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Local government strategy in times of crisis: strengthen your ecosystem’s innovation capacity to ensure a fast economic 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 coronavirus outbreak has a major impact on our Dutch economy. The government has drawn up a number of exceptional economic measures to mitigate the consequences for self-employed and freelancers , SMEs and large companies. A big part of this government support is put in place by municipalities with the mission to foster a fast recovery of the local economy.

The several measures that have been put in place to tackle the coronavirus outbreak – and most notably the 1.5m distance economy, have hit the Dutch economy hard: economic prosperity has been replaced by economic contraction. The Netherlands Bureau for Economic Policy Analysis (CPB) predicts that the Dutch economy will shrink by 6 percent this year due to the corona crisis and the strict measures that the government has introduced in response to this. 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. In the first half of 2020, a total of 1904 Dutch companies and institutions were declared bankrupt. It is striking that the sectors that score low in the Dutch Innovation Monitor (2019), such as logistics, trade and catering, currently experience more difficulties with the rapidly changing market.

The unprecedented speed at which the economy is changing and the insecurity about the future require entrepreneurs to innovate. Investing in innovation ensures the long-term success of a company and especially now, on the brink of an economic crisis, it may be the key determinant of a company’s survival.

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.

There exist different strategies to foster innovation. 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. But how do you know which innovation strategy best fits a local ecosystem?

Every ecosystem is unique and its success is determined by different factors that are specific to its geographical concentration. There exists in fact no “golden rule” capable of stimulating innovation and which applies to all ecosystems. In order to take the most effective decisions, it is crucial to continuously monitor the performance of a  local ecosystem: is there enough talent and capital available? Can companies access local and international markets to sell their products and services? Is the current infrastructure conducive enough for companies to innovate? As ecosystems are influenced by regional specialization, sector distribution and the presence of influential parties such as incubators, accelerators, development companies, as well as knowledge institutions such as colleges or universities, monitoring allows municipalities to identify the bottlenecks and intervene accordingly.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 research@ece.nl or +31 10 302 1331.

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