1. Constructing Regional Advantage: Challenges for Regional Innovation Policy for Small and Medium Enterprises
Professor Bjørn Asheim, Deputy Director,
CIRCLE (Centre for Innovation, Research and Competence in the Learning Economy),
Lund University, Sweden.
Presentation at Knowledge Economy Forum VII:
Technology Absorption by Innovative Small
and Medium Enterprises
Ancona, Italy, June 17-19, 2008

2. Regional Innovation Policy: A Classification of Policy Instruments
Support: Financial and technical
Behavioural change: Learning to innovate
Financial support
Mobility schemes
Firm-focused
Brokers
Technology
Regional
System-focused
centres
innovation
systems
Bjørn Asheim, 2008

3. What is Regional Innovation Systems (RIS) – narrow definition (human capital strategic):
A RIS is constituted by two sub-systems and the systemic interaction between them (and with non-local actors and agencies):
The knowledge exploration and diffusing sub-system (universities, technical colleges, R&D institutes, technology transfer agencies, business associations and finance institutions)
The knowledge exploitation sub-system (firms in regional clusters as well as their support industries (customers and suppliers))
STI (Science, Technology, Innovation) mode of innovation – high-tech (science push/supply driven); radical innovations
Bjørn Asheim, 2008

4. What is a RIS - broad defintion (social capital strategic):
A system of organisations and institutions supporting learning and organisational innovation, and their interactions with local firms (learning regions)
Developmental (creative) learning: competence building – learning work organisation
Reproductive (adaptive) learning: interactive learning (user-producer relationships) – inter-firm networks
A market/demand/user driven system mostly generating incremental innovations
DUI (Doing, Using, Interacting) mode of innovation – Competence building and organisational innovations – market/demand/user driven
Bjørn Asheim, 2008

5. Varieties of Regional Innovation Systems (RIS)
Territorially embedded RIS (’grassroots RIS’) – demand/user driven (less systemic university-industry relations) – broad definition of IS (learning regions)
Regionalised national innovation systems
(’dirigiste RIS’) – science/supply driven – narrow definition of IS (technopolis, science parks)
Regional networked innovation systems (’network RIS’) – mixed supply/demand interaction (combined narrow and broad definition)
Bjørn Asheim, 2008

6. Policy challenges: Institutionally thin (peripheral) and old industrial (lock-in) regions
Institutionally thin regions
Less innovative in comparison to more agglomerated regions
Less R&D intensity and innovation
A less developed knowledge infrastructure (universities and R&D institutions)
Suffering from institutional thinness
Lock-in regions
Overspecialised in mature industries experiencing decline (negative lock-in in specialised localisation economies)
Few R&D activities, mature technological trajectories, cognitive lock-in
University and public research oriented at traditional industries / technologies
Bjørn Asheim, 2008
Source: Tödtling & Trippl (2005)

7. Policy challenges: Fragmented metropolitan and networked regions
Fragmented regions
Many and diverse industries/ business services
Lack of dynamic clusters of (local) innovative firms and knowledge spill-overs (unrelated variety of urbanisation economies)
R&D departments and headquarters of large firms
Many and high quality universities and public research organisation but weak industry-university links (weak connectivity in RIS)
Networked regions
Regions with cutting edge technologies and a high level of R&D as well as high connectivity in RIS)
Exposed to new challenges and competition from emergent economies
Diversify into new but related industries (related variety/differentiated knowledge bases)
New ways of continuous innovation support
Bjørn Asheim, 2008
Source: Tödtling & Trippl (2005)

8. Policy responses to regions’ and SMEs’ innovation problems - RIS with problems of organisational thinness.
Financial: Attract and retain innovating firms
Technological: Link firms with technological resources outside the region – absorptive capacity key resource
Human Resources: Attract/retain highly-skilled workers – raise absorptive capacity through mobility schemes
Openess and learning attitude: Promotion of networking between firms and clusters at every geographical scale
Strategy and Organisation: Support firms in linking to international input and output markets
Bjørn Asheim, 2008

9. Policy responses to regions’ and SMEs’ innovation problems – RIS with lock-in problems
Financial: Ensure long-term finance for ’overall’ innovation project and new firms formation
Technological: Push firms to seek new technology options using brokers, also through international partnerships
Human resources: Develop creative capacities of workers (human capital development; learning work organisation)
Openess and learning attitude: Help SMEs evolve towards more creativity and autonomy in production
Strategy and organisation: Open windows of opportunities for SMEs; innovation management training
Bjørn Asheim, 2008

10. Policy responses to regions’ and SMEs’ innovation problems – RIS with fragmentation problems
Financial: Coach firms in linking to finance sources
Technological: Provide bridge between firms and technological resources by promoting university-industry interaction and improving connectivity in RIS
Human resources: Foster exchange of codified and tacit knowledge (STI and DUI mode of innovation)
Openess and learning attitude: Foster a more collaborative spirit and more strategic orientation in the regions (learning to innovate)
Strategy and Organisation: Help firms identify, articulate and ’de-bundle’ their needs
Bjørn Asheim, 2008

11. From competitive to constructed advantage: Regional Policy Challenges in a Globalising Knowledge Economy
Imitation and adaptation is not any longer a sufficient strategy for regions in the long run (cost-based, low road strategy). Unique advantages have to be actively constructed (innovation-based, high-road strategy). However, innovation can build on cost advantages (e.g. TATA-Nano car from India).
Industrial renewal takes place in-between and beyond existing sectors – need for transcending traditional sector policies (platform policy)
Innovation through combining existing knowledge, technologies and competencies with new generic technologies (IT, biotech (green and white))
How to shape conditions for constructing regional advantage?
Bjørn Asheim, 2008

12. From competitive to constructed advantage
Competitive advantage: too strong focus on markets and rivelry as selection mechanisms as well as a too narrow approach to the creation of endogenous capacity of regions to learn and innovate as primarily being based on co-location of firms in clusters and by placing the state in the same peripheral position as ’chance’ in Porter’s diamond model
Constructed advantage: acknowledges more the important interplay between industrial dynamics (knowledge bases) and institutional dynamics (i.e. different knowledge bases need different kinds of institutional support) as well as private-public complementarities in policy making by a stronger focus on actors, agencies and governance forms (addressing system failures – weak connectivity within and between IS).
Bjørn Asheim, 2008

13. Content of policies for Constructing Regional Advantage
Proactive and trans-sectoral, platform oriented policies (transcending traditional industry or sector specific policies):
Related variety (spillover effects)
Differentiated knowledge bases (analytical, synthetic and symbolic)
Distributed knowledge networks
Bjørn Asheim, 2008

14. Platform policies – Japan’s new cluster policy (2004):
Ex: Strengthening policies for advanced component/materials industries
Bjørn Asheim, 2008

15. 1) Related variety: Agglomeration economies and optimal cognitive distance – absorptive capacity
Localisation economies – sector specialisation achieving efficiency? – Traditional clusters
Urbanisation economies – diversity promoting creativity? However, can knowledge spillover take place between sectors that are unrelated (portfolio vs. knowledge spillover effects)?
Trade-off betwen cognitive distance, for the sake of novelty, and cognitive proximity, for the sake of efficient absorption. Information is useless if it is not new, but it is also useless if it is so new that it cannot be understood
Bjørn Asheim, 2008

16. Related variety (spillover effects)
Related variety is defined as sectors that are related in terms of shared or complementary knowledge bases and competences
One of the driving forces behind urban and regional growth due to knowledge spillover
Acknowledge that generic technologies have a huge impact on economic development (e.g. green and white biotech)
Related variety combines the strength of the specialisation of localisation economies and the diversity of urbanisation economies
Bjørn Asheim, 2008

17. 2) Differentiated knowledge bases: A typology
Analytical (science based)
Synthetic (engineering based)
Symbolic (artistic based)
Developing new know-ledge about natural systems by applying scientific laws; know why
Applying or combining existing knowledge in new ways; know how
Creating meaning, aesthetic
qualities, affect, symbols, images; know who
Scientific knowledge, models, deductive
Problem-solving, custom production, inductive
Creative process
Collaboration within and between research units
Interactive learning with customers and suppliers
Learning-by-doing, in studio, project teams
Strong codified knowledge content, highly abstract, universal
Partially codified knowledge, strong tacit component, more context-specific
Importance of interpretation, creativity, cultural knowledge, implies very strong context specificity
Meaning relatively constant between places
Meaning varies substantially between places
Meaning highly variable between place, class and gender
Drug development
Mechanical engineering
Cultural production
Bjørn Asheim, 2008

18. Differentiated knowledge bases
Characterise the nature of the critical knowledge which the innovation activity cannot do without (hence the term ’knowledge base’ understood as an ideal type)
Makes it wrong to classify some types of knowledge as more advanced, complex, and sophisticated than other knowledge (e.g. to consider science based (analytical knowledge) as more important for innovation and competitiveness of firms and regions than engineering based (synthetic) knowledge or artistic based (symbolic) knowledge). Different knowledge bases should rather be looked upon as complementary assets (STI vs. DUI)
Bjørn Asheim, 2008

19. 3) Distributed knowledge networks – open innovation
More and more highly complicated combinations of different knowledge types, e.g. codified and experience based, tacit knowledge, as well as synthetic/analytical/symbolic knowledge bases
As a result of the increasing complexity and diversity of knowledge creation and innovation processes, firms need to acquire new, external knowledge to supplement their internal, core knowledge base(s)
Transition from internal knowledge base(s) within firms to distributed knowledge networks across a range of firms, industries and sectors locally and globally
Bjørn Asheim, 2008

20. Clusters and distributed knowledge networks – absorptive capacity
The structure of knowledge networks is not symmetrical within a region – heterogeneous distribution of firms’ competence bases (human capital and R&D) generates an uneven distribution of knowledge and selective inter-firm learning (extra-local absorptive capacity as well as intra-regional diffusion capacity). Differentiated along knowledge bases.
This requires more systemic approaches both with respect to local ’buzz’ and global ’pipelines’ (RIS)
Regional advantages must be proactively constructed by a stronger focus on actors, agencies and governance forms in a multi-level perspective
Bjørn Asheim, 2008

21. What can be achieved at the regional level – the role of RIS (narrow def.)
Competitive research and innovation environments (e.g. Centres of Expertise) can only be established in a limited number of regions
Such regions must have strong research centres/large universities, competitive industries and proactive regional governments and governance building RIS
These regions will be able to serve R&D intensive domestic industry as well as to attract TNC’s R&D
Similar industry in other regions must rely on the national and international levels (in addition to the strong regions) – multi-level approach
Bjørn Asheim, 2008

22. What about the ordinary industries in the ordinary regions – the role of RIS (broad def.)
RIS have other tasks than only to support R&D intensive industries, as regions have other types of industries that are in need of innovation support from RIS
Knowledge creation and innovation in all types of industries with different knowledge bases
Optimal combinations of R&D and user driven innovation (STI (Science, Technology, Innovation) and DUI (Doing, Using, Interacting) modes of innovation) on the level of firms and regions
Look to Finland – the new innovation policy is extended to deal with user driven innovation in addition to R&D. Increased focus on less R&D intensive industries as well as services. Building on the STI – DUI framework
Bjørn Asheim, 2008

23. RIS TYPOLOGY Type of Analytical/ science based Synthetic/
knowledge
Type of RIS
Analytical/
science based
Synthetic/
engineering based
Symbolic/
artistic based
Territorially embedded
(grassroots RIS)
IDs in Emilia-Romagna (machinery)
’Advertising
village’ – Soho
(London)
Networked
(network RIS)
Regional clusters – regional university (wireless in Aalborg)
Regional clusters – regional technical university (mechanical in Baden-Württemberg)
Barcelona as the design city
Regionalised
national
(dirigiste RIS)
Science parks/
technopolis
(biotech, IT)
Large industrial complex
(Norwegian oil and gas related industry)
Bjørn Asheim, 2008

24. RIS in developing economies
From endogenous to exogenous perspectives. Relying more on:
External capital
Transnational knowledge sources
TNC’s and FDIs
Thus, non-local (extra-national) factors often more important than local (national) in moving up the value chain from competing on cost to competing on knowledge creation and innovation
Bjørn Asheim, 2008

25. RIS in developing economies
Developing firms’ and regions’ absorptive capacity by human capital development and improving R&D
Embedding TNCs and FDs in the region
The formation of RIS, clusters and technology transfer agencies as well as the promotion of soft knowledge infrastructure are important parts of regional policies for attaining these goals
Bjørn Asheim, 2008