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The Higher ED Blog: What’s new in economic development research (summer 2017 edition)

Meg Ronson / July 4, 2017

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The Higher ED Blog: What’s new in economic development research (summer 2017 edition)

The Higher ED Blog publishes a quarterly economic development research roundup that shares new research practitioners might find useful. The series draws from Economic Development QuarterlyRegional Studies, the Journal of Rural Studies, and other reputable peer-reviewed academic journals.

Targeted employment growth programs grounded in flimsy evidence

Economic developers like to approach labour force development with solid, evidence-supported tools. But what if those tools are built around shaky research? A recent study cautions that some economic development programs, specifically ones that target particular firm characteristics like firm age, firm size, and industry sector, might not be the best bet.

In examining existing research on employment and firm characteristics, the study found that, depending on what, where, or when you are looking at, you can churn out most any result. To that end, the researchers highlight an econometric rule that states that just because a variable is statistically significant does not necessarily mean that it will be a good policy instrument.

The paper attempts to make sense of often conflicting results in this space by analyzing the same dataset using a variety of models. They found that the results were highly sensitive to the model being chosen, demonstrating that nearly any policy can find support in academic research. Thus, any economic development programming that is based on employment growth within specific firm categories should be taken with more than a few grains of salt.

Read more: Weak Foundations in Economic Development Programs, Economic Development Quarterly, volume 31(2)

Understanding the ‘smart city’ concept and what it means for urban policy

With big data comes big responsibility, or so we hear. As technology continues to change the way we approach the world, so too will it shape how economic developers approach their policies, and nowhere is that more evident than in scholarship on ‘smart cities.’ Researchers in Europe want policy-makers to start thinking through the growth of the information and communication technology (ICT) sector, and what kinds of opportunities it presents in managing and planning urban spaces.

The study first describes the evolution of urban centres and the increasing tendency for people to congregate in cities, which can range from densely packed areas to expansive sprawl. The creation and development of spatial networks along these lines has led to new ways of understanding and studying regional economies, thereby necessitating ever greater and constantly-upgrading information systems to manage them. Some very exciting developments have arisen in this space, including geo-imaging applications to social media to help urban stakeholders and policy-makers better understand their own cities. We are also finding new ways of mapping physical- and cyber- interactions between urban actors, with a study of London, England having recently undergone an analysis of such flows within their local economy.

It has become possible for cities to access and analyze the unique movements of people within their boundaries and develop policies and plans based on where people are to improve accessibility, utilities, social linkages and its overall attractiveness as a result. When considering the kind of insights that are available through analyzing simple smartphone ‘big data,’ the implications for economic development, and its sister professions like tourism and business development, are profound. It is already possible to analyze the clustering of people around certain attractions through cellphone use patterns, or even the frequency with which photos were posted on social media of a certain area.

The article concludes by stressing the need to expand our collection and use of data in order to inform urban initiatives and strategies and ground them in statistics and knowledge. To that end, every city can leverage new technologies and their own unique agglomeration trends to become ‘smart,’ so long as they commit to updating their information systems and tapping into that rich, complex sea that is big data.

Read more: The significance of digital data systems for smart city policy, Socio-economic Planning Sciences, volume 58

What’s to be done about retiring small business owners in rural communities?

Rural communities are facing a new demographic challenge in small business retention: retiring owners. A new article provides an updated perspective on the issue by conducting research in rural cities in Minnesota, addressing a gap in our knowledge on what the communities themselves can do to face this issue head on.

First, focused interviews with different stakeholders in the succession space found numerous barriers that retiring business owners face when looking to exit their business. Broad themes include lack of awareness of the process, lack of available credit for potential buyers, and lack of resources and support for the transition.

The next phase involved identifying recent cases of successful business transitions and interviewing the new owners on this process. The findings indicated that successful new owners had pooled numerous resources in order to complete their purchase, identifying an average of 2.3 very important resources and 3.8 very or moderately important important resources. Banks were consistently considered the most important resource, while local governments and small business centres much less so, perhaps due to lack of awareness of their services and support. The new owners also cited a need for mentorship and guidance from other local business owners.

Various case studies in the state identified locally offered, targeted resources like business succession planning programs as helpful if they were affordable, or framed in such a way as to be accessible to all business owners and not just those looking to retire. There were also instances where communities rallied around their cherished local firms to convert them into co-operatively owned businesses. In all cases, the crucial ingredients to a successful conversion involved networking and leveraging social capital, knowing about and tapping into available resources, access to financial assistance, and involving the community in projects and leadership.

At the end of the day, there is a big incentive to ensure that local businesses stay in the community. When examining a recently purchased business’s performance before and after an ownership transition, the study found that 41% reported employing more people, 68% reported increasing their customer base, and 68% reported increasing their sales volume.

There are many practical take-aways from the research. Encouraging business owners to undergo formal valuations of their firm, offering them workshops and other programming on succession planning, facilitating community networks and keeping abreast of available financing are all important ways to assist local businesses in their ownership transfer.

Read more: The silver tsunami and rural small business retention: What can communities do? Community Development, volume 48(2)

 

About the author

Meg Ronson is the editor of Higher ED, Outreach Manager for the Economic Development Program and Masters candidate of Economic Development and Innovation at University of Waterloo. Her research involves studying credit unions and co-operative businesses as potential tools for strengthening and diversifying local economies, and is currently engaged in a project investigating co-operative solutions to the small business succession issue in Ontario and Canada.

About the series

Higher ED: Insights for the Next Economy is a platform for students, guest speakers, staff and faculty of the University of Waterloo’s professional and graduate economic development programs to share knowledge with the field at large. The series takes works destined for an academic audience and reworks them into a fresh, easy-to-digest blog article.

Established in 1987, the Master of Economic Development and Innovation (MEDI) is one of the only graduate programs in Canada focused exclusively on economic development. Students learn economic development theory and practice, and are exposed to leading edge knowledge, tools, and approaches to address contemporary challenges in cities and communities across Canada and internationally.

The Economic Development Program is a nationally-accredited provider of professional training. It delivers certification programs and seminars that offer a deep understanding of the Canadian context in a convenient block format. Peer learning is combined with informative lectures and practical case studies to provide dynamic instruction that is beneficial for junior and senior-level practitioners.

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