Published 03 June 2013

Local business climate

- prerequisites and limitations

On the basis of the commission, this report deals with local business climate in a broad sense and what the government might possibly be able to do to improve the small munici­palities’ prerequisites for their work.

In recent years, regional growth policy has come to be increasingly focused on a pro­gramme-based way of working, where the regions have been given greater responsibility for both planning and implementation of the policy. A great focus has been laid on increas­ing collaboration between different players and levels in the system to give the policy greater impact. The government considers that it is important to involve the municipal level in regional growth work to a greater extent. The report focuses on what the govern­ment could do to strengthen small municipalities’ prerequisites for local growth efforts. A natural component was also to study what the municipal organisation can do to contribute to a positive climate for its trade and industry.

The business climate consists of a number of factors that are determined at international or national level. The municipalities can only influence a small proportion of these factors. The prerequisites for a good business climate are therefore dependent on several interact­ing issues. The municipalities’ work to influence the business climate requires measures in several areas that are adapted to local prerequisites and the individual companies’ needs. Not least the ability to collaborate with different players at different levels of society is clearly an increasingly important issue, particularly for the smaller municipalities.

Within the framework of the assignment, Growth Analysis has conducted interviews with a selection of business operators in three municipalities; Mark, Orsa and Boden. A common denominator for the three municipalities is that they all work actively to improve their lo­cal business climate. The aim of the interviews was to form a picture of how the companies themselves value the importance of the municipality level for their possibilities to develop. We also wanted to get a picture of which municipal operations the companies consider to be particularly important for their future development. Our findings indicate that the com­panies in general value short administration times, correct information and decisions and that the municipalities work to improve the infrastructure. Nonetheless, they also feel it is important that the municipalities, both politicians and officers, work to improve attitudes to business. These findings are in line with earlier research.

Interviews were also conducted with the municipal management teams. These have been used in part to reflect the companies’ views. The aim was to investigate whether the manage­ment teams’ views agree with those of the companies. The general picture is that the management teams’ and the companies’ views correspond relatively well with each other. The municipal management teams naturally place a higher value on what importance the municipality’s actions have as regards the development of the companies than the com­panies themselves do. Another clear difference is that the management teams consider different kinds of outreach activity (e.g. breakfast meetings) to be more valuable than the companies do. Their role as a player in development is also accorded greater importance by the municipal management teams. Greatly simplified, the companies rank “hard” fac­tors higher than the management teams, who put greater emphasis on softer factors like contact activities, recruitment campaigns, and campaigns to attract people to the munici­palities.

Our observations from the interviews lead us to the question of what the municipal level can really do to improve the local business climate. To learn more about this and how local business climate can be defined and understood, the report also contains a literature re­view, where it is suggested that the local business climate can be defined as prerequisites that affect local trade and industry’s competitiveness and financial activities. The review indicates that the following factors are of importance for the local business climate:

  • Quality of service and exercise of authority
  • Access to infrastructure
  • Attitude to entrepreneurship and possibilities to develop business concepts
  • Education and human capital
  • Composition of trade and industry and dissemination of knowledge

According to the literature review, public service, education and the municipal infrastruc­ture are factors that are to a great degree controllable by individual municipalities. The same applies to the municipalities’ possibilities to be a coordinating player in local develop­ment efforts. The municipalities also have some possibilities to promote expansion of infrastructure for digital communication and contribute to the development of the local human capital. They can also to some extent influence attitudes to and prerequisites for entrepreneurship and contribute to the development of a local market and a diversified trade and industry. Access to national infrastructure, however, can only be influenced to a limited extent. On the question of what the municipalities should give priority to, areas where it is possible to mobilise the involvement of several different players are empha­sised. What is possible is determined by local prerequisites. The municipalities should focus their efforts on general measures that strengthen the business climate and make it interesting for more companies to establish themselves in the municipality, which can be expected to contribute to a diversified trade and industry.

To put these questions in a comparative perspective, surveys of Norway, Denmark and Finland are presented alongside examples of Swedish initiatives. The purpose of these brief surveys is to investigate whether there are national initiatives in these countries di­rected at the municipal sector. Some details from these surveys are considered to be of interest from a Swedish perspective.

Development needs

The report identifies development potential at different levels in the system, from the munici­pal and inter-municipal/regional levels to national level.

Municipal level

At the municipal level our findings from the company interviews indicate that there is a need to further increase consensus between the municipality’s departments. One important lesson is thus that efforts to improve the business climate must not remain within a trade and industry office or some equivalent department.

In Growth Analysis’ opinion, the municipalities can also improve the local business cli­mate by working with the operations that the companies consider to be important for their possibilities to develop.

This illustrates two important aspects: the necessity for the municipality to pull together rather than work as independent boards and committees and the need for the municipality to be alert to its trade and industry’s specific needs.

Inter-municipal collaboration and regional level

The report also points out the need for developed collaboration between the municipal and regional levels. Swedish municipalities are often too small to make major investments or implement growth measures of any substance on their own. Development-oriented measures therefore need to implemented in cooperation with other players to increase the chances of being able to influence development.

In the three case studies in the report, none of the municipalities emphasise collaboration with the regions as an important element in their local growth efforts. Some themed or inter-municipal collaborations are mentioned however. One interpretation might be that the municipalities do not spontaneously see collaboration with the region/county as an im­portant tool in their day-to-day work with trade and industry. Even if a certain degree of caution should be exercised in the interpretation, there does not appear to be any unified systematic collaboration comprising local and regional growth and development matters in the municipalities studied.

National level

Growth Analysis considers that there is a need to strengthen the linkages between the munici­pal, regional and national levels. With stronger collaboration, greater impact would be able to be achieved in the implementation of the regional growth policy. One important prerequisite for this is that there is sufficient capacity and competence at the municipal level.

One observation from some Swedish initiatives aimed at the municipal level is that they are as a rule short, time-limited measures. Despite these initiatives, it is Growth Analysis’ opinion that the fundamental problem still remains: The smaller municipalities are not equipped to be able to contribute to local and regional growth efforts effectively in the long-term.

It is in the government’s interest that development potential in the whole of the country be exploited. Material from this and earlier reports indicates that primarily small municipali­ties find it difficult to implement measures to exploit the growth potential that exists. From a government perspective, initiatives to strengthen small municipalities’ prerequisites to work with growth issues are therefore motivated in order to be able to take better ad­vantage of the country’s growth potential.

Proposals

If the government wishes to proceed further with concrete initiatives to improve small municipalities’ prerequisites to contribute to regional growth efforts, the report outlines some possibilities.

Growth Analysis proposes that the government consider a national initiative to strengthen small municipalities’ capacity in growth matters in the long term. Some rough starting points might be:

  • Swedish Agency for Economic and Regional Growth should be commissioned to, in consultation with SKL, draw up a proposal for a national programme to increase small municipalities’ long-term capacity and competence in growth matters.
  • Important starting points should be a long-term perspective, breadth, and a focus on achieving greater collaboration, primarily between the local and regional levels.
  • In the programme’s implementation, concrete growth and development work should be combined with different forms of competence development aimed primarily at the munici­pal level (the regional level should also be able to be included). For example through seminars, courses and different kinds of groupings where players from differ­ent authorities can participate.
  • The initiative should contain funding to allow small municipalities with weak finances to take part. This might also include funding for competence development, travel, or to cover the cost of any substitutes. To stimulate inter-municipal collaboration, the pos­sibilities to apply for funding a condition could be set that the application should be sub­mitted jointly by two municipalities.
  • In order to stimulate greater collaboration between the local and and regional levels, funds should be channelled through the regional player with responsibility for regional growth. This would give the municipalities the opportunity to apply for funding from the regions (and counties) who in turn would receive state funding for the initiative. Appli­cations, which should be voluntary, could to advantage be drawn up jointly be­tween the municipalities and the region. The local and regional levels should be allowed great freedom as regards the design of individual projects within the initiative.
  • The Swedish Agency for Economic and Regional Growth should be a natural respon­sible national authority. Other government agencies and authorities should be involved in different ways. One important party in the collaboration is SKL (The Swedish Associ­ation of Local Authorities and Regions) who need to be involved both in draw­ing up a more developed proposal and in the implementation of the programme itself.
  • The programme should initially run with a horizon of five to ten years. It is probable that measures will need to continue to be implemented after this first phase.

Title
Local business climate - prerequisites and limitations

Serial number
Report 2013:10

Reference number
2012/013

Download Swedish reportPDF