What is Place-Based Industrial Strategy?

A well-known North American institution, the Business Improvement Area (BIA), is being given a makeover in the northwest corner of Toronto, Canada, by mixing elements of top down industrial strategy and more “bottom-up” local economic development. This innovation, which we highlight in a paper to be published in Osgoode Hall Law Journal, comes by way of the Duke Heights BIA (DHBIA). The DHBIA is opening up new and exciting opportunities to grow local economies and improve the performance of small-to-medium sized firms. It does so by a strategic focus on innovation, human capital and environmental sustainability; not just the traditional BIA roles of streetscaping and business promotion. We call this type of evolution in the system of business association and local economic development “place-based industrial strategy.”

The BIA – “A Made in Toronto Success”

Before delving into the DHBIA experience, it’s worth taking a brief look at the history of the BIA movement. It’s fitting that this new kind of BIA is emerging in Toronto, the home of the world’s first BIA. The history of the BIA goes back to the early 1970s, when in response to a request from a voluntary business association in Toronto’s west-end to collect mandatory dues from all members, the provincial government of Ontario, Canada passed enabling legislation to create the world’s first Business Improvement Area (BIA) in Bloor West Village.[1]

BIAs empower local business people, commercial property owners, and professionals in a specific geographic area to collaborate with the support of a local municipality in organizing, financing, and carrying out physical improvements and marketing of their districts. The key to its resilience over the years was the innovation of ‘compulsory BIA membership and levy payments’ which overcame the perennial free-rider problem intrinsic to voluntary business associations of the past. It is generally acknowledged that the BIA model, through this ability to harness business funds and reinvest them directly back into the local business area, has been a success internationally, in terms of enhanced economic, social, and community development outcomes.

DHBIA – Tapping the Potential of Older ‘Built-Out Urban Areas’

Most BIAs are generally defined by a tightly bound main street retail strip with restaurants, grocery stores, clothing retailers and some professional services. The DHBIA though, distinguishes itself in several ways from the traditional BIA model. One is its scale – the most recent survey found 2,534 businesses and 32,000 employees in the area. Moreover, by surface area it is the second largest in Canada. Also notable is its diversity of firms in export oriented clusters like furniture production and food processing. Again, this contrasts with the typical BIA which supports businesses like restaurants and grocery stores which only sell goods and services within the Toronto area.

The DHBIA is located in what planners define as a ‘Built-Out Urban’ area. Typically, these are older industrial districts, outside of downtowns and with a low density built form. They often lag other business districts in terms of investment and face a number of structural barriers to growth, such as poor infrastructure and connectivity. Nonetheless, significant business development and growth opportunities exist for these areas, especially in large regions such as Toronto where ‘built-in’ downtown commercial rents are high and where smaller and mid-size businesses are looking for space to expand. But to exploit these opportunities, business leaders must recognize the need to collectively address local barriers to growth; most notably investing in transportation infrastructure to get better movement of people and goods but also using a collective voice to let local government know about problems in the area.

From Inception to Implementation

Not surprisingly then, a key catalyst for the DHBIA’s creation in 2014 was the prospect of leveraging and having a say on massive transportation infrastructure investments earmarked for the area, including a new rapid transit line and major road enhancements.

Another factor supporting the creation of the DHBIA was the area’s zoning regime. The zoning within the BIA was (and is) almost entirely set aside for commercial, office and industrial use, with very limited space for residential zoning. Thus, for property owners, the most viable prospect for long-term growth in the district was to intensify the employment uses in the area, to in turn, increase property prices and rents. These were incentives enough for ten local businesses that stepped forward and initiated a two-year process to get the DHBIA incorporated. These ‘first-movers’ clearly understood that once the BIA was successfully formed (by majority vote of business owners in the designated area) and incorporated, funding could be secured due to the mandatory levy for individual property owners. This is where the private voluntary associations of the past always failed to gain traction.

The Need for Early Wins

Several years on, the DHBIA can point to concrete results both in its traditional and expanded remit in cluster development and employment strategy. In its core functions, the DHBIA is delivering improvements in transportation and electrical infrastructure, increasing greenspace and improving security. Meanwhile, its local industrial and employment strategy is gaining major momentum.

Its centerpiece is the DHBIA ‘Employment Hub” a collaboration between the BIA, NGOs, government agencies and educational institutions (secondary and post-secondary), focusses on the needs of local employers for skilled workers and on-going job-training support. The Hub operates both as a bricks and mortar and virtual place where workers and businesses can be linked to the most appropriate service. This includes developing bespoke training programs, sharing of employer best practices, and leveraging existing employment programs such as hiring subsidies for the benefit of BIA members. It now has over a dozen stakeholders participating and started offering services, free of charge to BIA members in 2017.

Overcoming Barriers to Success

Inevitably moving forward with such an ambitious agenda is not without its barriers. Collective participation can often be uneven, as is the case of the DHBIA. The area surrounding the DHBIA has some of the lowest levels of civic participation in Toronto and the Province, which affects the ability of the BIA to communicate with local businesses and the individuals within those businesses.

Another problem is that the existing employment service sector in Ontario has been largely tilted to the supply rather than the demand side of the employment equation (i.e., targeting unemployed workers instead of potential employers). Few service providers are currently equipped to deal with the challenges created by a demand (i.e., employer) driven process.

This is no small matter. The reaction of possible partners in the development of an Employment Hub has generally been enthusiastic, but the public funding structures of the existing system are fairly rigid and create considerable logistical problems that are by no means small obstacles.

Final Thoughts

In one sense, the DHBIA is a clear logical progression for the BIA model of locally-based economic decision making. The long-term viability of an industrial BIA will be determined by the success of its firms to compete and trade in national and international markets. Simply put, if the BIAs firms cannot compete in such markets, eventually they close-up shop or move to other locations, which is a story too often seen in many of the “rust-belts” that dot North America and the rest of the industrialized world.

Unlike jurisdictions with a strong history of regional employer associations (Germany[2], for example), there is really no easily accessible mechanism for small and medium sized firms (SMEs) in North America (apart from maybe Quebec)  to acquire business supports or any channel by which to disseminate and implement managerial and workplace best-practices. In such a decentralized and patchwork environment for North American SMEs, the one institution that can perhaps lower these costs and help in the successful transfer of tacit knowledge is the business improvement association (BIA). The BIA operates at a highly local level and is really the only institution that small-to-mid-sized, independently owned firms have direct access to when dealing with their competiveness challenges.

Lastly, there is no reason why the DHBIA model could not be adopted in traditional retail/service oriented BIAs within existing cities like Toronto. As recent research demonstrates, there are significant opportunities to improve productivity, innovation and management of firms whether they are a small restaurant, grocery store or local realtor. For example, in service industries such as retail, a participatory work environment that invests in people and democratizes decision-making and harnesses shop-floor knowledge has been found to enhance business performance by driving up quality and bringing down costs such as employee turnover.

 

[1] A short but valuable history of the BIA concept can be found on the Toronto Association of Business Improvement Areas (TABIA) website, online: http://www.toronto-bia.com/what-is-tabia/8-history

[2] There have been many writings on the German industrial relations system. For some of the more recent and best see: Wolfgang Streeck, Re-forming capitalism: institutional change in the German political economy. (2009)  Oxford University Press, Oxford;  David Marsden. “The future of the German industrial relations model.” (2015). Journal for Labour Market Research, 48(2), 169-187; Stephen J. Silva, Holding the shop together: German industrial relations in the postwar era. (2013) Cornell ILR Press, Ithaca.

[3] See Derek C Jones, Calvin P. Kalmi, and Alex Kauhanen “How does employee involvement stack up? The effects of human resource management policies on performance in a retail firm.” (2010). Industrial Relations: A journal of economy and society, 49(1), 1-21; Zeynep Ton,”Why “good jobs” are good for retailers.” Harvard Business Review 90, no. 1-2 (2011): 124-31.