LOCAL ECONOMIC DEVELOPMENT AND ITS MULTI-LEVEL, MULTI-ACTOR INFLUENCES:

LOCAL ECONOMIC DEVELOPMENT AND ITS MULTI-LEVEL,

MULTI-ACTOR INFLUENCES:

THE INFLUENCE OF A SUPRANATIONAL POWER AND SOCIAL CAPITAL By

Bianca Kistemaker 03-03-2014

MSc International Business and Management University of Groningen

CONTENT

The Role of Social Capital 9

Methodology 11

Research Design 11

Data Collection 12

Data Analysis 14

The Cookie Factory: A Possible 15

Answer to the Issues in a Shrinking Region in a Developed Country

Multi-level, Multi-actor Influences: Empirical Results 16

International Level 16

Supranational Power 18

National Level 19

Regional Level 20

Local Level 21

The Role of Social Capital 22

Discussion 24

Limitations and Further Research 28

References 29

ABSTRACT

This research investigates the differences in local economic development in developing and developed countries. It used the model by Pennink (2014) which is based on developing countries and applies it to a developed country. The findings are that MNEs and their activities do not seem to play a role in LED; universities have a supporting role and the regional and local level overlap. The supranational power and the role of social capital are added to the model. The supranational power appears to a supportive role in LED, like other institutions on all levels. Social capital plays a critical role as

entrepreneurs and their relations need to take initiative.

INTRODUCTION

'Economic development is a process to increase income percapita in the long term.' (Rahab, Najmudin, Istiqomah, 2013). This development increases a country's economic perspective and thus increases welfare. On a local level, this implies that stakeholders, public, private and nongovernmental, cooperate in order to create prosperity and economic growth. In the literature, this is recognized as local economic development, or LED, and is receiving attention of multiple

authors. Maharaj and Ramballi (1998)

recognized that even though LED is a concept with multiple cases and examples in the Western World, experiences in LED in the developing countries started to receive more attention as well.

One recent model focusing on LED in

developing countries is the work by Pennink (2014). His work starts with the work by Stimson et al. (2009), whose research

concludes with a model for achieving regional economic development. This approach is then adopted by Pennink (2014) in order to develop a multi-actor and multi-level model. It has integrated the model by Stimson with work by Birkholzer (2005) and own empirical research in Indonesia and Tanzania. By using a multi-level approach, it tries to incorporate all levels and actors involved in the process of LED. This thesis applies the model in the context of a developed country and adds two elements. Firstly, the model is extended by adding another element to the international level. The international level only

incorporates the influence of MNEs (Multinational Enterprises) and the global value chain. However, The Netherlands, where the case study is performed, is subject to a supranational power and therefore subject to its rules and laws. This

which for example provides their member countries with subsidies. This would imply that this power can be seen as another influence on LED and thus should be incorporated in the model. The case study shows that this is the case, as the region indeed is supported by the EU through subsidies.

The second element added to the model is the role of social capital. Pennink (2014) already mentions the involvement of the concept, however does not elaborate on the influence of social capital. This research elaborates further on this by explaining the importance of social capital, as the

relationships between actors are important in order to create local economic development. The case study shows that the interpersonal trust and participation in the community realizes an increase in cooperation for local economic development, mostly among entrepreneurs.

A final contribution to the model is the application of the model to a developed country in the case study, while the model is based on research in developing countries. In different fields, this has been a way of

grouping countries in order to compare and contrast differences among countries. This has not directly been done yet in the

literature on LED. Developing countries are different from developed countries in terms of for example income and government structures. This might influence the way local economic development is practiced, as for example developed countries have more legal protection and this might cause people to take more risks and to become more

entrepreneurial, which may in turn influences local economic development. Helmsing (2003) states that 'the context of local economic development (LED) has radically changed in low-income countries in general and in Africa in particular' (Helmsing, 2003). In developed countries rapid and radical changes caused the context of LED to change as well. As Clarke (1993) recognized for the United States, local economic development changed due to trends such as globalization and communication technology improving. Botchway et al. (2002) found evidence for changes in the United Kingdom. These rapid changes and challenges provide ground for more detailed research into local economic development. The differences among these two groups of countries and the changes they are both experience provide ground for further research.

supranational power and social capital influence local economic development in a developed country?

Empirical research will be performed to apply the model to the case study. This will be performed in the North-Eastern part of The Netherlands, which is a shrinking region and therefore highly involved in LED. Two

entrepreneurs are trying to set up an

innovative center and meeting place in an old cookie factory. This offers the opportunity to get insights from a local perspective. In addition secondary data from for example the government will be analyzed to broaden the perspective and incorporate all levels existing in the model by Pennink (2014). This research contributes to the theoretical field through the addition of two more elements to the model on local economic development. Firstly, it adds the element of a supranational power on the international level. Secondly, it adds the concept of social capital to the model. Finally, it compares LED in developed and developing countries, which has not been researched before. It applies the model by Pennink (2014) in a completely different context and further increases the generalizability of the model. The thesis adds to the managerial field as it gives managers insight into the actors needed and active in

local economic development, highlighting the role of a supranational power and the role of social capital. Secondly, it gives insights into the specific differences in the context of developed and developing countries, which provides them with valuable knowledge when expanding businesses towards other countries.

The remainder of this thesis will be

structured as followed. Firstly, the theoretical framework will be given, focusing first on the definition of local economic development and afterwards giving further insights into the model by Pennink (2014). The last part of this section will highlight the supranational power and the role of social capital. Secondly, the methodology will be outlined. Thirdly, a description of the case study will be given. Afterwards, the results from the case study will be discussed. Finally, a conclusion will be given, followed by the limitations and further research suggestions.

LITERATURE REVIEW

supranational power and social capital need to be assessed in order to put the two elements in the model. The literature review will first briefly discuss the definition of local economic development. Afterwards, the different levels of the model by Pennink (2014) will be briefly discussed. The model can be found in figure 1. Finally, the two additions, the supranational power and the role of social capital, to the model will be discussed according to the current literature. LED Definition

The definition of local economic development used by the Worldbank is the one by

Swinburn (2006), which is 'The purpose of LED is to build up the economic capacity of a local area to improve its economic future and the quality of life for all. It is a process by which public, business and non-governmental sector partners work collectively to create better conditions for economic growth and employment generation.'(Swinburn, 2006). Helmsing (2003), defined LED as ''a process in which partnerships between local

governments, community and civic groups and the private sector are established to manage existing resources to create jobs and stimulate the economy of a well-defined area'. (Helmsing, 2003).

Birkholzer (2005) described four different scenarios for local economic development. The first one is development from above, in which the national government is often the first one to initiate anything. This works on to regional and local governments. The second is development from outside, in which someone, for example an investor, is needed to start things up. Thirdly, the 'wait and see' scenario describes how local actors are just waiting to see what is coming. Finally, the fourth one is the scenario of development from within in which the domination of local actors is present, who play a key role in the economic development. This last scenario entails the concept of local economic development. 'It starts when people realize that neither the state nor the market economy serve their needs or solve their problems, and if they are unwilling or unable to leave their homes' (Birkholzer, 2005). The definitions by Swinburn (2006) and Helmsing (2003) and the last scenario outlines by Birkholzer (2005) show the importance of the cooperation between actors in order to stimulate economic growth and especially the involvement of local actors in this process.

The Model

On the international level, the model only incorporates the global value chain and thus the influence of MNEs and their activities. The global value chain is defined as a process ‘which focuses on the analysis of

international linkages among firms in worldwide production and distribution systems, emphasizing the role of leading companies that carry out functional integration and coordinate international dispersed activities.’ (Contreras, Carrillo, Alonso, 2012). The balance between globalization on one hand and local

development on the other hand has been a recent question. (Parrilli, Nadvi, Wai-Chung Yeung, 2013) Globalization on the one hand can cause benefits on a local scale, as it for example provides firms with new customers. On the other hand, it creates the threat of multiple foreign competitors. Multiple other benefits and threats for local actors can be found due to globalization. How much impact these benefits and threats have on local actors and local economies is unknown. Some authors stress the importance of spillovers and the transfer of managerial tasks or manufacturing knowledge. (Carrillo, Hualde, 1998; Contreras, Carrillo, Alonso, 2012). However, on the other hand authors state an unclear relationship between the activity of an MNE and benefits on the region. (Bair, Dussel, 2006; Contreras, Carrillo, Alonso,

2012).

National Level

On this level, the triple helix is put into place (Pennink, 2014). Etzkowitz and Leydesdorff (1995) were the first ones to come up with this interplay, using the government-industry-university triangle. Pennink (2014) adjusted this as ‘in this model Economic development is suggested to be stimulated by cooperation between government, business and industry’ (Pennink, 2014). The government is not only present on a national level, but involved as well on a municipal and provincial level. Universities are taken into account as well as being an actor in local economic

entrepreneurship’ (Contreras, Carrillo, Alonso, 2012).

Regional and Local Level

On the regional level, Pennink (2014) starts off with the work developed by Stimson et al. (2009). These authors created a model for achieving regional economic development and focused on the use of endogenous variables (Pennink, 2014). The model explains the importance of resource endowments and market conditions, being essential for local economic development. Pennink (2014) recognizes that these two conditions are needed in a region to be able to achieve sufficient growth and performance. The model continues with the interplay between institutions, leadership and entrepreneurship,

Supranational Power

Even though not included in the model, a supranational power could be seen as an influence on LED as well and could thus possibly be included in the model. There are two main influences present because of a supranational power. Firstly, borders have disappeared and therefore it seems that more international activities are possible. This would cause a higher importance of the international level in the model, as more possibilities arise for international activities. The influence of the international setting as described above may thus be higher because of this supranational power. However, Jesuit and Sych (2012) researched the influence of borders in Europe and North-America. They

found that 'focusing on local economic development issues results in a picture of the world not much different from the classic Westphalian system: the world is divided into sovereign states and borders still matter a great deal' (Jesuit and Sych, 2011). This would imply that borders thus still matter. Secondly, the EU has set up a program called INTERREG, which sponsors and supports local

development.(Engstrand, Ahlander, 2006). For these two reasons, increasing

international activity and providing support for local economic development, the supranational power seems to be a good addition to the model.

Even though the European Union is the only one in this shape and form in the world, the activities of this supranational power can be compared to other regional blocs that are present all over the world. 'There is a general trend towards countries in the same regional bloc to open up for free trade between themselves, while blocking the entry of goods and services from non-members.' (Siphambe, 2004). Even when this power does for example not provide subsidies or other helpful instruments, the close relationships between multiple countries due to being in the same regional bloc, can be of influence on local economic development. An example is the increasing international activity

because of disappearing borders. The role of social capital

The literature above has already shown some signs of actors working together in order to stimulate local economic development, especially actors on a regional and local level. These linkages lead to the concept of social capital.

Putnam (2000) and Jacobs (1961) already mentioned the importance and role of social capital. Their basic idea is that 'the

interaction between people builds communities, shared values and virtues, behavioural and social norms and a social fabric in which a society and an economy can function more effectively' (Westwood, 2009). Westwood (2009) explains how these social networks can realize bringing people together and realize a stable environment for

economic transactions between

entrepreneurs. Westlund (2006) explains social capital as the linkages between actors through which information flows. These linkages between people could be of help in supporting local economic development. It could be the link between the different actors in the model by Pennink (2014), mainly between entrepreneurs on a local level and regional level and help them take action and initiative together.

brings together groups with the same

interests or background, which could, on the other hand, also create outsiders. It seems logic that in the case of local economic development, people that for example belong to the same village or have the same kind of employment will put their forces together in order to achieve something. This does not have to be an issue, as this could be complemented by the creation of

bridging/weak tie social capital which will also bring together these different groups. Zak and Knack (2001) have established measurements for social capital, which could be helpful in order to determine the role of social capital in local economic development in this case study. Firstly, interpersonal trust can benefit the relationships between the actors as this increases the ease in

establishing these linkages (Roskruge et al, 2013). Secondly, participation in the

community can benefit as this 'facilitates the formation and strengthening of linkages' (Roskruge et al, 2013).

The research by Contreras, Carrillo and Alonso (2012) shows the interplay between the different parties on a national level as well as on a regional and local level, which is also expected to be found in the context of a developed country. The different parties are

present and it seems logic that these will also influence the local economic development in this case study. However, as social capital is expected to play a critical role in local

economic development, the balance between the different actors might shift towards the local and regional level. When social capital steps in, it implies that entrepreneurs work together in order to succeed in local

economic development. This could cause the actor institutions, on all levels, to step away in order to let the local actors act themselves. In addition, as the supranational power is expected to have an influence on local economic development in the form of subsidies, which is in a certain way

supporting the local environment, this might also be true for other institutional levels. Thus, it is expected that the role of

institutions is more supportive, while local and regional entrepreneurs are expected to take their own actions together. Secondly, as international activity and thus the activities of MNEs will be influenced by the presence of a supranational power, the influence of MNEs is expected to be present in a developed country context. This influence is probably even more clearly present due to

METHODOLOGY

The research design of this thesis is a case study. A case study is appropriate as the research question is a how question (Yin, 2009), investigating how the model can be used in the context of developed countries and how the influence of a supranational power and social capital play a role. Secondly, the study is exploratory, as it tries to look for further explanations within the boundaries of the model. Due to the use of one case, issues regarding generalizability of the study arise. However, two reasons show the relevance of the chosen research design. First, the model by Pennink (2014) has been based on research in developing countries. The case research in this study is performed in The Netherlands, which is a developed country. This is a first step into comparing issues regarding local economic development in both developing and developed countries and see whether the same actors and

relationships arise. Also, as multiple countries can be divided into the group of developed countries, findings will be transferable to other developed countries. Secondly, The Netherlands is a country which belongs to the European Union. One contribution of this thesis is to add the influence of a

supranational power. This would increase the

this research. Data Collection

Several methods were used in order to collect the data necessary to analyze the results and answer the research question, including observations, interviews and one questionnaire (see appendix). Official

documents were analyzed as well. Firstly, the interviews were conducted with

entrepreneurs in the region East-Groningen. These interviews included visits to their companies. Two visits were paid towards two other centers that had the same function as the Cookie factory wanted to create. Both companies were visited once for two hours. Both buildings were previously used for other functions, one being an old milk factory while the other one being an old center for people from the village. These two centers are situated in the province Drenthe and the region North-Groningen. The latter one is a shrinking region as well while the other one is close to these two regions and therefore both centers have the same issues with regard to attracting people. The main purpose of these visits was to see examples of the function the Cookie factory could have. However, two other important subjects that were discussed were the links to Germany and the role of their personal network in the region in order to succeed in their business.

Two other visits were paid to two

entrepreneurs in the region that both had a company operating mainly in their own region, but also in other parts of The Netherlands. One company was owned by two architects, producing furniture made out of sustainable materials. The second

company was a company in waste processing and recycling, specialized in steal. The first company was a smaller company, while the latter one also does business internationally and was thus interesting for this research. No structured question lists were used, as the visits were performed together with the two entrepreneurs involved in the Cookie factory, who had some of their own issues that needed to be sorted. Therefore, these

development through supporting local firms by using the materials produced by them. Other observations were done while

performing desk research. For 5 months, the researcher was present at the Cookie factory for one day a week. As the researcher shared an office with one of the entrepreneurs in the Cookie factory, observations were done when she for example had visitors. She was also the one who kept the researcher up to date on current developments in the region and the development in the Cookie Factory. As she herself was a member of the community and had lived in this region all her life, she could easily add missing information or verify information concerning the research

question. She for example explained in detail how the network groups work and how entrepreneurs work together. As she was also active in the public sector, she could also explain further the role of the institutions. The two entrepreneurs together also assigned the researcher to set up a questionnaire in order to see whether existing plans for the Cookie factory were positively assessed by other entrepreneurs. This questionnaire also included questions on doing business in Germany and the answers could therefore also be used in this thesis. The questionnaire also involved a question on

whether entrepreneurs were members of a network group or multiple network groups and which ones. This also gave further insight into the role of networks among

entrepreneurs.

Finally, documents by the government were analyzed in order to support the findings by official documents. These documents were found during a desk research. This desk research involved regional and local newspapers in order to see the current information on actions concerning local economic development and meetings of network groups. Other information was retrieved from the internet and this involved news articles as well and documentation provided by the government, national, regional and local, and information provided by the European Union.

Data Analysis

For the data analysis, a structured approach was taken in order to analyze the different sources of data and connect the data founded to the model by Pennink (2014). Firstly, pattern matching (Yin, 2009) was used, with the pattern being the initial model and the dependent and independent

the model. Then the data was analyzed in order to see whether these same patterns could be found in the data.

After patterns were found or not found in data, the researcher went back to the model and separated the different levels in the model, the international, the national, the regional and the local level, and analyzed the levels one by one through reading the

supporting article and writing down the relationships between the variables, including the dependent and independent variables as well as for example the relationship between the triple-helix variables. This was done twice, as the researcher wanted to make sure to re-check differences between the first and second analysis.

For the case of the added element of a supranational power and the role of social capital, the secondary data provided by the European Union and the primary data collected from the interviews, observations and the questionnaire were also compared in order to see whether these matched.

THE COOKIE FACTORY: A POSSIBLE

ANSWER TO THE ISSUES IN A

SHRINKING REGION IN A DEVELOPED

COUNTRY

The case study used for this research was performed in the Eastern part of the province Groningen, situated in The Netherlands. This part of The Netherlands is dealing with issues concerning shrinkage. Young adults move away from the region because they are unable to find jobs. On the other hand, firms have problems finding employees with the right education, which shows problems in demand and supply on the job market. Secondly, problems arise in housing, as less demand is present for houses for young adults, while on the other hand the percentage elderly people is rising which causes a shift in the housing market. Finally, issues arise as facilities move away to larger cities which also causes people to move away from the region. These issues lead to

shrinkage and for this reason different actors try to take initiative in order to boost the region and its economy. This is why local economic development is an important topic for this region.

entrepreneurs and inhabitants themselves. They try to support them in different ways, for example through subsidies or spreading a newsletter on the different initiatives taken and how they are doing. This support is not only provided by the three levels mentioned above, local, regional and national, but for example subsidies can also be provided by the European Union.

One of these initiatives is the one taken by two entrepreneurs. One of these

entrepreneurs is currently renting an office space in an old Cookie factory in Wedde, a small village situated in East-Groningen. This building now has a new function, which is providing office space to entrepreneurs, housing to the owners and could offer many more functions. However, the current owners have already been trying to sell the building since 2008 but have not been able to yet. The two entrepreneurs mentioned above see the potential of the building and feel that it could provide many more functions, for example by offering more office space, creating meeting places for entrepreneurs and inhabitants and giving workshops. The building would thus be used as a center where people, both

entrepreneurs and inhabitants, can walk in and meet and talk with each other. This could also be extended across borders, as Wedde is close to the border with Germany. German entrepreneurs could come and meet Dutch entrepreneurs in this location as well. Finally, the Cookie factory can be a center where corporate social responsibility is highly important. For example energy could be

generated through solar panels and products cultivated in the region could be sold or even cultivated at the Cookie factory itself, as the building also includes a large piece of land. The entrepreneurs want to investigate whether these plans are received positively by other entrepreneurs in the region and create this center together.

The country where the case study is performed is a developed country, which provides the opportunity to see whether the same actors are active in a developed and a developing country. This case is suitable to see whether the role of a supranational power and the role of social capital is present in local economic development.. This is the case for several reasons. Firstly, as the region is subject to shrinkage, local economic development is of high importance for the region and therefore could be investigated thoroughly as the development could be seen clearly in the region. Secondly, the case study involved visits to different firms, including firms setting an example for what the Cookie factory could be, which provided the

researcher with several different views and therefore objective results. Thirdly, the government as an actor is highly involved in the region, on all different levels, and could therefore also be examined closely. The desk research that could be performed included several governmental documents which provided more insights in the case. This also provides insights into the role of the

European Union. Finally, the two

inhabitants of the region and inside views on all matters and on the other hand were able to reach out to several other entrepreneurs. The role of social capital and the difference in bonding/strong-tie social capital and

bridging/weak-tie social capital.

MULTI-LEVEL, MULTI-ACTOR

INFLUENCES: EMPIRICAL RESULTS

discussed, followed by the added element of a supranational power. Afterwards, the national, regional and local level will be discussed and afterwards the role of social capital will be added.

International level

In the model the international level is pictured according to the global value chain and its influence on all levels. The case study it shows that the international influence is present, however not on a large scale. Different entrepreneurs in the region are active on an international field, even though this does not reach any further than the North-western part of Germany, which is just on the other side of the border. On the other

hand, many entrepreneurs also recognize the fact that there is no real connection to Germany, as they first have to focus on the local market to get their business going. For example, the two entrepreneurs with centers that serve as an example for the Cookie factory, recognize the difficulties in attracting customers from the region or the country itself and therefore the lack of focus on foreign countries.

In the case of the Cookie factory, the entrepreneurs that are trying to set up activities chose a connection to Germany as one of the focus points in their search for activities. However, many other

entrepreneurs that were asked about their opinion on doing business abroad noticed the differences in doing business between the two countries and therefore the difficulties in trying to achieve such connections.

doing business across borders. Some entrepreneurs were, others were already active and the third group was not interested at all. In the survey, a question was asked on what the entrepreneurs themselves found to be of importance and no one focused on doing business across borders, while other sub themes like corporate social

responsibility, were mentioned again and again. In sum, the entrepreneurs are often firstly more focused on their own region and maybe expanding into other regions in The Netherlands afterwards. This can also be caused by the fact that the differences in culture are still seen as high. For example, a presentation on the differences between doing business in The Netherlands and Germany was given and many entrepreneurs that were active or tried to be active in Germany mentioned the difficulties in moving to the German market.

Pennink (2014) argues that the activities of multinationals on an international level affect the local economic development. This has not been shown in the case study, as no signs of multinationals' activities or their influence has been seen while performing this research. On the other hand, the research has been performed on the level of entrepreneurs which may have caused to miss out on the activities of multinationals in

the region. In conclusion, the international level as pictured in the model, through the global value chain, does not seem to be of high influence in this case study in The Netherlands. This thus seems to be the first difference between the developed and developing countries. It is also surprising as more international activity was expected due to the presence of the European Union and the disappearing borders. The actual role of the supranational power will now be further explained.

Supranational Power

In addition to the model, data on the influence of the supranational power that The Netherlands is subject to, namely the European Union, was researched. This is something not explicitly included in the model, however it does appear to have an influence on local economic development. Two main elements influencing local

economic development came forward, being increasing international activity and helpful instruments such as subsidies.

country is on the other side of the border and therefore close to the region in this case study. As already mentioned above, the border still seems to matter a great deal as entrepreneurs in the region seem to prefer to first focus on their own region and afterwards on other regions in the same country. One of the explanations for this result is the

recognition of the differences in culture among The Netherlands and Germany, which thus seem to still matter a great deal.

Secondly, the supporting role of the European Union through for example subsidies was considered as possibly being important for local economic development. A good example of the provision of subsidies is found in the secondary data provided by the government. In different documents, the INTERREG program is mentioned. This program is financed through the European Regional Development Fund. 'The overall objective of the INTERREG IVC Programme is to improve the effectiveness of regional policies and instruments. A project build on the exchange of experiences among partners who are ideally responsible for the

development of their local and regional policies.' (INTERREG4c.eu). An example of such a project in the province Groningen is a project on energy and sustainable transport. (INTERREG4c.eu)

In conclusion, the supranational power seems to be a good addition to the model as it definitely has an influence on local economic development. However, this role seems to be mainly supportive, as was one of the

expectations on the role of the supranational power. In the case of European Union, this supportive role is mainly providing funds for regional development.

National Level

On this level, the cooperation between three actors is emphasized in the model: the government, business and industry (Pennink, 2012). For the government, this also involves the provincial and municipal actors and thus shows the overlap between the national, regional and local level. A last variable included on this level is the influence of universities.

across in the documentation provided by or assigned by the government is the

stimulation of initiatives by local actors. Both inhabitants and local entrepreneurs are stimulated to set up own initiatives or cooperate in order to stimulate local economic development. In the report 'Looking at shrinkage', which is published by provincial actors, emphasis is put on

'participation in society is key' (Kijk op Krimp, voortgangsrapportage december 2012, Provincie Groningen).

The final variable of importance on the national level is the variable universities. In the case study, it was not specifically shown that universities are highly involved in local economic development. However, while looking through data, universities have been mentioned as having an advising, consulting or researching role. Often this role is reserved for the University of Groningen, which is the university in the same province. This implies that universities do provide support for local economic development, but are not one of the active actors.

In conclusion, it seems that the government, national, provincial and municipal actors, plays a role in the stimulation of local

economic development. However, it seems to

be a more supporting role, as they try to do research on the existing problems in the region and they provide information on the current projects. However, the initiatives by inhabitants and entrepreneurs themselves is highly appreciated and supported by the government where possible, through for example a subsidy. Universities, on the other hand, do not seem to play an active role in local economic development, however they do have an advising or supporting role. This thus seems to be another difference between developed and developing countries, as universities have not specifically been mentioned as an important actor. Regional Level

The regional level includes different variables that are of relevance in order to achieve local economic development. Firstly, resource endowments and market conditions held by the region are important. Secondly, the interaction between leadership,

entrepreneurship and institutions is considered as an important factor. This is based on the work by Stimson et al (2011) on regional development.

Resource endowments and market conditions are needed in order to be able to create regional growth and thus economic

that need to be considered on this level. Resources can also be considered necessary for developed countries as the case study shows that many entrepreneurs in the region are able to succeed through the use of resources provided by the region. For

example, one entrepreneur has as an activity to sell potatoes that are specifically grown in Groningen. These products produced in the region are often a way to put the regional economy at speed again. On the other side, the case study shows that even though some resources, such as people, are scarce, local economic development is still possible. Good market conditions is the second aspect that is considered necessary in order to develop and grow. However, the market conditions seem to be relatively bad in comparison to other regions in the country and compared to the North-Western part of Germany on the other side of the border. This may sound logic, as this is why the case is interesting as market conditions are worse compared to the other regions and thus local economic

development is necessary. However, this does not seem to cause that economic

development is not possible to achieve. For both the resource endowment condition and the market condition aspect, it seems to be that the absence of these conditions lowers the economic success of a region in the first place. On the other hand, local economic

development to create economic activity in the region is still possible as creative ideas are initiated that are focused on the resources and conditions the region does have. The absence of resources and good market conditions could also be seen as a trigger to come up with more creative ideas in order to increase economic wealth.

Secondly, the interaction between leadership, entrepreneurship and institutions is

considered on the regional level as

intervening variables. Within this interaction, leadership can be performed by an individual as well as by a group of people or by the whole society. The empirical research shows that these linkages between the three variables indeed seem to exist. Even though the government often suggests the

importance of society starting up their own initiatives to create local economic

in local economic development. However, the absence of these conditions seems to trigger creative initiatives in order to develop and grow. The case study does provide the support for the interaction between

leadership, entrepreneurship and institutions in order to create local economic

development. Local level

At the local level, the model includes the three variables already recognized on the regional level, which are leadership,

entrepreneurship and institutions, with the latter being a variable in which local and regional levels overlap. The overlap of institutions on a regional and a local level can be recognized in the case study as well. Even though institutions are present on a local level, these local institutions often cooperate on a regional level. For example, the report on the issue of shrinkage was assigned by a combination of multiple local institutions. However, what can be found from the case study is that entrepreneurs and leadership cannot be separated clearly either between regional and local level. Often, entrepreneurs work together with different people and on projects that cover different levels as well and therefore it can be stated that no clear difference between an entrepreneur or leadership on the local or regional level can

be seen.

This distinction between regional and local levels can also be seen in the independent variable quality of local community and the dependent variable quality of life of local people (individual and community). The model separates these variables into the different levels, however the case study shows that local and regional cannot really be separated into different distinct groups. The case study showed that many entrepreneurs are members of a network group and often of different network groups, which links them with many different entrepreneurs in the whole region, instead of just their own local area. This does not imply that there are no groups of entrepreneurs on a local level, however this often has an overlap with the regional level. This is another difference found in developed countries, as regional and local level cannot really be separated.

In sum, the national, regional and local level all seem to support the fact that institutions have a more supporting role, while a larger role is present for entrepreneurs and

especially the cooperation of entrepreneurs. This seems to support the role of social capital, on which the results will be further discussed below.

The Concept of social capital

As described in the theoretical section, social capital concerns the relationships among different actors. Pennink (2014) has already briefly mentioned the role of social capital in the multi-level, multi-actor model, however has not yet explained further how this concept interacts within the model. The case study in this research shows that social capital indeed has an important role in local economic development. Entrepreneurs have created linkages through for example

network groups and because entrepreneurs often are part of multiple groups and have multiple roles in society, this creates a high-density network. However, on the other hand the case study shows the issues concerning bonding/strong-tie social capital, as network groups often also creates different groups of people with the same interests or values, which causes gaps between groups. The Cookie factory is trying to work towards a center where this gap is overcome through the creation of a walk-in center instead of another network group.

The two measurements of social capital also show a clear role of this concept in local economic development. Firstly, through interpersonal trust achieved before this particular case, the two entrepreneurs realized a strong support for their plans. For

example, two presentations were held for people interested in the plans for the Cookie factory and the entrepreneurs that attended these presentations clearly showed interest in the subject. The interpersonal trust made sure the entrepreneurs were willing to listen in the first place. Secondly, it also created new linkages with contacts of the

entrepreneurs that were enthusiastic about the plans and communicated this to others. On the other hand, as the two entrepreneurs in this case both were highly active in the community, this increased their amount of linkages with other entrepreneurs. The concept of social capital was not only shown among entrepreneurs, as actors belonging to municipal or provincial institutions also showed interest in the ideas and plans of the two entrepreneurs, which created new linkages.

In sum, the role of social capital seems to be of critical importance in this case study. This is due to the fact that the government also strongly supports local initiatives and

In conclusion, both the concept of a

supranational power and social capital seem to be a valuable addition to the model developed by Pennink (2014). An important factor in this seems the role of institutions in the context of a developed country. The supranational power seems to add another layer to the institutions, however, like the institutions on the other levels, only seems to have a supporting role. Because the

institutions in this supporting role stimulate local initiatives, the actions of entrepreneurs become more important. This leads to an important role for social capital.

In addition to the two elements that are added in comparison to the research in a developing country, three other issues were found that seem to differ between developed and developing countries. Firstly,

international activity of MNEs does not seem to really play a role in local economic

development. Secondly, universities do not seem to play an active role in the process, only possibly through a supporting role. Finally, the regional and local level can only not be separated according to the model on the variable institutions. This case study shows that the two levels overlap in more aspects as entrepreneurs, both locally and regionally, also seem to cooperate.

DISCUSSION

This thesis discussed the model developed by Pennink (2014) concerning local economic development. The model looks into different actors on four levels, international, national, regional and local and is based on research in a developing country. As the model is

originally based on research in developing countries, it is a useful addition to see whether the same variables apply to the context of a developed country. Two other elements were also added to the model. Firstly, the influence of a supranational power was added on the international level.

Secondly the concept of social capital was further developed. The case study was performed in The Netherlands, which is subject to the European Union. The region where this investigation took place was East-Groningen, which is a shrinking region and therefore highly active in local economic development. In this section of the thesis, the results will be further discussed.

many small firms and entrepreneurs who perform different tasks. This could be a reason for the missing link between MNE activity and local economic development. Also, as different actors recognized the difficulties in attracting customers from their own region, the connection to foreign countries, mainly focusing on Germany, was often left out. This lack of influence of activities of MNEs was even more surprising, as a higher influence was expected due to the supranational power. Because of the

European Union, borders between the member countries are disappearing and international activities are more easily performed. As East-Groningen is close to the border with Germany, activities between them seemed a logic consequence. However, it turned out that cultural differences still matter a great and therefore the focus mostly lay on the region or other parts of The

Netherlands.

The second influence of the European Union that was expected was found in the results of the case study. The European Union has created several funds for regional and local development. This shows a supporting role for local development by the European Union. As was noticed in the role of other institutions on the national, provincial and municipal level, institutions often seem to

have a supporting role in local economic development. This is for example through subsidies or through providing information. Therefore, the variable supranational power seems to be a logical addition to the model as another level of an institution. The European Union is the only one in this particular form, However multiple countries are subject to some kind of regional or international organization, for example through the creation of trade blocs.

The model shows an overlap in the variable institutions between national, regional and local levels. The case study shows these same results and adds that other variables, like entrepreneurs, also seem to overlap between the regional and the local level. This is a second difference between developed and developing countries. For the institution variable, especially regional and local

institutions seem to work together in order to achieve economic development. Local

universities, as they often only give advice or do research, which seems another difference in this context.

Again, what comes across is the importance of entrepreneurs themselves who often are the ones taking initiative. The conditions of having strong market conditions and resource endowments are specified as necessary in the model. Even though the absence of these conditions can lead to difficulties in the first place, the case study shows that the absence or partially absence of these conditions can lead to creativity in society and thus

achieving economic success. As showed above the presence of entrepreneurs is highly valuable for the region. Not only because they themselves want to take initiative, but the other side also is that institutions have a more supporting role and therefore initiatives taken by entrepreneurs are also highly critical. This is the point where social capital, or the links between these entrepreneurs, steps in. The case study shows that the linkages between entrepreneurs are highly valuable in order to achieve local economic development. When entrepreneurs try to take initiative they can easily make use of their network in order to find partners or people that can help them further in developing their plans. As

entrepreneurs often fulfill several roles, they have many different contacts themselves. However, one aspect that restricts

entrepreneurs is the network groups based on interests which creates division among entrepreneurs. A center like the Cookie factory where everybody can walk in without belonging to another network may be a way of overcoming this issue. As initiatives by entrepreneurs seem to be critical for local economic development and together they can achieve more than by themselves, it seems that social capital is of critical importance.

In conclusion, the levels and actors in the model, which is based on a developing country, seem to apply in a developed country as well with three exceptions. Firstly, the international activities of MNEs do not seem to matter a great deal. Secondly, universities only have a supporting role and do not really seem to have an active role in local economic development. Finally, the regional and local level seem to overlap more than is suggested in the model.

supporting role. The supranational power has this supporting role as well. MNE's activities do not seem to matter a great deal, while entrepreneurs and especially the networks between them seem to be the critical actors in local economic development. Thus, instead of relying on the activities of MNEs, the focus of institutions, on all four levels, need to be on entrepreneurs and their social networks. In figure 2, the adjusted model by Pennink (2014) can be found where both the supranational power and social capital are added. The supranational power is added on the international level and connected to local leaders, local social entrepreneur, businesses and universities, as are the institutions on the

As this study was exploratory in nature, there are several suggestions for further research. This section will discuss the limitations of this research and the avenues for further

research.

Due to the exploratory nature of this study, the results on the differences among developed and developing countries can be questioned. The three main differences that were found could be further investigated through other case studies in order to see whether they apply in other developed countries as well and further realize the generalizability of the study.

Also, the generalizability could be an issue as the region where the case study took place is a region dealing with shrinkage and many MNEs situated in the country are situated in the West. As already mentioned in the discussion, if this research would be

performed in the West of The Netherlands, the activities of MNEs would possibly be more clearly present. However, as local economic development is highly important in these kinds of regions, the case study

provides useful insights.

Furthermore, even though the supranational

power of the EU is present and more international organizations can create this influence, the European Union is the only supranational power in this form. Another research suggestion could therefore be to further investigate the influence of other international organizations on local economic development.

One other important finding is the

importance of entrepreneurs on a local and regional level, while institutions often only have a supporting role. It should be noted that the case study was performed at the level of two entrepreneurs and this could also have caused the findings of their importance. Further research could investigate whether entrepreneurs and small firms are often the ones mostly active in local economic

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APPENDIX

As the research performed for the two entrepreneurs was in Dutch, the data used for this research is also presented in Dutch. During the interviews, notes were taken, which are included in this appendix. Secondly, the questionnaire and the answers of entrepreneurs are included.

Finally, the report presented to the two entrepreneurs is added, as these are the practical

implications that are at the basis of this thesis. The references included in this report are included at the end of the report.

Notes interviews

Bezoek Bunne ' Melkfabriek'. - Heeft een horeca functie.

- Zakelijke functie --> puur praktische functie, ' pand' wordt pas gesignaleerd als mensen er zijn geweest. Dan wordt erover gepraat.

- mond op mond reclame

- overheid, onderwijs zorg --> willen niet de luxe, dus wel geïnteresseerd in dit, want het is een bijzondere locatie

- niet gefocust op buitenland, al moeilijk genoeg binnen Nederland - cultuur functie --> is een vraag van buitenaf.

- zien het als een soort buurthuis, dus andere vragen --> dus de vraag is of het goedkoop/gra-tis kan om hier iets te doen (voorbeeld koren).

- geld is altijd krap, maar deze mensen willen mooie dingen doen.

- geven en nemen is er niet bij. Ander verdienmodel dan de zakelijke markt. - filosofie --> aandacht, zorg, gastvrij.

- geen subsidie, commerciële onderneming

- wel gericht op producten uit de streek, maar niet als in productie of verkoop, maar in het gebruik van.

- niet alleen commercieel uitbaten, ook een podium voor..

- ' vrienden van de melkfabriek bunne' , hebben programmering overgenomen --> horeca in-komsten voor de melkfabriek, de rest voor hen met in gedachte doelstelling dat er mooie dingen gebeuren.

- Uitkijken --> die krijgt een eigen leven (de stichting)--> mensen associëren zich met stich-ting in plaats van met melkfabriek.

Hornhuizen bezoeken - 200 inwoners

- Soort van dijkdorp: een straat. - tegen andere dorpen aan

- -' laboratorium van de toekomst'. (Regio staat onder druk) - -'het is mij allemaal overkomen. Ik kom uit Amsterdam. '

- pand eerst een tijd gehuurd

- sloopvergunning was al aangevraagd.

- stichting DBF, bereid voor financieel plaatje --> economie en sociale cohesie bevorderen. Niet opkopen, maar zijn er partijen? Vraag en aanbod op elkaar afstemmen. Hoog bedrag. Ook subsidie gekregen. Te weinig voor omvang van verbouwing.

- pand is meer dan 100 jaar oud.

- ' geloof dat het een goedlopend bedrijf wordt, maar is niet makkelijk' .

- ' gebruik maken spanning randstad en lege land hier' ., geen focus op buitenland - 20-30, young professionals, vinden dit heel leuk ' in de voortuin van Groningen' . - accent op zelfvoorzienend, biologische, terug naar roots.

- puddingfabriek in Groningen --> met deze jongens de marketing.

- Samen zo belangrijk --> om groter te worden moeten allianties aangegaan worden. - Website moet aangepakt.

- -stichting doen

- pot nieuwe ontmoetingsplekken - inrichting

- nu 2e voor

- -culturele agenda, maatschappelijk doel ' in de regio staan'.

- Aardappel huis. --> kijken of we kunnen beginnen met oogstfeest. Al twee jaar gedaan. --> de vier parmentiers

- mond op mond reclame, belangrijk.

- een keer per maand restaurant (ongeveer 50 mensen) - kracht --> context, omgeving en plek volledig benutten. - deur open houden voor iedereen'.

- Meerwaarde van verhaal om film heen op filmavonden --> leid tot meer publiek. - ' zodra het geld kost, komt de helft van het dorp niet' .

- ' er is een markt, nu de overheid zich terugtrekt en de markt t meer moet doen ' - Toerisme --> opening voor schier. Voorportaal

Advies rapport:

De Koekjesfabriek te Wedde

In opdracht van: Stichting Ontwikkeling Potentieel Uitgevoerd door: Bianca Kistemaker

Inhoudsopgave

1. Introductie 4

2. Grenzeloos ondernemen & Maatschappelijk Verantwoord Ondernemen 5

3. De Regio Oost-Groningen 6 Demografische Ontwikkelingen 6 Woningmarkt 6 Jongeren 7 Schaalvergroting 7 Conclusie 7 4. Methodologie 8 5. Resultaten 9 Enquête 9 Achtergrond Respondenten 9

Bestaande Plannen en Ideeën 10

Grenzeloos ondernemen 15 Cases 16 Wongema 16 Melkfabriek 17 Observaties 17 Conclusies 18 6. Advies 19 Focus 19

Maatschappelijk Verantwoord Ondernemen 19

In- en Uitloop Centrum 20

Grenzeloos Ondernemen 20

Conclusie 21

7. Referenties 22

1. Introductie

De Koekjesfabriek is een pand in het dorp Wedde en is, zoals de naam al doet vermoeden, een voormalige koekjesfabriek. Tegenwoordig doet het pand dienst als woning en zijn er verschillende kantoorruimten. De huidige eigenaren proberen al een aantal jaar om het pand te verkopen, maar zonder succes. Tegelijkertijd is er meer ruimte beschikbaar in het pand die niet benut worden en die op verschillende manieren ingevuld zou kunnen worden. In opdracht van Stichting

Ontwikkeling Potentieel (STOP) is dit onderzoek uitgevoerd om te zien wat de behoeften zijn in de regio en of de reeds bestaande plannen ter invulling van deze ruimtes hierin passen.

Wedde ligt in de regio Oost-Groningen. Deze regio heeft te maken met de problematiek van een krimpgebied. Jongeren trekken weg uit de regio, de vergrijzing loopt op en schaalvergroting leidt tot minder goede bereikbaarheid van voorzieningen zoals scholen en zorginstellingen. Naar de oplossing wordt gezocht en hierbij staan voor de overheid lokale initiatieven hoog in het vaandel. Dit rapport voegt de bovenstaande twee vraagstukken samen en is gebaseerd op een onderzoek naar de plannen voor de Koekjesfabriek en de behoeften van de ondernemers in de regio. Tegelijkertijd zijn maatschappelijk verantwoord ondernemen en grenzeloos ondernemen twee hoofdthema’s in dit onderzoek. De belangrijkste vraag die beantwoord zal worden is: Welke behoeften zijn er waarin de Koekjesfabriek zou kunnen voorzien?

De structuur van dit rapport is als volgt. Eerst zal de situatie in de regio worden geschetst met betrekking tot de krimpproblematiek. Dit wordt gedaan aan de hand van het woon- en

2. Grenzeloos ondernemen & Maatschappelijk Verantwoord Ondernemen

Twee specifieke thema’s die benoemd zijn door de opdrachtgever zijn in dit onderzoek meegenomen: Grenzeloos ondernemen en maatschappelijk verantwoord ondernemen. Oost-Groningen ligt tegen de grens met Duitsland aan en de vraag is of hier kansen liggen voor de Nederlandse regio. Aan de Duitse kant van de grens is de economie bloeiende en zijn er tekorten aan werknemers, waar aan de Nederlandse kant de werkloosheid oploopt en mensen wegtrekken uit de regio. De vraag is of de Koekjesfabriek een invulling zou kunnen hebben in het verder verbinden van deze twee regio’s en zo meer kansen te creëren voor de Nederlandse gebieden. Maatschappelijk verantwoord ondernemen is een breed begrip waarin verschillende thema’s aan bod komen. De vraag is of en waarin de Koekjesfabriek een rol zou kunnen spelen. In het boek 'Duurzaam denken doen', geschreven door Jan Jonker, wordt de toekomstige wereld van 2035 omschreven en hoe wij richting deze wereld kunnen werken. Kleinschalige projecten die met elkaar samenhangen zijn hierin essentieel. Zoals het boek omschrijft 'bedrijven, burgers en maatschappelijke organisaties worden door overheden steeds vaker uitgenodigd

medeverantwoordelijkheid te dragen voor het ontwikkelen en uitvoeren van plannen.' (Duurzaam denken doen).

Daarnaast verandert de manier van werken in de toekomst. Mensen zijn straks geen onderdeel meer van een groot bedrijf maar van een groot netwerk. In 2035 zullen zogenoemde hubs centraal staan. 'Een hub is een fysiek of virtueel samenwerkingsverband, waarin lokale werknemers

samenwerken met kennisinstellingen, bedrijfsleven en overheid en waarin beschikbare kennis, ervaring en middelen van deze afzonderlijke partijen bij elkaar worden gebracht. Kantoorruimtes kunnen worden gedeeld en zorg voor ouderen, kinderen en zieken worden gebundeld en

gecombineerd met werk.' (Duurzaam denken doen).

3. De Regio Oost-Groningen

De Koekjesfabriek heeft de mogelijkheid om ook een maatschappelijke functie te dienen en via deze functie een bijdrage te leveren aan de oplossing van de maatschappelijke problemen in de regio. Belangrijk is daarom om deze problemen in de regio in kaart te brengen. Door de lokale overheid wordt met name samengewerkt met de andere gemeenten in de regio Oost-Groningen. Samen hebben zij opdracht gegeven tot het woon- en leefbaarheidsplan. Dit plan is opgesteld door KAW architecten en adviseurs. De gemeenten die gezamenlijk opdracht hebben gegeven voor dit plan zijn de gemeenten Bellingwedde, Menterwolde, Oldambt, Pekela, Stadskanaal, Veendam, Vlagtwedde en ook de provincie heeft er aan bij gedragen. In dit hoofdstuk zullen de resultaten kort besproken worden om een duidelijk beeld te schetsen van de huidige situatie in de regio waarin de Koekjesfabriek zich bevindt.

Demografische ontwikkelingen

Waar er in 2011 ongeveer 150.000 inwoners in de regio woonde, zal dit aantal met 8.000 tot 10.000 inwoners zijn afgenomen in 2030. De oorzaak hiervan ligt bij migratie en een hoger sterftecijfer dan geboortecijfer. Er zijn drie ontwikkelingen die de kern van het probleem vormen voor de krimpgebieden. De vergrijzing neemt toe en de woningmarkt staat, onder andere hierdoor, onder druk. Ten tweede, neemt het aantal jongeren in de gemeenten af. De laatste en derde ontwikkeling is die van schaalvergroting waarbij bijvoorbeeld scholen en ziekenhuizen samen voegen om te kunnen blijven bestaan.

Woningmarkt

Jongeren

Twee ontwikkelingen zijn gaande in de economische sector met betrekking tot jongeren in de regio. Ten eerste is de jeugdwerkloosheid hoog, wat weer als gevolg heeft dat jongeren wegtrekken uit de regio. Waar in 2010 het aandeel jongeren 22 % was, zal dit in 2030 zijn afgenomen tot 19% (Van Krimp naar Kwaliteit, 2011). Aan de andere kant hebben sectoren en bedrijven moeite om personeel te vinden en is er een groot tekort aan de juist geschoolde werknemers. Dit zal in de komende jaren onder anderen in de zorg een groter probleem worden, waar door de vergrijzing de vraag naar personaal stijgt. Vraag en aanbod zijn duidelijk niet goed op elkaar afgestemd.

Schaalvergroting

De reeds bovengenoemde schaalvergroting is gaande in bijvoorbeeld het onderwijs,

zorginstellingen, sportverenigingen en theaters. Dit is in verband met het tekort aan draagvlak in de dorpen, waardoor de enige mogelijkheid om te blijven bestaan het samenvoegen van deze instellingen is. Een van de problemen die hier weer op volgt is die van transport. Het openbaar vervoersnetwerk zal na deze verandering misschien niet meer aan de vraag kunnen voldoen en kleinschalig openbaar vervoer zal meer nodig zijn. Om voorzieningen wel te kunnen behouden, zijn hogere inwonersaantallen nodig.

Conclusie