Economic Geography

Thinking about regional competitiveness
Empirical observation amply testifies to the fact that some cities and some regions
(however defined) do better – in terms of average prosperity, employment, stan-
dard of living, growth or some other measure of ‘performance’ – than others.
Geographers have long highlighted spatial disparities and uneven development
of this sort. Geographers have not traditionally thought of such disparities in
performance explicitly in terms of competitiveness, although notions of ‘place
competition’ have woven their way through the economic geography literature.
For example, much of traditional location theory, in economic geography and in
regional science, was concerned with deriving the spatial structure of the econ-
omy as the outcome of a particular model of competition (such as perfect compe-
tition), under specific assumptions as to the production function of firms (especially
the assumption of diminishing returns to inputs), the geographical distribution
of resources and consumers, transport costs, and the movement of labour and
capital between places. Given that the dual focus of much of this work was on
the ‘relative attractiveness’ of locations to firms and workers and on inter-firm
competition across space (Sheppard 2000), the implication was that locations and
places do ‘compete’ in some sense, for example for capital, labour and markets.
Nevertheless, overall, the main aim of this work was on explaining the location of
industry and deriving equilibrium economic landscapes of activities, markets and
prices, not with unravelling the nature of regional or place competitiveness as such.
Similarly, Marxian economic geography also reverberates with implicit notions
of ‘competition between places’. One of the key arguments of this approach was
Economic geography and the new discourse of regional competitiveness
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that in response to changes in technology, costs, and market conditions, capital
constantly shifts from region to region in order to exploit geographical variations
in the opportunities for profitability. In seeking the most profitable locations in
this way, capital in effect ‘plays off’ different regions according to their relative
advantages for accumulation, so that development in certain regions tends to be
at the expense of that in others. Again, in a sense, regions are seen as competing
one against another. Further, this process is viewed as being relentless, denying
the creation of an equilibrium economic landscape, and continually reshaping
the relative advantage of different places as far as capital is concerned. As in the
case of location theory, however, the notion of regional competitiveness is not
itself the focus of analysis.
It is only in the last few years that the subject of ‘place-’ or ‘territorial-compet-
itiveness’ has begun to attract serious attention in its own right (see, for example
Begg 2002; Boschma 2004; Bristow 2005; Camagni 2003; Kitson et al. 2006;
Krugman 2003; Malecki 2004; Porter 2001; Storper 1997; Urban Studies 1999).
But, somewhat ironically, it has not been geographers but economists – especially
those that have ‘gone geographical’, notably Michael Porter and Paul Krugman
– who have led the new discourse of regional and urban competitiveness and
brought the idea to the attention of policymakers.
According to Porter (2001) a ‘new economics of competition’ is emerging
that is associated with six transitions: from macroeconomic policies to micro-
economic policies that recognise that the ‘drivers’ of prosperity are based at the
sub-national level; from a concern with current productivity to emphasising
innovation, as the basis of sustained productivity growth; from the economy as a
whole as the unit of analysis to a focus on ‘clusters’ (groups of interlinked
specialised activities, often geographically localised); from internal to external
sources of company success, recognising that the location of a company can
affect the capabilities it can draw upon; from separate to integrated economic
and social policy; and from national to regional and local levels as the locus of
analysis and policy intervention. Indeed, in Porter’s view, economic geography
assumes a pivotal role in understanding this ‘new competition’:
The more that one thinks in terms of microeconomics, innovation, clusters and
integrating economic and social policy, the more the city-region emerges as
an important unit. Issues or policies that span nations or are common to
many nations will be increasingly neutralised, and no longer sources of
competitive advantage. However, it is not a matter of one unit of geography
supplanting another . . . The task is to integrate the city-region with other
economic units, and to adopt a more textured view of the sources of pros-
perity and economic policy that encompasses multiple levels of geography. 
(ibid.: 141)
As for Krugman, in what is a major departure from his previous dismissal of
‘competitiveness talk’, he now argues that the notion may after all have particular
relevance at the regional level
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