Local responses to global technological change — Contrasting restructuring practices in two rural communities in Austria

Technological Forecasting & Social Change 80 (2013) 243–252

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Technological Forecasting & Social Change

Local responses to global technological change — Contrasting restructuring practices in two rural communities in Austria Matthias Fink a, Richard Lang a, Rainer Harms b,⁎ a b

WU Vienna, Institute for Small Business Management and Entrepreneurship, Augasse 2-6, 1090 Vienna, Austria University of Twente, NIKOS, Dutch Institute for Knowledge-Intensive Entrepreneurship, Postbus 217, 7500 AE Enschede, The Netherlands

a r t i c l e

i n f o

Article history: Received 1 January 2011 Received in revised form 21 July 2011 Accepted 27 September 2011 Available online 10 November 2011 Keywords: Institutional analysis Local development Restructuring Social innovation Theory informed case studies Disruptive technologies

a b s t r a c t In this article, we investigate into local economic restructuring in rural areas that are affected by disruptive technologies. Drawing on an institutionalist framework we apply systematic theory-informed case study analysis of two rural communities in Austria and identify practices that are crucial for a sustainable development of local communities and find that disruptive technologies have to be accompanied by social innovations in the affected communities which consider the capacities and the needs of the local community and establish vertical linkages to policies on the regional and national level. We contribute to the theoretical discussion by presenting a feasible framework for contextual analysis of economic restructuring. Further, we show how this institutionalist perspective can generate insights that support entrepreneurs and policy makers in designing strategies and policies to handle disruptive technologies in rural areas. © 2011 Elsevier Inc. All rights reserved.

1. Introduction In this paper, we look at local economic restructuring to identify practices that are crucial for sustainable development in local communities. We find (1) that disruptive technologies have to be accompanied by social innovations in the affected communities which (2) consider the capacities and the needs of the local community and (3) establish vertical linkages to regional and national policies. Disruptive technologies imply discontinuities which lead to established economic structures being replaced and which creates pressures for local economic restructuring [1–3]. Walsh and colleagues [4,5] point to the double-edged character of disruptive technologies: on the one hand, they are crucial for individual firms' innovative activity and competitiveness, as well as driving aggregate regional economic growth. On the other hand, there is a high risk of failure for those who engage with them. It is especially this characteristic of disruptive technologies which makes the resultant restructuring process difficult to anticipate and manage [6–8, 88]. Discontinuous innovation comes at the cost of “destroying” old, established technologies in parallel with their associated regional economic structures [3]. In regions dominated by a single industry or even company [9,10], typical in European rural regions, introducing disruptive technologies may have severe social consequences including economic recession and rising unemployment. Thus, regional capacity to react to disruptive technologies by appropriately restructuring becomes crucial [11,12]. In this respect, several authors have pointed to the importance of supportive infrastructure: here we mean both physical infrastructure, as well as human capabilities. Based on this insight, they have suggested models for designing strategies and policies to manage and assist discontinuous innovations on the firm-, industry- and governmental level [4,13,14].

⁎ Corresponding author. Tel.: + 31 53 489 3907; fax: + 31 53 489 2159. E-mail addresses: matthias.fi[email protected] (M. Fink), [email protected] (R. Lang), [email protected] (R. Harms). 0040-1625/$ – see front matter © 2011 Elsevier Inc. All rights reserved. doi:10.1016/j.techfore.2011.10.001

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In our article, we build on this perspective and broaden the debate by stressing two important and often neglected factors in analyzing technological innovations and their impacts: social relations and the role of place. Firstly, the distinct social nature of innovations has long been acknowledged in the economic literature: Joseph Schumpeter [15] stressed the importance of innovations in the social relations between individuals in parallel to technological innovation, as a key determinant of its economic impact [15,16]. Secondly, we stress the territorial specificity of the effects of disruptive technologies and the resulting restructuring. This relates not only to path dependency nor just the impact of the local institutional context (history and culture) on the restructuring process. Territorial specificity also points to the role of contingency for dealing with technological change at the local level, as both creative entrepreneurs, as well as local political leaders, may determine the fate of opportunities created by technological change [16,17]. But these local actors' practices and routines are embedded in the local institutional context upon which they draw resource configurations to cope with technological change [18–22]. To contribute to a better understanding of different local responses to disruptive technologies, in this article, we investigate how local restructuring practices are shaped by the institutional context. Our findings contribute to the scientific discussion on several levels. Theoretically, we advance understanding of how an institutionalist approach can be utilized to study local restructuring processes. We develop a plausible framework for analyzing restructuring practices in their respective historical and institutional contexts. To exploit our theoretical framework, our methodology is to apply systematic theoretically-informed case study analysis, which goes beyond descriptive case discussions to enhance our understanding of the place-specific concrete meanings of restructuring practices. Finally, we demonstrate how in practical terms this institutionalist perspective can provide insights for the design of local economic development policies. The context-sensitive approach allows the formulation of recommendations for action sensitive to key local variables and their interdependencies. To achieve this, we adopt the following structure. We begin by exploring existing empirical accounts of local responses to technological change; we then discuss the concept of institutions and show how an institutional approach can be utilized to grasp the institutional dynamics that shape local restructuring processes. We then utilize this framework by analyzing two case studies of small rural communities in Austria. We conclude by discussing these findings' implications for theory and practice. 2. The economic and social implications of disruptive technologies on rural areas In the European Union, 91% of its surface area is categorized as rural and the majority of Europe's citizens live and work in rural areas [23]. Thus, this rural areas' economic development is decisive in the development of the European economy as a whole. Improving quality of life and economic diversification is one of three core themes within the European Union's rural development plan 2007–2013 [24]. In the new “Europe 2020” initiative, rural development is visible in two out of seven flagship initiatives, underpinning the importance of regional cohesion [25,26]. A key element of the structural problem facing rural areas is their systematic disadvantage in terms of competitiveness factors related to human capital. Regional economists have consistently stressed that urban centers are more attractive locations for setting up businesses than rural areas [27–29]. Nevertheless, advances in information and communication technology (ICT) and transportation are said to be of special relevance for rural areas' competitiveness [30–33]: On the one hand, rural businesses have suddenly found themselves exposed to international competition [34]. On the other hand, reduced transportation and communication costs [35] have partly led to the “death of distance” [36] which has loosened the relationship between value creation and particular places. To leverage current opportunities offered by developments in ICT and transportation technologies, rural entrepreneurship policies across Europe are now increasingly targeting the promotion of knowledge intensive industries [24,37,38]. Alongside intensified investments in rural telecommunication and transportation infrastructures, these policies seek to stimulate private sector investments in rural employees' technical skills, along with knowledge transfer within regional clusters of economic activity [39]. Such policies draw on insights from territorial innovation models (for an overview see [40]). It is argued that this increases the chances of retaining jobs in rural areas, especially in service and knowledge intensive manufacturing sectors [41,42]. However, current empirical findings show that these policies do not always meet researchers' and policy makers' expectations [43]. Creative entrepreneurs and employees, e.g. in internet-based business [44], still tend to favor urban or peri-urban locations that provide access to higher-skilled labor, a diverse cultural scene and close connection to clients for their increasingly specialized products [42,45,46]. Moreover, these knowledge-based development (KBD) focused entrepreneurship policies also have potentially negative effects on local communities, illustrated by recent empirical evidence from the US biotechnology industry [47]. Residents, particularly those with low skills, are threatened by gentrification, loss of appropriate jobs and future employment opportunities, and environmental degradation. There are manifold explanations for these discouraging empirical findings: Puga [48] notes that advances in transportation technology did not lead to convergence but rather favor urban centers able to act as hubs for high capacity transportation infrastructure such as high speed trains. Kassicieh and Rahal [7] argue that many rural areas struggle with restructuring because local economic structures lack key resources for rapid adaptation to disruptive technologies, such as R&D or commercialization capabilities. Cohen et al. and Henderson [49,50] stress that in contrast to rurally-based firms, it is actually their urban counterparts who substantially benefit from technological spill-over effects in practice through migration of workers, specialized education, and formal and informal information exchange. Noco [51] adds that lagging regions often cannot benefit from technological spillover because their knowledge gap is too large, and their learning capabilities too low. Wintjes and Hollanders [52] relate Europe's core and periphery gap in terms of innovation to regional differences in innovation absorption capacity. According to Von Hippel

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[53], technological information is sometimes “sticky”, that is location specific innovation and with it the capacity to change is location-specific as well. Previous research thus highlights that rural areas differ from each other (1) in the effects of disruptive technologies and (2) in their capabilities for local economic restructuring. The focus of research on local restructuring must therefore be expanded beyond the pure economic sphere to the socio-cultural dimension of local communities. In this vein, a recent study from Spain [37] suggests that entrepreneurs in knowledge intensive industries who do settle in rural areas are not particularly attracted by rational economic motives, such as public incentives or institutional spillovers. The results highlight the relevance of social attractiveness variables, such as the emotional link with the local community, making it a desired place to live for the entrepreneur. In this article, we apply a comprehensive and context sensitive analysis to investigate local restructuring practices as a response to disruptive technologies' effects on rural areas' key industries. 3. An institutionalist approach to studying restructuring in rural communities In this article, we endeavor to highlight the importance of context-related research to analyzing socio-economic restructuring [54]. We define socio-economic restructuring here as a transformation within a spatio-temporal context that leads to a change in local resource configurations. We draw on a recent stream within new sociological institutionalism using analytical concepts developed in the field of policy analysis and planning [55–57]. Such an approach makes possible the perspective that socioeconomic restructuring is a process which is contested between different actor groups, rather than dependent upon consensus, while stressing the linkages between different spatial scales. This approach therefore avoids viewing the ‘local’ as isolated from national and transnational socio-economic forces [58]. Before we introduce our analytical framework for studying local restructuring processes, we must clarify both the content and the working of institutions. While new institutional economics has established the view of economic activity across disciplines as an institutionalized process, the concept of institutions itself is still used in a variety of ways with its content often loosely defined [59]. Institutionalism in mainstream economics applies a narrow conception of institutions as regulating actors' behavior [60]. These regulations (the first aspect of institutions) are obeyed by individuals and organizations out of a sense of self-interest [61]. In contrast, social sciences' institutional approaches follow the traditional institutionalist school of thought with its all-embracing view of the firm's environment [59,62]. Economic behavior is fundamentally socially embedded and influenced by an individual's obligation to collectively held norms and values [60,63]. This second aspect of institutions makes possible that cultural and historical contexts shape economic activities. Granovetter not only criticized the “undersocialized conception of human behavior” [63] in new institutional economics, but also stressed the enabling and empowering aspect of institutional elements that influence actors' behavior. Moreover, approaches developed within new sociological institutionalism stress a third aspect of institutions. This group stresses the importance of social identities and points to the meanings attributing to economic practices as key to understanding these activities. Meaning is collectively constructed by individuals through social interactions by which they create common frames of reference for their actions [59,60,64]. Sociological institutionalists within regional planning (e.g. [65]) have a particular focus on the interrelation of social identity and place. A spatial perspective enriches a sociological institutional approach by highlighting the different meanings which actors and organizations attach to particular places and territories. In this sense, practices of socio-economic restructuring can thus be understood as “an unequal encounter of different spatial imaginations” [56]. Furthermore, ‘place identity’ (the sense of belonging to a place) may be a powerful mobilizing force and the source of transformative potential in socio-economic practices [56,66]. Institutions' different elements – regulative, normative and cognitive – are interwoven at the concrete empirical level of institutional configurations [60]. After having clarified three aspects of institutions, we consider how institutional dynamics unfold and shape restructuring practices in specific communities. To this end, we present an analytical framework drawing on Giddens' [67] conception of the interaction of structure and agency, and an approach developed by González and Healey [56] within the planning field to study place-specific governance capacity. While the focus of institutionalist analysis is interactions, institutionalists also stress the importance of looking at the deeper levels of reference that structure the economic actors' behavior [56,68]. Our analytical model thus focuses on the interplay between the level of actors' visible and conscious interactions and deeper, structural levels of socio-cultural institutions embedded in particular historical contexts, of which we here highlight three: (1). Episodes of Interaction: This level refers to crucial moments in the restructuring process where key actors (individuals and groups) in specific institutional arenas [69], play out their strategies and make decisions, thus creating a unique atmosphere of interaction [56]. (2). Restructuring Practices: Underpinning the level of ‘episodes’ is the intermediary level of practices and discourses which provide actors with more or fewer resources in the restructuring process. Place-bounded institutions, such as values and rules, are reproduced within the routines followed by actors. Actors' involvement in episodes exposes them to established discourses and practices, while actors are simultaneously shaping and transforming their inherited institutional framework through interactively generating new discourses and practices [57,67,68,70,71]. (3). Governance Cultures: addressing why particular restructuring practices and discourses remain or change requires investigating their place-specific political and cultural embeddedness [56,72]. In the transformative episodes of a restructuring process, place-bound resources are mobilized at this deep institutional level and, at the same time, new “enduring” structures are created [56,68,73].

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4. Case studies 4.1. Case study design Our empirical analysis reflects the holistic research approach proposed by traditional institutionalist economics [74] which later influenced sociological institutionalism in regional planning and policy analysis [71,75]. It focuses on the dialectics between general mechanisms and specific situations [74,76], and assumes that economic practices in specific geographical contexts are very differently shaped by historical and cultural dynamics. Through comparing a range of elements of such practices in different contexts, generalities and differences can be identified, and individual elements can be contextually verified. This permits a stepwise establishment of a holistic theory of local socio-economic restructuring across different territories. However, in contrast to new institutional economics' reductionist treatment of economic activities, single cases are as important as a general typology because powerful idiosyncratic cases are important in identifying novel configurations within the evolving holistic model [74,76]. Nevertheless, abstract concepts are necessary to initiate our case-study oriented “intensive research” [77] towards placing economic practices in their respective historical and cultural contexts and thereby successfully reconstructing their concrete meaning [76]. To get an empirical understanding of local socio-economic restructuring, we analyzed two case studies of small rural communities in Austria. In conducting the analysis, we applied a content analysis of the gathered material [78] through the perspective of “story telling”. Theoretically-informed, historically and geographically embedded story telling focuses on specific emblematic moments (the level of episodes) and the structural dynamics which they reflect (the levels of practices and cultures). These stories name concrete actors (e.g. individuals, groups, organizations) instead of abstract bearers of social transformation. In a second step, we went beyond the single case story to search for cross-case patterns [79]. 4.2. Data collection Data was collected during 2006, in direct field research with ten narrative interviews conducted in the two rural communities located in the south east of Austria, St. Maragrethen an der Raab and Huettenberg. The selection of the interview partners was based on their social roles in the community. Collecting perspectives and interpretations of the communities' development between 1991 and 2001 that are as diverse as possible allows the meanings behind the statements to be brought to the fore. This strategy of data collection also allowed analysis to be based upon the principle of triangulation [80]. In each municipality the mayor, a councilor of the strongest opposition party with executive functions, an entrepreneur and two randomly selected citizens were interviewed: these interviews were recorded and transcribed. 4.3. Background and case selection Both municipalities – St. Margarethen an der Raab and Huettenberg – are located in Austria's rural periphery over a one hour drive to the closest urban center. Since the fall of the iron curtain in 1989 the two municipalities moved to the center of the Single European Market, being closer to this border than to the Austrian capital, Vienna. The political scene in both communities has been dominated for decades by one party. The mayors in St. Margarethen an der Raab were traditionally drawn from the conservative party, while in Huettenberg they were social democrats. Local politics largely concentrated on administrative matters; in practice, a status quo was preserved through a distribution of political powers between their peers: as a result there was no mature political culture of conflict. Politics and economics in both communities were strongly interwoven: in St. Margarethen an der Raab the mayors usually owned the dominant firm, while in Huettenberg they were typically first line executives from its mining company. Both communities' economic activities were strongly focused on the primary sector. In St. Margarethen an der Raab there was a dominant farming business that also ran a slaughtering house, while Huettenberg's local economy was dominated by a mining business. These businesses provided the majority of community jobs, and as Austrian local taxation depends on local employee numbers, dominant firms were also important municipality financiers, making the municipality as dependent upon the firm as individual citizens. In both St. Magarethen an der Raab and Huettenberg, their respective dominant firms were unable to adapt to the new environment of international competition [10], because these organizations dramatically lacked dynamic capabilities. This led to an economic downturn in both communities. Efforts to sustain both firms via public subsidies failed, with both the farming and mining businesses going bankrupt almost simultaneously. Because both communities' local economies were highly dependent upon these dominant firms, their failure came as a profound shock. In both communities, an alternative SME sector had not developed in time to absorb this economic shock, which led to a dramatic downturn during the 1980s. The two communities were confronted with comparable challenges resulting from disruptive technologies on the macro level. However, the two communities experienced very different socio-economic restructuring. Between 1991 and 2001, nearly all jobs were lost and more than 20% of the firms were closed in Huettenberg, while in St. Margarethen an der Raab hundreds of new jobs were created with the total number of firms nearly doubling. Despite facing a comparable shock and with similar framework conditions, the municipalities showed surprisingly different restructuring trajectories in the period 1991 to 2001. This divergence therefore makes St. Margarethen an der Raab und Huettenberg extreme and thus attractive cases for investigating the key variables and their interrelations underlying local economic restructuring.

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4.4. Description of the cases The municipality St. Margarethen an der Raab was formed by a fusion of eight small rural municipalities during the 1960s administrative reforms. Until the 1980s, its economic structure was dominated by agriculture, and in particular, a single family who owned both a substantial share of agricultural land and the largest local business. This family's landholdings were important to their local social status, and their refusal to sell land for industrial development prevented the relocation of external business to the area. This reinforced the economic dominance of the farming-slaughterhouse business. When falling global food prices drove this business to bankruptcy the family were forced to sell their land holdings. A large share of the citizens of St. Margarethen lost their jobs and the municipality's local tax receipts dropped substantially. This collapse left the community angry and desperate, while the local council had no answer in terms of stimulating economic growth and job creation. The subsequent local elections saw a candidate with an entrepreneurial rather than farming background elected. He offered a clear vision for the future of the municipality, and initiated activities by delivering the construction of a village bypass long blocked by opposition parties. The road was opened in 1990, and land allocated for new business developments. In 1991, the first firm moved into the new economic development area, with others following: in 1997 a middle sized renewable energy business relocated to St. Margarethen from the urban center. The period of 1991 to 2001 was also characterized by a renewal of the local social infrastructure, with projects such as new school buildings, a town hall refurbishment, a nursing home in the community center and a medical center realized. All these initiatives were strongly supported by residents who also provided the staffing. In 2001, there were over 600 jobs in about 200 firms in the municipality. In recent years, the population grew constantly, and in a recent election the ruling conservatives experienced only a marginal decline in vote share. Mining in Huettenberg dates back to 800 B.C. For centuries, the mine in Huettenberg was of importance to the region and beyond, but falling world-market prices for ore led the company to cease its mining activities in 1978, with the company closing several years later. This closure led to the loss of nearly all jobs in the municipality, and the almost total disappearance of the tax base. Prior to the mine's closure, the local authority had avoided the establishment or settlement of new businesses in the municipality to avoid reducing the workforce available to the mining company. Thus, there was no strong SME structure outside the mining business, and after its closure, the municipality lacked resources to create favorable business conditions. Subsidies spent on attempts to rescue the mining company left the municipality heavily indebted. The skilled workforce was forced to leave for urban centers with better job markets, given an absence of alternative job opportunities in Huettenberg. In the period 1991 to 2001, the municipality could not recover from the economic shock. Barely any new economic activity developed within the community. The local council focused its development initiatives on large scale projects, which sought to instrumentalize the municipality's history. The first project drew on Huettenberg's most important son, Heinrich Harrer, a famous mountaineer who developed tight-knit connections to the Tibetan political and spiritual leader Dalai Lama. This historical connection was used to propose a project aimed at building a Tibet-center comprising a hotel, spa and cultural center. However, the project was not realized because the regional government denied the necessary financial support and serious private investors could not be found. The only tourist attraction is a small Heinrich Harrer museum with a primarily regional catchment, offering no substantial economic impulse to Huettenberg. The second development initiative was based on the municipality's mining tradition. Financed by the regional government and the European Union, a temporary exhibition was developed in 1995 that told the history of the mining business using historical artifacts found Huettenberg. Even though the exhibition was a success, it offered no foundation for ongoing local economic activity. Thus, the local council failed to develop a feasible strategy for economic growth and job creation since the mining company's closure. Nor have citizens initiated substantial entrepreneurial initiatives: the number of residents dropped continually during 1991 and 2001. Local community frustration grew, reflected in the results of the following local elections where a mayor was directly elected from a far-right party, thereby breaking the traditional social democratic dominance. The majority of seats in the local council are also held by representatives of conservative and right-wing parties. 4.5. Case analysis We now turn to apply our analytical model to these cases to investigate practices of socio-economic restructuring (level 2 in Table 1) underpinned by institutional elements (level 3 in Table 1) that reflect in emblematic episodes of the restructuring in the two case communities (level 1 in Table 1). According to Scott [60], institutions may be working at different geographical levels simultaneously. Furthermore, certain types of institutions can be associated with specific actors. Although, our empirical analysis mainly focuses on the local level, it also takes into account regional and national developments. With taxation or state aid, national and regional state actors are clearly regulating local economic practices. Austria is a federal state, where competencies in the field of regional economic policy are mainly reserved to the provincial state (Land) level. Thus, in both of our cases, these kinds of regulative institutions can predominantly be located on the provincial state level. Traditionally, Austria has granted tax reductions and economic incentives to primary industries, with only since the 1990s a shift in regional policy to other economic sectors, and in particular, dealing with the problems of economic restructuring. In both cases, the strong focus until the 1990s on supporting the traditional, primary sector was also driven by strong normative institutions at the provincial state level. Nevertheless, only one of those cases, St. Margareten an der Raab, did provincial state actors feel morally obliged to help the municipality deal with economic downturn of the local community caused by disruptive technologies. While many rural areas underwent dramatic socio-economic restructuring, causing substantial losses in population

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Table 1 Analysis of key institutions underlying local restructuring.

Episodes of interaction

Restructuring practices

Governance cultures

Regulative institutions based on instrumentalism: “What is in my interest?”

Normative institutions based on appropriateness: “What is expected of me?”

Huettenberg Cognitive institutions based on the meaning attributed to the place: “Who are we and what actions make sense to us?”

Normative institutions based on appropriateness: “What is expected of me?”

Cognitive institutions based on the meaning attributed to the place: “Who are we and what actions make sense to us?”

• Establishment of a cooperative to finance a nursing home for the citizens • Decision to build a high – capacity road by –passing the village center

• Opening of the business development area • Opening of the community center • Re–location of an innovative medium sized firm

• Closure of the mine resulting in an atmosphere of resignation and frustration • Subsidy request for a large scale project to replace the mine

• Initiative to build a Tibetan center • Hosting the annual regional exhibition in the municipality

• Cooperative development strategies • Corporate social responsibility for the community

• Active place marketing to establish an SME structure • Investments in social and recreational infrastructure

• Demanding subsidies from regional government • Passive waiting for some external authority to act • Subsidized large–scale investments

• Single-industry focus in restructuring (on mining) • Place marketing centered around the historical heritage of the community

• Culture of solidarity • Attachment to the place

• Social identity: “Our municipality is a place of high quality of life.” • Social identity: “We are an entrepreneurial community.”

• Paternalistic planning culture • Traditionalist local culture

• Social identity: “We are a place with a great history.” • Social identity: “We are a mining community.”

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St. Margareten an der Raab

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and employment, the provincial state government of Styria remained strongly committed to maintaining economic and social infrastructures in small rural communities. Thus, significant political and financial support – e.g. for funding the new by-pass – came from provincial state politicians for St. Margareten's own restructuring approach. In the case of Huettenberg, however, provincial state authorities also faced increasing demands from local representatives and residents to maintain traditional economic infrastructures. The reaction of their provincial state government, Carinthia, however, was not based on normative moral obligations to support the community but was underpinned by regulative institutions. It kept to the regulations already set in place, precluding a political alliance forming between the local and the regional level to react to the rapidly changing economic environment. This institutional structure in some way constrained the way the local community contested regional policies for socio-economic restructuring. Turning to the local community level, in St. Margareten, to keep infrastructure and to maintain the quality of life, the local council emphasized citizen participation in both the planning and delivery of restructuring policies. A co-operative was established to finance a nursing home for citizens. When the road network was enlarged to attract new businesses, prior to its implementation, different community groups were consulted, to avoid generating conflicts with opposition groups. Local representatives were fighting actively against the loss of economic infrastructure, trying to prevent the community from becoming economically marginalized. Their response seemed to be driven by strong normative elements, demonstrating a moral obligation to act in favor of the needs of the community. The cooperative restructuring practices found in St. Margareten are clearly embedded in a culture of solidarity familiar in the traditional community structures of many rural societies. The other dominant restructuring practice found in St. Margareten can be described as active place marketing to establish a small and medium-sized enterprise base. This practice materialized in building a new business park to attract investors but also in investments in social and leisure facilities to complement newly established housing areas. In this way, community representatives activated a sense of local pride amongst residents which helped in positively mobilizing the community during restructuring. These practices are linked to a social identity of being “a place of high quality of life” and of being “an entrepreneurial community” which can be described as cognitive institutional elements [59]. These institutions may have been successfully transferred from other communities and geographical contexts, via a process of imitation. The reinforced attachment to place is also reflected in the corporate social responsibility felt by entrepreneurs born in St. Margarethen: they reported feeling morally obliged to contribute to the wellbeing of the community, an example of this being the relocation of a mid-sized business from the urban center to St. Margarethen in the mid-1990. In Huettenberg, the major normative institution influencing restructuring can be described as a culture of paternalism. There existed a clear tendency among community members to look to the regional authorities in case of uncertainty. Despite a high level of cohesion, there was no culture of resistance against gradual marginalization, with residents unused to actively participating in change. This normative institution manifested itself in two main emblematic episodes: First, it was reflected in extremely passive anger amongst the local population when the mining business closed. Both residents and local government representatives failed to harness their anger into action, and instead waited for support from the regional authorities. Second, even though the mine's closure and its consequences for the community were long anticipated, the local authority had meetings with the regional authorities to demand subsidies for large-scale projects as a kind of compensation for the mine's closure in a paternalist vein. However, the only result was a nomination as host for the annual regional exhibition. While this event only created a one-off effect for the local economy, it was an emblematic moment that shows the important role of cognitive institutions in Huettenberg's restructuring process. Triggered by this exhibition, subsequent restructuring practices in the community centered around exploiting Huettenberg's historical heritage. Similar to the other case, this practice activated a local sense of pride amongst residents. But it is notable that while this placeboundness in St. Margarethen was linked to a sense of a positive future, in Huettenberg it was directed towards a veneration of the past. Huettenberg's restructuring practices became underpinned by the constructed social identity of being “a community with great history” with its roots in the mining tradition. All of the policy initiatives for restructuring in Huettenberg are strongly connected with this cognitive institution, which can be regarded as an imitation of scripts that have succeeded in other places. However, in Huettenberg's specific context, the normative institution of patriarchy combined with the local regulative institutional structure to constrain such strategies and inhibit their development. Neither local representatives nor residents were able to transform their local historical heritage into tangible strategies for sustainable economic growth. 4. Conclusions and implications Disruptive technologies in ICT and transportation technologies have driven economic downturn and rising unemployment in many rural areas dominated by the primary sector and even by single dominant companies. Although these changes are driven by the same global forces, processes of socio-economic restructuring take on different forms in specific places. The different spectra of outcomes which restructuring may produce in particular places can be regarded as an interplay of these global forces with the distinct local practices and routines that provide actors with repertoires and resources to cope with disruptive technologies. At a theoretical level, in this article we show how an institutionalist approach can be utilized to study local restructuring taking into account key institutional elements and their interdependencies embedded in the local community. To grasp the complex interplay between the levels of agency and structure in transformation processes, in our analysis, we apply a context-sensitive framework that draws on new sociological institutionalism. Such an analytical approach highlights the fact that economic action is deeply embedded in the historical and institutional contexts of a specific place. To fully exploit our theoretical framework, on the methodological level, we apply systematic theory-informed case study analysis.

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Our findings are in line with those of Berkers and Geels [81] who showed for the reconfiguration of industries what we identified for communities. We firstly highlighted the constraints that institutional elements place on communities' economic actions. Secondly, we also highlighted the opportunities this may open up for innovative restructuring. The cases highlight the transformative potential of individual agents in local restructuring [82], such as mayors and their crucial role for mobilizing the community. Against this backdrop, our study suggests that the awareness of cognitive institutions is crucial for understanding the dynamics of local restructuring. Collective reconstruction of a community's identity serves as a mobilizing force in restructuring, if this identity is successfully transformed into practices which fit with the place-specific cultural heritage and norms. However, this insight also implies that the transferability of successful restructuring practices is limited, as their success depends on their specific historical and geographical contexts. This can be clearly seen in our comparative case analysis: After the disruptive technologies impacted on their local economies, in both cases the communities reconstructed their place-identity in part by imitating successful practices from other geographic contexts. Their restructuring practices aimed at restoring a local sense of pride and enhancing the perceived quality of life in the community. These practices involved a varying degree of community participation and investments in local social and leisure infrastructure. These findings are clearly in line with earlier institutionalist studies on socio-economic restructuring in marginalized communities [59,83]. However, the differential success of these restructuring practices observed in our case-study communities leads us back to consider the crucial role of context and the multi-level character of socio-economic restructuring. In Austria, the provincial state clearly has a constraining effect on local economic restructuring. Innovative local restructuring practices on the local level, as shown in the case of St. Margarethen, may evolve where parallel ideas and practices are promoted at the provincial state level, making key regional players feel normatively committed to support local initiatives and provide necessary resources. However, if restructuring practices in a particular community conflict with regional economic policy practices, as shown in the case of Huettenberg, such potentially innovative practices become locally trapped. At the same time innovations at the global level may be translated to the regional agents by intermediaries who facilitate communication between the different levels [84–86]. Thus, on the practical level, we show how an institutionalist perspective can provide useful insights for the design of regional policy measures: our findings suggest that disruptive technologies have to be accompanied by social innovations in the communities affected. Those restructuring practices that have been identified as being decisive for a sustainable development of local communities reflect the three dimensions of social innovation as put forth by Moulaert et al. [16]: (1) they consider the capabilities and the needs of the local community, (2) through making resident participation a crucial component in the local restructuring process and (3) establishing vertical linkages to policies on the regional and national level in order to access necessary resources to meet the needs of the community. Thus, we also argue in this article for a more realistic conceptualization of the autonomy of individual actors, highlighting the fact that institutions are durable over time and work at different geographical levels [60]. In line with inter alia Abbott and Yoong [87], our cases demonstrate the relevance of multilevel governance, in which national and regional practices, embedded in their respective governance cultures, shape local opportunity structures. In turn, the up-scaling of innovative socio-economic practices emerges as a pre-condition for successful local restructuring. The frame of multilevel governance, for instance, could facilitate innovative local responses to global challenges in terms of forecasting technological trends (e.g. scenario techniques: [30,33], the regional development platform method: [88]; for an industry context [89,90]) and providing long-term commitment to ensure innovative practices become more than ad hoc interventions. The sustainability of regional restructuring can be supported by the introduction of social experiments such as proposed by Caniels and Romijn [17]. However, evidence from both developed and developing rural settings show that restructuring initiatives which encompass a socially innovative content are often trapped in the local, because they fail to change existing local and regional power relations [91,92]. Our results must be interpreted mindful of the study's limitations. Our empirical study is based on a theory-informed analysis of two Austrian cases [80,93]. First, although we took great care to meet validity and reliability criteria for case study research by securing (1) internal validity through derivation of research framework from literature, (2) construct validity through data triangulation, (3) external validity through cross case analysis, and (4) reliability through detailed case study protocols, this approach faces some limitations regarding transferability. Second, our holistic research approach aims at catching the institutional dynamics and multi-scalar dialectics of a real life context while an essentialist methodology, as applied in new institutional economics, uses abstract categories and pursues generality to explain the complex reality of economic practice. Nevertheless, this article has demonstrated the policy-relevance of contextual research, thus complementing research within the new institutional economics paradigm. However, in accounting for the holistic approach, the case-analysis and its outcomes become complex and thus cannot be communicated as simple messages [94]. Longitudinal studies are needed to inquire into the long-term sustainability of restructuring practices. Further empirical work, such as through replication studies, is required to identify, compare and contextually verify practices in other institutional arenas.

Acknowledgments The authors would like to thank Stephan Loidl for his contribution in data collection and design of the underlying research project which was partly financed by the Austrian National Bank, The Austrian Association of Municipalities and Kommunalkredit Austria. Special thanks go the two anonymous reviewers for their valuable comments which helped to improve the manuscript substantially.

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Matthias Fink is head of the research institute for Liberal Professions and Associate Professor at the Department for Small Business Management and Entrepreneurship at the WU Vienna University of Economics and Business, where he received his venia docendi (Habilitation) in June 2010. He has been a habilitation scholar (APART) of the Austrian Academy of Sciences, a visiting professor at Vaasa University (Finland), and an EECPCL participating professor at Harvard Business School (USA). Furthermore, Matthias Fink is a senior researcher at the RiCC (Research Institute for Co-operation and Co-operatives), visiting professor at the Universitat Autonòma de Barcelona (Spain) and the University of Twente (NL), vice chairman of the Institut fuer Managementforschung Koeln e.V. (IMFK), and country vice president of the European Council of Small Business (ECSB). Richard Lang is a senior researcher at the Research Institute for Co-operation and Co-operatives and at the Department for Small Business Management and Entrepreneurship. His research interests revolve around urban and regional development, community co-operatives and social capital. Rainer Harms is an Assistant Professor (tenure track) at NIKOS, University of Twente. Prior to this position, he was Assistant Professor at the Department of Innovation Management and Entrepreneurship, University of Klagenfurt, Austria (Habilitation), and Researcher at the WWU Münster, Germany (Doctorate). Rainer is a Visiting Professor at the Vienna University of Economics and Business (Wirtschaftsuniversität Wien), at Klagenfurt University, and at the Universitat Autònoma de Barcelona. His research interests are (international) entrepreneurship, firm growth, and innovation management.