Innovation Drivers and Regional Innovation Strategies

M. Davide Parrilli, Rune Dahl Fitjar, Andrés Rodriguez-Pose

• Publisher: Routledge
• Year: 2016
• eBook ISBN: 9781317370239
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

In the global economy, regional development and innovation are increasingly an imperative to increase the competitive edge of EU economies. While European regions are different in many ways, the innovation capacity of regions, clusters and firms is what makes them capable of building up new and diversified pathways for sustainable growth.

For this reason, Innovation Drivers and Regional Innovation Strategies looks to analyze different knowledge drivers (e.g. entrepreneurial or policy-orientation; scientific and practice-based knowledge modes; institutional innovation support) that influence the innovative and competitive capacity of regions, clusters and firms in Europe. The aim of this volume is to develop an in-depth understanding of these drivers and their implications for the way in which regional and cluster growth may be upgraded.

Innovation Drivers and Regional Innovation Strategies examines the construction of new innovation pathways for regions and clusters in different geographical contexts. The main themes are cluster evolution, regional innovation systems and business innovation modes and capabilities. The objectives are centred on exploring the logic and mechanisms that can be activated as a means to promote innovation and competitiveness within regions and, within these, across and within firms.

Aimed at researchers and academics in the field, this is a thoughtful and innovative new volume that helps define the academic debate.

1 Innovation Drivers and Regional Innovation Strategies

Territorial and Business Insights

Mario Davide Parrilli, Rune Dahl Fitjar, and Andrés Rodríguez-Pose

1. Introduction

As a consequence of the rapidly globalizing world economy, regions and countries of Europe are facing increasing competition and development challenges. In order to sustain high wages and standards of living, European territories need to maintain or improve their levels of productivity relative to competing and emerging regions. This can only be achieved through continuous innovation that consistently improves regional productivity levels. Yet the recipe for success for European regions is unclear. The European territory encompasses a variety of regional traditions, industrial structures, institutional strengths and weaknesses, all of which make for highly different requirements for regional development across different parts of the continent. Together with significant regional differences in terms of resource endowments, production specializations, institutions, social capital, and support programs, the innovation capacity of regions (including their clusters and firms) also varies strongly within Europe. Strengthening the innovation capacity therefore requires building up new and diversified pathways for sustainable growth across the heterogeneity of contexts that make up the European geography (Foray and Van Ark, 2007; Asheim, Boschma and Cooke, 2011; McCann and Ortega-Argilés, 2013). For this reason, the present volume is devoted to analyzing different knowledge drivers that influence this innovation capacity. These drivers are analyzed in the context of local and regional production systems and across firms, which are the critical agents of local and regional development.

The book is original on two counts. On the one hand, it includes a nested analysis of innovation processes, which combines a meso-level perspective on regions and innovation systems with a microlevel perspective on firms, to examine the dynamics of regional innovation and competitiveness both from the perspective of firms and of territories. This multilevel theoretical debate permits a more thorough understanding and discussion of the heterogeneity that exists in any territory in terms of agents, linkages, and potentials that orient (and constrain) the pathways available to improve the innovation and competitive capacity of regions. On the other hand, it also recognizes the mutual interdependence between the wider geographical frameworks of regions and the individual business units. The wider geographical framework provides the social, institutional, and economic context, as well as the shared traditions and competences/specializations that orient business approaches and outcomes. Meanwhile, the business units on their part are the crucial actors that can determine the innovation and development prospects of an entire production and innovation system.

In this introduction, we discuss the recent literature on regions and their knowledge drivers. We then produce a similar analysis on business knowledge capabilities and innovation modes in a way that shows how heterogeneous firms (can) contribute effectively to their own innovation processes and those of their territories. A synthetic section is later presented in which we develop the idea of mutual dependence or interdependence between the regional context and firm innovation processes in determining the potential for economic development within a territory. A short description of the different chapters follows with a similarly synthetic presentation of the research gaps they target.

2. Innovation in a Regional Context

2.1 Regional Evolution

The concept of innovation systems emerged along with related concepts such as clusters and industrial districts in the 1980s and 1990s to highlight the systemic interplay between firms and other economic agents in promoting or deterring innovation. A common theme in all these theories is that firms in regions are mutually interdependent in both their production and innovation processes. Consequently, a large body of research investigating the linkages and networks between firms and with other organizations has been developed, and this has been a central theme in a great number of studies of local and regional industries across many countries over the past 30 years (Piore and Sabel, 1984; Porter, 1998; Nadvi and Schmitz, 1999; Lastres and Cassiolato, 2005; Bellandi and Di Tommaso, 2005; Pietrobelli and Rabellotti, 2007; Becattini et al., 2009; Boix and Galletto, 2009). However, a growing number of contributions over the last 15 years has also emphasized the potential limitations of interaction within regions or clusters, noting that firms and regions must also develop trans-local networks of firms and organizations in order to escape lock-in situations (Henderson et al., 2002; Bathelt et al., 2004; Boschma, 2005; Glückler, 2007; Visser and Atzema, 2008; Rodríguez-Pose and Comptour, 2012). Nonetheless, recent years have seen a renewed interest in clusters revived in academia, as well as in policy-making circles (Menzel and Fornhal, 2010; Parrilli and Sacchetti, 2008; Boschma and Frenken, 2011; Martin and Sunley, 2011; Lorenzen and Mudambi, 2012; Delgado, Porter and Stern, 2014). This reflects the existence of more or less thick business agglomerations that rely on joint actions and external economies (Schmitz, 1995), the related coordinated division and specialization of labor (Piore and Sabel, 1984; Parrilli and Sacchetti, 2008), as well as a continued belief in the ability of clusters to promote the exchange of tacit knowledge. While earlier versions of cluster theory held that this type of knowledge exchange would take place almost automatically through the sheer physical proximity between the actors, recent versions have added alternative dimensions, such as cognitive, social, cultural, and institutional proximity, as potential mechanisms, theorizing that physical proximity would promote the development of proximity in these other dimensions (Audretsch, 1998; Malmberg and Maskell, 2002; Guerrieri and Pietrobelli, 2004; Giuliani, 2005; Belussi and Sedita, 2012; Parrilli, 2012). However, the empirical evidence of a link between non-geographical and physical proximity dimensions remains somewhat mixed, and the question of to what extent permanent physical proximity is actually necessary for successful knowledge exchange therefore also remains unresolved.

A large number of studies are currently developed on this topic, in particular in the European context, where the historic reliance of EU economies on this type of business and territorial configuration make this a pressing topic. This is motivated by the heavy dependence of these economies on small and medium-sized enterprises—SMEs—which may be more dependent on developing external economies to remain competitive. This has been acknowledged in the new approach of the European Commission to the so-called “regional innovation strategies for smart specialization—RIS3” (Foray and van Ark, 2007; European Commission, 2010; McCann and Ortega-Argilés, 2013), which is a coordinated development strategy set up to promote smart and diversified specialization across EU regions and countries.

Within the topic of regional development, the current academic debate focuses on the identification of different patterns of regional evolution across time. This novel topic replaces former approaches to regional development that were mostly centered on the identification of “models” that specific local production systems were supposed to target directly (see Humphrey, 1995). For this reason, a novel round of studies commenced in order to identify critical factors of regional evolution (Knorringa, 2002; Pietrobelli and Rabellotti, 2007; Parrilli, 2009), some of which were and are specifically focused on knowledge drivers (Guerrieri and Pietrobelli, 2004; Menzel and Fornahl, 2007; Ter Wal and Boschma, 2011; Boschma and Fornahl, 2011; Li and Bathelt, 2011; Martin and Sunley, 2011; Crespo, Suire, and Vicente, 2014).

Within this relatively novel approach, a debate is stirred about the strategies that are supposed to generate new competencies and innovation capacity at the local and regional level. The “related variety” approach postulates the importance of moving from current industrial/production specializations to proximate ones as a means to build up new competencies and capacities based upon the current absorptive capacity (Cooke, 2006; Asheim et al., 2011; Boschma and Frenken, 2011; Asheim et al. in this volume). Other scholars prioritize a process of “entrepreneurial discovery” in which entrepreneurs and other regional stakeholders actively explore potential new areas in which the region can build unique competitive advantage (Foray and van Ark, 2007; Foray and Goenaga, 2014). The two approaches may or may not complement each other, depending on whether the entrepreneurial discovery is based on the existing local/regional specializations or on exogenously based capacities (e.g., FDI).

The general debate on the evolution of local and regional production systems as well as the more specific discussion on the most appropriate territorial knowledge management strategy raise the interest of local agents (e.g., firms, technology organizations, cluster associations, chambers of commerce, among others) and regional and local policy-makers. They are interested in this dynamic view of local development as it helps to identify the critical aspects that can activate vibrant processes of territorial growth (EC, 2010). Moreover, the evolutionary approach to regional development may help policy-makers to differentiate stages and instruments that help them plan appropriate, local-specific innovation, and development policies and programs (Tödtling and Trippl, 2005, 2011; EC, 2010; Komninos et al., 2012; Valdaliso et al., 2013).

2.2 Knowledge as a Driver for the Evolution of Regions and Innovation Systems

The importance of knowledge for regional evolution is emphasized in different phases of the cluster life cycle literature (Menzel and Fornahl, 2007; Ter Wal and Boschma, 2011), with particular reference to a large set of mechanisms that help to transcend existing stages (Boschma and Frenken, 2011; Li and Bathelt, 2011; Sisti et al., 2014) and path dependencies (Martin, 2011). This literature is based on a wider economics literature on innovation that highlights a number of partially overlapping concepts and drivers. This includes the role of Research and Development (R&D) expenditure; skilled workforce; absorptive capacity; cognitive, social, and institutional proximity/distance; technological capabilities; industrial/sector competences; and related variety knowledge platforms, among others. All these concepts have been related to the development of local production systems more in general (Audretsch, 1998; Boschma, 2005; Menzel and Fornahl, 2007; Asheim et al., 2011). Among the different knowledge drivers, we focus on a few critical aspects that are currently discussed in the literature and which can have crucial implications for policy-making. First of all, we introduce the concept of the knowledge relatedness of the industries involved in the innovation process (Asheim et al., 2011; Boschma and Frenken, 2011). Knowledge relatedness concerns the absorptive capacity of firms and territories as well as the “cognitive proximity/distance” that is required to be able to absorb the type of knowledge that spurs novel and/or radical innovations (Nooteboom, 2000; Boschma and Frenken, 2011; Iammarino, 2011). This relatively new field of research is currently analyzed under a number of lenses/mechanisms (i.e., institutional, entrepreneurial, labor market, social capital, among others). However, there is an unresolved debate about the degree of openness that regions should pursue within a “related variety” approach. Is it better to favor a higher or a lower “related variety” within the territorial economy, thus a relative specialization? This has implications for the capacity of the local and regional economy to transform its production capacity and to react to exogenous shocks. In fact, once some exogenous shock hits specific industries, regions, and countries, a higher degree of “unrelated variety” may be a better solution, as it helps to reduce the negative impact on other regional and national industries. On the other hand, related variety means cognitive proximity and a higher capacity to extend the local knowledge on the basis of extant knowledge bases, thus making growth easier in periods of relative calm and growth of the economy (Parrilli and Zabala, 2014).

Such an approach has important implications for the investments and strategies that policy-makers set up to promote local and regional development. The question is whether the creation of new industries from scratch or, alternatively, the development of industrial branches that are closely related to (and possibly spin out from) their existing knowledge bases should be promoted. The debate might also stir deeper discussions on the adoption of policy approaches that are more in line with an “entrepreneurial discovery” market-driven type of approach (Foray and van Ark, 2007), vis-à-vis others, which may be connected with a more top-down, policy-inducement approach (Asheim et al. in this volume; Cooke, 2006).

Taking a different lens, the debate is also reflected in the discussion of the path dependence of innovation systems, which is in part mediated by the knowledge bases (analytic vs. synthetic or symbolic; see Asheim and Coenen, 2005) and the technological capabilities managed in the production and innovation system (Martin, 2011) and in part by other institutional and cultural aspects that may contribute in different ways to defining the options for knowledge exploration and market exploitation in regions and clusters (Amin and Thrift, 1994; Parrilli, 2009; Tödtling and Trippl, 2011; Rodríguez-Pose, 2013). Certain regions count with a thicker institutional framework based upon regional (e.g., the Basque Country, Emilia-Romagna) or national public and public/private organizations (e.g., German and French regions) that focus their activities on a reduced number of locally based industries, while other regions may benefit from a more dynamic and variable environment that responds quickly to market signals and/or new revolutionary scientific outputs (Cambridgeshire, south and southeast of England, Sophia-Antipolis in the south-east of France). Starting from these different institutional and social capital bases, processes of path dependence lead regions to develop more or less “related variety,” affecting their ability to respond to the continuously new market challenges. Thus a range of diverse development options—pathways—(e.g., branching out of new sectors or creation of brand-new industries) are available, which may provide different results in different types of innovation systems (e.g., thick vs. thin RISs; Trippl and Isaksen in this volume; see also Martin, 2011).

The discussion on the pathways available to innovation systems needs to be complemented with a debate about the efficiency and effectiveness of such systems. This requires undertaking an in-depth analysis of the micro-components of the innovation systems that also affect the way production systems work. Particularly in the European context, there are a wide variety of agents that participate in the innovation dynamics of regions and production systems, including universities, technology centers, private research centers, business incubators, science and technology parks, venture capitalists, high-tech industries, and knowledge-intensive business services (KIBS), among others. Such variety may help to generate an innovation system, but it may also lead to overlaps and system failures that need to be addressed. This set of organizations may have a major (or minor) impact on the innovation and competitive capacity of regions, industries, and, within these, firms, particularly when these are small and medium-sized enterprises (Cooke, 2001; Parrilli et al., 2010). In particular, the understanding of how innovation systems work becomes crucial. Innovation systems may be disassembled in a number of parts and agents, some of which may be efficient, while others not (Hollanders et al., 2009; Nauwelaers and Wintjes, 2008; Alberdi et al., 2014; Trippl and Isaksen, and Asheim et al. in this volume). Disassembling innovation systems may help identify the actual gaps that exist in each regional innovation system to promote a more effective institutional (and policy) support, as well as a more direct business involvement.

The analysis of regions is crucial in the identification of development/evolutionary pathways that can be targeted and implemented through the dynamism of the private sector and the support of public agents. Notwithstanding this, the actual agents of development and innovation are the firms, thus a well-grounded analysis of the potential prospects for growth of regional economies needs to “zoom” in on these specific “actors” as a means of understanding their key features and overall heterogeneity. The firms are grounded in specific territories, industries, and institutions but also act upon their environments and transform them. Hence, this volume devotes a special section to the presentation and understanding of businesses and their strengths, features, and impacts on innovation and economic development.

3. Business Developmen...

Table of contents

• Cover
• Title
• Copyright
• Contents
• List of Tables
• List of Figures
• Foreword
• Note on Contributors
• 1 Innovation Drivers and Regional Innovation Strategies: Territorial and Business Insights
• Part I Regional Innovation
• Part II Business Innovation
• Index