Competitiveness in Rural U.S. Regions: Learning and Research Agenda

Current policies to improve the disappointing economic performance of rural regions are,
by and large, not working. This is increasingly the consensus among policy makers
across political parties, not only in the United States but also in many other countries
around the globe.

Professor Michael E. Porter
With
Christian H. M. Ketels
Kaia Miller
Richard T. Bryden
Institute for Strategy and Competitiveness
Harvard Business School

(Many thanks to Don Iannone and Dave Bayless for passing this along- Russ)

Not only is the performance of rural regions lagging, but the gap in
performance levels between rural and urban areas seems to be widening. This state of
affairs exists despite significant efforts to boost rural regions through a wide variety of
policies with budgets of billions of dollars in the United States alone.

The failure of current policies for rural regions has many costs:

First, it draws on limited
government resources at a time of budget deficits and cuts in spending. With many other
competing demands on public sector funds, policies that fail to generate results are
getting increasingly hard to defend.

Second, rural counties account for 80% of land area, and 20% of U.S. population. Weak
performance in rural regions retards national productivity and national prosperity, and
fails to effectively utilize the nation’s resources. As the growth of the U.S. workforce
slows, making all parts of the economy productive is an important priority.

Third, the inability of rural areas to achieve their potential leads to an inefficient spatial
distribution of economic activity in the United States. Activities that could be performed
more efficiently in rural areas either migrate offshore or add to the congestion of urban
centers.

Fourth, weak rural performance creates demands for interventions that threaten to erode
the incentives for productive economic activity. The lack of competitiveness of rural
economies has been a prominent cause of agricultural subsidies as well as import barriers
that hurt the U.S. position in the international trading system without addressing the
underlying challenges rural regions face.

These broad conclusions about rural economic development are, by and large, not
surprising. The United States has the need and the opportunity to lead in this field.
Advances in thinking on competitiveness and regional economic development over the
last decade provide an opportunity to now examine rural regions in new ways.

The Institute for Strategy and Competitiveness at Harvard Business School has
undertaken a long-term project on the competitiveness of rural areas, drawing on its
expertise in studying competitiveness more generally in national, state, and regional
economies as well as in economically distressed urban areas. In addition to the theoretical
framework and body of case studies drawn from previous research, we also utilize a
unique data set on U.S. economic geography to investigate the economic performance
1

We are grateful to the Economic Development Administration and Harvard Business School for their
support of this project. We are also grateful to the many individuals who consented to be interviewed and
shared their candid views.
Competitiveness in Rural U.S. Regions
and composition of rural regions statistically. EDA has generously contributed a grant of
$100,000 to defray a portion of the cost of this ongoing project.

This report summarizes a selective, interpretative review of the literature on the economic
performance, the composition and evolution of rural economies in the United States, the
nature of the business environment in rural regions, and evidence on the role of clusters
in these areas. Clusters, or geographically concentrated groups of companies, suppliers,
educational organizations, and other institutions in a particular field, have drawn
increasing interest in the economic development literature and, more recently, in the work
on rural regions.

This report also briefly reviews U.S. policies towards rural regions and
the institutional network serving them. Finally, it summarizes the policy
recommendations for rural regions in the literature. In each section of the report, we offer
our recommendations for future research. The report concludes with our interpretation of
the state of rural competitiveness and highlights the opportunity to take rural policy to the
next stage.

We must emphasize that this exploratory study does not aim to be exhaustive, but to
inform a longer-term research and policy process. Such a preliminary assessment cannot
hope to capture all aspects of the literature nor reach specific conclusions and
recommendations for policy. Instead, our focus is on sketching some of the beginnings of
a conceptual framework for examining rural regions, adding some new data to the
discussion, and outlining a research agenda for the field.

Our aim is to contribute to a new stage of U.S. economic policy towards rural regions,
and to stimulate new research and new initiatives. As a next step, a conference or a series
of conferences on rural economic development would be highly beneficial in bringing
together the players to advance this important agenda.

Full report:
http://www.eda.gov/ImageCache/EDAPublic/documents/pdfdocs/eda_5frural_5fregions_5ffinal_2epdf/v1/eda_5frural_5fregions_5ffinal.pdf