The Role of Innovation and Industry Policies in Cluster Development Mirjana Dragičević, Full professor Faculty of Economics & Business- Zagreb University of Zagreb

Clusters  Clusters became the “key term” in new development initiatives, strategies and policies in last few years in Europe and in the globalised world….  Clusters are groups of independent companies and associated institutions that are:  Collaborating and competing;  Geographically concentrated in one or several regions, even though the cluster may have global extensions;  Specialised in a particular field, linked by common technologies and skills;  Either traditional or knowledge based;  Clusters can be either instituionalised or non- instituionalised;

Clusters The cluster has a positive influence on:  Innovation and competitiveness;  Skill formation and information;  Growth, development and lon long-term business dynamics.

Development of clusters  Clusters require a new way of thinking on national, regional and local economies:  New role of enterprises;  New role of goverments.  New way of thinking of economic and social changes and processes: a shift from traditional, sequential thinking to comprehensive, long-term thinking;  New way of acting: a shift from selfish and indivvidual to acting based on partnership, trust, collaboration, and cooperative competition.

Development of clusters  There is no “receipt” for cluster development; nor “fixed successful path” that should be strictly followed;  No standard cluster approach exists;  Cluster development does not allow the implementation of “one size fits all” models;  Cluster development should be “tailored” individually.

Cluster approach  Cluster approach is a part of the “family” of different approaches to innovative systems.  Cluster approach became a useful framework for the development and application of new role of government, in creation different forms of indirect support, instead of direct interventionistic policies.

Cluster policy: Industrial & Innovation policies  For cluster policies to be successful: a “new wave” of those that create policies is needed.  They have to combine analytical skills for the deep understanding of innovative dynamics and innovative style of some clusters and the flexibility to decide on their role in cluster development support

Cluster policy: Industrial & Innovation policies  This involves experiment and policies that are based on the continous learning and it includes both: the attempt and the mistake. (EC, 2003:7).  The public sector has a catalytic role;  It has to identify the barriers and the limitations for cluster development;  To strenghten the sinergy between all areas of action policies;  From a policy point of view, knowing what could become a cluster ( with proper policy stimulations ) is frequently more critical than knowing what is cluster.

Cluster policy  No fixed receipt for cluster development policies exists;  CP:  Is not isolated and independent;  It embraces all the policies that affect the development of clusters;  Has to take into the account the synergies and interchanges between policies.

Industrial and Innovation policies: Cluster policy  If industrial and innovation policies contribute to create an environment of co-operation among stakeholders at local, regional and national level, they are cluster development policies.  Countries that do not have officially labeled cluster policies, might still have policies affecting the clusters.

Cluster policy: Industrial & Innovation Policy  A policy on clusters should provide a framework for dialogue and inter-firm co-operation, and co-operation between enterprises, higher education and research institutions, public and non- public organisations.

Goverment influncences on cluster upgrading FACTOR CONDITIONS DEAMAND CONDITIONS RELATED & SUPPORTING INDUSTRIES FIRM STRUCTURE, STRATEGY, RIVALRY Create specialised education and training programe Establish local university research in cluster related technologies Support cluster – specific information gathering and compilation Enhance specialised transportation, communication and other infrastructure Sponsor forums to bring together cluster participante Encourage cluster – specific efforts to attract suppliers and service Establish cluster – oriented free trade zones, industrial or supplier parks Create proinnovation regulatory standards to reduce regulatory uncertainty; Stimulate early adoption and upgrading Sponsor independent testing,certification and rating services Act as sophisticated buver Eliminate barriers to compettition Organise relevant gov. departments around clusters Attract investments around clusters Focus export promotion around clusters

Government's impact on clusters  The government has crucial impact on:  Infrastructure;  Defining the rules of the game;  Resources.

Principles of cluster policies: industrial and innovation policies  Policies should combine common and specific goals;  Clusterisation process although frequently self- evolving has to be governed efficiently;  Bottom-up and top-down approaches have to be balanced;  Clusters are means of business inovations.

Cluster policy: Industrial and Innovation Policies  Policies of cluster development are the means of promoting the economic development and structural changes for the rise of innovative capabilites.  The policies strenghten the postion of public administration as a mediator in the network development among firms in the creation and realisation of the projects.  The mututal trust among all stakeholders is of a crucial importance in cluster development.

The Case of some small, post- transition countries and cluster policy  Competitiv. Ranking ; Innovation ranking :  Estonia  Slovenia 33 9  Lithuania  Croatia 51 - Sources: Comp.r. WEF, 2007; Innovat. r. Pro Inno Europe, 2007.

Cluster development  Estonia: cluster based economic development: innovative clusters: ICT, knowledge-based clusters; Baltic Rim: trans-national innovative programmes;  Country ranks stronger on quality of its global business environment than on clusters. Estonia is focused largely on a cross-sluster based economic strategy.  Lithuania: ranks high among EU-10 new memeber countries on all measures on cluster presence and cluster relevant business environment into the natural emergence of clusters. Sunrise valley cluster: Vilnius and others.  Knowledge based and ICT clusters: Baltic Rim: trans- national innovative programmes.

Cluster development  Slovenia: active cluster programmes since 1989 /Ministry of economy/, but, clusters are too much focused on creating networks of domestic companies rather than reaching out for foreign investors.

Cluster policy: Industrial and innovation policies  Estonia- enterpenurship policy exists; innovation policy as a no-policy policy: high awareness of innovation policy  Slovenia- industrial policy& restructuration of firms exists, measures for innovation improvemnet;  Lithuania- industrial and innovation policies exist and are interconnected..

Cluster policy: Industrial and innovation policies  Estonia: comprehensive and strategic approach, collaboration between strategies and policies that support cluster development.

Cluster policy: Industrial and innovation policies  Slovenia: strategic framework, existing policies, front- runner in cluster policies in new EU memeber countries.

Cluster policy: Industrial and innovation policies  Lithuania- approach in these policies: strategic, comprehensive, cooperative and built up on partnership with domestic and foreign actors.

The Case of Croatia: Cluster policy  Industrial policy is not created; innovation policy under the umbrella of R&D policy; it is not an integrated policy;  Cluster policies does not exist; The emergence of few industrial cluster initiatives;  The huge problem: the lack of mutual trust between stakeholders /trust is the commodity with low supply/.

Cluster policy: Industrial and innovation policy  The lack of insitutional cooperation on clusters:  There are:  significant efforts of Ministry of economy and of Croatian Association of Enterpreneurs;  The National Council on Competitiveness exists;  Some Regional development agencies made some initiatives on clusters,,,,,but …

Cluster policy  Although some institutions know why clusters are important:  There is no:  co-operation, coordination and no synergy between actors;  Nor:  Mutual trust between them.  There is no adequate strategy nor policy/policies, action plans....

Recommendations/ Lessons for Croatia  SWOT analysis of four elements in competitiveness diamond should be created;  The analysis of strenghts (S) should define: what industries, which technologies are the economic driving forces; which of them could effectively benefit from cluster form organisation and how they could be supported.

Recommendations/ Lessons for Croatia  Industrial and innovation policies should:  be created not like traditional, linear, separated ones;  be built enhancing linkages between the private industry and science community;  promote innovation- competitiveness nexus.

Recommnedations/ Lessons for Croatia  Industrial and innovation policies should:  Define institutional instruments for the policies implementation and monitoring of the whole process.  Cluster development asks for the new way of thinking and of acting between all stakeholders.  The government bodies, as the creators of cluster development policies /i.e. integrated industrial and innovation policies/ play a crucial role in fostering cluster development.  Croatia: a huge task is still to be done… but it should be fast….