Entrepreneurial Urban Regeneration

Business Improvement Districts as a Form of Organizational Innovation

Rezart Prifti, Fatma Jaupi

• Publisher: Routledge
• Year: 2020
• ISBN:
  9781000221763
• Edition: 1
• Topic: Business
• Subtopic: Entrepreneurship
• Index: Business

In today's world, towns and cities dynamically develop over time and that's why urban regeneration is a widely experienced phenomenon. How can Business Improvement Districts (BIDs) create necessary conditions for the development of these phenomena? What is the role that BIDs have in entrepreneurial urbanism, supporting SMEs, city marketing and city branding? These are questions examined in this volume, in an effort to provide an extensive analysis of business improvement districts.

Enriched with an analysis of various case studies, including South Africa, Ontario, Tokyo, Barcelona, Slovenia and with an in-field analysis of a cultural heritage site, Korca, Albania, the book analyses the importance, benefits, and impacts of this kind of organization. It highlights the social, economic and ecologic challenges to the historic city markets today, which led to their rapid stagnancy. This book offers a practical and structured guide of the concept of Business Improvement Districts and highlights the best practices for management, financing and organizing. It sheds light on the impacts and benefits of business improvement districts, offering conclusions about their influence on the future improvement of cultural and urban sites.

It will be of value to researchers, academics, professionals, and students in the fields of management, organizational studies, strategy, and sustainable development of tourism districts.

1 The Multi-Facet Nature of Innovation

Innovation is omnipresent. It certainly is so in the world of technology and production, but also in other disciplines, such as social processes, arts, and management, albeit not as frequently discussed. Modern economic settings and business models have come to capitalize on innovation like no other force has. Innovation is intrinsic to business growth to such a degree that authors (e.g., Godin, 2008) have stated that most people instinctively equate innovation with technological innovation. Innovation has become a quintessential concept to our society that Nowotny (2006) has defined our epoch as one of “a quest for innovation”. But, what particularly defines innovation, and how did it evolve to this point?

Innovation, as we view it today, became more commonplace in academic literature from the 1990s on (Lepore, 2014). The increased attention that innovation research has drawn is due to the industries’ demand. It has been widely recognized as a new “dimension” or “wave” sweeping through society, economy, and rivaling the magnitude of the Industrial Revolution, as well as an important mechanism for boosting economic growth. What perhaps best captures the essence of innovation as a multi-dimensional concept is the multitude of definitions that have been attached to it, either contemplating a specific aspect of it or simultaneously contemplating several of them. After conducting a thorough review of innovation literature published in the last few decades, Crossan and Apaydin (2010) synthesize the various definitions by defining innovation as both a process and an outcome. Thus, innovation is not interchangeable with technological advancement, as the latter is only affected by one of the several dimensions of innovation, namely technical/technological innovation. Nevertheless, other dimensions exercise considerable influence on innovation as well, such as leadership, managerial practice, administrative processes, and external factors. All these dimensions are grouped under a shared system in organizational settings in which the interconnectivity generates firm innovativeness. Hereinafter, the multi-faceted construct of organizational innovation is conceived.

1.1 The Perspective of Organizational Innovation

In a broader sense, organizational innovation refers to anything created or generated, within or adopted by an organization that is specifically new to that organization (Daft, 1978; Damanpour & Evan, 1984; Lam, 2004). Due to flexibility and lack of an exact and unique technical operational definition of “organizational innovation”, its existing bulk of literature is highly diverse and does not invigorate a sound theoretical framework. Hence organizational innovation has been subject to various interpretations depending on the plethora of studies dedicated to its scientific kindred. Generally speaking, three different streams of the literature on organizational innovation have been identified by Lam (2004), each with its separate focus and questions addressed. First, organizational design theories concentrate on the link between organizational structure and its capacity to generate and/or enhance innovativeness (Albers Mohrman & Lawler III, 2014; Devereaux Jennings & Zandbergen, 1995; Lemus-Aguilar & Hidalgo, 2016; Longoni, Golini, & Cagliano, 2014; Mintzberg, 1979). Generally, this stream of research has been engulfed by the literature on technological innovation, aimed at explaining how structural features of innovative organizations affect their general product and process innovativeness. Second, theories of organizational cognition/learning mostly evolve around processes of knowledge acquirement and retention, and how such processes affect organizational innovativeness (Argyris & Schön, 1978; Lam, 2004; Nonaka, 1994; Nonaka & Takeuchi, 1995). Through these lenses, researchers ought to understand how organizations build capacities to exploit knowledge to induce innovation. Third, theoretical approaches concerning adaption and change are innately related to the previous stream, as they also are concerned with organizational processes that facilitate or inhibit organizational knowledge creation and retention, albeit from a different angle. They are mostly concerned with the capability of an organization to overcome hindrances and inertia when faced with environmental and/or technological shifts. Thus, this third perspective focuses on an organization’s response to its external variables and their effects on it.

However, other distinctions within the field of organizational innovation can be identified. As Damanpour (1991) stated, organizational innovation has been characterized by studies in processes of innovation diffusion and adoption, as well as innovation generation (referred to as “innovating”) and innovativeness, with the latter being a broader concept for a firm’s innovation absorption capacity, notwithstanding its source. Thus, it is recognizable that an organization can either create, adopt or adapt innovation without having a particular influence on innovation generation and the mechanisms related to it. Nevertheless, despite the crude differences between conceptualizations of organizational innovation, real-life processes of firm innovativeness creation, adaption/adoption and retention are rudimentary, with a subtle degree of overlap between them. In a pioneering study, Damanpour (1991), building from earlier research on organizational innovation and recognizing the multitude of individual, organizational, and environmental influences on organizational innovation, recognized that the magnitude of studies of organizational variables’ influence on organizational innovation is far greater compared to the other two. He identified 13 structural variables (such as specialization, functional differentiation) that exercised influence on organizational innovation and allocated them to four “moderating categories”, namely type of organization, type of innovation, scope of innovation, and stage of adoption. The findings pinpointed that generally determinants of organizational innovation are relatively stable across different studies and that correction for sampling error is able to accommodate for the variance observed among studies. Furthermore, findings suggest that determinants of innovation were not significantly differentiated by any of the three types of innovation whereas moderator-determinant differences turned to be more relevant.

What this means is that a determinant can be crucial for moderating innovation in an organization based on contextual characteristics. For instance, determinants such as specialization and functional differentiation could be more relevant during the “stage of adoption” and when configured based on the “scope of innovation”, compared to when accounting for differences in “types of organization” and “types of innovation”. Hereupon, a Contingency Theory of Organizational Innovation took hold (Donaldson, 2001). In short, the Contingency Theory of Innovation states that innovation occurs in both organic and mechanistic organizational structures and that situational variables have the potential to significantly alter the organization’s innovativeness capacity, in spite of an organization’s level of innovativeness. According to Donaldson (1996, 2001), the Contingency Theory majorly contributes to the wealth of theories on organizational structure. It is based on the assumption that “the most effective organizational structural design is where the structure fits contingencies” (Donaldson, 2001). As organizational structure has the potential to affect innovation, the Contingency Theory of Organizational Structure became one of Innovation (Patwardhan, Ford, & Clarke, 2018).

However, moving away from the contingency model of explaining organizational innovation to a model that exercises greater focus on managerial role and non-technological aspects of innovation (Damanpour, Sanchez‐Henriquez, & Chiu, 2018), further research on organizational innovation has examined to provide information related to the dual influence of internal, external knowledge and information sources on managerial innovations. Thus, the authors present managerial innovations as an essential force for attaining organizational effectiveness, but it is one that has been not properly assessed by academia. They state that academic research has mostly analyzed antecedents and consequences of both product and process innovation, especially in manufacturing firms, and that it has been heavily reliant upon easily accessible tools and measures such as patents, number of new products, number of employees and proportion of scientific and technician employees to that number, R&D expenditure, etc. (Armbruster et al., 2008; Damanpour & Aravind, 2011; Damanpour et al., 2018; Miles; 2005). Such an extensive focus on technological innovation has drained innovation research from non-technological processes and tools which in turn rendered research on strategic and managerial innovation, two primordial components of organizational innovation, scarce (Černe, Kaše, & Škerlavaj, 2016; Crossan & Apaydin, 2010; Damanpour et al., 2018; Keupp, Palmié, & Gassmann, 2012). Nevertheless, academic findings are promising and both internal and external mechanisms, such as knowledge sources and information channels, through which managerial and strategic innovation affect organizational innovation, are receiving more scrutiny from researchers due to their potential to propagate organizational innovation (Damanpour et al., 2018).

1.2 BID and Organizational Innovation

BID, in essence, is innovative thinking (Mitchell, 1999, 2001). As innovative structures have the capacity to enhance both service delivery and managerial practice, BIDs have incorporated some of these characteristics within their organizational framework. According to Mitchell (2001), an academic extensively involved with studies of BID-related innovation, BID represents a major innovation in the Public Administration sphere. First introduced in the 1980s in large North American urban areas and later expanded worldwide, the establishment of BIDs represented a major shift in public policymaking and became a successful tool for instigating entrepreneurial innovation and management practices (which themselves are part of entrepreneurial innovation) in the public domain.

With its various administrative forms that it takes, which will be discussed later on in this monograph, BID constitutes a tool of empowerment (Briffault, 1999; Stahl, 2013) for various stakeholders including local government authorities, local SMEs, and other businesses, such as property and estate owners, tourism operators, and several other important beneficiaries. As all of these stakeholders come under a shared organizational structure, BID manifests a form of public-private partnership (Briffault, 1999; Grossman, 2008; Mitchell, 1999, 2001), which entails a common administration and asset ownership framework. In doing so, it introduces entrepreneurial principles to local government bureaucracy and offers businesses and local residents an opportunity for shared decision-making and day-to-day administration of the designed area. Structurally, as described by Mitchell (1999, 2001), BID represents a geographically defined majority of property owners and businesses that agree to impose a fee on all properties and businesses in their shared area to fund additional services, such as rehabilitation, cleaning, security, marketing, tourism development, and a host of other services. Local authorities intervene by establishing this district and then transferring funds to the BID organization, or an agreed representative. However, Stahl (2013) cites instances where BID has posed a threat of being exploited as a tool of majoritarian exploitation and imposition. Nevertheless, a further discussion of what BIDs are, what advantages and disadvantages they attain, will be explored further in the article.

According to Houston, Jr. (1997), BIDs enhance administrative innovation – a component of organizational innovation – in a way that combines entrepreneurial spirit, vision, and self-interest, with public finance and urban politics. By doing so, an innovative public-private hybrid organization umbrella forms in urban settings, blending managerial expertise with business-driven awareness and initiative. This is essentially the innovative component of organizational configuration that BID brings to public management and community leaders. It reinforces their roles as decision-makers and enables the establishment of various partnerships with the private sector that benefit both SMEs and residents. Hence, as Mitchell (2001) stated, innovation is quintessential to BID because of the way it is designed, providing an answer to many ills faced by modern urban areas, such as poor urban planning, hygiene standards, public transportation inefficiencies, mediocre marketing, and lack of adequate strategy for downtown SMEs. Similar to entrepreneurial initiatives, BIDs funnel managerial energy into the solution of problems, specifically public problems. In the following chapters, a more detailed description of the BID business model and commonly implemented organizational structures will follow.

2 A Literature Review on the Business Improvement District

2.1 The Concept of BID

Business Improvement District is an evolving and multidimensional concept. BIDs are found in districts where property or business owners voluntarily impose a tax on themselves to fund various projects in the area (Davies, 1997). In other words, the term BID describes a particular area where special funding mechanisms are used to provide additional services in order to improve the residential or business environment (Morçöl & Zimmermann, 2006). Taxes are usually collected by local government, and local government officials are always represented on the association besides area residents.

The associations take the form of non-profit corporations, created by local government (Unger, 2016), aiming to make public area improvements and provide special services as well (Davies, 1997). BIDs are in general initiated and governed by property owners and authorized by governments, whereas the term BID is used for both the selected area that receives special services and distinct investments and the association which governs this area (Morçöl, Zimmermann, Meek, & Hoyt, 2008). They deliver a highly adaptable small-scale management of urban spaces on the basis of the interests of property owners and businesses and to some degree substitute former public tasks.

BIDs stem from environmental policies that advocate for public-private partnerships (PPPs) in urban development (Unger, 2016). Hoyt and Gopal-Agge (2007) define BIDs as “privately directed and publicly sanctioned organizations that supplement public services within geographically defined boundaries by generating multiyear revenue through a compulsory assessment on local property owners and/or businesses”. Therefore, the term BID is used to refer to both the geographical area and to the organizations that manage them. Morçöl and Zimmermann (2006) describe BIDs as publicly regulated but privately managed organizations that provide supplementary service to improve public area spaces. In many cases, BIDs are temporally limited and have to undergo a renewal process after a predetermined period of time. While there is a longer history of business and property owner associations in many countries, BIDs differ from the majority of the city management models (Michel & Stein, 2015). Once they are established, they are compulsory for all property owners or businesses in the given area and time. It is argued that this approach helps minimizing the problem of freeloaders known to voluntary associations, where those who do not participate in the funding process benefit nonetheless (McCann & Ward, 2010; Michel & Stein, 2015).

Through the establishment of BIDs, the private sector in essence provides public goods in the city center, such as road maintenance and security are provided through a supplemental tax paid by a business in the BID which they impose on, administer, and spend themselves (Tallon, 2013). In other words, the private sectors assume some of the functions formerly provided by the state with the aim to boost the local economy of the BID area.

Additionally, there are other terms besides “business improvement district”, which refer to the same, or similar characteristics as BID does. Ward (2006) identifies “special improvement districts (SIDs)”, “public improvement districts (PIDs)”, “neighborhood improvement districts (NIDs)”, “municipal improvement districts (MIDs)”, and “business improvement districts (BIDs)” in the United States alone. The author identifies also “business improvement areas (BIAs)” in Canada, “downtown improvement districts (DIDs)” in Japan, “main street associations (MSAs)” in New Zealand, and “city improvement districts (CIDs)” in South Africa. In this list, we can only add “tourism improvement districts (TIDs)” recently introduced in Albania and which will be discussed in the following sections.

According to Mitchell (2008), BIDs are an innovation aimed at improving city’s environmental conditions by providing small services which altogether improve the area while they share seven common attributes:

1. recognized by law,
2. created according to a process,
3. formed as an organization,
4. financed by a special assessment,
5. governed by a board,
6. managed by one person, and
7. reviewed periodically.

What is clearly evident is the aim of private companies at ensuring profitability in real estate and commercial activity in the city. Thus, property owners jointly act to create an attractive district and manage to keep it attractive. Whilst creating an attractive district, they manage to increase their profitability without depending (to a certain extent) on public services. Sager (2011) explains that these “business-friendly” zon...

Table of contents

• Cover
• Half Title
• Series Page
• Title Page
• Copyright Page
• Table of Contents
• 1 The Multi-Facet Nature of Innovation
• 2 A Literature Review on the Business Improvement District
• 3 A Short Analysis of the Different Models of BIDs
• 4 Case Studies
• 5 A Study of the Tourism Improvement District in Albania
• References
• Index