Territorial Industrial Development Policies and Innovation

Abstract

Industrial policies are currently the focus of resurgent interest, in particular in the context of seeking to stimulate innovation. This interest has developed alongside a gradual shift in industrial policy-making capabilities to regional and local governments, such that the corresponding policies require analysis on multiple geographical scales. This paper introduces a special issue on territorial industrial development policies that are directed towards stimulating innovation. The issue has its roots in the 11th annual conference of the European Network of Industrial Policy (EUNIP), an academic network with specific interests in the analysis of industrial development and public policies.

The origins of this special issue lie in the 11th annual conference of the European Network on Industrial Policy (EUNIP), which was held in San Sebastian, Spain, in September of 2008. EUNIP is a multinational network of researchers in economics and management, who have specific research interests in the analysis of industrial development and public policies. Established in the early 1990s, it has identified and explored a strongly policy-oriented research agenda, incorporating themes including: the comparative analysis of industrial development; regulation and competition; economic cohesion; development of localities' competitiveness; clusters; innovation and industrial and regional policy evaluation.1 EUNIP as a network has developed around the view that policies, variously interweaved with private strategies, are necessary for a good combination of industrial development and social welfare, even if they have to be tempered with a cautious understanding of the limits of public agency. This view is enriched by the perception that economic activities are embedded in a complex system of relations between local and global forces, developing across a multiplicity of socio-cultural and institutional contexts. This explains the disciplinary openness of the network around the core concern for industrial development and public policies.

The annual EUNIP international conferences are catalysing events for the network, providing an opportunity to bring the discussion to an open forum, to exchange and debate opinions and to engage with policy-makers and practitioners. Recent conferences have been held in the wake of a resurgent interest in industrial policies within European Union central institutions and many national governments, in particular in the context of seeking to stimulate innovation, which is seen as a fundamental pillar of competitiveness and central to the Lisbon strategy. This interest has developed alongside a gradual shift in industrial policy-making capabilities to regional and local governments in many places such that the corresponding policies require analysis on multiple geographical scales. Researchers comprising the EUNIP network are responding to these analytical challenges, as reflected in the papers presented and debated at recent conferences. There has been a strong focus both on innovation policies and on policy analyses that extend beyond—both upwards and downwards—the traditional focus at the national level. This has been combined with a particular emphasis on the evaluation of these policies.

The 2008 conference was hosted by the Basque Institute of Competitiveness and ESTE (Faculty of Economics and Business Administration, University of Deusto) with the broad sub-theme of “competitiveness, territory and industrial policy”. This theme built explicitly on analysis at previous conferences of the policy challenges of ensuring competitiveness at different territorial scales. It also reflected the particular interests of the host institutions in analysing industrial policy issues in a regional setting, in a part of the world where there is strong policy autonomy at regional level. More generally, the 100-odd paper and keynote contributions to the conference articulated the traditional EUNIP agenda, where three fundamental types of analysis may be identified:

1. The consideration and assessment of varieties of industries, localities and regions to be targeted for policy, in a global perspective of social, market and technological tendencies and strategies.

2. The understanding of various lines and forms of public action on industrial development, following sectoral, innovation, competition, territorial and social policies.

3. The explicit definition of institutional features, design principles, implementation processes and evaluation methods of policies.

The contributions selected and developed for this special issue reflect different aspects of those types, as applied to a range of territories and policies.2 The first three papers are related more directly to an analysis of types (1) and (2); they illustrate and discuss different directions of regional industrial development policy, building on regional experiences in different European countries. The last four papers present other regional experiences, from Europe and elsewhere, but from a perspective more directly in line with an analysis of type (3); they focus in particular on the design principles and evaluation of policies. Linking all papers, and reflecting the overall concern highlighted above, is a fundamental focus on public policies directed towards stimulating innovation.

The first contribution, by Knut Koschatsky and Thomas Stahlecker, tackles head on the recent shift of significant responsibilities for innovation policy to the regional level, highlighting some of the coordination issues that this raises. Specifically, they discuss the trend in regional policy towards a focus on innovation, identifying a merger between innovation and cohesion policy in the 7th Framework Programme of the European Commission. Their analysis focuses on the challenges that this new policy mix poses for regional policy-makers, through a case analysis of two contrasting German regions. Bavaria (as a competitiveness region) and Saxony (as a convergence region) are the chosen cases, and the paper makes a detailed analysis of: the policy strategies each has developed for the implementation of EU structural funds; the coordination of policies with different levels and the evidence of successes in policy learning. From this comparative analysis, the authors conclude that both opportunities and risks arise for regional policy-makers from the merger of cohesion and innovation policy. In particular, they highlight the need for profound assistance for policy-makers of the convergence regions, especially given the high share of cohesion policy funds that is allocated to those regions, many of whom do not have much experience in innovation policy.

The second paper in the issue is by Luciana Lazzeretti, Francesco Capone and Tommaso Cinti. Maintaining the regional innovation theme, they provide an analysis of the quite new concept of “related variety” and in particular its relationship with policies that aim to establish a “regional development platform” (RDP) that is based on cross-fertilization across industrial sectors around a set of common technologies and competences. As there are very few associated empirical analyses, an aim of the paper is to provide some reflections on the application of these concepts in a specific case. The chosen case is that of a platform built around the food and art sectors in the region of Tuscany in Italy. The analysis focuses on two sets of processes within that system. First a series of bottom-up initiatives stimulated from a rural area of the region, and second a top-down driven process in response to a specific policy initiative of the regional government. The paper concludes by summarizing the positive signals of the case analysis for the establishment of a platform that is rooted in the art–food axis and integrates competences and technologies from other sectors (e.g. design). More generally, the paper concludes that the RDP should be seen not only as a tool for political planning, but also as a “public space”; an open place where experiences are exchanged and dialogue built around trajectories for regional development.

The next paper, by Miren Larrea, James Wilson and Mari Jose Aranguren, also explores the interface between top-down and bottom-up policy processes, this time focused on networks for innovation in the Basque Country region of Spain. The paper starts by presenting three related concepts argued to be important in understanding the challenges facing regions in stimulating processes of innovation: systems of innovation, the governance of territorial systems and the role of local development agencies in these dynamics. From this basis the case of a local, bottom-up network designed to support innovation is analysed using a 10-step “learning from success” inquiry process. The lessons identified are then applied in a comparative reflection on the design of a recently launched, top-down regional initiative that shares the same broad goals. The authors argue that it is important to “learn from the local” in trying to understand complementarities and possible overlaps in these two processes. More generally, their conclusion is that regional policy-makers need to design networking structures that coherently distribute both upwards and downwards knowledge flows within the regional innovation system.

The fourth paper, by Marco Bellandi and Annalisa Caloffi, continues the focus with networks for innovation, but marks the first of a series of papers with a more explicit emphasis on the evaluation of innovation policies. The authors argue that policy evaluation of system-based policies that are oriented towards supporting network relationships require a modelling of the resulting network relationships. Moreover, they suggest that evaluation in this context should be a component of the system itself, rather than an ex-post tool to demonstrate results. While it is not possible to establish a theoretical optimum for the relational architecture that a policy should seek to develop, the literature points to a number of hints in terms of the different competences of actors, the balance between weak/strong ties and between temporary/permanent network relationships and the role of bridging organizations in the relational space. The authors apply these ideas to an empirical analysis of policy-supported innovative projects implemented by networks of actors in the Italian region of Tuscany. They find that there are important differences in the relationships between the world of research and the world of production across the different sub-sectors and local production systems of the region, showing different mixes of density and “missing links” which should be targeted by system-based policies.

The next paper, by Elisa Barbieri, Marco di Tommaso and Manli Huang, also pursues the evaluation of innovation policies. It departs from the European focus to analyse policy in the Guangdong province of southern China, a context in which there is little previous research. In Guangdong, explicit policies to establish innovation platforms within the context of towns that are specialized in specific industrial activities have been employed since 2000. The authors seek to analyse the impacts that these policies have had on the strategic behaviour towards innovation of the leading firms in the specialized towns. Following a discussion of the policy context, in which the active role of the local governments towards innovation over recent years is established, they conduct a statistical analysis of behavioural impacts based on a sample of the leading firms in 95 specialized towns. They find that the behavioural response of firms to the establishment of innovation platforms is generally low, and that when it is positive it appears to be related to the ownership structure (role of government in ownership) and the prior engagement of the entrepreneur in government activities. Thus, there is an apparent link between policy impact and degree of government control exercised on the firm. The strength of the policy itself, however, does not appear to determine the behaviour of firms. Acknowledging the preliminary nature of the research, the authors conclude maintaining that there is a strong rationale for the development of robust policy evaluation processes that until now have not been in place in Chinese regions.

The sixth paper is a contribution by Nola Hewitt-Dundas and Stephen Roper. In contrast to the previous two papers, they follow a more traditional path for evaluating public policies towards innovation. Specifically, they test for the additionality of public support programmes, using evidence from Ireland and Northern Ireland. However, they articulate originally the analysis of output additionality, distinguishing between “extensive”, “improved product” and “new product” additionality. They estimate Probit and Tobit models incorporating proxy measures of such types of additionality, to test the effect of public support for R&D and innovation on firm's engagement in product innovation, sales of new products and sales of new and improved products. Positive average treatment effects are found for all cases (and are significant in most), both for all firms and for only indigenous firms. This is an important result given the widespread use of such policies and confirms their likely impacts. Other interesting results from the analysis emerge with regard to the importance of external knowledge sources for innovation. In-house R&D and supply-chain collaboration are more important than non-supply-chain collaboration, for example. Results also depend on organizational context, skills base and capital investment of the firm. In terms of policy implications, the results are clearly in favour of the continued use of policies that explicitly support firm-level R&D and innovation. The results also emphasize the importance of spanning boundaries, and supporting collaboration, particularly within supply chains.

The final paper in this special issue, by Elvira Uyarra and Kieron Flanagan, explores the design public procurement, an increasingly influential demand-side tool for innovation policy among European policy-makers. The authors highlight a series of limitations in current debates around the use of procurement to stimulate innovation. In particular, they point to definitional issues, an over-reliance on a narrow set of examples and an over-simplification in analysis of the varied routes through which procurement might have innovation impacts. As a response, the paper proposes a framework through which to better understand the dynamics between procurer and supplier in terms of a variety of different demand contexts. Their framework also distinguishes the geographical implications of these different typologies of procurement, contributing to questions around appropriate territorial scale of procurement policy. The authors conclude that there are risks in elevating innovation goals above the more established and immediate goals of the procurement. Rather, “innovation friendly” procurement should be encouraged in general. The proposed framework is useful to practitioners in that it illustrates how different combinations of policy goals can be addressed by different types of procurement and procurer. More importantly, it provides a starting point for detailed case studies to test the typologies identified and move towards an integrated framework for understanding the relationship between procurement and innovation.

Notes

See Cowling (1999) for a reflection on the inception and early years of the EUNIP network. In particular, he emphasizes the significance of policy orientation in the work of the network, arguing that as a group of researchers EUNIP was “endeavouring to descend from the ivory tower we have been occupying in order, hopefully, to capture the attention and interest of policy-makers for ideas which may appear sometimes rather divorced from the practical world of politics within which they have to operate”.

The editors of the special issue were chairs of the 2008 conference (Mari Jose Aranguren and James Wilson) and of the 2007 conference hosted in Prato (Tuscany, Italy) by the Polo Città di Prato of the University of Florence (Marco Bellandi).