KIT territorial evidence and ERDFRoberta Capello

Politecnico di Milano

ESPON 2013 Programme European Territorial Evidence for

EU Cohesion Policy and Programming

13-14 June 2012Aalborg, Denmark

State of the art in innovation policy debate

The KIT project is at the heart of an important policy debate.

ERDF Reform 2009 - 2012

DG-Regio and ESPON 2006-2013

DG Research - 2009 Europe 2020 - 2010

Barca Report

2009

KIT Project ‘Regional Patterns of Innovation’

2011-12

‘Smart Specialization’ in R&D policies

Smart Growth pillar ‘Innovation Europe’ Flagship Initiative

Smart Innovation Policies

Aim of the presentation

To underline the importance of the territorial evidence found by KIT for re-orienting regional innovation policies, by:

1.highlighting some general beliefs in the field of knowledge and innnovation;

2.providing territorial evidence from KIT that goes against the general beliefs, generating some unconventional policy warnings on how ERSF should be spent to boost innovation.

The Existence of a Knowledge Economy

knowledge is the most strategic asset on which comparative advantages of nations, regions and firms rest;

the knowledge economy is the present economic paradigm that pervades all economies.

The Existence of a Knowledge Economy: KIT evidence

The Knowledge Economy in Europe is a very fragmented picture.

What is striking from this map is the high number of regions in which the knowledge economy is still in its infancy.

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Acores

Guyane

Madeira

Réunion

Canarias

MartiniqueGuadeloupe

Valletta

Roma

Riga

Oslo

Bern

Wien

Kyiv

Vaduz

Paris

Praha

Minsk

Tounis

Lisboa

Athina

Skopje

Zagreb

Ankara

MadridTirana

Sofiya

London

Berlin

Dublin

Tallinn

Nicosia

Beograd

Vilnius

Kishinev

Sarajevo

Helsinki

Budapest

Warszawa

Podgorica

El-Jazair

Stockholm

Reykjavik

København

Bucuresti

Amsterdam

Luxembourg

Bruxelles/Brussel

Ljubljana

Bratislava

Regional level: NUTS2Source: Own elaboration, 2011

Origin of data: EUROSTAT and REGPAT, 2007© EuroGeographics Association for administrative boundaries

This map does notnecessarily reflect theopinion of the ESPONMonitoring Committee

The know ledge econom y in Europe

© Politecnico di Milano, ESPON KIT Project, 20120 520260

km

Legend

No data

None (137 regions)

TAR only (8 regions)

Scientific regions only (11 regions)

Networking regions only (43 regions)

TAR and scientific regions (3 regions)

TAR and networking regions (20 regions)

Scientific and networking regions (29 regions)

TAR, scientific and networking regions (31 regions)

Knowledge and the Flagship Initiative ‘Innovation Union’

A knowledge economy is the key driver to an ‘Innovation Europe’ Flagship Initiative.

General policy recommendation of the Agenda 2020: increase R&D / GDP to more than 3%.

Knowledge and the Flagship Initiative ‘Innovation Union’: KIT evidence

The KIT project shows that:

1.the invention-innovation short circuit is not in place everywhere;

2.an immediate interaction between R&D/high education facilities on one hand and innovative firms on the other does not take place everywhere.

Knowledge and the Flagship Initiative ‘Innovation Union’: KIT evidence

R&D expenditure / GDP Share of firms introducing product and/or process innovation

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Roma

Riga

Oslo

Bern

Wien

Kyiv

Vaduz

Paris

Praha

Minsk

Tounis

Lisboa

Skopje

Zagreb

Ankara

Madrid

Tirana

Sofiya

London Berlin

Dublin

Athinai

Tallinn

Nicosia

Beograd

Vilnius

Ar Ribat

Kishinev

Sarajevo

Helsinki

Budapest

Warszawa

Podgorica

El-Jazair

Ljubljana

Stockholm

Reykjavik

København

Bucuresti

Amsterdam

Bratislava

Luxembourg

Bruxelles/Brussel

Valletta

Acores

Guyane

Madeira

Réunion

Canarias

MartiniqueGuadeloupe

This map does notnecessarily reflect theopinion of the ESPONMonitoring Committee

0 500250km© Politecnico di Milano, Project KIT, 2011

Regional level: NUTS2Source: Politecnico di Milano, 2011

Origin of data: Community Innovation Survey 2004© EuroGeographics Association for administrative boundaries

KIT estimates

Share of both product and process innovationNA0 - 7.797.80 - 10.2410.25 - 13.1513.16 - 16.6916.70 - 21.3721.38 - 28.3428.35 - 42.6342.64 - 98.82

Iceland: CIS3 data.

Latvia and Slovenija: CIS 2006 data.

Switzerland: share of product and process innovation.

Knowledge and the Flagship Initiative ‘Innovation Union’: KIT evidence

Product innovation

Process innovation

Product and/or process

innovation

Marketing and/or

organizational innovation

Household propensity to adopt

innovation

Environmental innovation

TAR 17,42 13,76 43,66 32,75 57 0,007

Scientific 18,16 13,48 43,71 29,51 62 0,007

Networking 16,19 13,2 44,24 31,95 57 0,007

Other 6,34 9,88 27,4 20,58 41 0,003

Smart specialization and the Flagship Initiative ‘Innovation Union’

Regional Policy Contributing to Smart Growth in Europe fully subscribes to the smart specialization strategy that claims that European policies should be targetted according to a core - periphery model:

- Core areas: where R&D activities should be concentrated.

- Peripheral areas: where co-application efforts should be concentrated.

Smart specialization and the Flagship Initiative ‘Innovation Union’ : KIT evidence

The geography of innovation is much more complex that a core-periphery model.

The preconditions for knowledge creation, for turning knowledge into innovation, and for turning innovation into growth are all embedded in the territorial culture of each region.

This means that each region follows its own path in performing the different abstract phases of the innovation process, depending on the context conditions: its own ‘pattern of innovation’, in our terminology.

Territorial patterns of innovation

Pattern 1= A European science-based area

Pattern 2 = An applied science area

Pattern 3 = A smart technological application area

Pattern 4 = A smart and creative diversification area

Pattern 5 = An imitative innovation area

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Acores

Guyane

Madeira

Réunion

Canarias

MartiniqueGuadeloupe

Valletta

Roma

Riga

Oslo

Bern

Wien

Kyiv

Vaduz

Paris

Praha

Minsk

Tounis

Lisboa

Athina

Skopje

Zagreb

Ankara

MadridTirana

Sofiya

London

Berlin

Dublin

Tallinn

Nicosia

Beograd

Vilnius

Kishinev

Sarajevo

Helsinki

Budapest

Warszawa

Podgorica

El-Jazair

Stockholm

Reykjavik

København

Bucuresti

Amsterdam

Luxembourg

Bruxelles/Brussel

Ljubljana

Bratislava

Regional level: NUTS2Source: Own elaboration, 2012

Origin of data: EUROSTAT, 2012© EuroGeographics Association for administrative boundaries

This map does notnecessarily reflect theopinion of the ESPONMonitoring Committee

Territoria l patterns o f innovation in Europe

© Politecnico di Milano, ESPON KIT Project, 20120 520260

km

Legend

No data

Imitative innovation area

Smart and creative diversification area

Smart technological application area

Applied science area

European science-based area

Knowledge production

Knowledge is the most strategic asset for a modern economy to be competitive.

An increase in R&D expenditure increases knowledge output.

Knowledge production: KIT evidence

The return of R&D expenditure to knowledge production increases by increasing R&D expenditure up to a certain level, then it starts decreasing.

R&D expenditure suffers from decreasing retuns

Knowledge production: KIT evidence

Map: Impact or R&D investments on knowledge production

The return of R&D investments to knowledge production increases by increasing R&D investments up to a certain level, then it starts decreasing.

Pattern 5

Pattern 1

Pattern 2

Pattern 4

Pattern 3

Knowledge and Smart Growth

Knowledge is the most strategic asset for a modern economy to grow, therefore:

1.Knowledge (and in particular R&D) explains factor productivity;

2.knowledge generates GDP growth.

Knowledge and Smart Growth: KIT evidence

Knowledge and Smart Growth: KIT evidence

Map: Elasticity of GDP to R&D by patterns

A critical mass is required in order to achieve increasing returns (U-shaped form).

Pattern 2

Pattern 1

Pattern 5

Pattern 3

Pattern 4

Knowledge and Smart Growth: KIT evidence

GDP growth (2005-2007)

R&D on GDP

Share of innovative firms

Elasticity of GDP growth to R&D

Elasticity of GDP growth to innovation

EU average 3.64 1.37 35.54 0.12 0.38

European science-based area (ESBA)

3.29 2.56 63.16 0.24 0.41

Applied science area (ASA) 3.65 1.84 46.92 0.15 0.49

Smart technological application area (STAA)

3.17 1.71 38.43 0.16 0.26

Smart and creative diversification area (SCDA)

3.85 0.97 27.69 0.10 0.22

Imitative innovation area (IIA)

4.2 0.41 18.14 Not significant Not significant

Key policy messages from KIT (1)

Unconventional policy warnings with regard to: -R&D expenditures as the right policy tools to develop new knowledge, innovation and growth;-a knowledge economy as the driver of growth opportunities everywhere;-external knowledge as an efficient knowledge input for all regions;-an innovation-driven economy as an outcome of a knowledge economy;-formal knowledge as the main and most strategic knowledge asset on which a knowledge economy rests.

Key policy messages from KIT (2)

If innovation policies have to support modernization in all European regions, they have:

- to diversify their approach in order to comply with the specificities and potentials of the single regions, and;

- to avoid the opposite risks of dispersion of public resources in un-differentiated ways, or

- to concentrate all resources in a few regions where the traditional policy action, namely R&D support, is due to grant the highest returns.

Key policy messages from KIT (3)

The five differentiated patterns of innovation can be the way towards a renewed, spatially sound inclusion of the smart specialization strategy in R&D policies into an appropriate regional innovation policy framework.

Smart innovation policies: definition

Smart innovation policies may be defined as those policies able to increase the innovation capability of an area by boosting effectiveness of accumulated knowledge and fostering territorial applications and diversification, on the basis of local specificities and the characteristics of already established innovation patterns in each region.

Smart innovation policies: tools

Embeddedness: policies have to be embedded in the local reality, in local assets and strategic design capabilities.

Connectedness: policies have to guarantee the achievement of external knowledge through strong and virtuous linkages with the external world.

Differentiated for the different territorial patterns of innovation.

Smart innovation policies Territorial patterns of innovation

Policy aspectsEuropean science-

based area(Pattern 1)

Applied science area

(Pattern 2)

Smart technological

application area(Pattern 3)

Smart and creative

diversification area(Pattern 4)

Imitative innovation area

(Pattern 5)

Policy goals Maximum return to R&D investmentsMaximum return to applications and co-

operation in applicationsMaximum return to imitation

Policy actions for local knowledge generation

(Embeddedness)

Support to R&D in: Support to creative application, shifting capacity from old to new uses, improving

productivity in existing uses, through:

Fast diffusion of existing innovation

Enhancing receptivity of existing

innovation

New basic fields

General Purpose Technologies

Specialized technological fields

Variety in applications

Incentives to technological

development and upgrading

Variety creation

Identification of international best

practices

Support to search in product/market

diversification

Support to entrepreneurial

creativity

Support to local firms for

complementary projects with MNCs

Support to local firms for specialized

subcontracting

Policy actions for exploitation of knowledge spillovers

(Connectedness)

Incentives to inventors attraction and mobility

Support of research cooperation in:

Incentives for creative applications through: Incentives for MNCs attraction

GPT and trans-territorial projects (ERA)

specific technologies and trans-

territorial projects (ERA), in related sectors/domains

Encouraging of labour mobility among related sectors/domains

Co-operative research activities

among related sectors

Co-operative search for new

technological solutions

Participation of local actors to

specialized international fairs

Attraction of “star” researchers even

for short periods

Work experience in best practice

Knowledge creation firms of the same

domains

Bargaining on innovative ‘local

content’ procurement by MNCs

Smart innovation policy styles (1)

- Justification of the spatial allocation of funds and of differentiation of policy tools;

- tripartite co-operation between universities, research centres and firms in main R&D projects;

- peer assessment of R&D programmes and projects, - continuity in public support subject to intermediate and

ex-post assessment of outcomes;- tapping creativity and entrepreneurial spirit; - definition of informal but also lightly structured local

processes of ‘strategic industrial planning’.

Smart innovation policy styles (2)

Policy style Reach a critical mass in R&D activities through concentration of public support

Priority to triangular projects by Universities-Research Centres-Enterprises

Peer assessment of R&D research programmes

Support to knowledge and technological transfer mechanisms to related sectors

Thematical/ regional orientation of R&D funding:

Ex-ante careful assessment of innovation and differentiation strategies

and projects

Continuity in public support, subject to in-itinere and ex-post assessment of

outcomes

Support to bottom-up identification of industrial vocations, by raising awareness

on local capabilities and potentials (‘strategic industrial planning’)

Thematical/regional orientation of innovation funding, in order to:

Favour local spill-overs of

managerial and technological

knowledge from MNCs

Support to co-operation projects

between MNCs and local firms

in general purpose technologies

in specific fields of research and technological

specialization of the area

strengthen present formal and

tacit knowledge through co-

operation with strong external partners in the specialization

sectors

enhance local technological receptivity,

creativity and product

differentiation capability in

specializ. sectors

Support to technological transfer and

diffusion

Territorial patterns of innovation

Policy aspectsEuropean

science-based area(Pattern 1)

Applied science area

(Pattern 2)

Smart technological

application area(Pattern 3)

Smart and creative

diversification area

(Pattern 4)

Imitative innovation area

(Pattern 5)

Evolutionary smart innovation policies

- Some regions could be able to ‘jump’ over different and more advanced Innovation Patterns;

- ‘evolutionary’ policies could support these paths, with extreme attention and careful assessments, provided that context conditions and reliability of actors and strategies/projects could reduce risks of failure.

Thank you very muchfor your attention!