Regional Business Environment Framework
[ Last Updated 30 October 2008 ]
The following framework is one possible way to understand what influences business development in your region.
The framework focuses on factors that have the most influence on business development. When developing your strategy, you might want to include other factors that are not purely economic in nature, such as urban form and social issues.
The framework specifically deals with those factors which lie outside of individual firms. It is important to remember that factors internal to a business (such as management practices and organisational culture) can and often should be addressed when researching and analysing your region. Some of the factors addressed below might have less of an impact on business growth if factors internal to a business are not compatible. For example, firms might be able to access foreign markets (an external factor), but might not be willing to do so (an internal factor).
Many aspects of the business environment are determined nationally (and some globally). As you read the framework below, bear in mind that for regional economic development purposes, the degree of influence you have over each factor may vary. Other aspects of the business environment (such as some natural endowments) cannot be influenced, but should be considered to help understand what drives business development.
The framework has a specific focus on growing firms that are globally competitive, whether operating locally or in foreign markets. Such firms are necessary for driving an economy that is efficient, innovative and highly productive. Growing globally competitive firms also forms part of the national Economic Transformation Agenda.
The Framework
For globally competitive firms to develop within a region, the region's business environment must:
- provide access to adequate human, natural, physical and financial capital;
- expose firms to competitive pressures;
- be stable enough that firms are able to plan; and
- be made up of firms that collectively have sufficient desire and aspiration to grow.
There are a number of factors that influence whether a region’s business environment is able to meet these conditions. The factors listed below vary in their influence in different regions and sectors. You should conduct your own assessment of your region's business environment to determine which factors are most important or needed for business development.
This framework divides the factors that influence business development into foundations and the drivers. The drivers build on the base established by the foundations. For the drivers to deliver a high-performing business environment the foundations must first be in place.
These are the factors that form the basis of an effective business environment and include:
- solid infrastructure e.g. transport and communications infrastructure;
- a sound education and training system;
- adequate capital base;
- sound governance, regulatory and political institutions;
- social cohesion;
- access to other markets; and
- adequate natural endowments.
These are the factors that build upon and co-ordinate the foundations to create a high-performing business environment and include:
- a well functioning innovation system;
- strong leadership / strategic decision making capacity;
- critical mass in industries / value chains of strength; and
- a quality industrial, urban and living environment.
A broad-based regional economic development strategy will consider all of the above factors (both drivers and foundations).
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