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RSP 029

The paper explores the concept of economic resilience in regions, advocating for an evolutionary perspective rather than traditional equilibrist definitions. It discusses the adaptive cycle model from panarchy theory as a framework for analyzing urban and regional resilience, using case studies to illustrate its application. The authors conclude that understanding resilience as an adaptive capacity is crucial for analyzing the long-term development of regional economies.

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0% found this document useful (0 votes)
34 views17 pages

RSP 029

The paper explores the concept of economic resilience in regions, advocating for an evolutionary perspective rather than traditional equilibrist definitions. It discusses the adaptive cycle model from panarchy theory as a framework for analyzing urban and regional resilience, using case studies to illustrate its application. The authors conclude that understanding resilience as an adaptive capacity is crucial for analyzing the long-term development of regional economies.

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© © All Rights Reserved
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Cambridge Journal of Regions, Economy and Society 2010, 3, 27–43

doi:10.1093/cjres/rsp029
Advance Access publication 6 January 2010

The economic resilience of regions: towards an


evolutionary approach

James Simmiea and Ron Martinb

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a
School of the Built Environment, Oxford Brookes University, Oxford OX3 0BP, UK.
[email protected]
b
Department of Geography, University of Cambridge, Downing Place, Cambridge CB2 3EN, UK.
[email protected]

Received on May 17, 2009; accepted on November 23, 2009

In this paper, we review the different definitions of resilience and their potential application
in explaining the long-term development of urban and regional economies. We reject equi-
librist versions of resilience and argue instead that we should seek an understanding of the
concept from an evolutionary perspective. After discussing a number of such perspectives,
we focus on the adaptive cycle model from panarchy theory to generate testable hypotheses
concerning urban and regional resilience. Two case study city-regional economies are used
to explore this model. We conclude that the evolutionary adaptive cycle model, though not
without problems, warrants further study as a framework for analysing regional economic
resilience.

Keywords: regional economic resilience, evolutionary theory, panarchy, adaptive cycles


JEL classifications: O14, O18, O33

Introduction process but is subject to all sorts of interruptions


and disruptions: periodic economic recession, the
The recent interest in resilience has emerged in part
at least as a reaction to specific extraordinary events unpredictable rise of major competitors elsewhere,
and shocks that have prompted very particular types unexpected plant closures, the challenges arising
of public policy response. Indeed, as Vale and from technological change and the like. How re-
Campanella (2005) and Stehr (2006) point out, gional and local economies respond and adjust to
the perceived source of a disaster can have a mate- such disturbances and disruptions may well exert
rial impact on the forms and mechanisms of resil- a formative influence on how they develop and
ience, including, e.g., the scale and scope of state evolve. The notion of ‘resilience’ would thus seem
response; rapid catastrophic disasters pose very to be highly relevant to understanding the process
different policy and organisational challenges from and patterns of uneven regional development.
slow-paced and cumulative stresses (Foster, 2007). Of course this begs the question of what pre-
Somewhat similarly, regional and local economic cisely we mean by regional and local economic
development is far from a smooth and incremental resilience. Partly as a result of its comparatively

Ó The Author 2010. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved.
For permissions, please email: [email protected]
Simmie and Martin

recent emergence as an analytical concept there is, et al. (2008, 4) see resilience as ‘‘the ability of a re-
as yet, no universally agreed definition of resilience gion . to recover successfully from shocks to its
in economics or social science, let alone in regional economy that either throw it off its growth path or
or urban studies. In fact, some even contest the have the potential to throw it off its growth path’’.
value of the notion of resilience altogether (Hanley, But beyond these rather broad statements, there
1998). Some initial studies have recently appeared is much ambiguity. For one thing, should the notion
that attempt to outline how the idea of resilience refer not just to a regional economy’s ability to re-
might be defined in economics and in regional stud- cover from a shock but also to the degree of resis-

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ies (e.g. Rose and Liao, 2005; Briguglio et al., tance to that shock in the first place? After all, a
2006; Foster, 2007; Pendall et al., 2008; Hill regional economy that is hardly affected by a shock
et al., 2008; Ormerod, 2008), but this task is still is much more likely to recover, and more quickly,
far from complete. Our focus in this paper, there- than a regional economy that is severely weakened
fore, is to examine how the notion might be given or disrupted by the shock. That is to say, should
meaning in a regional or local economic context. resilience also refer to the sensitivity or vulnerabil-
We have problems with what we might call ‘equi- ity of a regional economy to shocks? For another
librist’ definitions that restrict the idea of resilience, thing, there is the issue of whether the concept
explicitly or implicitly, to the ability of a system—in refers to the ability of a regional or urban economy
our case a regional or local economy—either to to retain its structure and function despite the shock
return to a pre-existing stable or equilibrium state or disturbance to it or to the ability of a region or
or to move quickly to a new one. While not denying urban system to change its structure and function
the value and possible relevance of such an equili- rapidly and successfully in response to a shock.
brist interpretation, our interest is much more in Often, the two senses are combined, as in Hill
how far and in what ways resilience can function et al. (2008, 4) where it is suggested that the resil-
as an evolutionary concept. More specifically, we ience of a regional socio-economy refers to ‘‘the
are interested in the idea of resilience as ‘adaptive extent that its social structure of accumulation
ability’ since it is the differential ability of a region’s was stable or . the extent that it was able to make
or locality’s firms to adapt to changes and shocks in a rapid transition from one social structure of accu-
competitive, market, technological, policy and re- mulation to another’’. Then again, another issue is
lated conditions that shape the evolutionary dynam- that the resilience of a region’s economy is unlikely
ics and trajectories of that regional or local economy to be invariant over time: it may depend on the
over time. nature of the shock and may change over time as
the structure and nature of a region’s economy
evolves.
Thinking about regional economic The ambiguity that surrounds the concept of re-
resilience gional economic resilience is compounded by the
According to its strict Latin root, resilire, to leap fact that two definitions of the notion can be found
back or to rebound, the idea of resilience refers to in the ecological literature, where the idea has per-
the ability of an entity or system to ‘recover form haps been most debated. The first and more tradi-
and position elastically’ following a disturbance or tional definition, so-called ‘engineering resilience’,
disruption of some kind. Most uses of the term in concentrates on the stability of a system near an
regional or urban applications refer to this idea of equilibrium or steady state, where resistance to dis-
the ability of a local socio-economic system to re- turbance and the speed of return to the pre-existing
cover from a shock or disruption. Thus, Foster equilibrium are used to define the idea of resilience
(2007, 14) defines ‘‘regional resilience as the ability (e.g. Holling, 1973; Pimm, 1984). This seems clos-
of a region to anticipate, prepare for, respond to, est to the notion of ‘elasticity’ or the ability of a sys-
and recover from a disturbance’’. Or again, Hill tem to absorb and accommodate perturbation

28
The economic resilience of regions

without experiencing major structural transforma- reconcile the notion of resilience with the idea of
tion or collapse (McGlade et al., 2006). Under this regional economic evolution. The implication is
definition, therefore, regional economic resilience that the more resilient is a regional economy, the
would imply the retention of the region’s pre-shock less it would change over time, even in the face of
structure and function. The problem is that view various shocks. So, at best, this view of resilience
carries with it the baggage of equilibrist thinking. would yield an evolutionary model based on the
Indeed, the notion of engineering resilience bears maintenance of structure and stability.
a close affinity with the standard use of equilibrium The second definition, so-called ‘ecological resil-

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in mainstream economics. In this instance, a shock ience’, focuses on whether disturbances and shocks
or disturbance moves an economy off its equilib- cause a system to move into another regime of be-
rium growth path, but the assumption is that self- haviour. In this case, resilience refers to the magni-
correcting forces and adjustments eventually bring tude of the shock of disturbance that can be absorbed
it back onto that path (see Figure 1(a)). So the rel- before the system changes its structure and function
ative resilience of different economies would be and becomes shaped by a different set of processes
measured in terms of their susceptibility to being (Holling, 1973). According to some authors, this
moved off their equilibrium paths (their ‘sensitiv- definition opens up space for linking resilience with
ity’ to shocks) and their response times of recovery the idea of adaptability and is thus much richer
to equilibrium. The obvious problem with this def- in evolutionary scope (McGlade et al., 2006). But
inition is that if regional economic resilience is de- the notion of ecological resilience is not unproblem-
fined in terms of the ability of a regional economy atic. If ecological resilience is measured by the
to retain (return to) its equilibrium form and func- magnitude of the disturbance that can be absorbed
tion following a major shock, it becomes difficult to before the system changes structure, this seems to

Figure 1. Stylised Responses of a Regional Economy to a Major Shock.


Notes: (a) Return of region to its pre-existing steady growth path following the shock; (b) and (c) region fails to resume former steady
growth path after the shock, but settles on inferior path (d) region recovers from shock and assumes an improved growth path.

29
Simmie and Martin

imply that the bigger the shock required to change systems—national, regional or local—evolve? In-
a system’s structure and function, the more resilient deed, are urban and regional economies ever in
that system would be deemed to be. So, again, a re- any equilibrium? While ecological systems if left
silient regional economy would be one capable of undisturbed may, perhaps, attain equilibrium or sta-
absorbing and accommodating extreme shocks ble states, economic systems are arguably different.
without any significant change to its form or func- Economic evolution depends on the actions of in-
tion: we seem to be back to engineering resilience. dividual economic agents, who can learn, innovate
It is difficult to see how this view of resilience and adjust their behaviour. For this reason, some

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imbues the construct with much evolutionary con- evolutionary economists would argue that econo-
tent. mies can never be in equilibrium. As Ramlogan
If, on the other hand, resilience is interpreted in and Metcalfe (2006) point out, economies are based
terms of how well a system adapts its structure and on and driven by knowledge, and knowledge never
function in response to shocks, then, potentially, stands still but constantly changes; thus economies
this does indeed open up much more scope for can never stand still—capitalism is inherently a rest-
evolutionary analysis. But even here caution is less process.
needed. McGlade et al. (2006) argue that resilience In fact, appeal to multiple equilibria would not
‘‘is concerned with the role of instabilities in push- seem to be essential for developing the notion of
ing a system beyond a threshold or bifurcation point regional economic resilience. Certainly, regional
to a new stability domain’’ (149). The implication and urban economies exhibit stability and self-
seems to be that the evolutionary dynamic is periodic organisation. But, in line with the argument of
in nature, in which episodic shocks cause a system to Ramlogan and Metcalfe (op cit), stability and self-
adapt from one ‘regime of stability’ to another. It is organisation are not the same as equilibrium (see
but a small step from this conception to the notion of also Martin and Sunley, 2006, 2007; Martin, 2010).
multiple equilibria used in economics, the idea that To our mind, from an evolutionary perspective, the
there is no single unique equilibrium state or path of important attribute of regional economic resilience
an economy but several possible states or paths and is the adaptive capacity of a local economy. What
that an economy can be shifted from one such equi- matters for the long-run success of a regional econ-
librium to another by a shock. A resilient regional omy is the ability of the region’s industrial, techno-
economy would then presumably be one that adapts logical, labour force and institutional structures to
successfully and either resumes, or better still adapt to the changing competitive, technological
improves, its long-run equilibrium growth path (as and market pressures and opportunities that
in Figure 1(d)). A non-resilient regional economy confront its firms and workforce. What we have
would presumably be one that fails to transform in mind is akin to what Schumpeter referred to as
itself successfully and instead becomes ‘locked’ in- the notion of industrial ‘mutation’ that takes place
to an outmoded or obsolete structure, with a conse- via a process of ‘creative destruction’. And as
quential lowering of its long-run equilibrium he emphasised, industrial mutation (creative de-
growth path (Figure 1(c)). struction) can occur both more or less ‘incessantly’
Under this view of resilience, the argument would and also in rushes (gales of creative destruction).
seem to be that regional economic evolution follows How regional economies adapt to major shocks
a process of ‘punctuated equilibrium’, a succession thus remains of central importance; but how
of stable forms or steady growth paths the hysteretic regional economies respond to major shocks, such
movement between which is triggered by periodic as deep recessions, may itself be the product of
shocks or major perturbations. But although the a slower, more cumulative process of adaptation
notion of punctuated equilibrium is widely used in or ‘resilience building’. Put another way, any
discussions of biological and ecological evolution, convincing theory of regional economic resilience
is it a valid or sufficient model of how economic must explain how a regional economy’s resilience

30
The economic resilience of regions

evolves as well as how its resilience impacts back better adapted. One is the intentional response to
on that economy’s evolution. the perception of circumstances; a second is homeo-
Recently, some resilience theorists have begun to static, the automatic following of specific rules in
move closer in this direction of an evolutionary relation to target behaviours and a third is develop-
perspective and to consider the nature of constantly mental, the cumulative unfolding of new behaviour
changing non-equilibrium systems (see Carpenter patterns (such as innovation) within a specific set of
et al., 2005). Here resilience is considered as an constraints.
ongoing process rather than a recovery to a (pre- Variety might be expected to influence regional

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existing or new) stable equilibrium state. This shifts economic resilience and adaptability in several
the theoretical analysis from questions about how ways. In regional economics, the degree of local
a system such as an economy is resilient to how it sectoral variety (diversity) is often claimed to in-
adapts through time to various kinds of stress. Such fluence the vulnerability of a regional economy to
an approach does not require any necessary as- exogenous shocks, with regions having a more di-
sumptions about equilibria and instead seeks to versified economic structure being less prone to
understand constant change rather than stability shocks, or at least more able to recover from them,
(Pendall et al., 2008, 127). than more economically specialised regions, which
are not only prone to idiosyncratic sector-specific
shocks but lack the breadth of economic activity to
Regional economic resilience as an offset such adverse disturbances. Sectoral variety is
evolutionary process: in search of also alleged to influence innovative activity among
a conceptual framework local firms, though opinion is divided on whether
Linking the notion of regional economic resilience a diversified industrial structure is more conducive
to that of adaptation, and setting the analysis within to innovation than a specialised structure (the on-
an evolutionary perspective, opens up a wide range going debate over the Jacobsian versus Marshall–
of possible approaches. At least four conceptual Arrow–Romer theories). In its turn, innovation is
frameworks for constructing an evolutionary ac- key to the generation of local economic variety. The
count of regional economic resilience and adaptation importance of variety for understanding regional
can be distinguished: Generalised Darwinism economic resilience is that the existence of varia-
(which emphasises variety, novelty and selection); tion of types of firm and of firm behaviour in a re-
path dependence theory (which focuses on historical gion operates in conjunction with the mechanisms
continuity, ‘lock-in’ and new path creation); com- of firm selection (the competitive survival or failure
plexity theory (which highlights self-organisation, of firms) to impart adaptation of the regional
bifurcations and adaptive growth) and panarchy ensemble of firms as a whole over time.
(which explicitly links resilience and ‘adaptive How the notion of path dependence—itself prob-
cycles’). Though distinctive, there are certain points lematic (see Martin and Sunley, 2006; Martin,
of overlap between these frameworks. 2010)—bears on the question of regional resilience
An approach that draws on Generalised Darwin- and adaptation is open to different interpretations.
ism would put particular stress on the role of variety One of the key features of standard path depen-
in shaping regional economic resilience, e.g. in dence theory is the notion of lock-in, the process
terms of structural (sectoral) variety and variation whereby an economy—say a regional economy—
in firm behaviour, including the differential adapt- becomes ‘locked into’ in a particular trajectory of
ability of local firms. Adaptability is about the po- economic development through the operation of
tential to adjust to changing circumstances in an self-reinforcing localised increasing returns effects.
appropriate way. As Toulmin (1981) points out, In the canonical account of this model (e.g. David,
there are three basic mechanisms by which an en- 2005, 2007), the assumption is that an external
tity, such as a local firm, can change to become shock is required to ‘de-lock’ the economy from

31
Simmie and Martin

this path (in David’s work, such a path is assumed on, the emergence of new technologies and indus-
to be one of a number of possible multiple equilib- tries. This might arise, e.g., because the specific
ria). So one interpretation might be that a regional inherited knowledges and resources are not easily
economy is resilient if it is able to maintain its recombined or converted into new competences
‘locked-in’ development path even when disturbed (Maskell and Malmberg, 2007) or because of their
by an external shock of some kind: lock-in is thus previous success, existing industries have bid up
seen as a positive attribute of a regional economy. local land rents, prices and wages to levels that deter
This is akin to the notion of engineering resilience new entrepreneurial activity (Brezis and Krugman,

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discussed above. A different interpretation, how- 1997). Path dependence may thus act to enable or
ever, would be to regard lock-in as a negative attri- constrain regional economic adaptation in response
bute, as holding back the adaptation of the regional to a shock.
economy to a shock. The implication in this in- While these ideas from Generalised Darwinism
stance is that path-dependent lock-in undermines and path dependence theory certainly provide some
a regional economy’s resilience. Whether a regional scope for thinking about regional economic resil-
economy suffers from ‘negative lock-in’ thus be- ience as adaptation, they by no means exhaust the
comes an ex post matter, evident once a shock range of possible approaches. In fact, the logical step
has occurred (see also Setterfield, 1997). is to turn to those theoretical frameworks that at-
There is a third way in which path dependence tempt to deal explicitly with the evolutionary dy-
might be useful in conceptualising regional eco- namics of complex adaptive systems. There are
nomic resilience and one that has a closer bearing strong grounds for arguing that regional economies
on the issue of adaptation. Standard path depen- represent complex adaptive systems with emergent
dence theory has relatively little to say about where patterns of behaviour and organisation. Complex
paths of regional economic development come adaptive systems are characterised by several key
from, how they arise. Indeed, the typical assump- features (Martin and Sunley, 2007). Typically such
tion is that such paths originate in random, happen- systems have functions and relationships that are
stance events—hence, the frequent argument that distributed across system components at a whole va-
path dependence is concerned with how random riety of scales, giving the system a degree of con-
or adventitious events can shape the course of his- nectivity. The boundary between a complex adaptive
tory. But there is both good empirical evidence and system and its environment is neither fixed nor easy
strong conceptual grounds for arguing that new to identify, making operational closure difficult, and
paths are often shaped by old paths (see Martin the system subject to constant exchange with its en-
and Sunley, 2006; Simmie et al., 2008; Martin, vironment. Complex adaptive systems are character-
2010). The emergence of a new local industry ised by non-linear dynamics because of complex
may not be due to ‘chance’ or ‘historical accident’ feedbacks and self-reinforcing interactions among
but stimulated or enabled—at least in part—by the components, with the result that they are often char-
pre-existing resources, competences, skills and acterised by path dependence. They are also charac-
experiences inherited from previous local paths terised by emergence and self-organisation: i.e. there
and patterns of economic development. These is a tendency for macroscale structures and dynamics
inherited conditions shape the environment in to emerge spontaneously out of microscale behav-
which purposive or intentional experimentation iours and interactions of system components. And
and competition occur among local agents (or this same process of self-organisation imbues com-
shapes its attractiveness to agents from elsewhere). plex systems with the potential to adapt their struc-
Contrariwise, in other places—precisely for reasons tures and dynamics, whether in response to changes
arising from the specifics of their past economic in the external environment (e.g. external shocks), or
development—the local environment may be less from within through co-evolutionary mechanisms or
conducive to, perhaps even a ‘constraining’ force is response to ‘self-organised criticality’.

32
The economic resilience of regions

Certain implications are claimed to follow from of local firms, on entrepreneurial capabilities and
these features. Of particular relevance to the idea of new firm formation, institutional innovation, access
regional economic resilience is the argument that to investment and venture capital, willingness of
complex adaptive systems are characterised by workers to reskill and similar factors.
two conflicting tendencies: on the one hand, there The adaptive cycle model applied to a regional
is tendency in such systems towards increasing con- economy might take the form shown in Figure 2.
nectedness and order (or interrelatedness) among The cycle has two loops: one relating to the emer-
system components; but, on the other hand, increas- gence, development and stabilisation of a particular

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ing connectedness and order tend to reduce the economic structure and growth path (exploitation to
adaptability of the system to changes in environ- conservation) and another relating to the eventual
mental conditions. This implies that there is rigidification and decline of that structure and
a trade-off or conflict between connectedness and growth path and the opening up of new potential
resilience: the more internally connected is a sys- types of activity and growth sources for exploitation
tem, the more structurally and functionally rigid (release and reorganisation). Pendall et al. (2008)
and less adaptive it is. describe the movement between these phases in
The ecological model of ‘adaptive cycles’ seeks a regional economy in the following way. In the
to reconcile this contradiction or conflict through exploitation phase, regional growth develops and
the idea of ‘panarchy’, a model that posits a four- productive, human and knowledge capital are accu-
phase process of continual adjustment in ecologi- mulated as new local industries exploit comparative
cal, social and environmental systems. Each phase advantages and various external economies of
is characterised by varying levels of three dimen- localisation. But as this growth continues, the con-
sions of change: (i) the potential of accumulated nectedness between the various components of the
resources available to the system; (ii) the internal regional economy increases, and the pattern of de-
connectedness of system actors or components and velopment becomes increasingly rigid: its resilience
(iii) resilience, a measure of system vulnerability to to potential shocks declines (Figure 3). Thus if such
shocks disturbances and stresses, with high resil-
ience associated with phases of creative and flexible
response (Petersen, 2000; Holling and Gunderson,
2002; Pendall et al., 2008). Translated into a re-
gional economic context, the accumulated resour-
ces would include the competences of individual
firms, the skills of local workers, institutional forms
and arrangements, physical and soft infrastructures
(such as business and work cultures) and the like:
these of course would depend on previous forms
and structures of economic and social development
in the region. Internal connectedness would relate
to patterns of traded and untraded interdependen-
cies among local firms, including supply inputs,
horizontal interfirm divisions of labour in produc-
tion, local networks of trust, knowledge spillover,
formal and informal business associations, interfirm
patterns of labour mobility and so on. These like-
wise would be shaped by previous economic devel- Figure 2. A four-phase adaptive cycle model of regional
economic resilience.
opments in the region. Creative and flexible Source: Adapted from Holling and Gunderson (2002) and
response would depend on the innovative capacity Pendall et al. (2008).

33
Simmie and Martin

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Figure 3. Resilience as a process: variations in resilience across the adaptive cycle.

a shock occurs, structural decline and loss of cesses and on shorter term more microscale processes
growth momentum are likely to follow. Firms close and on how these interact. For example, a failure of
or move out of the region, the degree of connect- a region’s workforce to upgrade its educational at-
edness declines and agglomeration of localisation tainment and skill levels may hinder the local emer-
economies lose their impact. Old patterns of pro- gence of new firms orientated to new technologies
duction and institutional form unravel and resour- and new types of worker. In addition, conditions in
ces are released. This opens up the possibility for the national economy can affect those in regional
a second release–reorganisation loop, characterised economies. A national recession can adversely affect
by innovation, experimentation and restructuring, conditions in different regional economies. Or again,
as new types of activity begin to emerge. Connect- national policies to promote entrepreneurship and
edness is low, the potential for the creation of new new business formation can impact on a locality’s
paths high, the trajectories of development open, economic structure. And of course competitive pres-
and thus resilience high. As the particular forms sures or knowledge transfers originating at the
of new activity and new technologies are exploited, international and global levels can stimulate local
new comparative advantages develop and a new economic change. So local variety and novelty can
round of regional growth and accumulation is set be generated by processes operating at a whole range
in motion. of spatial scales.
A further, interesting feature of complex systems The panarchy model of adaptive cycles is obvi-
under this panarchy model is linkages across scales— ously highly suggestive. It has the advantage of
across both time and space—through two principal linking key attributes and processes of regional de-
mechanisms. Larger scales affect smaller ones (akin velopment, such as innovation, the dynamics of
to downward causation or ‘supervenience’ in some capital accumulation and the mechanisms that gen-
theories of emergence in complex systems), with lon- erate connectedness between and among local firms
ger term, region-wide processes and features (such as and institutions, with the notion of resilience and of
local government, the region’s educational system, emphasising the need to examine how the processes
physical infrastructures, etc.) shaping if not deter- and mechanisms at different scales. But the model
mining interactions and outcomes at smaller scales is not without limitations and unresolved problems.
(i.e. at the firm level). But smaller scales also act It is important to remember that the model was de-
back on larger scales, particularly during the release veloped to analyse ecological systems, the evolution
phase. The resilience of a regional economy thus of which may well be adequately conceptualised as
depends both on the longer term, region-wide pro- long periods of stability, even stasis, interrupted by

34
The economic resilience of regions

major external shocks. Is this a reasonable concep- in these two city regions (defined in terms of travel-
tualisation of how regional economies evolve? to-work areas) from the 1960s until the late-2000s
Regional economies consist of collections of agents (see Table 1), and attempt to categorise these
and institutions that learn and can change their be- changes and developments into the four phases
haviour even in the absence of major shocks or dis- postulated by the panarchy model summarised in
turbances. Further, the adaptive cycle approach to Figure 2. Over this time, the high-tech economy
understanding resilience implies that regional eco- of Cambridge developed through what can argu-
nomic development has an ineluctable, inner logic: ably be identified as three phases of the adaptive

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that regional development necessarily follows the cycle model: from the reorganisation of the local
phases that are argued to characterise adaptive economy around a new high-tech development path
cycles and that the evolution of a regional economy through a phase of exploitation and growth to
can be adequately represented in terms of such a phase of conservation. In contrast, the Swansea
cycles. The fact is that the adaptive cycle model economy appears to have experienced six phases,
functions as a conceptual framework rather than as it first lost its traditional mining industries, turned
as a theory or a set of testable hypotheses. As Swan- to foreign direct investment (FDI) in electronics and
strom (2008) argues, ultimately, the value of the subsequently lost that as well. Further, over this 40-
panarchy conceptual framework for studying re- year period both economies were subject to external
gional economies for will rest on its ability to sug- ‘slow-burn’ stresses such as changes in markets,
gest new hypotheses about regional economic technology and policy regimes. In addition, they
resilience that can be tested by empirical case were also confronted by the shock of two national
studies. It is to some initial steps in this direction economic recessions (early-1980s and early-1990s).
that we now turn by briefly examining two con- Of particular interest is how far the resilience of the
trasting examples of city-regional development two city regions to these major downturns can be
and adaptation. explained in terms of the adaptive phases described
by the panarchy model.
As Table 1 shows, in the 1960s and 1970s, the
Empirical exploration: two city region Cambridge economy was going through an histor-
case studies ical reorganisation in the composition and orienta-
To explore how the adaptive cycle model might tion of its economy. The transition from being
help to think about regional economic resilience, a service-based market town and home to one of
two UK city regions were selected that have expe- the UK’s foremost universities to a high-tech, high-
rienced quite different economic histories and out- growth and innovative economy began around
come over the past 40–50 years. The city region of 1960 with the formation of Cambridge Consultants
Cambridge is widely regarded as one of the UK’s by a group of newly graduated scientists and engi-
most successful innovative, high-tech and knowl- neers from the university. It was followed nearly
edge-based local economies. It is the type of econ- a decade later by the Mott report that recommended
omy that might be expected to be adaptable and the establishment of a science park, for which plan-
resilient. The city region of Swansea, on the other ning permission was granted in 1971. In contrast,
hand, has had a quite different industrial history to during the 1960s, the Swansea economy was expe-
that of Cambridge and has struggled to recover riencing a major phase of release and decline. By
from the loss of its former economic role and to the beginning of the 1970s, many of the area’s tra-
adapt to the changes taking place in the national ditional mining industries (coal, iron, copper, tin
and global economy. and zinc) that had formed the basis of its former
Adaptation in city-regional economies might be economic development were in steep decline or had
expected to take years if not decades. We therefore already closed. These closures were driven by in-
sketch the economic changes that have taken place ternational competition in the availability of raw

35
Simmie and Martin

Table 1. Adaptive cycles in the Cambridge and Swansea city region economies, 1960–2005.
Cambridge Swansea

1 Reorganisation phase 1 Release phase


1960 ‘Cambridge Consultants’ formed, by group of newly Decline of local extractive industries
graduated scientists and engineers from the university
1969 Mott report published, recommending the founding of
a Science Park
1970 Decision by Trinity College to develop the country’s

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first Science Park
1971 Outline planning permission granted for Cambridge
Science Park
2 Reorganisation phase
1973 First company, Laser-Scan, moved onto the Science Park FDI by Sony electronics factory at Bridgend
1976 WDA established
FDI by Japanese electronics firms including
Hitachi and Panasonic
1979 By end of 1970s, around 25 companies located on the
Science Park
1980 National recession trough Last coal mine closed in Swansea County
1981 UK’s first Enterprise Zone designated in Swansea
2 Exploitation phase 3 Exploitation phase
1985 ‘Cambridge Phenomenon’ report published by SQW FDI in consumer electronics, e.g. Hitachi and
Panasonic
1987 St John’s Innovation Centre establishedUniversity
publishes its first IP policy for Research Council
funded research
4 Conservation phase
1991 National recession trough
1993 During 1990s, cluster of hi-tech companies in the 5 Release phase
Cambridge area grew to around 1200 companies Loss of competitiveness based on low cost labour
employing around 35,000 people

Planned LG investment does not arrive


1996
3 Conservation phase 6 Reorganisation phase
1997 Eastern Region Biotechnology Initiative established
1999 Cambridge Network formed, as a voice for the high- WAG formed
technology business communityGreater Cambridge
Partnership formed
2001 University revises its IP policy for externally funded Technium Programme launched
research Cambridge Angels group formed
2004 Cambridge Science Park now home to more than 70 R&D
companies on the 152-acre site, including new clusters
such as photonics, nanotechnology and materials science
2005 New IP policy adopted by the university Publication of ‘Swansea 2020’, economic
regeneration strategy for the city
Post-2005 Slow down of innovation and growing concern over
growth momentum of high-tech cluster

materials and more efficient production processes In Cambridge, the 1970s saw the continuation of
elsewhere. The closures released a pool of low- reorganisation with the establishment of several
skilled, low-wage labour onto the local labour new high-tech enterprises and the emergence of
market. an identifiable high-tech cluster. The first company,

36
The economic resilience of regions

Laser-Scan, moved onto the new Trinity College cession, manufacturing employment in Swansea
science park in 1973, and by the end of the showed no signs of regaining its pre-1980 level.
1970s, the reorientation of the Cambridge economy The shock of the early-1980s recession exposed
around high-tech activity was well underway, with the different nature of adaptation and resilience in
some 30 companies located on the park. They were the two case study economies. The steady market-
mainly based on IT activities, specifically electronic led development of innovation, high-tech small and
equipment and instruments. The 1970s also saw the medium sized enterprises and early cluster devel-
Swansea economy beginning to embark on a phase opment in Cambridge over the 20 years from 1960

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of reorganisation. With the closure of its traditional did seem to provide it with the resilience to weather
mining industries, it was forced by international the industrial downturn of the recession. In contrast,
competition to seek new forms of economic activity. by the late-1970s, the economy of Swansea had not
It did this by turning to FDI and offering relatively been able to reorganise its economy sufficiently to
cheap land and labour. One of the first significant be able to withstand the impact of the recession.
inward investments in the electronics industry was The extent of restructuring based on the introduc-
the Sony facility in Bridgend in 1973, east of Swan- tion of medium-sized FDI branch plants was not
sea. This was the first major Japanese investment in sufficient to provide it with the sort of economic
Wales and acted as a catalyst for other inward base to survive the shock of the downturn, and its
investors, particularly in the electronics sector. manufacturing base not only declined faster but
Both economies were then subject to the external also failed to recover. The evidence suggests that
shock of the deep national recession of the early- the Swansea economy was noticeably less resilient
1980s. By the onset of the recession the structure of than its Cambridge counterpart.
both economies had evolved significantly from Following the early-1980s recession, the econo-
what they had been in the 1960s. According to mies of both Cambridge and Swansea entered
the adaptive cycle model outlined in Figure 2 a growth phase based on the exploitation of their
above, the structural reorganisation occurring in existing industries. In the case of Cambridge, the
both economies should have led to increasing resil- foundations proved to be far stronger than those in
ience to external shocks. But the two economies Swansea. In Cambridge, the rate of high-tech new
reacted rather differently to the shock of the reces- firm formation increased significantly and was
sion. Figure 4 shows how the employment growth marked by the creation of new pathways by branch-
paths of the two city regions were affected. Just ing out into life sciences and in particular biotech-
prior to the downturn, the two city regions had nology. This was driven by a mixture of endogenous
almost identical employment levels (around cutting-edge university research and organic growth
215,000). The recession impacted much more se- within the sector. The Swansea economy for its
verely on the Swansea economy than it did on Cam- part became increasingly reliant on the external
bridge, and the latter recovered much more strongly knowledge brought into the area by foreign-owned
and quickly than the former. Indeed, in Swansea electronics companies. Encouraged by the Welsh
employment had not fully returned to its 1980s Development Agency, in addition to Sony, multina-
level even a decade later. tional companies such as Panasonic and Hitachi
One of the main differences in the resilience of opened branch plants in the area. At the height of
the two economies following the shock of the reces- this phase, some 50% of televisions and 75% of
sion can be seen in the changes taking place in video cassette recorders (VCRs) produced in Europe
manufacturing employment (Figure 5). In Cam- were made in south Wales, located mainly in and
bridge, manufacturing employment declined around Swansea.
slightly during and after the recession but it soon This success led to a certain degree of conserva-
recovered and by the mid-1980s had exceeded its tion in the local Swansea economy, in the sense this
1980 level. By way of contrast, following the re- notion is used in the panarchy model. The branch

37
Simmie and Martin

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Figure 4. Employment growth paths in the two city regions, 1980–2008.
Source: Cambridge Econometrics.

Figure 5. Manufacturing employment growth paths in the two city regions, 1980–2008.
Source: Cambridge Econometrics.

plants became locked into the technologies distrib- gidity in an industry driven globally by rapid tech-
uted to them by their Japanese-owned parent com- nological change, which in the case of Swansea’s
panies. Although this marked a temporary period of production plants was in the companies’ research
stability, it was also characterised by increasing ri- laboratories located back in Japan. This local

38
The economic resilience of regions

technological lock-in and external dependence re- permanent. And the slowdown in service employment
duced the resilience of the local economy and soon growth during the recession continued until the late-
proved fatal to the survival of the consumer elec- 1990s. Only then did steady growth in this sector take
tronics industry in the Swansea area. The run up to place (Figure 6). In Cambridge, although the reces-
the 1991 recession saw the international demise of sion halted the rapid expansion in service jobs that
both cathode ray tube (CRT) technology-based tele- occurred over the 1980s, the interruption was short
vision and VCR-based recording devices. Sony lived, and from 1992 onwards, the economy resumed
closed one of its Swansea plants, moving produc- strong employment growth in this sector.

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tion to Barcelona where local expertise in the new One of the key contributions to the relatively
digital and plasma technology helped them re- higher adaptability and resilience in the Cambridge
spond to the changing market. This was followed economy was the ability to continually branch out of
after the recession by the eventual closure of the the existing specialised industrial sectors. New de-
Panasonic and Hitachi manufacturing plants. All velopment pathways were created out of a strong
that remains in Swansea today are retail outlets for endogenous knowledge platform grounded in ad-
the products of these companies that are manufac- vanced mathematics and computing. The 1990s
tured elsewhere. saw a continued growth in the high-tech economy
The early-1990s recession impacted on both econ- of the city region, with a strong upward rise in the
omies, as shown in Figure 3. Both areas experienced number of new firms formed each year (Figure 7),
a sharp contraction in manufacturing employment and the formation of several new subcluster special-
(Figure 5), but Cambridge once again proved more isms, including ink-jet technologies, telecoms, bio-
resilient, with a recovery in jobs in those sectors, at sciences, informatics and clean technologies. By the
least up to 2000. In Swansea, manufacturing employ- end of the decade, the high-tech cluster comprised
ment failed to recover at all: the contraction proved more than 300 such enterprises, employing perhaps

Figure 6. Service sector employment growth paths in the two city regions, 1980–2008.
Source: Cambridge Econometrics.

39
Simmie and Martin

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Figure 7. Number of new firms established in the Cambridge high-tech cluster, 1970–2004.
Source: Library House.

as many as 20,000 people. There is some sign, how- omy to adapt to these changes was hampered by lock-
ever, that this phase of exploitation, rapid expansion in to a culture of industrial subsidies dependency and
and accumulation of high-tech assets, may possibly an expectation of lifetime employment in traditional
have come to an end and that local high-tech devel- industries. This combination proved too difficult to be
opment may have entered a conservation phase of overcome by free market adaptations. Instead it has
distinctly slower growth. Both the rate of new firm required intervention by the Welsh Assembly Gov-
formation and the rate of innovation have slowed ernment (WAG) to develop a public strategy to move
appreciably since 2000, and local business leaders Wales (and Swansea) up the value chain, by focusing
and associations have expressed repeated concern development on the knowledge economy.
that the cluster seems to have lost its momentum. Since the end of the 1990s, in line with this wider
The Swansea economy fared much less well fol- regional strategy, a new attempt to reorganise the
lowing the early-1990s recession. The flow of FDI Swansea economy has been underway, initially based
that had begun to provide the possible basis for on the provision of start-up incubator and support
a new phase of exploitation and growth ceased units, an initiative called Technia, in partnership with
and promised additional arrivals of overseas invest- the Welsh Development Agency (now incorporated
ments, such as that by the electronics giant LG, did into the WAG) and Swansea University. The imple-
not take place. It is arguable whether the economy mentation of this strategy has been slow, however,
ever embarked on a secure or sustained path of and the first Technium was not opened in Swansea
exploitation and growth based around a new con- until 2001. There are currently a total of nine across
sumer electronics industry. Rather, it would seem Wales. Their aim is to provide infrastructure and busi-
that this potential development path failed before it ness support to new innovative companies and to pro-
really took off, and as a result the economy moved vide space for them to develop their ideas and grow
quickly to a further phase of release and decline. into successful knowledge-related businesses. The
The FDI withdrew and the ability of the local econ- scale of each Technium is quite small. Each of them

40
The economic resilience of regions

contains around only 10–12 firms. How resilient the appear to have gone through only three phases
two city region economies will prove to be to the deep suggested by adaptive cycle model: reorganisation,
recession of 2008–2009 remains to be seen. exploitation and possibly the onset of conserva-
tion. It arrived at each of the two major recessions
covered by this study having developed its resilient
Summary and conclusions capacity over the preceding one or two decades.
In this paper, we have sought to review and ana- The long-term development of adaptive and resil-
lyse the concept of regional economic resilience. ience capacities in Cambridge were driven by the

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Our starting position is a rejection of equilibrist conscious decisions of local entrepreneurs making
approaches. This is because we think that the use of endogenously created new knowledge. This
firms, organisations and institutions that comprise was facilitated by the co-evolution of the attitude
regional economies are continually changing of Cambridge University to commercial exploita-
and adapting to their economic environments. tion of intellectual property rights and the facil-
These changes are increasingly driven by the cre- itation of the development of science parks and
ation, acquisition and commercial exploitation of incubation units on land owned by the different
new knowledge. These processes are never in colleges.
equilibrium. The experience of Swansea has been quite differ-
Following these arguments, we turned to an evo- ent and far less successful. The Swansea economy
lutionary theoretical perspective. This emphasises seems to have gone through one and a half cycles of
adaptation and change as key processes in the de- the model. The first cycle, starting around the
velopment of regional economies. We argue that 1960s, saw the decline of the traditional extractive
these processes are the bases of regional economic industries and the loss of their endogenous knowl-
resilience. For the purposes of this paper, we ex- edge base. This was followed in the 1970s by the
plored the applicability of the panarchy model, de- beginnings of reorganisation driven by the con-
veloped in ecological science, for further analysis scious decisions of public policy and based on the
and developed a four-phase adaptive cycle model of attraction of FDI in the form of Japanese consumer
regional economic resilience. This postulated that electronics. The FDI brought with it sufficient cod-
adaptation in regional economies follows a sequen- ified external knowledge for the establishment of
tial cycle of innovation and restructuring, growth manufacturing branch plants based on VCR and
and the seizing of opportunities, stability and in- CRT technologies. According to the adaptive cycle
creasing rigidity, followed by a release phase and model, this reorganisation phase should have been
eventually the repetition of the cycle over various accompanied by increasing resilience. This did not
periods of time. Each phase of the cycle is associ- prove to be the case. The shock of the early-1980s
ated with different degrees of resilience, connected- recession led to a decline in manufacturing employ-
ness and capital accumulation or release. ment from which the Swansea economy never fully
It should be stressed that this is primarily a de- recovered. The exploitation of foreign-owned elec-
scriptive model and does not contain any theoretical tronics was resumed after the recession, again
explanations of the causes of each phase of adapta- driven as much by public policy as by market
tion nor what drives an economy from one phase to forces. This sector then entered a short conservation
the next. To illustrate possible explanations for such phase becoming locked into increasingly outdated
adaptation and change, we turned to two contrast- technologies. As a result, it arrived at the recession
ing case studies. These were selected according to of the early-1990s with declining resilience. The
their presumed illustration of contrasting degrees of shock of the recession exposed the weakness of
adaptation and resilience. relying on exogenous knowledge generated by mul-
What we found was that over the 45-year period tinational companies. Instead of transferring new
of study, the Cambridge high-tech economy would technological knowledge to Swansea, they

41
Simmie and Martin

transferred it to new plants in Spain and Eastern Acknowledgements


Europe. As a result, manufacturing employment fell
The authors gratefully acknowledge the financial support
again in Swansea as the economy entered a second of The National Endowment for Science, Technology
phase of capital disinvestment and release. and the Arts (NESTA) for the empirical work reported
These case studies—albeit only briefly discussed in the paper. A full exposition of this research is avail-
here—suggest that endogenous sources of new able from NESTA published as: Simmie, J., Carpenter, J.,
knowledge combined with market driven and con- Chadwick, A. and Martin, R. (2008) History Matters:
scious entrepreneurial decisions could be among Path Dependence and Innovation in British Cities,

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the key factors for understanding regional economic London: NESTA. The authors also acknowledge the
resilience. In addition, the co-evolution of facilitat- helpful comments from two anonymous referees.
ing institutional environments is also significant.
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