Ocde Innovation and networks

Local and Regional InnovationLocal and Regional Innovation

OECD Capacity Building SeminarOECD Capacity Building Seminar

Supporting SMEs in a Time of Crisis Supporting SMEs in a Time of Crisis

Jay MitraJay Mitra

13 October, 200913 October, 2009

Definitional IssuesDefinitional Issues EntrepreneurshipEntrepreneurship = new opportunity identification & realisation = new opportunity identification & realisation

(for the purpose of this paper ‘E’ = new business creation)(for the purpose of this paper ‘E’ = new business creation)

InnovationInnovation = successful exploitation of a new idea = successful exploitation of a new idea

CultureCulture = a set of attitudes/beliefs common to a group = a set of attitudes/beliefs common to a group

Culture Culture = a set of activities concerned with moral, aesthetic, and = a set of activities concerned with moral, aesthetic, and intellectual aspects of life (activities include some element of intellectual aspects of life (activities include some element of creativity in production, communication of meaning & intellectual creativity in production, communication of meaning & intellectual property)property)

CultureCulture = a diverse way of life (from beef steak to Beethoven to = a diverse way of life (from beef steak to Beethoven to Eminem)Eminem)

Entrepreneurial CultureEntrepreneurial Culture = diverse set of attitudes, beliefs, systems, = diverse set of attitudes, beliefs, systems, institutions and structures that are connected together with a view to institutions and structures that are connected together with a view to supporting new venture creation, innovation and growth in a supporting new venture creation, innovation and growth in a particular environment & in regional innovation systems. particular environment & in regional innovation systems.

Innovation is non-linear but involves interaction Innovation is non-linear but involves interaction between many actors between many actors

Interest resulting from research on the success of the Japanese model (Freeman, 1987)

Emergence of “innovation systems” models Emergence of “innovation systems” models (Freeman, 1987)

Why Innovation Systems?Why Innovation Systems?

NationalNational innovation systems innovation systems (Freeman, 1987; Lundvall, 2007)(Freeman, 1987; Lundvall, 2007)

RegionalRegional innovation systems innovation systems (Cooke 1992; Braczyk et al., (Cooke 1992; Braczyk et al., 1998)1998)

Key Models of Innovation SystemsKey Models of Innovation Systems

Some Stylised Facts and AssumptionsSome Stylised Facts and Assumptions

F/A 1: Innovation = source of economic growthF/A 1: Innovation = source of economic growth

The endogenous model)– critical importance of The endogenous model)– critical importance of technological change in economic growth ( total technological change in economic growth ( total factor productivity accounted for 87.5% of factor productivity accounted for 87.5% of economic growth – Solow, 1957) Romer, 1990, economic growth – Solow, 1957) Romer, 1990, OECD 2003OECD 2003

Strong emphasis on role of R&D, skilled labour Strong emphasis on role of R&D, skilled labour & knowledge spillovers – greater productivity, & knowledge spillovers – greater productivity, product quality dependent on innovation product quality dependent on innovation


F/A 2: Innovation is not evenly spread but spatially F/A 2: Innovation is not evenly spread but spatially concentratedconcentrated

Well-known concentrations = Oxford; Cambridge; SE, UK; Well-known concentrations = Oxford; Cambridge; SE, UK; Lombardy; Bangalore, ShanghaiLombardy; Bangalore, Shanghai

High urban focus – OCED countries High urban focus – OCED countries

Significant local differences within countries (Camagni & Significant local differences within countries (Camagni & Capello, 1997; Keeble, 1996; Acs, 2002)Capello, 1997; Keeble, 1996; Acs, 2002)

Different measures – innovation output (patent Different measures – innovation output (patent applications) & input/output (employment in high applications) & input/output (employment in high technology manufacturing & knowledge-intensive technology manufacturing & knowledge-intensive

industries)industries)

Top TerritoriesTop Territories Patent Patent Applications Applications per million per million inhabitants. inhabitants.

Bottom territoriesBottom territories Patent Patent Applications Applications per million per million inhabitants inhabitants

Zuid Nederland, Zuid Nederland, NetherlandsNetherlands

797797 Noreste, SpainNoreste, Spain 3434

Baden Wuttenburg, Baden Wuttenburg, GermanyGermany

597597 Sud, ItalySud, Italy 1414

Bayern, GermanyBayern, Germany 473473 Attiki, GreeceAttiki, Greece 1313

Ile de France, France 313Ile de France, France 313 Isole, ItalyIsole, Italy 1111

Maner Suomi, FinlandManer Suomi, Finland 312312 French Overseas French Overseas DepartmentsDepartments

66

Eastern, UK Eastern, UK 253253 Continente, PortugalContinente, Portugal 55

Westosterreich, AustriaWestosterreich, Austria 223223 Kentriki Ellada, GreeceKentriki Ellada, Greece 44

SE, UKSE, UK 205205 Madeira, PortugalMadeira, Portugal 11

Mean Mean 131131 Acores, PortugalAcores, Portugal 00

MedianMedian 9696

Subnational Variations in European Patent Applications, 2002 S

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Top territoriesTop territories Employees in Employees in HT HT manufacturing manufacturing (% of total (% of total Manufacturing Manufacturing employees)employees)

Bottom TerritoriesBottom Territories Employees in Employees in HT HT manufacturing manufacturing (% of total (% of total Manufacturing Manufacturing employees)employees)

Aland, FinlandAland, Finland 6969 Centro, SpainCentro, Spain 3838

London, UKLondon, UK 6161 Sur, SpainSur, Spain 3838

Manner Suomi, FinlandManner Suomi, Finland 5959 Continente, PortugalContinente, Portugal 3737

Hamburg, GermanyHamburg, Germany 5757 Voreia Ellada, GreeceVoreia Ellada, Greece 3636

SE, UKSE, UK 5757 Acores, PortugalAcores, Portugal 3434

Brussels, BelgiumBrussels, Belgium 5656 Canarias, SpainCanarias, Spain 3333

Ile de France, FranceIle de France, France 5656 Madeira, PortugalMadeira, Portugal 3232

SW, UKSW, UK 5555 Kentriki Ellada, Greece Kentriki Ellada, Greece 2929

Eastern, UKEastern, UK 5454 Nisia Aigaiou, Kriti, Nisia Aigaiou, Kriti, GreeceGreece

2828

MeanMean 4747

MedianMedian 4848

Subnational Variations in Innovation-Related Employment- High Tech Manufacturing , 2003S

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Top TerritoriesTop Territories A *A * Bottom TerritoriesBottom Territories A *A *

SE, UKSE, UK 1717 Vlaams Gewest, Vlaams Gewest, BelgiumBelgium

55

Berlin, GermanyBerlin, Germany 1616 WM, UKWM, UK 55

Scotland, UKScotland, UK 1414 Sud, ItalySud, Italy 44

Schieswig Holstein, Schieswig Holstein, GermanyGermany

1414 Centro, ItalyCentro, Italy 44

Dunantul, HungaryDunantul, Hungary 1313 Yorkshire & Humber, Yorkshire & Humber, UKUK

44

Ile de France, FranceIle de France, France 1313 Attiki, GreeceAttiki, Greece 44

Kozep Magyarorszag, Kozep Magyarorszag, HungaryHungary

1212 Este, SpainEste, Spain 33

Sudosterrrich, AustriaSudosterrrich, Austria 1111 Sur, SpainSur, Spain 22

Baden Wurttermburg, Baden Wurttermburg, Germany Germany

1111 Noreste, SpainNoreste, Spain 22

MeanMean 88 Continente, PortugalContinente, Portugal 22

MedianMedian 77

Subnational Variations in Innovation-Related Employment – Knowledge Intensive Industries

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F/A 3: SMEs participate in innovation processF/A 3: SMEs participate in innovation process

Classic ‘structure-conduct-perfomance’ model = large firms have monopoly Classic ‘structure-conduct-perfomance’ model = large firms have monopoly positions, commit substantial R&Dpositions, commit substantial R&D

Alternative model = SMEs have more impact (more radical innovation, Alternative model = SMEs have more impact (more radical innovation, Baumol, 2002)Baumol, 2002)

Importance of business churning (OECD, 2003) to national productivityImportance of business churning (OECD, 2003) to national productivity

Empirical evidence suggests that both small and large firms play a part – Empirical evidence suggests that both small and large firms play a part – dependent on active links to knowledge of market (users) & knowledge of dependent on active links to knowledge of market (users) & knowledge of materials & machinery (suppliers) & non-firm organisationsmaterials & machinery (suppliers) & non-firm organisations

Small firms rely heavily on external environmentSmall firms rely heavily on external environment

Spatial business clusters – association between spatial concentrations & Spatial business clusters – association between spatial concentrations & rates of technological innovation (Baptista and Swann, 1998) rates of technological innovation (Baptista and Swann, 1998)

FrameworkFramework Mechanisms supporting SME innovationMechanisms supporting SME innovation

Porterian Clusters (Porter, Porterian Clusters (Porter, 1990019900

Rivalry between competitors; specialised facotrs of production (land, Rivalry between competitors; specialised facotrs of production (land, labour, capital); large & growing demand & sophisticated customers; labour, capital); large & growing demand & sophisticated customers; related industries & support institutions related industries & support institutions

Marshallian districts (Pyke, Marshallian districts (Pyke, et al, 1990)et al, 1990)

Non pecuniary externalities from knowoedge spillovers through Non pecuniary externalities from knowoedge spillovers through informal personal exchanges, customer supplier transactions; labour informal personal exchanges, customer supplier transactions; labour pooling; inter-firm linkagespooling; inter-firm linkages

Innovative milieuxInnovative milieux Linkages between firms through labour mobility & informal networking, Linkages between firms through labour mobility & informal networking, supporting collective learning; reduction of uncertainty supporting collective learning; reduction of uncertainty

Learning Regions (Storper, Learning Regions (Storper, et al, 1997; Morgan, 1997)et al, 1997; Morgan, 1997)

Untraded interdependencies between local firms & other organisations; Untraded interdependencies between local firms & other organisations; use of formal & informal information & collaboration networks & labour use of formal & informal information & collaboration networks & labour market interactions; facilitated by trust & social capital & technology market interactions; facilitated by trust & social capital & technology support organisationssupport organisations

Local Innovation Systems Local Innovation Systems (Cooke, Heindrich & (Cooke, Heindrich & Braczyk, 2004; Howells, Braczyk, 2004; Howells, 1999)1999)

Knowledge generation, exchange & exploitation in system with Knowledge generation, exchange & exploitation in system with important learning interactions among suppliers, customers, public important learning interactions among suppliers, customers, public research organisations, financial institutions. Supported by local research organisations, financial institutions. Supported by local policiespolicies

Frameworks for Analysing Innovation Process in Agglomerations S

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Innovation = 80% of productivity growth and comparable figure for GDP Innovation = 80% of productivity growth and comparable figure for GDP (Freeman, 1994)(Freeman, 1994)

Regional disparities in innovation & GDP Regional disparities in innovation & GDP (Acs, 2002; Cooke (Acs, 2002; Cooke et alet al., 2002)., 2002)

Innovation = higher in regions with more knowledge generation e.g. R&D by Innovation = higher in regions with more knowledge generation e.g. R&D by firms & institutions firms & institutions (Acs, 2002)(Acs, 2002)

Region = new focus of economic policy Region = new focus of economic policy (Cooke (Cooke et alet al. 2003). 2003)

Why is a Regional Innovation System important?Why is a Regional Innovation System important?

Why are Local/regional Innovation Systems Relevant?Why are Local/regional Innovation Systems Relevant?

Most processes driving innovation occur locally – Most processes driving innovation occur locally – knowledge embedded in people ; distance decay effects knowledge embedded in people ; distance decay effects in rate of knowledge & information links;in rate of knowledge & information links;

SMEs have spatially restricted search patterns for SMEs have spatially restricted search patterns for collaborative partnerships or technological inputs;collaborative partnerships or technological inputs;

Different localities have different sector specialisations & Different localities have different sector specialisations & distinct sets of innovation processes;distinct sets of innovation processes;

Strong local differences in innovation performance Strong local differences in innovation performance

Type of FailureType of Failure Nature of FailureNature of Failure Potential local policy Potential local policy actionsactions

Information failureInformation failure Barriers to flow of information on Barriers to flow of information on innovation opps. Lead to missing markets innovation opps. Lead to missing markets & constraints for SMEs in obtaining & constraints for SMEs in obtaining finance, partners, etc.finance, partners, etc.

Promotion of networks & Promotion of networks & partnerships. Public support to partnerships. Public support to SME research projectsSME research projects

Public goodsPublic goods Undersupply of non rival goods & non Undersupply of non rival goods & non excludable goods that contribute to SME excludable goods that contribute to SME innovation – e.g. university research innovation – e.g. university research

Public policy of basic Public policy of basic innovation infrastructure locallyinnovation infrastructure locally

ExternalitiesExternalities Undersupply of activities that benefit Undersupply of activities that benefit others in addition to producers – e.g. others in addition to producers – e.g. training of highly skilled labour; reduced training of highly skilled labour; reduced incentives to SME innovationincentives to SME innovation

Direct public support for SME Direct public support for SME research projects for training of research projects for training of highly skilled labour in local highly skilled labour in local specialismsspecialisms

MonopoliesMonopolies Incumbent firms restrict entry through Incumbent firms restrict entry through branding & other behaviour, constraining branding & other behaviour, constraining ability of innovative, new & small firms to ability of innovative, new & small firms to enter market & compete enter market & compete

““Second best” policies Second best” policies supporting SMEs in order to supporting SMEs in order to “level the playing field”. “level the playing field”. Support of new firm entry in Support of new firm entry in local sector specialsims.local sector specialsims.

IndivisibilitiesIndivisibilities Indivisible cost in creating knowledge. If Indivisible cost in creating knowledge. If marginal cost pricing is used fixed cost is marginal cost pricing is used fixed cost is irrecoverable, constraining production of irrecoverable, constraining production of knowledge by SMEs & others knowledge by SMEs & others

Public funding of public & Public funding of public & private research projects with private research projects with

Potential spin offs for SMEsPotential spin offs for SMEs

Market Failures and SME InnovationS

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Type of FailureType of Failure Nature of FailureNature of Failure Potential Local policy actionPotential Local policy action

Infrastructure ProvisionInfrastructure Provision Underinvestment in local infrastructure with Underinvestment in local infrastructure with which firms interact – e.g. communications which firms interact – e.g. communications infrastructureinfrastructure

Incentives for private or public communications & Incentives for private or public communications & knowledge transfer infrastructuresknowledge transfer infrastructures

Transition & lock in Transition & lock in failuresfailures

Firms & localities are highly capable in their own Firms & localities are highly capable in their own technological areas but in related ones. Unable technological areas but in related ones. Unable to switch from existing technologies to switch from existing technologies

Incentives for technological activities that broaden Incentives for technological activities that broaden firm & organisational capabilities & nurturing of firm & organisational capabilities & nurturing of emerging systemsemerging systems

Institutional failuresInstitutional failures Institutional & regulatory context has unexpected Institutional & regulatory context has unexpected negative impactnegative impact

Monitoring & adjusting local institutions & Monitoring & adjusting local institutions & regulationsregulations

Learning failuresLearning failures Firms may not be able to learn rapidly & Firms may not be able to learn rapidly & effectively effectively

Developing firm capabilities through human capital Developing firm capabilities through human capital programmes, support for R&D 7 technology programmes, support for R&D 7 technology dissemination policies. Opening channels to dissemination policies. Opening channels to knowledge sourcesknowledge sources

Suboptimal balance bet. Suboptimal balance bet. exploitation & exploitation & exploration exploration

Local innovation concentrations may work too Local innovation concentrations may work too much on exploitation & not enough on much on exploitation & not enough on exploration (or vice versa)exploration (or vice versa)

Using public procurement & funding to support Using public procurement & funding to support exploration, introducing diversity in industry by exploration, introducing diversity in industry by supporting new & small firms; supporting variety supporting new & small firms; supporting variety through dissemination of codified information through dissemination of codified information

Suboptimal balance bet. Suboptimal balance bet. selection & varietyselection & variety

Local innovation concentrations may have too Local innovation concentrations may have too rapid selection whereby underperforming firms rapid selection whereby underperforming firms close, & too little variety, in terms of firms & close, & too little variety, in terms of firms & activities carrying potentially promising activities carrying potentially promising technologies technologies

Strengthening competition policies & use industrial Strengthening competition policies & use industrial & technological policies to support new firms & technological policies to support new firms carrying potentially promising technologies ( or carrying potentially promising technologies ( or weaken competition policies & limit use of weaken competition policies & limit use of industrial & technological policies supporting firms industrial & technological policies supporting firms that are likely to fail) that are likely to fail)

Appropriability trapsAppropriability traps Too stringent appropriability may limit Too stringent appropriability may limit spread of knowledge within innovation spread of knowledge within innovation systemsystem

Encouraging local knowledge transfers Encouraging local knowledge transfers

Complementarities Complementarities failuresfailures

The appropriate complementarities may not be The appropriate complementarities may not be present in local innovation systempresent in local innovation system

Formation of R&D networks; industry university Formation of R&D networks; industry university interfaces & bridging systemsinterfaces & bridging systems

System Failures & SME Innovation source: OECD, 2005, Lundvall & Borras, 1997

““Regional innovation system consists of interacting Regional innovation system consists of interacting

knowledge generationknowledge generation and and exploitationexploitation sub-systems sub-systems linked to global, national and other linked to global, national and other

regional innovation systems regional innovation systems for commercializing new for commercializing new knowledge” knowledge” (Cooke, 2004 p.3)(Cooke, 2004 p.3)

Emphasis: Firms in interaction with other firms & knowledge infrastructure at regional level.

What is Regional Innovation System?What is Regional Innovation System?

ESSENTIAL NOTIONS:ESSENTIAL NOTIONS:

Tacit knowledgeTacit knowledge = Innovation involves face-face interaction between actors = Innovation involves face-face interaction between actors due to tacit knowledge e.g. experience due to tacit knowledge e.g. experience ((Maskell and Malmberg, 1999))

Costs of interactionCosts of interaction = = Regional level has lower distance, transportation & Regional level has lower distance, transportation & communication costs communication costs (Audretsch, 1998; Krugman, 1991)(Audretsch, 1998; Krugman, 1991)

Local networksLocal networks = Innovation is higher in regions with local networks of = Innovation is higher in regions with local networks of SMEs and R&DSMEs and R&D ((Maskell & Malmberg, 1999; Asheim & Gertler, 2004)

Regional Innovation Systems (RIS)Regional Innovation Systems (RIS)

1.1. Knowledge Generation:Knowledge Generation:

Public & private research laboratoriesPublic & private research laboratories

Universities & Colleges for scientific & technical trainingUniversities & Colleges for scientific & technical training

Firms thatFirms that transfer knowledgetransfer knowledge

2.2. Knowledge Exploitation:Knowledge Exploitation:

Firms with regional & global value chain relationshipsFirms with regional & global value chain relationships

Venture capitalistsVenture capitalists

ConsultantsConsultants

Adapted from: Cooke Adapted from: Cooke et. al., (2003)2003)

Sub-Systems of RISSub-Systems of RIS

1.1. Innovation process is social Innovation process is social

Innovation = involves face-face interaction Innovation = involves face-face interaction between actors internal & external to the firmbetween actors internal & external to the firm ((Maskell and Malmberg, 1999))

Basic Arguments of RISBasic Arguments of RIS

2.2. Region facilitates interactionRegion facilitates interaction

Region = lower distance, transportation & communication costs for Region = lower distance, transportation & communication costs for interaction (Krugman, 1993)interaction (Krugman, 1993)

Face-to-face interaction and cooperation are easier at the regional Face-to-face interaction and cooperation are easier at the regional levellevel


3. Regional concentration of R&D firms & institutions boosts 3. Regional concentration of R&D firms & institutions boosts innovationinnovation

Combination of knowledge generation (e.g. by universities) & Combination of knowledge generation (e.g. by universities) & exploitation (by SMEs with local networks) boosts innovationexploitation (by SMEs with local networks) boosts innovation

Local concentration increases capacity to use external knowledge Local concentration increases capacity to use external knowledge for innovationfor innovation

Adapted from: Adapted from: Cooke et al., 2003Cooke et al., 2003 ; Asheim & Gertler, 2004


4. External Links boost innovation

Entering global marketsEntering global markets

Sourcing Knowledge from global sources (e.g. R&D)Sourcing Knowledge from global sources (e.g. R&D)


Entrepreneurship – requires knowledge and resource seeking (e.g. Entrepreneurship – requires knowledge and resource seeking (e.g. technical knowledge, finance, consultancy etc.) technical knowledge, finance, consultancy etc.)

Innovative activity of firms and entrepreneurs are largely based on localised Innovative activity of firms and entrepreneurs are largely based on localised resources (Asheim et. al., 2003; Cooke et. al., 2000)resources (Asheim et. al., 2003; Cooke et. al., 2000)

RIS provides access to critical resources for entrepreneurship within RIS provides access to critical resources for entrepreneurship within proximityproximity

Links between RIS and EntrepreneurshipLinks between RIS and Entrepreneurship

Grass rootsGrass roots – SME dominated or industrial district (less public – SME dominated or industrial district (less public governance) governance)

NetworkedNetworked – Associated between regional governance & industry – Associated between regional governance & industry pronouncedpronounced

CentralistCentralist – Governance is strongly centralised – Governance is strongly centralised

Cooke et. al (2003)Cooke et. al (2003)

RIS Public Governance SystemRIS Public Governance System

Problem of RIS: Few Regions in the world are high-tech clusters

Typology of Regional Innovation SystemsTypology of Regional Innovation Systems

Globalist California North-Rhine Westphalia Mid-Pyrenees

Interactive Catalonia Baden-Wurttemberg Quebec

Localist Tuscany Tampere Northern Ireland

Grassroots Networked Centralist

Source: Braczyk et. al. 1998; Cooke et. al. (2003 p.368)

Public Governance System

Bu

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Identify Strong Sectors/Candidate ClustersIdentify Strong Sectors/Candidate Clusters

Investigate Regional ClustersInvestigate Regional Clusters

Identify Competitive AdvantageIdentify Competitive Advantage

Identify Innovation PracticesIdentify Innovation Practices

Cooperative or Individualistic?Cooperative or Individualistic?

Innovation Support SystemInnovation Support System

Developing Innovation SystemsDeveloping Innovation Systems

1.1. Infrastructure issuesInfrastructure issues

2.2. SuperstructureSuperstructure

Conditions for Assessing RISConditions for Assessing RIS

Conditions for Higher & Lower RIS PotentialConditions for Higher & Lower RIS Potential

Infrastructure level Regional private equityRegional private equity Policy influence on infrastructurePolicy influence on infrastructure Regional university-industry strategyRegional university-industry strategy

Superstructural level

Institutional dimension Co-operative cultureCo-operative culture Interactive learningInteractive learning Associative consensusAssociative consensus

Organisational Dimension (firms) Worker mentoringWorker mentoring ExternalisationExternalisation Interactive innovationInteractive innovation

Organisational dimension (policy) MonitoringMonitoring ConsultativeConsultative NetworkingNetworking

Decentralised spendingDecentralised spending National financing organisationNational financing organisation Limited influence on infrastructureLimited influence on infrastructure

Competitive cultureCompetitive culture IndividualisticIndividualistic Institutional dissensionInstitutional dissension

Self acquired skillsSelf acquired skills InternationalisationInternationalisation Stand alone R&DStand alone R&D

ReactingReacting AuthoritativeAuthoritative HierarchicalHierarchical

Adapted from: Cooke et. al. (2001)

Higher RIS potential Lower RIS potential

National Policy

Information

Legitimation

Ministrics Assembly

SME Agency Business associates

FDI Agency Training agency

Trade Board Universities

Regional steering Committee

National Research Institutes

National technology

agency

Social partners Research CommunityVenture Capitalists Local Cooperative Forum Local GovernmentTechnology Consultants Chambers of commerce

ReportingRequirement

Information

Programmeapproval

Strategy

Advice

Information

Measures Coordination

Proposals

Regional Enterprise Support System for InnovationRegional Enterprise Support System for Innovation

Source: Braczyk, Cooke and Heinreich, eds. (1998)

Assets

CapabilitiesConnectivities

Public investment in technology developmentCreation of S&T parksAttracting inward investmentSupporting access to finance

Education & Training of individualsAdvice, training & consultancy to SMEsInfluencing motivation & abilities of universities &Research organisations in collaborative research with SMEs

Creation & strengthening oflocal networksEncouraging local innovation collaborationsCreation of bridging institutionsEnsuring openness of local innovation system to sources of knowledge outside system

Policy Levers to Strengthen Local Innovation Systems

Concepts Definitions and differences

Regional cluster

• A concentration o f ‘interdependent’ firms within the same or adjacent industrial sectors in a small geographic area

Regional innovation network

• Increasingly organised co-operation (agreements) between firms, stimulated by trust, norms and conventions

Regional innovation system

• Co-operation between firms and different organisations for knowledge development and diffusion

Learning regions

• Increasingly organised co-operation with a broader set of civil organisations and public authorities that are embedded in social and regional structures.

Comparison RIS & other Regional ModelsComparison RIS & other Regional Models

RISs are rare and newly discoveredRISs are rare and newly discovered

Hard to detect systemic regional innovationHard to detect systemic regional innovation

In Europe = high dependence on public expenditure In Europe = high dependence on public expenditure

Source: Cooke (2001)Source: Cooke (2001)

Problems with Public Support for RISProblems with Public Support for RIS

RIS problems Type of Problem Typical problem region Possible policy tools

Organisational ‘thinness’

Lack of relevant local actors Peripheral areas

Link firms to external recourses + acquisition

Fragmentation

Lack of regional co-operation and mutual trust Some regional clusters Develop regional ‘club goods’

Loc k-in

Regional industry specialised in outdated technologies

Old industrial regions and raw material based peripheral

Open up networks towards external actors + local mobilisation

Isaksen (2001)

Problems with Public Support for RISProblems with Public Support for RIS

Differences: National vs. Regional SystemsDifferences: National vs. Regional Systems

National Innovation National Innovation SystemsSystems

Regional Innovation Regional Innovation SystemsSystems

Inter-firm relations - Market- Market - Clusters- Clusters

Knowledge infrastructure - Formal R&D laboratories- Formal R&D laboratories

- National R&D - National R&D laboratorieslaboratories

- University research- University research

- Firm external sources of - Firm external sources of knowledgeknowledge

Public Sector (government)

- Emphasis on national - Emphasis on national levellevel

- Emphasis on regional - Emphasis on regional levellevel

Financial institutions - Formal savings- Formal savings

- Formal financial sector- Formal financial sector

- Venture capital- Venture capital

- Informal financial sector- Informal financial sector

Source: Acs (2002)

A Region of 1500 Square Miles in California, USA Region of 1500 Square Miles in California, US

One of the “most” innovative high-tech regions in the worldOne of the “most” innovative high-tech regions in the world

1.35 million jobs1.35 million jobs

Headquarters for over 400 public companiesHeadquarters for over 400 public companies

Average salary of $65,000Average salary of $65,000

Venture Capital Investments of over $8 billionVenture Capital Investments of over $8 billion

Case Study: Silicon Valley Case Study: Silicon Valley

Source: Stanford University

Past:Past: Linkages to Federal funding agencies and flood of Government Sponsored Linkages to Federal funding agencies and flood of Government Sponsored

Research at universities (Cold war effect in1950s)Research at universities (Cold war effect in1950s)

Present:Present: Cutting-edge education to company employeesCutting-edge education to company employees

Small Business Innovation Research (SBIR) grants: Over $2B awarded in Small Business Innovation Research (SBIR) grants: Over $2B awarded in U.S. in 2006U.S. in 2006

“knowledge generation” in Silicon Valley (1)


Figure 5: Engineering School Ph.D. Production

0

20

40

60

80

100

120

140

160

180

Electrical

Ph.D. Total in Enginerring

“knowledge generation” in Silicon Valley (2)


Stanford graduates, faculty & staff have launched approximately 1200 companies in the last 50 years

More than 50% of Silicon Valley product is due to companies started by Stanford alumni

“knowledge Exploitation” in Silicon Valley


Silicon Valley Innovations: Past & PresentSilicon Valley Innovations: Past & Present


Some Silicon Valley companies

RIS consists of knowledge generation and exploitation subsystemsRIS consists of knowledge generation and exploitation subsystems

New focus of economic policyNew focus of economic policy

Think local, act global - External links are important for RISThink local, act global - External links are important for RIS

RISs are rare and rely heavily on public expenditure RISs are rare and rely heavily on public expenditure

ConclusionsConclusions

Some Preliminary QuestionsSome Preliminary Questions

Can/does higher education make a difference?Can/does higher education make a difference?

Does it make a difference by itself or in Does it make a difference by itself or in collaboration with other institutions?collaboration with other institutions?

Do small businesses interact with this Do small businesses interact with this collaborative venture?collaborative venture?

Does such interaction generate new businesses? Does such interaction generate new businesses?

University Culture and University Culture and Entrepreneurship Entrepreneurship

What unites academics more? Car Parking or intellectual What unites academics more? Car Parking or intellectual discourse?discourse?

What price entrepreneurship?What price entrepreneurship?

““Loosely coupled systems” (Weick 1976) Loosely coupled systems” (Weick 1976)

Collegial academy of chaosCollegial academy of chaos

Four cultures of “collegium”, “bureaucracy”, “corporation” Four cultures of “collegium”, “bureaucracy”, “corporation” and “enterprise” (McNay, 1995) and “enterprise” (McNay, 1995)

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sUniversity/B-School Learning FocusUniversity/B-School Learning Focus Entrepreneurs’ Learning NeedsEntrepreneurs’ Learning Needs

Critical judgment after analyzing large amounts Critical judgment after analyzing large amounts of informationof information Gut feel decision making with limited Gut feel decision making with limited

informationinformation

Understanding and recalling the information Understanding and recalling the information itselfitself Understanding the values of those who Understanding the values of those who

transmit/filter informationtransmit/filter information

Assuming commonality of goalsAssuming commonality of goalsRecognizing the widely varied goals of different Recognizing the widely varied goals of different stakeholdersstakeholders

Seeking (impersonally) to verify the absolute Seeking (impersonally) to verify the absolute truth by study of informationtruth by study of information Making decisions on the basis of judgment of Making decisions on the basis of judgment of

trust & competence of people. trust & competence of people.

Understanding the basic principles of the society Understanding the basic principles of the society in the metaphysical sensein the metaphysical sense Seeking to apply and adjust in practice to the Seeking to apply and adjust in practice to the

basic principles of societybasic principles of society

Seeking the correct answer, with (enough) time Seeking the correct answer, with (enough) time to do itto do it Developing the most appropriate solution often Developing the most appropriate solution often

under time-pressureunder time-pressure

Learning in the class roomLearning in the class roomLearning while & through doingLearning while & through doing

Gleaning information from experts and Gleaning information from experts and authoritative sources for the sake of its authoritative sources for the sake of its genuineness genuineness

Gleaning information from any and everywhere Gleaning information from any and everywhere & assessing its practical usefulness& assessing its practical usefulness

Evaluation through written assessmentEvaluation through written assessmentEvaluation through judgment of people and Evaluation through judgment of people and events through direct feedbackevents through direct feedback

Success in learning measured by passing of Success in learning measured by passing of knowledge-based examinationsknowledge-based examinations Success in learning measured by solving Success in learning measured by solving

problems, learning from failures and providing problems, learning from failures and providing useful products and services to the society.useful products and services to the society.

Some Stylised Observations 1/2Some Stylised Observations 1/2 Patterns of use of university (especially research) output:Patterns of use of university (especially research) output:

Economic stability = pure research; instability = Economic stability = pure research; instability = commercialisationcommercialisation

But note a few caveatsBut note a few caveats::

a) Origins of university activity– industry focuseda) Origins of university activity– industry focused Technische Mittelschulen, Technische Hochschulen, Technische Mittelschulen, Technische Hochschulen,

Fachhoschulen in Germany; USA – University of Akron Fachhoschulen in Germany; USA – University of Akron (polymers & elastomers), Cornell’s electrical engineering dept. (polymers & elastomers), Cornell’s electrical engineering dept.

b) advent of science in engineering with government superseding b) advent of science in engineering with government superseding industry & emergence of divide between corporate and university industry & emergence of divide between corporate and university R&DR&D

Some stylised observations Some stylised observations 2/22/2

Economic sectors with most rapid growth are closest to science Economic sectors with most rapid growth are closest to science – microelectronics, software, biotech and new materials.– microelectronics, software, biotech and new materials.

Above industries also have high ‘social qualities’ – high wages, Above industries also have high ‘social qualities’ – high wages, good environmental characteristics, low barriers to entry for good environmental characteristics, low barriers to entry for small firms, relative independence from geographic constraintssmall firms, relative independence from geographic constraints

Universities benefit from government policy to encourage Universities benefit from government policy to encourage entrepreneurship (licensed inventions from govt. grants entrepreneurship (licensed inventions from govt. grants (Mowrey, Nelson & Sampat, 1999)(Mowrey, Nelson & Sampat, 1999)

Real spur to entrepreneurship in universities = business Real spur to entrepreneurship in universities = business opportunity from basic scienceopportunity from basic science

Most revenues from patents of a very basic nature for process Most revenues from patents of a very basic nature for process or tools & licensed non-exclusivelyor tools & licensed non-exclusively

The Forces At Work - The Forces At Work - RegionalisationRegionalisation

New & diverse client bases for teaching & researchNew & diverse client bases for teaching & research

From traditional relationships with large corporations to regional From traditional relationships with large corporations to regional clusters of firms (not just money but changes in nature & scope of clusters of firms (not just money but changes in nature & scope of technologies) technologies)

Regionalisation of regulating institutions leads to regional Regionalisation of regulating institutions leads to regional networking & institutional capacity buildingnetworking & institutional capacity building

Universities as regional intermediaries & commentatorsUniversities as regional intermediaries & commentators

Regional networking as institutional survivalRegional networking as institutional survival

Ambivalent relationship with territoryAmbivalent relationship with territory

The Forces at Work – Forms of The Forces at Work – Forms of LearningLearning

New mode of learning production from inter-New mode of learning production from inter-disciplinary research centres & reliance on disciplinary research centres & reliance on external funding (Gibbon, 1994)external funding (Gibbon, 1994)

Interactive forms of learning inherently bound in Interactive forms of learning inherently bound in time & space – regional context for learning & time & space – regional context for learning & knowledgeknowledge

International research transferred to specific International research transferred to specific localities through universitieslocalities through universities

Forces at Work – The New Forces at Work – The New CultureCulture

The new student – decentred world & multiple livesThe new student – decentred world & multiple lives

Diverse forms of preparationDiverse forms of preparation

Episodic & fragmented engagement not holistic, intense, linear forms of Episodic & fragmented engagement not holistic, intense, linear forms of learninglearning

Research generated in heterogeneous environments of producers, brokers Research generated in heterogeneous environments of producers, brokers and usersand users

Knowledge is more contextualised & intensely reflexiveKnowledge is more contextualised & intensely reflexive

Communicative culture – from cerebral, objective, codified & symbolic (Communicative culture – from cerebral, objective, codified & symbolic ( logoslogos) ) to visual, intuitive, volatile, subjectiveto visual, intuitive, volatile, subjective

Wider social distribution of knowledge generation Wider social distribution of knowledge generation

(source: Scott, 2004) (source: Scott, 2004)

The Knowledge Economy FactorR&D, Universities, Small Firms, Skills Sets and

ICT

A Role For Learning, Research and Higher Education;

Catalysts For An Entrepreneurial Culture?

The East of England