Creating a Seamless Local Government and Small Business Interface for Better Regional Economic Development Outcomes
Robyn J Morris (#) and Gary P Brennan (~) (#) Senior Lecturer, Edith Cowan University, Robertson Drive, Bunbury, Western Australia 6230 (~) Principal Consultant, Regional Corporate Support Services, 35 Queensbury Street, Bunbury, Western Australia 6230
ABSTRACT Today SMEs are readily acknowledged worldwide as the key drivers of and significant contributors to the growth and economic well-being of economies, both nationally and regionally. Current models of regional development purport that regional economic development can be facilitated through the adoption of a “self-help”, locally driven approach and emphasise the importance of establishing networks with cooperative relations between a region’s key stakeholders. In regional areas two key stakeholders are the SME sector and local government. By establishing an “enabling” culture in local government, cooperatively formulating its policies, procedures and practices with the SME sector to create a seamless interface. It is posited that a business environment that is more conducive to entrepreneurial activity, business expansion and regional economic development will result. This paper reports the findings and outcomes of a collaborative pilot study undertaken by a regional university and local government authority in regional Australia. It documents a comparative analysis of SME and local government perceptions of drivers and inhibitors to small business development in the region. Current performance of these sub-regional local governments in supporting business development and local government measures for building a better regional business environment are also addressed. Participating local governments accepted that regional economic development is highly important. They also recognised the contribution made by SMEs to economic development. These professed perceptions were however neither totally reflected in current practices nor demonstrated through designated resource commitment. In practice, considerable divergences exist between SME and local government perceptions of Council performance in supporting SMEs and how best to provide this support. Based on an empirical analysis of the research findings, a framework is presented for reducing these divergences and establishing a seamless interface between local governments and the small business sector with a view to stimulating SME growth and enhancing regional economic development outcomes.
INTRODUCTION SMEs are well recognised and acknowledged worldwide as vital and significant contributors to economic development, job creation, and the general health and welfare of economies, both nationally and regionally (McKinsey & Co, 1994 [1]; Karlsson et al, 1993 [2]; O’Neill, 1993 [3]; Storey, 1985 [4]) . The Australian Bureau of Statistics (ABS,1998 [5]) has estimated that in Australia there existed 1,052,000 small private sector businesses employing approximately 3.5 million people in 1996-97. These firms accounted for some 97% of all private sector businesses and more than 50% of all private sector business employment (ABS, 1998, p.1 [5]). Over the 13 years between 1983-84 and 1996-97, the number of small businesses grew at an average annual rate
of 3.5% with small business employment increasing at an average rate of 3.2% per annum. While the growth pattern of the number of small firms slowed over the latter three years, this sector continued to contribute strongly to employment growth, with the total amount of small business employment increasing at an average annual rate of 3.6% (ABS, 1998, p.17 [5]).
A 1994 national study of business investment in regions by McKinsey and Company [1], identified the importance of and need for all levels of government to take a facilitatory role in promoting regional economic development. Current approaches to regional economic development emphasise the importance of establishing networks of cooperative relations between a region’s key stakeholders, both public and private (McKinsey & Co, 1994 [1]; WAMA, 1994 [6]; Romano et al, 1991 [7]). Amongst these primary stakeholders in regional areas are local small and medium enterprises (SMEs) and local governments. This process can be facilitated through the adoption of a locally driven, “self-help” approach to regional economic development. An examination of the literature however, suggests that limited evidence exists for local governments proactively developing and implementing such policy and strategies.
Recent research by the Centre for Local Government Research (CLGR) in association with the Institute of Municipal Management (IMM) revealed that while high importance is generally given to economic development and this area of Council services should be of particular concern to all Australian Councils, this was not the reported situation. In practice, very low levels of performance in this area contributed to very low levels of customer satisfaction in councils across most states, with councils across no states receiving a high satisfaction rating. Economic development services received the lowest satisfaction ratings in the national service satisfaction poll surveying 1133 respondents (CLGR and IMM, September 1998 [8]). It is proposed by the researchers that the adoption of a “can do” or an “enabling” culture by local governments combined with a collaborative approach to formulating local policies, procedures and practices with the region's SMEs should be the cornerstones in creating a supportive business environment highly conducive to entrepreneurial activity, business expansion and regional economic development. The impact of local government on SMEs has not been well researched and documented. The research presented in this paper makes an initial step towards addressing this gap in SME research through an exploratory study of the interaction between local government and SMEs in a regional area of Australia.
Past studies of local government factors that can assist SMEs and regional economic development revealed several important variables. These included Councils taking a corporate approach to economic development involving clearly stated policies, provision of an encouraging environment, all officers understanding the economic development objectives, provision of a range of information and advice, a proactive and consultative approach through formal and informal networks, knowing the market and enhancing and promoting the local area (Pryor, 1997 [9]; Breen and Calvert, 1993 [10]; Romano, 1991 [7]).
It has been proposed that successful local government models should incorporate active communication and interaction between the Council and the business sector to determine needs and future directions (Pryor, 1997 [9]; Breen and Calvert, 1993 [10]; Romano, 1991 [7]; Windshuttle, 1987 [11]), introduce streamlining statutory approval processes (Pryor, 1997 [9]; SCSD, 1994 [12]) and undertake networking closely with existing regional economic development bodies (SCSD, 1994 [12]). Based on an examination of the literature, a schema for examining the impact of local government on SME performance and regional economic development outcomes is presented in Figure 1. This schema depicts the interrelationships between local government activities and SME performance and regional development outcomes as they impact on the local business environment, reflecting the impact of change back onto the local government corporate culture.
Local Councils generally focus on a practical view of regional economic development based on a vision for overall community development (Pryor, 1997 [9]). Each community should therefore seek to adopt a workable framework driven by local leadership with shared vision of a community’s future being in its own hands. The framework should be a practical, strategically driven response to global, national, state and local factors affecting jobs and investment growth within the community ( McKinsey and Co, 1994 [1]; Pryor, 1997 [9]).
Figure 1 Schema of Local Government Impact on SMEs and Regional Economic Development Outcomes Formation of Networks
Active communication and consultation Proactiveness Flexibility
Local government corporate culture
Organisational Attitudes
Role in regional economic development Supportive Regional Business Environment
SME Performance
Regional Economic Development Outcomes
Local Area Promotion Provision of support services
Information and Advice Infrastructure
(Morris, R. (2000) [13])
THE RESEARCH Background In 1998/99 a collaborative research project was undertaken by the regional campus of Edith Cowan University, and the City of Bunbury. This was a pilot study of SMEs and local governments in the Bunbury-Wellington area, located 180 kilometres south of the State capital in the South West of Western Australia. This sub-region has a combined population of 70,000 and comprises six local government areas centred around the port city of Bunbury. The region has a strong diversity of industry with the City of Bunbury being a highly significant regional exporting port. It has the largest manufacturing sector outside the State capital, produces all the State’s coal and encompasses highly productive agricultural land, extensive mining operations and a substantial retail and services sector.
This exploratory research examines issues associated with business development and the interaction between local governments and SMEs, identifying significant drivers and inhibitors of business development at a number
of levels within the region: firstly growth at the local level; secondly business and local government perceptions of Council performance in supporting business development; and finally approaches for local Councils in building a better business environment to support regional SMEs. An essential partnership in the successful formulation and implementation of a workable regional economic development strategy is the relationship between local government and SMEs. Historically this interaction has not been satisfactorily achieved in many regional areas across the nation.
The focus of this research is the identification of key issues to be addressed within the regional contexts and will be achieved through the identification of divergences in perceptions of local government and local business owners/managers regarding the value of current support for SMEs. Through this research a framework based on the creation of a seamless interface between local government and the SME sector is formulated (see Figure 2). This framework has been developed in the light of the most valued forms of local government support identified by SMEs in the research, recognising also the value of having a locally driven, ‘self-help’ approach and establishing cooperative networks as proposed in the literature.
Methodology This research was undertaken in two phases. The initial phase involved three elements; (1) a review of the literature; (2) in-depth interviews conducted with a cross-section of business owners and managers; and (3) a focus group discussion with key local government staff involved with economic development policy and procedures in the local Councils within the study area. This exploratory research formed the basis for phase two; formulating two questionnaires, one to be administered to a random sample of SME owners/managers from a cross-section of industry sectors and the second to be administered to all elected members and relevant Council staff from each of the six local governments in the study region.
Questions in the survey instruments related to perceptions of drivers and inhibitors to business development, economic development policy of local Councils, level of local government understanding of SMEs, local government responsibility in promoting regional economic development, Council performance in supporting SMEs and promoting economic development and local government strategies for creating a supportive regional business environment. The predominantly structured questions used a five-point Likert scale of measurement
although opportunity was provided for open comments. Responses were tested for understanding, bias and statistical reliability with the survey instrument having a 92% reliability.
The business questionnaires were mailed to a random sample of 972 business owners/managers with one followup mail out. In total 222 surveys were returned giving a response rate of 22.8% which is at the upper end of the scale (8% to 26%) reported as the norm for international research of small entrepreneurial businesses (Alpar and Spitzer, 1989 [14]). Ten responses were eliminated as unusable and three more excluded from the results reported as meeting the international definition of SMEs, but disqualified as being large firms under the ABS definition.
The local government questionnaire was distributed to all elected members and relevant Council staff within the study area. Of the 79 distributed, 33 responses were returned. One elected member was unwilling to complete the written survey, but agreed to participate in a personal interview. The response rates for each Council varied from 25% to 64%, with the overall response rate being 44.3%. This paper presents the research results based on 209 usable SME responses and 33 usable local government responses.
The survey responses were analysed using the SPSS statistical package. Statistical tests included reliability testing, frequencies, means, modes and standard deviations, cross-tabulations, and anovas to identify significant differences based on size of firm (micro, other small and medium size firms) and industry sector (mining, manufacturing, non-manufacturing and agriculture/horticulture/forestry), and between SMEs and local government participants. A content analysis was undertaken of the qualitative responses to open-ended questions.
Discussion of Findings Of the 209 SMEs included in the analysis, 90% were the business owners and 10% managers but not the owner. Seventy-nine percent were non-manufacturing, 7% manufacturing, 3% mining/mineral processing and 11% agriculture, forestry or horticulture. Fifty-three percent were micro businesses (employing less than 5 people), 39% other small businesses (non-manufacturing businesses employing 5-19 people and manufacturing businesses 5-99) and 8% medium businesses (non-manufacturing employing 20-199 people and manufacturing businesses
100-199). Approximately half the firms were located in the largest council area and half in the surrounding five local government areas. Three-quarters of businesses indicated they conduct business in the regional centre of Bunbury and approximately half conduct business in the surrounding five Shires. Of the 33 usable local government responses, 79% were elected members of Councils and 21% Council staff. Almost one-quarter were from the City of Bunbury and the remaining three-quarters from the surrounding five Shires.
Regional Economic Development Perceptions, Policies and Practices Local government respondents acknowledged the importance of small business contribution to economic development of the region. They also acknowledged that Councils have a role in supporting the development of existing businesses and attracting new businesses. It is evident from the Council survey responses that considerable scope exists for developing and improving the understanding amongst elected members and Council staff of forces underlying regional economic development, and problems and issues facing small businesses in the local area.
Elected members and Council staff were asked to indicate their understanding of the importance of SMEs to economic development and the processes driving regional economic development in their local areas. Ninetyfour percent recognised that SMEs are very important contributors to economic development in the region. However, contrary to government reports and other studies, this sector was not generally recognised as the main driver of economic development with only 41% of Council respondents agreeing with this statement.
Attracting
more large industry to the region was considered to be more important in promoting economic development in the local area (73% agreed/strongly agreed with this).
The attraction of new businesses to the region (91% agreeing) was perceived as more important in promoting economic development than the support of existing businesses (79% agreement). This understanding is in direct contrast with the McKinsey & Company report (McKinsey & Co, 1994 [1]) which identified that 70% of growth in regional areas emanates from existing businesses.
With regard to understanding the problems and issues facing SMEs in the local area, only 30% of Council respondents considered that elected members generally have a good understanding of these issues confronting SMEs, while 55% considered that Council staff have a good understanding of these matters.
Local government respondents indicated that they place a high level of importance on local economic development (81% rating it of high or very high importance). This focus is reinforced amongst SMEs who considered that high priority should be given to local economic development by local Councils (86% rated it high/very high). With regard to the promotion of economic development regionally however, a substantially higher proportion of SMEs considered that local government should place a high level of importance on promoting regional economic development (79% rating of high/very high importance) than was reported by Council respondents (63% rating it of high/very high importance). Further, SMEs rated the importance of Council participation in a regional or sub-regional economic development group more highly (77%) than did local government (63%).
A significant divergence existed between the expectations of SMEs and local government members regarding the level of government at which the responsibility lies for promoting economic development locally and regionally. The major responsibility perceptions of the two groups were essentially the inverse of each other. While the SMEs considered the promotion of regional economic development to be principally the responsibility of local government (53 % local government alone and another 7% state and local government responsibility combined; 36% state government alone), Council respondents perceived the major responsibility to lie with State government ( 52% state government alone and another 15% state and local governments combined; 24% local government alone).
Local government perceptions of its responsibility for taking the leading role in promoting regional economic development will be reflected in the scope of its activities and the aggressiveness with which it pursues this goal. Any significant divergences in expectations between these two stakeholder groups are certain to manifest themselves in a perceived deficiency amongst SMEs in the level of performance on the part of local government in promoting regional economic development. Despite the stated importance given to economic development by the Councils in the region, generally these local governments have no structured and planned approach to
promoting this outcome either individually or jointly. Fifty-nine percent of the Council respondents identified their economic development policy to be incorporated in another document such as Strategic Planning documents. Twenty-one percent indicated they have no formal economic development policy only an informal policy, 9% stated they had no policy at all and 9% indicated they were in the process of developing a policy. This general lack of a formal economic development policy was further reflected in the absence of dedicated resources to this activity at the local government level.
Inhibitors of Business Development in the Region Survey participants were asked to rate the importance of 14 factors that potentially impact on business development. All 14 factors listed were identified to be of some importance in impacting on business development, having average ratings in excess of three on a five point scale. While a degree of commonality existed between SMEs and local government responses to the most important inhibitors to business development, the ranking of these factors varied considerably. Several of these factors pertain specifically to SME interaction with local government.
SMEs clearly identified general economic conditions and growth in local markets to be of greatest significance. Other highly ranked factors included local government approach to business development, government regulations (at all levels of government) and communication between Councils and local businesses (see Table 1). These latter factors were considered particularly important in affecting the ability of the local area to attract new firms, with growth in local markets receiving the highest ranking.
By way of contrast, it was the perception amongst local government respondents that the principal inhibitors to business development are the availability of suitable land and the level of infrastructure. This reflects the traditional view of the core functions of local government. It needs to be recognised however, that these two factors were not considered by SMEs to be major constraints (being ranked 12th and 9th respectively out of 14 items listed). While local government rated growth in local markets and general economic conditions amongst the more important factors, their overall average ratings were significantly lower than those indicated by the SMEs (see Table 1).
Table 1:
Drivers and Inhibitors of Business Development SME Perceptions
Local Government Perceptions
Drivers/Inhibitors (Five point rating scale employed where 1 = Little or no importance and 5 = Very important)
Rated Very Important or important (4 or 5) 57.1%
Average Rating
Average Rating
General economic conditions
2
Growth in local markets
53.4%
4.18
1.13
78.8%
3.91
0.58
0.17
3
Local government approach to business development
39.9%
3.88
1.22
72.7%
4.09
0.88
.351
4
State/Federal government regulations (ie ‘red tape’ and regulations) Availability and ease of access to information
41.5%
3.87
1.22
77.4%
4.06
1.06
.424
27.7%
3.61
1.19
69.7%
3.79
0.86
.400
Local government regulations (ie ‘red tape’ and regulations) Communication between Council and local businesses Availability of labour and skills
32.2%
3.59
1.32
60.6%
3.70
0.73
.660
31.1% 35.0%
3.59 3.58
1.28 1.37
57.6% 53.1%
3.82 3.53
0.88 0.98
.188 .810
Level of infrastructure (eg water, sewerage, power, roads, telecommunications etc) 10 Access to finance
33.5%
3.39
1.50
78.8%
4.27
1.04
.000
27.3%
3.32
1.39
68.8%
3.72
0.85
.018
3.64
0.90
.017
6 7 8 9
3.91
Standard p-value Deviation (Differences between the means) 0.80 .006
1
5
4.36
Standard Rated Very Deviation Important or important (4 or 5) 0.93 75.7%
11 Network of business support and advisory bodies available (eg Chambers of Commerce, Business Enterprise Centres etc) 12 Availability of suitable land
18.4%
3.19
1.29
54.6%
23.4%
2.83
1.59
81.2%
4.22
1.07
.000
13 Growth in export markets
22.1%
2.78
1.56
60.6%
3.76
0.87
.000
14 Links between businesses and educational institutions (eg TAFE, ECU)
11.1%
2.68
1.34
37.6%
3.41
0.98
.001
Overall the identification of the top two inhibitors to business development in the region by local government and small business, are quite different. This has implications when determining prioritised activities for local government to best support and promote small business development.
Local Government Performance in Supporting SMEs and Regional Economic Development Businesses and local government members surveyed were asked to rate the performance of Council on a range of issues identified in the literature and through exploratory discussions with SME owners/managers, as important factors in supporting SMEs and promoting regional economic development. Considerable divergences existed between the assessments of SMEs and local government respondents on Council performance (see Table 2). While it is not unusual for Councils to be the target of adverse comment with respect to their activities, often due to unrecognised constraints being faced by them, the extent of this divergence of views cannot be ignored. If an average rating at or above the midpoint value of three on the five point Likert scale is considered a minimum desirable target, it is concerning to note that while local government respondents rated their performance favourably on 13 of the 19 factors, SMEs rated the Councils unfavourably on all 19 factors. This outcome is consistent with the findings of a national poll undertaken by the Centre for Local Government Research (CLGR and IMM, September 1998 [8]). There was agreement by the two stakeholder groups that the best area of performance was in the general promotion of the local area, with recognition of the importance of small business to the local area also being one of the more highly rated factors. The areas of best performance identified by small business respondents were significantly, general promotion of the area (35% rated this well/very well); linking with networks of advisory bodies (25%); and, recognising the importance of small business to the local area (25%). Local government respondents rated general promotion of the local area highest (66% rated well/very well) with recognition of the importance of small business to the local area next highest at 64%. Overall the response from both sets of respondents indicate a good deal of effort is required to improve the perceived and actual performance of local government in its support of SMEs.
The assessment of Council performance varied considerably between the six local government areas especially with regard to recognising the importance of small business to the local are promoting the local area and creating a business environment that encourages business development.
Table 2: Local Government Performance in Supporting SME Growth and Development
Local Government Performance Areas
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
(Five point rating scale employed where 1 = Very poorly and 5 = Very well) Consulting with local business (through a formal or informal network) Understanding the problems and issues facing businesses in your local area Providing market information / knowledge to local businesses Providing information to local businesses that will assist their growth Communicating Council’s economic development policies to the local community. Elected Councillors having a ‘can do’ attitude towards local businesses Identifying economic development opportunities in your local area Flexibility of local government policies and local laws Creating a local business environment that encourages business development Dedicating resources to promoting economic development ( eg. Economic development unit/officer) Being proactive in its approach to economic development/ business development Council staff having a ‘can do’ attitude towards local businesses Having a clear written economic development policy. Elected Councillors having a ‘can do’ attitude towards economic development Council staff having a ‘can do’ attitude towards economic development Delegating authority to Council staff for economic development activities. Recognising the importance of small business to your local area Linking with networks of advisory bodies ( eg. BEC,CCI) General promotion of the local area.
SME Perceptions Local Government Perceptions p-value Rated Rated Average Standard (Differences Average Standard Very Well Very Well Rating Deviation between the Rating Deviation or Well or Well means) (4 or 5) (4 or 5) 11.7% 2.27 1.06 31.3% 3.00 0.88 .000 14.5% 2.31 1.12 30.3% 2.97 0.95 .001 14.0% 14.0% 14.0%
2.34 2.34 2.35
1.12 1.12 1.14
18.9% 39.4% 9.4%
2.53 3.12 2.38
1.05 1.02 1.01
.110 .000 .932
15.6%
2.35
1.15
42.4%
3.06
1.06
.001
15.1% 15.1% 18.1%
2.36 2.37 2.39
1.12 1.13 1.20
27.3% 39.4% 48.5%
3.00 3.18 3.27
0.97 0.95 1.04
.001 .000 .000
11.9%
2.39
1.05
6.2%
2.28
0.96
.540
16.0%
2.44
1.10
45.4%
3.45
0.90
.000
17.5% 15.7% 17.6%
2.46 2.47 2.47
1.13 1.15 1.11
56.2% 9.4% 42.4%
3.38 2.16 3.09
0.91 1.02 0.91
.000 .123 .004
16.6%
2.48
1.08
50.1%
3.44
0.84
.000
15.0%
2.52
1.05
30.3%
3.03
0.92
.006
25.0% 24.5% 35.5%
2.57 2.73 2.90
1.29 1.16 1.25
63.6% 31.3% 66.7%
3.58 2.94 3.73
0.90 1.11 0.84
.000 .397 .000
Qualitative comments especially by SMEs operating across several local government areas in the sub-region further highlighted this diversity in performance. Generally, the areas in which local government needs to direct major attention are: •
Improving their understanding of the problems and issues faced by local businesses;
•
Providing information to local businesses that will assist their growth.
•
Consulting with local businesses (both formally and informally); and
•
Communicating Council economic development policy to the local community (although this will require in the first instance a greater recognition of the need for, and acceptance of, responsibility by local government in taking an active role in this area and a more formalised and structured approach to economic development policy formulation).
These areas were amongst the lower rated factors by local government respondents (being amongst the lowest eight items), but on average Council respondents perceived their performance in these areas to be significantly better than did SMEs. While providing market information/knowledge to local businesses was amongst the worst rated performance areas, many SMEs qualified their ratings by stating that this activity is already being undertaken by other business advisory bodies in the region. It was considered an unnecessary duplication of services for local Councils to undertake this role, however, a facilitating and possibly a coordinating role was desirable.
Improving Local Government Support for SMEs and Regional Economic Development Of the six top rated issues requiring action by local government for supporting business and regional economic development, only two were common to the two groups of survey respondents. Promotion of the local area and a positive and 'enabling' attitude of Council staff were rated by both groups of respondents as very important factors in creating a supportive business environment. While local government respondents emphasised the value of cooperating with surrounding councils on economic development issues (70%) and developing more flexible policies and local laws (66%), SMEs identified the development of a greater understanding of small business problems and issues (82%), greater recognition of the importance of this sector to the local economy (81%) and
Table 3: Local Government Actions to Build a Better Regional Business Environment
Local Government Actions
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
(Five point rating scale employed where 1 = Little or no value and 5 = Highly valuable) Promoting the local area. Giving greater recognition to the importance of small business to your local area Having a better understanding of the problems and issues facing businesses in your local area Being proactive in its approach to economic development/ business development Council staff having a ‘can do’ attitude towards local businesses Providing information to local businesses that will assist their growth Cooperating with surrounding Councils in actively promoting economic development in the region Elected Councillors having a ‘can do’ attitude towards local businesses Communicating Council’s economic development policies to the local community. Council staff having a ‘can do’ attitude towards economic development Identifying economic development opportunities in your local area Elected Councillors having a ‘can do’ attitude towards economic development Providing market information / knowledge to local businesses Cooperating with surrounding Councils to establish common guidelines and information for businesses Having a clear written economic development policy. Linking with networks of advisory bodies ( eg. BEC,CCI) More flexible local government policies and local laws that are responsive to the market place Dedicating resources to promoting economic development ( eg. Economic development unit/officer) Actively consulting with local business through a formal network Delegating authority to Council staff for economic development activities. Actively consulting with local business through an informal network
SME Perceptions Local Government Perceptions Rated Rated Average Standard p-value Average Standard Highly Highly Valuable or Rating Deviation Valuable or Rating Deviation (Differences between the Valuable Valuable means) (4 or 5) (4 or 5) 86.4% 4.46 0.94 87.9% 4.39 0.70 .668 81.0%
4.32
1.07
57.6%
3.61
0.97
.000
82.0%
4.26
1.05
54.5%
3.45
0.97
.000
78.4% 78.5% 78.4%
4.22 4.12 4.11
1.15 1.09 1.09
48.5% 62.5% 57.6%
3.61 3.81 3.58
0.93 0.90 1.00
.003 .100 .005
74.6% 76.0%
4.06 4.04
1.05 1.16
69.7% 56.3%
4.09 3.56
0.91 1.08
.991 .030
71.7% 74.0% 71.7%
4.03 4.01 3.99
1.03 1.13 1.25
42.4% 62.6% 48.5%
3.24 3.75 3.58
1.00 0.84 0.90
.000 .179 .045
73.5% 73.2%
3.99 3.97
1.18 1.21
62.5% 31.2%
3.59 3.22
1.01 1.01
.075 .000
70.2% 68.7% 64.3%
3.94 3.95 3.88
1.10 1.13 1.08
54.6% 39.4% 42.4%
3.67 2.97 3.36
1.05 1.19 1.08
.119 .000 .007
66.4%
3.87
1.11
65.6%
3.66
0.94
.252
61.0% 63.4% 55.0% 54.4%
3.73 3.71 3.60 3.54
1.16 1.19 1.13 1.22
27.3% 42.4% 39.4% 51.5%
2.94 3.30 3.24 3.42
1.17 0.95 1.00 0.94
.000 .049 .054 .391
proactivity by local governments (78%) as being of greater significance. These factors while not rated as highly by local government participants were still recognised as important (see Table 3). These ratings provide further support for an overall acknowledgment that most issues requiring action to build a better business environment supporting SME growth and regional economic development involve local strategies.
It is critical that local government addresses these issues and develops practical actions for exploring the principal concerns of the SME sector and incorporates these into their policies and practices where practicable. If undertaken on a cooperative sub-regional basis, this can enhance the benefits particularly for firms operating across local government areas. In guiding Councils in their assessment of the top priorities for improving performance in SME support and regional economic development, an evaluation was undertaken of: (1) the average rating of each potential local government action; (2) the ranked order of the top three most valuable actions identified by each survey group; and, (3) the ‘performance gap’ calculated for each action. The ‘performance gap’ was determined by calculating the difference between the average rating for the value of the specified actions by local government in supporting business development and the average performance ratings for each of the corresponding actions by each of the respective survey groups. That is;
Performance Gap = (Average rating for local government action - Average rating of local government performance)
Activity priorities from the perspective of SMEs and local government participants have been determined by the researchers after taking into account a combination of these three assessments. The important areas identified are summarised in Table 4.
Local government respondents gave greater importance to cooperating with surrounding councils. While current council performance was not specifically assessed for this activity by SME and Council respondents, it was identified by SMEs as an area in which local government should place an emphasis.
High priority is given by SMEs to local government recognition of the importance of small business to the local area. While this is recognised by the local government respondents as a valuable action (being ranked 7th out of the 21), it does not appear as a priority action from the local government perspective as it was not amongst the
‘top three’ most important actions identified by this group and the performance gap was almost zero. This outcome reflects a perception amongst local government respondents that councils are already giving an appropriate level of recognition to the contribution of small business in the local area. This however is not consistent with the views of the SME sector in the region.
Tables 4. LOCAL GOVERNMENT: Perceptions of their own top priority actions
SMALL BUSINESS: Perceptions of local government top priority actions
Major priorities: • Promoting the local area • More flexible local government policies and local laws. • Cooperation with surrounding Councils in actively promoting economic development in the region and establishing common guidelines and information for businesses.
Major priorities: • Having a better understanding of the problems and issues facing businesses in the local area. • Giving greater recognition of the importance of small business to the local area. • Being proactive in approach to economic and business development. • Elected members and Council staff having a ‘can do’ towards local businesses.
Other top ranked actions:
Other top ranked actions:
•
• •
• • • •
Council staff having a more ‘can do’ attitude towards local business and economic development. Elected members having a ‘can do’ towards local businesses. Identifying economic development opportunities in the local area. Being proactive in approach to economic and business development. Communicating Council’s economic development policy to the local community.
• •
Promoting the local area. Providing information to local business to assist their growth. Communicating Council’s economic development policy to the local community. Cooperation with surrounding Councils in actively promoting economic development in the region.
Overall the performance gaps resulting from the local government assessment of their activities were clearly smaller than those resulting from the small business sector assessment. A substantial divergence exists regarding how local government should proceed on the basis of the two independent evaluations. It is evident from these results that the Councils in the Bunbury Wellington region need to consult and communicate more actively and formally with the SME sector. This will not only enable them to gain a better understanding of the problems and issues confronted by local businesses in their areas, but also to develop strategies for creating a more supportive business environment, one capable of enhancing business development and economic development outcomes both locally and regionally. While consultation and effective communication with SMEs has not emerged as one
of the highest priorities for action through the analysis of responses undertaken, it was clear amongst small business owners in their qualitative comments during interviews that this needs to occur.
Conclusions and Recommendations The findings from the Bunbury-Wellington pilot study were employed to formulate a framework to guide local governments in developing strategies to establish a partnership with SMEs and industry in their regions to build a better business environment in which SMEs can prosper and grow (See Figure 2). Critical elements of the framework are the formation of a partnership approach between local government and local business, the establishment of an ‘enabling’ corporate culture, the adoption of flexible processes and practices that are responsive to business community needs and reflect a more consultative approach to decision making. It is envisaged that the appropriate vehicle for developing, promoting and implementing these strategies at the macro (sub-regional)level in the region would be a regional Economic Alliance, and at the micro (local) level, its member Councils.
Figure 2
A Local Government and SME Partnership Framework for Better Regional Economic Development Outcomes Cooperation between regional Councils
Local Governments
SMEs
Large industry
Local Councils, SME and industry Partnership (Regional Economic Alliance)
Resource sharing & common policies and practices
Proactive Cooperative Regional Promotion
Enhanced Regional Economic Development Outcomes
Lobbying of govt Network with govt and business support organisations Cooperative approach to formulation of local policies, procedures and practices
•Enhanced communication & consultation •‘Enabling’ local government culture •Flexiblelocal govt. policies & practices •Improved awareness & understanding between local Councils & SMEs
Supportive regional business environment
Some practical actions Councils can employ both individually and cooperatively to progress the implementation of the framework are: a)
Building Awareness and Understanding : Local government to establish quarterly briefing sessions involving representatives of the Chamber of Commerce and other small business operators, and business advisory and regional development bodies to increase awareness of the importance of small business and entrepreneurial activity to generate and sustain economic growth within communities and within regions. These meetings consider appropriate policy change to assist small business overcome constraints imposed by Local Government.
b) Enhancing Communication and Consultation: Local governments regularly consult with their communities to determine the community values regarding economic growth . c)
Building an ‘enabling’ and Flexible Policy Culture: Local governments implement a corporate approach to assisting small business development through •
Regular review of the relevancy of Town Planning policies.
•
Introduction of flexible and timely land use requirements and,
•
Continuously enhance the statutory approval processes through increased delegations and adequate resources to achieve efficient processing times.
d)
Proactive Promotion of the Local Area: Local government enhance the physical attraction of their
areas to entice visitors to use local businesses and promote “buy local”, through a proactive council purchasing policy reflecting this philosophy.
The implementation of such a framework at the local and regional levels presents a major challenge to the traditional views and culture of local governments. In many instances this will require a major paradigm shift amongst both elected members and Council staff.
While it has been strongly recommended for some time that there is a significant role that should be played by local governments in supporting and promoting regional economic development, local governments across Australia have generally been slow in adopting this role in a proactive manner. It is evident from the research that the Councils in the Bunbury Wellington region are yet to make the necessary paradigm shift and to actively take on this challenge. It is strongly evident that the traditional view of Councils still persists amongst many
members of the Councils comprising this region. Further, the apparent imperative is for local governments to communicate and consult more actively and extensively with SMEs in their local areas and the broader region to provide a bilateral flow of information and ideas to gain an enhanced level of understanding of issues confronting both stakeholders. It is postulated in this paper that the formation of a local government-SME alliance is an essential partnership for building a better business environment capable of generating better regional economic development outcomes.
It is evident from the findings of this study that opportunities for further research exist in quantifying the extent of the impact of local government on SMEs in regional areas, examining the organisational characteristics of local governments that impact on the development of an 'enabling corporate culture' and evaluating factors that impact on the propensity for local governments to form partnerships with SMEs to achieve better regional economic development outcomes.
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