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Stimulate local economic development

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Clarify expectations: digital technology as an economic sector or at the service of economic activities?


Digital technology’s capacity to generate income and jobs depends on the role played by local authorities in stimulating this new economic sector.

Digital services can contribute to traditional economic development by increasing the productivity of enterprises, improving infrastructure operation, favouring innovation, and improving the attractivity of the city (tourism or heritage protection). The main advantage is that it can support almost all the local economic sectors.

While it spreads within existing firms, digital technology also generates flexible and innovative types of companies, increased tax revenue and local job opportunities – particularly for young people. Commitment is required from local authorities to foster the emergence of this dynamic economic fabric and guarantee its anchorage in the territory, for it to become a real driving force behind local development.

Several models for the development of the digital environment

Digital technology is a particularly dynamic business sector, which mobilises a diversity of stakeholders with a variety of capacities for influence, investment and impact.

The “turnkey” offers of the major groups

Developed by major companies (through research & development departments), technical solutions are devised in the interests of these companies to increase their revenue. Certain solutions can be expensive for cities and not suited to local context.

For them to have a real grip on local reality and be suited to the users, strong guidance on the part of the local public authorities is necessary to supervise a form of order which is in the public interest and accessible.

The start-up model

Over the past few years it has imposed itself as a new urban business model: small, dynamic, responsive to demand for innovation but with still uncertain economic benefits in numerous cities. The challenge for these new structures is to be able to find available space to create their prototype, but also premises for scaling up, that is to say meeting firms and financial bodies that could either buy them, or fund them to develop an activity that goes beyond the pilot phase to generate income and jobs.

This change of scale depends, certainly, on the growth capacity of these firms, but also on external variables on which the municipality can intervene: stability of institutional framework, access to financial resources, availability of innovation support, identification of customers and promising markets. Local authorities can also encourage (or even co-fund) development of incubators Incubators Support structure for business creation projects. Provide know-how, a network and logistics during the first stages of the life of the company. Incubators address companies that are very young or in the course of being incorporated.
Incubators stand out by the services they propose, whether or not they are profitable or by the type of projects they target.
Since the mid 2000s, “second generation incubators” have appeared known as accelerators, offering aid for the creation of a firm in exchange for shares in the new company.
(to develop prototypes) or accelerators (places that create contact between start-ups and “corporate clients” to lead to industrialisation).

Supporting digital innovation

The third way is the introduction of local strategies to create favourable conditions for digital urban innovation. In close relation to a national policy framework, these policies can be implemented by the local authorities to allow a mature ecosystem to emerge on the territory.

To do so, it is necessary to assemble the human, financial and technical resources necessary for the development of innovative SMEs. Skills can be mobilised for example via partnerships with universities or the creation of innovation centres bringing stakeholders together on a chosen territory.

Organising meetings with banks and local investors for new enterprises can also facilitate scaling up and the identification of commercial markets.


The City of Le Havre co-finances the Digital City
Le Havre, France

A building dedicated to the digital economy co-financed by local public stakeholders.

The operation consists in the construction, at the heart of the maritime and port campus of Le Havre in France, of a building to allow the emergence of an ecosystem favourable to the development of innovation, entrepreneurship and the digital economy.

Perspective du futur bâtiment de l’EM Normandie et de la Cité Numérique (© CODAH / Groupe 6)

The digital City contributes material and intangible means for the to development of the diversity of the digital stakeholders: dedicated, outfitted spaces, a digital canteen (coworking Coworking Type of organisation of work comprising two notions: a shared work space and a network of workers (community) encouraging exchanges and opening. Coworking spaces are considered third places. spaces reserved for web and digital technology professionals), a training structure that favours new digital skills, a fab lab and an accommodation offer tailored to the development of the firms:

  • An incubator for project leaders/business founders;
  • A business/start-up incubator (hosting/personalised support/services);
  • A business hotel for developing companies.

The local authority of the Le Havre agglomeration (CODAH) is owner of the execution of the Digital Cité project and co-finances the building for 9.53 million euros out of a total budget of 24 million euros. Benefits and return on investment comprise rents collected and new jobs generated.

Lessons learnt

Practical exercise

Explicit expectations of digital technology for local economic development

Choose an orientation that represents local economic opportunities for digital technology

You are expecting digital technology to be…

  • An economic development sector in itself which requires support in particular for start-ups that will create jobs and generate innovation.
  • A supply of services to increase performance, appeal and profitability of the existing economic sectors.
  • A means of inciting the appearance of new markets and innovative services not yet identified, in liaison with other development domains (urban service applications, technology innovations).

Identify the risks of exclusion and mechanisms targeted to attenuate it

  • What economic activities and business lines could be threatened by the introduction of digital technology?
  • Which groups of clienteles could lack access to the new digital markets? For what reasons (price, accessibility, type of services proposed)?
  • Who might the start-ups be in competition with?
  • How can we encourage the traditional economy stakeholders to follow and collaborate with the new digital technology economic stakeholders?
  • How can we support the traditional economy stakeholders in their own digitalization?

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