Towards a contextually sensitive regional development

In the last decade, we have seen a number of arguments underlining the need for context-dependency and historical sensitiveness in studies on the construction of economic spaces (Gualini 2006; Moulaert et al. 2007; Bristow 2010). Moulaert et al. (2007:196) have criticised how market-led neoliberal regional development discourse overly abstracts actual development trajectories and many times overlooks the fact that development is deeply historical and place specific and takes place in concrete institutional settings (see also Gualini 2006). Historical embeddedness is crucial to policy transfer processes; border regions need to be approached as path-dependent historical processes (Paasi 1996; Paasi

& Prokkola 2008). Still, in the mainstream studies on the institutional development of border regions, which can be understood as policy transfer studies, there is a tendency to emphasise spatiality over temporality (O’Dowd 2010: 172).

While scholars and policy makers have been trying to understand why the returns from the implementation of top-down and universal development strategies and policies across the world have been relatively modest, growing attention has shifted to the influence of institutions on economic development (Rodriguez-Pose 2013: 1036; see also Tomaney 2014; Bathelt & Gluckler 2014).Thus, institution has become one of the key concepts in explaining the processes and outcomes of economic development both in development theory and policy, from the 1990s onwards (Bebbington 2017: 2; Farole et al. 2011; Dale 2002; Wood & Valler 2004). As Wood and Valler (2004: 1) emphasise, this so-called “institutional turn” or “contextual turn” (Dale 2002) refers to both theoretical and empirical work which entails an understanding of how economy is “embedded in formal and informal institutional, social and cultural conditions and practices” (see also Bebbington 2017). For instance, “regional identity” has become one of the key concepts in this regard, along with many other “endogenous” concepts (Tomaney & Ward 2000;

Raagmaa 2002; Paasi 2013). From the perspective of regional planning and policy transfer processes, the concept of regional identity can be regarded both as a planning idea which is “transferred” and as an explanatory factor that determines the extent of policy transfer, depending on the perspective from which the concept is approached and how it is conceptualised. Thus the building or mobilisation of regional identity, or more specifically identity of a region, referring to the socio-cultural characteristics of a region that differentiate it from regions, has become a key means for improving the competitiveness of regions (Paasi 2013; Stoffelen & Vanneste 2017). It has become a widely used concept both among policy makers and planners. Then again, regional identity, as a shared regional consciousness (Paasi 1996), is part of institutional legacy, which for its part affect the adaptation and implementation of certain development discourses, such as EU’s cross-border co-operation policy discourse.

The research strand and policy discourse emphasising especially local and regional institutions, as opposed to state-level institutions, is regarded as “new regionalism”.

Developed by economic geographers, institutional economists and economic sociologists, it focuses on regions’ ability to develop and sustain indigenous assets and resources which would improve their capacity to adjust to the changing circumstances of the globalised economy (Pike et al. 2006: 102). These indigenous institutional assets are seen to enable knowledge creation, learning and innovation through which economic growth is seen to be accomplished. Harrison and Growe (2014: 22) call this scheme “capitalism’s new after-fordist form”. The roots of this research harken date back in the 1970s when the structural challenges caused by globalisation and economic recession challenged comprehensive national policies based on the values of equalisation and territorial cohesion and the local and regional scale started to gain both academic and policy attention (Hadjimichalis 2017).

As Hadjimichalis (2006: 690–691) argues, institutionalist regional approaches have opened valuable debates within the academy; there now exists a strong awareness of the importance of different institutional, cultural and evolutionary aspects in social life. Accordingly, it is these insights that have boosted the regional policies promoting endogenous regional growth of the European Commission, for instance (Avdikos

& Chardas 2016). Although it was introduced as a “third way” between state-led Keynesianism and market-led neoliberalism (see Amin 1999), it is argued that the bottom-up institutionalist approach is actually embedded in the so-called neoliberal logic of rationalisation (Lovering 1999; Harrison 2013). Regions are in a way obligated to adapt to the socio-economic changes caused by globalisation and neoliberalisation of markets through learning and innovation (Cumbers et al. 2003).

Institution and regional development, however, are not unproblematic notions. There exists a number of contested issues related not only to their relationship but also to the concept of institution itself. There is wide academic consensus on the slippery nature of the concept of institution, and there is no comprehensive and agreed upon definition for it (Rodriguez-Pose 2013; Tomaney 2014). According to a prevailing general agreement, however, institutions are complexes of social practices that have certain characteristics:

for instance, they are regularly reproduced they are linked to defined roles and social relations, and they have a major impact on social order (Jessop & Sum 2013: 34–36;

see also Bebbington 2017). In this sense, family, religion, markets, the state, etc. can be regarded as institutions.

Accordingly, in this thesis institutions are seen as relatively stable and enduring “rules”

that govern human behaviour and, importantly, legitimise certain practices, ideas and strategies in particular contexts (Hodgson 2007: 331; MacKinnon et al. 2009). MacKinnon et al. (2009) add that institutions not only enable and constrain human behaviour but they also have the capacity to change human aspirations. Moreover, two important analytical distinctions with regards to institutions need to be made – the distinction between an institution and an organisation, and the distinction between formal and informal institutions. In everyday language, and in some research literature, institution is taken as a synonym for organisation (Edquist & Johnson 1997; Rodriguez-Pose 2013). Nevertheless, as Jessop and Sum (2013: 34–36) point out, it is important not to confuse institutions with their particular actualisations. For instance, while municipality is a formal institution built on many subordinated social practices, such as self-governance and zoning (also regarded as institutions themselves), a particular municipality with town hall and employees is not an institution as such. North’s (1990: 5) much-cited definition illustrates this well: “while institutions are the rules of the game, organisations are the players”.²

Similarly important is the distinction between formal and informal institutions. While formal institutions are “written” societal rules and regulations, informal institutions are

“unwritten” communal norms, habits and beliefs (Rodriguez-Pose 2013). Martin (2000) has also noted the useful division between institutional arrangement and institutional environment. What is common to both formal and informal institutions is, on the one hand, their endeavour to control and restrict but also to enable action with certain uncertainty (Storper 1997: 268). Institutions embed a normative understanding of what is meaningful and “right” in certain spatio-temporal contexts. They are not unproblematic but indicate a hegemonic way of thinking and acting at certain scales (community, region, nation state, EU, global). As Tomaney (2014: 136) emphasises, institutions do not merely establish technical conditions for development but also represent social and political values of development.

In addition, a wide range of methodological problems arise from the difficulty of operationalising the term. This applies especially to informal institutions. One is the tautologous nature of institutions and regional economic development: institutional structures are seen to affect economic development but are also in part the outcome of economic development. This coevolution and mutual reinforcement make the prediction of the direction of causality at any given time or place very difficult (Rodriguez-Pose 2013: 1041). However, there exists a rather firm consensus that the absence of basic

2 However, although most of the institutionalists agree with North’s definition on a general level, it is

com-monly associated with rational choice institutionalism and New Institutional Economics (Sorensen 2018), which differ greatly from other schools of institutional analysis (see chapter 3.1.).

formal institutions (education systems, juridical system, etc.) has a negative effect on economic development (Farole et al. 2011). Still, institutions are spatially and temporally dependent, and different institutional arrangements in different geographical contexts can lead to similar economic outcomes, which challenges researchers to investigate the role of institutions (Rodrigues-Pose 2013: 1038).

Institution is a widely used term in studies of cross-border regions. In the context of Europe, cross-border co-operation itself is defined as a “process of institution building”

in local and regional planning (Perkmann 1999: 665). Thus, for instance, cross-border co-operation projects strive to build cross-border institutions, both formal and informal.

Presently, there is a growing interest in studying the role of more informal communal institutions, such as trust (see e.g. Häkli 2009; Mirwaldt 2013; Grix & Knowles 2003;

Medeiros 2014a; Koch 2018b; Article III) and regional identity (Prokkola 2008; Prokkola et al. 2015; Stoffelen & Vanneste 2018), in the framework of border region governance.

Accordingly, there exist a wide knowledge on how different, both formal (laws, bureaucratic differences, etc.) and informal (language, cultural differences, etc.), institutions act as obstacles to building cross-border institutions and transnational regions (e.g. Perkmann 2003; Fabbro & Haselsberger 2009; Prokkola 2008a; Mirwaldt 2012; Smallbone et al.

2007). In much research, the empirical emphasis has been on state borders and national divisions, whereas little attention has been paid to the dynamics between other interest groups such as public-private actors and surrounding municipalities.

Institutionalisation can be understood in a very broad and general manner as a process in which values are formatted through habits (routines, practices) (see Dale 2002: 6). A process which every institutional structure must go through. However, in the context of planning and governance, it can be seen as a wider spatio-temporal process which entails various formal and informal institutional dynamics and scalar agencies. Accordingly, it takes place when certain development ideas, values and ideologies are gradually “built” into organisational and governmental structures and regulations and, ultimately, normalised (cf. Jessop & Sum 2013). When interrogating the institutionalisation process of a new development strategy at the local and regional level, it oftentimes appears to take place through policy transfer processes. However, the policy transfer and recontextualisation processes are themselves highly context-sensitive and dependent on local and regional agencies, which makes the institutionalisation of a certain development strategy or discourse in a particular context a process both inwardly and outwardly oriented.

Moreover, institutionalisation is not a linear or straightforward process but complex and contested. However, through the path-dependencies of institutional structures, it is historically contingent.