Glossary of LED Terms

Local Economic Development (LED) has its own language and terminology. Terms such as capacity building, empowerment, indigenous development and social capital are common and are used by a variety of actors in the local economic development field. However, many of the terms surrounding local economic development require a considerable amount of interpretation, comprehension and negotiation when applied ‘on the ground’ in different institutional settings. In recognizing that some of these terms are not universally understood, the following provides an understanding to this terminology by describing the more commonly used words and acronyms.

Additionality:  The principle that funding from a particular source is additional to that provided by national and local authorities. The additionality principle requires that funds awarded for a project should not be used merely to substitute or replace existing funds, but for additional projects and activities.

Brownfields:  This is a general term used for sites that have been developed in the past that may or may not be contaminated. Sustainable economic development strategies encourage the beneficial reuse of these sites, even though this may be more expensive than building or developing (new, to date undeveloped) Greenfield sites.

Business Incubators:  A business incubator is an economic development tool primarily designed to help create and grow new business in a community, within a specific building or location. Business incubators help emerging businesses by providing various support services such as assistance with: developing business and marketing plans, building management skills, obtaining capital and access to more specialized services. They also provide flexible space to rent, shared equipment and administrative services in managed workspace.

Business Retention Strategies (BRS):  BRS are systematic efforts designed to keep local companies content at their present locations within the city area. Strategies include helping companies cope with changing economic conditions, addressing new markets and even assisting with internal company problems. Business Start-up Support: Business support includes the full range of services available to people starting in business for the first time. Initiatives include: training, business advisory support, business networking and mentoring and financial assistance (grants, loans, interest rate subsidies are traditional methods; a more innovative approach to financial support is to try and attract as much private sector investment as possible, rather than public sector).

Clusters:  An industry cluster is a grouping of related industries and institutions in an area or region. The industries are inter-linked and connected in many different ways. Some industries in the cluster will be suppliers to others; some will be buyers from others; some will share labor or resources. The important thing about a cluster is that the industries within the cluster are economically linked, they both collaborate and compete and are, to some degree, dependant upon each other; and ideally, they take advantage of synergies.

Entrepreneurial Training:  Programs that provide guidance and instruction on business basics (such as accounting and marketing) so that businesses improve their chances of success.

Export Development Services:  Export assistance programs can help businesses to diversify their customer base, expand operations and become more profitable. Export services include: assessing company capacity for exporting; market research; information services (on exporting, trade regulations, transportation, etc.); international lead generation and trade shows/exhibitions or promotional marketing trips.

Foreign Direct Investment (FDI):  FDI is investment that is attracted from abroad. It can mean either Greenfield investment (i.e. investment in building new facilities on hitherto undeveloped sites) or portfolio investment (i.e. buying into an established business). Inward investment can take similar forms (either Greenfield or portfolio). However it could include investment from within your country as well as from abroad.

Greenfields:  Refers to factories and offices being built on land that has hitherto not been developed. Greenfield investments also imply that facilities are designed and built for investors, rather than the investor buying a facility already built.

Growth Node:  A physical location where industry and/or commercial development is deliberately directed; done either to reduce growth pressures elsewhere in the city or to redistribute growth within a city.

Forward Strategy:  Is an arrangement to continue the life of projects after initial project funding stops. Sometimes described as an exit or succession strategy. This should be established at the outset of all projects that are likely to need ongoing capital or revenue resources after the initial period of establishing the project.

Hard Infrastructure:  Hard infrastructure includes all the tangible physical assets that contribute to the economy of a city. For example, transport infrastructure (roads, railways, ports, airports), industrial and commercial buildings, water, waste disposal, energy, telecommunications etc. See also soft infrastructure below.

High Road Techniques:  High road techniques stress the need to make more efficient use of resources and invest in processes, technological innovation and employee skills. It views labor as an important commodity and skill enhancement as a crucial, targeted investment. It entails the mobilization and upgrading of local resources and the maximization of local strengths and advantages to balance relatively higher wage rates.

Indicators:  Proxy measures to provide operational definitions to the multidimensional components of LED. Indicators are expected to serve the function of defining policy problems and informing policy formulation. They should provide a basis for policy discussion and planning.

Indigenous Businesses:  Local businesses, usually those that have developed in the community. Increasingly, the term refers to all businesses in an area whether they are ‘locally grown’ or not.

Informal Sector:  Not within formal or legal sector and therefore not raised and not provided with services. Not able to use assets as collateral for new productive investment.

Labor Market Information:  The body of data available on a particular labor market, including employment and unemployment statistics, occupational statistics, and average hours and earnings data.

Local Economic Forum:  A coordinating mechanism set up to achieve the streamlining and improvement of local economic service delivery.

Low Road Techniques:  Low road techniques promote an area economic position through the lowering of production costs, especially wage rates; this is not a sustainable approach.

Mobile Manufacturing (or service sector) Investment:  Where manufacturing (or service) companies have a wide choice of location choices. Consequently they are in very strong negotiating positions when it comes to choosing where to locate their businesses.

One-stop Business Service Centers:  Facilities where business persons can go to obtain advice and support to help them establish and expand their business. Sometimes these centers also issue licenses and permits needed by businesses to start-up, operate or expand. These centers improve the local business environment by reducing the number of separate agencies and offices a business may need to approach for advice or to apply for various licenses and permits. They save public and private time and improve efficiency as a result.

Soft Infrastructure:  Soft infrastructure relates to the less tangible aspects of LED such as education and training provision, quality of life infrastructure such as park, leisure and library services, housing, business support, business networking and financing services etc. 

SMEs:  This is the acronym for ‘small and medium-sized enterprises’. There is no definitive delineation between a small and medium sized business. As a general reference, small is often from 5 to 20 employees, medium from 20 up to 200. Businesses with fewer than 5 employees are usually called micro-enterprises. This is a guide only.

Stakeholders:  Individuals and groups who have an interest in the issues in hand. They normally represent their own interests as stakeholders.

Supply Chains:  The products and processes that are essential to the production of a good or service. For example, to produce frozen fish, the supply chain inputs will extend from fish catching, handling, processing, and freezing to packaging, storing and distribution. These are all elements of a supply chain. Integrated LED strategies will try and capture as much as possible of the higher value end of the value chain in their area. In this case fish processing, packaging, storing and distribution will be adding value and therefore be seen at the higher end of the value chain. An industry cluster is a grouping of related industries and institutions in an area or region. The industries are inter-linked and connected in many different ways. Some industries in the cluster will be suppliers to others; some will be buyers from others; some will share labor or resources. The important thing about a cluster is that the industries within the cluster are economically linked, they both collaborate and compete and are, to some degree, dependant upon each other; and ideally, they take advantage of synergies.