1. 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

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

3. 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

4. 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
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)

5. 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)

6. 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

7. where to intervene in the regional industrial structure?

8. 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)

9. 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

10. Thank you for your attention!

11. the structure of related industries in Sweden