1. Clusters and city regions: an exploration of the imperatives for innovation in city-region governance
Presentation to The Competitiveness Institute Annual Conference
Cape Town, October 2008
Glen Robbins
School of Development Studies
University of KwaZulu-Natal
Durban, South Africa

2. Structure of presentation
Some definitions
Governance challenges facing city-regions with respect to clusters
Reflecting on experiences
South Africa’s experience
A framework to inform governance reform in support of competitive clusters

3. Definitions City-regions Clusters Governance
“From a geographic point of view, global City-Regions constitute dense polarised masses of capital, labour, and social life that are bound up in intricate ways in intensifying and far-flung extra-national relationships. As such, they represent an outgrowth of large metropolitan areas—or contiguous sets of metropolitan areas— together with surrounding hinterlands of variable extent which may themselves be sites of scattered urban settlements.” (Scott J, 2001, Globalization and the Rise of City-regions, European Planning Studies, 9 (7), p. 814)
Clusters
“… geographical concentrations of interconnected companies, specialised suppliers, service providers, firms in related industries, and associated institutions (for example universities, standards agencies and trade associations) that compete but also co-operate (Porter M, 1998, PORTER, M. E. (1998) On Competition. Boston, MA: Harvard Business School Press, p. 197)
Governance
According to Kaufmann et al, urban governance should not only include the static governance attributes of accountability, responsiveness, and participation, but should also include a dynamic concept of urban governance identified by Mehta (1998), namely, “management innovation, which measures the degree to which urban managers have been able to successfully implement changes in their systems of administration to achieve superior performance. Mehta introduces three measures which relate to the ability of cities to transform global opportunities to local value. These include measures such as public-private partnerships, local government-citizen interaction, and networking.” (Kaufmann D, Léautier F& Mastruzzi M, 2004, “Governance and the City: An Empirical Exploration into Global Determinants of Urban Performance”, World Bank Institute Draft Paper, p. 7)

4. Challenges posed to traditional forms of city governance by clusters (i)
Traditional municipal frameworks
Services delivered only within specified administrative boundaries
Services mix focused on traditional categories of core utilities, social services, regulatory functions
Institutional attention to economic development matters often patchy and inconsistent
Municipal performance disconnected from key business operating environment competitiveness categories and largely unresponsive to growing global dimensions of competitiveness
Municipal interaction with business customers limited largely to one-to-one customer dimensions around utility services and municipal taxes
Little or no development of strategic frameworks in partnership with business
Growth of urban areas, sprawl of cities and greater evidence of polycentricism in urban system not responded to in terms of systems of governance

5. Challenges posed to traditional forms of city governance by clusters (ii)
Implications of changing cluster dynamics:
Firms competitiveness prospects and performance enhanced through being able to take advantage of both passively generated externalities in clusters as well as externalities arising from collaborative actions.
Firms operating within the context of a cluster increasingly having to demonstrate systemic competitiveness characteristics with fixed comparative advantages rendered insufficient to compete.
Spatial fixes of clusters and their connections are increasingly disturbed by the globalisation of production, growing outsourcing and technological change requiring for clusters, and the firms within them, to be networked beyond the cluster.
Growing forms of specialisation underpinning competitiveness dimensions requiring reorientation of cluster resources and capabilities away from those of the past.
Reduction of national scope for industrial policy interventions seeing greater emphasis on locally or regional specific constraints or opportunities that could enable firms to differentiate themselves in markets.

6. Challenges posed to traditional forms of city governance by clusters (iii)
Implications of this for municipal governance:
Increasing pressure for municipalities to be relevant actors in the economic field requiring the adoption of new roles and functions.
The performance of city administrations must be responsive to new competitiveness agendas facing firms and clusters
New public goods
Reorientation of service commitments to take account of global competition
This requires new approaches to institutional collaboration:
public-public and public-private
across spatial as well as functional spheres
in strategic and in operational terms

7. Some examples of city administration responsiveness
United Kingdom
Regional Development Agencies seek to enhance regional capabilities beyond the limitations of municipal boundaries
United States of America
Formation of metropolitan agencies with responsibilities across municipal boundaries
City development agencies working with networks of firms and communities across municipal boundaries
Canada
Re-organisation of some municipal functions to incorporate services across municipal boundaries in metropolitan districts
Collaborative sub-regional planning around competitiveness frameworks
Creation of new institutional partnerships

8. South Africa’s experience
Since 1994 there have been major adjustments to municipal structural foundations with an emphasis on:
enhancing democracy
accelerating basic service provision to citizens denied services under apartheid
Subsequent to 2000 the creation of expansive metropolitan governments has resulted in less fragmented municipal systems
A growing emphasis has been placed on expanding the economic dimensions of municipal agendas but levels of sophistication remain relatively low
Some cities have taken on engagement with clusters with spatial footprints very different from municipal ones
Some level of engagement between municipal actors across municipal boundaries has surfaced but remains limited to traditional spheres of focus (transport system alignment, scale economies in services etc):
Concerns about the possibility of diminished identity and reduced control have undermined these processes
The voice of cluster firms remains too fragmented or too hesitant to engage more forcefully with local government

9. harvest externalities
A framework to inform governance reform in support of competitive clusters
Attempts to innovate effectively in the economic development arena by cities must be accompanied by an new understanding of space and institutional and governance innovation requirements.
City character
City focus
Geographic
focus
Governance
& institutions
Traditional City
Core services
Fixed municipal
boundaries
State centred and
exclusively public-
sector driven
City-led
economic
agenda
City using physical
& financial assets
to boost growth
& employment
Municipal area in
relation to rational
and global
Public sector-led
but inclusive of
selected partners
Competitiveness
oriented
City Region
Generate new
public goods and
harvest externalities
Fluid sub-regional
spatial interactions
as base for global
competitiveness
Negotiated and
shared networks
of responsibility

10. A final word …
“improving governance at the city level allows cities to translate global opportunity into local value for their citizens. This implies that reformist city leaders do have important local policy and institutional levers at their disposal: governance at the local level matters significantly for urban performance.”
(Kaufmann D, Léautier F& Mastruzzi M, 2004, “Governance and the City: An Empirical Exploration into Global Determinants of Urban Performance”, World Bank Institute Draft Paper, p. 39)