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DETERMINANTS OF HUNGARIAN SUB-REGIONS’ TERRITORIAL CAPITAL

Profile image of Gyorgy JonaGyorgy Jona

Abstract
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The study explores the concept of territorial capital, particularly focusing on its determinants in Hungarian sub-regions from 2004 to 2010. It emphasizes the importance of both tangible and intangible assets in regional economic growth, using spatial econometric methods to measure annual changes in territorial capital. The findings reveal that variations in territorial capital are influenced by several factors, including economic, relational, and institutional capitals, and underscore the differences between achieved and potential regional development.

Figures (13)
Table 1. Variables and sub-indices constructing the territorial capital
Table 1. Variables and sub-indices constructing the territorial capital
Table 2. Main data of principal component analysis
Table 2. Main data of principal component analysis
Determinants of Hungarian Sub-Regions’ Territorial Capital However, comparing the rate of territorial accumulation of the 40 sub-regions with the lowest and the highest territorial capital, a totally different result can be obtained. 40 sub-regions with the lowest territorial capital increased annually by 0.24% on average, while 40 sub-regions with the highest territorial capital decreased by 2.26% annually. The convergence in this context can be traceable but it could evolve if the state of the most developed sub-regions worsened relatively, and the ones being in the worst state improved minimally (see figure 3). In this comparison the territorial convergence can be measured statistically because the 40 sub-regions with highest territorial capital were marginalized.
Determinants of Hungarian Sub-Regions’ Territorial Capital However, comparing the rate of territorial accumulation of the 40 sub-regions with the lowest and the highest territorial capital, a totally different result can be obtained. 40 sub-regions with the lowest territorial capital increased annually by 0.24% on average, while 40 sub-regions with the highest territorial capital decreased by 2.26% annually. The convergence in this context can be traceable but it could evolve if the state of the most developed sub-regions worsened relatively, and the ones being in the worst state improved minimally (see figure 3). In this comparison the territorial convergence can be measured statistically because the 40 sub-regions with highest territorial capital were marginalized.
Table 3. Annual changes in capital types determining territorial capital on the basis of beta value The link between relational and economic capital means that the chance for srowth of the region can be improved by coordination, cooperation and gathering of clusters of economic units embedded regionally. Note that relational capital ‘learly shows that intangible assets also determine the conditions of regional srowth — the performance of a region increases if its relational capital is high. ncrease in economic and relational capital contributes to the same extent to the success of local entrepreneurs, which is proved by the structure of territorial -apital in Hungary.
Table 3. Annual changes in capital types determining territorial capital on the basis of beta value The link between relational and economic capital means that the chance for srowth of the region can be improved by coordination, cooperation and gathering of clusters of economic units embedded regionally. Note that relational capital ‘learly shows that intangible assets also determine the conditions of regional srowth — the performance of a region increases if its relational capital is high. ncrease in economic and relational capital contributes to the same extent to the success of local entrepreneurs, which is proved by the structure of territorial -apital in Hungary.
five categories (Perucca, 2013). In the ana yzed period, the Rétsag, Balatonféldvar, Balatonalmadi, Szob, Ercsi, and Erd sub-regions had the highest territorial capital loss. It might be surprising tha all of these are sub-regions with the highest GDP. The Budaérs, Baja, Vasarosnamény, Lengyeltot, Csurg6, Szentgothard and Edelény sub- regions accumulated the most territorial capital. The listed sub-regions (except Buda6rs) can seen in figure be considered as underdeveloped. The summarizing results can be 4. There was significant territorial capital growth in 19 sub-regions (see figure 5). It is important that 14 of these have low territorial capital and only 5 of these sub-regions have high territorial capital; the sub-regions with relatively low territorial capital managed to preserve their territorial capital against the crisis. The question is how they were able to do it. It can be seen from figure 5 that the structure of the territorial capital of these sub-regions basically differs from the national average. It is typical that the most determining is the economic, cultural and relational capital; in other words, territorial capital is accumulated in those
five categories (Perucca, 2013). In the ana yzed period, the Rétsag, Balatonféldvar, Balatonalmadi, Szob, Ercsi, and Erd sub-regions had the highest territorial capital loss. It might be surprising tha all of these are sub-regions with the highest GDP. The Budaérs, Baja, Vasarosnamény, Lengyeltot, Csurg6, Szentgothard and Edelény sub- regions accumulated the most territorial capital. The listed sub-regions (except Buda6rs) can seen in figure be considered as underdeveloped. The summarizing results can be 4. There was significant territorial capital growth in 19 sub-regions (see figure 5). It is important that 14 of these have low territorial capital and only 5 of these sub-regions have high territorial capital; the sub-regions with relatively low territorial capital managed to preserve their territorial capital against the crisis. The question is how they were able to do it. It can be seen from figure 5 that the structure of the territorial capital of these sub-regions basically differs from the national average. It is typical that the most determining is the economic, cultural and relational capital; in other words, territorial capital is accumulated in those
sub-regions even during the crisis where the background conditions of cultural economy exist and prevail (Colombo e¢ a/., 2011). Cultural economy means that cultural institutions and the cultural industrial sector of the region are actively utilized, socioeconomic interactions thicken and these are embedded in regional economic processes, which finally define regional development (Bain-McLean, 2013; Donald et al., 2013). The partial effect of human capital is relatively large; the partial effect of institutional capital is smaller than the national average, that is to say the territorial capital structure of the sub-regions will be so stable with the revaluation of knowledge and the network proximity becoming closer that it could grow even during the crisis (Faludi, 2014). According to the results, it is true without exception for the sub-regions showing an outstandingly high territorial capital growth that they relieved their club goods in the structures of the cultural economy, and adapted the channels of the institutional system of formal and informal knowledge to market demands (Servillo et al., 2012). Simply put, those sub-regions could increase territorial capital which could improve and integrate their relation system, cultural pattern and knowledge base into regional economic processes (Fuchs and Klingemann, 2011). Of course, it does not mean that these sub-regions exploited these possibilities maximally but it is true that the above mentioned conditions existed in this period.
sub-regions even during the crisis where the background conditions of cultural economy exist and prevail (Colombo e¢ a/., 2011). Cultural economy means that cultural institutions and the cultural industrial sector of the region are actively utilized, socioeconomic interactions thicken and these are embedded in regional economic processes, which finally define regional development (Bain-McLean, 2013; Donald et al., 2013). The partial effect of human capital is relatively large; the partial effect of institutional capital is smaller than the national average, that is to say the territorial capital structure of the sub-regions will be so stable with the revaluation of knowledge and the network proximity becoming closer that it could grow even during the crisis (Faludi, 2014). According to the results, it is true without exception for the sub-regions showing an outstandingly high territorial capital growth that they relieved their club goods in the structures of the cultural economy, and adapted the channels of the institutional system of formal and informal knowledge to market demands (Servillo et al., 2012). Simply put, those sub-regions could increase territorial capital which could improve and integrate their relation system, cultural pattern and knowledge base into regional economic processes (Fuchs and Klingemann, 2011). Of course, it does not mean that these sub-regions exploited these possibilities maximally but it is true that the above mentioned conditions existed in this period.
influence on territorial capital than cultural capital. This result of the sub- regions can also be explained by the fact that they mobilized more effectively the advantages of socio-cultural proximity (Camagni, 2004; Stimson, 2014). The coordinating costs could decrease because the face-to-face relations and keeping in touch, and cooperation of local economic actors — despite sometimes opposing interests — resulted in increased trust, and the synergic effect could strengthen among the entrepreneurs (Desai et al., 2011; Capello, 2012). The stagnant sub-regions do not follow any pattern on the basis of their geographical location. 42 sub-regions are in this group. It is typical for them that the effect of social capital is much stronger than the national average, while the economic, institutional and human capital were able to change the territorial capital to a much lesser extent. It means that in these sub-regions local social inequalities are relatively smaller; the institutions supplying cultural services and the knowledge capital are present to a smaller degree (see figure 7). It is interesting that in these sub-regions the improvement of social relation systems contributed to territorial capital accumulation only very slightly. In the territorial capital structure (see figure 8) of the sub-regions with moderate decrease (there were altogether 19 such regions) the effect of the institutional capital stands out significantly against the other capital types, while the influence of the economic and relational capital is de-emphasized and the human capital also loses some of its determining power. If institutional capital gets stronger in the way that during this period the socioeconomic criteria changed slightly, it causes a slight decrease in the territorial capital of the sub-region.
influence on territorial capital than cultural capital. This result of the sub- regions can also be explained by the fact that they mobilized more effectively the advantages of socio-cultural proximity (Camagni, 2004; Stimson, 2014). The coordinating costs could decrease because the face-to-face relations and keeping in touch, and cooperation of local economic actors — despite sometimes opposing interests — resulted in increased trust, and the synergic effect could strengthen among the entrepreneurs (Desai et al., 2011; Capello, 2012). The stagnant sub-regions do not follow any pattern on the basis of their geographical location. 42 sub-regions are in this group. It is typical for them that the effect of social capital is much stronger than the national average, while the economic, institutional and human capital were able to change the territorial capital to a much lesser extent. It means that in these sub-regions local social inequalities are relatively smaller; the institutions supplying cultural services and the knowledge capital are present to a smaller degree (see figure 7). It is interesting that in these sub-regions the improvement of social relation systems contributed to territorial capital accumulation only very slightly. In the territorial capital structure (see figure 8) of the sub-regions with moderate decrease (there were altogether 19 such regions) the effect of the institutional capital stands out significantly against the other capital types, while the influence of the economic and relational capital is de-emphasized and the human capital also loses some of its determining power. If institutional capital gets stronger in the way that during this period the socioeconomic criteria changed slightly, it causes a slight decrease in the territorial capital of the sub-region.
The sub-regions with significant decrease (including 9 regions) were typically he sub-regions in Nograd, Somogy, northern sub-regions of Pest County, western regions of Vas County, and north-eastern and southern sub-regions of Balaton oelong. It is remarkable that none of the sub-regions in Tiszantul can be found here. Institutional capital causes significant changes in the territorial capital structure in sub-regions with significant decrease. It does not mean that institutional capital sets back growth, only that the so powerful partial effect of institutional capital and this territorial capital structure set back the territorial capital accumulation
The sub-regions with significant decrease (including 9 regions) were typically he sub-regions in Nograd, Somogy, northern sub-regions of Pest County, western regions of Vas County, and north-eastern and southern sub-regions of Balaton oelong. It is remarkable that none of the sub-regions in Tiszantul can be found here. Institutional capital causes significant changes in the territorial capital structure in sub-regions with significant decrease. It does not mean that institutional capital sets back growth, only that the so powerful partial effect of institutional capital and this territorial capital structure set back the territorial capital accumulation
Determinants of Hungarian Sub-Regions’ Territorial Capital
Determinants of Hungarian Sub-Regions’ Territorial Capital
(Rodriguez and Pose, 2013; Capello and Perucca, 2014). The effacement of the relational capital refers to the shattered business relation among local enterprises (Bathelt and Gluckler, 2011) (see figure 9). A further characteristic of this territorial capital structure is that the explaining power of economic and human capital is much worse than the national one. These factors caused that the sub-regions lost almost 10% of their territorial capital during the analyzed seven years.
(Rodriguez and Pose, 2013; Capello and Perucca, 2014). The effacement of the relational capital refers to the shattered business relation among local enterprises (Bathelt and Gluckler, 2011) (see figure 9). A further characteristic of this territorial capital structure is that the explaining power of economic and human capital is much worse than the national one. These factors caused that the sub-regions lost almost 10% of their territorial capital during the analyzed seven years.

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