The Multiple Roles of Demand in Regional Development A Conceptual Analysis

This paper contributes to the literature on new regional industrial path development by highlighting the multiple roles that demand can play in regional development. We develop a conceptual framework relating different roles of demand to different types of new path development. Based on the literature on regional development, we differentiate among the role of demand as anonymous consumer, sophisticated buyer, active co-developer, public procurer, and norm and value setter. These roles influence different types of new path development, including path extension, path renewal and new path creation. New path development can be triggered by changing norms and values in the society (e.g. environmental concerns and the growing demand for cleaner technologies), public procurement for innovation (governments demand new products or services and thereby steer economic development) or by users modifying existing products or developing novel solutions that are not yet on the market (e.g. user innovations). In order to foster a new industrial growth path in a region, local firms need to sustain, establish and grow their market shares, focusing on the role of anonymous consumers. The various roles of demand, as well as its effect on new path development, depend on the geographical context. Changes of demand in one region might contribute to path extension, path renewal or new path creation in other regions. We argue that taking a nuanced view toward demand will add a novel dimension to the debate on new path development.