Why should we link regional development to the family business?

Given the influence of economy on individuals, the study of regional or local economy is an issue at the heart of the academic debate and included in governments’ agendas. What variables make a region grow?  What are the processes and dynamics that occur in space and affect growth? Why is there growing in some regions more than in others? Why do some regions experience high growth rates over a certain period of time while others report low rates? What is the difference between growth and development?

We need to take a glimpse over economic history to get some answers. For several centuries, economists and non-economists have wondered about the reasons why some regions grow and others do not. For a long time, it has been considered that the allocation of resources or factors of production such as land, labor or capital are crucial to the growth of a region. This growth refers to the wealth that a region is able to create and that is measured by the Gross Domestic Product (GDP). The numbers and productivity of these factors are responsible for defining the growth differences between countries or regions.

However, land, labor and capital can only be partly responsible for growth: there are regions which are rich in resources but have historically reported low rates of growth. The regional disparities are clear and persistent over time. In 1960, for example, the richest country in the world had a per capita income 39 times higher than that of the poorest country, and that number was nearly doubled by the year 2000. Different regions within a country may follow the same fate, but the differences become more significant in developing countries.

Since traditional variables seem to be unable to explain the differences in growth rates, the “technological change” has been blamed, in turn. Now, what is “technological change”? Knowledge, as an alternative factor of production, has played an important role in explaining the growth of a country or region. This implies there is a significant paradigm shift to understand growth and the factors that determine it. For example, for a few decades now, “growth” has been considered a different term from “development”. When we refer to something growing, it does not imply there is development; but we can certainly consider that growing is one of the stages in any development. That is, development is a broader concept that includes not only wealth, but also the quality of life, social equality and access to opportunities, among others.

This interpretation of inclusive development is paired up with an endogenous vision of space and its factors. Endogenous means “found or coming from within something”. The region is no longer a container full of resources. Its success depends on the components of their socio-economic and cultural systems, such as the entrepreneurial skills of its inhabitants, the production factor endowments, the interaction of economic and social operators to increase or transmit knowledge and skills in decision-making to guide the development process. These elements will facilitate positive externalities, and in the same way, the spread of knowledge and innovation will also enhance the benefits of agglomeration and the organization of business clusters.

This endogenous process is ideal for family businesses, since they can play a key role in local development, both as active participants and as actors who have been historically committed to the region. My proposed study focuses precisely on the link between business-family-region as an economic and social force for development.

Therefore, the research questions on which I am currently working are: Is the family business a factor of economic development? What role does it play in that development? Can it promote economic development processes, such as entrepreneurship? Does it differ from non-family business behaviour? Do differences in behavior have an impact on regional development? What kind of impact does it have?

 

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