Local government strategy in times of crisis: research strengthens recovery

29 April 2020

The coronavirus outbreak has a major impact on the Dutch economy. The government has drawn up a number of exceptional economic measures to mitigate the consequences for self-employed persons, SMEs and large companies. Part of this government support will be provided by municipalities, which should have an effective strategy to help restore the local economy.

The measures that have been put in place to tackle the Coronavirus outbreak have hit the Dutch economy hard: economic prosperity has been replaced by economic contraction. The International Monetary Fund (IMF) expects the Dutch economy to decline by 7.5 percent, in which case the decline will be greater than that experienced during the crisis of 2008/2009. However, the economic consequences differ greatly depending on region and sector. The consequences of the corona measures have by far the greatest impact on sectors that are forced to drastically change or stop their activities, such as most contact professions, the catering industry and the leisure sector, but other sectors are also affected. It is striking that the sectors that score low in the Dutch Innovation Monitor (2019), (such as the logistics, trade and catering sectors) currently experience more difficulties with the rapidly changing market.

The unprecedented speed at which the economy is changing requires entrepreneurs to innovate. Innovation is not only important in times of prosperity, but it also allows companies to survive in times of crisis. Innovation goes further than investments in areas such as research and development (R&D) or the purchase of new machines and technologies. Nowadays, companies attach more and more value to investments in the ‘soft’ forms of innovation, such as innovation under strict resource constraints known as frugal innovation, as well as training and educating staff or new forms of management (social innovation) that are popular and effective.

Innovation is not only important in times of prosperity, but it also allows companies to survive in times of crisis.

However, it is not the innovation frontrunners, but a large part of SMEs who struggle with responding to the changing market and the wishes of consumers (ScaleUp dashboard 2019), especially in times of crisis. There is an important task for municipalities here, in which they will have to strengthen the innovative capacity of SMEs.

Continuous monitoring of the local ecosystem is essential for this to happen. This offers municipalities the opportunity to determine the impact of the crisis and the resilience of companies at the local and sector level. The consequences will strongly depend on the local composition of the ecosystem, which is influenced by the type of activity in the region, the representation of sectors and the presence of influential parties such as incubators, accelerators, development companies, as well as knowledge institutions such as colleges or universities.

A clear overview of the local ecosystem is essential for drawing up an effective and efficient innovation policy, which allows strongly affected existing companies to renew their business models and ambitious new companies to grow. This can partly be done by knowledge valorisation, financing and network creation. This is how municipalities really make a difference for local entrepreneurs.

Are you curious about the economic change within the local ecosystem of your municipality or region? Do you want to know how local SMEs can be supported in times of crisis? Erasmus Centre for Entrepreneurship is happy to assist local authorities in monitoring and strengthening local ecosystems. Contact our research team at or +31 10 302 1331.

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