This document discusses the evolution of territorial systems of innovation from 1st generation clusters to 2nd generation regional systems. 1) 1st generation systems were cluster-based, focused on physical proximity within industries to reduce costs through cooperation and knowledge spillovers. They included traditional industrial districts and newer technology districts. 2) 2nd generation systems recognized innovation as a systemic process involving regional networks of actors beyond clusters. These regional systems of innovation integrated universities, companies, and government in knowledge generation and application through alliances like research partnerships and technology transfer organizations. 3) The shift expanded innovation drivers from internal R&D to open networks across a region that facilitated collaborative learning, commercialization, and new knowledge development.

1. Lecture 2
INTELLIGENT CITIES
Towards Global – Intelligent Innovation Ecosystems
Nicos Komninos
URENIO Research, Aristotle University
www.urenio.org
PhD seminar “Intelligent cities: Systems and Environment of Innovation” 1

2. Contents
Introduction: Intelligence and Innovation
1st G: Innovation clusters and technology districts
2nd G: Regional systems of innovation
3rd G: Intelligent / global innovation ecosystems
2

3. Introduction: Intelligence and Innovation
Research on human intelligence clearly links intelligence and innovation,
arguing that intelligence is bears elements of novelty, problem-solving,
achieving something that has never been done before by the particular
individual.
“I think of intelligence as the high-end scenery of neurophysiology – the
outcome of many aspects of an individual’s brain organisation which bears on doing
something one has never done before . . . This captures the element of novelty, the
coping and groping ability needed when there is no ‘right’ answer, when business as
usual isn’t likely to suffice”.
Calvin, W.H. (1998) How Brains Think. Evolving Intelligence, Then and Now,
London: Phoenix. pp. 14 and 18.
The concept of the ‘intelligent city’ integrates all aspects of human,
collective, and artificial intelligence enabling innovative behaviour and
performance of a population / community / city.
Innovative behaviour and performance, however, is systemic, emerging
from systems of interactions between science, technology, production,
funding, intermediary organisations and end-users. The foundation of
intelligent cities are on territorial (place-based) systems of innovation. 3

4. Systems of innovation exhibit a continuous spatial and social enlargement
enabling an increasing number of actors to be involved in the innovation process.
Knowledge interactions and boundaries of innovation systems expand
geographically all over the world.
Acquire
existing
(state-of-the-
art) know-how
Disseminate
Observe, Develop new
watch, knowledge knowledge
evaluate application (embodied
capability into new
Invent / products)
create new
knowledge
Knowledge interactions along the innovation process
Small innovation systems, based on physical proximity within clusters, have
evolved into larger-scale regional / national systems due to institutional
agreements and state policies; then with the introduction of advanced
information and communication technologies they have become more intelligent
and further enlarged to wider supra-national and global scales.
Three generations of territorial systems of innovation can be traced: (1) cluster-
based, (2) regional / national systems, and (3) intelligent / global systems. 4

5. 1st Generation systems:
Innovation clusters and technology districts
5

6. 1st generation systems of innovation
Innovation clusters and technology districts
Explanations linking innovation and territory appeared in early 1980s in the
literature about industrial districts. The foundations of this paradigm can
be traced back to 1977, when Bagnasco and Becattini published their
studies on the Third Italy, describing small cities and communities of
central Italy flourishing on the basis of innovative small company clusters
belonging to the same industry.
Michael Porter popularized the concept of industry clusters is his book The
Competitive Advantage of Nations (1990). Porter recognized that the
majority of economic activity takes place at the regional level and his ideas
are commonly applied to cities and regions.
Porter provides a simple definition of two types of clusters: vertical
clusters, and horizontal clusters. Vertical clusters are made up of industries
that are linked through buyer-seller relationships. Horizontal clusters
include industries which might share a common market for the end
products, use a common technology or labour force skills, or require
similar natural resources.
The basic concept of the cluster is a geographical concentration of industries
that gain performance advantages through co-location and agglomeration
economies, either of scale or scope. 6

7. 1st generation systems of innovation
Clusters definition
A group of the same or similar elements gathered or occurring closely
together < <http://www.thefreedictionary.com/cluster>
Α group of small firms from similar industries that team up and act as one
body <http://dictionary.bnet.com/definition/business+cluster.html>
A business cluster is a geographic concentration of interconnected
businesses, suppliers, and associated institutions in a particular field.
Clusters are considered to increase the productivity with which companies
can compete, nationally and globally. In urban study, the term
agglomeration is used.
This term industry cluster, also known as a business cluster, competitive
cluster, or Porterian cluster, was introduced and the term cluster
popularized by Michael Porter in The Competitive Advantage of Nations
(1990). The importance of economic geography, or more correctly
geographical economics, was also brought to attention by Paul Krugman in
Geography and Trade (1991).
<http://en.wikipedia.org/wiki/Business_cluster>
7

8. 1st generation systems of innovation
Innovation clusters typology
Type A – Cohesive Clusters
Cohesive Clusters are the oldest type. The operational characteristics of these agglomerative economies
were mentioned by Weber (1909) and Marshall (1925). Cohesive clusters are groups of firms which initially
located together to reduce costs. They tended to specialize in industries such as fashion items,
reproduction furniture, and printing. The main economic advantage has traditionally been described as
the reduction of ‘transaction costs’ particularly transport costs.
Type B – New Industrial Districts
New Industrial Districts tend be knowledge-based – that is they often have a high proportion of companies
in high-tech sectors such as computing, Information Technology (IT) and micro-electronics. They rely
extensively on R&D for the creation of new products. They tend to be located on the fringe of urban areas
or even at some distance from them – examples include Silicon Valley in California and the M4 Motorway
Corridor in Britain. Type B clusters are composed of a range of different size firms, from Trans-Nationals to
SMEs. The large firms form, often, long-standing relations with their smaller suppliers and they work
jointly on projects – in some cases with time horizons of decades.
Type C – Innovative Mileux
The description of the third type of cluster is largely based on the work of the group of researchers called
GREMI which emphasized the importance of social capital and collective learning in promoting innovation.
The Type C Clusters actively seek to promote innovation rather than simply rapidly responding to it and
actively work together to promote common, medium and long-term innovative goals.
Type D – Proximity Clusters
Proximity clusters are so called because they are located in a relatively close spatial relationships with
each other but do not form the kind of Local Production Network which the previous three clusters
exhibited in different ways. They are not so much embedded in an area but weakly attached to it.
Source: D.A. Hart, Innovation clusters: key concepts, http://www.reading.ac.uk/LM/LM/fulltxt/0600.pdf8

9. 1st generation systems of innovation
Industrial districts in traditional sectors
Buyers / catalysers
Flexible combinations
Nontraded inputs
Technological spillovers
Specialised firms / Skilled workers
Basic elements Structuring elements
 Specialised firms / skilled  Flexible combinations
workers  Nontraded inputs
 Buyers / catalysers  Technological spillovers
9

10. 1st generation systems of innovation
Technology districts in high tech sectors
The Silicon Valley pattern
Fundamental processes sustaining innovation in the Valley are:
Basic research, knowledge generation and application capability of the kind
normally found centred on advanced private research or leading edge public
research laboratories.
Venture capital is crucial as the means by which ideas have been screened
and selected are given a chance to fly as commercial products or services.
Law firms are important as gatekeepers, advising firms on appropriate
investors, counselors assisting entrepreneurs to access other services, and
sources of contracts for many things ranging from recruitment to contract
manufacturing.
Specialist consultants in business and technological services ranging from
management accountants rather than simple auditing services, head hunting
services and specialist engineering, software and media, and regulatory
advisers or property development services, including specialised public
provision.
A local value chain of firms that can conduct, for example contract
manufacturing, design and fabrication, and various fairly prosaic supplies like
logistics, or exhibition organisation and specialised catering services. 10
Source: Cooke, P. (2003) ‘Economic globalisation and its future challenges for regional development , IJTM, V.26

11. 1st generation systems of innovation
Innovative milieu
Lawson and Lorenz (1999) argue
that the technological dynamism of The Networked Economy
districts is dependent on the firms Business
Consultants:
within them, sharing two forms of Public Sector
Services
cooperation: (1) the provision of National/Regional
Administration
Universities
collective goods and services such Innovation Management
Gr hem sity- n...
on
Sc iver atio
ov s
Techniques
ad es
es Inn eme
ati
Un oper
ua
Technology Audits
as training, education, R&D, and (2)
Co
Bu ppor tion
h
te
Ce sine t Sc
Technology Foresights
Pla
Su nova
ntr ss
cem
sharing of certain norms of
n
En
I
en
ter
t
pri
Intermediaries
se
reciprocity such as information,
mes...
usters
Technology Tr
R&D Valorisa
Projects
Big Firms
Mentoring Sche
Technology
Value Chain Cl
subcontracting, refraining from Centres
Enterprise
wage competition. Reciprocity was SME
ansfer
tion
identified as the key element of
cy ms
Bus re Cap
vent Capita
…
Seed
r P Foru
technological dynamism, reducing
ines
u
oli
EEE
ust ss
s An tal
Cl sine
the risks associated with new e
Finance-
u
gels
Enterprise
B
i
l
SME Banks
product development and
discouraging wage competition.
Source: Landabaso, 1999
11

12. 1st generation systems of innovation
Planned districts: Science and technology parks
The complexity of networks
within the district makes
(D) Space, Property,
‘technology districts planning’ infrastructure
extremely complicated. Technological valorisation of property
The nearest application of the
Spin-offs
district concept to urban and
(A) R&D Units
regional planning comes through Tech Transfer
science and technology parks.
About 400 cases in Europe (C) Innovative
Firms
(B) Technology
Four constituting elements: (a) Transfer Attraction of firms
Organisations
land / infrastructure, (b) R&D Tech Transfer
institutes, (c) technology
intermediary organisations, (d) New round of investment
innovative companies. Technology diffusion
Four types of technology
cooperation: joint R&D,
technology transfer, spin-off
creation, technology
dissemination. 12

13. 1st generation systems of innovation
Cluster-based innovation mechanisms
The innovation mechanism within the cluster / district is based on three
factors:
The concentration of many and diverse skills in the cluster or district
covering various fields of knowledge and production. Even in cases where
the whole cluster focuses on a single industrial sector, the multiplicity of
skills comes from specialisation in different stages of the production
process.
 The cooperation networks between the members of the cluster.
Cooperation produce innovation, as the later stems from the combination
of skills, knowledge, and qualities that are put together. A minimum
number of cluster members is necessary to actualise spontaneous
networking (i.e. 100 companies has been considered as the threshold for
the definition of a production complex as an industrial district).
 The presence of “catalysts” that facilitate combinations among the many
and diverse skills and units. The function of the catalyst, at Prato, for
example, is ensured by the “impannatori”, who constantly re-organise the
productive processes of the district in relation to trade orders. VC functions
as catalyst also in high tech clusters. The central administration and liaison
offices in the case of technology parks.
13

14. 2nd Generation systems:
Regional systems of innovation
14

15. 2nd generation innovation systems
An institutional breakthrough
In 1990s, a radical shift from district theory took place. Three changes occurred:
From district theory to learning regions. The contribution of the District theory
write Lawson and Lorenz (1999) was more in the area of understanding the
territorial foundations of inter-firm cooperation than in understanding the
contribution of territorial clustering to a firm’s capacity to learn and generate new
knowledge.
From individual to organisational learning (OL): Individual learning refers to the
acquisition of information, knowledge, understanding and skills, through
participation is some form of education, training, whether formal or informal.
Organisational learning depends upon individual learning and builds upon. OL
amplifies the knowledge created by individuals, by appropriating knowledge from
outside or by creating new knowledge in interaction and collaboration to other
organisations
From linear (within the Lab) to systemic (within the territory) innovation : A
process hermetically sealed within the research lab of the large company has been
transformed into a system that covers an entire city-region involving participants
from the finance, the technological, and the production communities.
15

16. 2nd generation innovation systems
An institutional breakthrough
RESEARCH AND
TECHNOLOGICAL
DEVELOPMENT INNOVATION FINANCE
 Research institutes  Venture capital funds
 University research  Technology incentives
 R&D in large companies  Regional incentives and aids
 Innovative SMEs  Spin-offs / start-ups
TECHNOLOGY
TRANSFER
 Co-operation between
universities and
companies
 Technology brokerage
Strategic
Company
 Licensing
Planning
Innovation Market New Production
R&D Funding Research Product Re-tooling
Production
Runs
Development
PROCESS
INNOVATION
 Clusters and networks
 Technology co-operation
 Supply chains NEW PRODUCT
 Alliances DEVELOPMENT
 Distribution &  Provision of
Promotion management, product,
market, and quality
services
 Specialised centres
 Business consultants
16

17. 2nd generation innovation systems
Learning regions / regional systems of innovation
The region is conceptualised as
living organism with
technology learning,
REGIONAL SYSTEM OF
management, selection, and INNOVATION
Universities /
Research
knowledge development Institutes
capabilities Technology Transfer
Organisations
 Innovation is based on a Tech Parks, Tech Networks,
Public R&D
system of clusters, R&D, tech Brokers, Consultants
Laboratories
transfer, and finance CLUSTERS
 The system includes (1) Group of companies in co-
operation
Private R&D
Departments
demand and supply Vertical / Horizontal and Centres
institutions, (2) knowledge
networks
 Networks allocate ‘formal’ and
‘tacit’ knowledge and enable Innovation Financing Technological Information System
collaborative innovation Banks, Business Angels, Patents, Standards, Technical
Publications, Emerging Markets,
Venture Capital, Regional
 Institutions work as switches Incentives Foresight
selecting (on) and rejecting
(off) innovations
 Priorities are on intangible
infrastructure, skills, human
capital, finance, cooperation
and social capital. 17

18. 2nd generation innovation systems
Learning regions / regional systems of innovation
18

19. 2nd generation innovation systems
Triple helix alliances
The model denotes the “university-industry-government” relationships as a complex of
interdependent institutional spheres, which overlap and complement each other along
the process of innovation. 19

20. 2nd generation innovation systems
Precarious regional systems of innovation – Missing elements
TT R&D
C
FU INT
R&D: Research and development; TT: Technology transfer; INT: Information
intelligence; C: Companies (innovative) and Clusters; FU: Funding.
20

21. 2nd generation innovation systems
Policy model: Regional Innovation Strategies
In 1994, core concepts of the ‘learning
region’ paradigm (collaborative
networks, organisational learning,
institutional agreements, social
capital, political consensus) were
adopted by the European Commission
A new family of policy schemes was
introduced having a strategic view
over technology and innovation at the
regional level: Regional Innovation and
Technology Transfer Infrastructures
and Strategies (RITTS), Regional
Technology Plans (RTP), Regional
Innovation Strategies (RIS), and
Programmes of Regional Innovative
Actions (PRIA).
The objective is to create regional systems
of innovation capable to sustain and
facilitate innovation in small
companies in manufacturing and
services
21

22. 2nd generation innovation systems
Policy model: Regional Innovation Strategies
RIS principles are reflected in the policy’s methodology :
1. Raising awareness about innovation and building a regional consensus
among key regional actors;
2. Analysis of the regional innovation system (its actors and their interaction),
including technology and market trends assessment, technology foresight
and benchmarking with other regions ;
3. Analysis of the strengths and weaknesses of regional firms: assessment of
regional demand for innovation services, including technology audits (in
SMEs in particular) and surveys regarding firms’ needs and capacities,
including management, finance, technology, training, marketing, etc.;
4. Assessment of the regional innovation support infrastructures and policy
schemes;
5. Definition of a strategic framework – including a detailed action plan and
the establishment of a monitoring and evaluation system. The action plan
may involve pilot actions and feasibility studies as well as concrete projects
that might be financed under existing structural funds operational
programmes.
22

23. 2nd generation innovation systems
Policy model: Regional Innovation Strategies
Strategic priorities to support
a regional system of innovation
Strengthen Improve intra- Offer risk Advance
Advance R&D technology company and start-up market and
capability transfer innovation funds to technology
capability capability innovation watch
23

24. 2nd generation innovation systems
Policy model: Innovation Poles / multicluster systems
INNOVATION POLES
 In some countries (France, Italy) more
than one districts, clusters, and
science parks were developed within
the same urban system, creating
larger innovation poles.
 Innovation Poles rely on multi-cluster
systems.
 The emphasis is on clusters and
networks. Networks of collaboration,
communication and co-ordination
ensure the cohesion and synergy
among the individual poles.
Dev. Org. Univ. Labs
Montpellier: An early multi-cluster
Cluster Tech Park concept in master plan of the city
(1980’). Four clusters (Agrofood,
Pharmaceutical, Media, Automation)
Cluster Res. Inst. + Housing + Leisure
24

25. 3rd Generation:
Intelligent / global innovation ecosystems
25

26. New trends in innovation
Open innovation and rising Asia
Business R&D expenditure rose by 5.2% in North America, 2.3% in Europe, and 3.8% in Japan during
2000-05, but by 17% in India and China, and by 19.7% in Australia, Brazil, Singapore, South Korea,
and Taiwan combined. 26

27. New trends
Innovation offshoring
The majority of the new R&D centers
to be created by MNCs will be
located in India, China and Asian
cities
Cisco has R&D facilities in
Bangalore
Toyota in Thailand
Nokia operates nine satellite
design studios located in India
(Bangalore), China (Beijing), and
Brazil
Source: United Nations (2005) UNCTAD Survey on the
Internationalization of R&D
27

28. New trends
Globalization of innovation clusters
28

29. New trends
Emerging innovation clusters in China, India, Malaysia
Bangalore (India) one of the largest
ΙΤ clusters (satellite platform).
Zhongguancun High Technology
Development Zone (China), cluster
in consumer electronicς.
Taiwan, Hsinchu Science Park,
cluster leader in semiconductors.
Singapore, new clusters in disk
drivers, multimedia, broadband
technologies, financial services.
Korea, Teheran Valley near Seoul, a nucleus of national industry, clusters in
broadband technologies and mobile communications.
Malaysia, long term effort in semiconductors, electronics, and software:
Multimedia Super Corridor, and cyber cities Cyberjaya, Purtajaya, Penang.
29

30. New trends
Global online technology brokers
30

31. New trends
Global online science communities
31

32. New trends
Innovation co-design with end-users / Crowdsourcing / Living Labs
Collaborative innovation environments based on community spaces, enable the
involvement of population in innovation development: Creative communities
32

33. New trends
Global online networks over innovation ecosystems
New trends (innovation offshoring /
digital brokers) create a global
virtual / organizational space over
the local / regional system of
innovation
Glocalisation of innovation: Local
systems open to global cooperation,
global networks in technology
acquisition, global product
development, global supply chains, Innovation System
product promotion
Intelligent cities enable local
innovation systems to integrate
global networks and advance
people-led innovation
33

34. 3rd generation systems of innovation
Intelligent cities and regions
All these trends (global innovation
supply chains, open innovation,
Crowdsourcing, web-based innovation)
create a new innovation spatiality,
Innovation ecosystem
linking territorial systems of innovation Virtual Space
to the web, online knowledge
management tool, and digital
cooperation / communication spaces.
TT
Key processes: R&D
Dematerialisation of infrastructure FIN
Online learning and technology
Innovation ecosystem
management NET Physical Space
Virtual technology co-operation and PD
exchange
Virtual communities Intelligent cities and regions are territories
Digital promotion of innovation combining strong innovation systems with IT
Technology transfer as communication infrastructure and digital innovation services
34

35. Territorial systems of innovation: Continuous enlargement
Advantages and weaknesses
Advantages Weaknesses
Clusters/ • Direct participation of • Planning barriers
Technology districts companies • High development costs
• Well known and wide • Innovation through
spread concept infrastructure ?
Learning regions / • Wider system of • Need for high institutional
Regional systems of reference thickness
innovation • Participation of R&D • Strong public-private
institutions partnership
• Emphasis on institutions •Sustainability after the
•Public policy support public support period
Physical – virtual • Low development cost • Digital gap
environments of • Easy access • IT literacy
innovation / • Global communication • Complex environments
Intelligent cities and networks • Need for simultaneous
• Involvement of people physical / digital interaction
35

36. More:
Komninos, N. (2002) Intelligent Cities: Innovation, knowledge systems and digital
spaces, London and New York, Taylor and Francis (Part 1 and 2)
Komninos, N. (2008) Intelligent Cities and Globalisation of Innovation Networks,
London and New York, Routledge (Chapters 3 and 4)
36
36