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«Regional Innovation Systems as Public Goods UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Regional Innovation Systems as Public Goods By Phil ...»

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The lesson of the 1990s What was learned in the 1990s is that assisting in the formation of network relationships among firms and establishing the broader institutional setting supports firms’ innovative activities is not sufficiently powerful to embed them structurally, especially when global conditions no longer favour such strategies. RIS are a useful framework for studying economic and innovative performance; they are also functional tools to enhance the innovation processes of firms. They do this by knitting together knowledge flows and the systems on which they rely, building trust and confidence in institutional reliability; and above all, they do it by generating institutional self-knowledge and a certain kind of collective dissatisfaction with the status quo. RIS comprise a set of institutions, both public and private, which produce pervasive and systemic effects that encourage firms in the region to adopt common norms, expectations, values, attitudes and practices, where a culture of innovation is nurtured and knowledge-transfer processes are enhanced. A national system of innovation (NIS) cannot adequately do this; time economies, as well as distance and decay effects, militate against thoroughgoing cognitive penetration.4 A dimension that seems almost completely missing in the way most national innovation systems function is the capability to manage media communication about innovation in other than a dogmatic way. This can be inimical to furthering innovation strategies, since labour supply and demand mismatches arise as market failures owing to the absence of even virtual knowledge spillovers. Governments in most developed regions and many developing countries make injunctions to their businesses to innovate, but this is seldom analysed or popularized in ways that assist non-innovators to gain the necessary knowledge to effect change. A contributory factor is that innovation is seldom communicated in digestible ways to the media. This issue has been at the forefront of concern in the ongoing activities of The Competitiveness Institute (TCI), one of whose members, the Swedish Innovation Agency (VINNOVA), houses the only known dedicated innovation media specialist.

Contrariwise, regional innovation interaction among firms and other innovation organizations has been regarded as playing an important role in fostering regional innovation potential. Labour demand and supply are increasingly influenced by innovation, growth potential and linkages among firms within a defined location. The portability of information and communication technology (ICT) skills is an example of how Metcalfe (1997) defines a NIS as “a system of interconnected institutions to create, store and transfer the knowledge, skills and artefacts which define new technology.” This is both much broader in institutional scale, thus remote from specific regional industrial mixes, and narrower because of its “new technology” emphasis than the definition of a RIS, which is as follows: “a regional innovation system consists of interacting knowledge generation and exploitation sub-systems linked to global, national and other regional systems for commercialising new knowledge” (Cooke, 2004).


knowledge of labour market opportunities filters through to appropriately qualified talent. It follows from this that the functioning of a system of innovation influences the labour market dynamic and the ability of localities to generate, attract and retain the highly skilled workers that are essential for establishing and growing innovative companies, as argued in Florida (2002). The presence of research capabilities in numerous universities and of entrepreneurs, financiers and artistic cultures is crucial to talentled growth.

Innovation systems: supply and demand

Previous work has identified two sides of an innovation system: a supply side and a demand side (Braczyk et al., 1998). The former consists of the institutional sources of knowledge creation as well as the institutions responsible for training and the preparation of highly qualified labour power. The demand side subsumes productive systems, firms and organizations that develop and apply the scientific and technological output of the supply side in the creation and marketing of innovative products and processes.5 Bridging the gap between the two is a wide range of innovation support organizations that play a role in the acquisition and diffusion of technological ideas, solutions and know-how throughout the innovation system. These may include: skills agencies, technology centres, technology brokers, business innovation centres, organizations in the higher education sector and mechanisms for financing innovation such as venture capital systems. One of the assumptions of the RIS approach is that many innovative firms operate in regional networks, cooperating and interacting not only with other firms such as suppliers, clients and competitors, but also with research and technology resource organizations, innovation support agencies, venture capital funds, and local and regional government bodies. Innovation is a process that frequently benefits from the proximity of organizations that can trigger this process. Furthermore, regional authorities have an important role to play to support innovation processes by offering services and other mechanisms that augment the interlinkages between all these actors.

RIS as portrayed in figure 1 show that the main connectivity vectors at regional level are horizontal, while those at national level are primarily vertical. Moreover, although it is difficult to be precise, it can be suggested that at least half the key connectivity at national level is outwards to the global level. This applies to larger firms and to the activities of innovation ministers at numerous meetings on science and technology policy, technical standards and the design of international innovation programmes, which can include both multilateral economic assistance organizations (MEAOs) and bilateral collaborations. In some countries, such ministries and their functionaries are fully engaged in devising schemes to protect “national champions” or to promote their industries to global markets. In most cases, nation states are engaged in science and technology strategy building. It is difficult to avoid the inference that national innovation systems have lost salience considerably as a result of, on the one hand, global This may also involve new knowledge creation, albeit more in synthetic (e.g. engineering) or even symbolic (e.g.

design) than analytical (scientific) knowledge.


Figure 1. The regional innovation system: a schematic illustration Regional socioeconomic and cultural setting

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innovation impulses—most notably from the United States—and, on the other, the more embedded approach, feasible only at regional level but by no means generically present in all regions.

Where there is a rich innovation infrastructure, ranging from specialist research institutes, to universities, colleges and technology-transfer agencies, and institutional learning is routine, firms have considerable opportunities to access or test knowledge, whether internally or externally generated to the region. A strong, regionalized innovation system is one with systemic linkages between external as well as internal sources of knowledge production (universities, research institutions and other intermediary organizations and institutions providing government and private innovation services) and firms, both large and small.

Two dimensions of innovation systems

Following Braczyk et al. (1998), different innovation systems can be measured and identified along the two following dimensions.

First is the governance dimension, which comprises public policy, institutions and knowledge infrastructure; also known as the soft infrastructure of enterprise innovation support. Here, reference is made to a networking propensity whereby key regional governance mechanisms, notably the regional administrative bodies, are


interactive and inclusive with respect to other bodies of consequence to regional innovation. This may lead to an organizational setting in which the regional administration animates or facilitates associativeness among representative bodies inside or outside public governance.

Second is the business innovation dimension, namely the industrial base characterized in terms of productive culture and systemic innovation. This refers to the level of investment, especially in R&D; the type of firms and their degree of linkage and communication, in terms of networking, subcontracting, presence or absence of supply and value chains and degree of co-makership between customers and suppliers.

Three types of RIS

Following these two dimensions, Braczyk et al. (1998) suggested a taxonomy of RIS, as represented in figure 2. Firms can range from possessing global to merely local reach.

Three different types of RIS emerge: the localist one is not dominated by large indigenous firms and the business innovation culture is one in which the research reach of firms is not very great, although there may be local research organizations capable of combining with industry clusters within the region. A localist set-up will probably have few major public innovation or R&D resources, but may have smaller private ones.

Finally, there will be a reasonably high degree of associativeness among entrepreneurs and between them and local or regional policymakers. An interactive RIS is one in which there is a balance between large and small firms. The reach of this combination will vary between numerous instances of access to regional research resources and to foreign innovation sourcing as and when required. The mix of public and private research institutes and laboratories in the interactive RIS is balanced, reflecting the presence of larger firms with regional headquarters and a regional government keen to

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promote the innovation base of the economy. In the third type of RIS, the globalized one, the innovation system is dominated by global corporations, often supported by clustered supply chains of rather dependent small and medium-sized enterprises (SMEs).

The research reach is largely internal and private in nature rather than public, although a more public innovation structure aimed at helping SMEs may have developed.

Three forms of RIS governance Following Cooke et al. (2004), the governance dimension can generate three different RIS forms: grassroots, network and dirigiste. Grassroots is where the innovation system is generated and organized locally, at town or district level. Financial support and research competences are diffused locally, with a very low amount of supra-local or national coordination. Local development agencies and local institutional actors play a predominant role. A network RIS is more likely to occur when the institutional support encompasses local, regional, federal and supranational levels, and funding is often guided by agreements among banks, government agencies and firms.

Table 1. Typology of regional innovation systems and key action impulses

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Source: Cooke, 1992.

The research competence is likely to be mixed, with both pure and applied, blue-skies (exploration) and near-market (exploitation) activities geared to the needs of large and small firms. A dirigiste system is animated mainly from outside and above the region itself. Innovation often occurs as a product of central government policies. Funding is centrally determined, with decentralized units located in the region and with research competences often linked to the needs of larger, state-owned firms in or beyond the region. It is important to note that in each RIS system public intervention is variable but public good knowledge for innovation circulates relatively freely beyond the institutions that originate ideas, whether firms or other bodies.


The grassroots system is driven by local initiation. Funding may come from family, community and local credit agencies, research is highly applied and practical rather than scientific, coordination of interactions is based on social capital rather than formal organizations, and industry specialization may be diverse, as in the case of regions with numerous distinctive clusters. Italy is the exemplar, where, for example, the regions of Tuscany or Marche have at least 10 distinctive clusters (see box 1).


Box 1. Origins of the grassroots innovation concept

When first researched (around 1989 or 1990) the drivers of the work on the grassroots innovation concept were the concepts of innovation, which replaced a much narrower discourse about technology and networks emerging to challenge market and state as the key coordination modes for complex institutional action and industrial order. An influence highlighting these concerns was the then new book by Best (1990) on new forms of competition. There were accounts of the superiority of certain networked forms of innovation governance over markets. Powerful instances of this were the distinctive trajectories of the Italian design-intensive and UK scale-intensive furniture industries. The former succeeded while the latter atrophied. The industrial district RIS model was the genesis for the stylized grassroots category since it was clearly a market-driven model but one in which neither scale nor science was particularly pronounced. Nevertheless, local, weak ties coupling or coordination were clearly present, as were diffuse—we would now say social capital-based—funding mechanisms and a regionally diversified grouping of distinctive industrial districts. It could be said that communicative linkages in the grassroots model were locally intense but mediated nationally and globally by looser entrepreneurial intermediation.


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