Research

Summary page

Research

An enterprising approach to regional growth: Implications for policy and the role of vocational education and training

Introduction

This report explores patterns of regional economic growth in Australia over the period 1984 to 2002 in order to determine how and why these patterns evolved. From the results, we have attempted to identify regional opportunities and the policies and practices that can assist in realising them and, in particular, the potential contribution of the vocational education and training (VET) sector towards regional growth. Understanding the patterns and determinants of regional growth is an important prerequisite before any policy or practice can effectively be designed and implemented.

A multi-methods approach was used to ensure that factors determining both the breadth and depth of regional growth variation within a national framework of all regions were identified. The quantitative side of the analysis used econometric modelling across 94 regions, while in-depth, facilitated community workshops in 11 diverse regions enabled us to inform the quantitative results with specific regional circumstances, thereby gaining a closer understanding of how regional growth actually occurs.

Behind the analytical approach was a significant assessment of the current international theory and literature on regional development. The detailed literature review was undertaken for three reasons. First, we were not convinced that the last two decades of regional development policy and practice had generated much in the way of successful competitive growth outcomes for regions. This was borne out by both the quantitative and qualitative assessments carried out in this project. Second, a number of cross-checking qualitative analytical methods were used to ensure that the quantitative analysis results accorded with the reality of regional growth. Third, we believed that there was much to question about the accuracy of accepted regional development theory and its use in policy and practice implementation.

Our assessment is that regional development theories built on a strong institutional role are flawed, as they ignore the realities of global capitalism, the quest for profit, the control of price and the means of production. They also ignore the influence of interfirm power inequalities in shaping business relationships, whereby collaboration is favoured over competition. They fail to adequately incorporate issues of time, change and path dependency¹ in understanding the way regional economies actually work. Equally, they oversimplify firm-based entrepreneurial processes and the way new knowledge is converted into commercial ventures and, at the same time, they fail to appreciate the potential of existing regional attributes, particularly human capital.

Over recent decades, policy-makers and practitioners have, in our view, been too easily seduced by ‘off the shelf’, highly promoted theory that offers a quick-fix solution but is underpinned by thin evidence, poor analysis and layers of theoretical concepts. For example, concepts like ‘social capital’, ‘flexible specialisation’, ‘business agglomeration’², ‘learning regions’ and ‘institutional thickness’³ have become popular expressions for an approach to regional development that emphasises strong institutional involvement by business and government in particular in establishing new structures, programs and partnerships amongst themselves. The growing body of evidence in the literature and our analysis in this project call into question much of this approach as explaining regional growth.

Findings

The quantitative and qualitative analysis in this project revealed the following.

Growth rates amongst Australia’s regions over the last two decades have diverged. Clusters of high- and low-growth regions are now more apparent and more entrenched. There has been no long-term trend amongst regions in approaching equality in growth. Key metropolitan regions have been the main beneficiaries of national growth, while non-metropolitan regions have fallen behind. The key metropolitan regions, particularly Sydney, have also widened the geographic spread of their growth, becoming even larger. Non-metropolitan regions, in the main, have had declining relative growth, although there may be some individual hot spots of growth among them.
We believe that a combination of increased amounts of human capital, access to high technology, greater industry specialisation and less government intervention has the largest impact on regional growth. Other potential drivers, such as population growth, access to local markets and information, and relationships between small firms, do not have the impact on regional growth suggested by existing regional development theory.
In relation to the importance of human capital, we have found from the analysis of theory, the econometric modelling and the qualitative analysis that ‘enterprising’ human capital, rather than the other form of human capital—creative human capital—holds the key to regional development. Enterprising human capital—whereby individuals take responsibility for action— goes beyond simply generating the ‘good idea’ or being highly skilled, and embraces the knowledge that enables on-the-ground achievements. Regional development practice in Australia has struggled to go beyond ‘good ideas’ and the strategic planning processes attached to them.
At the local level there is little continuity between regional planning and regional development outcomes, with an over-reliance on solutions from government and business. There is little focus on harnessing and directing local human capital on a regional scale, with the result that it either ‘leaks’ out to other regions, as is particularly the case with younger people, or is left under-utilised (that is, under-employed), as is the case with older and knowledge workers employed in occupations below their skill levels. Regional leadership tends towards a narrow reliance on institutional (business and government) solutions, rather than towards engaging the enterprising attributes of the region’s workers (human capital) across a broad front.

A policy and practice focus on engaging local enterprising human capital is the way forward for regions. Because of its highly regionalised presence, its established connections with local business, its size, and its core business of creating human capital through education and training, the vocational education and training sector has an important role in facilitating successful regional growth. Developing enterprising skills in addition to traditional and vocational skills fits more comfortably with a vocationally focused education program than with one based around the narrow science, technology and liberal arts programs of higher education. Nevertheless, a background in these areas is also important to the enterprising process because they encourage people to think ‘outside the box’.

Consultations undertaken through the 11 regional workshops suggest that the education—as opposed to the training—component in VET is underdone and in need of more direction in the face of a number of challenges. These include increased competition from other post-secondary education providers, increasing pressure from industry for VET to be more responsive in the provision of ‘just in time’ training, and a perception that students and parents prefer higher education. The consultations highlighted the need for more flexibility in the way VET is delivered and for a funding model that allows for innovative and anticipatory initiatives or for diversity in program design and delivery.

From our analysis, we feel VET can contribute in two main areas. First, the education element of VET has much to offer in fostering regional development in an environment where, in most regions, potential for growth is not being realised, the key metropolitan centres being the exception. This education role would play a part in developing enterprising skills, knowledge and cultures to ensure that regional human capital is used to its full potential rather than being lost to major metropolitan centres, left to languish unrecognised and unrewarded, or directed to areas where, in a competitive world, there is little prospect that regional development will result.

The second area where VET could contribute to regional development is through using its connections with business to establish regional coalitions that link regional attributes, objectives, strategies, investment and VET programs to promote human capital development to ensure brighter regional futures.

We believe that fostering an enterprising culture on a broad front is the way to realise regional growth and competitiveness objectives. VET courses designed to develop enterprising skills need to be linked closely to key regional attributes, strategies and investment and be comprehensive across VET programs.

¹ Path dependence is the dependence of economic outcomes on the path of previous outcomes, rather than simply on current conditions http://eh.net/encyclopedia/article/puffert.path.dependence.
² That is, adopting practices such as networking and clustering of similar businesses.
³ That is, the presence of relevant institutions and infrastrructure.