Transformative Catalysts

The economic development of any area is seldom an integrated brocade of growth but tends to be dominantly controlled, and in most cases, solely propelled by the existence and prosperity of a dominant industry. A leading industry is an economic keystone, with far-reaching direct and indirect advantages over-spilling into the broader local economy, creating jobs, drawing in investment, driving innovation, and indeed raising the general prosperity and reputation of the region as a whole within the national or international context. Being able to identify the special contribution of such an industry is vital for regional planning and sustainable development.

Perhaps the most tangible and straightforward effect of a dominant industry is wholesale job creation. This covers far more than directly created jobs by the central industry itself. For each direct job created by the central industry (e.g., a semiconductor factory), several more are created in industries that support it. These range from construction, logistics, provision of raw materials, maintenance, and professional services such as law, accounting, and advertising. In addition, increasing numbers of disposable incomes of a rising workforce give rise to regional retailing, hospitality, health, and educational needs, generating further “multiplier effect” jobs. This trickle-down strategy has the effect of substantially lowering unemployment rates, raising standards of living, and generating a solid economic foundation upon which to exist for the region’s people.

In addition to direct employment, a healthy industry is a good attractant for capital investment. It is an indicator of a good business climate and quality labour force, and encourages domestic and foreign direct investment. This is manifested in various ways: the erection of new facilities, the setting up of new ancillary firms, or the construction of infrastructure to support the new industry. E.g., the automotive manufacturing sector of places like Detroit (historically) or Bavaria, Germany, has attracted huge investments in factories, R&D centers, and a network of suppliers. While this investment creates immediate short-term economic activity, it also raises the region’s long-run productive capacity, diversifies its economy, and creates a more stable financial system.

A leading industry also acts as a powerful innovation and technology developer in an area. Leading companies in such an industry invest heavily in research and development, creating an innovative culture. This leads to the creation of new technology, processes, and products that spill over to other industries. Local educational institutions can align their research agenda with the needs of the industry, thus establishing a win-win situation that gives birth to paradigm shifts in innovations. The Silicon Valley’s long success, for instance, highly relies on ongoing innovation in the semiconductor and software industries. This incessant quest for newness fueled by a robust industry catapults the overall level of technology in the whole region and region competitiveness.

The existence of a powerful industry always creates massive growth and development of the infrastructure. For itself, the industry requires robust transport infrastructure (roads, ports, airports), stable power supply, advanced telecommunications, and decent housing for its personnel. Private developers and local governments are invited to invest in such main infrastructures, thus benefiting all inhabitants and businesses in the area. For instance, the growth of large ports or logistics centers is usually prompted by the demand for an industry leadership in manufacturing or export-led leading industry. The ensuing enhanced infrastructure increases accessibility, lowers the cost of operation per business, and promotes the area as more desirable for future investment.

Apart from that, a leading industry will prompt specialist skill sets and training programs to emerge. And as the industry expands, it needs a very skilled pool of workers, and this causes the local schools – from vocational schools right on through to colleges and universities – to change their curriculum in order to specialize in addressing these very particular needs. This is a feedback cycle: industry requires educated labor, the education system provides it, and this reservoir of talent then available serves to make the area more desirable to the core industry and service sectors. This emphasis on focused human capital building not only enhances the employability of the individual but also enhances the region’s intellectual capital overall, building a knowledge-based economy.

But dependence on one leading industry can be detrimental too.

A region can be susceptible to the boom-and-bust cycles, technological obsolescence, or international changes in the leading industry. Therefore, a mature leading industry also carries the duty, and most often the consequence, of enforcing economic diversification. As it prospers, it generates wealth and an energetic environment that can generate new firms within other industries, or stimulate firms in other sectors wishing to take advantage of the area’s enhanced infrastructure, educated workforce, and favorable business climate. This diversification, while not necessarily being created immediately by the flagship industry itself, is a significant long-term effect of its original success.

Take the case of Pune, Maharashtra, India. Long associated with the agricultural sector, the arrival of the auto and IT industries made it a major industrial and IT hub. Tata Motors, Mercedes-Benz, Infosys, and Wipro became leading industry experts. They created direct job opportunities of thousands and indirect stimulation of growth in housing, retailing, and services. They attracted other engineering- and IT-focused schools and provided a talent pool of professionals. The needs of these industries triggered massive infrastructure development, improved road connections, and connectivity with Mumbai. It is a case of how a leading industry can turn the socio-economic character of an area tremendously, creating permanent prosperity.

Overall, the influence of a dominant industry on the economic advancement of an area is all-round and sweeping. It is a key driver of employment creation, investment attraction, innovation stimulus, and strategic infrastructure investment impetus. It determines skill sets in education, including specialist skill groups, and can even develop the platforms for diversification in the economy. Although its predominance may be hazardous, a successful alliance with a dominant industry is a pillar on which to build long-term prosperity, filling a region’s economic potential into actual prosperity and better way of living of its citizens.