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Making a difference? Regionalgovernment, economic developmentand European regional policyShari Garmise aa National Council for Urban Economic Development , 1730 KStreet, NW, Washington, DC, 20006, USAPublished online: 18 Apr 2007.

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International Planning Studies, Vol. 2, No. 1, 1997 63

Making a Difference? Regional Government, EconomicDevelopment and European Regional Policy

SHARI GARMISE

National Council for Urban Economic Development, 1730 K Street, NW, Washington, DC20006, USA

ABSTRACT This article assesses the contribution regional government makes to economic develop-ment. The role of regional government is evaluated through a comparative analysis of theeffectiveness of two different regions, Tuscany in Italy and the East Midlands in the UK, whichpossess different types of regional governance structures, managing a common framework -- Eu-ropean Regional Policy. I conclude that democratically elected regional government may providea number of crucial advantages for promoting economic development.

Introduction

It has been suggested that global economic restructuring is altering significantlythe spatial distribution of production, in particular it is reinforcing the region asa key locus of economic activity. Although this indicates that the governance ofthose forces can be influenced, if not shaped, by regional politics and regionalinstitutions, real questions remain regarding whether regional governments aseconomic actors are relevant in a context where regional and national economiesare becoming increasingly internationalized. The increasing stress of the Euro-pean Union on the achievement of social and economic cohesion, especiallythrough regional policy initiatives and tri-level partnerships, makes research onthis area even more pressing. This article addresses this issue through acomparative analysis of the effectiveness of two very different types of regionalgovernrnent structures, coping with similar problems of industrial decline, andmanaging a common development framework (European Regional Policy).

This article is divided into four parts. The first section outlines the processesfuelling this regional renaissance. The second section discusses the generalcontribution regional government structures may make to economic develop-ment, especially firm competitiveness, and then explores the question as towhether or not the exercise of an economic development role is more effectivelyfilled by any particular type of regional administration. The third sectionaddresses these issues by comparing briefly the general experiences of twocountries, the UK and Italy, and then looks in depth at two regions, Tuscany inItaly and the East Midlands in the UK, and their experiences managing acommon development framework, the European Structural Funds. Conclusionsare presented in the final section.

1356-3475/97/010063-19 © 1997 Journals Oxford Ltd

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Global Restructuring and Regional Resurgence

Over the past decade, much of the research on economic development indicatesthat the region may constitute a fundamental unit of social and economicarrangements in emergent new patterns of capitalist organization (Sabel, 1989;Storper, 1995). This is not to say that the region had, heretofore, gone unnoticedbut rather it had been seen as epiphenomenal to wider political and economicprocesses. This (re)emergence of the region has been attributed to mutuallyreinforcing patterns of political and economic restructuring.

In the political sphere, economic globalization has weakened the ability of thestate to regulate the national economy effectively. Jessop (1994) points out"[T]his loss of autonomy creates in turn both the need for supranationalcoordination and the space for subnational resurgence" (p. 264). Consequently,states have reallocated functions down to sub-national government, laterally tothe market, or up to the European Union (EU) which, in turn, has encourageda growing relationship between the EU and sub-national authorities, thrustingthem onto new economic and political playing fields. These changes in the statehave been paralleled by changes in state policy—especially spatial developmentpolicy. After the 1973 energy crisis, increased attention to national macroeco-nomic policy meant a decreasing concentration on regional policies in mostWestern European states (Swyngedouw, 1989). Fearing a consequent escalationof the gap between stronger and weaker regions (Rokkan & Urwin, 1983), manysub-national authorities have increased their economic development activity,especially as they have been forced to shoulder responsibility for the host ofproblems emerging from economic restructuring. The increased activity ofcertain authorities has compelled others to become more involved both throughthe demonstration effect, and, equally, through increasing competition betweenregions to capture inward investment and European funding.

While all levels of sub-national authorities have increased their activity ineconomic development in response to changing political and economic condi-tions, increasingly the debilitating competition for investment betweenneighbouring local authorities in countries without autonomous regionalgovernment has spurred many of them to establish collaborative regionalagencies of some sort to market and manage the regional space (see for example,Garmise et al., 1996; Garmise, 1996). Hence there is a growing consensus at thepolitical level, that at least certain types of economic development strategy (e.g.inward investment) may be most effectively pursued at some administrativelevel between local and national; in other words, regional.

On the economic dimension, the increasing fragmentation and globalization ofmarkets, rapidly changing demand and the shortening of production andproduct cycles favour firms which employ more flexible production methodsand have a well-developed innovative capacity. There seems a growing consen-sus that flexibility and innovation are best developed within a networked formof organization among firms (Aydalot & Keeble, 1988; Cooke & Morgan, 1993;Storper, 1994; 1995). Specifically, inter-firm networks are the main conduits oftacit knowledge which refers to "the type of knowledge learned only byexperience and which is difficult to transmit to others by any means other thandemonstration.... Thus, this knowledge is diffused via personal communication,mobility and contact..." (DG XIII, 1993: 4). As codified knowledge, alternatively,is easily transferable, tacit knowledge is increasingly recognized as a significant

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Making a Difference? 65

component of firms' competitiveness because it is not tradeable in its own right,but only available through regular exchange between institutions. Since thetrading of tacit knowledge is through direct exchange networks, such activitywould be inefficient across space, making territorially rooted inter-firm networksan increasingly significant component for the competitive success of firms.

Evidence suggests that these territorially based inter-firm networks promote arange of interdependencies whose regulation is only feasible at the regional levelbecause these interdependencies, which include land and energy usage, commu-nications, waste disposal, and managerial, entrepreneurial and skills training,cover a territorial level larger than local administrations but require policytailorization and regulation at a level closer than national (Trigilia, 1991). In fact,much research indicates that inter-firm networks in recognized dynamic regionshave received a wide spectrum of assistance from parallel networks of region-specific institutions that have been able to tailor policies to meet regionalexigencies and regional demand (Piore & Sabel, 1984; Saxenian, 1990; Cooke &Morgan, 1993; Storper, 1994; 1995). These institutions have the advantage ofbeing closer to the customer, and able to act on regional knowledge to meet andadapt to needs of environmental conditions which are territorially specific(Morgan, 1996).

The implications emerging from a study of economic restructuring parallel theramifications arising from our assessment of political restructuring—that econ-omic development requires some type of political and policy input from aregional unit of government. Therefore, in this article, regional boundaries aredefined administratively; thus the region corresponds to the existing adminis-trative unit of government between the local and the national. Although it is animperfect definition, it is most suited for an analysis of the relationship betweenregional institutions and economic development. Crucially, as will be explainedin detail below, the structure and capacity of the regional government influencethe design and capacity of the regional institutional infrastructure and thus mustbe used as a starting point for any understanding of the role of regionalinstitutions in the development process. The next section explores the relation-ship between regional government and economic development.

The Role of Regional Government in Economic Development

Economic development, like the term region, remains an ambiguous and oftendisputed concept. In this article, the relationship between regional governmentand one particular aspect of economic development is highlighted—assistance tofirms to encourage their innovative capacity. Although it is admittedly a limiteddefinition, there are two advantages to using it. First, it marries the conclusionsemerging from the synchronous processes of political and economic restructur-ing. In particular, that innovation is a crucial input of economic success and thatthis may be enhanced by regional policy support. Second, it generates two usefulmeasures for comparing the performance of different types of regional adminis-tration: the nature of economic development strategies generated and the degreeof private sector involvement in the formation of those strategies. The utility ofthese measures will be discussed in more detail below.

This section is subdivided into two parts. The first addresses the issue of howregional government may contribute to the innovative potential of firms. Thesecond examines the potential differences between certain types of regional

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structures in performing this economic development role and generates ahypothesis that will be tested by the empirical data in the following section.

Regional Government, Economic Development and Innovation: The EntrepreneurialFunction

The growing focus on innovation as a crucial source of firm competitivenessdraws our attention to the pivotal economic role of the entrepreneur, whotranslates innovation into commercial success, thereby providing the motor forthe capitalist engine (Schumpeter, 1976). Specifically, Schumpeter's entrepreneuridentifies and exploits a wide range of new economic opportunities includingnew inventions, new technologies, new products, new markets, new suppliers oreven new types of institutions.

Entrepreneurship, however, may be best conceptualized as a function ratherthan in terms of an individual (Schumpeter, 1976; Casson, 1995). In other words,"the entrepreneur is what the entrepreneur does" (Casson, 1995: p. 104, originalitalics). Successful entrepreneurs, contrary to accepted wisdom, are not atomisticindividuals, but social beings who must successfully assemble dispersed re-sources, manage teams, coordinate extensive networks, and intermediate amongdiverse actors involved in the various stages of product development (ibid.). Theentrepreneur him/herself is not required to be either inventor or banker. Ratherhis/her job often may be to mobilize and efficiently allocate the resourcesnecessary to exploit new opportunities. As Schumpeter (1976) suggests: "Thisfunction does not essentially consist in either inventing anything or otherwisecreating the conditions which the enterprise exploits. It consists in getting thingsdone" (p. 132). The de-linking of the function from the widespread, buterroneous, assumption that an entrepreneur is a private sector individual opensup the space for a wider range of actors to undertake this role.

As the centre of various public, economic and social networks, the regionalgovernment is particularly suited to take on this task. Able to leverage in publicfunds from other sources, especially higher tiers of government, regional author-ities can be a desirable partner to private agents. Similarly, the ability to mobilizeprivate resources may be critical in gaining assistance from higher levels ofgovernment and tailoring policies to meet regional needs. As well as assemblingthe necessary financial backing for a particular strategy, regional governmentcan serve as broker for building a plethora of new economic relationships suchas matching buyers and suppliers or cross-firm alliances for joint research anddevelopment (R&D). As the institutional expression of regional public interest,the regional government can represent an honest broker in these often delicatenegotiations. Research by Tripsas et al. (1995), for example, indicates thatgovernment can stimulate increased R&D activity by acting as guarantor ofcooperative behaviour. Specifically, by acting as honest broker and providingincentives and monitoring capabilities to oversee cooperative agreements, it candiscourage opportunistic behaviour among firms, allowing them to cooperateunder difficult conditions.

In fact, in response to political and economic restructuring, there is growingevidence that this function is being increasingly shouldered by regional govern-ments, especially under conditions where the private sector finds it difficult toassume this role (Nanetti, 1987; Eisinger, 1988; Leonardi; 1994). These conditionsinclude, but are not limited to, a lack of resources, short-sighted vision (Eisinger,

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1988), small firm-based economies, and collective action problems. In responseto these entrepreneurial gaps, regional governments are now underwriting apart of the risk for innovation. They have created export promotion agencies,technology transfer agencies, sources of start-up finance, support for productdevelopment, research and development, new types of inter-firm relationships,and the adoption of new techniques and processes, especially in mature indus-tries, and this is by no means an exhaustive list. Furthermore, there areburgeoning alliances being built between regions to exchange economic infor-mation, identify new markets, set up cooperative cross-regional firm alliances,and lobby higher levels of government for new policies or resources.

Some regional governments, however, seem to be more effective than othersin assuming the entrepreneurial function and devising appropriate strategies toassist firm innovation capacity. Although the discussion thus far makes a generalcase that regional agents may be able to play an effective entrepreneurial role,we have made no attempt to distinguish between types of regional government.Do autonomous regional governments provide advantages over deconcentratedcentral government structures or strategic planning regions in performing anentrepreneurial function? Should we expect to see operational differences amongdifferent types of regional administrations emerging from structural variations,especially in the area of policy formation and private sector mobilization? Thesequestions are explored below.

Democracy and Economic Renewal

Given what has been shown to be the social nature of entrepreneurship, for aregional agency successfully to assume an entrepreneurial mantle presupposesan existing relationship between that body and a range of economic actors(Leonardi, 1994;; Eisinger, 1988). This, in turn, presupposes that economic agentsare organized collectively at a regional level in order to articulate regionalinterests.

Trigilia (1991) argues convincingly that the strength or weakness of a systemof regional interest representation shapes regional performance and its ability togovern the regional economic space in both political and economic terms. Weaksystems of regional representation result in the "under-utilization of resourcesthat would otherwise be available" (p. 319) because those resources remainfractured, and dispersed. In the absence of regional interests, competing, frag-mented local coalitions tend to emerge which seriously inhibit the developmentof wider regional economic strategies to manage regional inter-firm interdepen-dendes. Therefore, the ability to mobilize and efficiently target resources,especially from the private sector, may be greatly enhanced when some type ofregional administration is present. While this indicates that regional bodies maybe more effective at providing entrepreneurial assistance to firms than localadministrations, it does not reveal any hypotheses regarding the differingimpact of diverse regional governance structures.

The seminal work by Olson (1965) may help us generate some hypotheses inthis area. Olson argues that the existence of collective interests does not ipso factotranslate into organized collective action. Often certain conditions must first bemet. In this case, the emergence of regional actors, a number of facilitatingcircumstances have been suggested in work by Trigilia (1991). One such con-dition is the prior existence of a historically determined regional identity, such

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as found in Catalonia or the Basque Country. This is not, however, a situationshared by many regions. Another more widely relevant condition is the capa-bility of regional institutions. Regional interests are more likely to organizeregionally if their influence on the regional administration could lead to abeneficial alteration or preservation of their economic position (Schmitter &Lanzalaco, 1989). For a regional administration to bestow such benefits, itrequires clearly mandated responsibilities and resources which it can use toexpand its authority. Work by Nanetti (1988), for example, on the evolution ofItalian regional governments showed that the regional governments activelyencouraged economic groups to organize regionally to assist them in policydevelopment. When a regional government lacks these attributes and its mainrole is solely to administer central policies, the private sector and general publictend to have less investment and less interest in fostering relations with them(Bryant & White, 1982). Therefore regional collective action is more likely toemerge if a region has adequate capabilities and resources for autonomouspolicy development and implementation.

Conversely, where regional governing institutions are merely deconcentratedarms of the centre or simple planning regions, the incentives for regionalcollective interest representation may be deficient. In this case, groups would bemore likely to centralize their power and organization to interact effectively withthe institutions which hold political power (central government). Experimentswith supply-side policies in Britain, implemented through regional branches ofgovernment agencies, have shown that they get bogged down in such heavybureaucratization and centralized control (Bennett, 1995), that the unintendedend result is national standardization rather than policy adaptation and exper-imentation. In this situation, centrally mandated policies and activities mayconflict directly with regional interests. Thus to impact on policy design, themore rational strategy would be to devote resources to influencing central notregional decision makers. Therefore, in the absence of autonomous regionalgovernment, a region will tend to lack the regional associations and institutionswhich are believed to enhance economic performance.

This suggests an important hypothesis that will be tested in this study, that forregional government to take on the entrepreneurial role effectively, the presenceof autonomous regional government is one of those preconditions. Autonomy, inthis article, is defined electorally (that the public votes for regional governmentrepresentatives) and constitutionally (some regional powers are guaranteed).

Before moving to the third section to test this hypothesis, I must add a normativecomponent to the theoretical argument presented above. Whether or not auton-omous regional government proves to be more effective at promoting economicdevelopment, there are sound normative reasons for autonomous regional govern-ment, directly elected by the regional population, to assume this crucial role ineconomic development. Unlike the private individual, the ends of government inthe entrepreneurial position are to "identify market opportunities not for its ownexclusive gain but on behalf of private actors whose pursuit of these opportunitiesmay serve public ends" (Eisinger, 1988, p. 9). As representative and guarantor ofthe public good, elected regional government is well placed to make sure that thefruits of their investment are more widely distributed.

Specifically, the increasing stress on innovation and competitiveness hastended to overlook the equally important issues of equity and democracy. Inparticular, the assumptions in the literature that economic efficiency

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emerging from inter-firm networking results in increased equity and democracyremain unproven (Amin & Thrift, 1995). Inter-firm networks, whatever theirform, are not democratic institutions but instead naturally pursue profit over theachievement of social goals (ibid). Although government is clearly an imperfecttool and may often fail in its defence of the public good in face of widereconomic and political pressures (e.g. Molotch, 1976), its ultimate accountabilityto the regional population means that it still remains the best we have to overseethe public interest.

Of additional significance, with the democratization process sweeping a goodportion of the globe hand in hand with the process of marketization, thereremain many questions and uncertainties regarding the relationship betweendemocratic institutions, the emergence of civic society and economic develop-ment. While this article will, in the end, provide no definitive answers in thisregard, it may hopefully shed some light on these crucial questions.

We turn now to an examination of the research findings.

Testing the Hypothesis: The Empirical Evidence

To test the hypothesis laid out above, that elected regional government may bemore effective at performing an entrepreneurial role, the comparative case studymethod will be employed. The advantage of using this method is that it enablesthe researcher to highlight the importance of the context or the institutionalfactors as key explanatory variables (Dogan & Pelassy, 1990) making it aneffective tool for the study of institutions. Additionally, cross-national compari-sons also make it easier to ascertain the more important determinants of policyand distinguish what problems and solutions are peculiar to the locality andwhich are common across countries, thus providing an important source forinforming policy in other areas (Hall, 1986). Given that we are testing ahypothesis concerning how the design of certain types of institutions impacts onpolicy formation, this method is particularly appropriate.

When using binary comparisons, however, the researcher must guard againsta significant hazard: it can be extremely difficult to extract general truths fromthe specifics of the individual contexts (Dogan & Pelassy, 1990). As Yin (1989)points out, case studies should be generalizable to theoretical propositions ratherthan to specific populations or universes. Although this difficulty cannot becompletely overcome, in this study it is alleviated by the existence of certainshared contextual variables. Given certain shared contexts, general theoreticalconclusions can be offered.

Several contextual variables were influential in determining the choice ofcases. First, the cases needed to be experiencing similar economic challenges, inorder to compare their approaches to coping with them. Second, they needed tobe eligible for similar types of funding from the EU, thereby providing acommon policy context in which they both work. Finally, there needed to besome similarity in the patterns of state-society relations. In other words, sinceone of the main criteria being evaluated is the differing ability between types ofregions to (1) design economic development strategies and (2) stimulate privatesector involvement in development, we required two countries which hadimportant similarities in this regard.

Although not obvious at first glance, Italy and the UK offer a rich vein forsuch a comparison. In particular, both have strong centralized governments.

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Although Italy has had a constitutional provision for the creation of electedregional authorities since the postwar establishment of the Republic, most of theItalian regions were not instituted until 1970 (five regions with special statuswere set up earlier). Rather, regionalization has been consistently resisted bystrong centralizing forces despite its protection in the Italian constitution,resulting in a rather peculiar amalgamation of centralization and regionalization(Grote, 1995). Notably, Keating (1988) has described the Italian regions as a'minimalist' version of regional government. While Italian regions are directlyelected and have legislative powers, Italian regions have no tax raising capabil-ities and their freedom of movement is curbed by strong legal constraints. TheUK, similarly, has a distinctive constitutional design. Although power is ulti-mately centralized in the national government through the ultra vires doctrine,the UK remains a union rather than unitary state as administrative power isdevolved to integrated Government Offices in Scotland, Wales and NorthernIreland which have their own budgets and are accountable to singular cabinetministers. In England, alternatively, although regional offices exist, power fordiverse policy areas remains fragmented among a range of Whitehajl Depart-ments. A recent initiative to merge four Ministries' Regional Offices (Departmentof the Environment, Department of Employment—now Education and Employ-ment, Department of Transport, and the Department of Trade and Industry) intosingle Government Offices for the Region (GOR) makes small steps to equalizethe institutional architecture across the UK, but the budgets and policy powerremain rooted in the separate Whitehall ministries.

Both states are similarly marked by the organizational fragmentation of theprivate sector, which could impede both regions' ability to mobilize privateresources for development. Katzenstein (1978) points out some key issues in thisarea. In the UK, there is a stark divide between banking and business, whilelabour is more decentralized than business as a consequence of the shop stewardmovement. In Italy, diverse ideological sub-cultures created deep splits in boththe labour movement and small business associations while small and medium-sized enterprises (SMEs) have been kept locked out of national economic policymaking by the powerful Confindustria.

When choosing two regions in these countries to examine in depth the impactof differing regional structures, further selection criteria were required. Notably,Allum (1995) points out that British labourism and Italian red cultures, whichhave a regional mobilizing component to them, had much in common includinga tradition of delegation of authority and a strong cooperative movement. Withthese common historical traditions of collective action and empowerment at thegrass-roots level, these regions might have a particular advantage in being ableto mobilize private sector participation in policy making, irrespective of the typeof regional administration in place, thus allowing the hypothesis to be negated.Furthermore, neither the UK country regions nor the Italian special statusregions could be chosen as they possess a strong, historically shaped territorialidentity which, as discussed above, can proxy for the existence of regionalgovernment as an incentive for regional mobilization.

Using these criteria as a guide, the East Midlands, a traditionally strong labourarea in the UK, and Tuscany in the Italian red zone were selected for study.The comparison is a particularly good one as they both represent inter-mediate regions with areas of prosperity juxtaposed with problem zones. Bothregions contain Objective 2 areas (those deemed in industrial decline), and

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Table 1. Economic indicators for the regions

East MidlandsTuscanyEU12

GDP 3-yearaverage1989-91

EU12 = 100PPSper

inhabitant

94.5109.4100

Share of sectorstotal employment

Ag Industry

2.7 38.05.5 33.66.4 33.2

in1991

Services

58.560.960.2

Unemploymentrate1993

9.08.1

10.4

Averageunemp.

rate1991-92-93

EUR12 = 100

89.680.7

100

Source: CEC (1994), pp. 201-202.

receive a range of European funding from more specific European programmes(e.g. Rechar and Resider). Table 1 summarizes the economic position of the tworegions.

To assess the impact of differing regional structures on economic develop-ment, a common context in which both regions functioned was required for thecomparison. Two shared settings were selected: (1) the policy design andimplementation of the EU's first Community Support Frameworks (CSFs) and(2) as both areas have been active in their support for the local textile andclothing industry, how each region responded to Retex, a new European fundingprogramme to aid this industry, will be examined.

The First Community Support Frameworks (1989-93)

The purpose of this section is to evaluate whether different types of regionaladministrative structures vary in their ability to (1) mobilize private sectorinvolvement in development and (2) design entrepreneurial development strate-gies which support the innovative capacity of firms. First, we look at how theCSFs were funded, in particular to what degree the region was able to mobilizea range of resources, especially private resources, to support regional strategies.Second, we examine how the funding was used and what the priorities wereregarding distribution which will indicate the degree to which regional re-sources were used in an entrepreneurial fashion to support the region'sinnovative capacity.

Before looking at the data from the regional cases, let us briefly compare theoverall track record of UK and Italian regions in terms of their ability to mobilizethe private sector. A useful, albeit crude measure for private sector mobilizationis the degree to which private money is used to fund development strategies.Table 2 shows the general funding patterns of the CSFs within all regionscontaining Objective 2 areas in the UK and Italy.1 These data provide someinitial evidence that, given similar problems (industrial decline in this case)elected regions may be better at mobilizing a wider range of resources tosupport the development process. The Italian regions were generally better ableto involve private resources (27% of total costs) than British regions (15%). As aresult, British projects rely more on public and EU financial assistance than theirItalian counterparts.

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Table 2. Funding of UK and Italian CSFs (1989-91) in regions withObjective 2 areas (%)

PiedmontValle D'AostaLiguriaLombardyVenetoTuscanyUmbriaMarcheLazioItaly (Obj. 2)Italy (Total)NorthYork, and Humb.East MidlandsWest MidlandsNorthwestWalesScotlandUK (Obj. 2)UK (Total)

Privatesector

36.60.0

39.67.1

36.053.613.537.623.127.325.2

9.022.911.74.5

19.47.4

28.214.715.2

% Contribution

National/public

35.564.130.551.536.526.645.136.444.241.343.954.739.451.433.547.449.647.646.249.0

Total EU

27.835.931.141.327.419.840.826.032.731.436.8 ,36.537.637.224.333.240.333.834.637.2

ERDF

12.89.5

12.82.16.88.7

16.96.36.08.1

15.726.132.728.220.622.332.027.327.027.2

ESF

15.726.518.139.213.8

7.013.919.719.919.320.110.14.98.93.7

11.18.34.37.38.9

EAGGF

0.00.00.00.06.94.19.50.07.53.13.10.00.00.00.00.00.02.10.30.7

Source: CEC (1992a), elaborated by the author.

Tuscany and the East Midlands reflect their respective country profiles.Tuscany has an overwhelming reliance on the private sector (54%) and receivesquite a small amount of total project costs from the EU (20%). The EastMidlands, alternatively, has a low degree of private participation (12%) and aparticularly high dependence on government (51%) and EU (37%) funding.

Table 3 (Tuscany) and Table 4 (Eastern England—the CSF covers both the EastMidlands and Yorkshire and Humberside) look at the patterns of fundingprovision of the CSFs in more detail. Before assessing the data, it is necessary todigress a moment and discuss the organization of the data. The simple fact thatthe CSF covers Eastern England as opposed to the East Midlands makes a starkcomment on the variability of the concept of region in the UK, as compared withItaly. Different EU programmes do indeed correspond to different regionalborders, despite the presence of a regional administration, while in Tuscanythere are only those which correspond to the regional government. This may bepart of the problem that the East Midlands faces when trying to involve theprivate sector in its development initiatives.

Looking at the data, the evidence does suggest a relationship between type ofpolicy and type of funding in the region of Tuscany. The private sector plays asubstantial role in the provision of key entrepreneurial policies (business sup-,port services, tourism and general support to the industry) which supports thepremise that for a region to take an entrepreneurial role requires that it is wellnetworked with the private sector. The dominance of private resources in the

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Table 3. Distribution of financial responsibility by type of measure in the CSF forTuscany (1989-93)

Funding source

YearsMeasure

Business supportInfrastructureTourismEnvironmentR&D, Vocational

trainingTechnical assistanceTotal

1989-91

5121315

45459

, EU

1992-93

9321031

454514

%

1989-91

7421058

555524

Public

1992-93

12401825

55551 8 •

% Private

1989-91

88467727

00

67

1992-93

78277244

00

68

Note: In Tables 3 and 4, some revision was made to make the two regions comparable. For Tuscany,the business support category was entitled development and strengthening of SMEs. For EasternEngland, it is labelled business development. For Tuscany, the infrastructure category was identifiedas support structures for economic activity. For Eastern England, it represents the merging of twocategories—facilities for the development of productive activities and transport facilities.Source: 1989-91: CEC (1990), elaborated by author.

1992-93: Regione Toscana (1993b).

finance of business support in Tuscany (83% is funded from the private sector)is quite marked while in Eastern England the public sector provides the lion'sshare of funding (75%).

Because of its ability to mobilize a wide range of resources, especially from theprivate sector, Tuscany was able to institute more ambitious, bigger budgetprojects even though they received less overall funding from Europe. Between1989 and 1991, Tuscany received 41.78 million ECU (MECU) from the EU whileEastern England was given 57 MECU (CEC, 1992a). The total costs of theseprojects, however, were, in Eastern England, 168.3 MECU while Tuscany spent436.71 MECU (CEC, 1992a). Although the EU provided both a higher sum ofmoney as well as a higher percentage of the total costs in Eastern England,Tuscany was able to assemble a wider pool of regional resources to addresspressing economic problems.

Given that our two regions demonstrate distinctly different funding patternsfor their EU projects, does this affect the design of the two regions' developmentstrategies? In order to gauge the relative policy priorities of each area, we cancompare how the funds were allotted by policy area, which is presented in Table5. Tuscan funds went primarily to support supply-side entrepreneurial policieswhile the bulk of the UK region's funds were channelled into infrastructureprojects. Tuscany has concentrated primarily on business support, which growsin priority between the 1989-91 and 1992-93 periods from 47% of total fundingto 59%. Infrastructure, which received substantial support (34%) drops drasti-cally to only 9% of funding in 1992-93. In Eastern England, we do see a generalgrowth of expenditure on business support moving from 19% to 26% of totalfunding, reflecting the central government's emphasis on creating a climate forbusiness. Infrastructure funding, however, still remains the major recipient ofEU funds. This is not to deny the importance of government's role in providinginfrastructure but, given changing conditions, one would expect a change in

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Table 4. Distribution of financial responsibility by type of measure in the CSF forEastern England (1989-93)

Funding source

YearsMeasure

Business supportInfrastructureTourismEnvironmentR&D, Vocational

trainingTechnical assistanceTotal

%

1989-91

35333350

220

34

, EU

1992-93

35333650

260

35

%

1989-91

40684150

270

52

Public

1992-93

40684450

320

52

% Private

1989-91

250

260

500

14

1992-93

250

200

420

13

Source: 1989-91: CEC (1991), elaborated by author.1992-93: DoE (1991), elaborated by author.

policy priorities as well. Given its focus on infrastructure projects, the EastMidlands has not assumed a strong entrepreneurial position. Although the datado not allow any definitive conclusions, the evidence does provide support forthe hypothesis that the autonomous region does seem better at mobilizingresources in support of development, especially those which more broadlycorrespond to entrepreneurial-style policies.

We have examined policy funding. Let us look at how European regionaldevelopment strategies are formulated under the CSF regimes in order toevaluate further the impact of differing types of regional administrative struc-tures on economic development. Looking first at the UK, Table 6 presents themembership of the monitoring committee for the East Midlands Partnershipwhich oversees and distributes the funding for the East Midlands OperationalProgramme (the section of the Eastern England CSF for the Objective 2 areas inthe East Midlands). The table demonstrates the dominance of public bodies onthe committee, including a range of central government departments and all

Table 5. Percentage of total CSF funding by type ofmeasure in Tuscany and Eastern England

Region Tuscany Eastern England

YearMeasure

Business supportInfrastructureTourismEnvironmentR&D, trainingTechnical assistance

1989-91

473418620.3

1992-93

599

23620.8

1989-91

1945199

170

1992-93

264214990

Source: 1989-91: CEC (1990 and 1991).1992-93: DoE (1991) and Regione Toscana (1993) elaborated by theauthor.

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Making a Difference? 75

Table 6. East Midlands Regional Partnership for theStructural Funds

DoE: East Midlands Regional OfficerProgramme Secretariat

County councils: Nottinghamshire, Derbyshire, LincolnshireCity councils: NottinghamDistrict councils: North East Derbyshire, Bolsover, West

Lindsey, Mansfield, Newark and Sherwood,Bassetlaw, East Lindsey, Ashfield

Borough councils: Chesterfield

DoE: HQ Policy DivisionDTIDepartment of Employment Training AgencyEmployment Service—East MidlandsDTPDPS 3 (C)European Commission (DG XVI)

British WaterwaysBritish RailYorkshire WaterAnglican WaterSevern Trent WaterBritish Coal Nottinghamshire GroupBritish Coal Enterprise

East Midlands Chamber of CommerceNational TrustEast Midlands Tourist BoardNorth Nottinghamshire TECRural Development Commission

Source: DTI (1992).

East Midlands local authorities. The private sector is represented primarily bylarge individual utility and transport companies, and quangos—not throughregional collective associations. Only the Regional Chamber of Commerce,which is a fairly weak body, provides a voice for the business sector. Labour isnot represented. Although specific regional and local strategies or projects mightbe put out for consultation to a wider audience, this would be predominantly apostal exercise where comments are mailed in and then incorporated (or not)into the strategy redraft.

To obtain funding, individual projects are submitted by actors, most of whichare partners on the monitoring committee. The Secretariat, located in the DoE,evaluates each application which is then passed on to a Technical Group in thevarious programme areas. The recommendations of the Technical Group arethen provided to the Monitoring Committee, which approves or rejects thegrant. Much of the funding has gone to projects which require minimal interac-tion among actors such as sites and buildings and financial support for businessloan programmes (DoE, 1992) with little to actually resolve the serious economicproblems they were intended to attack. Furthermore, as the Retex examplebelow will highlight, the East Midlands is plagued by problems of competitionand infighting among local authorities, which maintains the fragmentation of

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their limited resources (Garmise, 1995). This is perhaps demonstrated moststarkly by the creation of not one but two competing offices in Brussels—one forthe East Midlands, comprising county authorities, and one for Nottinghamshire,comprising local authorities.

Within the strategy negotiations, no body exists which represents regionalinterests. The regional authority, as the arm of the national government, has theunenviable role of balancing national and European criteria for evaluating policyand programme applications. Local authorities, often in competition for thefunding, have found it difficult to overcome past hostilities to work together inmany areas devising cross-border strategies to deal with shared problems (seebelow). Hence, a regional viewpoint is often missing, which is crucial asObjective 2 areas, and the problems they must tackle, cross local authorityboundaries. Without an autonomous region, it has been difficult for the EastMidlands to mobilize its resources for wide-ranging development strategies.Consequently, European money has been traditionally underspent in the EastMidlands (Garmise, 1995).

Tuscany, alternatively, with an autonomous regional government, was able totap into an already established and politically mobilized system of collectiveinterests which has supported significant resource pooling and the emergence ofcollective projects and strategy development. When working out the details ofthe Tuscan Operational Programme, the Region acted in regular and directconsultation with the regional collective representatives from business, craft andtrade interest associations and were able to devise collective strategies for eachof the three Objective 2 areas. For example, the plan for the Prato Objective 2area was developed through direct negotiations with the area's strategic forum,the Committee for Economic Consultation (local authorities, employers, mer-chant and craft associations, trade unions). Most of the projects supportedthrough the Structural Funds were developed, funded and managed throughconsortia or joint committees of public and civic actors, unlike the individualprojects found in the East Midlands, and represent entrepreneurial attempts toenhance the innovative capacity of the local industry. Key projects includeSPRINT, a telecommunications initiative which links up firms to each other andto a range of informational databases, support for technological research, Pro-duct Promotion Consortia, and the Textile Quality Centre, a firm-initiated butpublic-supported institution targeted at updating the quality of local production.Such working methods have allowed for the successful integration of Europeanfunding initiatives with wider development policy that meet the needs of localfirms.

The data in this section have provided some support for the hypothesis thatautonomous regional government may be better able to mobilize resourcestoward development and promote entrepreneurial strategies to assist firm inno-vation than are simply administrative regions. Finally, we examine how bothregions responded to a common development opportunity, the EU's Retexprogramme.

Retex

The Retex programme, which was devised to encourage the diversification ofregions which are heavily reliant on the textile and clothing industry, providedan opportunity for both Tuscany and the East Midlands, which have a particular

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Making a Difference? 77

dependence on textile production. Approved on 13 May 1992 under Article 11of Council Regulation (EEC) 4253/88, Retex differs from other similar com-munity initiatives because it provides aid to all sectors as well as to viable textilecompanies as a strategy to promote diversification as well as restructuring (CEC,1992b). Thus, it is actually a regional rather than sectoral programme and isadministered by DG XVI, the Directorate General for Regional Policies. Theinitiative was designed to complement the Structural Funds, not as an indepen-dent programme. Eligible regions include those which are overly dependent onthe textile and clothing sector, are designated as Objective 1 (backlagging),Objective 2 (in industrial decline), or Objective 5b (rural areas requiring di-versification) regions and those where textile and clothing firms provide a largepercentage of jobs to the regional labour market (at least 2000 jobs and a levelof employment in textiles and clothing that is greater than 10% of total manufac-turing employment). For the first year, 80% of Retex funds were earmarked forObjective 1 regions; the remaining 20% would be allocated to Objective 2 and 5bregions. The UK Government had lobbied to expand the eligibility criteria tonon-Objective textile regions but was unsuccessful for the first instalment. Ofparticular importance, the EU does not decide the regions eligible for Retexfunds; that responsibility falls to the member states (although those regions mustmeet the EU criteria discussed above).

Retex was a particularly sensitive issue in the East Midlands as result ofpolitical tension and economic competition, a situation fuelled rather thanmoderated by the central government departments. A number of areas inLeicestershire and Derbyshire which are highly dependent on textile and cloth-ing production were not eligible for the first instalment, but authorities in theNottinghamshire area, holding Objective 2 status, were. In fact, the Notting-hamshire authorities had been actively involved in a European-wide lobbyingeffort to establish the programme. The decision to allocate Retex funds nation-ally rather than regionally meant that, despite their efforts, little funding wouldactually be available to them. These tensions were exacerbated by the generationof similar initiatives between various actors within the region competing forsupport. At the time of the research, three service centres to support the textileindustry were either established or in the planning stages: an existing centre inNottingham city, one in discussion by Nottinghamshire county, and a third indiscussion, supported by the DTI, to be placed in Leicester. In the absence ofregional government, the East Midlands was unable to respond effectively tothis new opportunity. One participant noted:

In my opinion, if we had gotten our act together and put in a globalapplication on behalf of the whole of the East Midlands, sorted outvarious shares between the various local authorities in terms of theircontributions, we would have gotten a lot of money, but we failed.

Rather than using Retex as an incentive for wider strategic planning, localcompetition, often intensified by government departments, guaranteed the con-tinued fragmentation and under-utilization of regional resources, thus inhibitingregional governance of an industry which had a clear regional organization.Consequently, no wide-ranging strategies in support of either diversification orrestructuring emerged, but rather individual smaller projects, many unattachedto wider strategic aims (e.g. the conversion of workshops into a day nursery),were submitted under Retex.

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In Tuscany, however, there was no question but that they would be Retexrecipients which, again, highlights the political advantages of an independentlyelected regional body. Although power ultimately rests in the centre in Italy, thecentre has no means to impose its will and must negotiate with the regions,giving regions room to manoeuvre (Allum, 1995). Only two areas in Tuscanywere eligible for the 1993 Retex bids, Prato and the mountain community ofGarfagnano. When the criteria were extended in the 1994-97 funding period toinclude non-objective areas dependent on the industry, the list was expanded. InPrato, the Economic Consultation Committee drew up the proposals for projects,which were presented by the Region to the Ministry of Industry, Commerce andCrafts and accepted into the overall operative programme established by theCommunity Support Framework. Thus, the programme was easily integratedinto both the established regional decision-making structures and the overallfunding regimes. Similar to the East Midlands, not all textile-dependent areas inTuscany were eligible for the first Retex tranche, but the regional governmentwas able to guarantee that the region received a substantial part of the nationalallocation. Moreover, it was able to coordinate the bids and make sure they fittedinto broader strategic goals. Retex projects included technical support to SMEs,assistance for SME collaboration in the areas of research and development,buyer-supplier relations, commercialization and product diversification, and thereclamation of abandoned industrial sites (Regione Toscana, 1993a), which arecrucial policies for enhancing local innovation capacity.

It would be incorrect, however, to assume that the negotiations surroundingRetex in Tuscany were not similarly fraught with political tensions and compe-tition for funding. The joint remit of Retex to support both restructuring anddiversification, with an emphasis on diversification, was politically problematicand EU observers have commented that Prato has had a particularly difficulttime allocating resources in support of diversification measures (DG V, 1993).Nevertheless, a crucial lesson emerges from this experience concerning howtensions and differing interests can be negotiated into wide-reaching strategiesamong collective actors, mediated by a region with a broader vision andinvested with safeguarding the public interest. Tension and conflict, if moder-ated effectively, can be an important source of innovation and experimentation.Regional administrations, alternatively, are more highly constrained by centrallymandated policy, limiting the degree to which new policies can be developedand pursued, even when those policies are demanded by regionally basedgroups. Thus without an effective body to play this role, fragmentation andcompetition remained the rule in the East Midlands, inhibiting regional re-sponses to regional economic challenges and regional ability to exploit Europeanopportunities.

Conclusions: Limitations to Regional Government

This article has argued that in these changing and uncertain economic times,directly elected regional government may be a necessary (although notsufficient) component of economic development. Through a comparative analy-sis of how each region managed a common policy regime, the evidence supportsthe hypothesis that directly elected regions seem generally better at mobilizingand efficiently allocating resources, devising more comprehensive developmentstrategies which can assist firm innovation capacity and competitiveness, medi-

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Making a Difference? 79

ating among local interests, and supporting the evolution of a system of regionalinterest intermediation. They seem to provide more effectively an entrepreneu-rial support function to the regional economy, especially under uncertaineconomic times. These conclusions, however, must necessarily temper somewhatthe optimism which has come across in the discussion thus far. Although theevidence does suggest that regional government does provide advantages in theeconomic development game, several important limitations require mention.

First, not all regional governments will find it easy to take on an entrepreneu-rial role in the regulation of the regional economy. Putnam et al. (1993), forexample, found that regional performance in Italy varied dramatically. Differentgovernance capacities are attributable to a range of variables such as the strengthof regional civic society (Putnam et al., 1993), debilitating political arrangements(Piattoni, 1993), narrow political coalitions (Stone & Sanders, 1987), institutionaldisparities (Grote, 1995) and competitive pressures which reroute many re-sources away from innovation enhancement to more questionably effectiveactivities such as place marketing. Moreover there already appears to be agrowing hierarchy among regions in Europe, with the already well resourcedbetter able to make and exploit new opportunities, especially those emergingfrom the EU.

Second, the stress on innovation and firm competitiveness can obscure theissues of equity and distribution, often to the detriment of the already lessprivileged. For economic development to be sustainable in the longer term(economically, politically, socially and environmentally), the fruits of growthmust be distributed among all regional and all national inhabitants. Economicdevelopment and certain methods for achieving it are not critically evaluatedoften enough, as the need for jobs often obscures other equally importantcomponents of social justice and distribution. Although it seems that theevolving design of European Regional Policy may be supportive of certainaspects of distributive justice, it is still insufficient in the face of growingeconomic problems (see Bufacchi & Garmise, 1995).

Finally, it is indeed true that regional governments cannot control inter-national economic forces (e.g. foreign exchange movements, energy prices) norcan many truly equal the powers of the multinationals they would like to attractor retain. However, increasingly, neither can many nation states. Given thehighly variable impact of global processes on different regions, a differentiatedresponse is required and it in this area that regional government has made itsmost significant contribution (Keating, 1988). It is this contribution that adminis-trative regions have difficulty achieving. Although many questions concerningthe relationship between regional government, democracy and economic pros-perity remain, growing evidence does suggest that regional government canmake a difference.

Acknowledgements

The research for this article was supported by the Central Research Fund at theUniversity of London. I am grateful for their support. I would also like to thankRobert Leonardi, Huw Thomas and two anonymous referees for their usefulcomments on earlier drafts. The usual disclaimers apply. The opinions expressedby the author are solely her own and in no way represent the organizationwhere she is employed.

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Note1. To create Table 2, I used the publication, The Community's Structural Interventions (CEC, 1992a),

to create a regional data bank on the financing of the Structural Funds covering the years1989-91. When calculating these figures, a few of the programmes covered two regions. Whenthis occurred, the finances was evenly divided between them. Additionally, some of theseregions also include Objective 3/4 and 5b areas and these finances are also included in theregional figures.

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