Growth Poles Theory

Growth Poles Theory

The French economist Perroux outlined in the 1950s that economic development, or growth, is not uniform over an entire region but takes place around a specific pole (or cluster). This pole is often characterized by core industries around which linked industries develop, mainly through direct and indirect effects. Core industries can involve a wide variety of sectors such as automotive, aeronautical, agribusiness, electronics, steel, petrochemical, etc. Direct effects imply the core industry is purchasing goods and services from its suppliers (upstream linked industries) or providing goods and services to its customers (downstream linked industries). Core industries can thus have relationships either as customers or as suppliers for linked industries. Indirect effects can involve the demand for goods and services by people employed by the core and linked industries supporting the development and expansion of economic activities such as retail and real estate.

The expansion of the core industry implies the expansion of output, employment, related investments, as well as new technologies and new industrial sectors. Because of scale and agglomeration economies near the growth pole, regional development is unbalanced. Transportation, especially transport terminals, can play a significant role in such a process. The more dependent or related activity is to transportation, the more likely and robust this relationship is. At a later stage, the emergence of secondary growth poles is possible, mainly if a secondary industrial sector emerges with its own linked industries, contributing to the regional economic diversity.

The conceptualization of the growth pole theory relies on a series of assumptions. The main assumption is that leading (core) industries create multiplying effects on other firms that depend on realized economic opportunities. Another critical assumption is the creation of a series of complex links between the industries of the pole. These links can be forward or backward to the core industry, and the creation and expansion of these links are a fundamental driver of the economic dynamism of the pole. Then, growth poles are based on economies of agglomeration that can be considered the summation of the linkages and the proximity of the firms within the pole.

Global supply chains have challenged several dimensions of the growth poles theory since growth and linkages generated by a core industry could concern activities located elsewhere.