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

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. RECAP OF RELEVANT
PRODUCTIVITY/
REGIONAL OUTLOOK
FINDINGS

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. Future of productivity:
The problem is diffusion

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. SOME CONTEXT
FACTS ON SCIENCE,
TECHNOLOGY, AND
INNOVATION

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. 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. 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. 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. Challenge to boost international innovation
collaboration of SMEs: Slovak SMEs active

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. WHY REGIONS
MATTER FOR
INNOVATION, AND
INNOVATION
MATTERS FOR
REGIONS

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. 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. 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. 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. IMPLICATIONS FOR SMART
SPECIALISATION STRATEGIES

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. • 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. • 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. 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. 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. • 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
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. 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. 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. SPECIAL CASE OF
REGIONAL
INNOVATION
POLICY IN CROSS-
BORDER AREAS

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. 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
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
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. THANK YOU!