Regional Innovation Systems

Dr. Lisa De ProprisBirmingham Business SchoolInstitute for Economic Development Policy

Content

Sources of competitiveness What in innovation?

– Definition– Types of innovation processes– Features of innovation

Regional innovation system Cambridge: a successful case Birmingham: a RIS in the making

Levels of competitiveness

National– Macro-economic indicators (trade

advantages, employment (GDP per capita) and productivity)

– Social, political, administrative and legal framework

Local/ regional

Firm

Definition EU infrastructureinfrastructure

Competitiveness human capitalhuman capital

innovationinnovation

Business competitiveness: “capacity of a regional economy to generate, diffuse and utilise knowledgeknowledge and so maintain an effective regional innovation regional innovation systemsystem; a business culture which encourages entrepreneurship and the existence of cooperation cooperation networksnetworks and clustersclusters of particulars activities”

Third Cohesion Report, 2004:37

Definition Porter “Competitive strategy is the search for a favourable competitive position in an industry, the fundamental arena in which competition occurs …. aims to establish a profitable and sustainable position against the forces that determine industry competition”

(Porter, 1985:1)

Competitive advantage = diamond diamond

therefore, clustering of competitive industries or interrelationships among clustering of competitive industries or interrelationships among related businessesrelated businesses

Porter (1990)

Business strategy, market structure and competition

Factors of production Domestic demand

Related and supporting industries

Sources of regional competitiveness Trade advantage / productivity

– price competition – non-price competition: quality, variety and

novelty

innovation and productivity

Only innovative firms/regions can be competitive

What is innovation?Innovation is:

“The search for, and the discovery, experimentation, development, imitation and adoption of new products, new production processes and new organisational set-ups”.

Dosi et al (1988), Technological Change and Economic Theory

Product innovationTechnology pull innovationDemand push innovation

Process innovationCost savings

Increase productivity

Radical innovation & incremental innovation

Innovation process: linear model

BASIC RESEARCH

APPLIED RESEARCH

DEVELOPMENT

ADOPTION

DIFFUSION

Innovation process: circular modelCIRCULAR MODEL

Source: Kline and Rosenberg (1986)

distribute and market

redesign and

produce

detailed design and

test

invent/ product design

potential market

RESEARCH

KNOWLEDGE

Features of innovationR&D is risky, uncertain and expensive

Innovation = information= knowledge (tacit vs. codified)

Innovation depends of human, social and relational capital

Innovation is cumulative and partly immobile

Innovation is learning (by doing, by using and by interacting)

Camagni (2002) technical progress is technical progress is notnot a public a public good; it is good; it is notnot perfectly mobile and accessible to perfectly mobile and accessible to everybodyeverybody

Therefore, the innovation process is not mobile but embedded

systemic innovation capacitysystemic innovation capacity

The competitive advantage of regions/localities depends on the immobility of some production factors: knowledge and innovation

Three models: Innovative milieux, RISRIS and industrial district

Regional innovation systemPROXIMITY: face-to-face contacts create informal, trustworthy and long term networking

NATURE OF LINKAGES BETWEEN FIRMS:–Cooperation over innovation: JV, joint projects, joint training– Horizontal and vertical cooperation over innovation between firms (supply chain)

–Linkages between firms and knowledge centres and business support organisations

LEARING AND KNOWLEDGE SHARING

HUMAN CAPITAL: Knowledge is embodied in human capital

APPROPRIABILITY Withdraw innovation from competitors to appropriate the full returns VS. DIFFUSION: cost of being first-mover; if technology –pushed innovation, need to create demand and to set new standards; and need for diffusion

DEVELOPMENT PATTERN: spontaneous or exogenously driven

Institutional RIS vs. Entrepreneurship RIS

EU Study on Factors of Competitiveness , Martin

Why policy matters?1.INNOVATION PROCESSES ARE IMMOBILE

•core – periphery divide

2.SYSTEMIC INNOVATION CAPACITY•The attractiveness and competitiveness of localities depend on macro context and local HC, SC and RC determine the learning capacity of the system

3.PICKING WINNERS or HORIZONTAL SUPPORT?

Krugman is critical of Govt’s ability to choose ‘strategic sectors’, however support can be horizontal through ‘real services’

Innovation policy

Barcelona European Council 2002

Objectives: Increase R&D investment to 3% of GDP by 2010 Encourage investment in human capital and intangible

assets Create and support innovative clusters and networks Create and support regional innovation systems

Employmenthi-tech 2002

< 7.45

< 7.45 – 9.55

< 9.55 – 11.65

11.65 – 13.75

>= 13.75

No data

Sources: Eurostat

Average = 10.6Standard Deviation = 4.30

Cambridge innovation system Bottom up development (human capital from Cam Uni, business

community and support infrastructure) Born in 1960, 350 firms in 1985, 2000 in 2000 and 3500 in 2003 Information tech, biotech, nano tech/materials Great transport and comms infrastructure Institutional infrastructure

– 6 UniCam research centres– Cam-MIT link– 11 regional agencies (e.g. GOE, EEDA, chamber of commerce)– Local venture capital network (17 funds)– 9 science parks– 3 incubators– Business support firms (law, accounting, patent, consulting,

banks) 14 initial companies attraction of big players (e.g Hitachi,

Microsoft, Toshiba and GSK) Massive govt funding via the Cam Entrepreneurship Centre

Birmingham innovation systemBham in not a RIS

Transitional economy from manufacturing to knowledge intensive activities/services

Institutional infrastructure: 6 Universities, about 50 colleges, chamber of commerce, many sector associations, RDA

POLICY is focusing on cluster development but:

Too many clusters

Clusters chosen because ‘fashionable’

Still embryonic

It will take time

Sector make upHigh-value added consumer products (jewellery, china, clothing)Screen image and soundEnvironmental technologiesBuilding technologiesTransportsBusiness servicesFood and drinkTourism and leisureManufacturingICTMedical technologies

Sector make upHigh-value added consumer products (jewellery, china, clothing) DOWNScreen image and sound EMBRYONICEnvironmental technologies UPBuilding technologies UPTransports DOWNBusiness services EMBRYONICFood and drink EMBRYONICTourism and leisure EMBRYONIC Manufacturing DOWNICT EMBRYONICMedical technologies EMBRYONIC

Reading listCoreBecattini, G., Bellandi, M., Dei Ottati, G. and Sforzi, F. (2003) From Industrial Districts to Local

Development, Cheltenham, Edward Elgar – ch 9R. Camagni, (2002) On the concept of territorial competitiveness: sound or mis-leading? Urban

Studies, Vo. 39, No. 13. P.Cooke, M. Gomez Uranga and G. Etxebarria (1997) Regional Innovation Systems: Institutional

and Organisational dimensions, Regional Policy, No 26M.E. Porter (2001) Regions and the New Competition, in A.J. Scott, Global City-Regions. Trends,

Theory and Policy, OUP, Oxford.

AdditionalR. Camagni (1993) Inter-firm Industrial Networks. The Costs and Benefits of Cooperative

Behaviours, Journal of Industry Studies, Vol.1 No. 1 P.Cooke, M. Heidenreich and H. Braczyk (2004) Regional innovation systems, Routledge, London, -

Introduction pp.1-18 and conclusion pp.363-389P.Cooke (2001) Regional Innovation Systems, Clusters and the Knowledge Economy, Industrial and

Corporate Change, Vol 10 No. 4.L. De Propris, N. Driffield and S. Menghinello (2005) Local Industrial Systems and the Location of

FDI in Italy, International Journal of the Economics of Business, Vol. 12, No.1S. Meghinello (2004) Local Engines of Global Trade: The case of Italian industrial districts, in G .

Cainelli and R. Zoboli (Ed.) The evolution of industrial districts, Physica-VerlagOECD (2001) Innovative clusters: drivers of NIS