My previous posts dealt with Competitiveness in countries and companies, but Competitiveness is a concept that can be applied to any institution or entity in our societies, cities included.
Despite de pandemic we currently live in, the future of the human civilisation is in cities. The economic activity and the decisional power of cities keep growing in detriment of regions and even countries. New York, London, Paris, Shanghai, Tokyo, Nairobi, Sydney, Moscow, Madrid, Singapore, Shenzhen, Hamburg, Mumbai… they are much more than mere human settlements. These global cities are poles of growth for their regions and countries; they attract millions every year and cumulate substantial economic resources and power. This trend accelerates every single day.
It makes all sense to think about the Competitiveness of cities because those capable of competing will move forward, while those incapable of following will see their populations mingle. This phenomenon is visible for some time now. This article by El Confidencial shows how every year Madrid captures 100.000 new inhabitants from the rest of Spain. Migration might have always existed. The difference now is that these new people are not coming from more impoverished regions in Spain; they come from rich areas such as Barcelona or Bilbao. Madrid is becoming a very successful centre of attraction for talent from the rest of Spain and many other countries. Some studies see Madrid with a population of 7 million in a few years (3.5 million now), many of which will abandon other provinces in Spain that, until not long ago, were growing in population.
What makes a city competitive is similar to what makes a country or a company competitive: To put is simple, “moving there is worth the pain”. Competitive cities offer reasonable compensation to those who move in. Considerations such as more security, more income, better health conditions, possibilities of development, confidence in local institutions, and others are nothing new.
I found an excellent study of the measures that some Asian cities were deploying to gain Competitiveness which I recommend to anyone interested in leading a city: Competitive cities in the 21st century, Cluster-Based Local Economic Development (KyeongAe and Brian Roberts for the Asian Development Bank). It dates from 2011 and before entering into the analysis of three particular cities it settles and analyses the parameters that will sustain the reasoning of the study. This frame is valid for every town in the world and worth reading to have a better idea of what to do if you want to improve the competitive status of your city.
I will copy extracts from the paper for the continuation of my post. They will be “distinguishable” from my text.
The weight of cities is so meaningful that the raise of GDP in a country is closely related to the growth of the urban population. This graph shows this relationship in Asian countries:
“Governments and entrepreneurs in Asian cities need to find new ways to improve their Competitiveness, if they are to create and maintain sustainable development and inclusive economic growth in a world where cities—no longer countries— compete for trade and investment.“
“Cities become competitive through shared services and infrastructure, or “commons” (Frost and Morner 2005): urban infrastructure, communications, and public services; business rivalry and cooperation; access to natural resources and skills; location relative to markets; risk management; social capital; quality of life. These factors are not all present, and not to the same degree, in all cities, especially in the developing world. Governments and private businesses alike must understand better the importance of these factors to economic development to compete in the globalising economy, grow sustainably, and reap other benefits.”
The study focuses in the role of clusters as motors for the competitiveness of cities: ICT clusters, education clusters, industrial clusters. This is a very ineresting approach which requires the initiative of local authorities and the implication of the private sector according to this scheme:
“Asian cities that have better integrated City Competitiveness and Cluster-Based Economic Development into the global economy, have invested in maintaining and improving infrastructure services and the environment, and have supported more open information sharing and transparent governance.“
As cities evolve and try to become more competitive, they realize that they are not alone in the race. They put in value some aspects that the authors denominate “Comparative advantage”, such as infrastructures, labour costs or location of markets, but many cities offer the same. Those a little more advanced will talk about “Competitive advantage” as are skilled employees and quality of life. These are elements of differentiation, not all cities can put them on the table, but again they are not alone. The third group of entities, a privileged one, will be several steps forward and present a “Collaborative advantage”. Under this umbrella, we find all kinds of collaborations between the different stakeholders implicated in the promotion of the city. Understanding that cooperation among administrations and private sector, among companies in the same and different fields, among political parties, among universities and firms, does not seem to be at the reach of all. Instead, it is a compelling magnet. We know that the best results are obtained when collaboration exists. Then, why is it so difficult to achieve? This principle, here presented for the competitiveness of cities, can be entirely extrapolated to any other field, from companies to countries with the same results.
This schema is, for me, one of the most important charts in this paper.
“The globalisation of communications and information systems means that companies, regardless of size or location, have the same access to new knowledge and ideas. To stay ahead of competitors, it is no longer enough for business enterprises to invest in new technologies, human capital, innovation, and new product development, as many will have the same access to new information and innovation. A new phenomenon related to the Competitiveness of cities—collaborative advantage—has emerged in recent years. The concept of mass collaboration (Tapscott and Williams 2006), which is linked to collaborative advantage, has turned many an idea about how cities and companies strengthen competitive advantage on its head.“
“Competitiveness in local economies and business development is now directed toward a new objective: reducing total supply chain transaction costs. Governments and businesses must adopt strategies that will both increase internal efficiencies and reduce the total transaction costs of externalities.“
And now I refer to Europe. There are cities, large and small, which disdain all of the above. They present themselves to the world with empty shells or without a real understanding of what being competitive means. Their infrastructures are weak, their regulation stupid and show no intention of collaboration between the public and private sectors. Besides regretting this, I have not much to say. The world is full of cities where people can choose to move to, and in which companies can prefer to invest. The elements in the chart where valid in 2011, when the report was written, and are factual today. The difference is that the world is accelerating at a rate never seen before. What might have been acceptable in the past is not acceptable today.
Of course, competitiveness is not a race that only one wins, and to be the 100th most competitive city in the world is a great success. The problem is that many do not to even try, many prefer to miss the race.
