Good Governance and Effective Business Support for European Innovation Ecosystems Kevin Morgan Cardiff University

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1 Good Governance and Effective Business Support for European Innovation Ecosystems Kevin Morgan Cardiff University European Innovation Ecosystems: good governance and effective business support for Smart Specialisation Committee of the Regions/European Commission Joint Conference 26 January, Brussels This project has received funding from the European Union s Seventh Framework Programme for research, technological development and demonstration under grant agreement number

2 Overview Regional innovation policy (RIP) was 25 years old last year what have we learned? RIP a challenge for regions, Member States and EC RIS3 needs good governance and effective business support this requires public sector innovation Orchestrating innovation ecosystems the real goal of RIS3 Examples of innovation ecosystems - implications for public policy and business infrastructure

3 Challenge of RIP RIP creates big challenges for all concerned It s a big absorption challenge for Less Developed Regions (LDRs) It s also a big political challenge for the EC and Member States to demonstrate the efficacy of RIP and Cohesion Policy generally After 25 years the evidence of its effectiveness is so inconclusive (Bachtler et al, 2015)

4 Research & Innovation Strategies for Smart Specialisation (RIS3) Building on the past, whilst breaking with the past: Building on existing strengths and potential Strengthening comparative advantage Stimulating research AND innovation Connecting with local AND external expertise Building collective capacity - especially between regional state, business community, universities and civil society Involves focused investment, through: Prioritisation of research and innovation fields Stimulating discovery and search processes

5 Key issues in RIS3 practice The biggest tension in the RIS3 implementation process is between policy rhetoric and regulatory reality Regional policy rhetoric invites public bodies to be more agile, creative & experimental But our audit/compliance culture is intolerant of failure it seems to say be experimental as long as you don t make mistakes!

6 RIS3 presumes a smart state RIS3 presumes the existence of a smart state because it demands a lot of the regional state and other public bodies Key aspects of the smart state include quality of government absorptive capacity public procurement capacity entrepreneurial discovery process responsive political elites

7 Quality of Government Index Poor governance can stymie innovation and economic growth and trap regions in a low growth equilibrium Poor governance makes for poor and unresponsive public services Poor governance is cause and consequence of fraud and corruption Poor governance compromises the impact of Cohesion Policies as it reduces absorptive capacity

8 Absorptive Capacity Absorption of Cohesion Policy funding and Government effectiveness, ,5 1,5 WB Government effectiveness index, 2012 standardised so that 1,0 FI 1,0 DK SE NL 0,5 LU 0,5 UK BE FR CYAT DE MT IE 0,0 PT ES 0,0 SI CZ SK LV LT EE HU PL -0,5-0,5 IT EL BG -1,0-1,0 RO -1,5-1, Total absorption rate of Cohesion Policy funding by 21/05/2014 (%) Source: World Bank and SFC

9 Public procurement guide Low cost still dominant even though the PP guidelines allow public bodies to seek values for money and not just value for money The power of purchase is stymied by a lack of whole life costing skills & political commitment Public procurement is the sleeping giant of regional innovation policy

10 Entrepreneurial discovery At the core of RIS3 is the entrepreneurial discovery process where the smart state identifies new R&I priorities alongside firms and universities But many regions still cling to the linear model of innovation in the (mistaken) belief that research inputs = innovation outputs Big disconnect here with the academy, where the linear model was buried more than 20 years ago

11 Regional elites The RIS3 Guide was the first regional policy guide to treat elites seriously because poor governance correlates with low innovation Need to hold elites to account through local civil society and extra-local conditionalities But effective regional elites have a major role to play in making RIS3 a success because political leadership is crucial

12 Public sector innovation RIS3 makes enormous demands of the public sector, but there is a paradox here RISS3 expects the public sector to be smarter when austerity is undermining its capacity Public sector innovation MUST happen because RIS3 needs: smarter public administration user-focused business support services

13 Barriers to public sector innovation 3 barriers to public sector innovation: Feedback is critical in all systems - but it is stymied by fear, power and hierarchy Failure is not tolerated - but the public sector is invited to be more experimental & less risk averse Learning is very difficult because time and space are not properly afforded to monitoring, evaluation and reflection

14 Good governance = effective business support Good governance = more effective business support systems (European Court of Auditors) Effective business support systems are demand-led not supply-driven Business incubators need more realistic business plans suitably skilled staff/expert knowledge customised support for firms robust monitoring systems to assess progress more knowledge exchange/peer support

15 RIS3 strategies (based on findings) Most are broadly drawn Fairly traditional approach based on sectors, clusters or technologies Often focused on the strongest sectors and existing structures Signs of further targeting taking place Some take a wider approach considering arenas/eco-systems promoting inter-industry cross-overs

16 Some limitations Entrepreneurial Discovery Process primarily present in prioritization process Strategies strongly focused on S&T models Social Innovation content weak Triple Helix model is still a big challenge (Quadruple Helix even more so) External dimensions rarely incorporated explicitly but some good practices emerging (eg Vanguard)

17 Orchestrating ecosystems Markku Markkula and his colleagues have produced a very good guide as to how a regional innovation ecosystem was nurtured through place-based collaboration in Espoo, Finland

18 Orchestrating ecosystems Other good examples of innovation ecosystems include South Moravia and the Basque Country and we need to share these experiences through better peer-to-peer learning networks A key feature of an innovation ecosystem is connectivity (in and beyond the region) and this requires good relationships and these are based on trust Trust is a unique asset it has a value but no price, so it has to be earned!!!

19 Questions for the public sector To earn the trust of its partners, the public sector needs to be properly resourced to orchestrate placebased innovation ecosystems Do Public Administrations in the regions have the right skill sets for the RIS3 challenge? Are Member States empowering their regions to rise to the challenge? Is the European Commission investing too much in compliance and too little in creativity?

20 The RIS3 opportunity RIS3 is a real opportunity to create European innovation ecosystems but we must not use the money to build cathedrals in the desert We need to ensure that good practice is the norm and not the exception so why is good practice such a bad traveller? The public sector can do more but our innovation intermediaries also need to do more Time to make good practice a good traveller!

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