Economic Geography

Competitiveness: a contentious concept
One source of confusion is that even in economics, the idea of ‘competitiveness’ has
attracted considerable debate. For the individual firm it is often taken to mean
the ability to create, retain or expand market share for some product or service,
on the basis of price, quality, design, delivery, or some other advantage. Firms
that progressively lose market share and face declining profitability are deemed
to be ‘uncompetitive’, and may ultimately go out of business. But what does the
term mean for economic aggregates above the level of the firm? At the national
scale, definitions have proliferated (see Cellini and Soci 2002), prompting an
early critical salvo by Reich (1990) to the effect that: ‘National competitiveness
is one of those rare terms of public discourse to have gone directly from obscu-
rity to meaninglessness without any intervening period of coherence’.
This is not entirely true, however, since most definitions of national competitive-
ness refer in some way or another to a nation’s economic ‘performance’, be this
Gross Domestic Product (GDP) per head, productivity, or trade balance.
Frequently, reference is made to a ‘nation’s ability to produce goods and services
Economic geography and the new discourse of regional competitiveness
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that meet the test of international markets, while at the same time maintaining
high and sustainable levels of income and employment’. Yet for writers like Paul
Krugman (1996a, 1996b) this appeal to trade performance is itself problematic,
since it can all too easily conjure up a neo-mercantilist image of nations compet-
ing one against another, in a zero-sum fashion, over shares of particular product
or service markets. According to Krugman, the notion of competitiveness is an
attribute of firms but not of cities, regions or nations. Others disagree. Michael
Porter in his seminal studies of ‘competitive advantage’ deplores the lack of
attention to competitiveness in economic analysis (Porter 1990, 1998). He goes on
to argue that the national environment affects the competitive position of firms,
and that understanding that environment would yield some fundamental insights
into how competitive advantage at the firm level is created and sustained (1990: xii).
But if defining the concept of ‘competitiveness’ at the national level is
contentious, it is doubly so at the regional or local scale. For one thing, some
geographers would argue that confusion surrounding the notion of ‘regional
competitiveness’ also arises because the concept of the ‘region’ itself is equally
problematic. It may be that regions have become increasingly salient loci in 
the global economy, but defining and conceptualising regions, it is contended, has
simultaneously become increasingly more complex – in part because of the very
globalisation that is promoting the new discourse on competitiveness. The prob-
lem is that regions are typically not pre-given, fixed, internally-coherent economic
units, but highly fuzzy, open and internally discontinuous entities, the various
spatial and economic components of which are differently linked into different
aspects of the both the national and global economy. There is no pre-existing,
singular ‘essential’ geographical economic space called the ‘region’: rather there are
different regional representations of economic space depending on the specific
issue under enquiry and the perspective adopted (Allen et al. 1998: 34). In addi-
tion, there is the issue of agency. Regions are not decision-making entities in the
same way that firms are, but instead consist of ‘bundles’ of firms, organisations,
social groups and institutions, all with their own imperatives, dynamics and
networks of interactions. And regional authorities typically have little or no direct
control or influence over the firms within their areas. Hence, many geographers
would have reservations about the idea of ‘regional’ competitiveness.
However, just as in a Coasian view of the world, where it is the organisation
of productive assets in a firm that gives rise to the analysis of the firm as a unit
of production, so nations, regions and cities too can be seen as collections of
assets, variously organised, so that it is reasonable to think in terms of the
competitiveness of that bundle of assets, even if Krugman is right in advocating
caution about making analogies between the firm and the nation or region.
Furthermore, although most regional units used for policy and analytical purposes
are based on political or administrative boundaries that need bear little corre-
spondence to economic relationships, there are certain features about such ‘offi-
cial’ regions that do give them some measure of meaning as economic entities.
Thus regional authorities often have tax-raising powers and responsibilities for
spending on public services, utilities and infrastructure, all of which impact on
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local firms. Also, as noted above, regional authorities and bodies are becoming
increasingly active in other areas of local economic governance, whether as the
delivery agents of decentralised national government policies, or as active policy
agents in their own right and capacity. It may be that regions are difficult to
define as ‘essential’ economic units, but the fact is that a process of ‘regional
institutionalisation’ of policy intervention and responsibility appears to be under-
way that is endowing politically and administratively defined regions with some
degree of functional economic meaning. It is as part of this institutionalisation
process that regional authorities and bodies are busy devising policies to improve
and upgrade the competitiveness and productivity of the businesses, workers and
organisations in their jurisdictions. If only because of this rise of the region as an
arena of economic governance and intervention, and the increasing trend for
policymakers to think of regions as the sites of competitive advantage, it is impor-
tant to appraise the different senses in which the term ‘regional competitiveness’
is used.
There are in fact two interrelated questions that research needs to address:
does thinking in terms of competitiveness throw light on how we define and
analyse regional economies? And does a regional (geographical) perspective help
us to understand competitiveness? Both questions are worthy of serious attention
by economic geographers, and both have direct policy implications.