Innovation policies and regional development: the European challenge

1. Innovation policies and regional development: the European challenge Luc Soete University of Maastricht MERIT http://www.merit.unimaas.nl Globelics Academy lecture, Lisbon, June 1st, 2004, 16.30-18.00

2. Outline • An EU story: EU is a union of nation states has lots of implications also in relation to S&T • Some regional economics: intrinsic limits of social cohesion policies in a Europe of nation states • The European Research Area and its impact on regional development and social cohesion • Case for regional Knowledge Anchorage

3. 1. Some macro-economics • “National” competitiveness policies have in a monetary union potential beggar-thy-neighbour implications: • Impact of national “wage settling” policies on (un)employment in other member countries • Competition between member countries in negative rather than positive integration measures • Danger of a European “race to the bottom” with respect to social and welfare policies • The European Research Area as a “race to the top”: • Up to now a top down approach: European targets translated in national targets/benchmarks • Need for bottom up approach: regional diversity as factor for knowledge activation policies

4. The EU and social cohesion • Europe unique laboratory of regional development policies, but social cohesion aims becoming questioned: • Effectiveness: national growth convergence within the EU, but regional divergence (national failure in first instance) • Physical borders of European solidarity being questioned with enlargement (strong political reasons for national regional policies) • Intrinsic limits of regional policy: peripheral regions; success implies discontinuation; hence vulnerability of created European goodwill

5. 2. Some regional economics • Diversity of regional development is a reflection of mixture of factors: • Geographical ones: peripheral location • Physical endowments: agriculture, mining, logistics • Agglomeration effects: snowball size effect; population density closely linked to knowledge activities • New endowments: sustainability (pollution, congestion, urban development); ageing (health and care, mobility, housing) • Positive cluster effects vs negative cluster effects

6. The regional dimension of the ERA • Social cohesion implications of ERA under-researched: • Likely internal EU migration effects of highly skilled • Regional/local implications of Mattheus effects of research excellence • Local knowledge cluster effects could lead to accentuation of regional (and national) growth diversity • Quid when EU nations (including accession countries) observe strong brain drain trends?

7. 3. Some comments on NSI • Complex subject with many actors involved (Lundvall, Fagerberg, and all those not here Nelson, Freeman, Edquist…) • Need for a systemic approach to the many interactions between science and socio-economic development • Some borders do matter: role for national versus regional innovation systems • Such systems evolve over long periods, changes are often incremental: • National systems under international pressures • Regional systems in search of dynamism • Role of universities (Mowery)

8. Public-Private Knowledge Links: An Increasing Mismatch? • “National” research policies: improving quality, strengthening research capacities, but little specialisation… • Dutch knowledge disease: phenomenon of growing duality emerging between private and public research capacity, typical for small to medium sized countries with large multinationals • Private research strongly internationalized • Public research: national research “autarchy” policy • Region as natural environment for ERA related science and development policy

9. Different regional policy trajectories • “Crowding in” strategy of existing private R&D. To build stronger linkages between private R&D activities and public research institutes • Only way to achieve ERA without further exacerbate European research paradox • Might maintain private R&D expenditures of existing European MNCs • Spinn-offs of universities and polytechnics: support technostarters • Cooperation with local authorities, regional innovation platforms • Role of large firms as having “the clout to make things work”

10. Role of universities • Not just universities but also polytechnics: • Different in various EU countries • Uniformisation towards university level not always positive (UK experience) • Focus on both strategies, but with totally different angles: • Technology angle in case of “crowding in” • Marketing angle in case of “spin-offs” and start-ups • Need for a truly joint effort (example of academic hospitals; coaching, technopartners, etc.)

11. 4. Case for Regional Knowledge Anchorage • From regional system of innovation perspective 4 elements appear particularly relevant for regional growth and development: • Quality of human capital formation • Openness of research capacity • Strength of innovative performance • Absorptive regional capacity

12. Regional human capital formation • Focus on local/regional higher education institutions: universities, polytechnics, professional training schools, including life long learning • Emphasis on quality, reduction in failure rates and drop outs • Improving attractiveness to “foreign” students, i.e. from other regions • Recognition of importance of exchange programmes as benchmark learning tools

13. Openness of research capacity • Strengthening of local research presence in regional economic, industrial and political tissue (seminars, (in)formal networks, local media, cooperation) • Joint public-private regional initiatives • Focused excellence where openness to “foreign” knowledge, researchers, institutes collaboration is dominant trend • Strengthening research infrastructure common regional aim

14. Local innovative performance • Recognition of importance of local scientific spin-off (scientific entrepreneurs) • Strengthening of links between public research institutes/researchers/teachers and local SMEs (local knowledge vouchers) • Embedment of large, dominant MNC in public research infrastructure (anchorage, increasing costs of footlooseness) • Regional/local PR of innovative identity

15. Absorptive regional capacity • Focus on regional bèta users • Role of regional public authorities in terms of procurement • Regional presence “abroad” (fairs, etc.) • Focus on regional diffusion and knowledge distribution policies • Cooperation with other “foreign” regions

16. HUMAN CAPITAL USERS Sophistication: - Regional characteristics - Local dynamism SUPPLY: - from within the region - attraction from outside region ABSORTION CAPACITY RESEARCH CAPACITY CREATORS Universities, research labs: - Own expertise - Openness DEMAND: - Local SME spinn-offs - Large dominant players INNOVAT. PERFORMANCE

17. SOCIAL & HUMAN CAPITAL ABSORTION CAPACITY RESEARCH CAPACITY TECH. & INNOVAT. PERFORMANCE

18. SOCIAL & HUMAN CAPITAL RESEARCH CAPACITY ABSORPTIONCAPACITY TECH. & INNOVAT. PERFORMANCE

19. "BIASES" in N.S.I.

20. 5. Interesting experiences • Regions of knowledge EU programme • Emphasis on role of local universities and/or public research institutes • Cooperation between highly advanced and social cohesion regions (interactive learning) • Cross-national border regions • Border regions and the underutilized growth potential beyond the national border • Use differences between country’s to own regional advantage

21. Case LEA: differences Belgium-Netherlands-Germany • Belgian/Flemish knowledge economy: • Dependent on foreign firms • Universities underfunded but attractors • Strong human and S&E capital • Dutch knowledge economy: • Dependent on Dutch MNCs which are internationalizing • Fragmented university/higher education policy • S&E shortages • German knowledge economy: • Nationally oriented higher education policy • Lagging behind: old knowledge economy

23. Beyond “nationalism” • “National competitiveness a dangourous obsession?” to paraphrase Paul Krugman • Knowledge economy is an economy without borders: pieces of knowledge acquired, bought, stolen, reshuffled form all over the world. • National targets (Barcelona) were ultimately primarily inspired by national statistics and national policy makers • New geography and agglomeration effects: regions are the natural environment for local anchorage of knowledge related activities.

24. In search of European clusters… • Significance of regional and/or local research and innovation activities/policies in Europe comparable to the US • Limited success on implementation of cross-border cooperation: dominance of nationalism in RTD and innovation policies • Diversified or fragmented as one prefers to take a positive or negative view with respect to universities, businesses, local authorities generally involved • In search of European regional clusters towards an ERRA… only way to achieve Lisbon.