1. Åge Mariussen senior researcher, Nordland Research Institute
Related varieties and Smart Specialization in Nordland – analysis and proposal for strategy
Åge Mariussen senior researcher, Nordland Research Institute

2. The presentation What is Smart Specialisation?
Do we really need growth inNorway?
The 4H strategy in brief
The solution in principle: entrepreneurial discoveries, related varieties, tripple helix connectivity
Relatedness in Nordland (IO-data)
Conclusions: what is to be done?

3. What is Smart Specialisation?
The S3 platform: a guide in recreating economic growth in Europe
Smart strategies should be driven by analysis of regional competitive advantages
Specialisation - diversification
Our 4H report: a suggestion of how Nordland can solve the current problem of the Norwegian economy

4. What is new with Smart Specialisation?
Point of departure is structural analysis of regional specialisation and relatedness, not any kind of «innovative firm»
Entrepreneurial discoveries of what can be produced at low costs in a region
Regions should be more different, co-specialize and together build European systems of innovation
Smart specialization is about changing policies and systems of innovation: Beware of «pet projects» and vested interests (GAP analysis)

5. Are strategies promoting growth relevant in Norway
Are strategies promoting growth relevant in Norway? Norway has reached a turning point..

6. Norwegian oil production: fold up your table, fasten your seatbelts, our on-board service has ended..

7. How can we recreate growth in Norway (SSB, økonomiske analyser 1/2014, DN 6.6.2014)
development
2013
2014
2015
2016
2017
GDP
0.6
2.2
1.7
2.5
MAINLAND GDP
2.0
3.1
INVESTMENTS IN HOUSING
6.4
-4.8
3.9
5.5
5.8
HOUSING PRISES
0.7
2.9
3.4
5.0
Household net income
3.6
3.2
THE SOLUTION IS CREDIT DRIVEN GROWTH IN HOUSE PRICES,
FEEDING INVESTMENTS IN HOUSING

8. How can we recreate growth in Norway (SSB, økonomiske analyser 1/2014, DN 6.6.2014)
«The housing market will be one of the growth engines in the Norwegian economy when oil investments do not grow anymore» (SSB, , DN)
«Increase in housing prices will boost private consumption, investments in housing, and GDP»,
but at the same time reduce net balance of trade and increase household indebtedness.

9. ..growth in housing prises is not a long term solution…
House of Debt: How They (and You) Caused the Great Recession, and How We Can Prevent It from Happening Again, by Atif Mian and Amir Sufi,
University of Chicago Press, RRP£18/$26, 192 pages

10. .. So what is the sustainable GROWTH alternative?
2013
2014
2015
2016
2017
Housing investments
6.4
-4.8
3.9
5.5
5.8
Oil and gas export
-7.7
2.7
-0.2
0.4
0.6
Other goods, services, export
1.8
2.4
4.3
4.9
NORDLAND

11. The structural problem created during the last 40 years: Norwegian Dutch disease
INDUSTRIAL PRODUCTION, % OF GDP
EU TARGET
NORWAY EXCLUDING OIL AND GAS

12. Nordland is specialised in the sustainable solution: export of other goods and services

13. Competitive sectors – exporting from Nordland
Suppliers
Tourism – experience economy
Marine sector
Processing industries

14. STRENGTH
EXCELLENT BALANCE OF TRADE
GLOBALLY COMPETITIVE AND WELL-RELATED CLUSTERS – BASED ON EXPLOITATION OF NATURE
HIGH ABILITY TO MAKE ENTREPRENEURIAL DISCOVERIES
LOTS OF UNUSED OPPORTUNITIES IN NATURE
OPPORTUNITIES
MORE ENTREPRENEURIAL DISCOVERIES, EXPLOITING NATURE IN NEW AND SUSTAINABLE WAYS
REFORMED EDUCATIONAL INSTITUTIONS SUPPORTING OUR STRENGTHS «THE GERMAN MODEL OF EDUCATION» 
DIALOGUE BASED COORDINATION OF REGIONAL POLICIES, INDUSTRIAL DEVELOPMENT POLICIES, ENERGY POLICIES AND POLICIES OF SUSTAINABLE DEVELOPMENT
WEAKNESS
CARBON-STATE DIRRIGISM / NEO-LIBERALISM CREATING «WARS» BETWEEN GROWTH AND NATURE PROTECTION AND MISSED INDUSTRIAL OPPORTUNITIES
«ANGLOSAXON» EDUCATIONAL SYSTEM
TREAT:
A NATIONAL LABOR MARKET AND SYSTEM OF EDUCATION DRIVEN BY THE DUTCH DISEASE UNDERMINES THE LOCAL KNOWLEDGE BASES OF OUR STRONG CLUSTERS

15. The solution in principle, entrepreneurial discoveries, related varieties and tripple helix coordinatioon through GAP analysis

16. Unused opportunities Entrepreneurial discoveries – economic development as self-discovery
… there is great social value to discovering that cut flowers, soccer balls, or computer software can be produced at low cost, because this knowledge can orient the investments of other entrepreneurs.
But the initial entrepreneur who makes the “discovery” can capture only a small part of the social value that this knowledge generates. (…) , other entrepreneurs can quickly emulate such discoveries. Consequently, entrepreneurship of this type—learning what can be produced—will typically be undersupplied, and economic transformation delayed.
ECONOMIC DEVELOPMENT AS SELF-DISCOVERY Ricardo Hausmann Dani Rodrik Working Paper NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA May 2002

17. Entrepreneurial discoveries
The problem identified by Hausmann and Rodrik is especially acute in a region like Nordland, specialising in the exploitation of resources in nature
Typically, barriers to entry are likely to be low in the first phase, at the same time, the expectation is that the opportunity will be exploited by the leaders
This is likely to create bubbles

18. How do we discover unused opportunities? Boshma and Gianelle 2014
The objective is to aim for specialized diversification into related technologies which generates new economic activities that are rooted in the region and that can draw on local related resources
This requires collection of data to identify the degree of relatedness between industries in a region, and to assess weather these related industries are actually related or not.

19. Drivers of innovation according to Boshma and Gianelle
Experienced entrepreneurs
Labor market mobility between related industries
Research collaboration between related partners
Knowledge institutions

20. Are industry, knowledge institutions and labor market related?
Place based development
Sustainable development
economy
universities
administration
Society and labor market
nature

21. Relatedness - analysis of Nordland

22. Panda I-O matrix data used to identify the degree of relatedness between industries in a region

23. INNOVATION THROUGH RELATED VARIETIES 1
FISH BREEDING IN LAKES AND RIVERS
Fish Processing
fishing
aquaculture
plastic
Textiles (nets and ropes)
INNOVATION THROUGH RELATED VARIETIES 1

24. REGIONAL IO RELATIONS – FLOWS OF RAW MATERIALS
fishing
Fish processing
55389
187832
OTHER
food
aquaculture
REGIONAL IO RELATIONS – FLOWS OF RAW MATERIALS

25. INNOVATION THROUGH RELATED VARIETIES 2:
Fish processing
Fish food
fishing
aquaculture
plastic
Textiles (nets and ropes)
INNOVATION THROUGH RELATED VARIETIES 2:
MARINE EQUIPMENT FOR OIL AND GAS
Oil and gas

26. A NATIONAL SYSTEM OF SCIENCE BASED INNOVATION
Avansert fôr
Tørt
Logistikk
Vått (fiskeavfall)
Sikkerhet
Kvalitet
Fôr
Norge
Salg
Avl
Vitenskapelig avl
Eksport
Lakse-opp-drett
Utstyr
Seleksjon
Hjemmelaget
Fabrikkert
Helse
Prosess
Automatisert
Parasitter
Virus og bakerie-
sykdommer
Deformiteter

27. Aquaculture, summary
Science-based system of innovation: world class. Salmon has a national science based system of innovation which is world leader. Salmon producers have excellent contacts with their knowledge suplers. Systems of innovation are open, with a substantial public sector funding.
Recent attempts at innovation through related varieties: destructive bubbles. Attempts to apply salmon based technologies on other species through shortcuts have created destructive bubbles with too early competitive industrial upscaling (cod, mussles). This was based on a coordination of science based and synthetic knowledge.

28. Related varieties going wild 1: The cod bubble
Application of salmon technology on cod
a premature competitive race for early industrialisation,
crucial barriers were overlooked
Competition from the old technology, wild fish catching, was fierce.

29. Improved strategies for entrepreneurial discoveries
The Hausman and Roderik advice is to protect the leading entrepreneur throughout the process of industrialzation, and avoid support for dissemination.
other entrepreneurs can quickly emulate such discoveries….
In this case, emulation started too early, and lots of resources were wasted..

30. Green energy region Nordland: a strong body with a weak heart

31. President Obamas green energy cluster initiative.
A successful green energy cluster is able to commercialize green energy technology, and use it profitably for industrial development.
In the first part of the 20th Century, cheap hydroelectric energy provided the basis of industrialization in Nordland, based on minerals, metals and chemicals.
Institutions were put in place which secured long term contracts with cheap energy to industrial investors, and regional control of energy production
This made it possible to increase the regional production of green hydroelectric energy and at the same time to develop strong processing industries, consuming this energy.

32. The weak heart problem 1 (historical explanation)
Rivers were owned by the locals (not by the state, as in Sweden)
Municipalities owns power production facilities (not the state, as in Sweden)
Electrotechnical industries were weak (in Sweden they were developed by the state as energy producer, «utvecklingsblock»)
When the oil came, investments in electrical production stopped,
The weak electrotechnical industries tried to survive by going global, instead they died
The green energy clusters were deregulated in the 1980s, through new neo-liberal regulations of electrical production
But the production system of the green energy technology regions survived.. Because chemical and metal industries developed an extremely high productivity
This has given us industrial towns with labor markets and skills necessary to promote and support industrialization of new technologies.
This is an important building block

33. THE INSTITUTIONS WHICH ENABLED THE DEVELOPMENT OF OUR GREEN ENERGY CLUSTER ARE GONE, BUT THE PRODUCTION SYSTEM IS STILL THERE:

34. The metal gang > 10 million NOK metals Metal products
Electrical and ict equipment
machines
minerals
Repair and installation
> 10 million NOK

35. The metal – chemical network
mining
metals
Metal products
chemicals
Electrical and ict equipment
machines
minerals
Repair and installation
< 10 million NOK

36. INDUSTRIAL INNOVATION THROUGH GLOBAL NETWORKS

37. The green energy cluster
44256
mining
electricity
638023
metals
315059
Metal products
chemicals
54488
10719
Electrical and ict equipment
4354
machines
minerals
Why is this number so low?
Repair and installation
< 10 million NOK

38. THE ELECTROTECHNICAL INNOVATION SYSTEM WHICH ENABLED THE DEVELOPMENT OF OUR GREEN ENERGY CLUSTER IS GONE:

39. Suppliers to investments in electrical production
Construction (26)
Retail (28)
Telecommunications (37)
Electrical equipment and computing (19)
Metal goods (18)
Machines (19)
construction
Still very low

40. Electricity production, operations
Business services
Other energy producers
Electrotechnical and ICT

41. The weak heart problem 2: Current barriers to increased green energy production
Weak market demand (regional overproduction)
limited export options due to weak infrastructure (old fashion electrical grid)
No regional smart grid coordination
Local competition from hydroelectric power

42. Related varieties going wild 2: The wind bubble
EU 2020 objectives
National level incentives and mobilisation…
Existing energy companies start projects..
..based on existing electrotechnical solutions
Lots of optimism and lots of projects..

43. The carbon regime strikes back
Central level coordination (NVE)
Capacity problems in the central NVE administration
Priority to other regions with more regional demand for energy
Competition between projects based on environmental criteria
No master plan to guide spatial planning
No facilitation of knowledge base for decisions
The investments are not comming, lots of investors have lost lots of money

44. Green energy region strategy
The nature in Nordland has several promising features which have not yet been successfully commercialized: wind, ocean waves, and sea currents.

45. A green energy cluster strategy
44256
mining
electricity
638023
metals
315059
Metal products
chemicals
54488
10719
Electrical and ict equipment
machines
minerals
Repair and installation
European
Electrotechnical
System of innovation
Institutions enabling sustainable development

46. Suggestions
We need proper institutions. Regional level coordination of energy policy, energy production (smart grid), industrial policy, environmental planning and regional development strategies
We need a system of innovation. European level partnership with regions with strong electrotechnical industries through Interreg

47. Tourism, a success story
Experienced entrepreneurs
… assisted by a successful cluster development program (ARENA)
… supported through long-term investments in a research program (Innovative opplevelser) and
an applied program (VRI)
Led to successful development of a shared platform for experience economy innovation
A high level of experience economy innovation

48. Hotel and restaurant, customers
export
Air and land transport

49. Hotel and restaurant, supplers
Business services
Financial services
construction
food
Fish processing
agriculture

50. Air and land transportation
export
construction
metals
Fish processing

51. Domestic sea transportation
export
Air and land transportation

52. National system of innovation
Fish processing
Fish food
R&D
fishing
aquaculture
National system of innovation
Financial consulting
plastic
Textiles (nets and ropes)
Technical consulting
Ship building
Repair and installation
Wholesale, retail
Oil and gas services
Maritime transportation
Electrical and ict equipment
Fuel, Air and land transportation
Oil and gas production
electricity
Water supply
metals
Global systems of innovation, KET
Metal products
mining
Renting of labor
minerals
machines
Metal recycling
chemicals

53. Tripple helix - quadrupple helix
Place based development
Sustainable development
economy
universities
administration
society
nature

54. Who are buying research
export
Public sector
consulting
Technical services
telecom
Computers, el. equipment

55. Dailogue based coordination: GAP analysis
GAP analysis comes from business studies
We have applied GAP analysis on the tripple helix
Questions to business leaders (AND OTHERS IN THE 3H):
What is your expectations to research and education (and other sectors) in your region (ON A SCALE FROM 1 – 10) – and
what are your experiences (ON A SCALE FROM 1 – 10)?
GAP is the difference.
A GAP > 2 indicates a problem
A small GAP with high expectations indicates that this might be a good solution
compare GAPs across regions in different countries, and in the same region through time (improvements)
Dialogue on PROBLEMS, search for HAPPY solutions.
6/27/2019
Regional Innovation Policy in practice

56. GAP ANALYSIS, TRIPPLE HELIX, example of Norwegian 3H data
Public sector
R&D
Polytechnical education
Labor market policies
Planning
Infrastructure
Environmental policies
Energy policy
Industrial policy
Suppliers and customers
6/27/2019
Regional Innovation Policy in practice

57. Regional Innovation Policy in practice
GAP comparisons: Why are Finns happier that Norwegians? (it cannot be results in the Olympics)
Nordland Processing Industries
Ostrobothnia, energy
education
6/27/2019
Regional Innovation Policy in practice

58. Regional Innovation Policy in practice
Explain the difference in GAP: Norway and Finland has different educational systems which creates different systems of innovation
Finland
Academic engineers STI
university
gymnasium
Poly-technical
Engineers working with craftsmen STI + DUI
Craft education
Norway
Academic engineers STI
gymnasium
university
Craft education
Craftsmen DUI
6/27/2019
Regional Innovation Policy in practice

59. Explain the difference Kokkola University Consortium Applied chemistry
Students are mostly adults, working in the regional industries
Their academic degrees are based on research which often also is innovation projects in the firms where they are working
6/27/2019
Regional Innovation Policy in practice

60. Example of a good solution reducing the GAP: University Consortium
It is set up in a peripheral rural area or a small industrial town
The municipal investment is a house fitted for education
Scientific equipment (laboratories etc) are to a large degree donated by industries in the region or EU Structural Funds
The staff is employed by national Finnish universities located in other parts of Finland
The salaries of the staff is based on regular state funding to these universities
The scientific quality of research and education is guaranteed by the national universities
6/27/2019
Regional Innovation Policy in practice

61. Regional Innovation Policy in practice
University consortia
Education and research is coordinated with regional industries, with an over-all objective to promote regional development
This policy-mix is based on a combination of
National policies
University strategies
Structural funds
Business and union strategies
Individual strategies among students/ empoyees
6/27/2019
Regional Innovation Policy in practice

62. Innovation in the three peaks
Strategic priorities
SMART SPESIALI-SERING
Innovation in the three peaks
THE GERMAN MODEL OF EDUCATION, UNIVERSITY CONSORTIA, WITH LOCAL INNOVATION CENTRA
SUPPORT LEADERS, NOT FOLLOWERS
CO-SPECIALIZE AND BUILD EUROPEAN SYSTEMS OF INNOVATION
GAP ANALYSIS
SUPPLIER INDUSTRIES
SUPPORT EXPORT-ORIENTED SUPPLY SECTORS
EXPLOIT RELATEDNESS WITH OIL AND GAS
Entrepreneurial discoveries
GREEN ENERGY CLUSTER STRATEGY
REGIONAL COORDINATION OF POLICIES