New governance institutions in the entrepreneurial urban region

Abstract

The ability of the entrepreneurial urban region to function and thrive in the contemporary economy depends on the acquisition and maintenance of new political and economic capacities and new institutions and practices, which will enable that urban region to be structurally competitive in the global economy. This urban dynamic competitiveness is socially produced by the joint entrepreneurial activities of economic, political and social actors, while each sector, having different motivations, resources, networks and activities, exploits their complementarities to create a competitive urban milieu. The central argument of this article is that this joint creation of urban competitiveness is made possible by new governance models, which build workable consensus or obtain consent in a context where many interests are in play and strategic change is critical. These ideas are illustrated from the recent experiences of American cities.

Keywords:

• entrepreneurial city competitiveness
• American governance models

Notes

1. There are three types of agglomeration economies (noted by Marshall in nineteenth-century Sheffield): (1) scale economies in the provision of public infrastructure – typically called urbanization economies; (2) the cost reduction realized in transferring intermediate goods from one plant to another plant within the urban area – called juxtaposition economies; (3) spillover of labor and knowledge skills within firms of the same industry – called localization economies.

2. This is not a new idea, as evinced by the writings of historians from Toynbee to Braudel (1992). Most recently, Jane Jacobs (1969) has talked about it in the context of cities like New York and Toronto. Recent econometric work by scholars like Audretsch and Feldman (1996) has substantiated the role of these kinds of economies of variety in urban innovation generation.

3. Camagni (2004) emphasizes the “physical” and “social” proximity of people working in these small firms within an urban area. He suggests that this social and physical proximity leads to which he calls “relational capital”, by which people are able to connect with one another, develop notions of trust, exchange knowledge and innovate.

4. The theoretical literature on entrepreneurial behavior identifies the attributes of foresight, discovery, innovative behavior and risk-taking with an economic agent. We suggest that such propositions in theories of entrepreneurship (as elaborated differentially in the Schumpeterian and Kirznerian traditions), normally applied to private entrepreneurs, are also applicable to the pervasive entrepreneurial behavior of urban, social and political actors, as they engage jointly in creating dynamic urban competitiveness.

5. This idea of a spatially competitive urban economy emerged in the late 1980s and early 1990s. David Harvey (1989) was an early commentator. Others have emphasized the notion of a “competition state” (Cerny 2000) and the “Schumpeterian welfare state” (Jessop 1997). At the urban level, we suggest that the central function of an entrepreneurial city is to improve the overall competitiveness of that urban area in the global economy, which in turn promotes endogenous growth.

6. Peter Calthorpe offers an example of a contemporary social entrepreneur with his ideas on transit-oriented development and the new urbanism.

7. We can draw a parallel here between the differences between invention and innovation in the economic domain and the ideas of visionaries and their implementation in the social domain.

8. When social-sector agents make judgment mistakes about resources available from governmental and non-governmental sources, overestimate the forces of change, and underestimate local urban dynamics, etc., they fail to stimulate change through new institutional development. Institutions die in their nascent stage and their efforts are lost or are adopted and modified by SEs at a later date.

9. Unlike this generalization, there are examples of socially well-meaning entrepreneurs in both sectors who have taken innovative decisions guided primarily by their social conscience, rather than self interest. By and large, they are exceptions that prove the rule.

10. Public policies can affect the allocation of entrepreneurship more effectively in urban areas than they can influence its supply. There are examples of productive and unproductive entrepreneurship in cities. The selective use of arson for land clearance in urban sites, for example, and the resulting acquisition of capital from insurance claims may be entrepreneurial in nature, but private gains are made at the cost of social loss. Gains from drug trafficking, pimping and other forms of social pathologies can be entrepreneurial, but they are of the unproductive type. It is not uncommon to find corrupt officials and police aiding such non-beneficial entrepreneurial activities in the market with a partnership between creative corrupt officials in the public sector and illegal entrepreneurs in the private sector. In depressed, underserved urban areas, entrepreneurial talents can be devoted to unproductive uses due to the economic and socio-political rewards for such activities.