Forest Related Perspectives for Regional Development in Europe: European Forest Institute Research Report 13 (Research Report (European Forest Institute), ... Report (European Forest Institute), 13.)

FOREST RELATED PERSPECTIVES FOR REGIONAL DEVELOPMENT IN EUROPE European Forest Institute Research Report 13

BRILL LEIDEN · BOSTON · KÖLN

2002

FOREST RELATED PERSPECTIVES FOR REGIONAL DEVELOPMENT IN EUROPE

EUROPEAN FOREST INSTITUTE RESEARCH REPORT The Scientific Advisory Board: M R DAVID A. BURDEKIN, United Kingdom P ROF. D R G ÉRARD BUTTOUD, France M R P ÉTER C SÓKA, Hungary P ROF. D R M AX K ROTT, Germany P ROF. D R E LENA G. K ULIKOVA, Russian Federation P ROF. D R JARI K UULUVAINEN , Finland P ROF. D R F RITS M OHREN, Netherlands P ROF. D R E DUARDO ROJAS -B RIALES, Spain P ROF. D R H EINRICH S PIECKER, Germany, Chairman of the SAB P ROF. D R M ARGARIDA TOMÉ, Portugal NO. 13

FOREST RELATED PERSPECTIVES FOR REGIONAL DEVELOPMENT IN EUROPE European Forest Institute Research Report 13 BY

PENTTI HYTTINEN ANSSI NISKANEN ANDREAS OTTITSCH MARKKU TYKKYLÄINEN JOHANNA VÄYRYNEN

BRILL LEIDEN · BOSTON · KÖLN

2002

The views expressed in this book are those of the authors and do not necessarily correspond to those of the European Forest Institute. This book is printed on acid-free paper. Library of Congress Cataloging-in-Publication Data The Library of Congress Cataloging-in-Publication Data is also available

Die Deutsche Bibliothek - CIP-Einheitsaufnahme Forest related perspectives for regional development in Europe /by P. Hyttinen . . .—Leiden ; Boston ; Köln : Brill, 2002 (European Forest Institute research report; No. 13) ISBN 90–04–12311–3

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Contents

Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

v vii ix

1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1. From Agricultural to Multi-Sectoral Countryside . . . . . . . . 1.2. Main Concepts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3. Links to Earlier Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4. FORWARD Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.5. Purpose and Objectives of the Report . . . . . . . . . . . . . . . . .

1 1 3 6 7 10

2. Theories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1. From the 1950s to the Key Issues in the 1990s . . . . . . . . . 2.2. The Multifaceted Nature of the Forest Sector . . . . . . . . . . 2.3. Production Types . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4. Regional Development Theories and the Forest Sector . . 2.4.1. A broad framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4.2. The relevance of theories . . . . . . . . . . . . . . . . . . . . . . . . 2.5. Multi-Causal Explanation of Development . . . . . . . . . . . . . 2.6. The Role of Human Agency: Innovation or Adaptation . 2.7. How Much Does the Proactivity of Locals Matter? . . . . . . 2.8. The Framework of Research . . . . . . . . . . . . . . . . . . . . . . . . . 2.9. Limits to Research: Uncertain Future . . . . . . . . . . . . . . . . .

11 11 12 15 19 19 30 32 37 39 42 46

3. Quantitative and Qualitative Methods . . . . . . . . . . . . . . . . . . . . . 3.1. The Combination of Quantitative and Qualitative Approaches in FORWARD . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2. Quantitative Data and Analysis . . . . . . . . . . . . . . . . . . . . . . . 3.2.1. Regional forest resource and socio-economic data . . 3.2.2. Multivariate statistical analysis . . . . . . . . . . . . . . . . . . . . 3.3. Qualitative Data and Analysis . . . . . . . . . . . . . . . . . . . . . . . . 3.3.1. The potential of qualitative approaches . . . . . . . . . . . . 3.3.2. A Boolean approach for qualitative comparative analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3.3. Deductive process for the development of hypotheses

49 49 50 50 51 53 53 55 62

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CONTENTS

3.3.4. Data collection for qualitative analysis . . . . . . . . . . . . .

66

4. The Role of the Forest Sector in Employment and Income . . 4.1. Forestry and Socio-Economic Structures in EU Countries 4.2. Regional Variation in Forestry and Socio-Economic Variables in the EU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3. Results for Comparative Qualitative Analysis . . . . . . . . . . .

71 71

5. Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1. Theoretical Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1.1. Relevance of the theories . . . . . . . . . . . . . . . . . . . . . . . . 5.1.2. Theoretical considerations based on the quantitative results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1.3. Theoretical considerations based on the qualitative results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2. Conclusions on the Success Factors . . . . . . . . . . . . . . . . . . . 5.2.1. Timber resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2.2. Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2.3. Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2.4. Know-how . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3. Policy Implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3.1. Regional lessons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3.2. Public intervention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3.3. Human resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4. Future Research Needs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

109 109 109

80 86

110 112 113 113 114 115 116 117 117 118 119 120

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121

Preface

Most of the less-favoured regions in Europe feature large areas of forest land. These areas, often located far from political and economic centres, and in many cases in difficult climatic or terrain conditions, have been problematic for agriculture. Because of this relationship between the forest cover and regional development opportunities, forest resources have become an important factor for the regional employment and income in many less favoured regions. Greater utilization of existing wood- and non-wood forest resources and services is expected to contribute to rural development by increasing the employment opportunities and income. The FORWARD – Forest Resources for Work Opportunities and Regional Development – project at the European Forest Institute was initiated to investigate the opportunities for rural areas to generate employment and income based on forest resources. The four-year study concentrated mainly on the 11 case areas located in the border regions of Europe. In addition, analyses on the overall situation in Europe were conducted. The project was financed by the Regional Council of North Karelia, Finland, and the European Forest Institute; EFI also provided facilities for the research work. In addition to the financiers, I would like to acknowledge the large number of researchers, forestry professionals, administrators and organizations, who are far too many to name separately, that have contributed to the implementation of the project and the preparation of this final report. Joensuu, August 2000 Pentti Hyttinen Project leader Corresponding author

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Executive Summary

Rural areas across Europe are facing more rapid emigration than ever before. Due to the diminishing prospects for financially feasible agriculture, and the lack of supplementing sources of income, rural areas are characterized by high unemployment, a narrow occupational base and poor job creation. The result is a loss of attractiveness of rural regions for human resources. The main challenge for the forest sector in supporting rural development is to find counter-measures to break the vicious circle. Higher and especially more innovative utilization of existing wood and non-wood forest resources would contribute to rural development by increasing employment opportunities, and raise the economic benefits obtained from the forests. The challenges of the forest sector in contributing to the vitality of rural areas in Europe have been extensively examined in the FORWARD project at the European Forest Institute. Quantitative and qualitative analyses were used to study the possibilities for employment and income generation in the border regions of Europe. Based on the quantitative analysis, regional variation in forest resource and socio-economic structures in EU countries was considered to be large. However, on the basis of national-level data, country groups that have similar characteristics in forestry, forest products trade and socio-economics could be identified. These groups prove a valuable aid in arriving at suggestions for a more general applicability of the results of regional level analyses. The Qualitative Comparative Analysis was used in looking for support for the hypotheses on regional development. Low local demand and long distance to the main markets are the major hindrances to be overcome. The strategies aimed at increasing the potential for the forest sector cannot concentrate on regional consumption alone. The main task lies in connecting rural producers and urban consumers. On the processing side, much hope is placed especially on small- and medium-scale mechanical wood industries. The development of services is also identified as one of the opportunities to create forest related income and employment. Tourism

x

EXECUTIVE SUMMARY

is usually named among the main possibilities for development, but other options exist as well. Examples can be seen where employment has been created through conservation activities – such as the use of traditional management methods that have been used with the intention of creating aesthetically pleasing landscapes. One of the main problems here is the development of appropriate transactions mechanisms to direct income from these activities to rural regions rather than to actors from outside the region. The work also intends to draw the attention to the importance of the development of human rather than physical resources in the development of strategies. It has to be emphasized that regions and countries are different, and one has to be very cautious in drawing generally applicable conclusions. This also means that the differences between countries and regions should be respected, and the development efforts concentrated on the approaches that utilize the local characteristics in the best possible way.

1

Introduction

1.1 From Agricultural to Multi-Sectoral Countryside The question of the future prospects for rural areas has been rising in importance and popularity around Europe. The prospects for livelihood in most of the peripheral areas of Europe have gradually become worse, despite many national and EU policies aimed especially at improving the livelihood of rural people and at keeping rural areas inhabited. This trend has been strengthened by the decrease of agricultural subsidies and product prices, and limited possibilities to develop new employment opportunities to compensate for the decrease in income. Scarce work opportunities have resulted in emigration from rural regions to urban agglomerations and in a loss of human capital. This has, in many cases, reduced the tax revenues, which in turn has decreased the local investments in infrastructure and education, and diminished the chances of creating public incentives for the new industries. Once this vicious circle of degradation, as described by Niskanen et al. (1999), has started, it is difficult to put a stop to it (Figure 1.1). As the farming sector loses 200 000 jobs a year, agriculture can no longer be the backbone of the European countryside (Djurfeldt, 1999). Adoption of the Agenda 2000 package of reforms and trade liberation agreements signed by the European Union (EU) and the World Trade Organization (WTO), are likely to continue the trend to cut agricultural subsidies. Furthermore, producer prices of many agricultural products are likely to drop when Eastern European countries become members of the EU. As a result of these policies the possibilities to secure a rural livelihood in agriculture will decrease further. Due to the diminishing prospects for agriculture in the border regions of Europe, new sources of livelihood have been exploited. The existing resources, among them forests, are in the centre of interest in this exploration since sparsely populated areas are traditionally characterized by a narrow economic base. Most of the less-favoured

2

INTRODUCTION

Figure 1.1. Schematic presentation of a vicious circle where poor regional employment may lead to economic degradation (Niskanen et al., 1999).

regions in Europe feature large areas of forest land. These areas are often located far from political and economic centres, and in many cases in difficult climatic or terrain conditions that have been problematic for agriculture. Because of this relationship between the forest cover and regional development opportunities, forest resources have become an important factor for the regional employment and income in many less favoured regions. Higher utilization of existing wood- and non-wood forest resources and services is expected to contribute to rural development by increasing the employment opportunities and income (Hyttinen et al., 1999). It should be noted here that the employment in forestry has also decreased rapidly in recent decades, especially because more mechanized methods have been developed for harvesting and transportation. This technical development has secured the competitiveness of the European forestry-wood chain, and as such it has been a necessary and positive phenomenon. The trend in employment has been similar also in the large-scale forest industries, where the benefits of economics of scale and increased international competition have forced owners to increase the size of the production units, and made investments in automation profitable. Therefore, as the employment within forestry and the large-scale forest industries has continued to decline, a great deal of emphasis in Europe has been put on the development of small-

MAIN CONCEPTS

3

and medium-scale forest industries to find sustainable and increasing employment opportunities in the forest sector.

1.2 Main Concepts Clarifying the main concepts is an essential task before starting any research efforts. In this study, the main concepts are those related to forest and development. A concept like development is not easy to define, and it has a different content depending on the stakeholder. Solberg (1996) has discussed the problems in defining rural development, concluding that the definition is mainly a political question. Development means improvement of some kind and is closely connected with increase in welfare. Crucial questions are “whose welfare is being discussed?”, and “from which perspective, is it being discussed?” Operationalization of the concept of development clarifies the discussion. In the context of rural development, the welfare components that are easiest to operationalize are employment and income. Therefore, in this study these are the basic measures for development and success. However, this should not be interpreted as meaning that other welfare components (such as social participation, a feeling of belonging to society, and self-realization) are of less importance. This simplification was made for practical reasons. The use of the term forest may vary following the legal definitions valid for each country, including productive forests as well as other wooded land. For the countries represented in the FORWARD case studies (e.g. see Hyttinen et al., 1999) different requirements for features such as crown cover (10–30%) or minimum size (0.05–0.5 ha) and width (10–30 m) are valid (e.g. see Köhl and Päivinen, 1996). For country comparisons, the definitions used by the original data-provider (in most cases FAO) are valid. The term forest resource includes all biotic (i.e. flora and fauna) and abiotic elements of forests, following the above definition. Forestry deals with the management and use of forest resources. In the national accounting, the term includes forest regeneration, silvicultural works, timber harvesting and transportation from forest to the roadside and nature conservation. Long-distance transportation to the mill is categorized under transportation. From the business economic viewpoint of a single entrepreneur, a broader definition of

4

INTRODUCTION

forestry can be used, including all the forest owners’ forestry-related activities (Hyttinen, 1994). Forest industry is defined as the industry that uses wood as raw material, and includes the sawmill, other wood, furniture, pulp, paper and paper product industries. Related and supporting industries cover all industrial and service enterprises that offer factors of production for forestry and forest industry. Porter (1980) has defined the term ‘business branch’ as a group of companies, the products or services of which are near to each other. Forest sector means activities within the field of forestry and forest industry. For example, in the Finnish national economic statistics, the forest sector consists of six business branches: forestry, sawmill industry, other wood industry, furniture industry, pulp industry and paper product industry (Toropainen, 1993). Unlike a forest cluster, forest sector enterprises do not necessarily act as a dynamic entity and the links between enterprises can be rather loose. A forest cluster is a group of enterprises that are in a dynamic interaction that provides clear benefits. In a forest cluster, the dynamic links between enterprises are important, rather than the borders between different enterprises or branches. A forest cluster includes forestry and forest industry, as well as forestry-related and supporting sectors. Tikkanen et al. (1995) have defined the term ‘forest cluster’ as a group of industries or business branches connected to each other by forest resources and knowledge. The two terms ‘forest cluster’ and ‘forest sector’ are often used synonymously and their use sometimes varies according to the research field in question. The major difference between a cluster and a sector is that the term cluster includes forestry-related and supporting businesses from other sectors. Those businesses are not included in forestry or forest industry, for example, in national accounting. A cluster also requires a rather large geographical area. Finland, for instance, has one single forest cluster covering the whole country. The forest sector possesses two kinds of spatial patterns. Forestry is an areal mode of production often based on scattered settlement structures in countries where small farming and farmers’ forest ownership are dominant. Other forest industries, such as sawmills, pulp mills and chipboard factories, usually create an agglomerated regional structure in the form of villages and industrial towns. The term resource community is a feasible concept for the analysis of community

MAIN CONCEPTS

5

development also in the forest sector. This term is often associated with small localities in resource frontiers (i.e. remote settlements that gain their livelihood from mining, agriculture, etc.) (Brealey et al., 1988). A forest industrial community is a sub-category of the concept resource community and is usually a compact town in a rural setting. From the standpoint of a forest industrial company, such communities increasingly consist of a network of social entities of the company split into several localities. A shared interest in the forest business maintains the social network in which they are collaborating. The factors forming such a forest industrial community provide a common economic basis that induces a social network. As an example, the settlement pattern in Finland, generated by resource-based industrial activities, has consisted mainly of a network of forest industrial communities, where sawmills, pulp mills, and other wood processing plants are located. Forest resource communities may be considered from the standpoints of farmers, foresters or timber companies. Overall, forestry has generated a more dispersed settlement pattern, earlier being closely linked with agriculture and providing a source of seasonal work. Nowadays, forestry provides work for a few farmers and harvesting entrepreneurs (e.g. see Rannikko, 1996), sustaining the scattered patterns of settlement. Forest resource communities are incorporated into rural settlement structures, being an inconspicuous part of rural communities. Advanced technology makes possible the increase of labour productivity, and hence, the prevalence of the spatial reorganization of labour in forestry. Economic and social structures and the physical shape of communities vary and are currently faced with restructuring due to the structural changes taking place in the forest sector. The concept of restructuring refers to structural changes in society (Friedmann, 1991; Storper and Walker, 1989; Neil and Tykkyläinen, 1998). This restructuring process, caused by economic upheavals, and individual and social responses to them, leads to new spatial forms and arrangements of communities (Figure 1.2). Restructuring is especially associated with rapid qualitative changes in a community, such as the closures of factories or the emergence of new industries. In general, communities are transforming their structures and functions in the face of external pressures and local responses. Communities are faced with different outcomes due to this restructuring. Local or regional development can be ‘balanced’ and steady,

6

INTRODUCTION

Figure 1.2. Spatial impacts of structural change in both forest resource communities and forest industrial communities (Tykkyläinen et al., 1997).

often meaning low unemployment and migration rates. Furthermore, the diversification of the local economic sector may occur. Expansion of the basic sectors may create an economic boom in the community, as often happens when an economic upswing prevails in the forest sector. Sometimes the community may be scaled down, for instance when a sawmill or a pulp mill is closed. Simultaneously, new investments may take place in the region and, hence, some communities flourish. Communities based on the forest sector are facing a variety of development factors; these developments have to be taken into account in making an evaluation of the theories (Tykkyläinen et al., 1997).

1.3 Links to Earlier Studies At the general level, a lot of research has been conducted on socioeconomic development of communities, regions, countries etc. in the fields of social sciences and economics (see Tykkyläinen et al., 1997).

FORWARD PROJECT

7

The main streams and findings of these research efforts are discussed, especially from a theoretical perspective, in more detail in Chapter 2. More comprehensive reviews on the relevant studies are presented by, for example, Hyttinen et al. (1996a). Regardless of the considerable activity at the general level, relatively little is done on socio-economic development with a specialization in forest-related matters (e.g. see Glück and Weiss, 1996). A survey conducted as part of the FORWARD project at the European Forest Institute revealed that the knowledge base on the prevailing or potential role of forests in selected regions of the EU is rather weak (Hyttinen et al., 1996a). A detailed analysis on the state-of-the-art and future possibilities has since been carried out in each of those regions (Hyttinen et al., 1999). An important initial step for more established research on the role of forests in regional development has been the COST Action E3 “Forestry in the context of rural development” carried out during 1994–1998 (Koch and Rasmussen, 1998). The objectives of the Action were to: (1) gain a greater understanding on public perception and the attitudes of farmers and forest owners towards forestry as a means of rural development; (2) obtain information on the management and silvicultural options of farm forestry in order to open up new possibilities of income and employment; and (3) obtain information on silviculture and management means as well as on policy tools in order to ensure the role of forests in protecting mountainous rural areas. The main achievement of the Action was the state-of-the-art description country by country and the establishment of the network of European researchers working in the topic area. Another outcome of the Action was the identification of the future research needs. As a consequence, several national and international research projects have recently been started in the topic area.

1.4 FORWARD Project In July 1995, a four-year research project FORWARD (Forest Resources for Work Opportunities and Regional Development) was launched at the European Forest Institute. The starting point of the study was that different regions have their own traditions and ways of utilizing their forest resources. Their capacities in the forest sector also vary. In this project, the means for creating forest-based income

8

INTRODUCTION

and employment in eleven border regions of the EU member states and associated states were studied (Figure 1.3). By analysing the forest and the forestry-related resources, socio-economic circumstances and regional history in the survey regions, the FORWARD project aimed to identify the possible success factors, and to simulate strategies. The selection of the eleven case study regions was made on the basis of the following criteria. First of all, it was required that the region was located outside the market centres of Europe. The terms such as ‘border region’ or ‘remote rural area’ were used in describing the market position of the case study region. Another requirement was that the forest sector had to be seen as a relevant development object in the region. In practice that meant that the forest sector had to be visible in the regional development plans. Furthermore, it was expected that active research projects and practical surveys or investigations were ongoing for the topic related to that region. Finally, some flexibility had to be accepted with the above criteria due to the fact that the nature of the research problem required a great deal of interaction and communication with human actors rather than with ‘cool’ data. It

Figure 1.3. FORWARD case study regions.

FORWARD PROJECT

9

should also be noted that it was not the aim of the study to look for statistically representative material. In the first phase of the FORWARD project, which was completed at the end of 1997, the current role of the forest sector in the study regions was surveyed. This phase was conducted first by exploring the available literature and statistics concerning the regions, and then by interviewing the key actors in the regions. In addition, a questionnaire was sent to the counterpart institutions working in the case study regions. The purpose of the first phase was to explore aspects such as: history of forestry; forest policy and legislation; organizations and actors in the forest sector; utilization of wood and non-wood forest resources; training, education and research in forestry; and the potential, problems and opportunities in the case study regions. The forest resources were taken in their broadest sense, covering both timber and non-wood goods and services. The material provided by the local institutions was compiled by the FORWARD-project and published as EFI Working Paper (Hyttinen et al., 1999). The second phase of the project was implemented between mid1997 and early 1999. The specific aim of the second phase was to test various hypotheses regarding the reasons for the forest sector being successful in creating income and employment in some regions, and unsuccessful in other regions. The theories behind the hypotheses are discussed in Tykkyläinen et al. (1997). The analysis part of the second phase was divided into two parallel approaches: quantitative and qualitative analysis. In the quantitative analysis, a set of regional level data was collected and visualized for geographical information maps. The maps illustrate the regional differences in socio-economic and forestry-related variables in EU countries. In addition, the quantitative analysis explored under what circumstances the regional similarities were observable, providing basic knowledge for the extension of research information on regional development. In the qualitative analysis, the main aims were to identify the factors that are critical conditions for success (at the global and regional levels), and to analyse the relative importance of these factors. Based on this analysis, it was possible to identify those areas that have the potential to increase the benefits of forests in the future. Another interesting point of investigation was whether and how the government and/or other public institutions can contribute to the utilization of forests.

10

INTRODUCTION

In the final phase of the project, completed at the end of 1999, the task was to draw region-specific and generally applicable conclusions on how forest-related income and employment can be increased to contribute to the vitality of rural areas in Europe. Consequently, the main objective for the third phase was to compile the final report of the project and publish articles and research reports through which conclusions of the project can be widely distributed. In addition to the scientific reports and articles, special attention was paid on the distribution of the project outcome among researchers and, on the other hand, among practical actors in the domain area. To distribute the project outcome among researchers, two international courses for researchers were arranged in summer 1999: one in Scotland, UK; and the other in North Karelia, Finland. The main objectives of both events were to: (i) contribute to the knowledge base of participating researchers on forest sector-related regional strategies; and (ii) distribute the results of the FORWARD project to the research society in Europe.

1.5 Purpose and Objectives of the Report The purpose of this report is to present the main findings of the FORWARD project. The presentation follows the standard structure of scientific articles. The report starts with an introduction to the research problem and presentation of the main concepts. The theoretical framework for the study is presented in Chapter 2, followed by the presentation of the methodology in Chapter 3. The research results are presented in Chapter 4; this chapter covers the current role of the forest sector, especially in terms of income and employment, and encompasses both quantitative and qualitative aspects, and the analysis of the success factors. In Chapter 5, the conclusions are presented on how forest-related income and employment could be increased to contribute to the vitality of rural areas in Europe.

2

Theories

2.1 From the 1950s to the Key Issues in the 1990s The regional development paradigm has not been independent of societal development in the post-war Europe. The importance of single causal factors explaining regional development has varied over the course of time – from the post-war reconstruction period to the Information Society in the turn of the millennium. Nevertheless, the basic behaviour of actors in business and the organizational principles of the democratic societies have not radically changed. It may be that this evolution of theoretical thoughts reflects the gradual transformation of the society – from industrial to post-industrial, from regulated national economies to advanced capitalism, from protectionism to free-trade, etc. Industrial technology has changed as well, from manmachine systems, and man and horse in the forests, to computercontrolled production systems. The forest sector operated in rather closed nation states in Europe in the 1950s. At the post-war times of reconstruction, the crucial issues were the acquisition of raw materials, workforce issues, constructing infrastructure (such as roads and waterways) and financing investments in the forest sector. Thus the physical, social and technical conditions of that time were perceived as crucial issues for regional development. These practical bottlenecks of development were also reflected in the theoretical thoughts of regional development. Since the 1960s, the awareness of development problems was developed within countries and also internationally; regional development policies have become more important in many countries. The key issue was to direct the growth of the economy towards less-developed, often agrarian, regions (Palo, 1988). The main doctrine of forest-based development was established according to the lines of the inter-industry economics and its theories of employment and income effects for several decades. The approach did not deal much with innovations and regional dynamics. The reason for this was obvious. The main focus of policy-makers was in investment decisions of conventional high-volume production, and not so much in market and technical changes.

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THEORIES

A variety of new factors in regional development emerged in the 1990s. Local problems are interpreted in a global, multifaceted context (Amin and Thrift, 1994). Culturally-bound reasons have increased in importance as factors in explaining regional development, and many recent development problems in transitional countries have been explained by institutional reasons. Enterprise networks and industrial clusters are the keywords in interpreting the success of economic development. This new strand of theory has included the forest clusters as well (Lammi, 1996). The cluster approach has many logical similarities with the traditional linkage-based strand (see Palo, 1988), but the recent approach is less technical than the earlier one and is based on enterprises’ networking, and on the attributes of social capital (i.e. for instance, people enhancing their know-how by interaction). Development has been proven to be dependent on cultural assets and know-how. This reasoning has introduced the concept of learning regions and dynamic competence (Vartiainen, 1996). In practice, European peripheries have been boosted by the structural funds of the EU. Money has been spent on both soft (e.g. training) and hard (e.g. roads) infrastructure. The rise of information technology has accelerated to the organizational and spatial reformation of society in recent years (Agres et al., 1998; Castells, 1989). From the forestry sector standpoint it may indicate economic growth which impacts on paper and other forest-based consumption. The new economic order of the Information Society restructure socio-spatial systems (i.e. urban and regional structures, housing, transport and consumption). Digital information, cyberspace and virtual communities are envisioned as growing parts of the human action spaces (Agres et al., 1998; Komito, 1998). Certainly the new ways of work and every day life modify the socio-economic and spatial organization of the forest sector. Moreover, the forest has become increasingly a part of landscape and a source of recreation instead of just a source of roundwood for industrial use. Forest and forest-based utilities are perceived differently depending on time and location (Kennedy and Thomas, 1996).

2.2 The Multifaceted Nature of the Forest Sector The forest sector is a rather complicated and multifaceted economic system. Its products, production technology and the scale of production

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13

vary considerably. Furthermore the forest sector operates in different institutional environments. For instance, forest legislation and the mode of forest ownership vary from country to country (Hyttinen et al., 1999). People’s values are culturally-born and personal. For instance, forests may be considered as part of a rare landscape, or in contrast, as the source of raw materials. The forest sector consists of a set of actors bound to time and a geographical space. The geographical focus in this study is on the forest-based income and employment opportunities in the border regions of Europe (Hyttinen et al., 1999, p. 13). The standpoint in this research is in conventional economic use of forest, or one may also say, the European one. The study focuses on advanced forest economic systems (i.e. European forest sectors in eleven regions). The European forest sector is the important part of the global forest economy. For comparison, in 1994 as much as 73% of industrial roundwood and sawn timber was produced in the developed part of the world (North America, Western Europe, Oceania, Eastern Europe, the former Soviet Union countries, and a few other countries); the share from Western Europe was 17%. Developed countries produced 90% of wood pulp and 79% of paper and board in 1994; the share produced by Western Europe being 22% and 27%, respectively (van Kooten and Vertinsky, 1999). The ‘big four’ in the forest sector are USA, Canada, Sweden and Finland. The viewpoint and emphasis of the study could be totally different if the project had studied forests in Africa, Amazonia or South-East Asia, or the forest research had focused on certain sub-themes, such as landscape, conservation or rural tourism. The forest sector in this study is seen as one of the production systems in the advanced European countries and as a part of socially and environmentally sustainable development of regions. As depicted in Figure 2.1, the advanced forest sector consists of the use of forest for industrial use and conservation. Part of the forest may remain unused or part of it may be in a non-market use. The destination of roundwood is to mechanical wood processing and pulp production, and the products go finally to markets. The forest sector comprises an inter-dependent production system with production links to the chemicals industry and energy production. To operate efficiently and profitably, this system requires a certain environment, a suitable techno-institutional milieu. A suitable societal environment

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Figure 2.1. Actors in the forest sector.

consists of institutions that encourages the economic use of forests. For instance, stable land-ownership conditions and the taxation system, which encourage the sustainable use of forests (Framstad, 1996). To be competitive, the forest sector requires appropriate technologies. Industrial capital must consist of the advanced machinery and equipment. Moreover, traditional parts of this technology package are, for instance, roads, railways and harbours. And finally, forestry must be environmentally sustainable in order to produce wood from one generation to another. Some attributes of forest are considered as public goods, which means that the optional values and uses of forest (such as forest as a recreational asset, a park or cultural heritage, the home of wildlife, etc.) should be considered. Some parts of the forest sector are very local, such as harvesting or sawmilling. They are regarded as local matters from the standpoint of income and employment effects. Forestry is basically a very local activity if forests are in the ownership of the locals. Forestry has major impacts on rural, forestry-dependent households and villages. As development programs deal with the forest industry (sawmills, pulp mills, etc.), such investments have been traditionally considered crucial

PRODUCTION TYPES

15

for regional development. Nevertheless, companies make the final decisions of production and investments. Although companies have the last say, development is still of a regional interest and can be regulated to some degree. The supply of raw materials, the impacts on environment and the multiplier effects of income and employment are regional. Regional authorities have been in a central position when attracting investments into a region. At least from the standpoint of major producers, if dealing with the final products such as paper and sawn timber, the arena of competition is often global. Products are sold on the international market, and the environmental concern comes from global sources. The logistics and sales takes place on a global scale, and Research and Development and investments also have a global reach.

2.3 Production Types The forest sector possesses a variety of locational geographical patterns. It can form an agglomeration, such as forest industry communities, or maintain a very scattered settlement pattern. Some parts of the forest sector, such as printing houses can be located in a metropolitan environment. Forestry is an areal mode of production often based on scattered settlement structures in countries where small farming and farmers’ forest ownership are dominant (Rannikko, 1996). Other forest industries, such as sawmills, pulp mills and chipboard factories, usually create a town-based regional structure in the form of villages and industrial towns. A corollary to this is that the employment and income effects of the forest-based production are different, leading either to the dispersion of forest income to rural, scattered settlements, as it is in the case of farmer-owned forest income, or to agglomeration and industrial capital funds, as it is in the case when a forest-based production unit operates in a town and is owned by non-locals. Forestry may loose a considerable part of its rural spin-off effects of income due to the shift of the forest ownership from farmers to urban dwellers and companies. The objectives of forest owners may diverge considerably at the regional scale (Karppinen, 1998) leading to different uses of forests. The motives of the use of forest vary also by ownership type, country and generation (van der Ploeg and Wiersum, 1996). Hence, the structure and dynamics of the forest ownership have spatial implications.

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From a standpoint of a forest industrial company, resource industrial communities (sawmill and pulp and paper mill communities) increasingly consist of a network of social entities of the company split into several localities. A shared interest in the forest business maintains the social network in which they are collaborating. The factors forming such a forest industrial community are a common economic basis, which induces a social network. As an example, the settlement pattern of forest-based regions, generated by resource-based industrial activities, has consisted mainly of a network of forest industrial communities, determined by the location of sawmills, pulp mills, and other wood processing plants. This network has become multi-local and multi-national when companies have merged and commenced to operate at the global scale. Forest industrial regions can also be based on smaller, more locally-oriented, companies as is the case in many densely populated areas in Southern Europe. The actors in forestry may vary considerably by region or even by locality. The key actors can be (forest) farmers, foresters or harvesting or timber companies. A Russian harvesting-company-based settlement pattern has resulted in a network of forest villages. This Russian model represents the most concentrated way to organize forest work geographically. Forestry, in countries where land-ownership is dispersed and owners usually take part in harvesting, has generated a more dispersed settlement pattern, earlier being closely linked with agriculture. As labour productivity increases, forestry provides work for fewer farmers and harvesting entrepreneurs. Nevertheless, forestry sustains the scattered patterns of settlement (see Figure 1.2 in the previous chapter). The settlement pattern is becoming more sparse, and the population is concentrated in fewer agglomerations. Forest resource communities, which have been an essential part of the rural economies, are incorporated into rural settlement structures, being an inconspicuous part of rural communities. Advanced harvesting, processing and transport technologies have increased the labour productivity and, hence, less and less employees are needed in production (e.g. Kortelainen, 1999; Wibe, 1995). Rural forest resource communities are an integral part of the wider forest industrial network. These networks may vary in composition. Smaller, more local networks, can consist of the supply of wood to construction and furniture industry whereas high-volume mass production comprises large production systems. Nevertheless, the case

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studies of this FORWARD project reveal that even rather small regional forest sectors are linked to supra-regional production networks. Products and raw materials are transported across borders. The pulp and paper industry is comprised of advanced high-volume fibre processing systems acquiring inputs from the production of other wood products, chemicals, minerals and energy, etc. (see Figure 2.1). From the national standpoint it forms, if strong enough, an industrial cluster in a national economy. Maintenance companies, mechanical workshops, planning and research organizations are part of the forest cluster. Experts and professionals in forestry, forest industry and adjunct activities comprise a multi-local network. Such a network has become more and more international. Hence, the advanced industrial clusters have a strong global reach. All in all, each actor (owner, harvester, etc.) in the forest sector is linked to the complex web of actors, from local to global. The actors of the forest sector are dependent on their physical and socio-economic environments. The location of the primary producers is fully dependent on the location of forests, and the first parts of the production chain are thus transport and raw materials oriented. The industrial complexes of sawmills, chipboard factories, pulp mills and paper mills benefit from synergetic advantages (spin-offs from operations together) and agglomeration economies (the collective use of infrastructure). The end of the production chain is market-oriented, in other words consumer-oriented, and some production units need contacts to Research and Development more than the others. The orientation towards densely populated areas is in part the result of the supply of recycled fibre, originating in urban areas, to paper making. Local and regional authorities do not have much say in the decisions about where to locate businesses. The locational dynamics of the forest sector is self-regulating in that sense that investments regulate the amount of industrial capital in geographical space. The shorter the lifetime of an investment is, the more dynamic is the spatial structure of industry. The locational decision of a company is a rather complex set of choices and dependencies. Nevertheless, an actor attempts to operate in an economical way. According to the standard economic geographical theory, two types of locational decisions are typical in the forest sector. First, a forest industry company solves the location of its units by searching for optimal location in order to minimize the total costs

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of production and to maximize revenues. Hence, the location is (dynamically) determined by both revenues and costs. For instance, the factory can be relocated nearer to the markets, if such a move will increase profitability. In the second type of decision, the actors minimize the costs of operation in situ. For instance, the location of the forest resources and transport networks do not allow any alternative locations whereupon the producer cannot improve profitability by changing its location. The latter condition prevails typically in forestry. Factors engendering locational advantages have changed considerably in the last decades. Companies have become able to utilize advantages by developing their operations at the global scale. The removal of the barriers of trade and capital flows has led to international cooperation between forest companies, and investments are planned in large, transnational companies on a global base. Institutional and regulative changes (e.g. the development of the EU, foreign ownership, the harmonization of legislation, the environmental programs) have been important factors for (re-)organization of regional industrial spaces in Western Europe and such changes have even occurred in a much larger extent in transitional countries. The harvesting and production technologies are now much more capital intensive than a few decades ago, and there are now fewer production units. Logistics has also developed leading to a reduction in transport costs. The raw materials and final product markets of the forest sector have faced booms and busts as a result of the turmoil in the Russian and Asian economies. The Russian timber trade has continued, but most Russian manufacturers have lost their competitiveness in the market due to the lack of investments and product development in the 1990s. The Asian crises of the late 1990s postponed many investments in Asia and have cut the demand of the forest products. All commercially operating forest sectors are fully dependent on the markets where they operate. Signals from the market have forced companies to restructure and develop their production. Some companies have been more successful than others. Current products are not the same products that were produced a decade ago, but their qualitative attributes have been developed. In parallel, new products have been developed and the production of some others has ceased. Also companies have been established and closed down. Hence, the advanced forest sector is very dynamic in nature.

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2.4 Regional Development Theories and the Forest Sector 2.4.1

A broad framework

Theories of the development of forest-based regions can be backed up by various theories of regional development. Regional development theories comprise a heterogeneous set of theories that describe certain parts of social and economic processes. Accordingly, the arguments are very diverse. The variety of theories reflects the varying emphasis of interests in explaining development, a certain historical stage of development, the different intellectual environments and the evolution of theoretical ideas. Development theories may be grouped into more or less coherent approaches or paradigms. The currently prevailing approaches, with respect to forest industrial communities (Table 2.1), are discussed below in detail. Equilibrium seeking Abstract economic systems where forces of change are in balance have captured the imagination of economists and geographers throughout history. Equilibrium is the optimal state of economy, yielding maximum profit. This state is never achieved in practice, but is useful as a concept in understanding the principles of a profit-maximizing market economy. Alfred Weber’s classic work “Über den Standort der Industrie” published in 1909 laid the foundation for industrial location theory and the search for general spatial equilibrium of economic activities. The equilibrium seeking paradigm draws attention to the profitability aim of an enterprise under certain quantifiable conditions (Hurter and Martinich, 1989; Serck-Hanssen, 1970; Smith, 1981; Peters and Thisse, 2000). Optimal solutions can be achieved in different spatial conditions and under specific assumptions (Church and Davis, 1992; Thill, 1992; Miller et al., 1992; O’Kelly, 1992). Applied to regional development in general, these normative theories of production and spatial structure assume that investments take place where the returns are highest and labour will flow from low-wage to high-wage regions (Haggett et al., 1977; Malecki, 1991, p. 74–75). The spatial (re-)organization of the forest industry is certainly based on the economic principles and profit seeking. The low-cost transport of raw materials and products is important for the operation of the

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Table 2.1. Classification of the theories on regional development (Tykkyläinen et al., 1997). Approach

Basic idea

Policy implications

Applications in forest sector

Equilibrium seeking

Enterprises search for the highest profitability

No measures, except some infrastructural investments

Frequently used approach by forest industries in determining an optimum location for a plant

Technology and innovation

Technology and innovation are sources of restructuring

Considerable input on science and technology

Explains the development of new employment; explains effects of rationalization

Innovative milieux

Region can become an innovative environment creating opportunities

Training and infra-structural investments to support innovations, promotion of smalland medium-sized enterprises

Explains the success of certain industries, such as the furniture industry in Italy and Denmark

Global capitalism

Capital accumulates to the regions where the highest returns can be achieved

Reducing the costs of the use of production factors

Explains long-term shifts of forest industries

Regulationism

Emphasizes the role of public interventions

The role of state in regulation

Regulation of ownership, capital, trade and labour varies from one country to another

Institutionalism

Emphasizes the cultural basis of society as fundamental condition for development

Adaptive practices, learning

Behaviour, values and the institution of society create the cultural niche where the forest sector operates

Resources and the physical environment

The location and availability of natural resources play a major role in development of regions

Policies to remove physical constraints

Fundamental explanation for the historical development of forest sector

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Table 2.1. (Continued.) Approach

Basic idea

Policy implications

Applications in forest sector

Keynesian application

Emphasizes the role of multiplier effects in aiming at development

Policies to create growth centres

Subsidized forest industry investments in peripheries to boost regional development

Product cycles

The optimal location for production unit changes during the life-time of the product Investments in infrastructure should be encouraged to attract investors

Policy adjustments according to the cycles

Large mills are rather immobile; SMEs are susceptible to product cycles

Deregulation, investments in infrastructure, development projects, partnerships

Infrastructural factors, such as roads and waterways are considered as crucial factors

Human ecology and environmental management

Environmental factors have an increasing importance in location decisions

Regulation, taxation (environmental tax)

Impacts on investments: recycling, closed production processes, etc.

Environmental concern

The industrial sector should take into account the opinions of various interest groups and environmental preferences

Measures for environmentally friendly development

Explains environmentally sensitive production decisions and similar acquisitions of raw materials

Supply-side policy

entire forest sector. The availability of labour, energy and water is crucial for the operation, and the costs of these vary depending on the site. Price changes, new raw material sources, shifts in demand and improvements in technology bring about the continuous economic and spatial restructuring of the forest sector. The equilibrium is hence dynamic in nature. An optimum location of a plant is determined by calculating costs of raw materials, transport and labour. Usually these calculations have been made by the business itself, not by local or regional authorities. This approach has not been very popular in regional

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policy, because these calculations do not necessarily favour any politically predetermined locality. Furthermore, authorities do not benefit from the profitability of a local plant, and thus they are more interested in the spin-off effects of an investment, such as the impacts of investments on incomes and employment in the region. Technology and innovation Innovations have basically been the core of many economic theories, although there have been difficulties to put them into a any formal (e.g. neoclassical) framework (Andersen, 1996). It is easy to forget that which cannot be formalized (and anticipated). Hence, innovations are not frequently included in the economic reasoning in a concrete or formal way. Innovations and progress in production technology are common inducers of economic restructuring, and the role of these factors have been discussed more widely in recent years (e.g. Malecki, 1991; Davelaar, 1991; Hall et al., 1987; Husso et al., 1996; Kangasharju and Nijkamp, 1997). A new, post-Fordist, flexible techno-economic paradigm and an urban environment conducive to development have been regarded as engines in the new wave of development (Freeman and Perez, 1988; Brotchie et al., 1991). One of the key European ideas in promoting development has been to create the European system of innovation in the sense that each national system is part of the integrated EU innovation umbrella and programs (Gregersen and Johnson, 1997). Innovations increase the productivity of labour, and such increases in productivity can often explain why forest enterprises downsize labour. Thus, innovations may have a negative impact on regional development in that sense, but they are necessary to keep business viable. On the other hand, innovations are prerequisites for new products, and hence, innovations are, almost always, necessary conditions for development. The discussion of innovative society has dealt with changes in urban patterns, networks and high-tech industries and some services (Masuda, 1980; Stöhr, 1986; Andersson and Strömqvist, 1988; Hall, 1985; Castells, 1996). Nevertheless, regional innovation strategies have been increasingly included in a regional development agenda, and that policy has been intended to increase the innovative capacity of lessdeveloped areas (Morgan, 1997; Masser, 1989). Advanced technology can provide opportunities (such as new production) for keeping people

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in rural areas and help to maintain settlement patterns according to the preferences of employees (Richardson, 1997). Nevertheless, the impacts of information technology seem to be controversial (Bar-El and Felsenstein, 1989; Oakey and Cooper, 1989; Segerståhl and Jussila, 1989; Grimes and Lyon, 1994). Innovative milieux Lively discussions of innovative milieux have prevailed in recent years (Stöhr, 1986, 1987; Malmberg et al., 1996; Maskell and Malmberg, 1995; Wilhelm, 1997). This approach originates from the Marshallian concept of industrial districts from the end of the last century (Simmie, 1997). The arguments rest on the fact that a locality or region itself can become an environment which is innovative, and many scholars have referred to the opportunities to develop SMS-industries and craftsmanship in relatively peripheral areas (e.g. Camagni, 1995). The development of the forest sector is dependent on high-tech applications. In particular, pulp and paper production plants are high-tech-based and require large investments. Some very specialized industrial alliances of machine works in the world develop the modern technology in the field of the forest sector. Forest industrial companies are familiar with advanced technologies and process steering, but instead of being developed ‘locally’ they are increasingly developed on a national or global level. Industrial milieux can be comprised of global networks, but still possess local connections in the form of employees and raw materials (Dicken et al., 1994). The situation of the forest industry is comparable to that of the mining sector, in that both sectors have corrected to the global market and combine global technologies with local skills and raw materials (Liljenäs, 1992; Tykkyläinen, 1996). Hence, the spatial extent of such learning regions can vary greatly, from local craftsmanship to a few global networks of expertise. Some branches of the forest sector, such as the manufacture of furniture, may benefit from a development policy of local, innovative milieux based on small firms. For example, furniture industry regions in northern Italy can be taken as good illustrations of these (Merlo and Fodde, 1996). Illeris (1993) in his inductive theory of regional development contends that local development (in Europe) is increasingly dependent on the combination of global processes and local conditions that result in a mosaic of regional structures based on specialization and local-specific development policy.

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Global capitalism Various theories describe the global process of the accumulation of capital and its implications for the spatial organization of production (Wallerstein, 1974; Fröbel et al., 1980; Thrift, 1986). The development of a particular region is a result of the combination of its changing role in the global economy, distinctive history and resource endowment (Massey, 1984). The interpretation that the entire vertical process of production, from resource extraction to the final product, being subdivided into sub-processes that are assigned to whichever part of the world can provide the most profitable combination of natural resources, capital and labour, appears to be relevant, as forest companies become transnational. The theories of global capitalism explain, at best, the macro trends of development and the spatial fluctuation of production (Smith, 1990). The approach seems to be useful in explaining the global long-term shifts of the forest industry (e.g. chipboard production). The current interest of forest industry companies investing in the Far East and South America can be explained by this sort of search for profit by capitalist actor on a global scale. Regulation theory Regulation theories argue that the main forces for socio-economic changes occur within national economies and that the world economy consists of relations between national economies and is shaped by the national basis rather than by rootless capitalism (Aglietta, 1979, 1982; Lipietz, 1986). Regulation theories emphasize that structural changes can be explained by the nation-specific mode of production and by shifts towards new modes, such as post-Fordism, in order to guarantee the accumulation of capital. Much research has demonstrated a greater readiness to address the social and institutional regulation of regional spaces (Collinge, 1999; MacLeod and Jones, 1999). Along with advances in production paradigms and with the lessening of state intervention, the traditional modes of resource extraction and production are both under pressure to renew their spatial organization. The reshaping of regions and regional organizations has changed the modes of regulation also at the regional level. Communities are outcomes of ‘flexible accumulation’, ‘recycling of regions’ and geopolitical struggles (Harvey, 1987, 1989; Soja, 1989). The lowering of trade barriers has made possible the globalization and the merger

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of high-volume companies in the forest sector during the 1990s. The geographical differences of environmental regulations may contribute to industry relocation as well as changes in trade patterns (Tomberlin et al., 1998). Thus, development varies by locality and region. The Nordic forest companies have been successful in spite of the deregulation caused by the incorporation of Finland and Sweden into the EU. Regulative practices can also hinder or turn down development as the Russian experience shows (Åslund, 1997). Resource communities face a spatial reorganization of production in very definite ways, such as social and employment problems, migration and housing and town planning issues (Brealey et al., 1988). The forest sector consists of differing regulative practices. For instance, land-ownership differs from country to country (i.e. companies, individuals, farmers or state as owners). Furthermore, the composition of the wood processing sectors (i.e. large- or small-scale sawmilling, the manufacture of furniture, boards, etc.) differ not only according to the attributes of the supply of wood (i.e. quality and quantity) but also according to the country specific institutions and legislation and the cultural and industrial legacy of a region. At the local level, the idea of ‘spatial selectivity’, presented by Jones (1997), can be applied to processing forest industries. It would imply that the state has a tendency to favour certain places through various state projects and regional policy instruments, as has actually occurred in Europe (e.g. Sachsen Papier in Germany). Hence, the modes of production are far from being only global in various branches of the forest sector. Institutional approaches Restructuring also results from the cultural basis of society that denotes a crucial role for institutions. There are a variety of definitions of institutions. North (1991, p. 97) and Amin (1999, p. 367) define formal institutions as constitutions, rules, laws, property rights and organizations and informal or tacit institutions as individual habits, customs, codes to conduct, group routines and social norms, values, sanctions, taboos and traditions. Economists define institutions more narrowly through rules of the game (such as market economic principles) (Róna-Tas, 1998). Besides values, attitudes and cultural heritages as such, regional development is organized via the structures of power and authority in society (Friedmann, 1973; O’Neil, 1992; Lash and Urry, 1994).

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Forest industries and their geographical patterns are affected by the cultural environment of the society. Unresponsive attitudes towards forest businesses or a heavy bureaucratic legacy, for instance, may hinder the development of the forest industry in a region or country. Countries where the forest sector has a significant role have developed their legislation and organizations to favour a certain type of forest utilization. A great number of organizations that operate in this field have created an institutional capacity to make a competitive forestbased economy. Hence, development is dependent on associationist solutions, meaning a variety of actors that foster formal and informal institutions for development (Amin and Thrift, 1995). The transition to Nordic forest technology in Russia provides an example where the western forest industry has faced this contradiction between the local way to work and the institutional setting of Russia (Sigurdsson et al., 1995). Furthermore, socio-personal characteristics and motives influence decision-making in resource sectors – e.g. wood processing (Kortelainen, 1998) and farming (Ilbery, 1978). Similar points seem to be relevant in forestry and in the behaviour of forest owners when they argue about how forests should be utilized as a resource (Karppinen, 1998). In some cases the population may be unaccustomed to forested landscapes, as the example from Ireland shows. Massive field afforestation programs in Ireland have faced opposition from farmers as they have been reluctant to plant forests because of their resistance towards forested landscapes. Resources and the physical environment The location of a natural resource offers opportunities for establishing resource businesses on it, while the threat of natural hazards is a risk for businesses. The location of forest businesses can be considered from the standpoints of forest inventories and physical attributes of a region (Kuusela, 1994). This is usually the first stage of development planning. Climate, soil, access, location of deposits, etc. are physical factors influencing the location of forest businesses, and these factors have been a fundamental research domain in forest sciences. The relationship between physical and economic margins is a complex and dynamic one, and constitutes a central issue within the approach. The physical environment has very different properties varying in space with each resource having its own system of exploitation and occurrence on the earth (Miller, 1979; Cutter

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et al., 1985). There would be no production without surveys and a subsequent knowledge of the possibilities offered by nature. On the other hand, this approach is not a sufficient argument for establishing any wood processing industries – for example, successful furniture industries in Denmark are not based on locally available wood resources. Keynesian applications Popular paradigms in the 1960s and 1970s emphasized growth centres, propulsive industries and multiplier effects (e.g. Darwent, 1969; Tolosa and Reiner, 1970; Hansen, 1972; Moseley, 1973; Buttler, 1975; Gore, 1984, p. 81–117). This approach pointed out the inter-industry linkage effects of the forest sector. It was central in explaining development of the forest-based regions and in introducing policy recommendations to less-developed areas where the forest sector was considered as development potential (Palo, 1988). This approach, based on Westoby’s (1962) paper, was the mainstream doctrine in forest economics for a long time. A typical example is the calculation of employment and income effects of hypothetical pulp and paper production complexes on a regional economy (Karjalainen and Tykkyläinen, 1979). The interindustry linkages approach is most appropriate for analysing the short-term effects of a shrinking basic sector on the production level of the local economy. Many regional policy measures incorporating subsidiary and redistributive elements contain rudiments of Keynesianbased theoretical constructions. Product cycles Theories consisting of spatial manifestations of product cycles explain economic activity within regions in terms of the knowledge requirements of production during a product’s life-time. The product changes from being innovative to being mass-produced and the product is initially manufactured in knowledge-intensive areas in its early phase and outside the cores in later phases (Norton and Rees, 1979; Dicken, 1998). This model works in explaining the diffusion of growth waves from developed to less-developed countries (Korhonen, 1994). Relocation processes are of minor significance in the forest industries because the primary production system is immobile. Furthermore,

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the equipment of large mills is not easy to transport, but in the mechanical wood processing sector this relocation can take place. Old machinery can be relocated to a developing country, for instance, where production can be commenced. Supply-side policy According to those who emphasize the role of supply-side factors in restructuring, major rigidities in market conditions should be ameliorated and removed with the aim of creating a more flexible economy (Chisholm, 1990). Prices, exchange rates, incomes and the allocation of investment capital should all be determined by market signals (Welch, 1993). Instead of a redistribution of the national wealth between regions and communities, as practiced in Keynesian regional policy, infrastructural investment, deregulation and an opening up of the regions to competition should be encouraged. The advantages or benefits of competition among countries are often the underlying ideas behind the arguments. According to this approach, the contribution of infrastructure is an essential condition of production. The forest sector usually benefits from this policy greatly. For example, factors such as transport costs, communications, information superhighways, access to Research and Development activities and labour skills, have all been regarded as factors influencing development (Andersson et al., 1990; Vickerman, 1991; Bade and Nerlinger, 2000). During recent years this discussion has centred on urban development, and not so much on the forestbased regions. Many European rural areas have benefited from the EU funding targeted to the less-favoured areas. Infrastructural factors such as roads and waterways are crucial for remote resource extraction, and improved telecommunications are a necessary condition for new organizational structures. The newest wave of the construction of new infrastructure is the investment in the telecommunication and the Internet sector. The Information Society makes possible more flexible organizations, and a telecommunications revolution is on its way. It is leading to the telematic (remote) control of production and logistics, production automation and almost unlimited transfer of data over the globe. This transformation is clearly one of crucial aims of development in the EU. This approach is both theory and policy.

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Human ecology and environmental management Environmental management has its roots in the growing interest in applying principles arising from human ecology and environmentalism (Hägerstrand, 1993; Buttimer, 1998). This led to consideration of the forest sector as part of the ecosystem consisting of flows of energy and material (Cunningham, 1974; Jaatinen, 1978). In practice, development in resource communities is increasingly being influenced by public resource management, environmental control and environmental impact assessment (Rees, 1990, p. 277–445; Mitchell, 1989). Environmental planning (e.g. Environmental Impact Assessment) has become a routine matter. It is considered that this kind of ecosystems management combined with dialogues with stakeholders has much to offer for the resolution of forest conflicts (Elliott, 1996; Maser, 1994). Various theories have been developed to deal with environmental goods and externalities (e.g. Bowers, 1997; Tietenberg, 1996). Legislation and penalties are implemented in order to improve the sustainability of the economic-environmental system and, at the same time, residential preferences are becoming increasingly sensitive to environmental factors that shape the structure of the community. Ecosystembased management is increasingly replacing the more traditional forest management (Kennedy and Thomas, 1996). Decisions on the use of forest resources and technology are influenced by the criteria of sustainability, ecosystem rehabilitation and protection. Environmental concern The emergence of environmental movements is traced back to the 1960s, when pollution caused by the forest sector was a concern in industrialized countries. The societal nature of environmental concern has been discussed at great length in geography (e.g. O’Riordan, 1971; Sayer, 1979), but its public profile heightened with the growth of radical environmental movements. Forest conservation has a long history, and there is a variety of reasons for forest conservation (Elliott, 1996). Various measures have developed to reduce the environmental impacts of the forest sector, such as recycling regulations and financial incentives, packaging and reuse requirements, technical regulations and standards for product and processing methods and certification (Bourke, 1995).

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Taxation and infrastructure policy guide the primary utilization of forest efficiently (Framstad, 1996). Debates over forest devastation, paper recycling, nature protection, etc. have influences (often via customers) on the production decisions of the forest sector. Hence, theories describing and explaining people’s relations to nature and the environment have a role in explaining the restructuring of communities based on the forest sector. Ecological movements are concerned with the preservation of old forests in Fenno-Scandia. That concern has spread and many customers of the forest companies have adopted the same concern. Theories and discourses related to human environmental behaviour, values and social movements are growing in domain (Jagtenberg and McKie, 1997), and are becoming increasingly important for the development of the forest sector. 2.4.2

The relevance of theories

The previous categorization reveals that numerous approaches exist and that regional development theories are based on the time of its own and the particular development process of the society. Each theory covers a certain domain of regional development processes, and each theory can be supported under certain conditions. Nevertheless, such feasibility had to be taken as a sign that the explanatory power of a theory is dependent on societal and economic conditions of localities at a specific time. This dependency on historical context can be illustrated more clearly by taking an example from a longer period of time. When steam technology was introduced into the forests of the USA and forest workers were pioneers moving to the West in the late 1800s, the key issues of regional development were totally different to the development issues of the high-volume pulp and paper industry of today. Thus, the theoretical focus of a study can hardly be the same in the both cases. Geographical differences are also important. It is also easy to understand that the regional development issues in the province of Alberta (Canada) where forests are Crown forests and the majority of production consists of high-volume pulp production are different to the development issues of the Basque Country (Spain) where 20 000 forest owners provide 2.1 million m3 of wood and the main user in the terms of employment is the furniture industry (Mitchell, 1999). Hence,

REGIONAL DEVELOPMENT THEORIES AND THE FOREST SECTOR

31

Figure 2.2. Importance of the regional development theories in the late 20th Century.

the relevance of theories is bound to time and place – and finally, the research questions of a study. Figure 2.2 depicts the fluctuation of the importance of the various theoretical paradigms of regional development during the last four decades. Although the theoretical legacy of regional development theories seems to be rather speculative, limited and obscure, some strands prove to be more relevant than others. The current emphasis of certain regional development theories is partially a result of practical socio-economic objectives, such as the objectives expressed in structural policy of the EU. In addition to the academic mission theories, there are also tools to achieve practical development goals, and the theories that assist in achievement of current objectives are considered to be more valuable than others – providing that the theories can be verified. At the beginning of the new millennium, evidently the following strands of theory are the most important set of regional development theories: (1) technology and innovations; (2) innovative milieux; (3) institutionalism; (4) supply-side theories; and (5) human ecology and environmental management. The regulation theory is still strong, but if institutionalism is broadly defined, such broad institutionalism can be considered to include some of the regulationist approaches. Relevance in socio-economic sciences may have different meanings, denoting, for instance, whether a discipline is related to the resolution of current socio-economic problems or to respond to the demands set by doctrinaire governments and companies. The relevance of

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THEORIES

development theories is seen here as the extent to which the proposed theoretical framework helps in answering the questions of this research. One can prove any of the above-mentioned theories to be true, at least to some degree. However, whether such theories are relevant is quite another matter. The focal point is which of these theories provide results, and reveal crucial bottlenecks and present future options. In addition to the explanation of the past and current development, the framework should also be suitable for designing new (forest-based) development strategies. The relevance of regional development theories is approached from two standpoints in this study. First, the recent emphasis in the use of regional development theories is assumed to reflect the topical points of regional development. This can be justified because regional development is an intentional, socially constructed process, and regional development theories reflect, or rather should reflect, topical problems in regional development. Nevertheless, it does not indicate that one should be satisfied with these theories – they reflect the current issues of development and have no knowledge, and hence indications, of the future. Thus, they are only starting points from the past for the better explanations of current and future development. Theory building is an innovative process. Second, we rely on the latest experiences of case study research in regional development. Two research projects with comparative research settings have resulted in the new theoretical interpretations of development (Neil and Tykkyläinen, 1998; Wilson et al., 1999). These new insights can be developed further to constitute a theoretical framework for the FORWARD project.

2.5 Multi-Causal Explanation of Development As has been the case in the resource communities in general, a search for an explanation of regional development has led to the finding that there are various reasons why actors in the forest sector succeed or fail in economic restructuring and development. The development of communities and regions is a combination of such factors (Tykkyläinen and Neil, 1995; Neil and Tykkyläinen, 1998). The research by Tykkyläinen and Neil revealed that global, political, sectoral and local factors, in addition to the actors as development agents themselves, were important factors. The potential of human agency (such as

MULTI-CAUSAL EXPLANATION OF DEVELOPMENT

33

entrepreneurs, companies, local authorities, development projects, etc.) to create development should be evaluated in this sort of broad, multi-causal setting. Successful development is a unique and rare combination of factors and measures (Figure 2.3). This approach can be applied to the forest sector as a framework for successful development. Figure 2.3 summarizes the elements found in the former studies in the framework of multi-causal approach (Neil and Tykkyläinen, 1998). 1. Many international, or one may say global, factors of development have strengthened at the expense of national factors. These supra-national operations are evident trends also in the forest sector (Arthur and Wilson, 1999). Economies are globalized, the barriers of trade and capital flows have been removed, market-led ideologies have been dominant in the 1990s in many countries. The markets of roundwood and finished forest products are increasingly global. In Europe, the single market within the EU has removed trade barriers and the single currency (the Euro), will facilitate transactions and trade. The growth of environmental consciousness has crossed the national borders, indigenous forest preservation has become part of the national and supra-national forest policy, criteria for sustainable forest management have been formulated, and many supra-national agreements dealing with trade and monetary issues have been implemented. Local actors do not have much voice in these matters. They are powerless to protect their local economies and they cannot influence tariffs. The major decisions of conservation and preservation are made at the national, or even at the supranational, level and the local actors have to reconcile themselves to such rules as carbon dioxide regulation or monetary policy. Local actors are dependent on these external decisions. 2. The forest sector is not homogeneous in technology and market behaviour. Sawmills, paper-making and the manufacture of furniture, for instance, need exclusive technologies and have separate markets. Partly such (sub-)sectoral factors are dependent on the overall development, such as the development of automation and information technologies. The opportunities to implement automation and increase productivity vary by branches – automation has been much more widely applied to pulp and paper

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THEORIES

Figure 2.3. Conditions of successful development.

MULTI-CAUSAL EXPLANATION OF DEVELOPMENT

35

making than to furniture manufacturing and construction from wooden materials. Compared with other sectors in economy, such as electronics, trade and services, the specific nature of the forest sector becomes even more marked. The value choices of the society, such as recycling and protection, are sector-specific and dynamic. For instance, the growth of reforestation and afforestation of forests in Europe has long-term effects on the supply of wood. Recycling reduces the growth in demand of primary fibres in pulp production, etc. Thus, sectoral factors have certain, very specific roles in the development of communities. Success, measured by growth and profits, varies from one industrial branch to another within the forest sector. The shift of production from one branch to another belongs to the evolutionary nature of industry. Some branches are growing and new spin-off activities are developing, and some branches are declining. This results in the need for the reallocation of human and capital resources. Upward and downward swings in the market create opportunities for profit-making and cause closures, and innovations lead to the replacement of previous production processes and products. Some companies have successfully grown by taking opportunities from the transformation of markets. For instance, many companies have started in timber trade or mechanical wood processing and moved into pulp and paper. Some companies have shifted from being ‘only’ resource-exploiting logging enterprises to the role of consultants. Also, some recently privatized, former state owned forest enterprises, whose origins stretch back to former imperial estate administrations (e.g. the Austrian Federal Forests), are taking part in this process. In general, the share of services, from total output supplied to the endconsumer, has become more and more important (e.g. furniture companies selling interior design services either directly or indirectly through catalogues and showroom arrangements). This shift is part of restructuring. Local actors cannot influence this development other than by utilizing the opportunities that this restructuring from the market provides. 3. Political measures at the national level are the third set of factors (Figure 2.3). Authorities at the various levels, from local to national, carry out policies and programs in order to regulate development. There are a variety of measures

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THEORIES

(such as innovation policy, regulation by taxation, incentives, environmental standards for harvesting, ecosystems management, certification for sustainability and environmental policy) that influence the development of the forest sector. Individuals operate as political forces, and they make choices regarding the future. They form the rules and institutions by their own behaviour. The statutes of recycling and conservation are good examples of a rapidly changing political environment in the forest sector. Individuals can realign their economic goals. For instance, the industrial growth doctrine of post-war Europe was gradually replaced by the common goal of sustainable development in the 1980s and 1990s. Similarly, national political factors (for instance, environmental regulation) significantly influence the development of the forest sector. People influence the formulation of the practical measures of policy, and hence it is the choice of citizens. 4. Each forest economic region and forest industrial community comprises a unique environment for economic activity. Local factors in explanations deal with locational conditions, historical processes and opportunities (Figure 2.3). These explanations are related to spatial uniqueness and socio-economic processes in situ. The forest resources are a typical example of those unique, local factors, which put many localities into an advantageous position in forest business. The development of forest industries is more or less dependent on specific local features, e.g. the growth of forests, labour skills, local entrepreneurship, communications, the industrial composition, etc. 5. The actors themselves, entrepreneurs, employees, land-owners and companies, are decision makers and creators in development. Individuals, companies and groups directly and indirectly steer the outcomes of development. The development process is a reflexive process and a learning process that consists of the complex web of effects and feedback. Human activity is an evolutionary process which creates economic and social practices, part of those being economic production. It is a source of development. The contents of all innovative, developmental processes are ultimately dependent on human behaviour. The actor’s activity is always necessary, but is not by itself a sufficient condition for development.

THE ROLE OF HUMAN AGENCY: INNOVATION OR ADAPTATION

37

The complexity of the restructuring processes should be accounted for through well-elaborated and broad explanatory frameworks. It is not a new idea. For instance, Porter’s (1980) diamond model is a holistic one (see Lammi and Rouvinen, 1996). The focal matter is the combination of factors that makes a ‘region’ competitive. There is no panacea – only unique solutions, both in time and space. The forest sector operates globally and receives stimuli through the market, it is dependent on the properties of geographical space, it has sectoral dissimilarities, and it is involved with public intervention and private actors. Thus, it is essential to take this kind of conjunctural set of reasons into account when explaining regional development based on the forest sector. It is expected that a careful elaboration of the above factors will increase the understanding of the functioning and impacts of the forest sector. As one starting point for a more comprehensive explanation, one can recommend a comparative approach. Comparisons of rural restructuring processes and local economic schemes in an international context highlight different aspects of transformation, bringing out specific factors and providing a broader context within which to explain development. Thus, research that explores and compares restructuring processes and describes cases in various countries may yield explanations that are more comprehensive than research carried out within one country.

2.6 The Role of Human Agency: Innovation or Adaptation The development of the forest sector and the promotion of the sustainability of forest ecosystems constitute the path of choices of human agency (Maser, 1994). The mobilization of human agency towards to new solutions is a fundamental reaction to pressures to restructure. Otherwise there are no positive results, but only passive adaptation. This is a very simple condition for development, but it is often not fully realized. The local actors have often waited for outside actors (companies, authorities, state, etc.). Many examples of successful restructuring reveal the significance of a suitable coalition of actors and competent individuals in fostering development (Kortelainen, 1998). Development is bound to place, time, opportunities and human

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THEORIES

actions. Thus, there is no ideal, fixed model of local economic development within the forest sector or elsewhere in an economy. Human activity is shaped by the economic viability of a community. However, the economic viability of a community has multifarious effects on socio-economic practices. Human activity constitutes evolutionary processes that create economic and social practices, and finally, structures. That means institutions, the control of man-nature relations, industrial activities and social arenas in localities and states. At its best, local development, is both reflexive (within its social capital) and a learning process with associated effects and feedback (Figure 2.4). In many cases development or a ‘good life’ do not require growth or innovations; a development process may be adaptive, for instance, in a case where a community is gradually waning because the economic base of a community is no longer viable. Adaptive development should

Figure 2.4. Successful responses in regional development.

HOW MUCH DOES THE PROACTIVITY OF LOCALS MATTER?

39

not be underestimated or belittled as such situations may actually provide a ‘good life’ for those who stay there. Figure 2.4 points out that human agency, both directly and indirectly, steers the outcomes of development in localities. Development is also a matter of choice: how to innovate and how to adapt. The contents of all innovative, developmental processes are, in the end, dependent on human behaviour. This human striving is a necessary, but not in itself, a sufficient, condition for development. Individuals, groups and partnership organizations can affect development significantly, but not without limitations. This approach emphasizes the necessary conditions: the actions of local people and the local circumstances (see Illeris, 1993). On the other hand, sluggish development of the Russian North demonstrates how the inherited institutional, service and organizational structures hamper development. The largest failure of foreign business intervention in Russian Karelia in the 1990s was the failure of AssiDoman in its acquisition of Segezha pulp and paper mills (Tykkyläinen and Jussila, 1998). This failure reflects the mismatch between the principles of the market economy and the actual business conditions in this part of Russia – the source of many complaints from business people (Puumalainen, 1996). The institutional conditions for the development can be actively developed as was the case in Alberta (Canada) where the growth of forest business has been rapid during the last two decades (Luckert, 1999). Initiatives and the opportunities and obstacles of development vary locally, regionally and from country to country. Human agency, comprised of a complex web of actors, is central in creating conditions and acquiring benefits from sectoral transformation. For instance, companies continuously investigate attributes of geographical space by searching for more profitable locations and markets, and sectoral restructuring also means spatial restructuring. As the development takes place in this way, local people in forest-based communities should be involved in this transformation in order to create various options for development.

2.7 How Much Does the Proactivity of Locals Matter? Regions, or rather, actors in a region, can successfully compete by enhancing their human and social capital and by promoting innovation. Viable communities are a seedbed for all socio-economic

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THEORIES

activities. Up-to-date human and social capital is usually the best guarantee for keeping a resource business in a community and, if that strategy does not succeed, social capital can facilitate the acquisition and development of compensating businesses in the community. This strategy alone does not necessarily hold in the very harsh environments, as shown in a number of case studies in the mining sector of the Canadian Arctic (e.g. Kendall, 1992) and in mines located in deserts (Houghton, 1991). Thus, the enhancement of human and social capital is not necessarily bound to only the remote locality itself where production takes place, but also to the present and forthcoming settlement options of employees. Human and social capital should be seen from the perspectives of individuals and trans-local community networks. Forest-based communities and the remote regional economies are increasingly being characterized by linking them to urban networks of trade, education and culture. Advanced telecommunication and transport connect remote communities more efficiently than ever before to the advanced core economies. When economic systems become more open, as has occurred in Europe, many improvements of human capital (training, skills, technology, etc.) are acquired from outside the area. The external linkages must be recognized in each local community as a crucial factor of development. Business ideas and especially financial capital inputs are seldom local in origin. Although all communities (from those in the outlying peripheries to the urban core areas) are increasingly linked together, it is important that each community is competitive and remains proactive in the development that they wish to have. The studies of transitional countries especially have indicated that the innovative potential of a community is dependent on its everyday living conditions, not only in terms of education and training, but also in terms of the overall social and cultural milieu which continually produces and stimulates its innovative development. These forms of human and social capital, labour and a social milieu, are a crucial productive force that should be emphasized when planning the development of forest-based regions. Institutional theories demonstrate the decisive importance of organizational innovations in development. The preconditions for successful development are the existence of efficient and appropriate legislation and economic organizations (such as legal forms of companies, tax systems, duties, and the fair operation of public and local authorities) at

THE FRAMEWORK OF RESEARCH

41

all levels. The problems of the Russian forest sectors indicate clearly the decisive role of institutions and organizational structures (Piipponen, 1999; Carlsson, 1999; Tykkyläinen and Jussila, 1998). One can find examples of similar decisive institutional and organizational factors from any country, for example New Zealand (Wilson and Arthur, 1999) and Alberta (Canada) (Luckert, 1999). Developing business organizations require up-to-date institutions and business environments. Innovation is a broad concept that intersects general, political, sectoral and local factors, and thus, the preconditions for innovative development are created by the entire society. Each rural site is a unique case providing a space of habitation and a potential for development. A site linked to a community has to have its site-specific advantages to provide means for successful business. And furthermore, a community, or rather the individual members of such a community, must be proactive in order to develop their economic and social conditions. Development is the successful combination of active participation and discovered opportunities. Local proactivity and responses to challenges vary from region to region as the case studies of the research portray. In most cases, people have formed emotional and personal ties to the social networks and places where they live, and these dependencies decrease people’s willingness to move and change their lives radically. Such dependencies require special consideration in local policy and development measures. The former studies reveal that the actors reacting to the pressures of restructuring are sparse. Only a few members of the community are able to set up enterprises. These actors are comprised of both local and external individuals and newly-formed groups and ad hoc organizations, which have developed responses to restructuring. Successful endeavours usually supersede the borders of a single community and bring together new resources (skill, funds, etc.). It is not realistic to expect that a traditional community – a local authority or local residents – will operate as a collective and coherent organization in the development phase. The consequence of the heavy pressure to restructure is usually disorder rather than increased cohesion. Individuals who search for means of livelihood and a better life, or who try to develop more profitable configurations of capital and labour to avoid unemployment and decreasing welfare are usually creative inducers of development.

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2.8 The Framework of Research Many specific elements from varying theoretical constructions are of potential significance in explaining the development of communities based on the forest sector. Overall, it seems evident that the explanatory framework should be relatively broad, multi-causal and dynamic, and it should take into account global, sectoral, policy-related and local factors and the role of human agency, which are often omitted in routine explanations of development. The forest sector in the EU operates in an economic environment that is an arena for various factors, from local to global, as shown in Figure 2.3. The public sector provides the framework for operation of market forces. Hence, there is no opportunity for a strong, integrated policy that covers the entire production chain from forests to the end-use of forest products. The forest policy is a policy of stepwise increase in competitiveness of actors in the forest sector. Thus, any development policy should be tailored according to the local abilities and opportunities. Table 2.2 summarizes the most important theoretical strands and the factors (or one may say levels) of development. This is basically the framework representing the crucial issues of development in the forest sector. This theoretical framework can be made more definite by depicting the possible application of theoretical arguments. The following questions serve as starting points for the construction of an explanatory model or theory of successful development. These questions should also help in the operationalizing stage of key theoretical concepts. 1. Technology in the form of technological inputs and innovations has been proved to be crucial for industrial development and Table 2.2. Theories and factors of regional development. ∗∗∗ = pay special attention in research; ∗∗ = an important issue; ∗ = minor issue.

Technology Innovative milieux Institutions Supply-side Human ecology

Global

Sectoral

Policy

Local

Actor-based

** * *** * **

*** *** *** ** ***

*** *** *** *** **

*** *** ** *** ***

*** ** *** ** *

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modernization. A variety of questions can be raised in each of the case study regions. For instance, does the national (or EU) innovation policy support the development of the forest sector in a region? Is it directed to the evolution of the forest sector, or, does it support the conventional production? Would it be better to implement a policy that is directed towards new, risky sectors, or, towards the conventional ones? Is it more reasonable to support innovativeness in the framework of larger companies or to increase funding at the grassroots level? Does it make sense to enhance forest-based technology at all, and if no, what should be measures for assisting the restructuring of the industrial basis? 2. The theoretical arguments for innovative milieux raises the issues of education, training, local policy, housing, cultural amenities, etc. What sort of training is needed? How can skilled labour be attracted to the companies in a region? How can companies be networked in order to create self-sustained growth? How can higher education and research institutions, the service sector and relevant supra-regional actors be integrated to enhance the development of a region? How can the dynamic competence be maintained to keep companies at the leading edge of forestbased production? If there is no policy input for enhancing the competitiveness of companies, what will happen? Do companies maintain their position in competition? Or, are the global forces of market development stronger than any regional attempts to evolve development in the forest sector? 3. The forest sector is very sensitive to institutional arrangements. Forest ownership has many dimensions from economism to the emotional ties to the land. What would be the most efficient system of forest ownership and regulative practices in each stage of technological and societal development of the society and region? How will different interests and goals in society be taken into account when regulating the use of forests? What is the choice between promoting large-scale investments and small-scale production? What is the appropriate role of foreign investments? What risks does the import of wood include? And so on. There are several case studies in the FORWARD project: Are the institutional arrangements somewhere better organized than somewhere else? Is there any sense for common rules and a more harmonized legislation in Europe?

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4. Supply-side measures have always been crucial for forestry and high-volume production. What has been the role of infrastructure when comparing forest-based development in different part of Europe? Are there any major bottlenecks in infrastructure? Are there any new technologies that could make the utilization of forests more profitable for the companies and a region? What could be role of the EU funding in the forest sector? Is there anything that could be done from the standpoint of better infrastructure? Are the afforestation programs useful and profitable? What sort of forest infrastructure do the locals prefer? Does the community infrastructure support the targeted development? Should a development program for SMEs be introduced? What sort of supply-side measures do SMEs need? How about the sufficient supply of labour and energy? And most importantly, how can the primary raw materials be provided to the industrial sector of a region? Does it make any sense to promote raw material trade within the EU, and if so, what would be the directions of the raw material flows? 5. The doctrine of human ecology has brought the bundle of objectives into consideration. Forest ecosystem and people’s attitudes vary within Europe. What is the appropriate way to combine economic, social and environmental goals of the society? How can environmental attributes be assessed? Who are the stakeholders? Is there any common basis for the sustainable or ecosystem-based management of forests in Europe? What is the role of regions and localities when deciding these issues? How can the principles of subsidiarity be applied when deciding these matters? Are there any new regional ways to develop a more sustainable use of forest? Who are the relevant stakeholders when deciding the use of forest? What are the experiences from case study regions? These five theoretical strands are a very relevant starting point to further elaborate on forest-based development. The research setting is depicted in Figure 2.5. It is important to emphasize the role of stakeholders and actors in development. They should be a focal point in any model of regional development. Without the actors there is no development. The FORWARD project has focused empirically on case studies. The comparative case study approach has certain limitations. It

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Figure 2.5. From propositions to a theory and the findings of successful development patterns.

answers the ‘how’ and ‘why’ types of research questions (Yin, 1990, p. 17). It is rather inefficient in answering the ‘how many’, ‘how much’ or ‘where’ types of research questions. The case study approach is at its best when investigating complex and multi-causal (i.e. conjunctural) processes that are difficult to comprehend otherwise. Yin (1990, p. 23) states that a case study is suitable for situations when: (1) investigating a contemporary phenomenon within its real-life context; (2) the boundaries between phenomenon and context are not clearly evident; and (3) multiple sources of evidence are used. Case studies are preoccupied with the understanding of complex causal relations. These causal relations are often conjunctural and long multi-tier chains of causes and effects. The generalizations arising from this approach are seldom of a statistical nature, and the validity of the case study research does not depend much on the randomness or typicality of the cases selected for study. The success of a (regional) forest sector is a result of many inter-related factors. These kinds of complex systems are often explained by the realist methodology, which concentrates on the identification of causal mechanisms (Sayer, 1992; Saether, 1999). Complex systems can also be compared, for instance, by various comparative analysing techniques. The method selected in this study is the Boolean approach (Ragin, 1987). This method is well suited to rather ‘rough’ data and comparisons at a nominal scale. The Boolean approach would be suitable as a first step before the more detailed analysis of causal connections. Nevertheless, the methodological choices are finally dependent on the success of their ability to provide satisfactory answers to research

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questions. The approach to the research questions of the study in its empirical parts is not predetermined, although the complexity of the research task requires rather advanced and flexible analyses. The success of forest-based development in different physical and social environments is a bundle of causes and effects. There is no clear, ideal or a priori, model of forest-based development. Hence, the research process may thus be ‘iterative’. That is, the case study evidences are examined, theoretical positions are revised, and the evidence is re-examined from a revised perspective. In order to get a valid interpretation of forest-based development in the European context, cross-case analysis and comparisons are needed. The former report of the FORWARD project (Hyttinen et al., 1999) revealed the unique nature of development in these regions. Development seems to be locally-specific, bound to past development institutions, and local, regional and national willingness to develop a forest economy in each region. The case studies may reveal the unique combinations of opportunities and barriers for development. But how unique are they? One can anticipate that successful policy is a combination of innovative milieux, appropriate technology and innovations, appropriate institutions, suitable infrastructure and the solution of raw-material and environmental issues. After that we can ask what will be the role of various factors – is it a matter of global, sectoral, political or local dependency? And what is the role of the locals?

2.9 Limits to Research: Uncertain Future The design of regional development strategies is not an easy task. In order to design an effective regional policy for the forest sector, the anticipation of development is useful. If development is anticipated, development problems should also be anticipated. One of the key questions is: What will be the impacts of structural, long-term transformation of economic structures on outlying localities? The empirical studies have revealed how different the forest systems in different European regions are. There is no final panacea for how to enhance the competitiveness of a particular actor in forest business in different localities. Of course, the transfer of solutions may be useful, but in every locality the development process is a reflexive learning process between actors.

LIMITS TO RESEARCH: UNCERTAIN FUTURE

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Answers to the future questions of the forest-based development are true only with a certain degree of probability because nobody knows under what conditions the forest sector will develop in the future. Recommendations are only speculations, but they can be improved by the latest knowledge. The developed framework is topical, but it can be applied if taking into account the limits of prediction. The future is always uncertain. The framework may help to understand the key issues of forest sector at the turn of the century, and the framework is useful as long as the forest-based socio-economics of localities does not change considerably.

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3

Quantitative and Qualitative Methods

3.1 The Combination of Quantitative and Qualitative Approaches in FORWARD In FORWARD both qualitative and quantitative methods from social and economic sciences have been applied in order to make use of the benefits of both approaches. The project started out with exploratory research missions into each of the 11 case study regions in order to collect available material and conduct interviews with actors from the forest sector and other relevant contacts. This information has been compiled and published in the FORWARD-Phase 1 Report (Hyttinen et al., 1999). Based upon this information the research plan for the second phase of FORWARD was established. As a starting point a set of hypotheses for this phase was formulated. These were developed using the available information on the case study regions, and the theoretical framework that was outlined in Chapter 2 of this report. As a next step research activities in the project were structured into two modules, one focusing on quantitative methods and the other one using qualitative methods. Based upon the developed hypothesis plans and materials to investigate the hypotheses were developed. For the quantitative module this resulted in lists of variables that would be used in statistical analysis; for the qualitative module, hypotheses were used to develop structures for further interviews with actors in the case study regions. Continuous exchange of information served for the mutual benefit of the two modules of the project. The results of both the quantitative and qualitative part were then used in a synoptic analysis to develop the final conclusions of this research activity. Figure 3.1 gives a graphical overview of this research design.

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Figure 3.1. The FORWARD research design.

3.2 Quantitative Data and Analysis 3.2.1

Regional forest resource and socio-economic data

The subjective selection procedure and the small number of case regions did not provide a basis for proper comparative quantitative analysis to produce results on dependencies among the variables studied. Therefore, the quantitative analysis on forestry and socioeconomic data was based on information collected from general statistical sources at the country and regional levels in EU member countries. Although the collected information provided a general overview on employment and income at the country and regional levels, it still did not enable the analyses of the causality of forest sector’s contribution to employment and income at the national or regional levels.

QUANTITATIVE DATA AND ANALYSIS

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For that purpose, the existing data was insufficient and inconsistent. Nevertheless, the information available allowed application of multivariate statistical methods, Principle Component Analysis (PCA) and Cluster Analysis (CA) (Manly, 1986), which were used in the quantitative analysis to identify regional similarities of forest resources and socio-economic structures in EU member countries. The comparison of forest sector income and employment has been done mainly at the national level, as in principle, poor availability of data has made it difficult to internationally compare income and employment at the regional or local level. For the specific comparisons of forest sector’s contribution on employment and income, especially when focusing on the analyses of regional or local development, the country level figures remain too inaccurate. In the quantitative analysis of the FORWARD-project, ‘region’ was defined by following the Eurostat official division of regions to Nomenclature of Territorial Units for Statistics (NUTS) areas. Information was collected at NUTS2-level because of the European Commission suggestion (European Commission, 1999) that the distribution of structural funds should be based on the classification by the NUTS. Altogether the sub-national data following the NUTS classification was collected from 106 regions in EU member countries. The information on population, employment, income and forest resource variables at defined regional level was collected from Eurostat statistics (Regional Statistical Yearbook, 1994, 1995, 1996, 1997), and from the statistical database provided by the Statistical Office of Finland (Tilastokeskus, 1999). Although various sources were consulted, the heterogeneity of national account systems resulted in missing values for many variables. Consequently, the number of forest resource and socio-economic variables used in this study was limited to 11 (Table 3.1, column 1). 3.2.2

Multivariate statistical analysis

In the first part of the quantitative analysis, a total of 14 socio-economic variables were used to study the relationship between 106 regions. Due to the large heterogeneity of the regions in the EU, it was not possible to find significant causal relationship or correlation between the studied variables. Consequently, EU member countries were first grouped into more homogeneous country groups, and the causal relationship of regional variables was studied within these country groups.

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Table 3.1. Regional and national level data. Regional forest resource and socio-economic variables

National forestry, forest products trade and socio-economic variables

1. Unemployment rate (%) 1. Population density (persons/km2 ) 2. GDP per capita (EUROs) 2. Active population (persons 3. Forest and other wooded land between 15–64 years old) (1000 hectares) 3. Employment in services (persons) 4. Total removals (1000 m3 ) 4. Employment in primary production 5. Population (persons) (persons) 6. Population density (persons/km2 ) 5. Employment in secondary production 7. Annual change in population (%) (persons) 8. Active population (persons between 6. Unemployment rate (%) 15–64 years of age) 7. GDP per capita (EUROs) 9. Employment in services (persons) 8. Forest and other wooded land 10. Employment in primary production (1000 hectares) (persons) 9. Total removals (1000 m3 ) 11. Employment in secondary production 10. Wood pulp import (1000 tons) (persons) 11. Wood pulp production (1000 tons) 12. Paper and paper board import (1000 tons) 13. Paper and paper board production (1000 tons)

In the second part of the quantitative analysis, Principle Component Analysis (PCA) and Cluster Analysis (CA) were used to identify the regional similarities of forest resources and socio-economic structures in EU member countries. On the basis of 13 national level variables (Table 3.1, column 2), EU member countries were divided into five groups using three country grouping principles: (1) OECD rurality (Huillet and Long, 1992); (2) Ecological zoning for forest resources (Kuusela, 1994); and (3) the FORWARD grouping. The last grouping performed the best in the conducted PCA and was selected for further analyses. The following classifications of the 15 EU member countries were made: Finland and Sweden were classified as Forest resource dominant countries; Belgium (BE), Netherlands (NL), Luxembourg (LU) and Denmark (DK) as Benelux countries and Denmark; Ireland (IR), Portugal (PT) and Greece (GR) as East-Mediterranean-Atlantic countries; Italy (IT), France (FR), UK, Spain (SP) and Austria (AU) as Forest products consumption dominant countries; and Germany (DE) formed a group of its own (Table 3.2). The focus in the third part of the quantitative analysis was to examine the relationships between the regions of the countries within

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53

Table 3.2. The classification of EU countries into groups on the basis of the national level data presented in Table 3.1, column 2. Coun- OECD rurality try (Huillet and Long, group 1992)

Ecological zoning of forest resources (Kuusela, 1994)

FORWARD grouping

I

Northern (FI, SE) Atlantic (UK, IR) Sub-Atlantic (FR, BE, LU, NL) Alpine and Central (AT, DE, DK) Mediterranean (PT, SP, IT, GR)

Forest resource dominant countries (FI, SE) Benelux countries and Denmark (BE, NL, LU, DK) Germany (DE) East-Mediterranean-Atlantic (IR, PT, GR) Forest products consumption dominant countries (IT, FR, UK, SP, AU)

II III IV V

Predominantly rural (AU, DK, FI, SE) Significantly rural (IR, GR, PT) Significantly urban (FR, SP, IT) Predominantly urban (BE, DE, LU, NL, UK)

the same country groups. This was done to be able to compare the correlation between regional variables in the studied country groups. As the EU countries in the FORWARD grouping (Table 3.2), the FORWARD case areas were divided into five groups by using regional level information (see Table 3.1, columns 1 and 2). Finally, the grouping of EU member countries was compared with the grouping of FORWARD case areas.

3.3 Qualitative Data and Analysis 3.3.1

The potential of qualitative approaches

A case oriented approach allows for the consideration of cases as a whole and is aimed at understanding examined cases in their historical complexity. It is thus based in the tradition of qualitative social scientific research. Research dialogue is centred on intersections of causal conditions. The method allows for the consideration of causal complexity, which is mainly evident in the observation of similar outcomes from different starting conditions or vice versa different outcomes from seemingly similar starting conditions (Strauss, 1987). A decision was made to incorporate a qualitative module within FORWARD because of the difficulties in obtaining hard, quantifiable information on all aspects of the thematic issues that FORWARD wanted to address. Preliminary analysis on available theories also

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illustrated the large variety of hypothesis with regard to the processes in regional development as well as the different policy approaches resulting from them (Tykkyläinen et al., 1997; Hyttinen et al., 1996a). Viewing regional development issues as a social phenomenon, therefore requires a more flexible approach in addressing the research topic at hand. Based upon the initial knowledge on available theories a research concept was developed, aiming at deepening the understanding of the processes in the study regions, after an initial inventory on available information had been conducted in an earlier stage of the project. Structured interviews were used to collect information for the region. In general interview partners were chosen in co-operation with regional contacts, thus relying also on their expertise in identifying key actors. In addition to this, and also according to the more flexible approach of grounded theory, contacts established during the case study in the region or also in other contexts such as the participation in international research networks (most notably COST-E3 Forestry in the Context of Rural Development) were asked for additional input into this research activity. Admittedly, this bias towards understanding of cases in their complexity restricted the number of cases that may be compared with this method. Consequently the potential for the generalization of results is also diminished. This may be counterbalanced by the categorization of data as well as by explicitly stating the contextuality of new theoretical findings. In the context of development politics this simply means, that strategies that have proven successful in a specific socio-economic context may not necessarily prove successful under different conditions. Figure 3.2 gives a schematic overview of the research approach for the FORWARD qualitative module, which started out from the formulation of hypotheses, resulting in a structure for the interviews with key representatives within the regions. The result of these interviews was then compiled into a qualitative analysis for each region. This information was then used as input for the qualitative comparative analysis, performed with the QCA-software. The latter approach is described in more detail in section 3.3.2. In addition the gathered information was also used in more traditional qualitative approaches, mostly to illustrate specific topics, some of which were brought up in the discussion of this research with

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55

Figure 3.2. Research approach to FORWARD’s qualitative module.

other members of the scientific community or had arisen in the context of topic-specific meetings and conferences. 3.3.2

A Boolean approach for qualitative comparative analysis

General description of Boolean approach. The application of Boolean methods of qualitative comparison, as suggested by Ragin (1987), is a step towards combining the advantages of quantitative and qualitative approaches. It incorporates the capability for causal complexity as well as the handling of larger sets of data, which is facilitated by software packages developed for this type of analysis. An essential difference between this approach and statistical methods is that the frequency of an observation is not methodologically linked to its importance for the final result, even though frequency considerations

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may be incorporated into the analysis process. Therefore, it also allows the comparative analysis of information, which has been gathered without taking into account the sampling considerations necessary for quantitative methods. The method requires the researcher to establish hypotheses concerning the relevance of phenomena responsible for a specific outcome. The results from different cases are compared with each other and using logical minimization techniques the conditions that are seen to be most relevant for an outcome can be identified. The Qualitative Comparative Analysis (QCA) method allows for a more detailed and systematic comparison of complex case studies than would be possible without the standardized procedure. For the computation, qualitative data coded as Boolean variables (1 = presence, 0 = absence), and not ‘quantitative’ data (real numbers), are required. ‘Necessary’ and ‘sufficient’ conditions for a certain outcome are sorted out using truth tables. A detailed step-by-step demonstration of this approach is included in Chapter 4 of this report. It was already evident from the regional profiles, which had been part of phase 1 of the FORWARD-project (Hyttinen et al., 1999), that there was considerable variability among the study regions. It was also evident that comparing the different case studies with the aim of presenting some more general conclusions and identifying potential policy implications would be problematic. Also the number of case studies (11), suggested potential problems in relying solely on traditional methods of theory building based on the grounded theory approach as described by Strauss (1987). Using, for example, basic pairwise comparisons for specific topics would have required 55 (n∗ (n − 1)/2) such comparisons for each issue investigated. Nevertheless, the power of the qualitative approach to increase the knowledge on region specific processes seemed promising. A potential way to solve this dilemma was identified in Ragin’s approach to QCA (Ragin, 1987), which is aimed at making the results of larger numbers of qualitative case studies more apt to objective, comparative analysis. In principle this approach is based upon coding independent and dependent variables of each case study in regard to a specific phenomenon into Boolean variables (1 = presence, 0 = absence). The steps of this approach can be briefly summarized as:

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1. Coding of conditions and outcomes in Boolean variables: 1 = presence, 0 = absence; 2. Formulation of truth tables for observed combinations of conditions and outcomes; 3. Formulation of combinations of conditions and outcomes as Boolean products; 4. Formulation of sums of products as combinations of conditions resulting in the same outcome; 5. Boolean minimization techniques to differentiate between relevant and irrelevant conditions: Basic principle of logical minimization: There exist three factors A/a, B/b C/c (CAPITAL LETTER = factor is present; lower case letter = factor is absent), which are considered to be relevant for outcome D/d IF (A and B and C) = D OR (a and B and C) = D THEN the value of A/a is ‘irrelevant’, since it does not change the result. 6. Identification of and differentiation between ‘necessary’ and ‘sufficient’ conditions: In the above example, both B and C are ‘necessary’ conditions, since they are required for outcome D, but each of them alone is not ‘sufficient’, since the presence of both is necessary for outcome D. The method has been used in relation to forest policy-related research topics by Hellström (1996) and Hellström and Rytilä (1998), who investigated forestry-related conflicts throughout Europe, and also by Ottitsch and Weiss (1998) for the comparison of mountain forest policies in Europe. Demonstration of Boolean approach using a simplified example from the FORWARD-project. A short illustration of the method, using a simplified example from the FORWARD-project is given here. The example looks at the factors responsible for the success of initiatives to encourage co-operation among small-scale actors in the forest sector. Based upon the individual case studies, the following six groups of factors seems to be of relevance for the success of the co-operation of small-scale actors (forest owners) in the forestry sector.

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1. Strong land-owner organization. In several of the observed cases successful examples for co-operation among small-scale owners can be traced to activities by an existing strong land-owner organization, which in some countries has a penetration rate of 80% or more among agricultural and forest land-owners, based either on mandatory membership or its specific role in the determination of prices and sales conditions. 2. Link with local interests. Based upon general theories of individuals acting first in their own interest, the existence of a local specific interest can be seen as a strong motivator from the point of view of the individual (who might have a stronger link to local economic interests) as well as from the point of view of a community (where there is motivation to engage in a community oriented activity, based upon the realization that in day-to-day life humans are used to acting in groups). The general theories can be derived from a traditional neo-classical approach to economic behaviour as well as the incorporation of community-oriented behaviour, which is backed up by socioeconomic theories based upon communitaristic concepts. 3. Link with a local (familiar) organization. Another potential motivation for engaging in a co-operative activity is considered to be the backup for such an activity from a familiar, potentially larger organization. There is evidence, for example from Germany, for a greater readiness of citizens to engage in grassroute groups in those communities that already possessed a higher social network, measured in terms of membership figures in clubs and associations. Existing organizations provide the individual with a reassuring, well-known framework and also provide a basis for trust in the individuals, with whom interaction in a new context will have to be initialized. Through their semi-official role in some contexts, especially in countries with a corporatistic framework, such organizations also possess legitimitacy based upon their tradition and their role as suppliers of professional know-how at below-market value rates. 4. Strong industrial interests. In several of the observed cases largescale actors from the processing industries have also initialized activities for the co-operation of small-scale owners. Since such large-scale actors depend on a continuous supply of raw-material,

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the usual irregular (in fact market-adjusting) strategies of smallscale actors represents an uncertainty factor for the largescale actors. The small-scale actors can afford to postpone timber sales until prices are at an attractive level, and their selling strategies may be more dependent on immediate cashflow requirements rather than market analysis. They thus have tried to arrive at medium-term agreements with groups of small-scale owners, which provide the large-scale buyer with some certainty as regards future raw-material supply while at the same time allowing for some flexibility for the individual member of a group of small-scale actors. However, industries have not been successful in all instances in creating such local groups. This issue is also of relevance if an existing company considers the construction of a new plant in a region that is rich in timber resources, but also fragmented in ownership. 5. Strong relationship between forestry and farming. A strong link between forestry and farming is seen as an important factor, since it is assumed that farmers have access to some of the necessary production factors. This regards capital, since some equipment can be used both in farming and forestry, and also labour, since the costs for a farmer’s and his/her family’s own labour have a relatively low internal opportunity cost. This will encourage a farmer to spend more time engaging in forest-related activities than the owner of a larger estate or an absentee small-scale land-owner. 6. Tangible benefits (e.g. funding availability). Based upon the traditional concept of an economically optimizing actor, the availability of funding can also be seen as a motivation for engaging in co-operative activities. This fact is regarded in some national implementations of activities funded from the EU structural funds-activities. Investments in machinery, for example, are more easily made by co-operatively associated individuals than by individuals. Based upon the above described combinations of factors the following initial hypothesis is formulated: The success of a co-operative activity is dependent on the presence of a strong land-owner organization OR the link with local interests

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OR the link with an existing local organization OR strong industrial interests OR a strong relationship between farming and forestry OR the availability of tangible benefits (special funding possibilities). The process of this analysis for the case study regions is illustrated in the following tables. Table 3.3 shows how the variables were coded for the individual regions. The PRESENCE of a factor is expressed through UPPER-CASE CHARACTERS (CAPITALS), and the absence of a factor is expressed through lower-case characters. Table 3.4 depicts the ‘truth table summary’ as well as the basic hypothesis, as expressed above in Boolean coding. Among the case study areas the SUCCESS OF CO-OPERATIVE APPROACHES was Table 3.3. Truth table construction for the example ‘success of co-operative approaches’.

Table 3.4. Basic hypothesis in Boolean coding and truth table summary.

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61

observed in three configurations (representing seven cases) and was absent in three configurations. This part of the research did not cover the case of Wales. The next step of the analysis is shown in Table 3.5. It shows the result of the Boolean minimization process for the configurations. Due to the rather high number of observed phenomena (eight) in relation to observed cases (ten), the result did not identify any factor as being irrelevant. Interpretation of the results, however, allows for the identification of necessary conditions, especially in the context with other observed phenomena. The result shows that the presence of ALL the hypothesized factors ensures the success of co-operative efforts. Not surprisingly, this brings the Scandinavian and Austrian case studies into one group. Since some of the key-factors in these countries cannot be easily reproduced (corporatistic structures or strong landowner organizations) it is worth analysing other factors. A closer look at the results from the Portuguese Centro and the Italian Trentino Regions reveals that these two regions differ from each other only in the presence of a clearly identifiable local interest as a driving force behind the success or failure of the establishment of co-operative structures among small-scale actors in forestry, at least with regard to the factors taken into consideration in this example. Thus the initial basic hypothesis is further developed to: The success of a co-operative activity is dependent on the presence of a strong land-owner organization AND the link with local interests Table 3.5. Results of Boolean minimization and interpretation of study results.

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AND the link with an existing local organization AND strong industrial interests AND a strong relationship between farming and forestry AND the availability of tangible benefits (special funding possibilities). The availability of FINANCIAL INCENTIVES and the LINK TO A LOCAL INITIATIVE are NECESSARY but NOT SUFFICIENT factors. The role of INDUSTRIAL INTEREST could not be determined, since it is equally present in the presence as well as in the absence of successful co-operative efforts. All other things being equal, it is the LINK TO A LOCAL INTEREST (e.g. community heating plant), which facilitates the success of co-operative effects. 3.3.3

Deductive process for the development of hypotheses

Based upon the sampled theories and the initial descriptions of the case study regions the following groups of hypotheses were selected for testing within the qualitative module of FORWARD. Basic theoretical background for the hypotheses is provided by (Tykkyläinen et al., 1997) as well as in Chapter 2 of this report. The detailed case study descriptions are contained in (Hyttinen et al., 1999). The following section outlines the process of deduction that led to the suggested hypotheses. The concept for the selection of the groups of hypotheses that were used as a starting point for the qualitative module of the FORWARDproject followed an outward-spiral approach, starting from the relations between the forest resource and the intra- and extra-regional actors and their respective power-relations and distributions. In Chapter 2 of this report the following strands of theories on regional development have been identified as being the currently most interesting ones: A. B. C. D. E.

technology and innovations; institutionalism; human ecology and environmental management; innovative milieux; and supply-side theories.

Based upon theses theories as well as the information gathered in the preliminary screenings of the case studies the following hypotheses have been formulated for further investigation:

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A. Hypotheses based on the ‘technology and innovation’ strand of theories: • Hypothesis 1: the production of higher value added products tends to focus on areas within larger population agglomeration, following the theories of cumulative effects. Success for such productions in remote rural regions depends on the strengthening of links between remote rural and urban regions. In the forestry sector technological innovations in the last decades have led to an improvement of productivity, resulting in a decreased need for labour while simultaneously increasing the capital-intensiveness for many parts of the industry. As has been stated in Chapter 2, innovation had a negative effect on employment in rural areas, and yet was necessary for the economic viability of the sector. Consequently a restructuring of the sector has occurred, resulting in a reduction in the number, but an increase in the capacity of individual plants. • Hypothesis 2: large-scale industries play an important role in the context of forestry and regional development. However, the nature of this role can be either positive or negative, depending on the specific context. Negative effects can be expected to result specifically from the dominant position of strong individual actors on the market. Positive effects may occur, if the activities of largescale actors also offer possibilities for smaller sized businesses. Currently regional differentiation and restructuring can be seen at various spatial scales. Recent examples, as regards the success of the EU structural funds-programs in some regions, have shown that cumulative effects also appear at the regional level. In that context, regional agglomerations (which for remote areas at least have the advantage of being more easily accessible than remote metropols) could provide an opportunity. • Hypothesis 3: smaller agglomerations in rural regions can play an important role for the marketing of forests products and services, focusing on the concepts of endogenous development. B. Hypothesis based on the ‘institutionalism’ strand of theories: Historically, policies to protect forest resources in remote rural regions have been made, not so much in the interest of local populations as

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in the interest of more powerful groups in societies (e.g. forest industries, hunting interests of the nobility). This has influenced the attitudes of local populations towards forestry- and forest sector-related institutions and activities and has also limited the realization of alternative potentials. In this respect the existing political instruments of relevance for forestry and the forest sector also have to be investigated, paying attention again to the fact that existing political instruments are the products of existing power structures. • Hypothesis 4: traditional regulations for forestry, while having proven successful in protecting forest resources, have proved to be a hinderance for the realization of new opportunities. They were established in the interests of more powerful segments of the society, and they also support the institutional interests of powerful public services. C. Hypotheses based on the ‘human ecology and environmental management’ strand of theories: • Hypothesis 5: the new paradigm of sustainable forest management, such as developed in the UNCED and Pan-Europeanprocesses promise great benefits for all segments of societies from the realization of the potential of non-wood goods and services. Therefore, success for forestry- and forest sector-related development has to be expected from such activities. As regards forestry the new definitions of forest sustainability, which stress economical, ecological as well as social aspects, have to be taken into consideration if new strategies for this sector are considered. Turning again to general aspects of regional development the dichotomy between the two major approaches to development is worth regarding, especially since examples for the implementation of both concepts can be seen across Europe: • Hypothesis 6: endogenous development, based on regional resources and regional economic cycles, is nowadays accepted as a promising approach to regional, especially rural development. Therefore, it should provide possibilities for forestry- and forest sector-related activities.

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An important factor in favour of increasing the chances for marketing of products from remote rural regions, is quite often seen in the promotion of a regional image. In such an image links are to be established between the ‘healthy environment and rustic atmosphere’ of a region and the products and services produced there, which then can be used for specific marketing and labelling activities. • Hypothesis 7: the presence of a strong regional image is seen as a prerequisite for the successful marketing of forestry and forest sector goods and from remote rural regions. D. Hypotheses based on the ‘innovative milieux’ strand of theories: As a next step, new paradigms and trends for the development of societies, economic success as well as new paradigms of relevance for the forestry sector have to be taken into consideration. • Hypothesis 8: networking is seen as one of the new emerging concepts for social and economic interaction. Therefore, it also has potential for being a key factor in the success of forestry- and forest sector-related activities in remote regions. However, the institutionalized networks that exist in countries with corporatistic structures are subject to the development and pursuit of institutional interests. These networks are resistant to change. While regional development is generally more concerned with macrolevel analyses, the importance of micro-level factors should not be neglected, as has been already shown in Chapter 2. At the moment several theoretical concepts are being developed, focusing on this aspect. They stress the reality of the existence of different psychological profiles of actors, which in traditional neo-classical economic theory, at least in the more ideal concepts (e.g. fully informed, rational actors), are not always sufficiently taken into account. This also refers to the assumptions that lie behind the formulation of policies aimed at a specific behaviour of actors. • Hypothesis 9: according to theories of social characterization of economic actors there are two types of individuals, administrators and entrepreneurs. Many theories and approaches for economic development have shown the need for risk-taking entrepreneurs,

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yet also lament the lack of such individuals. This suggests that existing regulations favour administrators, a hypothesis, which might be backed up by the general critique towards highly bureaucratic requirements. E. Hypotheses based on the ‘supply-side’ strand of theories: Realizing the fact, that companies as well as private households are dependent on a certain level of infrastructure, the level of which contributes to the appeal of a site the next hypothesis focusing again on regional aspects can be developed. • Hypothesis 10: general conditions have also to be taken into consideration. Based upon the tendency of industries to take advantage of public externalities, a sufficient supply with infrastructure is also crucial and most notably a factor not easily to be influenced by the forest sector. Forestry programs at national and regional levels are seen as a promising new policy tool both for the implementation of the demands resulting from the developed new paradigms of forest sustainability and also for fully realizing all the potential benefits for societies from forestrelated activities. Therefore, one hypothesis is focused on the role of this instrument and its potential contribution to forestry- and forest sector-related development. • Hypothesis 11: political stakeholder involved planning is seen as a promising new informal policy tool. The existence of regional forest programs, demanded also in the documents of international processes, is a valuable prerequisite for forestry- and forest sectorrelated development. 3.3.4

Data collection for qualitative analysis

Concept of relevant actors and relationships as a starting point The qualitative analysis started out with the development of a structured interview, which was focused along the deductive structure outlined above. The aim of the regional studies was to obtain an assessment of the regional situation based upon the views of various actors. Considerations of available resources and practicability

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influenced the sampling process for the further design of the study. An ideal-typical model of society was conceptualized in order to illustrate the potentially existing interests in relation to forestry and the forest sector. The model differs from the traditional input-output model of political systems in that it acknowledges the heterogeneous nature of policy formulation and implementation. A rough approximation of this concept is depicted in Figure 3.3. It shows the different groups of actors representing interests both from the public as well as from the private sector. In addition it identifies also the main media of exchange between the two sectors. The borderline between the public and the private, however, is not that easy to define, with public sector agencies acting on behalf of their clients, and private institutionalized interests seeking to influence public decision making in direct ways (e.g. offer of employment opportunities in exchange for subsidies or financial guarantees) and indirect ways (e.g. lobbying and party-politics). Accordingly the border between the public and the private sector is depicted as a transition zone rather than as a clear line, illustrating the variety of formal and informal interactions among actors. Interview partners were selected in order to provide a representation of the different groups (Figure 3.3). The primary selection of partners was done using existing contacts in the region. The contacts were mostly established through research-networks, notably the representatives of COST Action E3 as well as EFI. Additional interview-contacts could be found using a ‘snowball’ approach, based upon the results of first interviews. Process of data gathering A list of desired interview partners for each region was produced and subsequently discussed with regional partners. The list was based upon the above-mentioned concept and primary knowledge, resulting from the first descriptions of the regions, which had been produced in phase 1 of the project (Hyttinen et al., 1999). The interviews for the qualitative module of FORWARD were then carried out from March to October 1998. Altogether about 120 interviews were made. In some cases additional information could be obtained from publications on region specific topics. The relevant publications were either pointed out by regional contacts, interview partners or by literature searches (both through international catalogues as well as local library facilities, where

68 QUANTITATIVE AND QUALITATIVE METHODS

Figure 3.3. Conceptual framework for the identification of relevant interests at the regional level.

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such were available). The materials gathered in the regions were then compiled to regional studies, following the hypothetical framework that was outlined above.

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4

The Role of the Forest Sector in Employment and Income

4.1 Forestry and Socio-Economic Structures in EU Countries The largest forest resources in the EU are in Sweden, Finland, France, Germany and Austria. The proportion of forest and other wooded land in Sweden and Finland is high all over these countries, whereas in France, Germany and Austria, the proportion of forest and other wooded land is high only in some parts of the countries. In Spain, the proportion of forest and other wooded land is also high, but the main part of this is other wooded land having less than 20% forest coverage (Figure 4.1). In the studies of the potential contribution of the forest sector to regional employment and income, the logical starting point is to look at the similarities of regions with respect to forest resources. Among the most commonly known studies for finding the similarities in forestry among the European countries has been the grouping of countries based on ecological zoning of forest vegetation (Kuusela, 1994). In this grouping, countries with similar growing conditions and growth and yield potential for forests were used to classify different countries into regions (Päivinen et al., 1999). As indicated in Chapter 2, the growth and yield potential of forests is not the only indicator of the contribution of the forest sector to regional development. Consequently, a different grouping of European countries that was based on forest resources and socio-economic information on European countries and regions was developed as described in Chapter 3. In this grouping, Finland and Sweden formed the first group of countries where forests characteristically dominated the landscape and the forest sector had significant importance in the national economies. More than 40% of the forest and other wooded land area in the EU is growing in these forest resource dominant countries. In these two countries, the average forest area per capita in 1996 was 3.2 ha, or approximately ten times more than the average in EU member

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Figure 4.1. Forest resources in Europe. Source: Päivinen et al. (2001).

countries (0.3 ha/capita). These countries are also characterized by a low population density (18 inhabitants/km2, compared with the average for the whole EU of 119 inhabitants/km2 ). Annual fellings in 1990 in these countries were 113.4 million m3 which was more than 40% of the annual fellings in the current EU member countries in the same year. The large forest resources supported large-scale forest industries both in mechanical and chemical wood processing (Table 4.1.a).

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Benelux countries and Denmark, was a group of small countries with a small forest resource and a high population density. The forest cover in these countries was less than 0.2 ha/capita in 1996. The average population density was 288 inhabitants/km2, which was more than double the average for EU member countries. Urbanization was also high, with more than 85% of the population living in urban areas. The highest GDP per capita in the EU in 1996 was in Luxembourg. There the GDP per capita was nearly twice as high as in EU member countries in average (Table 4.1.a). In the Benelux countries and Denmark, the forest sector had significantly different importance than in the forest resource dominant countries. There was also greater emphasis on non-wood uses of forests. Forest and forest-based industries had little importance for the national economies in these countries, although the wooden furniture industry in Denmark may be considered as an exception. The Benelux countries and Denmark formed a group of countries, which purchased a lot of forest industry products from the Nordic countries (most significantly printing paper products). Germany formed a group of its own in the cluster analysis (see Chapter 3). Forest resources and socio-economic structure in Germany can be considered unique in Europe, including a combination of large forest resources, relatively high timber fellings and high importance of the forest sector on the economy and employment. Although these are characteristics also for the forest resource dominant countries, Germany differed from these in having a high population density as well as a large proportion of the population living in urban areas (Tables 4.1.a and 4.1.b). The East-Mediterranean-Atlantic country group was a combination of EU border countries where GDP per capita and the share of people living in urban areas were the lowest in the EU. In Greece and Portugal, especially, the GDP per capita was only half of the average in EU member countries. Also investments in Research and Development were the lowest in the EU, only 0.6% of the GDP (average in the EU was 1.9% of the GDP in 1996) (Tables 4.1.a and 4.1.b). The forest products consumption dominant-country group (Italy, France, UK, Spain and Austria) was characterized by a high population; some 221 million people (approximately 58% of the total population in the EU) live in these five countries. In these countries, the forest sector has changing importance for the national economy and the share of forest and other wooded land was low except in France and Austria.

74

EU average

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.

(km2 )

Forest and other wooded land, 1996 Share of forest and other wooded land, 1996 (% of the total land area) Forest and other wooded land, 1996 (ha/capita) Net annual increment on exploitable forests, 1990 (million m3 ) Annual fellings, 1990 (million m3 ) GDP per capita, 1996 (EU average = 22 848 US$) Primary sector GDP, 1996 (% of the total GDP) Population density, 1996 (persons/km2 ) Share of people living in urban areas, 1996 (%) Unemployment rate, 1996 (%) Share of employment in primary sector, 1996 (%) Research and Development financing, 1996 (% GDP)

– 32.8 0.3 – – 100.0 2.3 119.0 78.0 10.9 5.6 1.9

Forest resource dominant countries FI SE 200 290 244 250 65.8 59.3 3.9 2.8 69.7 91.0 55.9 57.5 113.0 115.0 4.2 1.8 15.0 20.0 64.0 83.0 11.4 9.9 2.7 6.5 2.6 3.6

Benelux countries and Denmark BE

NL

LU

DK

6170 3340 880 4170 9.8 20.4 9.8 34.2 0.1 0.0 0.2 0.1 4.5 2.4 0.7 3.5 3.3 1.3 0.4 2.3 116.0 113.0 198.0 142.0 1.2 3.1 0.9 4.0 334.0 375.0 161.0 123.0 97.0 84.0 90.0 85.0 9.2 5.2 2.6 5.5 3.2 1.9 n.a. 6.9 1.6 2.1 n.a. 2.0

THE ROLE OF THE FOREST SECTOR IN EMPLOYMENT AND INCOME

Table 4.1.a. Forest resource and socio-economic structure in EU member states. EU average, Forest resource dominant countries and Benelux countries and Denmark.

East-Mediterranean-Atlantic DE 107 400 1. Forest and other wooded land, 1996 (km2 ) 2. Share of forest and other wooded land, 1996 30.7 (% of the total land area) 3. Forest and other wooded land, 1996 (ha/capita) 0.1 4. Net annual increment on exploitable forests, 1990 57.4 (million m3 ) 5. Annual fellings, 1990 (million m3 ) 42.6 6. GDP per capita, 1996 (EU average = 22 848 US$) 124.0 7. Primary sector GDP, 1996 (% of the total GDP) 1.0 8. Population density, 1996 (persons/km2 ) 230.0 9. Share of people living in urban areas, 1996 (%) 87.0 10. Unemployment rate, 1996 (%) 10.0 11. Share of employment in primary sector, 1996 (%) 3.7 12. Research and Development financing, 1996 (% GDP) 2.3

IR

PT

5700 28 750 8.3 31.3

GR 65 130 50.5

Forest products consumption dominant countries AU IT FR UK SP 64 960 150 340 23 900 83 880 22.1 27.3 9.9 16.8

38 770 46.9

0.3 11.3

0.6 3.3

0.1 17.5

0.3 65.9

0.0 11.1

0.2 27.8

0.5 22.0

1.6 10.9 80.0 46.0 4.1 5.4 52.0 107.0 58.0 36.0 10.1 6.8 3.7 2.9 1.4 0.6

3.4 53.0 14.2 80.0 59.0 9.6 10.9 0.6

8.0 88.0 2.9 191.0 67.0 12.1 2.3 1.0

48.0 114.0 2.4 106.0 75.0 12.4 4.6 2.3

8.1 91.0 1.5 238.0 89.0 7.0 8.3 1.9

15.0 64.0 3.7 78.0 77.0 20.8 13.3 0.9

17.3 122.0 1.5 96.0 64.0 4.4 6.5 1.5

0.2 3.3

Sources: 1. Tilastokeskus, 1999. 2. Tilastokeskus, 1999. 3. Tilastokeskus, 1999; Forest and other wooded land area divided by population. 4. Kuusela, 1994. 5. Kuusela, 1994. 6. Tilastokeskus, 1999; EU average = 22 848 US$/capita/year. 7. Tilastokeskus, 1999; weighted with GDP total. 8. Tilastokeskus, 1999; weighted with population total. 9. Tilastokeskus, 1999; weighted with population total. 10. Tilastokeskus, 1999; calculated by multiplying population and unemployment (%) = total amount of unemployed people in the EU. This was then divided by population in the EU. 11. Tilastokeskus, 1999; weighted with population total. 12. Tilastokeskus, 1999; average weighted with GDP total.

FORESTRY AND SOCIO-ECONOMIC STRUCTURES IN EU COUNTRIES

Table 4.1.b. Forest resource and socio-economic structure in EU member states. East-Mediterranean-Atlantic and forest products consumption dominant.

75

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In Austria, for example, the forest cover is the third highest in the EU after Finland and Sweden. In this country group, the annual fellings 0.38 m3 /capita in 1996. For comparison, the average annual fellings in the forest resource dominant countries in 1990 were 8.1 m3 /capita, and the average for the EU was 0.71 m3 /per capita (Tables 4.1.a and 4.1.b). From the other available national level figures, it can be estimated that in EU countries, the forest sector hosted the largest number of jobs in Germany where approximately one million people were working in the sector in 1996 (e.g. forestry and forest industries). Other countries in Europe, where the forest sector is an important employer include: France (566 000 employees), Spain (313 000), Sweden (193 000), Austria (132 000), Portugal (123 000) and Finland (102 000) (Hyttinen et al., 1996a) (Figure 4.2).

Figure 4.2. Employment in forestry, forest industries and forest sector in selected European countries (Ottitsch, 1999, Figure 22).

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Although countries with a high population also employ many people in the forest sector, it is those countries with abundant forest resources and long traditions in forest industries that have the highest proportion of employment in the forest sector. In Finland, for example, approximately 5.0% of the total employment is in the forest sector. Other countries in Europe where the forest sector is a significant employer in relative terms include: Sweden (4.8% of total employment), Norway (3.3%), Portugal (3.3%) and Germany (2.9%) (Figure 4.3). Employment in forestry has decreased rapidly in recent decades, especially because more mechanized methods have been developed for harvesting and transportation. The trend in employment has been similar also in the large-scale forest industries, where the benefits of economics of scale and increased international competition have forced owners to increase the size of the production units, and made investments in automation profitable. As the employment within forestry and the large-scale forest industries has continued to decline, a great deal of emphasis in Europe has been put on the development

Figure 4.3. Share of forest sector employment in selected European countries (Ottitsch, 1999, Figure 23). (For Italy and Ireland no data were available for ‘Share of Forest Sector Total’), (Ottitsch, 1999, Figure 23).

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of small- and medium-scale forest industries to find sustainable and increasing employment opportunities in the forest sector. The general trend in the forest sector has been that the relative employment in the forest sector has declined in those countries that have large-scale wood processing industries. For example, in Scandinavian countries the forest sector employment per 1000 m3 of harvested timber is much lower than in the UK and Austria (Petäjistö et al., 1997; Ottitsch, 1999) (Figure 4.4). When forest sector employment was measured with the amount of wood harvested and processed, an average of one job was created for each 36 m3 of wood harvested and processed in the UK, 175 m3 in Austria, and 476 m3 in Finland in 1994. The labour use intensity was highest in mechanical wood processing industries and lowest in forestry and wood export. For example, in Austria, 1000 m3 of wood processed in chemical and mechanical forest industries created 5.2 and

Figure 4.4. Relationship between employment and production in various parts of the forest sector, Y-Axis: jobs/m3 (mechanical production and fellings), jobs/metric ton (chemical production) (Ottitsch, 1999, Figure 24).

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6.2 jobs, respectively. In Finland, however, the labour use intensity in mechanical wood processing industries (2.0 person-years/1000 m3 of processed wood) was even less than in chemical wood processing industries (2.1 person-years/1000 m3 of processed wood) (Petäjistö et al., 1997) (Table 4.2). In Finland, the relatively low employment in forest sector is mainly due to the high proportion of large-scale wood processing industries. The success of the large-scale forest industries in Finland as well as in Sweden has been based on low production costs and high price competitiveness. The low production cost objective has resulted in a Table 4.2. Labour use intensity (person-years per 1000 m3 of wood consumption) in forest sector in Finland, Austria and the UK in 1994 (Petäjistö et al., 1997). Finland

Austria

UK

Forestry and wood Employment (’000 employees) Annual cuttings (million m3 ) Labour use intensity (Person-years/1000 m3 )

25.0 55.0 0.4

15.0 14.4 1.0

22.0 7.6 2.9

Mechanical wood processing/2 Employment (’000 employees)/5 Annual wood consumption (million m3 ) Labour use intensity (Person-years/1000 m3 )

53.0 26.5 2.0

92.0 14.8 6.2

220.5 7.5 29.4

Chemical wood processing industries/3 Employment (’000 employees)/5 Annual wood consumption (million m3 ) Labour use intensity (Person-years/1000 m3 )

91.0 43.2 2.1

55.2 10.6 5.2

460.1 18.9 24.3

147.0 69.2 2.1

150.0 26.5 5.7

682.0 24.9 27.4

export/1

Forest sector total/4 Employment (’000 employees)/5 Annual wood consumption (million m3 ) Labour use intensity (Person-years/1000 m3 )

/1 Includes forestry ‘toimihenkilöt’, forest workers, forest owners’ own work and temporary forest work. /2 Includes sawmilling, particle board, furniture, wood construction, wood carpentry and other wood manufacturing industries. /3 Includes pulp and paper, cartridge, paper manufacturing and graphical industries. /4 Includes forestry, mechanical and chemical wood processing, as well as furniture and graphical industries. /5 Includes forestry employment.

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high level of mechanization and automation, and a loss of jobs in the sector (Petäjistö et al., 1997). In Austria, the employment in forest sector in 1994 was approximately the same as in Finland although the annual cuttings were only 26% of the cuttings in Finland. Compared with Finland, the relatively higher employment in the forest sector in Austria is due to higher value-added processing of wood, a relatively higher proportion of small-scale wood processing industries, and a lower level of mechanization in timber harvesting (Petäjistö et al., 1997). In the UK, wood processing industries mainly process wood and wooden materials imported from other countries. The relative employment per 1000 m3 of processed wood is the highest among the three countries compared. The UK is an example of a country where high value-added production in wood industries created more jobs than in countries that export mainly low processed wood products such as lumber, pulp and paper (Petäjistö et al., 1997).

4.2 Regional Variation in Forestry and Socio-Economic Variables in the EU The variation of forestry and socio-economic variables in EU member countries can be visualized using maps, where different colours highlight the regional disparities. The following examples of the regional variation NUTS regions in 1996 are presented: (i) forest and other wooded land; (ii) total removals; (iii) GDP/capita; and (iv) unemployment rate. The values of the variables have been divided into five classes by using the 20th , 40th , 60th and 80th percentages as cut-off points. Regional variation in forest and other wooded land and total removals was substantially high in the EU. The highest share of forest and other wooded land was in the North (Finland and Sweden) and in the South (especially Spain). This was partly due to the definition of what was included in ‘forest and other wooded land’. In Spain, for example, the forest and other wooded land included vast areas of land that was not used for agriculture, habitation or constructions. These remnant areas were residuals classified as forest and other wooded land, even though in many cases the land had little or no forest vegetation. In Finland and Sweden, on the other hand, most of the forest and other wooded land was actually productive forest, and there were only

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some mires and mountain areas that did not have a permanent forest cover. The relationships between (a) the amount of forest and other wooded land and total removals, and (b) the total land area of a region and the total removals were obvious. The first relationship simply explained that total removals were high in those areas where the forest cover was the highest. The other relationship was as obvious: total removals in absolute terms were high in regions that were large in size. An example of the latter was England in the UK, where the amount of forest and other wooded land and total removals appeared to be high, although if compared in relative terms (i.e. cubic meters per hectare per year), the total removal had much less significance. Nevertheless, apart from the forest resource dominant countries in the North, the largest areas of forest and other wooded land in Europe were in central and northern Spain, southern and eastern France and in Germany and Austria. Northern Italy and northern Greece also had large areas of forests and other wooded land. Substantially low forest and other wooded land areas existed in the Benelux countries and Denmark (Figure 4.5). Total removals measured in thousands of cubic meters per region were the highest in the forest resource dominant countries in the North, in Germany and Austria, as well as in some parts of central and eastern France, northwest Spain and central Portugal. The total removals were especially high in southwestern France, where abundant plantation forests existed. The total removals were also high in England and Scotland in the UK, but this can be explained by the large land area in these regions. The lowest timber removals in the EU were in the Mediterranean regions, especially in southern Italy and Greece (Figure 4.6). The largest regional Gross Domestic Production (GDP) per capita was found in the central parts of the EU, including in Benelux countries and Denmark, western parts of Germany, France, Austria and northern Italy. Also Sweden and the southern-most part of Finland had high GDP per capita. The lowest GDP per capita in the EU were found from the regions of Mediterranean countries, including Portugal, Spain, southern Italy and Greece, and from eastern Finland, eastern Germany, Northern Ireland and Wales. It was obvious that the GDP per capita was lower especially in the border regions of the EU although the variation, even within one country, could be high.

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Figure 4.5. Regional structure of forest and other wooded land in the EU in 1996 (’000 ha) (Hyttinen et al., 2000).

The latter was observable especially in geographically large countries like Finland and Italy, where the differences between the North and the South in terms of GDP per capita were relatively high (Figure 4.7). In general, those areas with high GDP per capita also had a relatively high population density.

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Figure 4.6. Regional structure of total removals in the EU in 1996 (’000 m3 ) (Niskanen and Lin, 2000).

The highest unemployment rates were observable in the regions of Mediterranean countries, eastern Germany, France, Ireland and Finland. These were the same regions with the lowest GDP per capita. In the vast majority of the regions with low GDP, the unemployment rate in 1996 was over 11% in 1996 (Figure 4.8).

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Figure 4.7. Regional structure of gross domestic product per capita in the EU in 1996 (’000 EUR) (Niskanen and Lin, 2000).

In general, the correlation between regional forest resources (i.e. total removals and the area of forest and other wooded land) and socioeconomic variables (i.e. unemployment or GDP per capita) was low. Therefore, it is not self-evident that the existence of forest resources

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Figure 4.8. Regional structure of unemployment rate in the EU in 1996 (%) (Niskanen and Lin, 2000).

would contribute to regional development in terms of employment or income. Furthermore, the areas with large forest resources were also characterized by the remoteness of the area or a low population density. These both often reflect narrow occupational structure and

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limited prospects for economic development. Thus, from the economic point of view, remote regions often have a role to be sources of raw materials that are not used locally to generate income and employment opportunities. Instead, the resources may be transported for value-added processes that generate income and employment in more populated regions.

4.3 Results for Comparative Qualitative Analysis Analogous to the example depicted in Chapter 3, similar analyses were carried out for all the examined hypotheses. This chapter describes the results that were obtained from the research. In the following section, first the individual hypotheses are listed again, then the list of variables used to formulate the hypotheses for testing with the QCA-software are presented. The print-outs from the QCA-software then describe how the results were achieved. Results are accompanied by explanatory text and finally linked to the examined hypothesis, indicating whether the hypotheses could be rejected or not. During the analysis it was possible to group together factors of relevance for several hypotheses within the same strand of theories. A. Results for hypotheses based on the ‘technology and innoviation’ strand of theories • Hypothesis 1: the production of higher value added products tends to focus on areas within larger population agglomeration, following the theories of cumulative effects. Success for such productions in remote rural regions depends on the strengthening of links between remote rural and urban regions. • Hypothesis 2: large-scale industries play an important role in the context of forestry and regional development. However, the nature of this role can be either positive or negative, depending on the specific context. Negative effects can be expected to result specifically from the dominant position of strong individual actors on the market. Positive effects may occur, if the activities of largescale actors also offer possibilities for smaller sized businesses. • Hypothesis 3: smaller agglomerations in rural regions can play an important role for the marketing of forests products and services, focusing on the concepts of endogenous development.

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Based upon these hypotheses the following variables were coded: Independent variables: • Urban agglomeration (>200 000 inhabitants) within region: URBINREG • Smaller agglomeration (>20 000 inhabitants) within region: SMLAGGL • Large-scale forest industries in region: LARGINDU • Vocational training centre within region: VOTRAICE • Tradition of forest sector: TRAFOSEC • Co-operation programs within region: COOPPROG Dependent variable: • Significant amount of higher value-added production within region: HIVALADP In the following description, the print-out of the QCA-software is used to document the analysis, which led to conclusions on the three hypotheses (Table 4.3). Following the establishment of the truth-table the QCA-software was then used to minimize the configurations in order to identify the factor-combinations relevant for success (1-cases) or failure (0-cases) (Table 4.4). All 1-configurations (i.e. presence of relevant amount of high-value added production in the region) are identical, including all factors except the link to a larger urban centre, which therefore does not seem to be a crucial factor. Due to the cases being identical, no further minimization is possible. Therefore, in order to identify the relevance of the other factors, it is necessary to more closely examine the 0-configurations (no relevant amount of high-value added productions in the region) (see Table 4.5). The 0-configurations differ from the 1-configuration most notably in that they lack either the tradition of a forestry sector in a region and/or programs for vertical and horizontal co-operation. The presence of a smaller agglomeration in the region is common to all the regions, and therefore is not relevant for further conclusions. The other three factors can be either present or absent. In relation to the three hypotheses the following conclusions can be made from this analysis:

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Table 4.3. Truth table summary for variables coded for Hypotheses 1, 2 and 3.

Table 4.4. Minimization for 1-cases.

Table 4.5. Minimization for 0-cases.

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• Hypothesis 1 could be rejected. Among the study regions there are successful examples for the establishment of higher valueadded productions. However, the success of these is based on an existing tradition in the sector and more specifically in the availability of specialized education and vocational training programs as well as cross-sectoral and vertical co-operation among actors, whereas the vicinity of larger urban agglomerations is not a necessary criterion. • Hypothesis 2 could be upheld. In those cases, where highvalue added production has been successful there also exist strong co-operation programs, based upon strengthening the links between different actors, both vertically as well as horizontally. For regions representing 0-cases, however, it was reported from several actors that the long-term adaption to the requirements of large-scale industries had resulted in difficulties for smaller-scale actors. These difficulties consist either in a significant alteration of the local raw-material base through species-selection in regeneration or the other adaptations to the needs of bulk-production, such as available diameters or assortments. • Hypothesis 3 could not be upheld. While the role of regional agglomerations as centres for the provision of infrastructure may be of importance, their overall importance for marketing of products is less important. Successful examples (also from small- and medium-scale activities) can be more closely linked to active marketing, which equates to creating links between rural and urban regions. B. Hypothesis based on the ‘institutionalism’ strand of theories • Hypothesis 4: traditional regulations for forestry, while having proven successful in protecting forest resources, have proved to be a hinderance for the realization of new opportunities. They were established in the interests of more powerful segments of the society, and they also support the institutional interests of powerful public services. Based upon this hypothesis the following variables were coded:

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Independent variables: • Existence of a long tradition (i.e. since 18th Century) of regulations in interest of powerful outside interest: TRAREGOU • High level of government control of land owners (i.e. (de facto) mandatory management planning by government forest authorities): MANMAPLA • High level of financial power of forest service: FSFINPOW • Existence of timber production-oriented policy-framework (regulatory and financial instruments): PRODORPF • Legislation prevents conversion of forest area to other forms of land-use: FORPROLEG Dependent variable: • Dominance of traditional practices in forest sector activities: DOMTRA After assigning the variables to the case-studies the following results were obtained using the QCA-software (Table 4.6). Outcome 1 (domination of traditional approaches) was observed for all case-studies except for Scotland and Ireland. Within the 1-cases there exist four different configurations. The Scandinavian cases and Trentino in Italy feature the presence of all factors. The Austrian Waldviertel-region lacks de-facto mandatory management planning (i.e. either prescribed by law or linked to eligibility for the acceptance of certain financial benefits) by the forest authority for forest landowners. The Basque Country and Centro lack mandatory management planning, strong financial power of the forest service and legislation restricting the change of forest land-use. For the Drama region in Greece the variable ‘mandatory management planning’ was coded as present, due to the fact that this region features exclusively public owned forest land, which is managed by the state forest service. The two 0-cases showed identical configurations. They were characterized by the absence of strong legislative tools and regulatory power of forest authorities. They also feature a less rigid legislation as regards the preservation of forest land-use, with stronger rights of the landowner to decide upon a change in land-use. In both cases there are extensive financial tools, which are controlled by forest authorities. While strong landowner rights (i.e.

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Table 4.6. Truth table summary for variables coded for Hypothesis 4.

Table 4.7. Minimization for 0-cases.

the absence of ‘everyman’s rights’-type of regulations) allow for the landowner to directly market recreation activities wood production is the main goal for forestry activities in both cases (Table 4.7). The four 1-configurations could be minimized to two, and the variable ‘mandatory management planning’ was eliminated as having no relevance for the outcome (Table 4.8). A strong tradition of regulatory framework and a dominance of ‘(timber) production oriented forestry’ can be identified as necessary, but not sufficient conditions for the 1-cases. However, the dominance of

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Table 4.8. Minimization for 1-cases.

production oriented forestry was present in all investigated case studies. The financial power of the forest authorities as well as legislation preventing the change of forest land-use seem to play a less important role. However, the fact that they were present in five of the observed eight 1-cases can be seen as an argument strengthening their importance in the interpretation of results. • Therefore, Hypothesis 4 could not be rejected, based upon the results from the regions. External control of forest resources, based either on direct ownership by a centralized government agency, or strong legislation in favour of production-oriented forestry prevailed among those study regions, which feature mostly traditional approaches. In most of the study regions, existing regulations are in favor of primary production, which is reflected in regulative (management requirements), financial (taxation and grantschemes) as well as informal (‘management for healthy forests’) policy instruments. Here again institutional interests come into play. C. Hypotheses based on the ‘human ecology and environmental management’ strand of theories • Hypothesis 5: the new paradigm of forestry, such as developed in the UNCED and Pan-European-processes, promise great benefits for all segments of societies from the realization of the potential of non-wood goods and services. Success for forestry- and forest sector-related development therefore has to be expected from such activities. Existing regulatory frameworks have to be taken into account in this context. Based upon these hypothesis the following variables were coded (see Table 4.9):

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Table 4.9. Truth table summary for variables coded for Hypothesis 5.

Independent variables: • Land-owner has possibility to control and gain income from hunting-activities (direct or indirect): LOHUNT • Existing ‘Everyman’s rights’ for recreational use of forest land: EMRREC • Existing ‘Everyman’s rights’ for appropriation of non-wood forest products (except hunting): EMRNWP • Business activities related to hunting: BUSHUNT • Business activities related to non-wood forest products: BUSNWP • Tourism is an important factor of regional GDP and employment: TOURREG Dependent variable: • Significant income opportunities from non-wood goods and services: NWPLOIC

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Table 4.10. Minimization for 0-cases.

According to the result of the minimization for the 0-cases only necessary condition for the absence of significant income opportunities for land-owners from non-wood forest products and services is the presence of ‘everyman’s rights’ type of regulation for the appropriation of non-wood forest products. For a detailed interpretation of the results the three combinations are analysed more closely (Table 4.10). lohunt EMRREC EMRNWP TOURREG This configuration represents the conditions in the Basque Country. With no direct control over hunting activities or other non-wood forest products or services the land-owner lacks the possibilities to gain income from such activities. EMRREC EMRNWP bushunt TOURREG This situation represents the conditions in North Karelia. While the land-owner has some influence as regards hunting activities, the way hunting is organized does not render significant income to the landowners. The everyman’s right also prevents the owner from gaining significant income from the marketing of non-wood goods and services based upon his position as a land-owner. However, business activities related to non-wood forest products can be observed (e.g. export of mushrooms), but it is not necessarily the land-owners who are profiting from them. lohunt EMRREC EMRNWP bushunt This combination represents the conditions in the Centro and Drama regions. In both cases existing regulations do not allow the private land-owner major control on access to or appropriation of non-wood forest products or services. Out of minimization for the 1-cases, the factor ‘importance of tourism for the region’ can be identified as a necessary condition. For closer interpretation, the three combinations are again linked to

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Table 4.11. Minimization for 1-cases.

the regions, where they occur and discussed taking into account the specific conditions (Table 4.11). LOHUNT emrrec emrnwp TOURREG This combination represents the conditions in Scotland and Ireland. In both cases the land-owners have a high level of control as regards access and appropriation of non-wood forest products and services. Consequently it is possible to develop business activities in which the land-owner can use his control over this rights as a valuable asset for income-generation. In such conditions activities other than hunting can also be used for income-generation. LOHUNT EMRREC EMRNWP BUSHUNT TOURREG This combination represents the conditions in the Waldviertel region in Austria. The main source of direct income for land-owners from non-wood forest products and services is the income from huntinglicenses. However, these can form a considerable part of land-owners’ income. lohunt EMRREC emrnwp bushunt TOURREG This combination represents the conditions in the Trentino region. The landowner has only limited control over hunting activities and existing hunting laws make it very difficult to generate business activities related to hunting (issue of hunting licenses for non-residents of the region is very limited). Since there are no everyman’s rights for the appropriation of non-wood forest products, income can be generated from selling licenses. In relation to the everyman’s rights for recreation activities, it should also be mentioned that this right has been granted by forest owners (mostly municipalities) in exchange for receiving subsidies from the forest service for road building and other infrastructure measures.

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Based upon these analyses the following result was obtained as regards the hypothesis. • Under the current conditions in the case study areas, Hypothesis 5 has to be rejected. While impressive examples exist for the financial evaluation of the benefits from non-wood goods and services to society, so far these are only of minor importance for forest owners. This is again related to legal and other institutional aspects. So far hunting is the most important nonwood activity. Whether it has to be treated as production of venison and trophies or rather as the provision of a recreational service is not yet clearly defined. However, in many instances it is also the one activity that has a high conflict potential with other forest-related land-uses. Regardless of the high importance of tourism activities in many rural areas, so far there is no clear link to forestry and the forest sector, specifically as regards economic benefits. To some degree this is also related to the varying legal and other country-specific conditions. In many instances these conditions either include a large degree of recreation activities in everymen’s rights, or foresee the provision of such services by public authorities, who take the opportunity to increase their field of activities. These activities may also be seen as a strategy to counter existing pressure for rationalization through increased legitimization for institutional interests. Also related to the ‘human ecology and environmental management’ strand of theories the following two hypotheses had been formulated: • Hypothesis 6: endogenous development, based on regional resources and regional economic cycles, is nowadays accepted as a promising approach to regional, especially rural development. It therefore should provide a potential for forestry- and forest sector-related activities. • Hypothesis 7: the presence of a strong regional image is seen as a prerequisite for the successful marketing of forestry and forest sector goods and from remote rural regions. Based upon these two hypotheses the following variables were coded (Table 4.12):

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Table 4.12. Truth table summary for variables coded for Hypotheses 6 and 7.

Independent variables: • There exists an autonomous government for the region: AUTGOV • Some form of regional management outside the regular (central) administration network exists: REGMANGM • Region (or a major part of it) is eligible for specific support programs (EU structural funds, Objective 1, 5b or 6 or equivalent): SUPELIG • Specific forest sector-related programs have been established at the regional level: FORSEPRO • Region enjoys a strong positive image at least at a national level: REPOIMG

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• Regional levels of origin have been established and promoted for forest products: LABORIG Dependent variable: • Successful marketing of forest products from the region: SUCFMARK This analysis of minimization for 0-cases identifies the absence of a regional label as a necessary condition for the failure of the marketing of higher value added forest products. For a closer analysis again the configurations are linked to respective case studies (Table 4.13). AUTGOV SUPELIG FORSEPRO REGPOIMG laborig This configuration represents the case studies for Ireland and Scotland. They differ mainly as regards the presence of a designated institution for regional management. Neither region has so far managed to establish a market for higher value added forest products originating from there. However, it should be kept in mind that as far as the development of forestry and the forest sector is concerned these two regions are still evolving and forestry has for quite a long time not been among the major activities for these regions. As results from other analyses have shown (e.g. results for Hypotheses 4 and 7 and 8) this ‘lack of tradition’ together with a rather liberal regulatory framework has proven advantageous in the identification of new opportunities. autgov regmangm SUPELIG regpoimg laborig This configuration represents the situation in the regions Centro and Drama. In these regions factors favouring the development of regional identities and endogenous development have not yet evolved sufficiently to show positive results. Forest sector activities in these regions have mainly been dominated by policies aiming at external investment. Both regions are situated in countries with Table 4.13. Minimization for 0-cases.

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rather centralistic administrative structures and no specific institutions exist at the regional level dedicated to the management of economic development. This issue also came up repeatedly during data-gathering activities (i.e. expert interviews) in these regions. AUTGOV REGMANGM supelig FORSEPRO regpoimg laborig This configuration represents the situation in the Basque Country. While specific forestry-related programs have been initiated in this autonomous region, so far there is no specific identity for forest products originating from there. So far, forest sector-related activities have also been mainly aimed at larger-scale operations. This analysis of minimization for 1-cases identifies the presence of institutions dedicated to the management of regional development, specific forest sector-related programs as well as a positive regional image as necessary conditions (Table 4.14). While the eligibility for (and thus availability of) special funding from outside sources such as the EU structural funds is present in two of the observed configurations, which together represent four of the observed five 1-cases, it cannot be identified as a necessary condition. This fact is reinforced by it being present also in some of the 0-cases. For closer interpretation the individual configurations are again analysed. autgov REGMANGM SUPELIG FORSEPRO REGPOIMG This configuration represents the conditions in North Karelia, Västerbotten and Waldviertel. They only differ as regards the presence or absence of some form of regional label of origin being used in the marketing of forest products from these regions. The main factors of success are the existence of specific institutions dedicated to regional economic development and specific forest sector-related programs. These activi-

Table 4.14. Minimization for 1-cases.

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ties benefit from the availability of special funding as well as an existing positive image of these regions. autgov REGMANGM SUPELIG FORSEPRO laborig This configuration represents the conditions in Vest Agder. It is characterized by the presence of all three conditions (presence of institutions dedicated to the management of regional development, specific forest sector-related programs as well as a positive regional image as necessary conditions), which have been identified as necessary in this analysis. Eligibility for Norwegian regional support programs was used as an equivalent for the support from EU structural funds in this case. AUTGOV REGMANGM supelig FORSEPRO REGPOIMG LABORIG This configuration represents the conditions in the Trentino region. This autonomous region also features the two necessary conditions. Activities aiming at marketing regional products may profit from an existing positive image and there also have been initiatives towards establishing regional labels of origin. While it is stated here that specific outside funding activities do not exist it has to be kept in mind that as an autonomous region, Trentino has a high control over the use of tax revenues and has the possibility to direct resources to such activities. Based upon this analysis the following can be stated in relation to the examined hypotheses: • Hypothesis 6 could not be rejected. As has been shown by another result (role of regional agglomerations), the successful development of export markets is seen as a crucial factor. Approaches based upon endogenous activities have created impressive examples for success, based upon co-ordinated activities that bring together education, innovative technology and close co-operation among actors, including vertical co-operation among SMEs and large-scale operations. • Hypothesis 7, the role of a positive regional image, cannot be rejected. On the other hand it has proven not to be a sufficient criterion for success. It may also be assumed that in many instances it is not so much an independent variable, but actually an indicator of the success of other activities.

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D. Hypotheses based on the ‘innovative milieux’ strand of theories • Hypothesis 8: networking is seen as one of the new emerging concepts for social and economic interaction. Therefore, it also has potential for being a key factor in the success of forestryand forest sector-related activities in remote regions. On the other hand institutionalized networks, which exist in countries with corporatistic structures, are subject to the development and pursuit of institutional interests, which are reluctant to change. • Hypothesis 9: according to theories of social characterization of economic actors there exist two types of individuals, administrators and entrepreneurs. Many theories and approaches for economic development have shown the need for risk-taking entrepreneurs, yet also lament on the lack of such individuals. This suggests that existing regulations favour administrators, a hypothesis, which might be backed up by the general critique towards high bureaucratic requirements. Based upon these hypotheses the following variables were coded (Table 4.15): • Forest sector-related horizontal and vertical networks: FSNETW • Corporatistic tradition in the political system: CORPORAT • High level of institutionalized economic relations (e.g. fixed timber prices): INSTECO • High general level of regulation in the national economy (bureaucratic requirements): HIREG • Good conditions reported for small- and medium-scale enterprises: GOCOSME • Significant amount of higher value-added production within region: HIVALADP According to minimization for 1-cases well established forest sectorrelated networks, institutionalized economic relations and high level of government regulation are present in all 1-configurations (successful experiences with high-value added productions) (Table 4.16). For further insight a minimization of 0-cases is performed in Table 4.17. According to this analysis (Table 4.17) 0-configurations can be minimized to the following combinations of factors. They all have in common a low level or absence of institutionalized economic

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THE ROLE OF THE FOREST SECTOR IN EMPLOYMENT AND INCOME

Table 4.15. Truth table summary for variables coded for Hypotheses 8 and 9.

Table 4.16. Minimization for 1-cases.

Table 4.17. Minimization for 0-cases.

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relationships and a low level of governmental regulation. They occur either in the presence or in the absence of corporatistic structures or in the presence or absence of perceived good conditions for small- and medium-scale enterprises. For the formulated hypothesis this leads to the following conclusions: • Both aspects of Hypothesis 8 could not be rejected. Forest sector-related networks are present in all 1-cases, yet in the 1configurations they are also accompanied by other factors, mainly a high level of corporatistic structures and government control. However, differences in the activity level of traditional organizations could be determined. The existing divide between traditional actors in forestry and new institutions, representing recreation and conservation interests prevails, manifesting itself, for example, in the current discussions around certification or the involvement of stakeholders in national and regional forest strategies. • As regards Hypothesis 9, a high level of government involvement has not proven to be a negative factor, as far as the case-studies are concerned. In many instances the characteristics of individual actors have proven to be more important for success or failure than general frameworks. Even within the same country or even at the regional level there are examples of success and failure. The basic rationale behind this is, that successful individuals are obviously not that easily deterred from adverse conditions. It should also be mentioned that for most of the 1-configuration regions, the forest sector has traditionally enjoyed significant attention in public activities. E. Hypotheses based on the ‘supply-side’ strand of theories • Hypothesis 10: general conditions have also to be taken into consideration. Based upon the tendency of industries to take advantage of public externalities, a sufficient supply with infrastructure is also crucial and most notably a factor not easily to be influenced by the forest sector. Based upon this hypothesis the following variables were coded (Table 4.18):

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Table 4.18. Truth table summary for variables coded for Hypothesis 10.

Independent variables: • Well established road network throughout the region (suitable for 40 ton truck-and-trailer): ROADS • Easy access to railroad links: RAILS • Easy access to naval transport (sea-harbour): NAVAL • Well developed internet services: INTERNET • Availability of special support for company-start-up: COMPSTART • Facilities for practical training and education (vocational training centre): VOTRAICE Dependent variable: • Significant amount of higher value-added production within region: HIVALADP As can be seen in Table 4.19, no minimization was possible for the 0-cases. The four different combinations represent the conditions in

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Table 4.19. Minimization for 0-cases.

Table 4.20. Minimization for 1-cases.

the respective regions as they are listed in the truth table. Except for Ireland, where road and rail networks are not very well developed, but all other factors are present, these regions lack mainly communication and information infrastructure. Also road or rail networks are not developed sufficiently in some of the 0-cases. The minimization for the 1-cases show that the presence of road and rail networks as well as opportunities for company start up and the existence of vocational training facilities can be identified as necessary conditions (Table 4.20). ROADS RAILS INTERNET COMPSTAR VOTRAICE This configuration represents the case studies of North Karelia (Finland), Waldviertel (Austria), Vest Agder (Norwary) and Västerbotten (Sweden). The main difference between these regions is that the regions in Sweden and Norway have access to a seaport, whereas the Finnish and Austrian cases are inland-regions. However, this factor was not significant for the result. ROADS RAILS naval COMPSTAR VOTRAICE This configuration represents the Trentino region in Italy. Apart from also being an inland region it differs from the other 1-cases by the fact that Internet services are not as well developed. Based upon this analysis the following statement can be made in relation to Hypothesis 10: Hypothesis 10 could not be rejected,

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THE ROLE OF THE FOREST SECTOR IN EMPLOYMENT AND INCOME

however it may be claimed that the observed phenomenon is also an indicator for the general economic climate in a country or region. The remote location of some forestry operations is, however, a factor influencing the career decision of individuals. Problems with transport infrastructure, specifically easy access to rail or naval transport is seen as a problem in several regions. In this group the hypothesis related to the role of regional forest programs has also been formulated. • Hypothesis 11: political stakeholder involving planning is seen as a promising new informal policy tool. The existence of regional forest programs, demanded also in the documents of international processes, is a valuable prerequisite for forestry- and forest sectorrelated development. Based upon this hypothesis the following variables were coded (Table 4.21): Table 4.21. Truth table for variables coded for Hypothesis 11.

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Independent variables: • Existence of a regional forest program including multiple stakeholder-involvement: REGFOPRO • Existence of other forest sector-related programs, based on traditional actors: FOSECTRA • Existence of programs focusing on the development of processing sector: FOPROCES • Existence of forest sector-related medium- to long-term planning activities: FOPLAN Dependent variable: • Forest sector-related development has profited from such programs: PROFOSEC The result for this truth table shows a number of contradictory configurations (i.e. different outcomes can be observed based on the same configuration of independent variables). The configurations for the 0-cases could be minimized (Table 4.22), leaving the absence of programs aimed at processing industries and the Table 4.22. Minimization for 0-cases.

Table 4.23. Minimization for 1-cases.

Table 4.24. Minimization for C-cases.

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THE ROLE OF THE FOREST SECTOR IN EMPLOYMENT AND INCOME

presence of other medium- to long-term planning activities as necessary factors. Since there is only one 1-case which is not involved in a contradictory configuration no minimization was possible (Table 4.23). This case represents the conditions in North Karelia. Theoretically a minimization can also be performed for the contradictory cases (C-cases). Since the C-cases all showed the same configuration (Table 4.24) for all independent variables, no minimization was possible. • Based upon these results the following statement is made in relation to Hypothesis 11. The results for Hypothesis 11 are contradictory. While in some regions regional forest programs have been established recently there exist so far no formal evaluations, which would allow for an assessment of success or failure. In some regions, however spontaneous forest sector-related programs could be observed, independent from national initiatives. Such activities usually have relied on existing networks and established production chains, and do not fulfil the requirements demanded from national forest programs in an international context. They have, however raised the level of attention for the sector and been successful in channelling funding to Research and Development activities.

5

Conclusions

5.1 Theoretical Findings 5.1.1

Relevance of the theories

The findings of this study indicate that each of the theories described in Chapter 2 can be supported under certain conditions. Different theories cover different parts of events and processes, and a division of theories into relevant and irrelevant ones is neither easy nor sensible. Nevertheless, such seemingly ubiquitous, usually short-lived, theoretical relevance may also be taken as a sign of the ideological rather than the scientific nature of a theory. It also loses its value, if every conceivable reality can be explained by it. Thus, the construction of potential falsifications would be the initial step towards assessing the predictive powers of any set of theories. The results of the study support the previous findings presented by Tykkyläinen et al. (1997), according to which it is evident that many specific elements from varying theoretical constructions are of potential significance to explaining the development and restructuring of communities based on the forest sector. The diversity of schools of thought implies evolution and competition in science. Since the 1970s, the explanations of spatial (e.g. regional) economic development have been shifting from one methodological and theoretical approach to another. The theories have not provided solutions for the prevailing regional development problems and have led to the conclusion that the simple models and very general explanations of local economic development must be avoided. Rather, as presented by Neil and Tykkyläinen (1998), it has been concluded that implementation and effectiveness of local policies depend on the complex economic, social and political conditions that are found in each region. Overall, it seems evident that the explanatory framework should be relatively broad and dynamic, and should take into account localspecific, sectoral and policy-related factors and the role of human agency, which are often omitted in routine explanations of development. The recognition of the fact that there are numerous circum-

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stances in which regional development takes place is a precondition for understanding the multifaceted nature of local development. The local level factors for success may vary from the large-scale resource base in Nordic forest dominant countries to very specific local level initiatives in some parts of northern Italy and France. Moreover, as the socio-economic system surrounding forest sector is dynamic, no fixed model for local development for all communities would be suitable. 5.1.2

Theoretical considerations based on the quantitative results

Despite the limitations of data, it can be easily concluded that the regions of Europe are very heterogeneous in terms of forestry and socio-economic structures. When the countries were grouped and regions were studied within the formed country groups, the diversity of regions decreased substantially. This result supports the examination of regional or rural development issues in certain spatial settings, such as the Nordic forest resource dominant countries or EU border countries (Hyttinen et al., 1998). Another main conclusion from the regional grouping exercise was that the extrapolation of research results on regional development opportunities and success factors from one region to another should always be very carefully considered. On the one hand, the regional similarities in forest resource and socio-economic data may be rather different from one region to another and it may be difficult to extrapolate research results into these substantially different circumstances. On the other hand, sometimes the extrapolation of research results between the regions in one country may perform rather poorly, as the regional differences within a country can be substantial. In some cases the regional differences within a country are much more significant than the differences between regions in different countries. The differences in regional forestry and socio-economic characteristics can be used, for example, in the assessment of the distribution of structural regional funding in forestry. An example of such division of regional development funding is the application of the criteria for the selection of regions for EU Objective 1. In this case, the average GDP per capita in the region had to be below 75% of the EU average in the year of comparison to be included into the highest category of regional development funding (Figure 5.1).

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Figure 5.1. Stuctural funding of the European Commission based on the regional GDP. (Source: Inforegio, 1999).

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CONCLUSIONS

The division of EU regions according to the criterion of GDP per capita is very straightforward and simple. The analysis of this report demonstrates the potential for elaborating a more specific division of regions based on the forestry and socio-economic characteristics of the region. This is an example of how the division of EU regions could be conducted more accurately to modify the classification on the basis of the purpose for which the classification is used. The FORWARD case areas, due to their location in remote and less populated regions, formed a rather homogeneous group of areas for the qualitative part of the analysis. On the basis of quantitative analysis it seems that the case-study areas could be divided into the following groups: (i) North Karelia and Västerbotten; (ii) Basque Country; (iii) Waldviertel and Trentino; (iv) Scotland, Wales and Ireland; and (v) Drama County and Centro regions. 5.1.3

Theoretical considerations based on the qualitative results

The central objective of the project was the identification of the factors influencing success (or failure) for forestry – and forest sectorrelated activities to contribute to regional development, particularly employment and income in remote rural regions in Europe. In the qualitative module of FORWARD an attempt was made to conceptualize success as a social phenomenon, based upon a variety of factors, ranging from general policy and institutional framework level to regional, local and even individual levels. Despite the fact that differences among the regions have made it difficult to arrive at a ‘recipe-like’, sure-fire list of conclusions, they can, however, be useful in shaping processes. In the interpretation of the results, it should be emphasized that the study regions are in different stages regarding the overall social and economic development. Similarly, the relations between forestry- and forest sector-related activities and regional development vary considerably. These background factors give a wide range of opportunities for the interpretation and justification of the theories. This research is based upon a dynamic concept of social development, recognizing regional differences not so much as a given status, which might lend itself easily to conceptualization, but rather as dynamic process, in which different stages of development may coexist temporally, but may develop at different rates. In addition, the

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sometimes perceivable ‘fin-de-millennium’ or ‘end of history’ feeling should not draw attention away from the fact that what is today perceived as yesterday’s folly was state-of-the-art at the time of its formulation and conceptualization.

5.2 Conclusions on the Success Factors 5.2.1

Timber resources

Generally speaking, the largest timber reserves of Europe are located in distant peripheral areas. Thus, the most forested areas are also the most rural areas, and therefore, it is not surprising that forest-related projects are used as a tool in the attempt to develop these regions. The expanding timber resources as such offer possibilities for regional development. If the annual increment of timber resources is compared with the annual drain, in most European countries, and especially in the border regions of Europe, there is a huge potential to increase the utilization of timber resources. The growing stock volume in virtually all European countries has been increasing and is expected to continue to do so. The area of forest land available for wood production, however, remains rather constant. This means that the average age of forests is increasing, which, in turn, means that the harvests can be increased without threatening the principles of sustainable forest management and development. The earlier report of the FORWARD project (Hyttinen et al., 1999) discusses the potential in more detail. What clearly came out from the results of this study was that abundant timber resources as such do not create employment. The connection between the existence of timber resources and the existence of timber-related employment seems to be rather weak. Denmark and Italy are examples of countries with well-developed mechanical wood industries despite their rather limited timber resources. In Finland, on the other hand, the contribution of the forest sector to regional income, and especially to employment, is relatively low despite the abundant timber resources. In some cases it might even be concluded that the countries with abundant timber resources have reached a stage where the material is considered too ordinary and common, or wood-based products as well as traditions of using wood material, or the related professions are

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not held in favour by the general public. For example, the attitudes to the tradition of wooden constructions and craftsmanship in Finland, or the popularity of woodworking firms as future working places for the young generation in Norway reflect the current trends. 5.2.2

Industries

Low local demand and long distance to the main markets seem to be the major hindrances to be overcome in developing competitive forest-based industries in rural areas. Developments in information technology and transportation systems are expected to provide help in this respect – although, so far the evidence seems to indicate that the opposite is in fact the case. The existence of large-scale forest industries seems to be an essential factor in guaranteeing the constant flow of income from timber sales. It also helps in maintaining the infrastructure in remote rural areas. Traditionally, large-scale processing plants, through their needs for constant supplies, have played an important role in keeping forest owners interested in management activities and, in some regions, have also played an important role in initializing co-operation among smallscale owners. Large-scale processing plants are in many regions the backbone of regional forest industries, even though they are less dependent on regional supply. The ongoing trend towards outsourcing of specific activities or production segments, has, however, opened new opportunities for co-operations among large, medium- and small-scale actors, with the medium- and small-scale actors playing an important role as suppliers of intermediate level products. On the other hand, in some instances, the adaptation of forestry to large-scale industry needs (e.g. species selection, diameter-restrictions, price arrangements with large-scale timber producers such as state owned forests) has made it more difficult for small-scale owners as well as for small-scale processors to penetrate into markets with their own specialities. Large-scale industries are also more likely, or rather are forced, to procure a considerable share of their raw-material from imported timber in order not to become too dependent on local conditions and to have ‘leverage’ in price-negotiations with local suppliers. Not surprisingly, mechanical wood processing is seen as most promising for the future prospects of forest-based industries. The

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main reason for this is that investment needs are relatively low, the economies of scale do not play such a substantial role as in the pulp and paper industry, and local markets supplement the export opportunities. Small- and medium-scale enterprises (SMEs) focusing on production of higher value added products have proven to be of significant importance. Such enterprises have made up the majority of new employment in the more successful examples from the case study regions. Specialized products can also profit from more local or regional markets. However, the development of export-markets for such products is essential. The importance of a close relationship with end-user markets becomes evident. For SMEs located in remote areas this means that new ways of establishing a marketing network in more urban regions have to be found. The creation of regional labels is one such strategy that has proven successful in some case examples. Existing positive images of, and associations with, a specific region have increased the potential for regional brand-names, provided that there is a legal framework for such strategies. Regional labels, aiming at improving the market situation, are of value especially for SMEs, which cannot afford to create their own brand-labels at the national or international level. Another possibility to strengthen the role of processing industries in remote areas is to gain access to more distant markets, thus becoming more independent of regional market problems. Experiences from the case study regions show that success in export markets depends on the willingness to adapt to new standards concerning dimensions and quality (e.g. for access to the US-markets). Also investments are required not only in new and flexible technology, but also in human capital, such as employees’ language skills. 5.2.3

Services

Along with timber and wood based production, the vast forest areas in the peripheral areas of Europe have potential for various other forms of forest uses. The contribution of forests to the welfare of society is not only timber, but also a large number of various goods and services. The relative importance of contribution differs between countries and regions. Many of the forest-related non-wood goods and services are difficult to evaluate, and unfortunately, many of them have at the moment little or no effect on income and employment.

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The distribution of property rights also influences the market possibilities. The differences concerning the right of access to forest areas in Europe are only one example of this, as are the different regulations concerning hunting, berry picking or fishing. If a region has everyman’s rights of access to forests, income from recreation activities can only be obtained by providing additional services to the potential customer (e.g. guided tours, renting equipment or selling food and drinks to tourists). Evidently, the potential of rural areas as a high-quality living environment is poorly utilized. Abundant space, quiet, flexible logistics, non-existent queues are some examples of the characteristics that could be used increasingly for the benefit of rural areas. In general, stronger links between the urban demand and the rural supply should be created. This also may require a change in existing legal frameworks, which in many countries are still focusing on strengthening primary production activities and sometimes are even adverse to an increasing rate of non-farmer settlement in a region. 5.2.4

Know-how

Due to depopulation, rural areas often suffer from the ‘brain drain’ as many educated people move to urban areas. The case studies revealed that, in addition to this unfavourable spatial distribution of knowhow, forest-based development efforts are suffering from the decreased image of the forest sector in general. The forest sector is not seen as attractive among young people; they are rather looking for education opportunities in other fields, such as information technology. Some drawbacks were also evident in the internal structure of forestrelated education. Education, as well as research, has largely been focused on timber production, and especially on that in large private or public estates. Not enough emphasis has been given to smallscale ownership structures, which usually are dominant in Europe. Therefore, important facts such as the income effect of small-scale forest ownership has not been given sufficient attention. Until recently, this important part of the forest sector has not been able to profit sufficiently from the recent technological improvements. It has to be noted also that income may not be found only in harvesting operations or planting, but also in environmental services. In this field new professions are developing; the ‘nature tour guide’ is one of these, and the ‘landscape steward’ another. The latter includes work that is

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carried out in the management of reserve areas. In addition to the skills common to traditional agricultural or forestry work, it also requires additional knowledge and understanding of the new management goals. In utilizing the existing, and often hidden, income and employment potential, the entrepreneurial skills of the actors in rural areas need to be developed. Another common matter of complaint was the co-operation between regional development administrators and entrepreneurs. This complaint needs to be addressed. Bureaucrats seem to avoid getting into the entrepreneurial spirit. Cross-sectoral co-operation and entrepreneurial networks, as well as intelligent, persistent, innovative and motivated individuals, are needed.

5.3 Policy Implications 5.3.1

Regional lessons

First of all, as mentioned earlier, it has to be emphasized that regions and countries are different, and caution must be applied when attempting to draw generally applicable conclusions. This also means that the differences between countries and regions should be respected and the development efforts put on the approaches that utilize the local characteristics the best. Furthermore, policy measures need to be addressed to several parts of the vicious circle (described in Chapter 1) at the same time to create countermeasures strong enough to break the circle. As far as the potential for policy formulation is concerned, the results from the project show that success, where achieved, has been the result of sustained efforts, often perceived over periods of a decade or longer. In such processes failure is to be expected. However, if accepted and learnt from, failure can lead to new opportunities. Again, this may be an argument for smaller activities, the consequences of which are, for the single case, not extreme either in the positive or in the negative direction. The results also show that inter-regional learning processes can be conceived. The different stages of development may be the guideline here, since they also show the potential direction a certain development might take. However, not all the factors that are responsible for the success of certain factors in one region can be easily reproduced in

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another one. Similar ecological conditions may sometimes prove less valuable as a guideline for finding the right ‘partner’ for such an exercise than comparable socio-economic situations. In this context the results from the quantitative part of this project will prove a valuable aid in arriving at suggestions for a more general applicability of the ‘regional lessons’. 5.3.2

Public intervention

Evidently, public intervention plays a different role in different countries and regions. There are international (mainly EU), national, regional and local policies aimed at regional development that have an impact on forest-related businesses. The development depends to a great extent on policy making in other sectors (economy, environment, energy, agriculture, rural development, trade, etc.). Therefore, it is impossible to separate the contribution of a single administrative level or sector. The importance of general infrastructure (be it the density and quality of the public road network, the availability of suitably equipped train stations or harbours as access to long distance transport, or the general network of public services, ranging from police stations to schools, hospitals or first-level administration authorities) is not to be neglected in rural development in general, or specifically in the forest sector. The competitiveness of forest-based and forest-related industries depends heavily on these infrastructural factors. In the wake of cuts in public budgets across Europe there is a tendency towards the centralization of infrastructural facilities. New developments in telecommunication technology could act as a countermeasure to this development by providing access to administrative services at small, decentralized facilities without large staff requirements. In this context, the provision of decentralized areas with fast communication lines (such as like ISDN-technology), is of considerable importance. The encouragement of alternative approaches is also regarded as an important factor. However, it has to be recognized that in some instances alternative approaches threaten existing interests and thus encounter resistance. This may be true for new land-use activities, which conflict with established land-uses, but it is also true in the context of new sectors, such as energy production, which are currently dominated by strong, increasingly Trans-European institutions.

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The importance of change, and the more and more evident change in terms of and attitudes towards land ownership and land management also calls for a change of political programs aimed at the sector. So far many existing programs are based on the traditional concept of a land-owner living on and from the land, carrying out activities using their own labour, rather than the increasingly important group of land-owners living from other resources (living for the land, one might be tempted to state). In this context potential conflicts of interest have to be identified and taken into account as well as potential new problems arising from these trends, such as the overuse of land or the development of speculative trade in resources. 5.3.3

Human resources

The initiation of local activities, which has been identified as an important factor, depends on the selection of the right institutional frameworks as well as the selection of the appropriate individuals or ‘leading figures’. So far the most successful examples have relied on already existing ‘leaders’. However, a closer analysis of the factors responsible for the presence of such figures is still lacking. Another important set of factors, which can be a guideline for potential policy implications is the involvement of stakeholder knowhow, encouraging the self-realization of development potential rather than the ‘subsidy-optimization’, which is prevailing in agricultural activities in many regions across Europe. Such an approach manifests itself, for example, in the successful marketing of related computersoftware, which serves as a multiplier for a specific development concept. The importance of co-operation has been stressed repeatedly in this paper, as have the difficulties in this context. The acceptance of this approach relies on a positive attitude toward this idea within societies. It also relies on the presence of a sufficient mass of locally interested actors. In some contexts other forms of co-operation are being developed, taking a more shareholder-like approach to the common ownership of an economic resource than that of a common holding. However, with regard to the increasing urbanization of societies this may also prove to be one solution to the problem. Overall the study has shown the need for the encouragement of entrepreneurial activities, but no clear vision on how this task may be

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realized can yet be identified. If anything, the work also draws attention to the importance of the development of human resources rather than physical resources (i.e. big trees, huge forests) in the development of strategies. Or to use the famous words of Jack Westoby: In the beginning of my career in forestry I listened to foresters talking and came to the immediate conclusion that forestry is about trees – yet I have realized that this was wrong. Forestry is all about people and it is about trees only in so far as they serve the needs of people.

5.4 Future Research Needs As far as the theoretical analyses are concerned, the quantitative part of this study revealed that the availability of statistical information on forest-related socio-economic variables, especially at the regional level, is far from adequate. To improve the situation, efforts for collecting more regional level information are needed. In the forestry socio-economic research, the collection and compilation of unified and detailed regional income and employment statistics should be primarily emphasized. As regards the subject matter of promoting forest-based regional development, research efforts should concentrate on improving the use of wood and wood products as well as other forest resources. Certainly, many of the potential benefits and production possibilities are not yet fully known. New technologies for using wood in construction work or a refinement of burner technologies for energy production from wood are among the examples of improving the use of wood and wood products. The systematic accession of traditional knowledge about the use of plants in preventive and reactive health care is an example of improving the use of other forest resources, which is of value not only in tropical rainforests, but also in remote areas of Europe.

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