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TÍTULO DE LA COMUNICACIÓN: A HOLISTIC APPROACH TO
TERRITORIAL STRATEGIES: THE CASE OF THE BASQUE COUNTRY
AUTOR 1: Mikel Navarro (*)Email: [email protected]
AUTOR 2: Jesús M. Valdaliso (†) Email: [email protected]
AUTOR 3: Mari Jose Aranguren (*)Email: [email protected]
AUTOR 4: Edurne Magro (*)Email: [email protected]
DEPARTAMENTO:
(*) Territorio, Innovación y Clústeres
(†) Departamento de Historia e Instituciones Económicas
UNIVERSIDAD:
(*) Orkestra-Basque Institute of Competitiveness and Deusto Business School
(†) Universidad del País Vasco/ Euskal Herriko Unibertsitatea
ÁREA TEMÁTICA: (indicar el área temática en la que se inscribe el contenido de la comunicación)
Industrial Districts, Territorial Clusters and Industrial Policy
RESUMEN: (máximo 300 palabras)
The concept of territorial strategy remains under-conceptualized as it has been imported from the Strategic Management field without reflecting about the specificities and
features a territorial strategy should contain. Furthermore, this translation of the concept to territory comes only from the school of strategic planning and not from other schools as the cognitive or learning ones. In addition, it does not exist a holistic approach of understanding territorial strategy, which includes all the key elements we have to take into account in its development. In this sense, this paper offers a holistic approach, which integrates all the elements a territorial strategy should take into account around three core questions: 1) with regard to the strategy objectives (‘what for?’), 2) main questions regarding the strategic positioning and its bases (‘what?’) and 3) the process of formulating and creating the strategy (‘how?’ and ‘who?’).We apply this theoretical framework to indentify and analyze the territorial strategies developed in the Basque Country over the last thirty years. The Basque case is of great interest by many reasons. First, it epitomizes the experience of old industrialized European regions that were ravaged by the economic crisis of the 1970s and since then have achieved a considerable economic success. Second, the Basque Country is a region where a new regional government was created in 1980, with exclusive powers in many matters, ruled by the same political party (alone or in government coalitions) between 1980 and 2009. Finally, the Basque case is a good example of the dual process that has taken place in Europe involving top-down decentralization (from national governments to regional and local authorities) and the transfer of powers from national governments to supranational institutions, with the subsequent implications for public policy
PALABRAS CLAVE: (máximo 6 palabras)
Strategy, Territory, Smart Specialization, Innovation
0. Introduction
Territorial strategy is a concept that has remained underconceptualized in the economic
literature. Although strategy is an old concept, it was not until the 60’s when it was
developed in the business field by a large number of scholars and it has not been until
the 90’s when the concept was introduced applied to territory. This application has been
done not only translating concepts from the business field, but also introducing inputs
from other disciplines as economic geography and has resulted into a fuzzy concept in
which territorial strategy has been used without making explicit its meaning and
content. Territorial strategy has been recently appeared with more intensity in both
economic literature and debates due to the launch of Smart Specialization Strategies by
the European Commission, which aims at encouraging European Regions to build their
own strategy based on a specialized diversification and smart upgrading.
Therefore, it is relevant to provide a conceptual framework that identifies the key
elements a territorial strategy should take into account. This paper takes a holistic view
of the regional strategy concept and sheds light around the content and process of a
territorial strategy (section 2 and 3) after exploring the origins of the concept (section
1). For doing so, this paper reviews the economic literature of prioritization, as strategy
is a process of making choices (Porter, 1996). In addition, the paper illustrates the
theoretical framework with a regional case, the Basque case.
The case of the Basque Country is of great interest in the field of regional development
strategies in Europe for numerous reasons. First, it epitomizes the experience of old
industrialized European regions that were ravaged by the economic crisis of the 1970s
and since then have achieved considerable success in transforming their industrial and
productive structure in the last thirty years. Second, the Basque Country is a region
where a new administration was forged ex nihilo, with exclusive jurisdiction in many
matters, which saw a remarkable political continuity in the regional government
between 1980 and 2009 and endured the phenomenon of terrorist violence until 2011.
Finally, in general terms, the Basque case is a good example of the dual process that has
taken place in Europe involving top-down decentralization (from national governments
to regional and local authorities) and the transfer of powers from national governments
to supranational institutions, with the subsequent implications for public policy.
1. From business strategy to territorial strategy
Even if strategy is an old term, initially linked to the military in such ancient cultures as
China or Greece, it moved in the sixties of the past century to the business field, where
the concept was painstakingly developed (firstly, by Alfred Chandler; and then by a
large cohort of scholars). From there it was imported to economics and territorial
strategy. Since the 1990s, in the literature on regional innovation, competitiveness and
development there is a progressive explicit recognition that territories need to develop
innovation strategies to build competitive advantages drawing upon their particular
resources, competencies, capabilities and existing trends (Porter, 2011; Asheim et al.
2006; Etzkowitz and Klofsten, 2005). As with some other terms, such us
competitiveness or benchmarking, imported from the management field to the economic
geography and regional economics, before applying the term to the new field there has
not been a careful reflection about the meaning and content that the term should take in
the new context (Navarro et al., 2011). This oversight has resulted in some ambiguity in
the use of the term or in partial definitions of its content and boundaries (Navarro et al.,
2012). Cross-fertilization among different fields might be a fruitful way to advance the
knowledge and it should be exploited by the analysts as far as possible. But the
implications of the singularities concerning each of the field to which the knowledge is
applied should not be ignored. So, let’s start by looking at the meaning of the strategy
when applied to business field. And then, let’s try to determine which would be the
equivalent questions or issues that should be raised, when instead of thinking of a firm
we are thinking of a region.
In classical handbooks on business strategy it is usual to distinguish three components
in it: the objectives, the content and the process of the strategy.
Regarding the objectives of a firm’s strategy, the Anglo mainstream advocates that
business strategy should seek to maximize value and economic profitability (Thompson
et al., 2008). However, there are approaches that broaden the focus and demand the
interests of all stakeholders to be taken into account, and ethical or social objectives be
included (White, 2004).
As far as the content is concerned, Porter (1996) says that strategic positioning emerge
from the answers that the firms give to three main questions: 1) which is the subset of
an industry’s products or services that the firm is going to produce (variety-based
positioning); 2) which are the needs of a particular group of customers that the firm is
going to meet (needs-based positioning); and 3) which is the configuration of activities
that the firm is going to use to reach the segmented customers (access-based
positioning). According to Porter, whatever the basis (variety, needs, access, or some
combination of the three), positioning requires a tailored set of activities, different from
rivals. In short, “strategy is the creation of an unique and valuable position, involving a
different set of activities” (Porter, 1996: 68).
Finally, as to the process of strategy development, the management literature has a wide
variety of approaches, from those where it is primarily a function of the managers to
those with more open processes in which "virtually anyone in the organization can be a
strategist" (Mintzberg, 1994: 26). In any case, business strategy involves all components
of the organization and, if approved, it results compulsory for everybody. In that sense,
no department head or director is allowed to oversee or go against the strategy enacted
for all the company.
With this short and three level ─objectives, content and process─ approach to the
business strategy in mind, how could we figure out the meaning and boundaries of the
territorial strategy?
First, in terms of the objectives (the “why”), it is generally considered that a territorial
strategy should aim to improve the welfare of the population. This welfare can be
understood in a narrow or restrictive standpoint (linked to the achievement of economic
goals), or in a broader way (including also social and environmental objectives).
McCann (2011), for instance, proposes to take into account the goals of the region in the
three dimensions advocated by the Europa2020 agenda, when building a smart
specialization strategy for it: the smart (or competitive) growth, the inclusive growth
and the sustainable growth.
Secondly, in order to define the content (the “what”) of the strategy, it could be very
helpful try to behave as Porter does regarding firm’s strategy: to explicit which are the
questions that should be answered as to the positioning and resources of the region. Of
course, just as the objectives are different in business and territorial strategies, the
questions to be answered concerning the positioning and resources will be different in
them as well. Being prioritization and choice making the essence of the strategy, in
order to find the questions to be answered, we have looked at the economic and
innovation literature that have dealt with prioritization and with structural issues related
to regional development.
Based on that review (see the next two sections), we have identified five questions to be
answered by a territorial strategy:
1. Which are the main economic activities (industries or clusters) or scientific and
technological fields in which the region is meant to excel?
2. Which are the unique assets or resources that the region will possess or develop
in order to succeed in those activities and scientific-technological fields?
3. Which are the targeted actors of that strategy and the actors by means of which
the strategy will be carried out?
4. Which relationship is developing the region with other territories and external
agents?
5. Which kind of internal articulation is sought in the region?
Thirdly, with regard to the process (the “how” and “by whom”) of territorial strategies,
participatory processes are not only desirable, like in the business strategy, but essential
and unavoidable. The reason is that in a market economy none of the various
stakeholders and authorities has the power to unilaterally impose to the other agents its
territorial strategy or enough knowledge or resources to execute it alone. The territorial
strategy is not compulsory for the private agents. Unlike with business strategies, if
somebody doesn’t follow it, it can’t be fired.
Anyway, the government is a major player in territorial strategies and its role may vary
(from strategy design to merely facilitation) depending on the different contexts.
Generally, the role played by the government will be determined by the powers of the
government and its capability to make use of such powers (Ismeri Europe and Applica,
2010; Walendoski et al., 2011; OECD, 2011).
After having mentioned the three levels that the analysis or building of a territorial
strategy should consider and the main differences that a territorial strategy shows in
comparison with a business one, let’s delve into the analysis of the second and third of
those levels. As a matter of fact, it is in these two levels where more heated has been the
economic debate and where more things have the economists to say for the building of a
territorial strategy.
2. The content of the territorial strategy
2.1. Priorities on scientific and technological areas and activities
As Porter (1996) expresses, the essence of strategy is choosing and making trade-offs.
Therefore, in order to advance the literature on territorial strategy, it is convenient to
review how the economic literature has dealt with prioritization. The literature on
scientific and technological (S&T) policies and the economic development are the fields
where the debate on prioritization has been more intriguing and enriching.
Within the literature on S&T policy some analysts (OECD, 1991; Gassler et al., 2004)
distinguish three main types of priorities: mission oriented, thematic and
structural/functional priorities.
The mission oriented priorities are those related to scientific and technological areas or
industries that have been taken by Governments due to their statutory responsibilities or
desire to reach a mission. There is no coincidence among the authors about which scope
should have these mission oriented priorities and policies. For instance, Ergas (1987)
focuses his analysis on the priorities taken by a few countries (US, United Kingdom and
France) in some fields very related to defense (aerospace, electronic and nuclear energy,
above all). Even if the support given by the government in defense related mission
oriented policies indirectly impinges heavily on the competitiveness and development of
civil sectors, the main reason or rationale for that support is to gain an international
strategic leadership (Branscomb, 1995; Ergas, 1987).
However, many other authors consider the support given to some S&T areas or
activities linked to the responsibilities or missions of government ministries in some
fields (health, environment, agriculture…) to be mission oriented policies. Just as in the
defense related mission oriented policies, the main reason that governments bear in
mind when giving this support is not fundamentally the competitiveness or development
of the economy. But, unlike in the former policies, all countries support R&D or
activities in these areas, thus the differences among countries are not outstanding
(Lederman, 1987).
Finally, even if it might be correct to include, as Mowery (2009) does, the government’s
support to the industrial technology development within the mission oriented policies, it
is preferable to separate them from the rest of non-defense related mission oriented
policies. Unlike in the rest of non-defense related priorities, there is a heated debate
about whether government should try to support some S&T areas or industries in order
to enhance competitiveness and economic development.
If we focus on priorities taken fundamentally by economic reasons, the literature has
usually made a distinction between thematic and structural priorities. The former
concerns the S&T areas or industries considered crucial for competitiveness and
development. In fact, thematic priorities have to do with the first question that,
according to our previous explanations, all territorial strategies should try to answer.
The latter concerns the structures or functions which are critical in the innovation or
economic system. Those structural or functional priorities have to do with the second
question that, as maintained previously, the territorial strategy must answer. Let’s
concentrate in the following paragraphs on the thematic priorities, and next on the
structural ones.
In market economies the debate on thematic priorities has usually confronted those
authors or countries opposed to fix priorities in S&T or industries in order to foster
competitiveness and economic development (thinking prevailing in the US) with those
in favor of making those kinds of choices (thinking predominant in Europe and Japan,
and being France a paradigmatic example).
In the regional level the debate on priorities appeared later on, with the revival or
growth of the literature on economic geography, regional innovation systems (and
learning regions), clusters and, more recently, smart specialization strategies. In this
regard, the main contribution of the economic geography comes from its debate on the
advantages and effects stemming from the different types of agglomeration economies
(Boschma and Martin, 2010). Along with its systemic approach, the literature on
regional innovation systems (RIS) has paid more attention to structural/functional
problems and priorities in the system, than to thematic priorities (Asheim and Gertler,
2005; Tödtling and Trippl, 2005); as to the kind of economic activity to be favored, like
the economic geography, they concern about agglomeration economies (specially to
related variety), and not so much about industries or clusters (Cooke et al., 2007). The
cluster literature, although biased in its practice towards the high-tech ones, in principle
holds that any kind of activity is per se (or everywhere) better than the others and that,
starting from the existing activities, cluster policies should try to affect and enhance the
sophistication of all the economy (Porter, 1998 and 2003). Finally, regional innovation
smart specialization strategies (RIS 3) advocates that regions should develop a
specialized diversification and smart upgrading, by means of applications of general
purpose technologies (GPT) or other innovation activities in the industries in which the
region has comparative advantages (Foray et al., 2012; Camagni, 2011).
The prevailing type of priority (defense related mission oriented, thematic or structural)
might change from place to place or from one period to other. However, the current
prevailing thinking is that territories should make choices in S&T areas with the highest
potential for the economic activities predominant in the region. Put forward a
specialized diversification and smart upgrading of the region, so that those places
become globally competitive in those activities (Foray et al., 2009). Thus, there would
be no economic activity or industry preferable per se everywhere. “Picking winners”
policies, consisting in identifying and fostering some S&T areas or industries without
taking into account the context existing in that territory, are fully rejected. But, on the
contrary, there is a growing consensus on the following: (i) each place has a context
offering some given comparative advantages, which tend to be reflected in its economic
structure; (ii) based on those structural conditions and considering that the development
is a matter not only of quantity, but also of transformation or change in the composition
of the existing activities (Nefke et al., 2011), there is some room to advance towards a
specialized diversification and to build competitive edge (Asheim et al., 2006 and
2011).
Four main ways to advance towards specialized diversification and smart upgrading
could be distinguished: retooling, extending, emerging and cross-fertilization.1
• Retooling (or modernization): the support to diversification and upgrading within an
already existing industry. For instance, the renewal of the pulp and paper industry in
Finland by applying nanotechnologies in it, the restructuration of the steel industry
in the Basque Country in the 80’s, the upgrading of traditional activities in the
Basque Country in the 90’s by mean of a cluster policy…
• Extending: some diversification of the knowledge base developed based on
synergies and commonalities between two or more activities. For instance, moving
from aeronautics to satellites and GPS technologies in Grenoble, the development of
aeronautics in the Basque Country in the 90’s starting from some capacities existing
1 These categories appeared first in the document COM (2010) 553, were included afterwards in the RIS 3 Guide elaborated by Foray et al. (2012) and have been used in some presentations of the smart specialisation strategies by officials of the European Commission. But the names and meanings of the categories are not entirely identical in those documents. In the same way, our four categories employed in the text are inspired in the ones of those documents, but slightly adapted.
in engineering and machine tool, the current attempt of the Basque wind energy
cluster to jump from the traditional to off-shore wind energy...
• Emerging (or radical foundation): the discovery of an entirely new niche which is
likely to be viable and economically important in the region. For instance, the
emergence of biofirms in the Basque Country in the first decade of the new
millennium, the current attempt to develop a new economic activity in the Basque
Country based on the wave energy, the development of an attractive and profitable
business activity in Florence based on the application of TICs to the maintenance of
the archaeological and historical heritage...
• Cross-sectoral: a new combination of sectors which helps generate innovative ideas
for new products and services. For instance, some activities stemming from the
collaboration inter-clusters policy launched by the Basque government after 2010
(from which the attempt to combine the strengths of the energy, automotive and
electronic clusters around the electric car could be the most noticeable).
Finally, it is worth mentioning that, due to the unstoppable development of “global
production networks” and the parallel fragmentation or ‘deverticalization’ of production
processes, nowadays it is more and more difficult to approach the prioritization and
diversification in terms of complete industries or clusters. Instead, it should be
approached as given sets of activities (Breznitz, 2007), usually related by a shared set of
skills or knowledge bases (Henning et al., 2010).
2.2. Priorities on functions and assets
As explained before, the literature on prioritization holds that priorities could be defined
with regard to the structure or functions of the system. When fixing priorities as to the
structure or functions of the system, two main dilemmas must be faced: 1) do focus on
the core strengths or capabilities existing in the territory or seek for a balance of the
different types of assets or functions; 2) do work with a broad or with a narrow
approach to competitiveness and innovation and to their determinants. The currently
prevailing stream is in favor of not limiting priorities to core capabilities or strengths,
but give the highest priority to neutralize the weakest structures and functions of the
system and to combine different types of learning, innovation and knowledge bases
(see, for instance, Hansen and Birkinshaw, 2007; Soete, 2006; Arundel and Hollanders,
2007; Jensen et al., 2007; Asheim, 2009; Frenz and Lambert, 2009; Mairesse and
Mohnen, 2007; Criscuolo et al., 2011; Wintges and Hollanders, 2010). Likewise, most
of analysts are in favor of considering all the components and relations that affect the
innovation and competitiveness, and not only the R&D or the hard ones (Lundvall,
1992; Edquist, 1997; Asheim and Gertler, 2005).
One general way to approach the identification of structures, functions or assets to be
prioritized is the one followed by Porter (1990), whit his stages of competitive
development. According to the stage of development (competing mainly in factors, in
efficiency or in innovation) the main assets, functions or structures to be developed will
be of one type or another.2
Even if territories should give priority to neutralize the weakest point of its system and
combine different types of innovation and learning, it doesn’t mean that everybody
should show the same mix of structures, functions or assets. On the contrary, from one
territory to another it should be different the emphasis put on:
• Science, technology or innovation (technological, organizational, commercial...)
(Morgan and Nauwelaers, 1999).
• Exploration, development and exploitation (or, in other words, generation,
absorption and diffusion) of the knowledge (OECD, 2011).
• The two main modes of innovation and learning: STI (science, technology and
innovation) and DUI (learning by doing, by using and by interacting) (Jensen et al.,
2007)
• Analytical, synthetic (or engineering) or symbolic knowledge bases (Asheim, 2009).
2.3. Priorities about actors, external relationships and internal
articulation
Either in the first typologies of region innovation systems developed by the founders of
the RIS literature (Cooke, 1998; Asheim and Isaksen, 1997 and 2002), or in the
characterization of the different development strategies developed by emerging
countries (Breznitz, 2007) or S&T policies (Ergas, 1987; Branscomb, 1995) there is a
clear identification of the type of firms (large national champions versus SMEs; public,
cooperative or purely private firms...) that are targeted or favored by the policies. There
is even an analysis of the different weight or role allocated to the different actors (firms,
2 Similarly, the OECD (2011) speaks about three main types of choices or strategy families faced by regions: catching-up, supporting socio-economic transformation and building on S&T based advantages
university, public and private research organizations, knowledge intensive business
services...) in the development of the functions (Niosi, 2010).3 In that sense, all
territorial strategies should define who are the main targeted actors or the actors by
means of which the strategy will be carried out.
Similarly, one of the main features employed in the first characterizations of the
regional systems by RIS typologies was their external connection (Cooke, 1998;
Asheim and Isaksen, 1997 y 2002). Some of the subsequent main contributors to the
RIS literature (Kaufmann and Tödtling, 2000; Archibugi et al., 1999) went on
underlining that it would be, not only impossible, but also extremely inefficient and
risky try to base the development of the regions upon its own knowledge and factors.
Even more strongly, Bathelt (2003 emphasized the need for the region to take into
account and develop, on top of ‘local buzz’, ‘global pipelines’. In a similar way, the
literature on S&T policies and priorities highlighted that one of the main issues of these
policies is the right combination between internal and external technology and the
international transfer of it (Tisdell, 1981). And, finally, the literature on the strategies
followed by emerging countries shows that those strategies differ according to the
weight attributed to internal and external factors, and above all to the role attributed to
multinational firms (who build, manage and to some extent control the global
production networks): it is not the same for the territory if multinationals think about it
as a assembler, low cost producer, sophisticated producer or knowledge hub (Breznitz,
2007). Anyway, the territorial strategy should determine the type of relationships and
role that the region will have with respect to other territories: neighboring regions, the
rest of the State and the geo-economic region in which they are located or the global
economy (Porter, 2011).
Finally, regions are not homogeneous territories, but they usually are made up of
various ‘places’, having distinctive features (Bathelt, 2003; MacKinnon et al., 2002;
Muscio, 2006; Uyarra, 2007; Uyarra and Flanagan, 2009; McCann, 2011). As Navarro
and Larrea (2007) and Zubiaurre et al. (2009) show, even the Basque Country ─a
territory considered by the literature as a typical RIS with a strong identity─ is made up
of an array of counties or places with very different innovation and competitiveness
patterns. In that sense, the strategy should define the kind of internal structure and
articulation that the territory is seeking for: the degree of concentration, polarization,
specialization…
3 Which actors are prioritized to carry out the functions of the innovation system could be included both in this section related to actors or in the previous section related to the functional priorities.
2.4. The process of the territorial strategy
The analysis of the process of a territorial strategy should try to take into account
different aspects.
First, following the distinction introduced by Mintzberg (1994) in the field of business
strategy, imported to territorial strategy by Sotarauta (2004), it is worth differentiating
between deliberate and emergent strategies. The former is the result of an accomplished
intended strategy, usually elaborated with a rational strategic planning. On the contrary,
the latter comes out spontaneously from an array of diverse processes. The realized
strategy tends to be the result of a combination of both, but in very different weights
from place to place.
As a result of an intended strategy there can be a formal o explicit strategy in the
territory. It could take different forms: from compulsory to more informal or intentional
(e.g. governmental decrees or ‘white papers’). Anyway, as Branscom (1995) claims,
strategy must be deducted from laws, organization and actions, because what has been
stated and what has been done could be completely different. In that sense, the analysis
of the budget used to be one of the traditional ways to assess the real strategies applied
in a territory (OECD, 1991). But we should take into account that soft measures and
policies can be very effective and crucial from a strategic point of view, even if they
don’t consume directly a lot of financial resources (for instance, the cluster policy in the
Basque Country; see Aranguren et al., 2012).
The territorial strategy is the result of priorities and processes carried out in different
layers of the hierarchical position of the different priority setting actors and
organizations. Following to OECD (1991) and Drilhon (1991), we could differentiate
the political, intermediate and operational layers. As the name indicates, the first one
refers to priorities and choices arising from the government and political bodies. The
second refers to research councils, agencies or sectoral bodies that play a central role in
funding and sometimes even in performing activities with their own laboratories; in this
layer S&T communities become involved in setting priorities and interact with political,
economic and social objectives and constraints. The operational layer includes
organizations such as universities, government laboratories and so on that translate
priorities into research and action. As Gassler et al. (2004) say, generally there is a
relation between types of priorities (mission oriented, thematic and
structural/functional) and layers setting priorities (political, intermediary and
operational), with the policy level being in charge of the broad mission orientated
priorities and budget allocations, and the more operational levels concretizing thematic
and functional priorities.
The traditional division by layers (political, intermediate and operational) should be
completed nowadays with a division by geographical levels. If in the past the discussion
on S&T priorities and policies was referred almost exclusively to the national (and
occasionally, international) level, after the discovery and increasing relevance of the
local and regional levels, on the one hand, and the growing globalization of S&T and
economic activity, on the other, it cannot avoid a geographic multilevel perspective. The
differences among territories are considerable, because of the different histories and
decentralization processes that affect the powers and competences of local and regional
governments. As Lederman (1987 and 1994) stated, the final consequences of a
particular option depends on how it is implemented. In that sense, it is not enough to
analyze the formal powers that the law acknowledges to each of this level and
administration, but the features and real capabilities that they have that allow them to
fulfill them properly.
The method and way for setting priorities can be more top-down/expert based or more
bottom-up/participatory (Gassler et al., 2004), both in each actor and in the overall
system. Both in “strategic intelligence” (including foresight and roadmap techniques,
monitoring and evaluation...) and participatory processes (e.g. public and private
partnerships) there have been remarkable advances in the last decades. Regarding the
former, the collaboration of multiple agents requires the existence of social capital, and
the analysis of constructing territorial strategies should not ignore the actions taken in
the territory concerning the three dimensions of it: the structure of relations and
networks among the actors, the types of personal relations (trust, confidence,
friendships...) that affect their behavior and the shared understandings visions, language
and codes (Nahapiet and Ghoshal, 1998).
A crucial component of the strategic intelligence that deserves a specific mention is
evaluation. It is a vital component of the process necessary not only to adapt to the
continuing changes taking place in the environment, but also to overcome the inertia
and lock-in tendencies that inevitably appears when setting priorities, specially with
thematic ones and when instead of acting by means of funding organizations the
government creates its own laboratories (Gassler et al., 2004). The intensity, frequency
and type of evaluation differ greatly from one place to other, and the same goes for the
frequency in which the formal or deliberated strategy is made public.
As the process of creating territorial strategies is becoming more and more complex
(with multiple types, layers, levels and mechanisms) and involves an increasing number
of actors, it is more necessary than ever to ensure the coherence and coordination of all
the process. With this aim, various kinds of organizations have been established:
specific council or advisory bodies, inter-ministerial coordination groups, etc. The point
is that in current advanced and complex systems it is not possible the leadership to be up
to only an agent: the government. It is more and more necessary to move from a
governance and leadership model based on hierarchy to another based on networks
(Aranguren et al., 2012).
The RIS 3 literature claims that the territorial strategy should be the result of an
entrepreneurial discovery process (Foray et al., 2012). Although initially Foray (2009a
and 2009b) held that the government should be just a facilitator of the process, currently
there is quite a broad consensus on the need of an active role of the government in the
discovery process and on the risk of a too large influence of private or particular
interests in the regional strategies and policies (OECD, 2011). On top of that, especially
in less favored regions, it is usual that private actors lack the abilities or interest to lead
the process (McCann and Ortega-Argilés, 2011). But it shouldn’t be taken for granted
that the local or regional governments have them, as recent analysis by Regional
Innovation Monitor show (Walendowski et al., 2011). In the end, the choice should be
taken after an analysis of the different capabilities existing from one region to other; and
even within a territory, the leadership could be held by different actors from one field to
other (e.g. from the bio strategy to the energy strategy in the Basque Country,) and from
one moment to other (e.g. from the birth of the bio strategy to the current stage, in the
Basque Country).
Last, but not least, in the same way than public policies are path dependent of previous
ones (Mytelka and Smith, 2002; Boschma, 2005; Woolcock et al., 2009; Flanagan et al.
2011), territorial strategies exhibit a strong path-dependent character. Institutions and
key actors are influenced by historical experience and its consequences: positive
evaluations of the past will become a source of inertia in the design and implementation
of strategies and policies, while negative ones will have the opposite effect, generating
fractures and changes. The lack of previous experiences of limitations or inherited
inertia, but also crisis situations (social, economic, political) can act as drivers of
change. As Boschma (2005: 267) as rightly emphasized, “regional policy is preoccupied
with making and breaking history”. Therefore, it is very difficult to understand all the
dimensions of a territorial strategy without understanding the key elements that have
characterized previous strategies in a certain territory.
3. The Basque Country case
To analyze the competitiveness policy and the strategies of regional economic
development we employ a qualitative methodology that draws on several sources of
information: the existing literature on Basque economic policy, and on industrial policy
in particular; the official documents (laws, plans, white papers, etc.), records, and
budgets of the Basque government on economic and industrial policy; the
reconstruction of the different teams of policy-makers in the Ministry of Industry for
every constituency from 1980 onwards; and semi-structured interviews with the
different ministries of the Basque government and with some key high government
officials (see Aranguren et al., 2012, with more detail). We have adopted a
chronological focus in order to examine how the challenges stemmed from an evolving
socioeconomic context, along with the previous history (incorporated in the diagnosis,
the policies carried out, the strategies taken, learning processes, or the sheer inertia of
the Basque government), may have shaped the understanding of the present and may
have affected the decisions of the policy makers. The periodization was initially based
on two criteria: political constituencies of the regional government and the team of high
executive posts in the Department of Industry. Due to the fact than the visible part of
the strategy is reflected in policies, we focus on the analysis of policies in order to
identify each of the elements the strategy should contain, from the objectives (what
for?) to the process (how?), including the contents (what?). In addition, we analyze the
positioning of the Basque Country in different elements of competitiveness and from
them and the policies followed, we interpret the strategy which lies behind.
We have identified three distinct stages in the evolution of industrial policies in the
Basque Country (see Table 1): the 1980s, when a new administration was created, and
where the main problem was to face up the severe economic and industrial crisis in the
region; the 1990s, when a new industrial policy, focused on clusters and
competitiveness, was applied; and the first years of the 21st century, when the first
challenge was to make the Basque country and innovation-driven economy. Every
period was strongly influenced by an outstanding political figure: Javier García-
Egocheaga in the 1980s, Jon Azua in the 1990s and Josu J. Imaz in the 2000s. But
below the highest position, there was a remarkable continuity in the team of high
government officials commanding the Department of Industry, in particular from 1991
until 2009, what provided industrial policy with a longer time horizon (Aranguren et al.,
2012).
In the first stage, the restructuring programs absorbed most of the budget and the effort
of the government, who employed a traditional policy (sector and firm focused and top-
down designed and implemented) to cope with the most important challenges and
problems.
In the second one, in particular once the 1991-93 economic crisis was over, the
programs of technology and internationalization, were the most important ones. In this
phase, the government started to develop other type of policies, cluster-based instead of
sector or firm-based, and more horizontal (at least in the design stage), and introduced
soft instruments which brought about some changes (e.g. additionalities) in the behavior
of agents.
In the third stage, from 1999 onwards, the innovation and internationalization programs
absorbed most of the resources and effort of the government. The Department of
Industry continued most of the programs and policies applied by the governments in the
1990s, reinforcing their horizontal character and the resort to soft instruments and
policies, with a greater emphasis on the internationalization of Basque firms and on the
diversification of the Basque economy towards more science-based sectors.
Table 1. Stages, actors, problems and challenges of the Basque industrial policy, 1980-2008
Policies to face the crisis (1980-1990)
Transition policies (1991-1998)
Policies for growth (1999-2008)
Constituencies (and Presidents and parties)
I-II (C. Garaikoetxea, PNV)
II-III (J. A. Ardanza, PNV)
IV-V (J. A. Ardanza, PNV)
VI-VII-VIII (J. J. Ibarretxe, PNV)
Ministers of Industry (and political party)
Javier García-Egocheaga (PNV)
Juan C. Isasti (PNV)
José I. Arrieta (PNV)
R. González-Orús (PSE)
Jon Azua (PNV)
Javier Retegui (PNV)
Josu J. Imaz (PNV)
Ana Aguirre (PNV)
Economic context, policy problems and challenges
Crisis and industrial restructuring
Scarce technological infrastructure
Crisis (1991-93) and growth
Single European market
Global competition and
Growth
Internationalization
Diversification
Transition problem (lock-in)
internationalization ‘Second Great Transformation’
Main fields Industrial restructuring and promotion (sector and firms)
Industrial restructuring and promotion (sector and firms)
Competitiveness (clusters)
Business change (horizontal)
Innovation and internationalization
Competitiveness (clusters)
Business change (horizontal)
Types of policies and government role
Top-down (design and implementation)
Sector and firm focused
Top-down (design and implementation)
First horizontal policies (design)
Sectors and clusters
Top-down (implementation)
Horizontal policies (design and implementation)
Instruments Financial Financial
Soft
Financial
Soft
Coordination problems Politics-firms
Politics-technological centers and state agencies
Basque Government-Provincial councils
Politics-technological centers and state agencies
Government-firms and clusters
Firms-clusters
Politics-technological centers and state agencies
Government-firms and clusters
Firms-clusters
Additionality Input and output Input and output
Behavior
Input and output
Behavior
Hits PRE
PET
Energy Policy Plan 1982-90
General economic policy plansPlan 3RCompetitiveness ProgramPTI-PCT
Plan 3E2000 & 3E2005
PIPE & PCEIS (Euskadi 2015)PESI & Agenda DigitalPCTI-PCTS
Strategy 3E2010
Source: Aranguren et al. (2012).
Throughout these 30 years there appear some general trends: an increasingly more
effective coordination between the Ministry of Industry and other Ministries of the
Government and the provincial councils; the gradual substitution of vertical policies for
horizontal ones; the increasing control of public expenditure eliminating the financial
subventions and using other financial formulas instead; the progressive deployment of
soft policies and instruments; and the slow but steady steps towards a more horizontal
and participating and less vertical and top-down process of policy design and
implementation.
Other two distinct features of the Basque industrial policy that are not depicted in the
former table are, first, the systematic comparison with other foreign regions of reference
(in Europe and North America) in order to transfer best practices and successful
experiences (technological parks, technological centers…), even the hiring of
international experts and organisms (Michael Porter, Stanford Research Institute,
Monitor Company, Harvard Business School) to help the government with particular
programs (competitiveness and cluster development, IMI program, CEIs, Technological
plans). Secondly, the increasing role that state agencies (SPRI, EVE) and other state
organisms played in the design and implementation of industrial policies. Although they
were controlled by the politics in charge (and sometimes problems between government
officers and politics arose), their continuity during all this period resulted in a
consolidation of its own capabilities and organizational culture. Consequently, industrial
policy became more autonomous of the political change (see Aranguren et al., 2012, for
a more thorough analysis).
Every aforementioned stage of industrial policy corresponded with a distinct territorial
strategy for regional development, although changes in this field were incremental, nor
radical. There was not such a thing as a strategic plan in the 1980s, but there was an
“emergent” strategy of supporting the continuity and upgrading of the industry as the
key driver of the Basque economy and at the same time of creating a favorable context
for business (economic, educational and technological infrastructure), to face the
challenge of entry into the European Economic Community first, and of the advent of
the single European market thereafter. Consequently, a great emphasis was made on
building up several kinds of infrastructures (physical, technological, educational, and
energy).
In the 1990s, for the first time, it was explicitly formulated a unique value proposition
and a “deliberate” strategic plan was designed and carried out. The Basque government,
highly influenced by M. E. Porter’s approach, who became an special adviser of the
Ministry of Industry, maintained and even reinforced its strategic bid on industry as the
key driver of economic development but now it shifted away from industries and firms
towards a new paradigm, the cluster, and for the first time it also attempted to facilitate
processes of industrial diversification into new high tech sectors such as aerospace and
telecommunications, and into creative and cultural industries linked to the urban
regeneration of Bilbao. It kept on improving the business context and on strengthening
the economic relations with EU, and reinforced its support to the internationalization
strategies of Basque firms, then in Latin America.
The governments of the first years of the 21st century continued this strategy along their
main lines: clusters, quality, internationalization. But they also attempted to move the
Basque economy to the next step, a stage driven by innovation and knowledge. They
tried to build up a scientific infrastructure (CICs and BERCs), to improve the existing
human capital stock and to attract new scientists to the region from all over the world.
They also supported a process of industrial diversification into new high tech sectors
such as bios and nano-sciences and nano-technologies (BioBasque and NanoBasque
Strategies), and expanded others already existing into new fields (renewable energies,
tourism).
As singular features that comprise the strategy of the Basque Country since 1980,
summing up the content of table 2, the next should be underlined. Regarding the what
for, the strategy of the Basque Country has been focused on developing a welfare based
mainly on economic progress, but avoiding high social differences.
Regarding the what, a common commitment in the prioritization of the activities is the
development of manufacturing and energy (with special focus on restructuring and
upgrading during the eighties, clusterization in the nineties and diversification since the
end of the nineties). As a consequence of this effort in developing the manufacturing
activity, high capabilities in engineering have been generated, while the capabilities in
social sciences and biomedicine are weaker.
Regarding the prioritization in the functions and assets, the approach to innovation has
been mainly based on the hard elements with a special focus on the push (supply side)
of innovation, and with a much weaker development of the soft elements and less focus
on demand (or pull based policies). In the capabilities of human resources, technical
aspect development has been underlined, while fostering of languages and transversal
competencies has been quite weak. In the infrastructures, the effort has been made in the
investment in such infrastructures, but there are important weaknesses in their
management.
Regarding the actors, medium and big companies and cooperatives and technological
actors have been prioritized, which has generated important weaknesses in small firms,
scientific actors and in non-technological innovators.
Concerning the external relationships, the main priority has been to overcome the
dependency from Spain and develop the relations with Europe, although during the last
decade there has been also an increase in the openness to other geographical areas. The
relations have been based more in exports and implantations outside, but there are yet
important weaknesses in the internationalization of services, knowledge and people.
Beside, the priority has been in facilitating local actors to open abroad and not so much
in facilitating the entry of external actor in the Basque Country.
Regarding the process, the development of the private-public partnerships should be
highlighted in the Basque Country, what has resulted in the creation of substantial social
capital. But the effort has concentrated more on the creation of the structures than on the
development of the relationship needed to develop new modes of governance.
Table 2. Strategies of economic development in the Basque Country (1980-2011)
1980-1990
From policies to a strategic plan
1991-1998
A strategy for productivity and competitiveness
1999-2011
A strategy for an innovation-driven
economy
Outcome of the strategy and degree of
alignment of policies and strategy
Unique value proposition
Industrial restructuring (cost competitiveness), building-up of fundamentals for economic development, and solidarity
Competitiveness (based on quality and efficiency) and solidarity
Competitiveness (based on innovation) and solidarity, more systemic and shared by different stake-holders
Relative strengths in socioeconomic aspects, but weaknesses in environmental issues –although with a positive evolution in the last years
Economic sectors
Scientific and technological areas
Restructuring and upgrading of the traditional industry
Restructuring and upgrading of the traditional industry
Industrial diversification: aeronautics, ICTs, creative and cultural industries
Traditional industry: size (tractor groups) and location, cluster development
Industrial diversification: bios, nano-technologies, renewable energies, tourism…
Economic specialization in energy and high-medium technological level industries, with strong cluster development, related variety and engineering competencesTechnical progress as the most important factor to productivity growth Engineering capabilitiesDecline in social sciences and increase in bios
Assets/innovation Technological infrastructures
Technological infrastructures
Technological and scientific infrastructures
One sided innovation, based on R&D inputs; inefficient innovation system and scarce organizational innovation
Assets/People Educational infrastructures
Human capital improvement
Qualified human capital Human capital well trained but lack of transversal competences and knowledge of foreign languages
Assets/Physical infrastructure
Physical, energetic, and finance & investment infrastructures
Physical, energetic, and finance & investment infrastructures
Physical, energetic, and finance & investment infrastructures
Good infrastructures, but its management needs to be improved
Assets/institutions and social context
New institutions (Basque Government and Diputaciones) with high level of self-government (progressive transfer of powers from national government)
Terrorism, social unrest and bad public image of entrepreneurs
Transfer of powers stopped until 1996 Terrorism, but increasing social appreciation of entrepreneurship
Transfer of powers in R&D, employment and others from 2010 onwards
Decreasing social support and power of terrorism
High level of self-government (economic agreement…). High density of governmental institutions at different levels that support innovation but also overlapping competences and waste of resources
Main actors/ Private/public
Firms and sectors Sectors, clusters and business associations
Urban regeneration
Sectors, social capital based on cooperation within clusters and local
High number of public/private collaborative initiatives
networks, socially shared challenges (innovation, Made in Euskadi)
Embryonic technological platforms
that result in social capital
Main actors/
Type of firm
Innovation agents
Traditional industry: big firms involved in restructuring programs of the national government; restructuring and upgrading of SMEs
Technological centers
Traditional industry: big firms less involved in national programs; restructuring and upgrading of SMEs
Technological centers, KIBS
Policies to foster cooperation to increase SMEs’ competitiveness
Support to creation of tractor business groups
CICs and BERCs
SMEs proliferate, big support to cooperatives
Technological centers and CICs/BERCs are the most important agents; universities and KIBs with a less important role
Policies focused on local actors
Relationship with other territories (regional, national, global)
Lack of cooperation with neighboring regions
Spain: transfer of powers and industrial policy coordination, frictions until 1984, then agreement; to diminish the dependence on the Spanish market
EU: integration and increasing economic relations
Rest of the world: beginning of a slight openness
Lack of cooperation with neighboring regions
Spain: collaboration but frictions; to diminish the dependence on the Spanish market
EU: integration and increasing economic relations
Rest of the world: internationalization into Latin America
Lack of cooperation with neighboring regions
Spain: frictions and increasing political conflict; to diminish the dependence on the Spanish
EU: integration and increasing economic relations
Rest of the world: internationalization into Latin America, Eastern Europe and Asia
High level of openness in industry (goods), but endogamy in human capital, services, capital and knowledge.
With regard to markets, focus on Europe and Latin America, but less in Asia.
Policies that support local actors instead of international ones
Relations between sectors, areas and actors
Sectors (to implement plans and get support) and territories (concentration of Mondragon group; and birth of the local development agencies)
Sectors and clusters (competitive upgrading) and territories (strengthening of local development agencies; divisional restructuring of Mondragon group). Support to associations and networks (Euskalit, Saretek…)
Strengthening of sector and cluster relations, and relations between the different territories
Increasing support to institutions aimed at fostering networking between different agents (Innobasque…)
Scarce connection between the different agents
Exploitation of opportunities that stem from local heterogeneity by bottom up initiatives
Participation of stake-holders, degree of social and political consensus, and degree of formalization
Social conversations with social and economic agents (labor unions and business associations), but clear governmental leadership
Political consensus on industrial policy (explicit from 1987)
Lack of an strategic plan: strategy as a result of different policies
Social dialogue with businessmen but governmental leadership; frictions with labor unions
Explicit political consensus on industrial policy
Strategic plan, classic approach, top-down
Increasing participation in policy design, but still need of improvement in policy learning
Improvements in shared leadership and vision
Non explicit political consensus on industrial policy
Strategic plan, classic (“future can be created”) and process approach
Several collective initiatives that support the creation of a regional strategy for the Basque country, but lack of a joint initiative that merge and/or coordinate the different initiatives
Source: Aranguren et al. (2012).
Finally, the remarkable political continuity in the Basque government (and in the team
of policy makers) throughout three decades made the process of strategy design and
implementation more path-dependent, as it also happened in other European regions
(Fuchs & Wasserman, 2005; Kiesse, 2010). In this regard, the rule of behavior of the
first teams in charge of the Department of Industry on “building on what it already
existed” became a sort of routine followed by the successive teams of policy-makers.
The continuity of politics and high-government officials in the Basque Government, but
of the coordination mechanisms with the socioeconomic agents too, and the cumulative
and communicative nature of the collective learning processes developed in the region,
enhanced the cognitive proximity among agents, reduced coordination problems and
facilitated the joint alignment of different stakeholders around an increasingly shared
territorial strategy.
4. Conclusions
There is a need of further explore and conceptualize the concept of territorial strategy
for several reasons. First of all it is a concept that has taken insights from several
academic disciplines without sometimes making explicit how the translation has been
made to the economic literature. In addition, we cannot find in the economic literature a
holistic approach to deal with territorial strategy, which takes into account all the
individual elements that should be included within it.
Even if we can define a common approach to territorial strategy, there is not a single
strategy for all the territories or regions (one size doesn’t fit all) as territories have
structural conditions in which their strategies should be based on. These conditions
include their industrial specialization, knowledge and physical infrastructures,
institutions, people and cultural conditions, among others, that is to say, singular assets.
Given that, we propose in this paper a holistic approach that is valid for analyzing and
building a territorial strategy, which involves making choices and setting priorities
around the content and the process of such a strategy. Within the content we can
differentiate between priorities in S&T areas and industries, functions and assets, actors,
external relationships and internal articulation; and the process will include not only the
actors involved but also the methods used as well as the character of the strategy
(deliberate versus emergent). Choices in all the strategic elements develop a path with
its strengths and weaknesses and due to the path dependency of policies and strategy,
past choices will affect future ones. For example, as the case shows, a strong focus on
technological innovation means that science is being undervalued as the region has
chosen one path and not the other. This decision affects not only to one element of the
strategy but also the rest of them as for example targeted actors will be different in one
or another alternative. This connection of all the strategic elements requires a high
degree of coordination between the government and other actors involved in the strategy
building process. In addition, the case shows that some choices would not been possible
without previous paths. For example, the region was able to make the choice of
diversifying the economy after upgrading it, so strategy is shaped through choices made
at different moments of the time.
In consequence, governments should be aware of the importance of choosing and
prioritizing and develop the necessary strategic intelligence and tools to conduct these
choices with the right information, not only about all the strategic elements in the
present, but also about the possible consequences and paths these decisions will involve.
It is in this field in which strategic intelligence tools such as foresight and evaluation are
key elements.
Finally, we would like to highlight that this paper has taken into account all the key
elements for a territorial strategy in a separate way, but we recognize the systemic
character of them. As we mentioned above, one element of the strategy affects to the
rest, for example, choices and priorities in certain sectors will affect to actors and
capabilities. Therefore, further research should take into account how these elements are
interrelated for effectively understand the strategy building process.
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