Local Economic Development

For an innovative, social and ecological economic development

Urban economic development is about making cities more attractive, fostering investment, reducing environmental impact, indirectly creating jobs and generating tax revenue that can be used to finance local government services. Sustainable growth, new media, creativity and innovation are the cornerstones of modern urban economic development and shape the image of cities.

Today, many cities face considerable competition in attracting business. If a city is seen as a desirable location to do business, it attracts new investment and start-ups, which can bring a new innovative force to the entire urban region.

Structural change and declining populations in Germany and other industrialised countries further exacerbate the competition between cities. The first signs of shortages of skilled workers are already apparent. With the migration of jobs and people, regional disparities in economic power and tax revenues are also widening.

By contrast, rural-urban migration and swelling population numbers are the challenges facing most cities in developing countries and emerging economies. However, these trends also offer potential. The booming informal sector is particularly important in this context. It provides work for well over half of all self-employed and employed people. The informal sector can offer new arrivals an entry point into economic life and a livelihood, and can be the first rung on the economic ladder - this applies both to individuals and to entire districts of cities.

In recent years a very wide range of economic development concepts and instruments have emerged. The focus is on promoting sustainable economic growth which combines social, environmental and economic considerations. The main entry points for economic development are promoting start-ups, supporting existing small and medium-sized enterprises (SMEs) (support for SMEs, fostering innovation) and attracting new businesses to the area (business development).

In terms of approach, these instruments vary little, whether they are used in developing countries, emerging economies or industrialised nations. However, there are big differences in organisational and technological terms.

In developing countries and poorer urban regions, there is generally a focus on establishing and systematising coherent economic development. The German-Namibian programme Partnership for economic growth, for instance, works at a number of levels. On the basis of new and regularly gathered economic data, dialogue forums are organised with the government and the private sector, so as to improve the framework for local economic development through the national development plan. At local level, in 13 cities and regions businesses and city governments work together to develop and implement appropriate strategies. The capacities of business associations and providers of business services are also developed to enable them to offer SMEs better advice and infrastructure services, and to give SMEs easier access to capital by offering new financial products.

More economically developed urban centres often focus on sensitising important players to new trends and market opportunities. The green urban economy approach, for instance, aims to foster regional economic activity and green value chains.

A strong focus on direct business development has given way to a more strategic policy to make cities as a whole more attractive to business. This involves coordinating work in different areas of local government, for instance in city-run green growth initiatives. Bielefeld's Initiative for energies of the future and energy efficiency, which has received numerous awards, addresses the upgrading of older housing stock and heat insulation, along with efforts to promote energy efficiency and the use of renewable energies in industry, commerce and municipal facilities. The initiative has already spawned a regional network with some 130 members, which fosters an exchange of experience between businesses and institutions, and trains motivated staff in this field. Cooperation with the city's business community is seen as particularly important in fostering technological innovation and local markets for renewable energies.

The availability and mobilisation of knowledge - for example, about the consequences of economic development and possible alternatives - is already highly developed in cities. The wide range of informal processes that have become established in cities and municipalities, including advisory committees and round tables, processes to develop guiding principles and future workshops, are an expression of an emerging culture of participation in local government. Networks that are strongly based on cooperation, reflexivity and trust, help members share ideas, experience and views and can make it easier to reconcile divergent interests. Facilitating communication among participating actors has thus become a field in its own right in urban economic development.

Globalisation has led to fiercer international competition among different cities and regions. Cities are better able to act as drivers of growth and innovation if they see themselves as part of a region. For this reason, cooperation at regional and international level and inter-municipal cooperation have become important factors in international competition to attract business. Business, research and governmental organisations form initiatives in which cities and sub-regions can network, expertise can be shared and strategic decisions taken jointly.

Globalisation also fosters international dialogue on corporate social responsibility in urban economic development. This can create advantages for both businesses and cities, while contributing to the good of society and the environment.

Local economic development must take into account individual firms and important sectors, the city itself and the surrounding region. It is about coordinating fields of responsibility in city governments and facilitating interaction between business, academia and civil society with the aim of driving innovative, inclusive and ecologically sustainable economic development.

Good Practices

Lörrach plans Germany’s first timber-built commercial area


There is more than enough wood available in the town of Lörrach and its proximity to the Black Forest. The idea was born…



Social entrepreneurship enriches municipalities

20/09/2021 to 23/09/2021
virtual event in cooperation with the city of Kiel

At the virtual dialogue event held on 20, 21 and 23 September 2021, over 45 participants from 10 countries took a look…