Below the critical mass: developmental cooperation in minor cities

Abstract

Regional studies highlight the relevance of agglomeration economies in the development of city-regions, and the way metropolitan areas have been able to harness their competitive advantages. A system of linked world cities and metropolitan centres have become the main drivers of the global economy with an emphasis on high-value-adding activities. These areas often serve as idealised case studies of urban and regional development, and, as a consequence, concentration has become the underlying logic of a polycentric development policy. As a result, non-metropolitan, minor cities have had to face the consequences of becoming peripheral due to the loss or lack of critical resources, among them the critical mass to muster sufficient agglomerative forces in a competitive field. This, in turn, calls for new adaptive strategies to ensure that urban agglomerations which do not possess a sufficient critical mass can also find a profitable niche which offers developmental opportunities.

In this study, written from the perspective of evolutionary economic geography, the author uses the example of three minor Hungarian cities to highlight different forms of adaptation to the realities of metropolis-driven growth, and the relevance of helpful institutional structures. Based on structured in-depth interviews with key stakeholders in economic development (enterprises, chambers of commerce and development organisations), it is shown that successful development in minor cities hinges on an adaptive restructuring of the local economy, the knowledge-transfer role and economic embeddedness of higher education; and the strength or weakness of urban governance. All examined cities show weaknesses characteristic of post-socialism and/or low urban mass (not enough citizens), but nevertheless serve as examples of how different restructuring strategies have led to widely different degrees of success.

The capacities and traditions of urban governance, as well as strong domestically-owned corporations which characterise North America and Western Europe are missing in post-socialist Central Europe. Owing to their insufficient size and historical underdevelopment, even nationally relevant cities lack the knowledge, resources and power to create fully formed urban regimes, while the business sector is characterised by fragmentation, small firm size and undercapitalisation. Under these circumstances, the needs of development policy would probably be better served by more mosaic-like development coalitions representing the common interests of local stakeholders, or neo-corporative arrangements that resemble the Austrian or South German model of economic governance. This implies the empowerment of chambers of industry and commerce to manage knowledge transfer, generate social and relational capital and represent local business interests, as well as an emphasis on strengthening social dialogue.

Absent strong agglomeration economies, minor cities must make good use of their endogenous resources (particularly human capital), and pay close attention to the development of local–regional innovation systems. Decision makers will need to walk a fine line between the dominant cluster-based development paradigm (emphasising resource concentration and strong specialisation in selected industries), and looking out for the needs of long-term urban resilience (emphasising industrial diversity and adaptability). However, this will prove to be a challenging task due to the limitations of size as well as the scarcity of resources which has become particularly severe in the aftermath of the global financial and economic crisis.