FRIDA: Anchor firms contribute to regional development

How can regional development policy help Europe achieve its goal of “smarter, more sustainable, more inclusive growth”? According to the FRIDA research project, part of the answer lies in understanding the nature of ‘anchor firms’. After studying regional development models in Europe for over two years, the team of researchers concluded that anchor firms and the networks they create constitute ‘key drivers’ of the European Union’s 2020 growth strategy. The ongoing project produced evidence indicating that anchor firms have the capacity to upgrade local economies and thereby contribute to a more dynamic economy in Europe overall.

Looking at companies representing three industrial sectors (biotech, nanoelectronics and aerospace) in six European countries (Italy, France, Poland, Germany, Ukraine and the UK), the researchers confirmed that anchors can emerge in virtually any industrial setting, including those that may be considered mature or ‘un-innovative’. Whether high-tech or low-tech, anchor firms have several distinguishing features that set them apart from a typical company. These features reflect the numerous ways that anchors shape new and existing organisations. According to the researchers, anchor firms affect not only the creation of new organisations but also the transformation of existing ones. They do this by:

  • Spawning new firms (spinoffs).
  • Generating knowledge spillovers.
  • Serving as role models for other players.
  • Building and coordinating inter-organisational networks.
  • Attracting outside talent.
  • Providing financing and markets.
  • Diffusing global technological and market knowledge.
  • Training and upgrading new generations of entrepreneurial managers.

The FRIDA project explains that regional anchors do not necessarily set out to achieve the above results deliberately. Instead, more often than not, these achievements result simply from the anchors going about their day-to-day activities. It is therefore imperative, say the researchers, that policy makers recognise an anchor’s specific economic incentives. The task for policy makers then is to ensure that they work with those incentives and not against them.

Unfortunately, while anchors may be enormously valuable for regional development, it seems these firms are very difficult for policy makers to identify and equally difficult to support. When it comes to spotting a potential anchor, FRIDA urges caution with respect to what some development officials might consider obvious candidates: large international research and development (R&D)-intensive firms. Such firms may appear to have anchor potential, but they could end up working in isolation without having any impact on regional development. Worse yet, some might turn out to be corporate predators, ‘cannibalising’ smaller firms in the region. To avoid this danger, the researchers stress the importance of integrating home-grown companies into any anchor development strategy.

FRIDA highlights the anchor’s role as visionary orchestrator, triggering entrepreneurship and operating in local, national and global networks. The networking component is critical to regional development as it carries the potential for sharing knowledge and other resources among various actors on different planes. It makes sense, then, for policy makers to nurture these exchange platforms and actively encourage local companies to participate in building them. As the researchers observe, “Simply focusing on generating more local firms is likely to generate more marginal firms. The key policy agenda is to generate high impact firms, where impact is seen at the network level, not at the level of the individual firm.”

At the same time, because innovative initiatives tend to move globally in search of knowledge, resources and opportunities, looking only at the restricted boundaries of the local cluster is reductive and likely to be ineffective as a guide to policy. Thinking both locally and globally is an imperative for both anchor firms and policy makers.

Finally, thinking ahead, the FRIDA consortium reminds policy makers that anchors may have limited life spans, and regional development authorities should not depend on any one anchor firm for future growth. Hence, instead of promoting a single regional ‘champion’, policy makers are advised to promote competition among anchors, by engineering ad hoc contests in which companies compete to obtain visibility and resources (both tangible and intangible). The policy focus, according to FRIDA, should not be on picking winners but rather on creating the conditions that allow winners to emerge.

FRIDA - Fostering Regional Innovation and Development through Anchors and Networks (duration: 1/1/2009 – 31/3/2011) is a Collaborative Research Project funded under the 7th Framework Programme for Research of the European Union, Thematic Priority 2 – Combining economic, social and environmental objectives in a European perspective.

See: http://www.fridaproject.eu

Contact: Simone Ferriani, simone.ferriani@unibo.it