS INDEX: CONCEPT, MEASUREMENT, IMPLICATIONS AND LINKS WITH RESILIENCE Robert Huggins The Management School University of Sheffield Presentation to the International Conference on Small States and Economic Resilience Valletta, Malta, 23-25 th April 2007

2 Outline The Concept of Competitiveness Introducing the European Competitiveness Index The Role of the Knowledge-Base of an Economy Competitiveness and Resilience Conclusions.

3 European Council: "Europe must renew the basis of its competitiveness, increase its growth potential and its productivity and strengthen social cohesion, placing the main emphasis on knowledge, innovation and the optimisation of human capital” Source: Presidency Conclusions, European Council, March 2005

4 What is Competitiveness? We define competitiveness as the capability of an economy to attract and maintain firms with stable or rising market shares in an activity, while maintaining stable or increasing standards of living for those who participate in it.

5 Regional Competitiveness The competitiveness of a region will depend on its ability to anticipate and successfully adapt to internal and external economic and social challenges, by providing new economic opportunities, including higher quality jobs.

6 What Makes a Competitive Region? Competitiveness is influenced by a number of different factors including public and private investment in human capital, the quality of physical infrastructure, the productivity of the workforce, institutional capacity, social capital, innovation and research facilities, accessibility to markets, and so on. In other words, competitiveness is increasingly being measured in terms of creativity, knowledge and environmental conditions, rather than purely on accumulated wealth.

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8 European Competitiveness Index – Geographic Scope: The European Competitiveness Index 2006- include all EU-25 nations and their respective NUTS-1 regions, as well as Norway and Switzerland. The continued focus on regions, as well as nations, reflects the growing consensus that it is regions that are the primary spatial unit that compete to attract investment, and the level at which knowledge is circulated and transferred, resulting in agglomerations, or clusters, of industrial and service sector enterprises. Throughout the report an index value of 100 refers to the mean average of the EU-25 regions plus Norway and Switzerland.

9 Methodology (1) All data are first converted so that the mean and variance of each variable is set at zero and one respectively. After the standardisation, factor analysis is applied to the data set. To extract the common part of variations among the original variables (i.e. commonalities), image factoring is employed. The dimensions obtained are then rotated. Varimax is used with Kaiser normalisation. While identifying common dimensions of the underlying structure, factor analysis also shows the location of each case (i.e. region in this study) within the underlying structure, by providing the case's scores for the dimensions identified.

10 Methodology (2) We use these scores for the dimensions as sub-composite indices. Subsequently, we aggregate these sub-composite indices with a view to obtaining a single composite. Data Envelopment Analysis (DEA) is used to obtain a single composite index from the above sub-composite indices. DEA is a linear programming technique originally developed for the estimation of the relative efficiency of a set of units (called decision making units, DMUs) producing a set of outputs from common inputs. It neither assigns weights to variables with any dependent variable chosen a priori, nor assigns weights set a priori. Instead, it seeks a set of weights for each unit that maximises a weighted sum of variables.

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23 Is Competitiveness Similar to Resilience?

24 Towards a European Regional Resilience Index Adaptation of Briguglio et al.’s (2005) National Resilience Index: Macroeconomic stability index - adjusted to account for regional GDP (per capita) and unemployment rates. Social development index - adjusted to account for regional educational rates (based on numbers in upper secondary and vocational education). Governance index – although in world of multi-level governance the regional level is becoming increasingly prominent there are few existing metrics. Microeconomic efficiency index – regulation is still largely a national issue, although markets often have a regional focus.

25 A Very Tentative European Regional Resilience Index RankRegion Resilience IndexRankRegion Resilience Index 1Uusimaa, Finland0.78121Prague, Czech Republic0.679 2Denmark0.75822Stockholm, Sweden0.679 3Etelä-Suomi, Finland0.75323Övre Norrland, Sweden0.678 4Pohjois-Suomi, Finland0.75124Östra Mellansverige, Sweden0.677 5Länsi-Suomi, Finland0.73725Norway0.676 6Itä-Suomi, Finland0.72926Wales, UK0.675 7Southern and Eastern, Ireland0.72627Småland med öarna, Sweden0.674 8Switzerland0.71928West Midlands, UK0.673 9Noord-Nederland, Netherlands0.71829East Midlands, UK0.671 10Westösterreich, Austria0.71830Västsverige, Sweden0.671 11Oost-Nederland, Netherlands0.70231South West, UK0.668 12Zuid-Nederland, Netherlands0.70132Sydsverige, Sweden0.667 13West-Nederland, Netherlands0.69933Vlaams Gewest, Belgium0.666 14Südösterreich, Austria0.69834North West, UK0.664 15Ostösterreich, Austria0.69335Hamburg, Germany0.662 16North East, UK0.69236Yorkshire and The Humber, UK0.662 17Région de Bruxelles-Capitale, Belgium0.68837Baden-Württemberg, Germany0.650 18Mellersta Norrland, Sweden0.68538Scotland, UK0.649 19Norra Mellansverige, Sweden0.67939Estonia0.647 20Border, Midlands and Western, Ireland0.67940Bremen, Germany0.646

26 RankRegion Resilience IndexRankRegion Resilience Index 41Região Autónoma da Madeira, Portugal0.64461Noreste, Spain0.615 42Eastern, UK0.64462Bassin Parisien, France0.613 43Hessen, Germany0.64263Mecklenburg-Vorpommern, Germany0.613 44South East, UK0.64264Continente, Portugal0.612 45Northern Ireland, UK0.64265Ouest, France0.612 46Bayern, Germany0.63766Région Wallonne, Belgium0.611 47Île de France, France0.63767Malta0.608 48London, UK0.63568Região Autónoma dos Açores, Portugal0.607 49Nordrhein-Westfalen, Germany0.62969Berlin, Germany0.607 50Comunidad de Madrid, Spain0.62670Közép-Magyarország, Hungary0.607 51Luxembourg0.62571Sachsen-Anhalt, Germany0.604 52Saarland, Germany0.62572Méditerranée, France0.604 53Rheinland-Pfalz, Germany0.62373Sur, Spain0.603 54Nord - Pas-de-Calais, France0.62374Thüringen, Germany0.602 55Niedersachsen, Germany0.62375Sud-Ouest, France0.601 56Brandenburg, Germany0.61876Noroeste, Spain0.600 57Canarias, Spain0.61777Sachsen, Germany0.598 58Schleswig-Holstein, Germany0.61778Centro, Spain0.596 59Est, France0.61679Este, Spain0.594 60Centre-Est, France0.61580Bratislavský, Slovakia0.584 A Very Tentative European Regional Resilience Index (2)

27 RankRegion Resilience IndexRankRegion Resilience Index 81Sicilia, Italy0.57098Molise, Italy0.545 82Lombardia, Italy0.56899Centro, Italy0.545 83Nord Est, Italy0.567100Strední Morava, Czech Republic0.544 84Emilia-Romagna, Italy0.566101Severozápad, Czech Republic0.539 85Slovenia0.561102Latvia0.534 86Dunántúl, Hungary0.560103Strední Cechy, Czech Republic0.534 87Campania, Italy0.558104Cyprus0.523 88Jihovýchod, Czech Republic0.558105Centralny, Poland0.509 89Nord Ovest, Italy0.557106Poludniowo-Zachodni, Poland0.501 90Jihozápad, Czech Republic0.556107Pólnocno-Zachodni, Poland0.501 91Abruzzo, Italy0.553108Poludniowy, Poland0.500 92Alföld és Észak, Hungary0.552109Pólnocny, Poland0.500 93Sud, Italy0.552110Východné Slovensko, Slovakia0.499 94Sardegna, Italy0.551111Lithuania0.498 95Severovýchod, Czech Republic0.549112Západné Slovensko, Slovakia0.496 96Lazio, Italy0.548113Stredné Slovensko, Slovakia0.494 97Moravskoslezko, Czech Republic0.546114Wschodni, Poland0.484 A Very Tentative European Regional Resilience Index (3)

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29 Concluding Remarks (1) Not only is there an obvious divide in competitiveness between old and new Europe, but an increasing dependence of Europe on its urban and city locations as the source its competitiveness, with a widening gap between the performance of key cities and much of Europe’s hinterland. On top of this, we are seeing the continued erosion in the regional competitiveness of locations in some of Europe’s major economies, especially Germany.

30 Concluding Remarks (2) The European Commission has made its objective the improvement of the competitiveness of all Europe’s regions through investments in the knowledge economy. With the further inclusion of Bulgaria and Romania from the beginning of 2007, if the Commission is to go anywhere near achieving this aim there is a requirement for its Cohesion Policy to be clearly focused on understanding and removing the bottlenecks that are hindering the competitiveness of many regions in Europe. These bottlenecks vary on a region by region basis, and policies must be attuned to the particular types of knowledge that individuals regions can best utilise in order to improve their competitiveness.

31 Thank you


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