This document summarizes a presentation on strategies for smart specialization as a driver of regional growth. It discusses key global trends like the rise of global value chains and increasing innovation-related collaboration. It also covers regional considerations, noting productivity differences across regions and the importance of tradable sectors for growth. The presentation outlines two stylized models of regional economies and emphasizes that smart specialization strategies should facilitate entrepreneurial self-discovery in regions through strategic diversification and knowledge investments in activities rather than sectors.

1. STRATEGY FOR SMART
SPECIALISATION: A GROWTH
DRIVER FOR REGIONS
Hammamet, Tunisia 17 May 2016
Karen Maguire, Counsellor/ Project Manager (Innovation
and regional development)
Regional Development Policy Division

2. 2
• Regional innovation and territorial reviews
– Thematic reports on special topics such as clusters, globalisation,
regional innovation policy
– Country/region/city reviews at the request of governments
– Inputs to other thematic projects, such as the Innovation Strategy
• Different levels of government seek policy advice:
– National governments that must support a diversity of region
types (regional development, S&T, enterprise, higher ed)
– Regional and local authorities that seek the right policy mix
Regional development policy
and innovation

3. CONTEXT AND GLOBAL TRENDS

4. • 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

5. Latest OECD STI Scoreboard
• 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

6. Type of business capital investment by
country: KBC leading in some countries

7. Some countries have a notable share of
Business R&D funding from abroad

8. Global value chains intensifying:
New measurement tools to understand them
Foreign value-added content of exports by country
8
OECD-WTO: Statistics on Trade in Value Added, (database), doi: 10.1787/data-00648-en
1995: 24.7%
2011: 32.4%
Tunisia added in
2015 to TiVA
Database
Is there a significant re-shoring trend?
Some evidence of nearshoring (Internal report: DSTI/IND(2015)8)

9. Innovation-related collaboration
increasingly global
9
International scientific co-publications tripling from 7% to 22% over 20 years.
The share of regional co-patents with foreign inventors has doubled from 10% to
20% over 30 years
0
50
100
150
200
250
300
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
Thousands
International
co-authorship
Single-institution
co-authorship
Domestic
co-authorship
Single author
Source: OECD (2010), Measuring Innovation: A New Perspective, OECD Publishing,
http://dx.doi.org/10.1787/9789264059474-en.
International scientific production
Source: OECD Science, Technology and Industry Scoreboard,
OECD Publishing. http://dx.doi.org/10.1787/888932891416

10. But proximity still plays an important role in
collaboration
10
Over 33% of R&D in the top 10% of large regions; 58% of patents in the
top 10% of small regions
Spatial decay (150-200 km); neighbourhood effects; “cost” of the
border increasing over time
Source: OECD (2014),
OECD Regions at a Glance,
OECD Publishing,.
Location of co-patenting partner

11. Collaboration with public/higher education
researcher (share of product/process innovating firms)
11

12. Future of productivity:
The problem is diffusion

13. REGIONAL CONSIDERATIONS

14. Striking productivity differences
across regions
0 50 100 150 200 250 300
CHL
MEX
KOR
CHE
NLD
FRA
GBR (TL2)
NZL
POL
GRC
USA
CAN
ITA
DEU
AUS
CZE
SVK
IRL
SWE
EST
PRT
BEL
HUN
NOR
AUT
FIN
DNK
JPN
ESP
SVN
COL
LVA
LTU
Minimum Maximum Country average=100
%
268
GDP per worker across small (TL3 )regions
• Care about productivity
differences across regions given
the impacts on people via
– Income
– Jobs
• Need to better understand the
role of different sectors in these
regional economies
• Innovation tightly linked with
productivity—hence concern for
innovation and regional
development policy streams

15. The “great divergence” across regions,
metropolitan areas and people (OECD)
GDP per capita
dispersion across
regions within
countries is now
greater than across
countries
GDP per capita
dispersion across
metropolitan areas
within countries is
greater than across
countries
Income inequality
across people is also on
the rise
Source: OECD Regional Outlook
2016, forthcoming

16. Source: OECD (2011) Regional Outlook and OECD (2012) Promoting Growth in All Regions
• A few big regional hubs contribute a lot to aggregate growth
• Most growth occurs outside the hubs
• Many big cities are making little or no growth contribution
• The notion of an “average region” is meaningless
16
Regional growth: some key findings (1/2)
Contributions
to OECD-wide
growth, TL2
regions

17. 17
Regional growth: some key findings (2/2)
• Skills: The low-skilled population is a bigger drag on
regional growth than lack of high-skilled workers, and the
low-skilled are typically less mobile
• Innovation: Technology-based measures of innovation
become increasingly important for regional growth the closer
the region is to the technology frontier
• Urban vs. rural contexts
– Urbanisation a key driver of productivity growth in
development
– Different growth models/types of industries
– Rural regions close to cities linked to nearby city
– Remote rural doing well often have natural resources

18. The tradable sector appears to make the
difference: due to “unconditional” convergence?
All tradable sectors Industry
Notes: Tradable sectors are defined by a selection of the 10 industries defined in the SNA 2008. They include: agriculture (A), industry
(BCDE), information and communication (J), financial and insurance activities (K), and other services (R to U). Non tradable sectors are
composed of construction, distributive trade, repairs, transport, accommodation, food services activities (GHI), real estate activities (L),
business services (MN), and public administration (OPQ).

19. Common Elements:
• Led by the service sector, especially producer services
• Manufacturing is high-end, innovation-intensive
• High diversification of economic activity and redundancy in markets
• Network economy – internet, computers, telecommunication (ICT)
• Highly skilled core workforce, with growing gap between skilled and
unskilled
• Economic growth driven by innovation and productivity
• Job-creation driven by entrepreneurs and SMEs
• Growth driven by large conurbations
• Competition is intense in most product/services markets, thanks to
globalisation
• Endogenous growth 19
Stylised model 1: the “post-modern”,
knowledge-driven economy

20. Common Elements:
• Most employment in services, but mainly low end consumer services,
with larger employment shares in the primary sector
• Manufacturing tends to be “mature” in product-cycle terms
• Limited diversification of economic activity, long supply chains
• Weaker transport and communications connectivity
• Weak skills, youth outmigration and an ageing workforce
• Low productivity, except in the primary sectors, and limited
entrepreneurial activity
• Small not necessarily the problem: isolated is (peripherality & distance)
• Low levels of patenting and formal R&D
• Local markets tend to be thin, with weak competition
• Firm population dominated by SMEs but often low-growth firms
• Exogenous growth
Export orientation + distance => competitiveness challenge
20
Stylised model 2: The low-density “modern”
economy

21. 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 innovation
system linkages to influence strategy
Internationallinkages
Type of regional innovation system (RIS)

22. Regions matter for innovation, and
innovation matters for regions
• Concentration of certain
forms of innovation activity;
inter-regional differences
• Developing a policy mix to
meet the needs of the region
• Multi-level governance of
innovation policy
• Special role of regional
innovation/economic
development agencies

23. • 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

24. Universities and RTOs
• Expectations for knowledge transfer to be matched with
regional context.
• Research and curricula relevant for the existing firm base
may have greater economic impact
• Mapping university offer and ensuring brokers to reach
SMEs is costly
• Quality of technology transfer offices a consideration
• In-firm placement of university PhDs/recent graduates
requires cultural acceptance
• The role of RTOs (research and technology organisations) is an
under-exploited opportunity in many regions
24

25. • Regional development policy gives people opportunities to:
– Work where they live or move if they choose
• Regional economies are not the same so adaptation to
regional specificities is needed
• Smart specialisation strategies are (if done well):
– A critical process for diagnosis and building knowledge
across public and private actors
– An opportunity to guide public action more strategically
– A useful way to track progress
• Some prerequisites include:
– Data
– Regional networks
Concluding thoughts