Innovation policies and regional development: the European challenge Luc Soete University of Maastricht MERIT Globelics Academy lecture, Lisbon, June 1 st, 2004,

Outline An EU story: EU is a union of nation states has lots of implications also in relation to S&T Some regional economics: intrinsic limits of social cohesion policies in a Europe of nation states The European Research Area and its impact on regional development and social cohesion Case for regional Knowledge Anchorage

1. Some macro-economics “National” competitiveness policies have in a monetary union potential beggar-thy-neighbour implications: Impact of national “wage settling” policies on (un)employment in other member countries Competition between member countries in negative rather than positive integration measures Danger of a European “race to the bottom” with respect to social and welfare policies The European Research Area as a “race to the top”: Up to now a top down approach: European targets translated in national targets/benchmarks Need for bottom up approach: regional diversity as factor for knowledge activation policies

The EU and social cohesion Europe unique laboratory of regional development policies, but social cohesion aims becoming questioned: Effectiveness: national growth convergence within the EU, but regional divergence (national failure in first instance) Physical borders of European solidarity being questioned with enlargement (strong political reasons for national regional policies) Intrinsic limits of regional policy: peripheral regions; success implies discontinuation; hence vulnerability of created European goodwill

2. Some regional economics Diversity of regional development is a reflection of mixture of factors: Geographical ones: peripheral location Physical endowments: agriculture, mining, logistics Agglomeration effects: snowball size effect; population density closely linked to knowledge activities New endowments: sustainability (pollution, congestion, urban development); ageing (health and care, mobility, housing) Positive cluster effects vs negative cluster effects

The regional dimension of the ERA Social cohesion implications of ERA under- researched: Likely internal EU migration effects of highly skilled Regional/local implications of Mattheus effects of research excellence Local knowledge cluster effects could lead to accentuation of regional (and national) growth diversity Quid when EU nations (including accession countries) observe strong brain drain trends?

3. Some comments on NSI Complex subject with many actors involved (Lundvall, Fagerberg, and all those not here Nelson, Freeman, Edquist…) Need for a systemic approach to the many interactions between science and socio-economic development Some borders do matter: role for national versus regional innovation systems Such systems evolve over long periods, changes are often incremental: National systems under international pressures Regional systems in search of dynamism Role of universities (Mowery)

Public-Private Knowledge Links: An Increasing Mismatch? “National” research policies: improving quality, strengthening research capacities, but little specialisation… Dutch knowledge disease: phenomenon of growing duality emerging between private and public research capacity, typical for small to medium sized countries with large multinationals Private research strongly internationalized Public research: national research “autarchy” policy Region as natural environment for ERA related science and development policy

Different regional policy trajectories “Crowding in” strategy of existing private R&D. To build stronger linkages between private R&D activities and public research institutes Only way to achieve ERA without further exacerbate European research paradox Might maintain private R&D expenditures of existing European MNCs Spinn-offs of universities and polytechnics: support technostarters Cooperation with local authorities, regional innovation platforms Role of large firms as having “the clout to make things work”

Role of universities Not just universities but also polytechnics: –Different in various EU countries –Uniformisation towards university level not always positive (UK experience) Focus on both strategies, but with totally different angles: –Technology angle in case of “crowding in” –Marketing angle in case of “spin-offs” and start-ups Need for a truly joint effort (example of academic hospitals; coaching, technopartners, etc.)

4. Case for Regional Knowledge Anchorage From regional system of innovation perspective 4 elements appear particularly relevant for regional growth and development: –Quality of human capital formation –Openness of research capacity –Strength of innovative performance –Absorptive regional capacity

Regional human capital formation Focus on local/regional higher education institutions: universities, polytechnics, professional training schools, including life long learning Emphasis on quality, reduction in failure rates and drop outs Improving attractiveness to “foreign” students, i.e. from other regions Recognition of importance of exchange programmes as benchmark learning tools

Openness of research capacity Strengthening of local research presence in regional economic, industrial and political tissue (seminars, (in)formal networks, local media, cooperation) Joint public-private regional initiatives Focused excellence where openness to “foreign” knowledge, researchers, institutes collaboration is dominant trend Strengthening research infrastructure common regional aim

Local innovative performance Recognition of importance of local scientific spin- off (scientific entrepreneurs) Strengthening of links between public research institutes/researchers/teachers and local SMEs (local knowledge vouchers) Embedment of large, dominant MNC in public research infrastructure (anchorage, increasing costs of footlooseness) Regional/local PR of innovative identity

Absorptive regional capacity Focus on regional bèta users Role of regional public authorities in terms of procurement Regional presence “abroad” (fairs, etc.) Focus on regional diffusion and knowledge distribution policies Cooperation with other “foreign” regions

INNOVAT. PERFORMANCE ABSORTION CAPACITY HUMAN CAPITAL RESEARCH CAPACITY

TECH. & INNOVAT. PERFORMANCE ABSORTION CAPACITY SOCIAL & HUMAN CAPITAL RESEARCH CAPACITY

SOCIAL & HUMAN CAPITAL TECH. & INNOVAT. PERFORMANCE RESEARCH CAPACITYABSORPTION CAPACITY

5. Interesting experiences Regions of knowledge EU programme –Emphasis on role of local universities and/or public research institutes –Cooperation between highly advanced and social cohesion regions (interactive learning) Cross-national border regions –Border regions and the underutilized growth potential beyond the national border –Use differences between country’s to own regional advantage

Case LEA: differences Belgium- Netherlands-Germany Belgian/Flemish knowledge economy: Dependent on foreign firms Universities underfunded but attractors Strong human and S&E capital Dutch knowledge economy: Dependent on Dutch MNCs which are internationalizing Fragmented university/higher education policy S&E shortages German knowledge economy: Nationally oriented higher education policy Lagging behind: old knowledge economy

Beyond “nationalism” “National competitiveness a dangourous obsession?” to paraphrase Paul Krugman Knowledge economy is an economy without borders: pieces of knowledge acquired, bought, stolen, reshuffled form all over the world. National targets (Barcelona) were ultimately primarily inspired by national statistics and national policy makers New geography and agglomeration effects: regions are the natural environment for local anchorage of knowledge related activities.

In search of European clusters… Significance of regional and/or local research and innovation activities/policies in Europe comparable to the US Limited success on implementation of cross-border cooperation: dominance of nationalism in RTD and innovation policies Diversified or fragmented as one prefers to take a positive or negative view with respect to universities, businesses, local authorities generally involved In search of European regional clusters towards an ERRA… only way to achieve Lisbon.