Regional technology policy and factors shaping local innovation networks in small German cities1

1. This paper was presented at the 43rd Congress of the European Regional Science Association (ERSA), in Jyväskylä, Finland in 2003.

Abstract

Local innovation networks are considered to be important to innovation and technological change and to growth prospects of regions and cities in Germany. When analysing the local (or regional) innovation system, one should consequently not only investigate horizontal and vertical relations among firms but also the contacts with universities and other research institutions. Furthermore, the role of government agencies and interest groups that provide financial support as well as commercial and technical information should also be taken into account. However, the review of relevant theoretical and empirical investigations related to the German experience shows that such innovation and R&D cooperation networks appear to be less significant than expected. In general various regional technology policy measures adopted in German states (the provision of research infrastructure, establishment of technology centres, innovative small and medium sized enterprises support programmes, etc.) have been more successful in economically better-off large cities than in the rural areas. Apart from offering a critical review of relevant theoretical and empirical research, this study introduces the present regional technology and R&D promotion policies in German states and examines the local innovation systems, taking Landshut as an example.

Acknowledgements

The authors are thankful to Philip Cooke and two anonymous referees for their helpful comments.

Notes

1. This paper was presented at the 43rd Congress of the European Regional Science Association (ERSA), in Jyväskylä, Finland in 2003.

2. New technology has also become more complicated. This requires “not only higher standards of knowledge, skills, and experience on the side of R&D [experts] but also forces all innovation actors to communicate [more] intensively” (Pleschak & Stummer, 2000, p. 176).

3. For example, “Silicon Valley is a large complex including ICT and biotechnology clusters […]. The Ruhr region is in Germany […] is an economic region with long-established coal, steel and engineering clusters” (Cooke & Memedovic, 2003, p. 3).

4. “Local innovation conditions and […] patterns are determined by the general socio-cultural and economic [environment], the individual actors and their interactions, as well as the knowledge base, including codified and tacit [ones]. Consequently, no regional system [fully] resembles another; instead, each one has [more or less] specific characteristics, and thus follows its own development path” (Zenker, 2000, p. 218).

5. Since the beginning of the 1980s, in order to promote R&D the Bavarian state government has placed strong political emphasis on (a) the selective expansion of universities and research institutes under the consideration of the R&D activities in urgent need and of future importance for the region, (b) the establishment of a large number of technology-transfer centres to transmit the applicable advanced know-how (developed in universities and research institutes) to private firms (operating in areas like micro-electronics, information and telecommunication, software development, media, biochemistry and environmental technology, etc.), and (c) the development of state government programmes to promote the innovation and research activities of SMEs. The item (c) includes, for example, (i) the Bavarian innovation support programme to promote firms' development of new technologies for marketable products, (ii) the Bavarian technology introduction programme to ease the market penetration of newly developed products, (iii) the Bavarian subsidy programme for the promotion of rational energy production, (iv) the Bavarian programme to support the establishment of technology-oriented companies, and (v) the SME business technology advice programme to financially support the procurement of the external consulting services required in the application of new technologies to company-specific processes and products (Bayerisches Staatsministerium für Wirtschaft, Verkehr und Technologie, 1998).

6. The German federal government also directly supports the establishment of regional/local innovation networks. The so-called BioRegio contest initiated in 1996 is an example. “Its major objective was to stimulate firm foundations and the location of foreign biotechnology companies in Germany, to accelerate growth in existing biotechnology enterprises and to ensure the supply of sufficient seed and venture capital to improve the competitive situation of Germany in biotechnology. In a competition procedure three regions with appropriate research potential were selected: Munich, the Rhine-Neckar Triangle (Heidelberg, Ludwigshafen, Mannheim) and the Rhineland (Cologne, Aachen, Düsseldorf, Wuppertal), each [was] subsidised with 50 million DM by the Federal Ministry of Education and Research (BMBF) until 2001” (Koschatzky, 2000, p. 14).

7. “The success or failure of innovation and technology policy measures supporting the network concept is decisively dependent on reaching a broad consensus of all relevant actors in policy, industry and science at an earlier stage. […] It is also important to jointly identify priority areas and fields of action. Concrete policy measures for support should be defined on this basis as well” (Walter, 2000, p. 119). Therefore, “the impact of a particular policy instrument […] depends in large part on the constraints and preconditions of the innovation system itself, [which include, for instance,] the political involvement of government administrations; the level of coodination and cooperation within the policy-making system; accumulation of experience by regional and national governments in formulating technology policy; the innovative orientation of firms and of the industrial structure as a whole; demand for innovative products; and the level of integration between research, education and industry” (Heijs, 2002, p. 191).

8. A variety of empirical studies suggest that large-scale companies are also at an advantage in comparison with SMEs regarding the access to external knowledge (Koschatzky & Zenker, 1999).

9. According to Herden (1992), networking between the different actors is particularly strong in regions that are economically highly developed.

10. Innovation and technological development in a region is path dependent in the sense that a further step in their process is based on knowledge previously acquired or generated in the same region. “On the other hand, previous investments, competence, habits and qualifications are devalued by innovations. The benefits of innovations and the risks of omitted innovations, therefore, always have to be balanced against the costs of successful innovations and the benefits of omitted innovations” (Heidenreich, 2003, p. 502).

11. Cooperation is also problematic: own strategies are revealed, independence is reduced and additional expenditures are necessary for coordination and communication with partners (Pleschak & Stummer, 2000).

12. In particular spatial proximity plays a role in the transfer of implicit, non-codified knowledge (Nauwelaers & Wintjes, 2000). “It is argued that codified knowledge, e.g. embedded in standardised technologies, can be transferred over long distance costs, especially when the knowledge receiver is able to understand and read the code. Spatial proximity between user and producer is not necessary. Tacit knowledge, on the other hand, is only transferable through interpersonal contacts and verbal or non-verbal communication. […] Spatial, social, and cultural proximity is a major precondition for this transmission process” (Koschatzky, 2000, p. 7).

13. Among a number of global factors that have recently led to the emergence of international dimensions of innovation, “[t]he harmonisation of intellectual property legislation, driven by [World Trade Organization] and the agreement on trade-related aspects of intellectual property rights, has been particularly significant. […] To the extent that intellectual property rights regulations are becoming indistinguishable and equally enforceable in all locations, national borders are becoming less important as boundaries to the production and diffusion of knowledge. Under these conditions transnational corporations can develop strong alliances with firms or institutions, or innovation sub-systems (Edquist, 1997) in the various countries. Such alliances provide a bridge between the transnational system and innovation activities that would be contained by state boundaries” (Turpin & Garrett-Jones, 2002, p. 201).

14. Cooke (2001) argues “that early attempts to implant innovation activities in selected geographical spaces, by encouraging decentralization of research laboratories and innovative firms to technopole environments, often produced rather disappointing results in terms of the achievement of stated objectives regarding exploitation of projected ‘synergetic surplus’ for innovation. [Such technopoles can be saved, if] they absorb the lessons of interactive innovation systems, by enhancing social capital, networking and intermediary activity. This has recently begun to happen at Sophia Antipolis with the arrival of University of Nice research departments with active spin-off policies” (p. 38).

15. A study of German manufacturing industry by Becker and Peters (2000) shows that firms use technological information from customers and suppliers as well as other firms, fairs and conferences to introduce new and improved products and process. Academic resources are seen as less important than the above external resources.

16. Bavaria's GVA amounted to 361 billion € in 2001.

17. In 2001 the unemployment rate was 6.7% in Landshut, compared to 6.3% in Bavaria.

18. The surveyed local high-tech SMEs include, for example, Renesas Semiconductor Europe GmbH (semiconductor), ebm-papst Landshut (motor engines), Vishay Elektronik GmbH (electronics), Althen Sensorik und Messtechnik GmbH (sensor and measurement equipment), Ecomal Deutschland GmbH (electronic parts), Heynau Antriebstechnik GmbH (vehicle gear), Krüger & Sohn GmbH (high-quality pipes), Loch Präzisions Bohrtechnik GmbH (drills), UP Umweltanalytische Produkte GmbH (environmental products in areas of plant physiology, meteorology, hydrology), Welwyn Electronics GmbH (hybrid form-work, film technology), Bavaria Kunststoff-Fenster GmbH (high quality windows). These SMEs were recommended by the Regional Chamber of Industry and Trade (IHK für Niederbayern).

19. Fachhochschule Landshut comprises the faculties of electro-technology, engineering, information technology, social studies and business administration.

20. Instructors and students of this polytechnic are often present in local firms to conduct laboratory sessions scheduled in the corresponding teaching and learning programmes. Highly qualified managers and technicians employed in these firms are also involved in the Fachhochschule's education programme as adjunct faculty, and/or invited research and thesis supervisors.