Photo: Evan HoltThe commonly accepted view of economic development is to concentrate on convincing businesses to relocate to our community. Of course, unless the business is new, or an existing business expanding to this community, our gain would be another community’s loss. In the greater scheme of things, this does little to grow the economy as a whole.

I call this traditional view of local economic development "outside-in" development. This approach has, in varying degrees, been successful. However, in some communities, it is clear that another form of economic development is emerging: "inside-out" development.

"Inside-out" development is characterized by innovations initiated by a community’s existing technologies and talented people being pushed out to external, national and international markets.

Communities that are best positioned for "inside-out" development must have some particular qualities: They must have a strong and proven technological base, and a critical mass of expertise that is creative, innovative, and forward-looking.

Photo: Evan Holt

Fortunately, Peterborough has a strong technological base and a critical mass of expertise both in its business community, and in its public institutions—Trent University, Fleming College, the Ontario Ministry of Natural Resources, and the Peterborough Regional Health Centre. The foundations upon which "inside-out" development can be built are in place.

Photo: Evan Holt

There is, however, one critical aspect of "inside-out" development that is missing—organizational innovation. The nature of the local economy in our time (which is very different than that of the era dominated by GE, Outboard Marine, Westclox, etc.) is that there are many successful organizations busy serving particular niches in the external marketplace. Each one has technologies and expertise that keep it competitive in their field. The focus on their market niche makes it difficult for these organizations to identify new market opportunities. Beyond their own niche, real market opportunities can exist in fields they don’t even consider.

To productively pursue "inside-out" development, we need to consider the economic potential—the community’s economic capacity—through combining the existing technologies and expertise across (rather than just within) organizations. In economic terms, this is achieving economies of scope at the community level. Economies of scope, as opposed to economies of scale, come from using existing inputs (i.e., technologies and expertise) to produce different outputs (i.e., innovative products and services).

The real organizational challenge for "inside-out" development is at the greater community, rather specific organization, level. We need to be able to help existing organizations to better identify opportunities for them to partner with other local organizations to create innovations and enter new, national and international markets.

Those communities that have the foundations necessary to pursue "inside-out" development, and create the community-based institutions necessary to identify and achieve community economies of scope, will be those that will enjoy the rewards of the new era of economic development.

[Contributed by PtboCanada's Tom Phillips Ph. D.]

[Editor's Note: This is Tom's second column for PtboCanada.com. He is Economist & Sustainability Director - Greater Ptbo Innovation Cluster. Click here to read his first column for us on Peterborough's "Creative Class".]

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