Revitalising Lagging Regions

Smart Specialisation and Industry 4.0

Mariachiara Barzotto, Carlo Corradini, Felicia M. Fai, Sandrine Labory, Philip R. Tomlinson

• Publisher: Routledge
• Year: 2020
• eBook ISBN: 9781000042467
• Topic: Economics
• Subtopic: Development Economics
• Index: Economics

This Expo book brings together leading academic and policymaker experts to reflect on the significant challenges faced by lagging regions in participating in the European Union's Research and Innovation Strategies for Smart Specialisation (RIS3) programme. In doing so, the book offers a set of new policy recommendations on the design and implementation of appropriate Smart Specialisation Strategies (S3) in lagging regions, which may enable them to benefit from the opportunities of digitalisation and Industry 4.0 (I4.0).

1. Introduction

Smart Specialisation (S3) has quickly become the major component of the European Union’s (EU) Innovation policy through the Research and Innovation Strategies for Smart Specialisation (RIS3) pro-gramme. The basic premise of S3 is a public-private partnership in which public funds are prioritised to support ‘activities’ in particular technological fields at the regional level which have the potential for innovation, ‘entrepreneurial discovery’ and commercial gain. RIS3 seeks to achieve this through a ‘bottom–up process’ involving local stakeholders and which deliberately builds upon a region’s existing and historic advantages and capabilities. It is anticipated these may be combined with new general purpose technologies (GPTs) such as ICT, electronics, and digitalisation which are driving the emergence of Industry 4.0 (I4.0) so as to stimulate knowledge and innovation opportunities. As such, S3 has been labelled as being ‘place-based’ and is a return to a more selective (and vertical) mode of industrial policy intervention.

There has been much rhetorical excitement surrounding RIS3, especially in its perceived potential to generate an industrial renaissance in mature industrial and lagging regions by breathing life into new ‘phoenix’ industries. Yet the inherent logic of S3 can extenuate regional imbalances since it may unduly favour more dynamic and leading regions, where greater entrepreneurial and technological capabilities and good networks already reside, and from which new opportunities are more likely to arise. Indeed, much of the empirical evaluation of RIS3 has so far tended to focus upon its application in more dynamic and exemplar regional contexts. In contrast, in lagging regions with ‘hollowed out’ manufacturing bases these capabilities are significantly diminished, which weakens their ability to participate in and benefit from RIS3 initiatives.

S3 was, in part, an EU response to the Great Financial Crisis to ignite European innovation and productivity growth at the regional level, and in this context has been described as the biggest and boldest experiment in regional industrial policy ever implemented.¹ Yet the capacity of S3 to transform the growth potential of lagging regions has been seriously questioned. Indeed, since 2008 there has been a significant reversal of the trend towards widespread inter-regional convergence to one of widening inter-regional divergence in terms of economic performance.² This consequently represents a significant challenge to the legitimacy of RIS3, especially given the difficulties of reconciling the possible adverse impacts of the implementation of S3 for balanced regional growth within the context of the EU’s wider policy aims of building ‘inclusive, innovative and reflective societies’³ and EU 2014–2020 Cohesion policy.

These issues are especially pertinent with the challenges and opportunities associated with Industry 4.0 (I4.0) and the so-called Fourth Industrial Revolution. This refers to increasing automation, digitalisation and data exchange in manufacturing technologies such as artificial intelligence, robotics, cyber-physical systems, the Internet of things and cloud computing. The emergence of these new technologies will cause major disruption to processes in both manufacturing and services. For example, digitalisation will open up new opportunities for the interaction between producers and consumers, possibly enabling the creation of entirely new businesses or transforming existing ones through the creation of new platforms and big data analytics. This can offer lagging regions the potential to re-invigorate traditional industries through greater product customisation and exploiting new synergies between R&D and manufacturing. In doing so, the re-shoring of production activities may become more attractive.⁴

However, there is a real danger that I4.0 and the uneven distribution of capital intensive manufacturing displacing labour, may unduly favour more dynamic regions and will introduce new layers of socio-economic and regional divides. Indeed, so called digital divides already exist not only between countries, but also between regions in the same country and the rich and poor in society (see Chapter 6). Furthermore, in many lagging regions there is little knowledge and/or adoption of new I4.0 technologies. This makes it extremely difficult for lagging regions to identify the potential and exploit the opportunities of I4.0 in the context of their own industrial base.

Moreover, current policy responses and practices, in the implementation of S3 vary significantly across countries and between regions. The focus tends to be based largely on specific initiatives and projects and a framework characterised by a simple distinction between leading and lagging regions. Where initiatives aimed at lagging regions – such as the RIS3 Lagging Regions project⁵ – exist, they have, as yet, tended to offer limited opportunities for a transition towards advanced manufacturing.

This Regional Studies Expo book offers a new set of perspectives on the challenges that lagging regions face when participating in RIS3; how they are seeking to embrace and implement both S3 and I4.0. It specifically explores how lagging regions can address their inherent weaknesses, and benefit from extra-regional collaboration, skills and technological upgrading and hence take advantage of both S3 and I4.0. In doing so, the book draws upon case evidence from lagging regions across Europe, and examines how RIS3 policies might be better tailored to enable them to pursue a new innovation-led pathway. This is especially timely, given the EU will soon commence Horizon Europe, its €100 billion research and innovation programme for 2021–2027.

The book comprises of six further chapters, each written by leading academic and policy experts in S3, I4.0 and place-based industrial strategy. Chapter 2 by Philip McCann and Raquel Ortega-Argilés sets the scene in outlining the basic concepts of S3, before examining the extent to which RIS3 initiatives are employed in lagging regions. In Chapter 3, Mariachiara Barzotto, Carlo Corradini, Felicia Fai, Sandrine Labory and Philip Tomlinson explore the potential benefits and pitfalls for lagging regions from engaging in extra-regional collaboration – especially between lagging and leading regions – using case examples from Cornwall in the UK, and Puglia in Italy. Chapter 4, by Jonathan Potter and Helen Lawton Smith, then considers the Polish experience of implementing S3, focusing on the regions of Pomorskie and Malopolskie. In Chapter 5, Sonja Šlander and Peter Wostner then focus upon the disruptive nature of I4.0 and examine how Slovenia is using S3 and related policies to successfully transition towards the new technologies of I4.0. Chapter 6, by David Bailey and Lisa De Propris considers the potential opportunities and adverse consequences of I4.0, before outlining policy suggestions to ensure lagging regions are able to take advantage. Finally, in Chapter 7, Kevin Morgan draws on the Welsh experience, to make the case for a more inclusive, regionally focused EU innovation policy framework which gives greater weight to social innovation and the Foundational Economy. Each chapter concludes with a set of identified challenges and specific policy recommendations.

Mariachiara Barzotto

[email protected]

Carlo Corradini

[email protected]

Felicia M Fai

[email protected]

Sandrine Labory

[email protected]

Philip R Tomlinson

[email protected]

References

1 Radosevic S., Ciampi Stancova K. (2018) Internationalising smart specialisation: Assessment and issues in the case of EU new member states. Journal of the Knowledge Economy, 9(1): 263–293.

2 European Union (2014) Investment for jobs and growth. Promoting development and good governance in EU Regions and cities: Sixth report on economic, social and territorial cohesion. Brussels: Publications Office of the European Union. Available online at: http://ec.europa.eu/regional_policy/cohesion_report [Accessed 27 February 2019].

3 European Commission (2017) Europe in a changing world – Inclusive, innovative and reflective societies. HORIZON 2020 – Work Programme 2016–2017. Brussels. Available online at: http://ec.europa.eu/research/participants/data/ref/h2020/wp/2016_2017/main/h2020-wp1617-societies_en.pdf [Accessed 27 February 2019].

4 De Propris L. and Bailey D. (2018) Industry 4.0, new industrial spaces and implications for industrial strategy. In C. Berry (ed.) What We Really Mean When We Talk About Industrial Strategy. A Future Economies Publication, Manchester Metropolitan University. https://www2.mmu.ac.uk/media/mmuacuk/content/documents/business-school/futureeconomies/WHAT_IND-STRAT___BERRY_NOV18.pdf [Accessed 27 February 2019].

5 Further information can be found at: http://s3platform.jrc.ec.europa.eu/ris3-in-lagging-regions [Accessed 27 February 2019].

2. Perspectives on Smart Specialisation Policies in Lagging Regions

1 Introduction

The RIS3 agenda has become a central plank of EU Cohesion policy. It is aimed at spearheading the drive towards research, innovation, and entrepreneurship across all EU regions, especially its weaker and economically lagging regions.¹ In this regard, RIS3 is regarded as a critical component in reversing the widening EU regional imbalances that have arisen since the 2008 global economic crisis.

However, regional innovation ecosystems in lagging regions often appear to be weak. This is largely due to poorly connected industrial and knowledge networks, alongside a lack of technological diversity to take advantage of changing market conditions. These inadequacies are a significant challenge for cohesion policy, which requires enabling lagging regions to find new innovation-led pathways. This will involve the upgrading and diversification of their technological capabilities so they are able to adapt to the modern economic challenges.

This chapter reviews the basic concepts of S3, and how these might be employed to enhance innovation led growth. In doing so, the chapter briefly outlines the extent to which EU smart specialisation initiatives are being adopted in lagging regions.

2 Smart Specialisation Strategy (S3): Concept and Basic Rationale

Many of the building blocks for smart specialisation strategies (S3) were already evident in different forms of modern regional innovation policies. At heart, S3 is a policy prioritisation framework aimed at finding ways to enhance the scale and effectiveness of a region’s entrepreneurial and innovation processes.

This is in marked contrast to previous generations of regional development policies. These predominantly focused upon the ‘importing’ of new technologies (via inward Foreign Direct Investment – FDI). Often, there was a mismatch between new imported technologies and a region’s existing technology base,² which was also reflected in skills and supply chain mismatches. These misalignments made it difficult to develop technological synergies and new regional growth paths. So, while short-term goals related to employment gains would often be achieved, in the long-run these technology transfer-types of activities were often very limited. Where EU Cohesion Policy resources were employed to facilitate FDI – via for example subsidies for the establishment of special development areas, new infrastructure provision or new land reclamation and rehabilitation activities – the lack of embeddedness and the resulting short lifespans of foreign firms would often act to discredit the policy interventions.

S3 gave rise to a completely new way of thinking about these issues. It focuses upon promoting a region’s entrepreneurial and innovation potential. This is best achieved by fostering local entrepreneurial search processes through the ideas, insights and actions of local entrepreneurs which are often the central drivers of change. As such, S3 is about technological and capability upgrading, alongside the diversifying of the regional industrial base. This is especially important in the case of lagging regions since they do not have the capabilities many other regions have. Enhancing capabilities may, however, be achieved through collaborating with external partners – hence the importance of fostering connectivity not only within but critically between regions (see Chapter 3).

It is important to note S3 is not in any way meant to be dirigiste. On the contrary, it is aimed at transforming policy-thinkin...

Table of contents

• Cover
• Title Page
• Copyright Page
• Table of Contents
• Forewords – Alessandro Rainoldi and Dominique Foray
• Contributors
• Executive Summary
• 1. Introduction
• 2. Perspectives on Smart Specialisation Policies in Lagging Regions
• 3. An Extra-Regional Collaborative Approach to Smart Specialisation
• 4. Smart Specialisation in Eastern Europe: Insights from two Lagging Polish Regions
• 5. Transformation and Transition to Industry 4.0: The Slovenian Smart Transformational Approach
• 6. Industry 4.0, Regional Disparities and Transformative Industrial Policy
• 7. The Future of Place-Based Innovation Policy (As IF ‘Lagging Regions’ Really Mattered)
• Glossary