Introduction

This paper reports on the findings of a questionnaire directed to local economic development practitioners across Australia and in particular it discusses some of the data on the effectiveness of local economic development agencies. As part of the survey the Chief Executive Officers of local or regional development agencies were asked to assess their effectiveness or impact on development within their region. They were also asked to identify the most and least effective strategies for encouraging development, and identify impediments to more effective operation. The paper argues that local economic development practitioners have a clear understanding of what constitutes “best practice” within economic development. There are, however, a number of barriers which prevent agencies from focussing on these most effective activities. These include structural constraints - such as the adequacy and duration of funding, staff numbers and skills - but also political and contextual factors such as local politics and parochialism, the difficulties of dealing with governments, low levels of acceptance by the broader community, the need to meet the priorities of funders and competition from other agencies. These problems force agencies to devote resources to operations which are less likely to achieve the agency’s broad economic goals but which resolve immediate difficulties. This paper describes the questionnaire used for this research, the nature of local economic development agencies across Australia, the types of activities they engage in, the CEOs assessment of their effectiveness and the nature of barriers to more effective development.

The Questionnaire

The names of the local economic development bodies to whom the questionnaire was sent were drawn from a number of sources. The largest proportion came from a listing compiled by the (then) Department of Housing and Regional Development in 1994. Most of the names on that list had been collated from responses to newspaper advertisements associated with the inquiry leading to the Kelty Report. This listing contained the names of nearly 300 organisations who identified themselves as being interested in local economic development and/or regional economic development. There was considerable diversity within this listing: it included local governments, regional development boards, business enterprise centres, community groups, as well as other organisations. Lists of all the business enterprise centres in NSW and Western Australia were a second and third source for the questionnaire mail out. All local governments in Victoria were also sent a questionnaire because recent reforms have given that tier of government primary responsibility for economic development at the local level. All of the Federal Government’s Regional Development Organisations (RDOs) were sent a questionnaire, but Area Consultative Committees (ACCs) were excluded from the survey as they lacked both a general “development” function and a public role. Finally, a locally produced census of local economic development organisations in Tasmania was used to cover the diverse bodies active in that state. The disparate sources used in this survey produced a number of overlaps which were eliminated prior to the dispatch of the questionnaire.

Some 183 questionnaires were returned by economic development organisations. We consider this to be roughly equal to a fifty per cent response rate as a considerable number of the organisations to whom we sent questionnaires no longer exist. Approximately 25 questionnaires were returned because of the closure of the intended recipient. We were also aware in sending out the questionnaires that many of the regional development authorities operating in 1994 no longer exist. Many in Victoria were wound up when local governments took on primary responsibility for local and regional economic development, but some have continued to operate and we felt it was necessary to give all organisations extant in 1994 an opportunity to respond. The estimated response rate of fifty per cent is very high for a postal questionnaire and reflects the commitment of local economic development practitioners to their field.

The conduct of the postal questionnaire has a number of implications for the interpretation of the results. First, it is important to recognise that the data are not drawn from a random sample of local development organisations and they may not be truly representative of this sector. However, we consider the results provide a reasonably robust picture of developments and conditions within the sector, particularly given the large number of responses. Secondly, it is important to recognise that the source of the names of economic development bodies are imperfect and that some types of organisations might have been improperly excluded. For example, questionnaires were not sent to all local governments in South Australia because while some are active in this field, many are either not active or play only a minor role.

Local Economic Development Agencies in Australia

The respondents also reflected the diversity within economic development agencies across Australia. The single largest group of respondents were Business Enterprise Centres (BECs) with a total of 53, followed by 46 responses from local governments, 35 returns from regional development boards and 20 from “other” agencies (Table 2). Six of the nine Regional Development Commissions operating in Western Australia responded to the survey, and there were six responses from Voluntary Regional Organisations of Councils (VROCs).

Respondents were also asked to provide information on the year in which they were established. Figure 1. shows that most agencies were established relatively recently, although some trace their roots back to the nineteenth century. In the main this latter group is comprised of local governments. Overall, however, one is struck by the relative recency of most of these organisations with 131 of the 183 respondent organisations established since 1990, and 73 (or almost one half) established since 1993. The youthfulness of local development agencies is also partly a function of their very high death rates. Agencies are extinguished through a variety of mechanisms including administrative changes (such as the restructuring of local government in Victoria), financial crises, lack of community support or interests, political disputes and changing priorities amongst supporters. Interviews with development practitioners suggest that most are well aware of the high failure rates.

Table 1. Respondents by State

Table 2. Respondents by Type of Organisation

Figure 1. Regional Development Bodies, Year of Establishment, Australia

Most local economic development agencies are small concerns with relatively few staff. Most agencies had limited human resources, with two staff being the median and three the modal or most frequent response.

What Functions Do Development Agencies Perform?

The pattern of activities indicated in Table 3 is consistent with contemporary ideas of what constitutes effective local economic development. The majority of work on local economic development - by practitioners and academics suggests that the most effective strategies are those that build upon the resources of a region or locality. That is, they endeavour to encourage new firm formation amongst persons living within the region and assist the expansion of local businesses. The arguments of economic development theorists are confirmed in the activities of development agencies. Business development is, by a considerable margin, the largest single category of “core business” and in conjunction with “self employment/business creation” accounts for a third of all responses. This is a remarkable degree of convergence given the diverse nature of local economic development agencies. It should also be noted that the second most frequent response “regional economic development” would also embrace this type of activity.

Table 3. Core Business

There is a wealth of data within Table 4. but just two points deserve our attention. Firstly, it is clear that most agencies engage in many different types of activities. Commonly, agencies will be involved up to 15 types of business development activity (and I have not presented here the ways these agencies market their regions which is a list of equal length). As shown earlier, this diverse range of tasks is undertaken by small staffs. Secondly, many agencies engage in business development and assistance strategies that are beyond the boundaries of their core activities and which are incompatible with contemporary approaches to what represents effective local economic development. For example, many agencies engage in “firm recruitment” strategies even though this type of activity is recognised as having relatively low success rates (Loveridge 1996). More importantly, very few agencies indicated that these types of activity were part of their core business. We must ask, therefore, why do agencies engage in these behaviours? What leads them to firstly extend their range of activities and secondly to engage in expensive, high risk development strategies?

Table 4. Which Development Activities Does the Agency Engage In?

The Effectiveness of Local Economic Development Agencies

Figure 2.

It is important to consider why development agencies consider their impact on the region is so limited. It is not because they cannot distinguish between effective and non-effective activities. As Table 5. shows, the CEOs of development agencies have a clear understanding of what is, and what is not, effective in their region. Interestingly, most major activities appear as both most effective and least effective strategies and this emphasises the fact that there is no one solution to the issues confronting each agency. Different localities face different problems and require different solutions. Overall, however, there are discernible trends within the data that have implications for understanding the broader pattern of effectiveness. For example, business development stands out as the most effective activity and this is consistent with the local economic development literature. There is also greater consensus on what is the most effective activity than on the least effective activity. It is worth noting that the only two activities to be mentioned on more than 10 occasions are those that are highly dependent on the relationship between the agency and external bodies either information sources or funding programs - and are therefore beyond the control of the agency.

Table 5. Most and Least Effective Activities, 1st Response

Table 6. What Limits Your Effectiveness? All Responses

In the first instance, Table 6 clearly shows that volume of funding received by local economic development agencies and the conditions under which it is received is seen to be a major limitation on the effectiveness of local economic development across Australia. With the possible exception of Western Australia’s Development Commissions, funding is the only issue of common concern to economic development agencies across Australia. Virtually all consider they have insufficient funds and most are concerned about the short term nature of funding, the inflexibility of funding guidelines or the changing priorities of funders. Resource concerns are common to most publicly-funded bodies and perhaps these complaints should be discounted. However, as will be argued later, economic development agencies are in a unique position to address this problem through changes to their behaviour.

The table also shows that there are a number of non financial factors which limit the effectiveness of economic development agencies. The second largest group of responses reflect the political environment in which agencies operate, the problems of dealing with complex layers of government and competition from similar agencies. American and British research (Rubin 1988; Axford 1994) has similarly identified the complex politics of local economic development. It is to be expected that politics and political factors could loom as an impediment to economic development but the problem appears to be more common and more serious than we might otherwise assume. Perhaps somewhat surprisingly, a lack of community support was mentioned on thirty occasions while the politics of parochialism also loom large in limiting effectiveness. The fact that agencies may not gain the support of the local community, or been seen as its legitimate representative, is not anticipated in the theoretical models of local economic development. Management problems are also significant. The boards that govern most agencies were considered an impediment to greater effectiveness in a small, but still significant, number of occasions while there were also problems in day-today administration, many of which reflected resource constraints.

A Paradox in Local Economic Development?

It is clear from the earlier discussion that most agencies are involved in a large number of areas and have a number of programs and strategies operating at any time, even though the CEO and other staff would be aware that some of the work is unlikely to result in major positive outcomes for the region. Why then do they pursue these actions? They do so in order to overcome the hurdles they face in their day-today operations. Participation in a civic beautification project may have marginal economic benefits for the community but can garner some community support for the agency, increase its profile amongst the public and improve cashflow. Business recruitment activities are often considered high risk and high cost strategies, but success in recruiting new enterprises can assure the agency of political support for a considerable period (Wolman and Spitzley 1996).

The need to broaden the financial basis of the agency is a major concern for most CEOs of development agencies. The opportunity to gain access to financial support has encouraged many agencies to diversify their interests - an ability that many other publicly-funded bodies lack. They are able to participate in labour market programs, town planning and other initiatives such as the Main Street program - and a number of other schemes as a way of generating larger administrative and program funds. Most avenues, however, offer limited financial resources and then only for short periods of time. Moreover, external funding comes at a high cost. As Table 6 showed, the amount of time spent seeking funds can be a major burden for development agencies and as Table 5 showed, fundseeking is considered to be one of the least effective activities pursued by these bodies.

There would appear to be a paradox within local economic development in Australia. Development agencies need to engage in diverse activities and make use of a broad range of funding sources if they are to adequately deal with the many hurdles, actual and potential, that confront them and threaten their existence. However, the activities needed to overcome these hurdles are inconsistent with “best practice” in local economic development as judged by international writings and the perceptions of practitioners. The greater the effort and time put into these “other” arenas the fewer the resources available for core local or regional development activities. It would be naive to suggest that local development agencies could step away from these non-core activities. To do so would cost them political support, financial independence, their community profile and in the extreme, their existence.

Conclusion

What conclusions and policy responses can we draw from this material? It would be nice to think that these problems could be avoided altogether through greater government funding. A greater volume of secure funding would permit agencies to focus only on those activities of greatest values to their region. This however is unlikely to happen, and if it was to occur may well create other problems, including reinforcing the view that these agencies are just another government body. There are some steps that can be taken at relatively little cost. The goal should be to reduce the complexity and hostility of the environment in which the agency and its staff work. Many of the non-resource and non- financial issues identified in Table 6. can be addressed. Firstly, agencies and their supporters - including local governments and boards of management - should endeavour to develop a better understanding of local economic development processes. Regional or local economic development takes considerable time and the pressure to produce results in the short-term can lead agencies into less effective avenues. The application of realistic goals may need to formalised in strategic planning documents and business plans that set realistic goals for the available resources. Secondly, there may be a need to change the constitution of management. Each agency should ask whether their board contains the right mix of skills, abilities and most importantly, interests. In some agencies individuals compete for election to the board and it is to be expected that these persons will have a commitment, in a very immediate sense, to the success of the agency. Private businesses that financially support development agencies have a strong interest in local development practice. Thirdly, there is a need to increase the community’s interest in local development. We must be concerned that practitioners feel that they are not supported by their local communities and this may partly be a question of who “owns” the agency and its activities. Changes to the membership of boards, as well as developing a general membership within the community, may be a solution but it is a problem that needs to be addressed by the boards and existing stakeholders rather than delegated to the CEOs.

Finally, we need to recognise that these problems are not unique to Australia. There is strong evidence that practitioners working in the United States face exactly the same difficulties. It is important to emphasise that every Australian state and Territory, if not every agency, must find their own solutions to these problems.

References

Axford, N. 1994 Growth Coalitions and Local Economic Development Strategy in Southern England, Political Geography, 13:4, pp 344-60.

Loveridge, S. 1996 On the Continuing Popularity of Industrial Recruitment, Economic Development Quarterly, 10:2, pp 151-58.

Moon, J. and Willoughby, K. Local Enterprise Initiatives: Between State and Market in Esperance, Australian Journal of Public Administration, 49:1, pp 2337.

Rubin, H. J. 1988 Shoot Anything that Flies; Claim Anything that Falls: Conversations with Economic Development Practitioners, Economic Development Quarterly, 2:3, pp 23651.

Teitz, M. 1994 Changes in Economic Development Theory and Practice, International Regional Science Review, 16:1, pp 101-106.

Wolman, H. Ford, C. and Hill, E. 1994 Evaluating the Success of Urban Success Stories, Urban Studies, 31:6, pp 83550.

Wolman, H. and Spitzley, D. 1996 The Politics of Local Economic Development, Economic Development Quarterly, 10:2, pp 115150.