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"Regional Innovation Trends and Policy Options

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Presentation on "Regional Innovation Trends and Policy Options" made at the Seminar on "Innovations and challenges in the management of a regional policy, held in Bratislava, Slovak Republic, 22 February 2017. Presentation by Joaquim Oliveira Martins, Regional Development Policy Division, OECD.

More information: www.oecd.org/gov/regional-policy/innovations-and-challenges.htm

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"Regional Innovation Trends and Policy Options

  1. 1. REGIONAL INNOVATION: TRENDS AND POLICY OPTIONS Joaquim Oliveira Martins Regional Development Policy Division, OECD Seminar: "Inovácie a výzvy v manažmente regionálneho rozvoja“ 22 February 2017 Bratislava, Slovak Republic
  2. 2. RECAP OF RELEVANT PRODUCTIVITY/ REGIONAL OUTLOOK FINDINGS
  3. 3. An increasing gap between firms at the frontier and the others Labour productivity; index 2001=0 Source: Andrews, D. C. Criscuolo and P. Gal (2015), “Frontier firms, technology diffusion and public policy: micro evidence from OECD countries”, OECD. OECD (2015), The Future of Productivity, OECD. 3
  4. 4. Future of productivity: The problem is diffusion
  5. 5. R&D and patents: what is the role in catching-up? Source: OECD (2016) OECD Regional Outlook 2016: Productive Regions for Inclusive Societies, http://dx.doi.org/10.1787/9789264260245-en They don’t appear to be as discriminating a factor as the tradable sector in promoting productivity catching up
  6. 6. SOME CONTEXT FACTS ON SCIENCE, TECHNOLOGY, AND INNOVATION
  7. 7. High concentration of many innovation resources • Business R&D on the rise, government R&D was hit by budget consolidation • 250 multinationals accounted for 70% of R&D expenditure, 70% of patents, almost 80% of ICT-related patents, and 44% of trademarks filings
  8. 8. Knowledge-based capital: large share of business investment in several countries OECD (2015), Science, Technology and Industry Scoreboard 2015: Innovation for growth and society
  9. 9. An element of knowledge- based capital that can: • Boost productivity growth – More comprehensive studies needed to better assess impact on productivity growth • Contribute to well-being • Further inclusiveness and development Data-driven innovation: capturing the benefits
  10. 10. Firms collaborating on innovation with higher education or research institutions, by firm size, 2010-12 As a percentage of product and/or process-innovating firms in each size category 10 OECD (2015), Science, Technology and Industry Scoreboard 2015: Innovation for growth and society Collaboration with public/ higher education for innovation: not always easy to achieve
  11. 11. Challenge to boost international innovation collaboration of SMEs: Slovak SMEs active
  12. 12. Global value chains intensifying: Is Slovak Republic adding enough value? Foreign value-added content of exports by country As a percent of total exports 1995 and 2009 12 OECD-WTO: Statistics on Trade in Value Added, (database), doi: 10.1787/data-00648-en Over 40% of export value added of Slovak Republic came from foreign value added
  13. 13. WHY REGIONS MATTER FOR INNOVATION, AND INNOVATION MATTERS FOR REGIONS
  14. 14. Develop a policy mix to meet the needs of the region Knowledge Generation Knowledge Diffusion Knowledge Exploitation Traditional instruments Technology funds R&D incentives/supports/ grants Support to scientific research and technology centres Support to infrastructure development Human capital for S&T Science parks Technology Transfer Offices and schemes Technology brokers Mobility schemes Talent attraction schemes Innovation awards Incubators Start ups support innovation services (business support and coaching) Training and awareness- raising for innovation Emerging Instruments Public private partnerships for innovation Research networks/poles Innovation vouchers Certifications/ accreditations Industrial PhDs Support to creativity Innovation benchmarking Competitiveness poles Competence centres New generation of scientific and technological parks and clusters Venture and seed capital Guarantee schemes for financing for innovation Experimental instruments Cross-border research centres Open source-Open science markets for knowledge Regional Industrial Policy Innovation-oriented public procurement Source: OECD (2011) Regions and Innovation Policy, OECD publishing,.
  15. 15. Number of instruments used by level of government 0 5 10 15 20 25 30 Austria Belgium Canada Germany Mexico Switzerland United States Czech Republic Denmark France Italy Netherlands Poland Spain Sweden Finland Hungary Korea Norway Portugal United Kingdom (England) Notes: National refers to the number of instruments used at national level. Regional refers to instruments reported at regional level. Common instruments refers to the number of instruments reported at both national and regional level, which includes those instruments reported in the count of national and regional instruments. Source: OECD (2011) Regions and Innovation Policy, based on an OECD-GOV Survey. National Regional Common instruments Some instruments are more frequent at regional level, some at national level, and many at both levels. Instruments reported in common are not necessarily a duplication. They may be complementary: • Shared financing •Different target groups and purposes Multi-level governance of innovation policy
  16. 16. Changing role of regional innovation agencies Traditional focus New approaches Place of agency Outside the system Actor in the system Role Top-down provider of resources Facilitator, node in the system Rationale for intervention Market failures Systems failures, learning failures Mission Redistributing funds Identifying and reinforcing strengths in the system: a change agent Instruments Isolated Policy mix Accountability and control mechanisms Administrative and financial Strategic, goal-oriented, additionality Autonomy Focused on execution Expanded to strategic decisions Source: OECD (2011) Regions and Innovation Policy, OECD Publishing, Paris.
  17. 17. OECD (2011) Regions and Innovation Policy, OECD Publishing, Paris based on Benneworth, P. and A. Dassen (2012), Strengthening Global- Regional Connectivity in Regional Innovation Strategies, Regional Development Working Papers, OECD Publishing, Paris. Internal and international networks matterInternationallinkages Type of regional innovation system (RIS)
  18. 18. IMPLICATIONS FOR SMART SPECIALISATION STRATEGIES
  19. 19. • A skilled workforce • A sound business environment • A strong and efficient system for knowledge creation and diffusion • Policies that encourage innovation and entrepreneurial activity • A strong focus on governance and implementation Updated OECD Innovation Strategy
  20. 20. • From “picking winners” to facilitating and supporting entrepreneurial self- discovery in regions • Activities, not sectors per se, are the level for setting priority setting for knowledge investments – Important role of general purpose technologies Core elements of a smart specialisation policy • Smart specialisation entails strategic and specialised diversification • Evaluation and monitoring… requires flexibility in policy making to be able to terminate or reallocate public support to R&D and innovation…. so clear benchmarks and criteria for success and failure are needed
  21. 21. • What can help support the tradable sectors – Challenges to operationalise this • Focus on the gaps in S&T-intensive indicators (R&D and patents) or productivity and jobs – What elements have to be IN the region itself and what assets can be sourced from outside the region • Consider instruments to boost productivity (& jobs) – While literature documents that reality is not always the linear model from R&D to innovation, policies typically assume it is • Some actors merit greater attention in these strategies – Unsung heroes (vocational training) Common missing elements of smart specialisation strategies
  22. 22. Universities as actors in developing smart specialisation strategies: challenges • Universities should always be “at the table” for strategy development – But with sufficient private sector involvement to keep strategies balanced and identify the most relevant areas for knowledge transfer • Examples of an excessive influence that results in strategies focused on science over economic benefits – In part because universities are a stable partner, sometimes have strong representative groups, are able to attend meetings • Examples of insufficient university involvement – Due in part to lower levels of regional engagement by some globally-oriented universities – And a lack either of an organised strategy or willingness to involve universities in it 22
  23. 23. University-based S&T parks and incubators • Regional and national governments often co-finance infrastructure – This is a visible investment for ribbon-cutting, but does the return for regional economic development always meet expectations? – Those with special equipment/thematic focus may have greater rationale for public funding – Everybody wants one—so the spatial distribution most appropriate for firm needs or economic impacts is not always behind the choice • Many science-based incubators have researchers, but few “entrepreneurs” – Researchers with start-ups report in interviews they have not grown in size much because they like to do research, not sales – Some start-ups not based on university research per se, but incubator an attractive environment to help start a firm given special conditions or labelling effect 23
  24. 24. • Non-metro innovation can be any sector, not just the primary sector. • The potential is particularly great in services – and perhaps especially in logistics and services allied to manufacturing. • Innovation in low-density environments is more likely to be driven by one person than metro-based innovation. • Such innovations may lead to patents, but many do not. • Many such innovations are likely to have a niche market, primarily significant in a particular place, but some have global effects. • It may take time for such innovations to exhibit their full value, so they tend not to attract venture capital. 24 Observations on innovation in regions that are not large metro areas
  25. 25. 25 Policies to promote innovation outside of leading regions Source: OECD (2016) OECD Regional Outlook 2016: Productive Regions for Inclusive Societies, http://dx.doi.org/10.1787/9789264260245-en
  26. 26. A few learning points from OECD regional innovation reviews (1/2) • Expectations for knowledge transfer to be matched with regional context – Regional growth model, regional innovation system, type of university, etc. • Research and curricula relevant for the existing firm base may have greater economic impact – Even if there is a bias in regional approaches towards patents and start-ups as indicators of “third mission” engagement – And timing delays in updating curricula are a recurring complaint of firms seeking knowledge transfer in the form of educated workers • Mapping university offer and ensuring brokers to reach SMEs is costly – And cost not easily borne by universities themselves 26
  27. 27. A few learning points from OECD regional innovation reviews (2/2) • Quality of technology transfer offices a consideration – So merging of offices across universities has been one way to improve quality and efficiency • In-firm placement of university PhDs/recent graduates can be helpful – But in some cultural contexts, firms resistant to this form of knowledge transfer • Universities can play a key “hub” role in the region and “gateway” role to the world to bring knowledge to the region’s firms – As evidenced in co-patenting data and other analyses 27
  28. 28. SPECIAL CASE OF REGIONAL INNOVATION POLICY IN CROSS- BORDER AREAS
  29. 29. Ten conditions favourable to cross-border collaboration for innovation Framework conditions 1. Geographic accessibility 2. Socio-cultural proximity 3. Institutional context conditions 4. Cross-border integration Innovation system conditions 5. Economic specialisation 6. Business innovation model 7. Knowledge infrastructure 8. Innovation system interactions Governance and policy context 9. Governance 10. Policy mix 29 Source: OECD (2013); inspired and adapted from Trippl (2009)
  30. 30. Defining the “functional” cross-border area for innovation support can differ from other functions Narrow border area All-island definition (international border denoted by gray line) Note: These maps are for illustrative purposes and are without prejudice to the status of or sovereignty over any territory covered by these maps. Source: Special EU Programmes Body. Source: Irish Academy of Engineering & InterTradeIreland (2010), Infrastructure for an Island Population of 8 Million. 30 High-tech systems Life sciences Source: Competitiveness Indices: BAK Basel Economics, 2012
  31. 31. 31 Generally seems to work • Attempts to allow funds from one country go to another (some exceptions) • Certain innovation projects in highly regulated sectors (health, energy) • International branding efforts often caught up in political sensibilities Mixed results depending on the cross-border region Particularly difficult • Cross-border linkages of firms with providers (e.g., innovation vouchers) • Cluster-related support for areas of common competencies • Joint prioritised research • Access to shared S&T parks, scientific installations, joint centres • Broad university collaborations; collaboration in specific fields easier • Researchers look for excellence over proximity • Students need right framework conditions (diploma recognition, financing, etc.) • Firm networking and matchmaking; leading to collaboration? Experiences using different instruments on a cross-border basis show…
  32. 32. 32 Innovating beyond borders Defining the functional area • Devote more efforts to strategy development and policy intelligence • Mainstream the cross- border element, and if not, align or allow for programme flexibility • Make greater use of opportunities created by the border • Publicize success stories of cross-border instruments Governing cross-border collaboration Aligning incentives and working together Making cross-border instruments work Learning from international lessons • Look at what the data says, but don’t wait to start • Only pursue the cross- border element when it makes sense • Allow flexibility in the area definition so as to not create unhelpful new borders • Don’t under-estimate the importance of other “hard” and “soft” factors beyond innovation • Give politicians a reason to care about the issue • Identify for supra/national governments where they can help local/regional efforts • Understand different costs and benefits, and their alignment, for a long-term, trust-based collaboration • Engage non-public actors in governance, with some form of secretariat Overview of recommendations for promoting regional innovation strategies cross-border
  33. 33. THANK YOU!

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