The Entrepreneurial State: The German Entrepreneurial Regions’ Programme as an Attenuator for the Financial Crisis

Abstract

The financial crisis encourages governments to identify innovation programmes that had proven successful in contributing to regional resilience. In this context, the federal programme Innovative, Regional Growth Core (Innovative Regional Growth Core, IRGC) developed under the umbrella of the Entrepreneurial Regions Programme Portfolio (ERP) (Based on a formative evaluation of the BMBF programme “IRGC” in the context of the ERP and 18 clusters in different funding stages (ex post funding stage after 3 years, funded and cluster in the proposal stage) running from 2003 to 2005. See Gebhardt et al. 2005, Endbericht der Evaluation des BMBF—“Innovative Regionale Wachstumskerne” 2003–2005. Report to the BMBF.) of the German Ministry of Education and Research (BMBF) deserves new consideration for its contribution to regional robustness. IRGC was designed as a crisis recovery tool to jump start East German economy after reunification. Since 2001, the programme has continuously generated a moderate number of new firms, spin-offs from universities and enhanced employment as well as private investments in the politically induced clusters, which have also shown a relatively stable development even in the economic downturn of the recent financial crisis. As a new programmatic feature, the BMBF demands a well-grounded market-oriented strategy from the regional consortia aiming at developing innovative and economically successful products from science. The German innovation programme IRGC illustrates the shift in innovation policy from passive funder to active entrepreneur. Through this strategic approach, government plays an important role in inducing, encouraging and organizing knowledge-based economic development. We discuss how these policies can add to the viability and resilience of innovative clusters by encouraging them to build up management competences.

Notes

The BMBF outlines further goals such as to develop more regions with competitive business and science profiles, to drive forward the successful founding of innovative companies, to halt the migration of young experts to West Germany or abroad, and to create attractive development opportunities for talented young scientists. http://www.unternehmen-region.de/en/54.php (accessed 10.12.2011).

SME are still the dominant firm seize in East Germany:

An overwhelming fraction of regional dispersed small and smallest companies with very low equity rates (mainly operating in traditional industries) are opposed by only a few large SMEs, primarily clustered in lighthouse regions such as Berlin, Leipzig or Dresden, with adequate or high equity ratios. http://www.oecd.org/dataoecd/53/61/42202993.pdf (accessed 16.12.2011).

OECD Policy Responses to the Economic Crisis: Investing in Innovation for Long-Term Growth, June 2009.

Insolvenzen, Neugründungen, Löschungen. Creditreform Wirtschaftsforschung. Verband der Vereine Creditreform 2011.

Indicators, such as numbers of patents, ranked publications, number of new firm foundations, university spin offs, employment in R&D (Porter), were enriched with customer value rankings for the new technology, development of market share with the new technology, upstream position in the value chain and position as a strategy technology supplier, number of relevant global linkages, clarity of individual assignments from cluster strategy, instalment of strategic controlling instruments, feasibility of the strategic road map with regard to investment, timelines, resources). Start-up cluster strategies were tested with the PIMS indicator set.

The selection of cluster managers was based on the critical incidents method. This method employs the discussion of specific and significant behavioural facts in individual careers (Flanagan, 1954). It became a crucial element in the selection process of regional consortia or initiatives entering the IRGC cluster competition because it brought a new perspective into innovation policy, which was general management skills and culture of entrepreneurship.

The PIMS database outlines principles for gaining and sustaining competitive advantage. The study was developed by GE and Harvard in order to provide empirical evidence of which strategies are likely to succeed on the bases of interconnected factors such as competition, market and structural data. In this context, the criteria from the study are used to evaluate cluster strategies.

Technology adoption typically occurs in an S-curve, as modelled in diffusion of innovations theory. For example, clusters based on innovation in life sciences have longer technology paths than IT-based clusters due to a long clinical phase. The strategic road map has to be different.

In the analysis, carried out from 2003 to 2005, the sample of 18 initiatives consisted of a networking structure among at least 10 and up to 40 institutions. For the formative evaluation, we categorized the initiatives according to their developmental stages (in bold print): Generation one (entering post funding/funding period 2001–2003): NOA Lausitz; xml city. PINK, Fanimat, INNOCIS, Maritime Safety. Therapeutische Proteine Halle, Verkehrstelematik, Pharma MD; Funded (in progress/2003–2006 and 2004–2007): Soundline Erzgebirge, IKON; Reactive Wet Coating, Bio Response, Alceru HighTech; Proposal Stage (drafting of a sound strategy/2004): Innozell MET, MaliTech, BioOK, Confirmatech; Aluminum Leichtmetall, Pyrosil.

http://www.unternehmen-region.de/en/56.php (accessed 29 May  2009).

(Source: Working party Regional Accounts of the Länder: http://www.vgrdl.de/Arbeitskreis_VGR/home.asp?lang=de-DE) accessed 2009 and Federal Ministry of Transport, Building and Urban Affairs, Jahresbericht der Bundesregierung zum Stand der deutschen Einheit (http://www.bmvbs.de/beauftragter/Zukunft-Ostdeutschland/-1659/Jahresberichte-Deutsche-Einheit.htm) (accessed 2009).

Insolvenzen, Neugründungen, Löschungen. Creditreform Wirtschaftsforschung. Verband der Vereine Creditreform 2011.