Analysing territorial competitiveness is important in order to identify and implement the most suitable policies to support socioeconomic development. Although it is firms and not territories which compete in global markets, the countries, regions and cities or towns where they are located supply many of the elements which 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 competitiveness analysis of the Basque Country is to understand what determines the effectiveness of the firms located in the region to compete and 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 Basque Government.
Competitiveness is a means of generating wellbeing among the population and a key lever to achieve the Sustainable Development Goals
The combination of the most important elements, both social and economic, is shown in Illustration 1, within the competitiveness framework which provides the structure for this competitiveness analysis. As we can see from the illustration, 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 include the overall goals to 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 goals to be achieved by the region, they are important to achieving the final outcomes. They comprise indicators related to employment, productivity, innovation and foreign trade.
The third level is made up of the determinants of competitiveness, in other words, the elements that impact the results for the two previous levels. 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 last category comprises aspects relating to three of the axes on the Porter Diamond (1990: the quality of the territory’s ‘factors’ of production, the existing ‘demand’ 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 are more or less given, at least in the medium term (location of the territory, natural resources, size of the region, institutions, etc.). As these characteristics have been analysed in previous reports, they are not included in this report.
Final competitiveness outcomes can produce a virtuous circle, feeding both intermediate output indicators and determinants of competitivenes
Beginning this year, the competitiveness framework explicitly includes an element which was implicit in previous years: despite being presented as a hierarchy, with lower levels that impact higher ones, the final competitiveness outcomes can produce a virtuous circle, feeding both intermediate performance indicators and determinants of competitiveness, given that, for example, the greater the wellbeing of those who live in a territory, the more they will be in a position to contribute to the competitiveness of firms and the more attractive the territory will be to both talent and capital. More wealth and earnings can also be allocated to public support programmes for R&D.
The report is arranged in sections and subsections organised according to the logic of this framework. At the start of each section (or subsection), there will be a table showing the relative position of the Basque Country in comparison with: all 218 regions of the European Union (EU-28); the group made up of the Basque Country and 30 comparable regions with similar structural characteristics; and the 19 Spanish autonomous communities and cities. As we indicated in the 2018 Basque Country Competitiveness Report, the comparable regions have been identified using a methodology which is based on elements found at the base of the analytical framework and among the 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 assess the results obtained by indicator and compare with regions whose knowledge may be transferrable, it makes sense to compare ourselves with regions that have similar characteristics.
The Basque Country is compared to EU28 regions as a whole, the Spanish autonomous communities and cities, and 30 comparable regions with similar structural characteristics
These tables will show both the position of the Basque Country in the last year for which there are data at the regional level in Europe and the change in comparison with the previous year. The tables contain bubble charts, which show the regions positioned from worst to best, from left to right, with the largest bubble marking the position of the Basque Country. The values of the regions are represented in a line that shows its concentration. Therefore, a number of bubbles close together indicates that there may be a difference in the ranking, but the values for that indicator are very similar.
Although regions are the main focus of comparison, being considered more appropriate than countries (as national averages do not reveal territorial differences and regional competitiveness levels differ from those of countries), they have a couple of disadvantages: (i) there are no regionalised data published for certain indicators (for example, export data), and (ii) there is a greater delay in the most recent year available in the statistics published by Eurostat. For this reason, in some cases, for the comparative analysis of the Basque Country, we have used national data published by Eurostat (for Spain, Germany and the EU-28 group), and Eustat (Basque Statistics Office) data for the Basque Country, provided that they are available and calculated using a methodology comparable to that utilised by Eurostat. In addition to making it possible to learn about a more recent year, this also provides the opportunity to analyse evolving trends somewhat longer than the change occurring in the last year, which is the trend analysis that has taken priority in regional comparison.
As a summary, Table 1 shows the most recent value available for the Basque Country for each of the indicators analysed in the report, as well as the values for Spain, Germany, EU-28 and, when they are available, those for the comparable regions. Additionally, Table 2 includes the position occupied by the Basque Country in the comparative rankings with European, comparable and Spanish regions. Given the abovementioned delay in the availability of regional data, the years of comparison in this table will in some cases be earlier than those in Table 1. The analysis of these data will be broken down in subsequent sections.
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.