Clusters and Innovation Policy Dr Alessandro Rosiello Innogen - PowerPoint PPT Presentation

Clusters and Innovation Policy Dr Alessandro Rosiello Innogen Institute – University of Edinburgh Bucharest 30/10/2012

Economic Growth • Neo-classical Economy (Solow 1950-70) – Capital-driven growth; trade- off between scale and efficiency; Chandler’s visible-hand • Neo-classical Economy (Romer 1980-90) – Knowledge-driven; spill-over effects • Entrepreneurial Capitalism (1990 – present) – New sources of economic growth – New firm entry: radical innovation , technological diffusion , competitive advantage based on knowledge creation, exchange and recombination – Flatter managerial structures “Entrepreneurs are agents of change and growth in a market economy and they can act to accelerate the generation, dissemination and application of innovative ideas… Entrepreneurs not only seek out and identify potentially profitable economic opportunities but are also willing to take risks to see if their hunches are right “ Audretsch DB Keilbach M (OECD1998) - Entrepreneurship Capital and Economic Growth

Evidence studies • Rodrik and Hausmann (2003) – First-mover advantages associated with “ entrepreneurial departures ” – Growth requires smart specialisation • Evolutionary Economics – Avnimelech and Teubal (2006): ICT cluster in Israel (  + GDP: 4%) – Bresnahan and Gambardella (2004): 7 worldwide cases of ICT clusters – Cooke, Feldman, Rosiello and Niosi: several case studies of Biocluster emergence worldwide – Saviotti (2008-12), Porter et al (2012), Boschma & Martin (2010), OECD (2010): clusters in various industries/countries

OECD (2012) new sources of growth… • IP, brains and multi-purpose technologies >> productivity + structural change • Created, accumulated and stored in specific locations > Critical Mass • Role of techno-scientific institutions • Specialisation but also Variety • Tacit/non-codifiable knowledge > hard to transfer > regional quasi-monopolies • Incremental dynamics

STI policy shaped by regional agglomeration of industries and technologies… • Regional concentration of new sources of growth • Role of entrepreneurship/SMEs • Extended benefits of technological innovation beyond boundaries of knowledge-hubs and research-intensive regions • Triple-helix • Competitive pressures: increased as a result of globalisation

Clusters: growth drivers OECD (2009) Clusters, Innovation and Entrepreneurship EU COM (2007-2010) Innovation Clusters in Europe • up to 40% of jobs in clustered areas (especially in innovative sectors) • Majority of newly created jobs in innovative start-ups • Statistically significant relationship between clustering on innovative firms and prosperity (EU 2007-10) • Innovative clusters need to be understood!!

Understanding clusters… • Porter: agglomeration of firms/institutions in a particular field, performing related activities > externalities  + productivity,  + innovation,  + firm formation • Cluster life cycle • In a particular field?.... • Sources of knowledge may reside outside the region • Market not prevalently local? Source: Innovation Clusters in Europe, DG Enterprise and Industry Report 2010

Cluster life cycle Examples: • ICT cluster Israel • Background conditions • Biotech Clusters – early-stage and indispensable conditions • Shipbuilding in – whether countries have or have not a chance of Scotland eventually developing an entrepreneurial and/or innovation system • Third-Italy • Triggering and emergence – A (non-critical) mass of SMEs, brains or key assets – Installation of an anchor institutions/firm – An historical event • Emergence – Incremental dynamics and critical mass – R&D capacity, technical/managerial skills, SMEs etc – Networks and collaborations (within & outwith) • Maturity…Decline? – Saturated markets – Technological dead-ends

Cluster type… OECD 2011 – regional knowledge specialisation Knowledge hubs Industrial production zones Non-S&T-driven regions Source: Ajmone Marsan G and Maguire K (2011), Regions and Innovation Policy, OECD publishing

Cluster policy rationale: market or systemic failure? or neither of them? • Business R&D expenditure • Spillovers • Financial gaps • Local/global networks • Inappropriate institutional structure • Lack of critical mass • Excessive cognitive distance • Dynamic coordination failures “organised efforts to increase growth and competitiveness of clusters within a region, involving cluster firms, government, and other research community” PRO-INNO Europe 2007, paper 5

Linking Clusters Globally • Local buzz within Global networks – Multinationals with similar/complementary activities in various countries - providing differentiated products to national/regional markets; – Multinationals with differentiated subsidiaries worldwide – Companies with geographically dispersed specialisations - whether or not dictated by local market specialisation; – globally-connected companies, with links to various centres of excellence Sources of competitive advantage “indigenous” not “endogenous” • Value of global linkages!! • Knowledge generators and users plus public government actors must work together > holistic strategy regional innovation!! “Knowledge producers and exploiters also participate in their external networks, and the value to them of regional co-operation is in providing a means to secure a unique knowledge advantage that is not as easily secured elsewhere” OECD (2011) Strengthening Global-Local Connectivity in Regional Innovation Strategies

Linking clusters globally OECD 2011: 4 strategies • Connecting globally: Building a global pipeline: finding a point of connection from the region to key global actors; • Cluster-building: Improving local networking to connect more local actors into the growing regional network; • Sustaining momentum : Building up new regional hinges with connections to regional firms – building critical mass; and • Deepening pipelines : extending hinge connectivity and networks around a hub.

Performance measures • SWOT analysis? • What is the impact on local businesses? – Decisional choices – Network advantages – Are they more competitive, innovative, productive? • Where is the cluster at? Where is it going? • What is the impact on the regional economy? • Impact of policy measures – Additionality: quantitative/behavioural

SMART Specialisation • Too much specialisation: locked-in dead-ends! • Too much diversity: fragmentation and/or lack of critical mass! • Knowledge/asset variety : key driver for cluster emergence and growth • Diffusion of multi-purpose technologies • Targeting areas of strength…without picking winners !

SMSP & Regional Growth • Emerging clusters drivers for economic growth • Cohesion policies: entrepreneurship & innovation have the potential to – Revitalise declining regions – Uplifting lagging-behind regions • Drop barriers to – Trans-regional collaboration – Access to innovation markets • In line with Grand Challenges & EU Strategic Priorities

Problems with SMSP • A realistic perspective for lagging behind regions? – Entrepreneurial discovery? – Dynamic coordination failures: how? • Uncertainty • Information asymmetries • (Lack of) absorptive capacity • Multi-level governance Source: Innovation Clusters in Europe, DG Enterprise and Industry Report 2010

SMSP - Policy mix • Structural change • Socially organised learning • Balanced growth RATIONALE • Exploiting tech diffusion/convergence • Access to (large) markets Approach • Picking winners X • Selecting Sectors X • Geography/Development? SMART Industrial • Entrepreneurial departures Policy • Targeting functional areas • Horizontal Vs. Vertical • Evidence-based analysis • Policy Mix • Multi-level governance • Effective coordination • Pro-active strategy