Preparing for the next big shock – regional resilience and innovation

The COVID19 pandemic is among the most comprehensive and all-encompassing crisis that has hit the global community in decades. It will have far-reaching implications for the society and the economy for years to come and will most likely lead to permanent changes in the ways in which people work, travel and interact. The crisis brings renewed attention to the concept of regional resilience but also reveals opportunities linked to innovation and digitalisation. Looming in the background is the greatest challenge of them all – climate change.

Resilience is a matter of preparedness

All regions are subject to different types of threats, and once in a while, they will experience larger shocks with a profound and widespread effect on the economy and community. The most recent is, of course, the COVID19 pandemic, but other examples include the financial crisis in 2008 and the oil crisis in 2014. Other shocks are more geographically concentrated but also have widespread socio-economic effects, such as the fall of Nokia Mobile Phones in Finland and the volcanic eruption in Vestmannaeyjar in Iceland in 1973.

“Regional resilience addresses the ability to prevent and react to the consequences of these types of disruptions and disturbances,” says Nordregio researcher Alberto Giacometti. “No matter how well prepared regions are, they will always be exposed to risks. The aim of our research is to identify the risk landscape for each region and assess their ability to cope with different issues.”

Giacometti says that while it is difficult to predict precisely when and how larger economic shocks will hit, many of the impacts following any shock will be similar. As an example, both the COVID19 pandemic and the financial crisis in 2008 caused a dramatic fall in global oil prices, had negative impacts on the housing market and led to a large increase in unemployment. This predictability allows regions to prepare and coordinate their response together with key local stakeholders.

“Regional resilience is about preparedness and adaptability,” says Giacometti. “The more adaptable the public institutions, companies and population are, the better they’re able to cope with disruption. Our research also shows the pivotal role of trust between the people who come together to decide the course of action. Trust helps mobilising key players and facilitates consensus, which enables a more rapid response. This is one of the reasons why the Nordic countries were able to quickly introduce significant financial support packages for companies affected by the pandemic.”

On an international level, however, the lack of coordination and cooperation has created challenges.

“We saw that many countries closed their borders and started making decisions independently. This caused a variety of issues, one of which was restricted mobility in some of the cross-border labour markets in the Nordic countries. This was probably unexpected for most, but from now on, the issue of hard borders will need to be taken into account in our regional resilience strategies. Cross-border communities and integration will most certainly suffer in the years to come.”

Digitalisation enables new ways of working

There is, however, also a positive side. Shocks such as this often bring about innovation and positive change, for instance by accelerating ongoing trends in the labour market, business and public administration. Crisis inspires people to eliminate inefficient and unsustainable practices, and during the pandemic, workplaces all over the world have displayed a remarkable ability to adapt.

Throughout the COVID19 crisis, there has been a dramatic increase in the number of people working from home, using digital technology to hold meetings and even larger seminars and conferences. Digitalisation has long been an important subject in regional studies, but with the crisis, progress has happened much faster than expected.

“This situation has given a collective boost to our digital skills,” says Research Fellow Linda Randall, who has been involved in Nordregio’s work on digitalisation in a regional development context from the very beginning. “One of the aspects we’ve studied is the human element of digitalisation. In other words, the idea that while technological progress can move quite quickly, the ability of people to adapt to the development is relatively slow. You could say that digitalisation is 20 per cent technology and 80 per cent human endeavour and the process of change management.”

She explains that digital skills should be analysed along two dimensions. One concerns the technical skills themselves, while the other is the ability to derive equivalent value from online interactions.

“The benefits of digitalisation are manifold. There are significant environmental benefits, as digital technology could replace much of our business travel, and then there’s a rural development component based on the notion of placeless jobs. Lastly, digital technology has great potential with regards to public involvement in urban planning and other participatory democratic processes.”

Being aware of regional strengths

According to Randall, all the usual principles of regional development should apply when it comes to recovering from the economic shock from the corona crisis.

“The tools are already there,” says Randall and advocates for a bottom-up approach to the recovery. “There are some broader structural factors at play – different regions have different industries and these industries will be affected in different ways. In a general sense, however, my view is that the regions that take the most inclusive approach to their recovery will be the ones that do best in the long term. The key is to have all the relevant stakeholders at the table.”

This inclusive approach is also at the centre of Smart Specialisation, a regional development tool that was developed to boost innovation, growth and job creation in the regions of Europe.

“The corona crisis is a good occasion for the regions to check in with their regional capacities,” says Nordregio researcher Mari Wøien Meijer. “It has shown very clearly how the regions are positioned in terms of local strengths, education and the ability of the local labour force to adapt. It’s also a great opportunity to strengthen the strategic focus on sustainability and the green transition.”

Meijer says that Nordic regions and municipalities are in a good position to develop efficient smart specialisation strategies, focusing on environmental, economic and social sustainability.

“They have a high level of autonomy, good access to funds, and many of them have applied similar methods when developing their research, innovation and development strategies. There’s also a strong tradition for cooperation between public authorities and local stakeholders, which is key to conceiving and deploying a good place-based smart specialisation strategy.”

Agenda 2030 – The decade of action

Nordregio has launched a range of initiatives to support Nordic local authorities in achieving the Sustainable Development Goals by 2030. The research is closely aligned with the Nordic Council of Ministers’ vision of becoming the most sustainable and integrated region in the world.

“For this to happen, we must become more innovative in our governance and decision-making,” says Senior Research Fellow Elin Slätmo. “In order to work towards carbon-neutrality, we have to implement a wide range of spatial planning initiatives and create physical structures that enable people to act more climate friendly. As an example, we need to develop our public transport and biking infrastructure and provide access to green areas, not only for recreational purposes but also to preserve biodiversity and strengthen our resilience to flooding and climate change.”

Furthermore, she adds, the transition must be driven by new types of green financing solutions.

“During the corona crisis, we’ve seen an unprecedented willingness to use tax money and government resources to preserve businesses all across the Nordic Region. Here, it’s important to emphasize that we shouldn’t be financing businesses that aren’t sustainable in the long run.”

Slätmo agrees that it is high time for Nordic decision makers and other stakeholders to start focusing more intensely on sustainable development.

“We’re in the decade of action – there’s only ten years left to fulfil the goals,” she says. “We sense that there’s an eagerness to learn new ways to integrate the SDGs on the local level. It’s important that we continue this current momentum and apply the place-based regional development tools in a manner that promotes carbon-neutrality and the integration of the SDGs.”

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