ECONOMIC GROWTH
The last set of regional analyses attempts to investigate whether different types of European regions appear to be characterised by different business unit structures. Specifically, are there any systematic and logical differences in business unit structures between Europe’s most highly-urbanised regions, on the one hand, and its rural areas, on the other? And are there differences in these business unit structures between economically dynamic regions, measured by recent GDP growth, and regions whose economies have been growing only slowly or have even declined? (1)
For the urban-rural comparison, 1996 population density was used to class individual regions as either highly-urbanised (over 260.0 persons per sq. km.), urbanised (136.0 to 259.9 persons per sq. km.), less urbanised (69.3 to 135.9 persons per sq. km.), or rural (3.4 to 69.2 persons per sq. km.) (2).
For the economic growth comparison, annual average regional GDP growth rates 1991-96 (measured in ECUs at constant prices) were used to class regions as either fast-growth (+ 1.65 % or more), medium-growth (+ 0.96 to + 1.64 %), slow-growth (+ 0.41 to + 0.95 %), or static/declining (–1.07 to + 0.40 %). The use of this most recent period does however result in analytical problems, in that differences in the timing of national business cycles and impact of the severe 1990s recession have had a significant effect on growth rates recorded by regions in different European countries.
In particular, it is noteworthy that over half of the static/declining regional group are German regions, including such major and traditionally dynamic regional economies as Stuttgart, Düsseldorf and Köln, in the same group as the southern Italian regions. Equally, the unique impact of German re-unification is evident in the inclusion of all eight east German regions at the head of the fast-growth group. These apparent anomalies do affect the results presented here.
In both cases, results are presented in terms of medians, rather than means, since the median is a more robust and valid measure of central tendency with small samples.
Europe’s urban regions generate small units, rural regions specialise on
manufacturing small and medium-sized units
The first of the three urban-rural graphs (Figure 1) plots median values of business unit densities (relative to the region’s workforce) for the four urban-rural regional groups defined above.
For total business units with at least one employee and for small and medium-sized units (units with 1 to 99 employees), European-wide median differences are very small. But there is nevertheless a very slight urban- rural gradient (highly-urbanised regions have the highest median density, rural regions the lowest) both for total units and for small and medium-sized units. Europe’s most urbanised regions are thus characterised by slightly higher densities of small and medium-sized units than rural regions. And this urban-rural difference is even more pronounced and clearcut for business units with no employees, with much higher densities of such micro units in Europe’s giant cities and urbanised regions than in less urbanised and rural areas (3).
These differences are likely to reflect both demand and supply side influences on, and sectoral differences in, small firm formation in these different urban and rural environments.
Small firm creation is encouraged in big cities and urbanised regions by higher incomes and greater local demand, by greater concentrations of skilled, professional and managerial workers as potential entrepreneurs, and by sectoral structures biased towards rapidly growing service sectors providing numerous new opportunities for small firms and sole proprietorships (specialised business and professional services, media and entertainment services).
(1) The regions of Spain, the Netherlands and the UK are excluded because of the absence of sectoral data. (2) Madeira was included in the less-urbanised group
notwithstanding a higher population density.
(3) It must be noted however that the German and Belgian regions are excluded from the data set used for estimating median zero employee unit densities, but are included in the total unit (with 1 or more employees), 1 to 99 employee unit, and 100+ employee unit data sets and graphs. The zero employee unit graph is thus calculated from a different and smaller (72 regions) sample compared with these other graphs.
Fig. 1 0 10 20 30 1 2 3 4 Urbanisation category Employment share (Medians) Manufacturing High Technology
Financial and Business Services 0 0.4 0.8 1.2 1 2 3 4 Urbanisation category (Medians)
Units with 100+ employees per 1 000 active population GDP / units with 1 or more employees (ECU millions)
0 40 80 120 1 2 3 4 Urbanisation category Number per 1 000 active population (Medians)
Units with 1 or more employees Units with 0 employees Units with 1-99 employees
Despite a tradition of local entrepreneurship in many rural regions of Europe, these stimuli to small firm formation are almost certainly less pronounced in rural areas.
The second graph plots two variables, regional median densities of large units with 100 employees or more relative to regional workforce, and the GDP per business unit measure discussed earlier.
Both variables reveal a clear urban-rural gradient in the same direction, highly-urbanised regions recording both the highest large unit densities and GDP per unit, rural regions recording the lowest large unit densities as well as low GDP per unit (though in this case slightly higher than that for less-urbanised regions) (1). It is important to stress that the GDP per unit pattern may partly reflect a statistical distortion produced by
over-inflation of GDP estimates in highly-urbanised capital city regions (see methodology box at the end of this chapter, pp. 125-126). But its similarity to that of urban-rural variations in large unit density is nonetheless logical, both patterns simply indicating that rural regions are characterised by relatively smaller business units, urbanised regions by relatively larger business units.
The third graph plots urban-rural variations in regional small and medium-sized unit specialisation in terms of employment in manufacturing, high-technology industry, and financial and business services.
Variations in business unit structure between urban and rural regions NUTS 2 — 1996
Number of units in proportion to
active population aged 15 and over
Number of large units in proportion to
active population aged 15 and over and GDP per unit
Sectoral share of small and medium-sized units
in total regional small and medium-sized unit employment
Source:Eurostat. Source:Eurostat. Source:Eurostat.
NB: Data are not available for Denmark, Greece, Ireland, Luxembourg, Spain, the Netherlands and the United Kingdom. Urbanisation category codes:
.
1: highly urbanised regions;.
2: urbanised regions;.
3: less urbanised regions;.
4: rural regions.(See definitions in the text)
%
(1) This may possibly reflect the presence in some of Europe’s rural regions of extractive and resource-based manufacturing industries. Numbers per 1 000 active population (Medians) (Medians) Employment shares (Medians)
Fig. 2
For manufacturing, an urban-rural gradient from lower to higher specialisation on manufacturing small and medium-sized units as a proportion of all small and medium-sized units in the region is interrupted by particularly high manufacturing small and medium- sized unit specialisation in the second, ‘urbanised region’, category. However, this reflects the fact that the urbanised region category includes nine Italian regions, which exhibit exceptional SMU manufacturing specialisation. If these are excluded, a consistent urban-rural gradient is evident, from lowest specialisation on manufacturing small and medium- sized units in Europe’s highly-urbanised regions, to highest specialisation in its most rural regions. This suggests that the urban-rural shift of small firm manufacturing activity identified in such countries as the United Kingdom may perhaps be a more general trend in the EU as a whole (1).
Regional small and medium-sized unit specialisation on high-technology activities however declines with increasing rurality, technology-based SMEs clearly preferring urbanised to remoter rural regional environments, probably for reasons of access to customers, finance, highly-qualified staff and knowledge institutions.
Finally, regional financial and business service small and medium-sized unit specialisation is, not surprisingly, greatest in Europe’s most highly-urbanised regions
Variations in business unit structure between fast-growth and slow-growth regions NUTS 2 — 1996
Number of units in proportion to
active population aged 15 and over
Number of large units in proportion to
active population aged 15 and over and GDP per unit
Sectoral share of small and medium-sized units in
total regional small and medium-sized unit employment
NB: Data are not available for Denmark, Greece, Ireland, Luxembourg, Spain, the Netherlands and the United Kingdom. Growth category codes:
.
1: fast-growth regions;.
2: medium-growth regions;.
3: slow-growth regions;.
4: static/declining regions.(See definitions in the text) 0
40 80
1 2 3 4
Growth category
Units with 1 or more employees Units with 0 employees Units with 1-99 employees
0 0.2 0.4 0.6 0.8 1 1.2 1 2 3 4 Growth category
Units with 100+ employees per 1 000 active population GDP / units with 1 or more employees (ECU millions)
0 5 10 15 20 25 30 1 2 3 4 Growth category Manufacturing High technology
Financial and business services
%
(1) See for example Keeble, D., Tyler, P., Broom, G. and Lewis, J. (1992) Business Success in the Countryside: The Performance of Rural Enterprise, HMSO for the Department of the Environment, London; and Keeble, D., Owens, P.L. and Thompson, C. (1983) The urban- rural manufacturing shift in the European Community, Urban Studies, 20, 405-418. Numbers per 1 000 active population (Medians) (Medians) Employment shares (Medians)
with their huge demand for these services. But rural regions record the second highest level, possibly as with manufacturing because of some degree of urban- rural shift of small business service entrepreneurs and firms, especially in northern Europe.
Fast growing regions are associated with small and medium-sized units,
declining regions with micro and large units
The second set of graphs (Figure 2) relate to differences in business unit structures between groups of regions differentiated by fast or slow recent GDP growth rates. The first of these reveals a clear gradient in densities of small and medium-sized units, and total business units with at least one employee, from the most rapidly- growing to the static/declining regional groups. The faster a group of regions has been growing during the 1990s, the higher its median density of small and medium-sized and of total business units with at least one employee relative to the regional workforce, whereas the static/declining region group has the lowest median densities of small and medium-sized and of total business units with at least one employee. This illustrates a certain degree of association between faster recent regional economic growth and the possession of regional business structures characterised by small and medium-sized units and enterprises.
At the same time, however, the zero employee unit analysis suggests that there is a marked inverse relationship between the density of micro-units and regional economic growth, with a much higher density of zero employee units in the static/declining region group, and a very low density of such units in the fast-growth group.
While this may be a product of small sample size, it is tempting to speculate that these differences might to some extent be an outcome of differential regional economic performance, with workers in slow growth
or declining regions being involuntarily forced into self-employment as an alternative to unemployment, whereas workers in growing regional economies can find employment in existing firms, and especially SMEs, more easily.
The patterns revealed in the second graph are equally interesting. First, GDP per unit shows a striking negative association with regional economic growth. Europe’s fastest-growing regions in the 1990s record the lowest ratios of GDP per unit, while its slowest- growing — or even declining — regions record the highest one.
And secondly, this pattern appears to be associated, at least to some degree, with the presence of large units, with slow-growing and static/declining regions having the highest densities of large units. It is at least possible that this indicates a relationship between poor regional economic performance and the historic presence of large firms, especially manufacturing firms (high value-added), which have been undergoing restructuring and down-sizing because of recession and intensified global competition during the 1990s. The third graph also reveals some clear patterns, this time of negative relationships between regional economic growth on the one hand, and regional small and medium-sized unit specialisation on both manufacturing and high-technology industry on the other. The latter may well be a product of the former, to the extent that the high-technology sectors selected are probably dominated in many regions (for example, in Italy and Germany) by high-technology manufacturing rather than high-technology services. The regional manufacturing small and medium-sized unit specialisation relationship identified appears to indicate that the more a region’s small and medium- sized units are specialised on manufacturing, the poorer the region’s recent economic growth performance.