Where do you come from? This is among the first questions we ask when meeting someone new.

We understand the importance of ‘place’ instinctively at a personal level—where you call home, nationality and heritage, the generational family home or farm, sporting allegiances, sacred sites, childhood holiday spots and neighbourhoods.

‘Place’ is equally important to the prosperity of countries and industries, but it is often lost amid macro level, spatially-neutral theories of economic development and growth. Moreover, frequently the approach to place-based policies, such as regional development, is straightjacketed into unnecessarily narrow specialisations—urban and land use planning, infrastructure, league tables of global cities, city versus country debates.

In Australia, typically we restrict the definition of region to rural and remote regions, at the expense of understanding the role in broader economic development of metropolitan areas, ‘city regions’ closely linked to their hinterlands, major regional centres and capital cities. This view limits the opportunities to be unleashed from rural and urban regions interacting with each other and capitalising on each other’s strengths and global connections.

The latest international thinking and research points to a significant shift in what makes place-based policies successful. New approaches to regional development focus on policies that fuel growth in regions by mobilising untapped potential and home-grown capabilities, rather than simply reducing disadvantage and decline by subsidising lagging regions.

The success factors in this new approach are the region’s internal specialist skills, know-how, relationships and innovation capabilities. In an era of more mobile capital, these factors embed investment in regions in ways that low cost labour and physical infrastructure cannot. There is evidence that infrastructure investments in regions only have a positive impact on growth and development if they are accompanied by improvements in human capital and innovation capacity.

Benefits flow from naturally-occurring agglomerations and concentrations of economic activity present in larger cities and populations. But concentration alone is insufficient for prosperity. Regions need to take on the characteristics of knowledge hubs and innovation clusters.

This means forging uncommon collaborations between businesses, universities, entrepreneurs, researchers, technologists, financiers and others, with consequent sharing and absorption of economically-useful knowledge. This in turn, generates new distinctive capabilities that increase the ability of the region’s enterprises to compete, innovate and lift productivity.

The lesson here is to understand the importance of ‘place’ and that its essential ingredients span policies for regional development, land use, employment, innovation and business support, infrastructure and skills. If these policies are deftly knitted together, the benefits extend beyond particular regions to the economy as a whole.

John Tomaney, University College London (2014), The Role of Local and Regional Institutions, in Göran Roos and Narelle Kennedy (editors), Global Perspectives on Achieving Success in High and Low Cost Operating Environments, IGI Global, 2014.