Are EU regional digital strategies evidence-based?

Are EU regional digital strategies evidence-‐based? An analysis of the alloca8on of 2007-‐13 Structural Funds

Luigi Reggi and Sergio Scicchitano Ministry of Economic Development, Department for Development and Economic Cohesion, Italy *

EIBURS-‐TAIPS team, University of Urbino

Regional Innova4on and Compe44veness Policy Workshop 15 November 2012

UK-‐Innova4on Research Centre -‐ University of Cambridge

* The views expressed here are those of the authors and, in parFcular, do not necessarily reflect those of the Ministry of Economic Development

[email protected] [email protected]

•  IntroducFon •  Research objecFves •  Regional digital strategies & EU Cohesion policy •  Data and methodology •  Results •  Discussion and Conclusions

Outline

•  ICT diffusion foster producFvity and growth •  “Digital Agenda for Europe” > a strategic framework for Informa(on Society (IS) development (2010)

•  A “sustained level of commitment” at the regional level is required –  increased powers in the field of InnovaFon policy

(OECD, 2011)

–  Regional InnovaFon Systems (Cooke and Morgan, 1998; EC, 1998)

– Within IS > regions play an intermediaFng role between EU frameworks and local intervenFons (Ca^aneo, 2004)

Introduc4on (1/2)

•  Regional planning for IS must be guided by effecFve Regional “digital strategies”, that should be both: 1.  consistent with the EU policy framework 2.  place-‐based, i.e. based on available evidence on

the characterisFcs of local contexts in terms of IS development (Barca, 2009; Tsipouri, 2002)

Introduc4on (2/2)

1.  InvesFgate the existence of different regional digital strategies

2.  Verify whether such strategies respond to local territorial condiFons

Research objec4ves

•  European Cohesion (or Regional) Policy offers an ideal opportunity to explore the key elements of regional digital strategies with a quanFtaFve approach

shared rules and regula(ons => funding is allocated and classified through common categories and definiFons, and that data on the financial distribuFon of resources is fully comparable.

Regional digital strategies & the EU Cohesion policy

The EC has put a great emphasis on the need to adopt comprehensive and balanced regional strategies for the InformaFon Society development •  1994-‐1999 > Regional InformaFon Society IniFaFve (RISI)

•  2000-‐2006 > 5.5 billion € (Vincente and Lopez, 2011). •  2007-‐2013 > 15.3 billion € (Reggi & Scicchitano, 2012)


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Fig. 5. Structural funds dedicated to Information Society development in 2007-13 period.

Source: Own elaboration from European Commission - DG for Regional Policy data

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POLICY RECOMMENDATIONS FROM THE LITERATURE

1.  Regional digital strategies should adopt a

holis4c and integrated perspecFve (e.g. public & private actors) (Tsipouri, 2002)

2.  Regional digital strategies should be based on a sound analysis of the implementa4on context and the territory-‐specific condiFons, needs and opportuniFes (Tsipouri, 2002, Technopolis, 2006)


POLICY RECOMMENDATIONS FROM THE LITERATURE

3.  A well-‐balanced approach is needed, since “IS

development involves parallel, mutually reinforcing developments in a range of fields” (Taylor and Downes, 2001).

Examples >

Telecommunica(on infrastructures vs. eServices development

Supply vs. Demand of ICT


•  The data on the allocaFon of EU Structural Funds are based on financial resources programmed by each 2007-‐13 Opera4onal Programme (OP) of the EU Cohesion Policy.

•  The dataset is provided by the European Commission – DG Regional Policy and includes data on the amount of programmed financial resources by “category of expenditure”:

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e-Services category is prevailing among the policy options available to EU regionsconfirms the long-standing trend in EU policy to invest in e-government, in ordernot only to obtain efficiency and effectiveness gains in the provision of publicservices, but also to improve role of governmental bodies in public procurement ofadvanced technology [14].

According to Council Regulation No. 1080/2006 of 5 July 2006, the RegionalDevelopment Fund (ERDF) co-finances a large spectrum of actions aimed at foster-ing Information Society, including: the development of electronic communicationsinfrastructure; the development of advanced content, services and applications, theimprovement of secure access to and development of on-line public services; aidand services to SMEs to adopt and effectively use information and communicationtechnologies (ICTs) or to exploit new ideas. Thus, the large majority of financialresources for IS (15 billion euros) and e-services (5) comes from the ERDF, while theESF – which is competent for the dissemination of information and communicationtechnologies and e-learning, as from the Council Regulation No. 1081/2006 of 5 July2006 – allocates respectively 128 and 90 million euros.

As already reported, CONV Objective absorbs the majority of Structural Funds.Regions belonging to CONV objective planned to invest almost 12.5 billion eurosfor the IS (almost 4, 5 for the public e-service). The expected investment by COMPregions is about six times lower than those of CONV Objective. It is interesting tonote that, while the financial effort from COMP Objective is limited in absolutevalues, they show the highest value in relative terms.

4.1 Financial Resources at the National Level

Figure 1 shows the amount of Structural Funds allocated to IS and e-Services(category no. 13) by the EU Regions and aggregated at a national level.The SlovakRepublic shows the highest values with respect to both e-services and IS resourcesover the total amount of Structural Funds available. Greece and Finland also showrelatively high values, while Poland, which is the Member State that receivedthe largest amount of Structural Funds in 2007–13 period, is now just over theEuropean average.

Table 1 Categories of expenditure dedicated to IS and public e-Services and financial resourcesallocated in both CONV and COMP objectives

N. Name A.V. %

10 Broadband networks 2,257,722,464 15%

11 ! 12 Information and communication technologies(interoperability, security, etc.)

4,121,115,554 27%

13 Services and applications for citizens 5,225,072,351 34%

14 Services and applications for SMEs 2,144,358,160 14%

15 Other measures for improving use of ICT by SMEs 1,537,162,147 10%

Total 15,285,430,676 100%

22 L. Reggi and S. Scicchitano

Data & methodology (1/3)

A two step procedure is adopted. 1.  EU regions classified into homogeneous groups

through a Principal Component Analysis (PCA) followed by a hierarchical Cluster Analysis (CA), on the basis of the allocaFon of Structural Funds (in %) to strategic IS objecFves in 2007-‐13 period.

2.   logit model to examine the link between the strategic choices idenFfied in the first step and the characterisFcs of regional contexts in terms of socio-‐economic development and IS diffusion.


Our analysis is limited to the lagging regions belonging to the CONV objec4ve where Structural Funds can be considered as a proxy of the total amount of financial resources that a region can invest in IS development. –  CONV regions benefit from a unprecedented amount of 2007-‐13 EU Cohesion resources dedicated to innovaFon (Bonaccorsi, 2010; Reggi & Scicchitano, 2012)

–  CONV regions tend to spend the few locally available resources to maintain the current levels of basic public services

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Fig. 4. Identifying three strategies in allocating financial resources for IS development in CONV Regions

-3.0 -1.5 0 1.5

-1.5

0

1.5

3.0

broadband

Dimension 1 - 36.90 %

CLUSTER 2

CLUSTER 3

SME2

SME1

ICT

e-Services

CLUSTER 1

Dimension 2 - 27.21 %


Table 5. Percentage of financial resources dedicated to each IS category of expenditure in CONV regions, by cluster Categories of expenditure

Cluster 1 ICT infrastructures (interop., security, etc) (n = 29)

Cluster 2 e-Services (e-health, e-Gov, etc.) (n= 29)

Cluster 3 ICT among SMEs and broadband (n = 49)

All CONV regions (n = 99)

Broadband 5 10 25 15 ICT 59 13 10 25 eServices 23 55 24 33 SME1 6 11 27 16 SME2 5 10 13 10 Total 100 100 100 100 Source: Own elaboration from European Commission - DG for Regional Policy data

Results: 1st step – PCA+CA

29%

41% 29%

•  We esFmate three logit models separately for each cluster.

•  The observed dependent variable is binary, taking the value of one if a region belongs to one of the three clusters and zero otherwise.

•  Most of the variables (with 2 excepFons) are at the NUTS2 (regional) level

•  Depending on data availability, most of regressors are from 2006, the year when regional strategies were approved; from 2007 otherwise.

Results: 2nd step -‐ logit model

MODEL REGRESSORS: Eurostat variables on IS local development i) Households with broadband access ii) Households with access to the Internet iii) Individuals who ordered goods or services over the Internet for private

use iv) Individuals using the Internet for interacFon with public authoriFes v) Enterprises who have ERP sooware package to share informaFon on sales/

purchases with other internal funcFonal areas

CONTROL VARIABLES: vi) Gross DomesFc Product (GDP) per capita vii) Number of local units viii) Number of employees in local units ix) Total intramural R&D expenditure in the higher educaFon sector x) Rate of unemployment



Table 5 Determinants of regional strategies on IS and e-services: Logit results Var Cluster 1 Cluster 2 Cluster 3 Coef. Std. Err. z Coef. Std. Err. z Coef. Std. Err. z Broad_house -1.143005 0.4492695 -2.54** 0.0564842 0.1604883 0.35 0 .4275693 0.1313482 3.26*** Internet_house 1.142004 0.448562 2.55** -0.1895048 0.1902209 -1 -0.3502617 0.1241232 -2.82*** Order_indiv -0.3475656 0.124287 -2.8*** 0.1648801 0.107555 1.53 0 .1935861 0.0728091 2.66*** Interact_indiv 0.5869741 0.2845014 2.06** 0.3405171 0.2055405 1.66* -0.4194555 0.1579136 -2.66*** Integr_process -1.371032 0.5737002 -2.39** 0.406413 0.1739903 2.34** 0 .2302201 0.098529 2.34** GDP_percapita 0.0000899 0.0002822 0.32 -0.000795 0.0003868 -2.06** 0 .000012 0.0001531 0.08 Local_units 0.0030452 0.0013319 2.29** 0.0029206 0.0023873 1.22 -0.0035533 0.0011161 -3.18*** Employees -0.0008222 0.0003594 -2.29** -0.0008053 0.0007944 -1.01 0 .0009812 0.0003352 2.93*** R&D 0.0448095 0.0290908 1.54 0.0209459 0.026945 0.78 -0.0387537 0.0197503 -1.96** Unemp 0.4254679 0.2084043 2.04** -0.2785523 0.1644312 -1.69** 0 .0813006 0.0633516 1.28 Cons -6.153135 4.415426 -1.39 -1.577808 3.686809 -0.43 2 .023108 2.100155 0.96 Number of obs. 70 70 70 LR chi2(10) 57.68 30.16 37.17 Log likelihood -14.734982 -11.777133 -29.475342 Prob> chi2 0.0000 0.0008 0 .0001 Pseudo R-sq 0.6618 0.5615 0 .3867 Note: Significance levels are as follows: * p<0.10, ** p<0.05, *** p<0.01.

•  Lagging Regions seek to further improve their strengths rather than focus on the weaknesses that emerge from the regional IS context.

•  This seems to explicitly contradict policy recommenda4ons in the literature

-‐ WHY? -‐

Discussion (1/3)

1.   Inadequate analysis of local context •  qualita4ve tools prevailing in policy evaluaFon, no quanFtaFve impact analysis •  no real benchmarking •  few available relevant indicators on IS at regional level

Discussion (2/3)

2.   Path dependence, the idea that insFtuFonal life is ooen characterized by posiFve feedback processes that make change costly. Example: mulF-‐annual investment decisions to implement large telecommunicaFon infrastructures

3.   Rules of Structural Funds (“N+2”) Concentrate resources on on-‐going projects that ensure immediate spending

Discussion (3/3)

EU Regions need to rebalance most of their

current “digital strategies” This is parFcularly important considering that, according to the current proposal of the European Commission, a balanced strategy for the IS is now an “ex-‐ante condiFonality” for accessing 2014-‐2020 Structural Funds

In conclusion...

–  Compare the allocaFon of programmed resources

with actual expenditure –  Extend the analysis by including Structural Funds

allocaFon to Research & InnovaFon, Human Capital and CompeFFveness

Future research

..Thank you for your aNen(on!

Luigi Reggi [email protected] [email protected] www.luigireggi.eu

Technology

Are EU regional digital strategies evidence-based?