Local economic development

We understand local economic development as an endeavour meant to spur durable generation of value, economic activity and jobs. The ultimate goal is a better life quality for all, with a reduced carbon and environmental footprint.

 

Companies are central to this approach, as they are where jobs, income and value creation – that is, economic activity – occurs. But it also involves a variety of different players, beyond enterprises.

 

Approach long-term benefits through value addition

 

The durability of economic gains is essential to local economic development, value added being a key indicator in this respect.

 

The value added of a company is the difference between outputs (sales revenue) and production costs excluding wages. It is split between wages, profit, and tax. Higher value added therefore means increased higher income creation capacity with unchanged costs and resources, as the chart shows.

 

Every local value addition therefore means new capacities of income creation, but also of GDP growth, local skills, jobs quality or tax revenue.

 

Let's imagine an insulation company that develops a new installation process that significantly improves the efficiency and durability of its product, with reasonable effects on production costs. Provided a suitable market for this upgrade, the company will be able to increase its prices higher than the production costs raise, hence increasing its value added. The additional income will be locally fixed and shared between wages, profit and tax, yielding further local effects such as more tax revenue available for public policies, skills enhancement, or the emergence of new markets subsequent to the income increase.

 

Added value may be quantified or assessed through qualitative analysis on the light of its two main drivers: innovation and cooperations.

 

Innovation applies to product and processes but also to marketing or organisational methods*. It always correlates with a skills and competences increase, and many times to technical change or upgrading. Innovation should be dissociated from the restrictive "high tech" notion that may be misleading: every innovation, even simple, can lead to value addition.

 

*Based on the OECD typology.

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Cooperations, interactions and knowledge spillovers are critical for innovation. They can be:

• Within the same industry or not (intra- or inter-industry)

• Commercially or non-commercially based

• Formal or informal

 

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>> As key drivers of durable local economic development, innovation and cooperations are integral to our studies. This leads us to:

• Study local economic endowments and possible connections with new activities

• Explore commonalities and synergies between economic districts

• Highlight all possible recycling and reusing flows in a given area, in order to foster interaction between economic players

• Recommend embedding new cooperations in industrial processes, as to ensure their durability

• Identify all innovation opportunities within a given project and insist on their importance, so that players seize and optimise them

 

For example, we have:

• Detailed the benefits of a partnership between a sand quarry and a major maritime port for the reusing of marine sediments

• Laid out the operational conditions of a collaboration between construction, waste management and reusing companies, on a same platform and with the aim of increasing skills and competences

• Delved into synergies between a reusing cluster and a thermal insulation one

 

Inecko also identified several original, and sometimes unexpected, cooperation opportunities.

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To explore further, you can refer to the 'related variety' approach.

 

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