WIRE: Week of Innovative Regions in Europe Granada, 15th 17th March 2010

WIRE: Week of Innovative Regions in Europe Granada, 15th 17th March 2010 Staying Competitive in a Changing World : Regional Innovation and Cohesion Policies Present and Future Brussels 14 September 2010 innovation Claire Nauwelaersin regions Innovation Unit Competitiveness and Regional Governance Division Public Governance and Territorial Development Directorate The challenges for regional innovation policies: an EU-OECD project The challenges for Claire Nauwelaers OECD Regional Development Policy Division OECD

Why worry about innovation and regions? Innovation has received increased priority to address not only productivity gaps, but also societal challenges in the move towards smart, sustainable and inclusive societies Regions are called as innovation mobilisers in their countries. Two moves: attention to territories in national innovation policies; more stress on innovation in regional development policies The adoption of a broader concept of innovation gives a chance to regions that are not at the technology frontier How to organise complementarity/synergies between policies at various levels of government? How effective are innovation policies by, for, in regions??

Sources OECD Survey of the multi-level governance of science, technology and innovation 2010 New research (in house, outside) urvey OECD content Survey on multi-level governance of STI policy OECD Territorial Reviews Roles, budgets and Globalisation challenges at and different Regional levels Multi-level governance Economies coordination (several case studies) Instruments used North at different of England, levels UK Regional dimension Piedmont, of national Italy S&T and innovation policies 15 Mexican States Future trends expected Catalonia, Spain Basque Country, Spain Switzerland

Sources Some typical responses to the OECD survey New research (in house, outside) Information sharing across levels of government to inform each other's policy is difficult OECD Survey on multi-level governance of STI policy Capacity problems at sub-national level to formulate and deliver policy OECD Territorial Reviews Globalisation and Regional actively participate and implement strategic plans Economies (several case studies) Financial resources are insufficient for certain regions/localities to Administrative boundaries at regional city/local level are an impediment to policy efforts North of England, UK Piedmont, Italy Policy silos at supranational/national level undermine efforts to coordinate at the sub-national level 15 Mexican States Catalonia, Spain Inefficiencies are high given the proliferation of programmes emanating from different levels Basque Country, Spain Gaps in the allocation of responsibilities result in policy areas unmet at any level of government Switzerland

Rationale for regional innovation policy Proximity matters for knowledge flows, because of tacit dimension: capitalising on localised knowledge spillovers, lower transaction costs, social capital: nurturing the innovation eco-system Indivisibilities imply economies of scale and different levels of intervention for activities with different degree of indivisibility Empirical evidence on regional disparities and uneven geography of innovation (agglomeration trend): need for differentiated approaches Regional governments are closer to actors in the field: reducing the information gap for managing some innovation support instruments (networks...)

Justifying the regional dimension = Fighting myths Myth 1: Concentration = growth Myth 2: Supporting lagging regions is a social policy not economic policy Myth 3: Urban regions drive growth and rural regions are marginal Myth 4: Infrastructure drives growth Myth 5: Only regions with a dense R&D infrastructure are innovative Myth 6: We should look for best practices in policies Sources: OECD (2009) Regions Matter: Economic Recovery, Innovation and Sustainable Growth OECD (2009) How Regions Grow: Trends and Analysis.

Does concentration = growth? In practice, many other patterns emerge Economic Density GDP per square kilometre Labour Productivity GDP per worker Germany Source: OECD (2009) Regions Matter: Economic Recovery, Innovation and Sustainable Growth Economic Growth Real GDP per capita growth

Other findings Disparities are not simply a function of development phase, both convergence Higher Productivity and divergence appear at all -50% levels 0% of 50% GDP 100% 150% -50% 0% 50% 100% Higher GDP per capita WARSAW BUDAPEST PARIS PRAGUE. MEXICO CITY NEW YORK HOUSTON AUCKLAND VALENCIA ATHENS BUDAPEST Supporting lagging regions is not just a WASHINGTON social policy as ROME BOSTON ZURICH MINNEAPOLIS SEATTLE BRUSSELS STOCKHOLM PARIS WARSAW they contribute a large share of national growth MILAN ATHENS ST.LOUIS DALLAS VIENNA GUADALAJARA HELSINKI ATLANTA DETROIT AICHI OECD AVERAGE SAN DIEGO SAN DIEGO BRUSSELS BALTIMORE Urban regions may have higher GPD per capita but many BARCELONA CLEVELAND VANCOUVER OECD AVERAGE MADRID DALLAS DUBLIN ZURICH PHILADELPHIA ISTANBUL rural regions have FRANKFURT higher growth ratesoecd AVERAGE PUEBLA TURIN PORTLAND RANDSTAD-HOLLAND BUSAN COPENHAGEN STUTTGART MELBOURNE BARCELONA STUTTGART PITTSBURGH Infrastructure influences MIAMI growth only when PARIS human capital ST.LOUIS PHOENIX NEW YORK PHOENIX MELBOURNE VIENNA KRAKOW ST.LOUIS HOUSTON and innovation are present: complementarities are at play ANKARA FUKUOKA BIRMINGHAM VALENCIA MANCHESTER TAMPA BAY LILLE BERLIN DEAGU Concentration correlated with higher performance (TL3 predominantly urban regions 2005: comparison with country average) WARSAW BUSAN SAN FRANCISCO WASHINGTON PRAGUE DENVER LOS ANGELES SAN DIEGO HANBURG OSAKA PORTLAND LONDON MILAN TAMPA BAY LILLE VANCOUVER MONTREAL Sources: OECD (2009) Regions LEEDS Matter, and OECD (2009) How Regions Grow: Trends and Analysis. NAPLES (Higher Employment ) MINNEAPOLIS BARCELONA BUDAPEST KRAKOW TURIN SYDNEY TAMPA BAY PHOENIX AICHI LONDON LEEDS ATHENS MONTREAL ANKARA COPENHAGEN LOS ANGELES FUKUOKA MONTERREY OSAKA PUEBLA RHINE-RUHR NAPLES -30.0% -20.0% -10.0% 0.0% 10.0% 20.0%

Other findings Disparities are not simply a function of development 6% phase, both convergence Higher Productivity and divergence appear at all -50% levels 0% of 50% GDP 100% 150% -50% 0% 50% 100% Higher GDP per capita WARSAW BUDAPEST PARIS PRAGUE. MEXICO CITY NEW YORK HOUSTON AUCKLAND VALENCIA 2% ATHENS BUDAPEST Supporting lagging regions is not just a WASHINGTON social policy as ROME BOSTON ZURICH MINNEAPOLIS SEATTLE BRUSSELS STOCKHOLM PARIS WARSAW they contribute a large share of national growth MILAN ATHENS ST.LOUIS DALLAS VIENNA GUADALAJARA HELSINKI ATLANTA DETROIT AICHI OECD AVERAGE SAN DIEGO SAN -2% DIEGO BRUSSELS BALTIMORE Urban regions may have higher GPD per capita but many BARCELONA CLEVELAND VANCOUVER MADRID DALLAS DUBLIN ZURICH PHILADELPHIA ISTANBUL rural regions have FRANKFURT higher growth ratesoecd AVERAGE OECD AVERAGE TURIN PORTLAND RANDSTAD-HOLLAND BUSAN COPENHAGEN STUTTGART MELBOURNE -6% BARCELONA STUTTGART PITTSBURGH Infrastructure influences MIAMI growth only when PARIS human capital ST.LOUIS PHOENIX NEW YORK PHOENIX MELBOURNE VIENNA KRAKOW ST.LOUIS HOUSTON and innovation are present: complementarities are at play ANKARA FUKUOKA BIRMINGHAM VALENCIA MANCHESTER TAMPA BAY LILLE BERLIN DEAGU but recent Growth has often been below national averages Concentration correlated with higher performance (TL3 predominantly urban regions 2005 difference w. National Growth) 4% 0% PUEBLA -4% WARSAW BUSAN SAN FRANCISCO WASHINGTON PRAGUE DENVER LOS ANGELES SAN DIEGO HANBURG OSAKA PORTLAND LONDON London Prague Leeds Manchester Birmingham Naples Stockholm Rome Milan Lyon Warsow Busan Turin Munich Dublin (TL3 predominantly urban regions 2005) MILAN TAMPA BAY LILLE VANCOUVER MONTREAL Sources: OECD (2009) Regions LEEDS Matter, and OECD (2009) How RHINE-RUHR Regions Grow: Trends and Analysis. NAPLES Stuttgart Helsinki Higher Employment MINNEAPOLIS BARCELONA BUDAPEST KRAKOW TURIN SYDNEY TAMPA BAY PHOENIX AICHI LONDON LEEDS ATHENS MONTREAL ANKARA COPENHAGEN LOS ANGELES Tokyo Fukuoka Lisbon Valencia Madrid Copenhagen Paris Aichi Frankfurt Lille Brussels Seoul Oslo Ankara Hamburg Randstad-Holland FUKUOKA MONTERREY OSAKA PUEBLA NAPLES -30.0%-20.0%-10.0% 0.0% 10.0% 20.0% Osaka Vienna Istanbul Rhine-Ruhr Barcelona Berlin Athens Izmir Krakow Daegu Budapest

Strong regional disparity in R&D and patents R&D as a share of GDP Share of patents in top 10% of regions Source: OECD (2009) OECD Regions at a Glance 2009.

R&D, patent variables are associated with growth NOT for lagging regions Average values per group, relative to national averages lagging growing lagging underperforming quasi lagging growing quasi lagging underperforming leading growing leading underperforming population density 102 98 178 156 612 471 GDP density (PPP yr 2000) 1.9 1.1 4.3 3.2 28.3 17.7 productivity (PPP yr 2000) 31476 29380 54098 50141 72210 56819 employment rate 58% 57% 69% 66% 68% 64% unemployment rate 9.69 7.07 6.35 8.30 5.86 7.30 youth unemployment rate 24.14 25.49 16.80 21.45 14.84 19.50 patent applications 33 31 271 214 985 514 patent intensity 13.63 11.76 67.14 65.87 124.44 72.52 primary attainment rate over LF 45.20 46.25 28.54 24.36 27.13 30.91 tertiary attainment rate over LF 12.90 13.06 10.76 13.21 9.73 11.21 infrastucture 0.24 0.15 0.29 0.20 0.19 0.20 BERD % GDP 34% 42% 95% 89% 127% 104% GERD % GDP 25% 21% 23% 13% 40% 17% HED % GDP 41% 39% 36% 36% 43% 33% distance to mtks 4.56 4.54 4.58 4.54 4.63 4.58 accesibility to mtks 2.39 2.08 1.59 2.09 2.31 2.81 # regions in each category 37 15 61 103 54 55 Notes: Lagging= initial GDP per capita <75% of national average, quasi-lagging =75-99% of national average, leading above the national average, growing =GDP per capita growth above the national average rate, underperforming=growth rate below the national average. Data from 1995-2005. Source: OECD Regional database

Lessons from empirical analyses Disparities are not simply a function of development phase, both convergence and divergence appear at all levels of GDP Supporting lagging regions is not just a social policy as they contribute a large share of national growth Infrastructure influences growth only when human capital and innovation are present: complementarities are at play Opportunities for growth exist in various types of regions Policy interventions should be informed by sound understanding of regional sources and barriers for growth R&D policies are long-term policies Sources: OECD (2009) Regions Matter, and OECD (2009) How Regions Grow: Trends and Analysis.

Regional innovation policies Looking for the best policy model??

Three arguments for more effective innovation policies in regions: 1. Variety in innovation policy models 2. Openness (content, space) of policies 3. Policy learning and experimentation

Diverse regions, diverse policy responses S&T driven innovation /application, adaptation of knowledge Specialisation of productive fabric Potential niches for smart specialisation Innovation driven by large incumbents/new firms Density of local linkages, regional cohesion, social capital Orientation and strength of global linkages Specific RIS bottlenecks: human capital, finance, etc. Institutional competences of the region in innovation Formal powers versus effective powers and budgetary means Intensity and quality of public commitment to innovation Development choices, strategic priorities, future visions

Diverse regions, diverse policy responses Regional innovation policy portfolios reflect diversity of regions along three dimensions: 1. Institutional power of the region in country context 2. Economic specialization, innovation profile 3. Strategic development choices Tendency to overlook one or two dimensions!

Identifying Policy Models The policy question: how to prioritise between various possible regional policy objectives? An answer: identifying typical policy models - and associated policy instruments portfolios (traditional, emerging, controversial) away from the supply-matching-demand model, balance between knowledge creation-absorptiondiffusion : Entrepreneurial model Node in global hub model Absorptive capacity model Innovation ecosystem model S&T co-generation model

Towards borderless innovation policies for regions 1. The need for borderless content of innovation policies Hidden forms of innovation, beyond R&D-driven innovation, should be stimulated through mixes of instruments from various policy areas: education, S&T, environment, infrastructure, etc. 2. The need for borderless territory for innovation policies Innovation does not stop at administrative borders: cross-border collaborations in policies are called for to target functional areas RIS are not small NIS : complementarities need to be ensured between policies and instruments at various levels

Policies versus policy mix RIS Characteristics Governance Broad Policy Objectives Other policy instrument instrument R&D policy R&D policy R&D policy instrument instrument R&D policy Other instrument instrument R&D policy policy instrument instrument R&D policy instrument R&D policy instrument R&D policy R&D instrument policy instrument Other policy Other policy instrument Other policy instrument Other policy instrument Policy impacts Source: www.policymix.eu

Seeking policy complementarities 2High impact 1Medium impact Land Use Zoning Transportation Natural Resources Building 0Neglible impact Renewable Energy Waste and Water Climate change policy packages Source: OECD (2009), Cities and climate change Working Paper

Horizontal coordination at regional level: example of agencies Old Paradigm New Paradigm Place of agency Outside of the system Actor in the system Role Top-down resource provider Facilitator, node in the system Rationale for intervention Market failures Systems failures, learning failures Mission Redistributing funds Identifying and reinforcing strengths in the system: a change agent Instruments Isolated Policy mix Accountability and control mechanisms Administrative and financial Strategic, goal-oriented, additionality Autonomy Restricted to execution Expanded to strategic decisions Source: OECD (2009) Governance of Regional Innovation Policy: Variety, Role and Impact of Regional Agencies Addressing Innovation (RIAs), unpublished.

Given different country contexts and shared responsibilities Source: Technopolis et al. (2006) Strategic Evaluation on Innovation and the knowledge based economy in relation to the Structural and Cohesion Funds, for the programming period 2007-2013: Synthesis Report. A report to the European Commission, Directorate General Regional Policy, Evaluation and additionality, 23 October 2006.

Evaluation still highly under-developed, but key to getting the strategies right Traditional performance indicator benchmarking Regional Innovation Scoreboard type indicators Need to develop metrics for broad innovation Lack of policy indicators (intensity, direction) Evaluations of individual programmes necessary but the evaluation of the policy mix is rarely performed Evaluations of the actors promoting innovation Innovation agencies, intermediaries and others Need for more Strategic policy intelligence and improved capacities (in-house, outside)

Policies for regional innovation systems. From stocks to flows as main focus of policy (of knowledge, human resources, finance, ). From supply-driven to user and society-driven innovation. From raising resources to promoting change and resilience: fostering learning capacity of agents in system. From best practice to system-specific policies: Variety. From standard policy-making towards policy intelligence and room for policy experimentation. Fromregions to «functional regions»: cross-border policies. From one problem-one response to policy synergies: search fo effectiveness of policy mixes (multi-level, multi-domain) VERTICAL and HORIZONTAL COORDINATION CHALLENGES