NEW RESEARCH | How important small businesses are for struggling regions

Regional disparities are growing, but disadvantaged areas can be saved.
Harnessing the entrepreneurial spirit is one of several key factors.

Many experts believe that social phenomena such as Brexit and the rise in support for Trump are consequences of the growing regional disparities in Europe and the world at large.
While some regions are doing very well, with a diverse economy and access to local research and education, more and more regions are seeing jobs disappear, schools close and confidence in the future wane.
– The consequences can be extreme, so we wanted to understand how regions with less favorable conditions can develop.
We have done this by studying regions that have been hit hard by various crises, but have managed to recover,” says Linda Stihl, Lund University.

In the hands of multinationals

In a major European project, she and several international researchers have investigated the growing regional differences in Europe.
In Linda Stihl’s doctoral thesis, three Swedish towns have been in focus: Olofström, Kiruna and Borås.

When Volvo Cars was forced to make major cutbacks in Olofström in 2008, conditions in the town changed radically.
– In a municipality of 13,000 inhabitants, 1,000 jobs disappeared.
Most of the subcontractors in the town had relied on Volvo’s existence and innovation work, and felt they had little incentive to invest in their own development and broaden their customer base.
Just two years before the crisis, Region Blekinge had identified the city as a risk region, says Linda Stihl.
She has studied Kiruna from the steel crisis in the 1970s onwards.
The focus has been on how the tourism industry has developed in the shadow of the mining industry and has had completely different conditions to develop.
– It is dominated by LKAB, which offers very good working conditions that other industries in the region find difficult to compete with.
This has a negative impact on smaller companies.
At the same time, several of LKAB’s subcontractors have been able to develop services and products for the technologically advanced mine.
– But what happens if commodity prices fall and jobs disappear?
Then there are few other industries that have managed to grow sufficiently and that the city can fall back on.

Collective business saves Borås

Since the textile crisis of the 1970s, when the textile industry almost disappeared, Borås lost 25 000 jobs in 30 years.
But the city survived the crisis thanks to a strong entrepreneurial culture.
– When the big companies in textile production went bankrupt in the 70s and 80s, they built new brands based on the resources they had.
Many small businesses remain in the textile industry today, while others have built on skills from the old industry and moved into other industries.
Logistics and e-commerce are examples of areas they have built on,” says Linda Stihl.
– “Borås has a very strong business climate, which it has built up collectively.
The public and private sectors have deep partnerships where they are keen to invest in the city.

Several recipes for development

Unlike the collective Borås, the development of the tourism industry in the Kiruna region has been driven by individuals.
– It is a few entrepreneurs who have boosted the tourism and hospitality industry there.
A good example is the Icehotel, which was created by an individual.
The hotel has been important in providing opportunities for others in the industry to grow.
For example, it has attracted companies with products such as moose safaris, dog sledding, Icelandic horseback riding and small businesses that carry out Sami activities.
Today, Volvo’s production is back on the same scale in Olofström, and many small companies have continued to produce for the large company.
But the situation is still different.
– The smaller companies are working more on their own product and skills development today than before, but have not come as far in broadening the customer base.
“There is clearly a willingness to change in Olofström, and that is something I will study further down the line,” says Linda Stihl. Contact us linda.stihl@keg.lu.se

Advice for those working in regional development:

– Recognize the importance of local actors. The municipalities do not always prioritize investments in the business community because it is the regions, not the municipalities, that are given responsibility and financial resources to work with regional development.
It is therefore important to understand that local actors, such as entrepreneurs, politicians, officials, business organizations and others, do important work in regional development when they support companies and businesses.
– Create the conditions for cooperation between private and public actors and between companies in different industries.
At local level, we are stronger together.
– Helping to detect so-called lock-in phases. When there has been little or no change in a region for a long time, this has been attributed to actors in the region being locked into a mindset and the physical environment.
For example, if the region has a political leadership that only manages what exists, development can never be achieved. MORE ABOUT THE THESIS Linda Stihl will defend her doctoral thesis Change agency in (old) industrial regions – Shaping new futures at Lund University on September 26. To the thesis.