The following blog post is based on the book “The Political Economy of Capital Cities“.

Think about Washington D.C. in comparison to New York in the United States. Take Switzerland as an example and compare Bern with Zurich or Geneva. Consider The Hague and Amsterdam in the Netherlands or Toronto and Ottawa in Canada. It seems that there is a pattern emerging when we compare a nation`s capital city with its primate city. In a number of countries, the capital city is not necessarily the most important city. In fact, we can call them secondary capital cities. Yet, these secondary capital cities do not rest on their political laurels. They proactively strive toward harvesting the economic benefits of being a political center, albeit in a variety of ways. Business leaders and policymakers in these cities are working to form a unique regional innovation system and they are engaging in locational policies to not only promote their location and strengthen their economic competitiveness, but also to ensure their status in the national urban system.

For the past five years, we have been engaged in an interdisciplinary research project for which we examined the political economy of capital cities. We compared the regional innovation systems and locational policies of four secondary capital cities (Bern, Ottawa, The Hague, Washington D.C.). The four cities were chosen because they represent secondary capital cities in the context of democratic political systems and are located with western, industrialized nations. Our study built on an interdisciplinary approach that draws on theories and methods in economic geography and political science. From the economic geography perspective, we explored how the four capital cities function as RIS driven by public procurement activities that engage the public and private sectors. The political science perspective examined the locational policies that are formulated in these four capital cities. Being embedded through field work in all four capitals, we were able to conduct 179 interviews, analyze data on public procurement, and examine detailed quantitative and qualitative data about the capitals` economic and administrative structures.

What are our findings? The economy of secondary capital cities is quite dynamic and benefits from the fact that national governments across the different national contexts increasingly outsource services to the private sector. The public procurement process is now the main driver of capital city economies. Actors such as firms, industry associations, universities are important players in this capital city regional innovation system. Firms, for example, benefit from being located in close proximity to national government agencies with whom they work with. Contracting firms also develop unique mechanisms by which they engage with the public sector in order to win more contracts. For example, they utilize various ways of engagement in dialogues with national government representatives before and after a contract. They also cooperate with competitors in order to form winning teams. Yet, these secondary capital city economies are often in danger of becoming locked into their government-oriented development paths. All four cities experience such lock-ins and are engaging with policies to avoid such situations.

Figure 1. Regional Innovation Systems

Locational policies are instruments to strengthen the competitiveness of secondary capital cities in interurban competition. The locational policy agendas in all four capital cities share this rationale to be competitive, but their exact configuration differ because locational policies are influenced by place-based economic and institutional constraints and possibilities. For example, all secondary capital cities are active in drafting innovation policies, but the actual policies that are implemented on the ground are aligned with the characteristics of their regional innovation system. Thus, locational policy agendas are place-specific, but they all share the urge to position the capital as a “business city” alongside its political function as a “government city”.

The book has a rather unusual conclusion because we present 10 recommendations for practitioners from the private and public sectors. These recommendations are:

  1. If you want to win a contract from the national government, be spatially proximate.
  2. Increase the competitiveness of your region as well as your own city by cooperating with competitors.
  3. Enhance economic dynamics through innovation and entrepreneurship policies in knowledge-intensive and highly-regulated sectors.
  4. Establish and make use of intermediary organizations to bring together government contractors and federal agencies.
  5. Build your city image on the current assets of your secondary capital city.
  6. Design your firm-attraction strategy in line with your RIS potential.
  7. Coordinate your municipality as far as possible.
  8. Ask for compensation payments and public funds regardless of your other locational policies choices.
  9. Take action against lock-in.
  10. Honor your secondary capital city – commit to your secondary capital city RIS.

The book is relevant as interurban competition is increasing and the possibilities to reap benefits from government contracting are emerging. This means that secondary capital cities need to be aware about how their unique economies work and how they can support this economic system with smart locational policies. Regarding research in economic geography, the emphasis on public procurement and associated innovation dynamics is rather new and needs to be developed further given that the public sector is able to contribute to knowledge spillovers and regional development in new ways. Political science researchers may be interesting in this work because it maps locational policies in a detailed and encompassing manner and we show how place-based economic and political institutions are important in explaining the design of such policies.

Acknowledgements

The authors gratefully acknowledge financial support from the Swiss National Science Foundation (grant 143784).

Bio

Heike Mayer is professor of economic geography at the University of Bern in Switzerland and an adjunct professor in urban affairs and planning at Virginia Tech in the United States. She is also a member of the Center for Regional Economic Development at the University of Bern. Her research is in local and regional economic development with a particular focus on dynamics of innovation and entrepreneurship, place making and sustainability. She is author of the book Entrepreneurship and Innovation in Second Tier Regions (published by Edward Elgar, Cheltenham), co-author of the book Small Town Sustainability (with Paul L. Knox, Birkhäuser Press, Basel), and co-author of the book The Political Economy of Capital Cities (with Fritz Sager, David Kaufmann, Martin Warland, Routledge, London).

David Kaufmann is a Postdoctoral Researcher at the KPM Center for Public Management, University of Bern in Switzerland. He is specialized in policy studies with a focus on urban policies as well as migration policies. David Kaufmann is the author of the book Varieties of Capital Cities: The Competitiveness Challenge for Secondary Capital Cities (published by Edward Elgar, Cheltenham) and the co-author of the book The Political Economy of Capital Cities (with Heike Mayer, Fritz Sager, and Martin Warland, Routledge, London).

Prof. Fritz Sager, Professor at the KPM Center for Public Management at the University of Bern, and Dr. Martin Warland were co-authors on the book.

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