STRATEGIC MANAGEMENT 7. Regional policies Regions in Central Europe 1

Reason of the presentation During the last decades spatial economy was one of the more rapidly developed topic in economics. The main-stream production strategy changed (adaptability and just in time became important instead of economy of scale and mass production). So, parallel with the globalisation’s theory the regional concepts became more and more important in the theory and the practice of firm’s strategy and the economic development at all. 2

Today a firm manager also have to know the main element of the spatial theory and use their business opportunities. The key questions of the modern regional policy are the regional competitiveness and the effective strategies in the competition. The answers can help the firm’s decisions about foundation and co operations. 3

Theoretical base First element of the spatial economy was based on the phenomenon that transport costs influence the production’s effectiveness. A. Marshall stated that low transport costs between firms which are located close to each other, can explain the development of industrial districts. After the first world war researchers observed the development of the division of labour between the „industrial” districts („centres”) and their „peripheries”. Firms in the centre offer services to the firms in the peripheries. 4

According to M. Porter in a developed economy the types of the regions can be the following: -cost-conducted (neo-fordist), where the typical aspiration of firms is the cost-reduction, -investment-conducted, where firms adapt the new inventions quickly. -innovation-conducted, where the actors create knowledge (inventions), In the developing economies there are cost- conducted and other types. 5

The leading centres in the world are the main engines of the technical development as well. Their location changed during the centuries from the Manchester district to the Ruhr-area, after this to the great lakes in the USA. (Sources: Krugman, Saxanien, etc.) Nowadays the most competitive regions of the World are USA, Japan, the European „blue banana” (figure) – and, in spite of their backwardness, China and India.. 6

The „blue banana” 7 (Source: Brunet)

The centres formed under the influence of the cooperation of firms, the distance of which is „small” (e.g. in the near past in middle England, Baden-Württenberg and Northern Italy). These networks (clusters) of firms offer more and more new competition’s advantages of their co- operation (so called synergies). Nowadays the notion of „small distances” has been extended because of the effects of the new opportunities of the information technology. This phenomenon also gives possibilities to increase the level of cooperation and competitiveness. 8

In the US practice, a competitive region has at least 3 millions inhabitants (and often employees in high-tech industries). The centre of an innovation-conducted region (where the main profile is high-tech industry, e.g. electronics, biotechnology) always has an entrepreneurial university. This university – its researches and knowledge-transfers - can be one of the main catalyser of the regional progress. In a cost-conducted region with traditional branches (e.g. machinery, textile) a university is not so important. 9

„ Competition” among regions There is great difference between the competition of firms and that of regions. The goal of the regional „competition” is the increase of the GDP and the living standard of the population in the region. The main tool of realisation is the creation of good business environment for the successful enterprises and employment. At the result of the „competition” often all regions are winners. If a region is looser, the consequence is not its liquidation. 10

Elaboration of a regional strategy Regional strategies analyse many topics. Their content is defined by the principle of subsidiarity. It says, that the decisions have to make in places where decision-makers have most of the information about the given topic. The main goals of the regional policy can be the support of the employment’s and productivity’s growth. 11

The arsenal of the regional development is rich. Regional policy have to develop industrial infrastructure (public utilities, transport, communication etc.). An important tool of the employment increase is the education, the creation of the competitive manpower. So, regions have to encourage the settling (home-making) of good teachers, professors, maintain and control schools, develop professional trainings etc. 12

Important task of the regional management is the aid of the SMEs’ development. It can support firm’s incubation, development of industrial parks, creation of business services, especially consulting etc. Very important task to create simple ways to the enterprise creation, and the capital redistribution (so, the sale and liquidation of firms). The stimulation of the mentor’s, business angel’s activity can be very effective as well. 13

The regional policy can help the creation and distribution of the knowledge with the techniques of management, intellectual property protection, support of researches, spin-offs, adaptation of modern technologies etc. Often the development of financial market, and the stimulation of foreign direct investments (FDI) are helpful. These can create both new workplaces and higher productivity. 14

During the working out of a regional plan the social dialog is a key factor of success. In the interest of the plans’ fulfilment all „stakeholders” have to agree with the envisaged main goals and tools. The social dialog can also clarify who (which organisations) are the allied, and who can go to opposition. The planners can transform the views of the opponents trough a bargaining process. 15

Regions in Central Europe In Central-Europe the most developed (industrial) regions are situated in the so called „red” boomerang (figure). The analysis of our EU project RECORD stated, that in many regions of the boomerang the number of the good R&D institutes (Centres of Excellence, COEs) is restricted (figure). It is a real danger of Central Europe, that the developed regions of „blue banana” attract the creative capacities from its developing „boomerang”. 16

Central European „red boomerang” 17 Red boomerang Eastern wall Centres Brown fields Source: Gordzelak

CoEs in Central Europe 18 Source: RECORD Map

In spite of their common problems, the Central European countries do not have a common „regional” strategy. The causes can be different. Often the competition among the regions for FDI, EU subventions etc. is strong. Between some countries the conflicts of nationalism have traditions as well etc. EU protect the catching up of the less developed regions. 19

Regions in Hungary Principles of the EU’s territorial distribution are fixed in the „Nomenclature of Territorial Units of Statistics” (NUTS). Hungary has 7 „NUTS 2” regions. The central region is Budapest and its surroundings, the others were formed by unifying 3-3 counties. Eger is in the Northern-Hungarian region. There are immense differences among the Hungarian regions (tables). 20

21 Source: Statistical Yearbook of Hungary

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Main problems of the Hungarian regions (except for the central one): they are too small, they do not have organic traditions, common cultural centres, leading institutions, and do not have any financial resources, often a (smaller or larger) part of their real economic territory is over the borders of Hungary. The differences of development between the Eastern and Western regions are too great. 23

Regional development goals In Hungary regional development plans were first developed at the end of the 1990’s because of EU requests. Further concepts were fixed in the National Development Plan of The regional bodies and representatives have not had enough possibilities in influencing the development of these documents. So, in spite of their existence the regional strategies fixed in these documents have many problems and cannot be the base of the regional policies. Neither of these two types of documents analyses the questions related to the borders and centres of the regions. 24

All the official Hungarian spatial concepts and plans are too general, they do not map the fields of development (and disinvestments) in particular. E.g. there are no clear concepts, how a region can increase the participation rate (create education for illiterate unemployed etc.), how it can stimulate economies and entrepreneurship of its population, in what fields and how it can develop relations between firms and R&D institutes of its area, how it can improve competitiveness of SMEs, in what fields and how it can attract FDI. 25

To solve these problems planning authorities can put the EU recommendations on social dialogue and subsidiarity into practice. They have to inform regional partners about the government’s (ministries’) concept on regional development. They have to map the claims, aspirations of the population and firms of the region, and, if it is possible, they have to enforce these in the plan. Finnish and Irish good practice shows that these EU recommendations actually work fine. 26

In many cases important methodological problems of spatial planning are the harmonisation of counties’ interest (protection of the counties’ individuals and institutions) further the coordination of their development’s actions as well. Often the collaboration of the actors of different counties who have similar goals can be very efficient. E.g. experts of the University of Picardie offer a method which helps the selection of counties which are in a similar situation (figure). 27

Determination of similar regions 28 Factor analysis: the two main factors were calculated based on particular data of employment in the given counties ( Source: Girard) Heves

Eszterházy College of Eger searches for the ways of the participation in the regional planning / development. The College tries to prepare students for entrepreneurship. It has good relations with many regional firms and the Chamber of Commerce. It won a tender and organises a survey to map the possibilities how to develop the relations among firms and R&D institutes of Northern Hungary. The College often helps the development efforts of SMEs. 29

Thank you for your attention! 30