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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 network system is rather more formalized and integrated at different levels: local, regional and national. Funding for innovation is more likely to engage public goods programmes with research of an applied but formalized nature being utilized. Some more scientific inputs may be accessed from industrial research institutes or universities. In such systems coordination is rather high, with membership systems and effective knowledge circulation through seminars, workshops and associational networks.

Specialization by economic activity is more flexible than in grassroots systems (box 2).

A scale above the grassroots model but still by no means governed or coordinated either fully by market relations arising from corporate power or state planning modes of intervention, this is basically a partnership model of networking in which power relations nevertheless also accompany symmetry in the innovation interactions among stakeholders. The network paradigm enabling the model to be envisaged arising from varieties of engineering excellence, from automotive to tooling and printing machinery, was Baden-Württemberg’s industrial system. This was a regionally associative form of the Germanic coordinated type of industrial order in which constructed advantage (Foray and Freeman, 1993) had arisen historically because the region was once so poor and suffering from major out-migration. The constructed nature of intervention in this historic case concerns the establishment by Ferdinand von Steinbeis of the vocational training works in locomotive technology (see box 2), which provided skills in the advanced technology of the day, railway locomotive engineering, that farm labourers and woodcutters would not otherwise derive locally. In turn this boosted regional engineering skills more broadly by establishing training curricula, contributing to the region’s global engineering advantage that persists to this day in the form of businesses built by regional entrepreneurs as Porsche, Daimler-Benz and Bosch.

10 REGIONAL INNOVATION SYSTEMS AS PUBLIC GOODS

Box 2. Constructing regional advantage by integration of public goods provision Baden-Württemberg was a Swabian (rather than Asian) “tiger”. Under the enlightened Kingdom of Württemberg, Ferdinand von Steinbeis in 1868 established the first industrial training facility in the locomotive works at Esslingen, near Stuttgart. This is thus an early case of endogenous constructed regional advantage, subsequently evolving and spreading its influence throughout a geographically integrated administrative region, so that today there are over 500 Steinbeis knowledge-transfer centres within Baden-Württemberg and neighbouring regions and States (e.g. Switzerland). However, they are structurally embedded in a specific cultural and institutional context. For example, they were designed as “fiefdoms” mainly of Fachhochschule (polytechnic) professors in a region with some 40 such institutions set in a national higher education system that privileges chair positions much more than elsewhere. Hence, historically, vocational training and corresponding talent formation in relation to basic technological needs related to railway technology was at the heart of this associative public goods provision, unmet by market forces. It set an example to regional governments in subsequent years. These emulated such principles in a more modern style. The integration of innovation support was secured by providing innovation support to affiliated experts.

Dirigiste

The dirigiste system has far more central government intervention and possibly more large-scale business engagement in its operations. Initiation and inspiration are centrally influenced and funding is specifically programme-based (as with the Franco-EU aerospace cluster at Toulouse in Aquitaine, France, which is the exemplary case). Basic scientific research inputs are as important as applied ones, and both coordination and specialization are strong. The science- and technology-rich region of Rhône-Alpes is testimony to the continuation of such a mode of intervention over a long period (box 3).

During the 1970s and 1980s, France (and Quebec in Canada) had been at the forefront of innovation policy. Foremost here was the French idea of technopoles, evolved from the postwar state-planning model inspired by Francis Perroux and his successful promotion of the growth poles idea. This echoed Schumpeter’s idea of swarming by firms seeking to imitate the innovating entrepreneur, leading to the formation of what would now be called a cluster.

Germany’s Ruhr Valley was Perroux’s inspiration. Large-scale industrial complexes, such as the great steel branches at Dunkirk and Fos-sur-Mer were designed as economic anchors for downstream processing, and the technopole idea built on the example of the Ruhr by setting up a more analytical, science-based and advanced technology infrastructure. Science parks and even science cities, as at Lille, were constructed, usually by decentralizing government research laboratories from Paris. This happened at the first such technopole with the Meylan-ZIRST science park at Grenoble, opened in the 1950s.

INNOVATION SUPPORT INSTITUTIONS 11

Box 3. Exogenous regional public goods innovation support

In a quest to find the world’s oldest cluster, Van der Linde (2003) selected Oyonnax in the Rhône-Alpes region. “Plastics Valley” as it is nowadays known “can trace its history back to the year 630AD when the village was given a monopoly to make combs. Wooden combs were followed by celluloid combs … when combs fell out of fashion in the 1920s and 1930s, the unemployed craftsmen turned to the production of plastic toys and eyewear lenses … a further innovation was the adoption of injection moulding in 1936 … By 1998 600 firms … and a workforce of 12,700 produced 1.8 billion worth of plastic toys and eyewear” (p. 140). At Oyonnax the real take-off of the eyewear business came with the foundation of the Société Confraternelle des Ouvriers Lunetiers in Paris in 1849. This confederation or “house of lens-makers” was the ancestor of today’s powerful Essilor group. Taking its inspiration from the collectivist ideas of Saint-Simon, the association was founded by three small industrialists: Duez, Duriez and Muneaux. However, notice the dependence on Paris for this. Nevertheless, the Lycée Technique Victor Bérard was France’s first optics school, founded in 1933 in the nearby eyewear district Morez. It is thus clear that the historical embeddedness and path dependence of regional innovation are rooted in and evolve from initial conditions that assist the construction of specific kinds of regional advantage.





By the 1980s, Grenoble and the wider Rhône-Alpes region were leading innovation in energy, high-performance engineering and materials. Populating the regional system by the early 1990s were regional centres for innovation and technology transfer (RCITTs) in composite materials, agro-food, production, electronics and mechanics, biotechnology and biomedical devices, chemistry and energy. There were also nine decentralized offices of the Ministry of Research and Technology (DRRTs) and numerous investments by ANVAR, the national risk-capital fund, in the region. Remarkably, despite the emergence of regional government in France some years previously, all this infrastructure was designed and funded from Paris. The region’s comparative advantage in hydroelectric power generation had morphed into a globally significant expertise in nuclear energy production, hence also specialization in materials science, electronics and mechanics.

Thus the region had become a technological powerhouse, with the pole itself including colleges, private and public research, large businesses (e.g. Rhône-Poulenc, now SanofiAventis, Caterpillar, Philips), SMEs and financing vehicles, but the whole was, as it were, steered or directed from Paris with relatively little regional or local innovation input.

The global competition imperative

In all the cases discussed above, innovation was seen as essential because of the pressure of global competition. In Emilia-Romagna, EU training programme funding was used to establish real services centres where small textile, clothing and footwear firms could access skills and technologies, to enable them to speed up the fashion manufacturing process to avoid losing markets after emulation of their previous designs by developing-country competitors. In Germany, Steinbeis centres became popular because of

12 REGIONAL INNOVATION SYSTEMS AS PUBLIC GOODS

innovation threats from external competitors like Japan and the East Asian newly industrialized economies (NIEs) in the engineering and automotive industries. Many of France’s comparable industries were similarly threatened. Since then, more firms have learned, helped by access to research and other valuable knowledge in their regional innovation systems, how to collaborate or form alliances with firms in developing countries. This is done often by tapping into developing-country clusters using overseas agents to identify reliable outsourcing targets. The German chamber of industry and commerce established “incubators” in Singapore, Japan and elsewhere to enable branches of medium-sized firms and spinouts from smaller ones to access markets on German industry parks in such countries. Thereafter, there has been production outsourcing and even R&D in developing countries, and complex systems integration of time-to-market scheduling and production logistics has become normal. In Brazil, incubator programmes have been used as a way of identifying small businesses that may contract in such outsourcing opportunities from high-tech firms abroad. Global-local interaction has become a vital part of most manufacturing industries. The key to development is securing the capabilities that enable local firms to engage with global value chains and networks on terms that are as favourable to them as realistically possible.

The management and control of innovation to meet constantly changing demands in global markets is an imperative.

3. How public goods innovation support operates Regional-level public goods interventions have frequently been crucial to the stimulation of economic growth in areas suffering from poverty and technological backwardness. But even though the region or province is an important canvas for economic development policy because of the economic advantages arising from geographies of association and collective entrepreneurship, these are capable of being stimulated by either endogenous forces like clusters or by exogenous forces in the shape of central government. The important developmental lesson is that whichever impulse triggers economic growth, a public goods posture focused at this meso level is important.

The long run

In all cases where a long history of such support for regional innovative capabilities can be traced, the origins came from an entrepreneurial impulse, probably with a regulatory flourish from noblesse oblige. This has enabled a specialist tinkering survival strategy to construct advantage that has produced benign path dependence. In Germany, the paradigmatic regulatory environment was that created under the Württemberg royal house and the vocational training innovator von Steinbeis, forerunner of the Land minister president, Lothar Späth. Späth quoted von Steinbeis as saying, to paraphrase, “... in this region we have only ever had our wits to rely upon” (Spath, 1985).6 In Italy, notably in Emilia-Romagna and Tuscany: “... the progressive traditions of the dukedoms of Parma and Piacenza … Modena and Reggio … exerted a powerful influence on the historical evolution of regional knowledge linkages. The industrial districts of Carpi, Sassuolo and Faenza are among the oldest in Italy … The economic prosperity of Toscana started in the eleventh century, based on the unique cultural traditions of its communes (Lucca, Pisa, Pistoia, Siena, Arezzo) … Florence prevailed and absorbed the most positive elements of Toscana’s typical pattern of development” (Iammarino, 2005: 510).

Späth (1985).

14 REGIONAL INNOVATION SYSTEMS AS PUBLIC GOODS

Entrepreneurship and constructed advantage

Being entrepreneurial can be seen in terms of Orlikowski’s (2002) “sense of knowing” about how, in this case, to “do business”. This is evident in Iammarino’s historical analysis of regional innovation systems in the longue durée. She describes “... communes, all fierce competitors for market share, product variety, trade intensity, cultural creativity and social dynamism”. In other words, these are traditions of collective entrepreneurship, familial, communal and social but also competitive and confident of being able to rely on others in the network to provide finance, to assist in planning and production, and to speak well of the key artisan seeking a contract in a system of production that was often in those early days for some kind of luxury consumption— a painting, a clock, or an ornate comb.

Constructed advantage took distinctive forms within a framework set by comparable but by no means identical cultural and institutional conditions (Geertz, 1973). In this case, distinctiveness evolves as part of a more open, innovative, modestly liberal governance regime in which entrepreneurship of a collective kind and innovation in meeting competitive market demand are able to flourish. Iammarino compares the more innovative Italian regions in the late middle ages with those, like Marche, Umbria and Lazio of the papal states, stifled under institutional dogmatism and adapting only slowly.

Innovation and entrepreneurship require talent and crucially the means for producing talent. Moreover, in more adventurous settings institutions for the formation of talent thrived, whether at Esslingen or in the creative apprentice workshops of Florence.

Evolutionary dynamics

The completion of research reported in Cooke et al. (2004) made it possible for the first time to trace the evolution of types of RIS since data on the position of regions studied were available for two time points 10 years apart. Detailed accounts of these regional trajectories may be found in Cooke et al. (2004) but in brief, three things may be said about both the general classification and the dynamic element portrayed.



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