Analysis of territorial competitiveness is important for identifying and implementing the most suitable policies to support socioeconomic development. Although it is firms and not territories which complete in the global marketplace, the countries, regions and cities or towns where they are located provide many of the elements that influence their ability to compete. In fact, it is interaction between firms and their environment that generates innovation, wealth and, ultimately, wellbeing.The aim of this analysis of the competitiveness of the Basque Country is to understand what determines the effectiveness of the firms located here to compete and so generate economic and social value. Therefore, competitiveness is not an end to itself, but a means of generating wellbeing among the population and a key lever to achieve the Sustainable Development Goals set by the United Nations and adopted by the Gobierno Vasco.
The framework for this competitiveness assessment incorporates both social and economic elements
The combination of the most important social and economic elements is shown in Illustration 1, the competitiveness framework which provides the structure for this analysis of competitiveness. This framework was developed by Orkestra as part of the European project known as the European Cluster Observatory. It has been used in the Basque Country Competitiveness Reports produced by Orkestra since 2011 and has also been adapted to analyse competitiveness in different territories. As the illustration shows, this framework is divided into four levels indicating the different factors which determine the territory’s competitive performance.
At the top are the outcome indicators, which contain the overall goals o be achieved in terms of citizen wellbeing. They include economic indicators, such as per capita income, as well as other, broader elements related to social cohesion.
Below this are the intermediate performance indicators. While these are not the overall aims to be achieved by the region, they are important to achieving the final outcomes. They include indicators related to employment, productivity, innovation and foreign trade.
It is through the determining factors of competitiveness that policies can have the clearest impact
The third level is made up of the determinants of competitiveness, in other words, the elements that affect the results for the two levels above. This level is particularly important because it is where policies can have a more obvious impact. The determinants are divided into three categories: firm performance, territory and cluster specialisation, and quality of the business environment. This final category comprises aspects relating to three of the axes of Porter’s diamond (1990): the quality of the territory’s ‘factors’ of production, the ‘demand’ found there, and the ‘context for firm strategy and rivalry’.
And lastly, at the base of the framework, endowments refer to certain characteristics of the territory that have an impact on competitiveness, but which can more or less be taken as givens, at least in the medium term (location of the territory, natural resources, size of the region, institutions, etc.).
The assessment will show the value of each indicator for the last year for which there are data at the regional level in Europe. We will also indicate how they have changed in comparison to the previous year, in order to thus determine whether the indicator is following a positive or negative trend. However, changes in the indicators may reflect global trends. For this reason, it is important to conduct a comparative analysis. As in previous reports, the relative position of the Basque Country is compared with: the group of 218 European Union regions (UE-28); the 19 Spanish autonomous communities and cities (CCAA); and the group made up of the Basque Country and 30 reference regions with similar structural characteristics.
Although the regions are the focal point of comparison, as they are considered more appropriate than countries, they have the disadvantage of updates being delayed longer at the European level. For this reason, if there are more recent data available for the Basque Country, they have been included in the time-based trend graphs, in which the Basque Country is compared with the European average, Spain and Germany (which is one of the most advanced countries).
The Basque Country is compared with 30 reference regions with similar structural conditions
The group of the 30 reference regions for the Basque Country is shown in Map 1, organised according to the distance separating them from the Basque Country. This is somewhat different from previous reports, because the methodology used to identify them has been updated. The identification is based on elements located at the base of the analytical framework and between components of specialisation. Without necessarily being good or bad per se, they influence intermediate performance and final outcomes. They are also difficult to change in the short term, as they are natural characteristics or the result of long historical processes. Therefore, if the aim is to learn from others, it makes sense to compare ourselves with regions that have similar characteristics, as the same corporate behaviour or efforts to develop a favourable environment would have different results when applied in very different regions. The characterisation of the Basque Country with respect to these structural elements is presented in section 5 of this report.
For a selection of recent analyses of these relationships, see Huggins, R. and Thompson, P. (Eds) (2017). Handbook of Regions and Competitiveness: Contemporary Theories and Perspectives on Economic Development. Cheltenham, UK: Edward Elgar.
See: Basque Government (2018). Agenda Euskadi Basque Country 2030.
Porter, M. E. (1990) The Competitive Advantage of Nations London: The Macmillan Press.
For details of the methodology, please see the technical report that accompanies this report.