Smart urban regions: The metropolitan and mainport economies working in tandem for transition

Erasmus School of Economics

At present, the Rotterdam economy is faced with a number of new developments – unfurling at a variety of paces – with potentially significant consequences for our society and economy. This is highly characteristic of a transition period. The appealing writings of authors like Jeremy Rifkin and the Rotterdam Mayor Ahmed Aboutaleb suggest that combined urban and port economies will have new opportunities for sustainable and innovative development through the adoption of new technologies that can have a game-changing impact on the local or global economy. 

For example, transition concepts like biobased energy, the circular or recycling economy, ‘Internet of things’ distribution and new manufacturing processes based on 3D printing are the subject of considerable speculation – not just in Rotterdam, but in many cities across the planet. Entire sectors like Chemicals and Oil Refining will see their competitive positions come under pressure. This will change the character of employment in specific sectors; jobs will be lost as a result of automation, and existing positions in value chains will become less stable. However, it will also become possible to capture new positions in this situation. New professions and greater dependence on services and content could potentially replace existing values. Shorter lead times in product and cluster lifecycles promise to create more dynamism, but also more uncertainty. Cross-overs and innovation will focus on new niche markets – occasionally in line with, but in many cases also well off, the ‘beaten track’ followed by today’s leading sectors. Due to this increased dynamism, it is quite likely that local economic growth will become harder and harder to steer in a relatively straightforward way via policy measures. Rather, innovation initiatives will come out of the self-organising capacity of the private sector and consumers, and subsequently flourish in areas where there is a higher level of scaling up and network connectivity. That is why the Social and Economic Council of the Netherlands (SER) recently advised cities and regions that lack the competitive capacity to refrain from focusing their policies on technological and economic innovations that can find more fertile ground elsewhere (“go with the flow”), since they would only be facing an uphill struggle.

Of course, every region is interested in putting its economy in lane for new growth and innovation opportunities – preferably while retaining or developing its existing strengths. Stagnation means decline, and the competition isn’t resting on its laurels. Regions believe they need to invest in their success: build campuses, stimulate clusters, promote research & development, economic development boards, venture capital, attract foreign investments and corporate headquarters, create landmarks and boost their image. But we can’t all be winners. Which aspects ensure that the Rotterdam region will be successful, however, in diversifying and restructuring its economy, so that it can put its economy in lane to take advantage of the benefits of transitions, while limiting the drawbacks?

Focus on Rotterdam’s ‘Mainport’ and metropolitan economies

Economic and innovation-oriented scientific insights offer us a number of important leads for answering this question. The major urban areas in particular appear well-equipped for handling diversification and ultimately adopting new technologies. Only rarely does innovation come as a bolt out of the blue. Innovations tend to be incremental, and most new approaches come out of a recombination of existing knowledge and technologies. Cross-overs play a key role in this process. The major urban regions offer a wide range of diversified elements that can communicate and match with each other in terms of scope – elements that at the local level are still large and specialised enough to achieve economies of scale. In addition, major regions often also offer more general economic advantages like a large-scale labour market, the presence of local knowledge institutes and of a wide range of suppliers and clients, and better international connections that help them to access the above facilities in the event that they are not found locally. In short: the major urban areas present agglomeration advantages. Research recently conducted in the Dutch regions shows that the best opportunities for innovative cross-overs are found along the Northern (Amsterdam-Utrecht) and Southern (Rotterdam-The Hague) Wings of the Randstad, although Brainport Eindhoven and FoodValley Wageningen also have good credentials in specific sectors. In terms of sectoral complementarity – and in line with the suggestions made by people like Jeremy Rifkin – the Rijnmond region appears to have particularly strong prospects in the fields of biobased energy, sustainable transport and IT-driven distribution. Despite Rotterdam’s strong potential in this – by Dutch standards – large urban region, the city will need to collaborate with the surrounding region to truly capitalise on the agglomeration advantages presented by neighbouring municipalities. One level on which it can meet this challenge is that of the Rotterdam-The Hague Metropolitan Area (MRDH).

A second aspect that is highlighted in the literature is that the presence of human capital that can be deployed in a variety of sectors plays a crucial role in the identification of cross-over opportunities. People who have a variety of skills that can be utilised in, for example, biotechnological research, the chemical sector, seed enhancement and health science, form natural ambassadors for bio-based energy cross-overs and are very attractive to private sector companies and knowledge institutes alike. But there are other activities that also combine economic value with innovation: the application of IT solutions in logistics, security and health, for example, or the implementation of hi-tech systems and materials technology in the automotive industry, machine industry, offshore maintenance, the fibre industry and specific health sectors – all important components of Rotterdam’s existing and future production structure. Cross-overs require people to develop competences and practical skills that can be put to use in at least two distinct sectors – and preferably more.

These cross-over skills and knowledge that relate to new transitional innovation embody a complex interaction of both technological production aspects and service-oriented and management innovation components. Although at present, none of the Netherlands’ regional economies have developed very far in relation to any kind of transition, research suggests that the complementary economies of international transport hubs referred to as mainports in the Netherlands (the port of Rotterdam with its manufacturing and logistics sectors being a prime example) and metropolitan regions (the Rotterdam-The Hague nexus with its service-oriented sectors) present the best opportunities for future cross-overs. That is why when the discussion turns to the ‘smart economies of the future’, it makes sense to focus on Rotterdam’s port and urban economy.

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