Regional branching and smart specialization policy Ron Boschma CIRCLE, Lund University Urban and Regional research centre Utrecht (URU) Utrecht University Innovation Strategy for Nordland Bodo, Norway June 10-11, 2014

structure of lecture 1. smart specialization and regional branching 2. regional branching and policy intervention? 3. policy actions

1. smart specialization and regional branching variety as key driver of regional growth: the more, the better however, variety per se does not enhance knowledge spillovers need for technological relatedness between firms and sectors in a region to enable knowledge spillovers what matters for regional growth: a wide range of sectors in a region that are technologically related the higher the number of technologically related industries in a region, the more learning opportunities are locally available, and the more knowledge spillovers will take place the higher this related variety in a region, the higher regional growth: empirical studies in the Netherlands, Italy, Finland, Britain, Spain, Germany and the US have confirmed this

1. smart specialization and regional branching how do regions diversify and develop new growth paths? technological relatedness also major input for regions to diversify into new industries and develop new growth paths regional branching: new industries branch out of technologically related local industries from which existing capabilities are exploited and recombined in new activities Neffke, Henning and Boschma (2011) Economic Geography: industry evolution of 70 Swedish regions 1969-2002 a new industry is more likely to enter a region when it is technologically related to other industries in the region (2,766 new industries in a region) existing industries tend to disappear from a region when these are not technologically related to other industries in the region (3,464 events of an industry exiting a region)

2. regional branching and policy intervention? no ‘one-size-fits-all’ policy: need for bottom-up, tailor-made policy strategies regional policy based on regional branching takes the existing industrial structure at the regional level as a starting point entrepreneurial discovery process: smart specialization is: “… largely about the policy process to select and prioritise fields or areas where a cluster of activities should be developed, and to let entrepreneurs discover the right domains of future specialization” (Foray et al. 2011, p. 7) bottom-up policy: “entrepreneurs ... are in the best position to discover the domains of R&D and innovation in which a region is likely to excel given its existing capabilities and productive assets” (Foray et al. 2011, p. 7)

2. regional branching and policy intervention? but how to identify regional potentials to diversify successfully? entrepreneurial discovery makes a lot of sense, but: (1) anything goes? how about setting priorities? (2) how to avoid that local stakeholders take over? relatedness and connectedness two crucial inputs to assess potentials of regions to diversify

where to intervene in the regional industrial structure?

3. policy actions objective is not to make strong sectors even stronger (not ‘picking-winners’, avoid vested interests), or support weak stand-alone sectors, but to make related sectors interact regional innovation policy should connect related industries to make regions diversify through relatedness entrepreneurship (e.g. focus on experienced entrepreneurs that take relevant knowledge from related industries) labour mobility (e.g. to enhance mobility between skill-related industries, to educate people in related disciplines) collaboration networks (e.g. to support research collaboration between related partners and local/non-local partners)

3. policy actions these mechanisms connecting old and new sectors basically take place at the regional level: reduces the risk of leakage effects to other regions they have the potential to move regions in new growth paths while building on regional assets linkages with other regions are crucial to secure exposure in principle, every industry can be made part of this policy framework, but every industry is different (in terms of knowledge base and supportive institutions) this also applies to every type of region: however, some regions have stronger capabilities and more related variety, and thus more opportunities to diversify into new industries

Thank you for your attention!

the structure of related industries in Sweden