10_Lect_Conceptualisation, and Implementation of Smart Specialisation Strategies

Lecture 1 - Introduction: economic geography and its recent paradigms
Evolutionary
Economic
Geography
Summer
Semester
2021
10th lecture
27/05/2021

8) 20-05: Strategic Thinking in Regional Development, Strategic
Spatial Planning and Regional Attractiveness
9) 25-05 (Tuesday): Recap > Corporate Spatial Responsibility, and
Strategic Coupling (Global Value Chains, GVC today or next)
10) 27-05 (Thursday): Strategic Coupling recap >
Smart Specialisation Strategies in Today’s Globalized World
11) 01-06 (Tuesday): New Directions in Economic Geography:
Classic versus Alternatives Concepts and Practices of Economic
Growth and Regional Development (Global Value Chains)
(google drive for recordings)
Lectures, April, May, June 2021
Tuesday, 10:15 – 11:45 | Thursday, 10:15 – 11:45
OLAT

Recap
From Planning
to regional
attractiveness
strategies

Regional attractiveness support through
Place brands have the capability of providing something for
everybody, only because and only when everybody creates them. >
governance exercise
Place branding through strategic spatial planning enhances the
needed connectedness among multiple place stakeholders and
communities. Place branding will play an important role in
communicating a place’s structural changes, encouraging strategic
visions, providing integration among a range of sectorial and multi-
spatial level plans (for example, national, regional and local).
Integrated in wider planning
Governance exercise
Co-created or co-produced

Open to multidisciplinary critique

Open to multidisciplinary critique
Saudi Arabia must cease the ill-
treatment of Ethiopian migrants

Strategic coupling (linked or connected)
The notion of strategic coupling constitutes a central concept
within the wider Global Production Networks framework
(Coe et al. 2004; Yeung 2009).
It describes the interaction ‘between regional economies
and global production networks (multinational
corporations/trans-national corporations) that is mediated
through specific action and practices of key actors and
institutions’ (Coe et al. 2004, p. 482) > fulfil strategic needs
Drives regional development through the
processes of value creation, enhancement
and capture.

Evolution of Huawei’s Embeddedness in Europe
Headquartered
in Shenzhen,
Guangdong.
 Strategically, Huawei’s embeddedness in Europe has
been pushed forward in four phases:
 Exploratory embeddedness (1996-2000),
 Strategic linkage (2001-2004),
 Strategic embeddedness (2005-2010),
 Strategic coupling (2011 up to now).
 Huawei started from lower-end customers in a
specific market and gradually turned to large-
and medium-sized enterprises.
 Huawei started from less-challenging markets
in Eastern Europe to more challenging ones in
across Europe.

1996 – present
Establish networks
'Cementing' their presence
More competitive
European markets

Embeddedness in
China
Embeddedness in Russia
Embeddedness in Eastern Europe
Embeddedness rest of Europe
Both:
Evolutionary process
corporate social responsibility report 2021

 Huawei started its path into Europe from Russia.
 It set up its Moscow Office in 1996.
 In 2000, Huawei made its breakthrough on the Russian market by successfully
closing contracts with Moscow Mobile TeleSystems’s (MTS)
 In 2000 Huawei established an R&D center in Stockholm, Sweden, to enhance
the company’s core competence
Guo Ping, deputy chairman of Huawei, with the head of the
Russian cellphone carrier MTS, Alexei Kornya, at the Kremlin in
Moscow. Behind them are the Chinese and Russian leaders, Xi
Xinping, left, and Vladimir V. Putin. (Credits Alexander
Zemlianichenko)
Source 2019
Moscow Office
in 1996
And R&D center
in Stockholm in
2000

Strategic Embeddedness Phase between 2005 and 2010
 Contracts signed: 2005 with Vodafone a Global Framework Agreement, as
Vodafone’s preferred telecom equipment supplier.
 Selected as supplier: In the same year, Huawei was selected as a preferred 21CN
supplier by British Telecom, supplying BT’s 21CN with multiservice network access
(MSAN) components and optical transmission equipment.
 Entering new markets: In 2006, Huawei Austria was established.
 Huawei signed with Vodafone a strategic cooperation agreement for 3G
handsets in 2006, and in 2007, won Vodafone’s “2007 Global Supplier Award,”
the only network equipment supplier;
 Established a joint venture: In 2007 a joint venture with Global Marine, providing
end-to-end submarine network solutions.
 Established complementary R&D: Huawei European Research Institute was
established in 2008, headquartered in Munich, Germany.

 On the 10th anniversary of its entry into European markets, Huawei announced
its intention to make Europe its second homeland and become a “European
company” by investing more and getting more open-minded.
 Engaging more high-end activities: The company began its strategic coupling in
Europe. With ever-deepening two-way economic, technical, social, cultural, and
institutional embeddedness, Huawei created in Europe “glocalized” R&D,
production and operations, and marketing and service networks.
 Shared ecosystems: Huawei and customers, suppliers, and sub-suppliers share
the same business ecosystem that thrives on shared success, so that all values
generated in networks are shared with customers around the globe and the
industry ecosystem sees a sound and sustainable development.
Huawei has made strategic coupling in Europe since 2011
Goal Global company

Strategic coupling primarily via R&D
 In 2012, Huawei stepped up investments in Britain and
established a new R&D center in Finland.
 In 2013, Huawei set up in London to manage global financial
risks and ensure that its financial operations remain
efficient, secure, and standard-compliant.
 Huawei’s European Logistics Center was put into official
operation in Hungary
Results
 Sales revenue in Europe reached USD 5.23 billion in 2013, an
increase of 25% year-on-year.
Local procurement has boosted local employment and development, and
deepened technical and innovation exchanges between enterprises in Europe
Huawei has made strategic coupling in Europe since 2011

corporate report 2020
The company has at least 10% of its sales revenue put in R&D
:::remarkable for the local economy i.e. Europe:::
R&D center in
Stockholm in
2000

A Comparison Between GPNs of Siemens and Huawei From the
Perspective of Embeddedness
Greater contributions to local industrial agglomeration; advancing
reform and innovation in China’s industrial system; institutional ties
Introducing technology, getting embedded in local
industry; little impact on institutional changes
Social
responsibility ?
Why?

When complementary effect exists between regions and global production networks
(multinational corporations), a developmental process of strategic coupling will take place
through which the advantages of regions interact positively with the strategic needs of actors in
these global production networks.
Key regional assets include the presence of research universities, the availability
of skilled labour and an attractive residential environment for creative workers;
Coe and Wai-chung Yeung 2015
Bear in mind
‘dark sides’
of strategic
coupling
Phelps et al. 2017

Bear in mind
‘dark sides’
of strategic coupling
Phelps et al. 2017
Ruptures and frictions between the GPN and the
region as well as within the region

Strategic coupling > summary
 First, it is strategic in that it needs intentional and active intervention on
the part of both regional institutions and global production network
actors to occur (multinational corporations // trans national
corporations).
 Second, it is time–space contingent (dependent), as it is subject to
change and is a temporary coalition between local and non-local actors.
 Third, it transcends territorial boundaries as actors from different spatial
scales interact.
Many of the key strategic decisions that determine
the nature of coupling within a particular region are
taken outside its bounds by actors associated with
other spatial scales (for example, national, global).
:::phases of decoupling and subsequent recoupling:::
Coe and Wai-chung Yeung 2015

Strategic coupling > Evolutionary perspectives
 Strategic coupling can be viewed in evolutionary terms, suggesting that
regional institutions’ capacities to bargain with Trans National Corporations
(TNCs)/Multinational Corporations will reflect the legacy of previous
strategies and forms of investment. > but is the case the result of legacies?
 Evolutionary processes related to strategic coupling have accelerated through
the growth of time-based competition and intensified mobility of capital
:::phases of decoupling and subsequent recoupling:::
 Prominent regional ‘hotspots’ in the economic geography literature include Silicon
Valley, the Boston region, Cambridge (UK), the so-called ‘Third Italy and Baden-
Württemberg’ (Saxenian, 1994, 2006; Bathelt, 2001; Huggins, 2008).
 Accounts of the development of such regions have emphasized their endogenous
dynamism rather than exogenous linkages (though see Markusen, 1999; Huggins,
2008), generating high rates of innovation and entrepreneurship and supported by
overlapping social and business networks.
Strategic coupling? e.g. in entrepreneurial regions
Results can also be achieved without strategic coupling
More Endogenous
Less exogenous linkages

Strategic coupling > Evolutionary perspectives
AnnaLee Saxenian
Regional Advantage: Culture and Competition in Silicon Valley
and Route 128
One argument
Explains the continued success of small size firms as a
product of cooperative networking arrangements which
promote flexibility & collaborative learning, while the
vertical integration of the latter, associated with the
dominance of large firms, resulted in relative decline.
Counterargument
Silicon Valley is itself the birthplace of many renowned TNCs
in the electronics and computing industries with firms such
as Fairchild, Intel and National Semiconductors generating a
number of subsequent spin-offs. As such, these dynamic
growth regions can be seen as generator regions for GPNs
(TNCs dominate), spawning a variety of lead firms which
tend to retain their headquarters there.
Small size firms = success
Small size firms = success = TNCs

Evolutionary perspectives > One way?
The-boys-of-silicon-valley
Combination of
approaches
Cultural
elements
Knowledge
flows
Governance
arrangements

Biden Calls for $50 Billion to Boost U.S. Chip
Industry
Source
Yes, public
investment
Also policies,
regional
development
policies
And Europe?
Reinforcing,
boosting,
expanding
specializations

Evolutionary Economic Geography

Smart Specialisation Strategies
OLAT
 The notion of smart
specialisation was conceived
around 2009
 Attracted the interest of
regional development policy
specialists
These origins are connected to
discussions within the group about
foreign R&D in European regions
and the ways in which these
regions could be more attractive to
global firms’ location strategies
(Foray and van Ark, 2008).

Before advancing
A smart specialisation strategy means the national or regional
innovation strategies which set priorities in order to build
competitive advantage by developing and matching research and
innovation own strengths to business needs in order to address
emerging opportunities and market developments in a coherent
manner, while avoiding duplication and fragmentation of efforts; a
smart specialisation strategy may take the form of, or be included in,
a national or regional research and innovation (R&I) strategic policy
framework.
Source
Source

Smart Specialisation as policy
 The idea of smart specialisation policy
was not conceived as a planning doctrine
that would require a region to specialise
in a particular set of industries.
It seeks robust and transparent means
for nominating those activities, at
regional level, that seem likely to benefit
from R&D and innovation.
Enhance regional assets through R&D

Smart Specialisation as means
Rather than suggesting, for instance, that
Galicia, Spain, which has an important
fisheries sector, should intensify its
specialisation in this industry
 It is not about requiring a specialization > but providing the means
for a better understanding of the potentials of the regional assets >
primarily those that could benefit more from R&D
Smart specialization policy provides a
means to assess whether fisheries
would benefit from more R&D and
innovation and whether Galicia should
‘specialise’ in the development of new
innovative solutions for this industry.

Smart Specialisation > engage politics
The smart specialisation framework encourages policy-
makers and stakeholders to ask themselves the important
questions about the future of their region:
Where do we want to see our region positioning itself in
the future knowledge economy and how do we implement
the policies necessary to conform to our collective and
strategic vision?

How to engage politics
Convincing of potential benefits > shaping discourses ideal long-term
What are the activities that we
wish to develop and what
structural changes do we wish to
make?
Smart specialisation framework
is particularly concerned with
regions that are less advanced
to improve their capabilities in
certain domains.
A means of achieving greater
efficiency in resource allocation
and coordination of activities at
system level (member-state and
EU level).

Prime example: 2014 – 2020 – 2021 – 2027
This is where the principle of smart specialisation emerged as a
strategic and integrated approach at regional level.
Be instrumental in investing Structural Funds more efficiently:
 Strengthening research, technological development and
innovation (R&I target);
 Enhancing access to and use of information and communication
technologies (ICT target).

Strategies for Smart Specialisation (RIS3) Platform
https://s3platform.jrc.ec.europa.eu/
Grand societal
challenges
Research and Innovation Strategies
for Smart Specialisation (RIS3)
Platform
hosted by the
Joint Research Centre (JRC)
Seville, Spain

This means it is a pre-condition related to the effective use of EU funds, which
should be fulfilled by the time an Operational Programme is approved.
Europe (EU) 2020 strategy
Strategic and integrated approach
Critique
 Are we still talking about a place-based innovation policy?
 Are there enough ‘roles’ in the knowledge economy ‘play’?
 Is there a risk that some regions will not get a share of the
knowledge economy, even if they would like to have a smart
specialisation strategy?

 What matters in smart specialisation is the development of
new specialties, through which regional systems will experience
structural changes.
What matters
As a result of various contributions, it became increasingly
clear that the modus operandi of smart specialisation as
policy approach was very much in coherence with the
regional policy level and that smart specialisation as a policy
tool to generate structural changes

Three main episodes of a smart specialisation
strategy
Entrepreneurial discovery and spillovers > the discovery is
the fact that it is possible to move from one
product/good/service to another on the basis of a similar
set of engineering capabilities and techniques;
Entry and agglomeration > of similar and complementary
businesses (cluster formation);
Structural changes > in the form of the transition from an
old business to a new one.
With // without a specific policy

Examples: 18th century
This was in 1796 in the region of
Morez – a small town on the
border between France and
Switzerland. Pierre-Hyacinthe
Caseaux discovered that from
his production of nails he could
switch to the production of
glasses (spectacles) using the
same techniques and
capabilities.

Examples: 20th century
“Precision Mouldmaking since 1946”
Anibal H. Abrantes created the first
mould manufacturing company in
Portugal, the main market for which
was glass-making. However, the latter
was in decline and Abrantes very
quickly saw the economic potential
offered by the new plastic products
market. He observed the rapid
development of ‘plastic firms’ in a
large number of sectors (toys,
electrical equipment, household
utensils and articles). He travelled all
over Europe and brought back all
sorts of plastic products;

This entrepreneurial discovery was to have two effects (Sopas, 2001):
providing an exceptional boost to the mould manufacturing industry in which
the Marinha Grande cluster still plays a very important role today and
encouraging the setting-up of a large number of firms producing plastic
articles in the same region. As in Morez, the sequence is infallible and the
industrial dynamic very virtuous:
 entrepreneurial discovery
 entry and agglomeration,
 structural change at the regional level
Examples: from 1946 to present
from to

Finland: pulp and paper companies
A few Finnish entrepreneurs viewed
nanotechnology as a promising source of
valuable applications and firms in this
industry were taking steps to assess this
potential.
Some firms responded to these
opportunities by increasing their R&D
spending, exploring recent advances in
nanotechnology in order to develop
applications for their own sector.
New R&D network – involving
incumbents, research institutions,
specialized suppliers and universities –
was a critical step for the assessment of
the usefulness and value of developing
nanotechnology applications for pulp and
paper processes.
From traditional
To more advanced high-tech
regional economic structure

Entrepreneurial discovery and spillovers
New domains > new paths > new business
It precedes the innovation stage and
consists of the exploration and
establishment of a new domain of
opportunities (technological and market),
potentially rich in numerous innovations
that will subsequently
occur.
It increases innovation probabilities > new ways of doing/managing
It is the demonstration that something is possible – for example,
moving from the manufacture of nails to glasses; developing from
traditional silk manufacture to a production of technical fabrics;
integrating nanotechnologies into the wood pulp production
process; founding a new domain for the treatment of fractures.

Entry and agglomeration
New opportunities because usefulness
The social value of the discovery is that it
informs the whole system that a particular
domain of R&D and innovation is likely to
create new opportunities for the regional
economy.
Entry constitutes the confirmation that
others see this discovery as meaningful.
Entry is a key ingredient of smart
specialization so that agglomeration
externalities can be realised.

Structural changes
New area of opportunities
The potential success of discoveries
and new activities that aim to explore
and open up a new area of
opportunities will ultimately translate
into some kind of structural changes
within the economy
Transition
Modernisation
Diversification
Radical foundation

Structural changes
The case of silk/textile firms in Lyon
exemplifies such a transition pattern
from traditional technologies for old
declining markets to new
technologies allowing these firms to
enter new markets.
Transition
A new domain emerging from an existing industrial systems (a
collection of R&D, engineering and manufacturing capabilities that
sustain innovation).

Structural changes
Development of ICT applications in
tourism and the exploration of
biotechnology potentials in the
agrofood industry.
Modernisation
When the development of specific applications of a general
purpose technology produces a significant impact on the efficiency
and quality of an existing (often traditional) sector.
 Protecting crops
 Drones in agriculture

Modernisation
ICT in agriculture

Structural changes
Such synergies make the move towards a new,
growing market, more attractive and profitable.
Diversification
Discovery concerns potential synergies (economies of scope) that
are likely to materialise between an existing activity and a new one.
Modernise and Diversify?
‘regions
diversify by
branching into
industries that
are related to
their current
industries’
(Neffke et al.
2009).

Structural changes
Radical foundation
A new domain is founded with no direct link
with existing structures.
Government intervention is needed to address the problems of underinvestment
in entrepreneurial discovery or insufficient capabilities to undertake
entrepreneurial discoveries.
https://www.metromile.com/

EU defines
100 Radical Innovation Breakthroughs for the future
source etc…etc…

Role of smart specialisation
Let’s assume that the regional economy includes
 A large agrofood sector characterised by weak to moderate
innovation capacities > sleeping giant
 A high-tech cluster > excited goblins
 Low-tech SMEs operating as subcontractors for the automotive
sector, which is based in other regions. > hungry dwarfs
The sleeping giant, as well as the hungry dwarfs, badly need
structural changes – modernisation or diversification – and this
will happen through a smart specialisation strategy that
involves them.

Role of smart specialisation
Ex ante actions are carried out well to support the formation of
entrepreneurial knowledge and capabilities, an inclusive strategy
will produce results enabling strong entrepreneurial discovery
projects to be developed in all parts of the economy.
An inclusive smart
specialisation strategy
Winner taking it all
Nice projects + funding

Current examples of smart specialisation
Examples here

Examples
Implementing Smart Specialisation: An analysis of practices across Europe
Smart Specialisation Platform on Agri-food, the
Region of Tuscany (Italy)
Participation in the thematic partnership has
enabled an organisational change at the level of
regional ministries, with an improved
communication on Smart Specialisation.
It also allowed for a behavioural change among
regional officers with more effective collaboration
among various operational programmes in the
lead region
Effective
collaboration

Multi-level governance that fosters innovative
market solutions
The Six City Strategy, is carried out by the six largest cities in Finland - Helsinki,
Espoo, Vantaa, Tampere, Turku and Oulu.
Source

The Six City Strategy
The cities have opened their data to
encourage its commercial use and
help companies scale-up their
business to the six cities.
The project portfolio ranges from
smart mobility, clean technologies
and agile piloting, to creating
development environments for
product testing and boosting open
data for business. Source
Open data for business

 Challenged in regions with less developed research and innovation
(R&D) > triggering questions about the universal applicability of its
concepts and methods.
Challenges: smart specialisation
Needs to be more open to
incorporating foreign direct
investment (FDI) and global value
chains (GVCs) into its conceptual
discourse and its policy
Needs strengthening policy delivery
rather than policy design
The entrepreneurial discovery process (EDP) implicitly assumes a mature
institutional framework, which is hardly realistic in the case of regions with
less developed R&I systems

State-of-the-art regional development theories highlight the important role of
informal institutional factors such as
Challenges: smart specialisation
 Trust
 Responsibility
 Professionalism,
 Partnership and
 Shared leadership for regional
(McCann and Ortega-Argile´s 2014)
This contrasts sharply with the under-developed institutional
framework in such regions, which together with risk-averse or
“play it safe” mentality > limits the space for experimentation,
manoeuvre and flexibility in decision-making and public initiatives
Several factors
could hinder
implementation
A potential solution to this problem lies in the improvement of
multi-scalar coordination
(Asheim et al. 2011; Todtling et al. 2013).

Lecture 1 - Introduction: economic geography and its recent paradigms
Thank you
Questions?
See you 01-06 (Tuesday): New Directions in Economic
Geography: Classic versus Alternatives Concepts and
Practices of Economic Growth and Regional
Development (OLAT / Zoom)
Evolutionary Economic Geography

10_Lect_Conceptualisation, and Implementation of Smart Specialisation Strategies

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