A Note on the Economic Performance of Territories

• Date: 01 March 2016
• DOI: http://doi.org/10.1002/jsc.2050
• Published date: 01 March 2016
• Author: Xavier Sala‐i‐Martin

RESEARCH ARTICLE

Strat. Change 25: 105–107 (2016)

Published online in Wiley Online Library

(wileyonlinelibrary.com) DOI: 10.1002/jsc.2050

Copyright © 2016 John Wiley & Sons, Ltd.

Strategic Change: Briengs in Entrepreneurial Finance

Strategic Change

DOI: 10.1002/jsc.2050

A Note on the Economic Performance of Territories1

Xavier Sala‐i‐Martin

Department of Economics, Columbia University, New York, USA

Research faces the challenge of harmonizing entrepreneurship research and the

role of entrepreneurship and innovations as engines of territorial performance.

To better understand the ways in which territories enhance their competitiveness,

it should rst be acknowledged that competitiveness is a complex and multidi-

mensional concept that entails a wide array of variables with potentially comple-

mentary or contrasting eects. Over the last three decades, governments and

public administrations operating at dierent levels – from all ideologies – have

devoted (at dierent intensities) incredibly large budget lines to developing infra-

structures and creating subsidies that primarily aim to boost territorial competi-

tiveness through innovativeness. ese eorts translate into public money

allocation policies that mainly benet innovative or high‐tech sectors, as well as

R&D clusters (e.g., Silicon Valley), among others.

e positive repercussions of R&D investments are well documented. R&D

helps improve standards of living through the development and commercialization

of new discoveries. Innovation‐driven competitiveness is the rationale at the core

of the intensive approach to economic growth: powering welfare through the

discovery and implementation of innovations that help economies better use their

resources and technologies. Under this approach, gross domestic product grows

more rapidly than the population, allowing a rise in standards of living measured

by real income per capita.

Yet, the positive eect of specic infrastructures and policies designed to

promote and introduce innovation into the marketplace have proven to be rather

ineective. When looking at how policy makers tackle stagnation in the context

of the current economic downturn one may nd that, in order to foster competi-

tiveness, contradictory policies have been adopted. In the case of the European

Union, many calls have been made to raise the economy’s competitiveness through

labor cuts, lower production costs, and more selective public investment policies.

Evidence has corroborated that the overwhelming majority of innovations

emerge from activities away from university research centers or innovation clusters.

1 JEL classication codes: L26, O1.

The vast majority of innovations

result from activities away from

university research centers or

innovation clusters, entrepreneurs

being mainly responsible for

channeling innovations to the

market.

The impact of R&D efforts on

competitiveness is heterogeneous

across countries.

Most developing and emerging

countries are still catching up

with technologies developed in

the USA and Europe, and their

biggest challenge in becoming

competitive champions relates to

improving their institutions to

make them more business friendly.