Arriving at the Dawn of the New Economy: Is Knowledge-Based Industrial Renewal Possible in a Peripheral Region?

Abstract

In the contemporary knowledge economy, characterized by both globalization and localization of economic activities, the ability of both firms and their respective regions to adapt to changes in their external environment and to retain their competitiveness is closely related to their capacity to innovate and to continually upgrade existing structures, practices and knowledge bases. In this respect, co-location of firms operating in the new knowledge-intensive sectors is typically considered to be beneficial for both the firms themselves and for their respective regional economies. In this study, we considered whether knowledge-based industrial renewal is possible in peripheral regions. The empirical study was designed to identify tendencies towards and potential concentrations of new knowledge-intensive industries in the relatively peripheral region of Pohjois-Savo in Finland. The strength of such tendencies was determined by employing the Herfindahl index and location-quotient methods. The analysis indicates that while the more traditional industries still appear to be dominating the region's economic landscape, the new knowledge-intensive industries have gained at least a foothold in the region, indicating a potential target for local policymakers' further development efforts. Pohjois-Savo can be considered to be a typical Finnish region, characterized by a large central city with a university, a few smaller sub-regional centres and the surrounding large rural periphery. However, earlier literature with the same focus is lacking and regional strategies and entrepreneurial structures differ in different regions; thus, we cannot establish whether these conclusions hold in other regions in Finland or how applicable these results are in an international context.

Acknowledgements

The authors would like to thank Professor Hannu Tervo and anonymous referees for their helpful comments. This study is a part of project no. 127049 financed by the Academy of Finland. Financial support from the Yksityisyrittäjäin Säätiö is also gratefully acknowledged.

Notes

1. Of course, the challenging dilemma that several regions are facing is that “the new economy may be too advanced for a region, while old economy sectors do not seem to offer viable opportunities either” (Hospers 2005, p. 455).

2. For the sake of optimal comparability across countries, the OECD's (1999) definition of knowledge-intensive industries also covers community, social and personal services, which include many services that might not be considered to be knowledge-intensive. These services are not considered in this study.

3. In Finland, science policy is lead by central government. Unless regions do not directly have any say in formulation of science policies, Sotarauta and Kautonen (2007) argue that local aspects have become integrated into national (and international) aspects more intensive and a long-term study reveals co-evolutionary characteristics in Finnish science policy (in three city-regions, Tampere, Jyväskylä and Seinäjoki).

4. The evaluation of the programme (Pelkonen et al., 2010) states that on the basis of positive experiences, the programme has been extended twice (1999 and 2003). However, the success of operations varies between clusters. Pelkonen et al. (2010) argue that the “stage of development and degree of networking of specific clusters have provided different premises for co-operation”. New methods of operation and a creation of co-operation practices have taken time, which in turn has reflected on the ability of reaching results. However, the programme has significantly improved innovation activity in its target regions (Pelkonen et al., 2010)

5. Eight initial regional centres of expertise were Helsinki, Jyväskylä, Kuopio, Lappeenranta, Oulu, Tampere, Turku and Vaasa. In 2007–2013, the National Centre of Expertise Programme (OSKE in Finnish) consists of 21 centres of expertise.

6. The original status of the University of Kuopio was an institute of higher education; in 1972, the organization was given university status. In 2010, the university merged with the University of Joensuu to form the University of Eastern Finland.

7. It is good to keep in mind that some regions are able to construct a more competitive environment compared to others (Saxenian, 1994). Aula and Harmaakorpi (2008) studied the innovation strategies of nine largest Finnish urban regions. They found that Lahti region differs to a great extent from university regions with the absence of a university and the low investments in research and development. Furthermore, they argue that university areas have human capital for research and they create research centres of excellence and promote technology transfer. In Lahti region development will be implemented via practice-based activities and social capital.

8. Firms, their clients, suppliers, competitors, co-operation partners, institutions, public research institutions, technology mediating organizations and educational institutions may be construed as comprising regional system (Tödtling & Trippl, 2005). See also Doloreux and Parto (2005) for the weaknesses and potentials of the RIS as a concept.

9. It is important to bear in mind, however, that firms other than KIBS also belong to these branches.