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Regional Innovation Strategies


A Regional Innovation Strategy (RIS) is a method for developing regional policies in the area of innovation, based on the assumption that it is not only the presence of technological know-how that is important, but also the business climate and the level of cooperation between the stakeholders.

Written by Meirion Thomas

Reviewed by David Walburn

 

The concept

The evolution of the RIS process

Step in the RIS process

What can be expected?

How to implement it?

A quote

References

Experts' comments

 

The concept


A Regional Innovation Strategy (RIS) is a method for developing regional policies in the area of innovation, based on the assumption that it is not only the presence of technological know-how that is important, but also the business climate and the level of cooperation between the stakeholders.

 

The evolution of the RIS process


Regional Innovation Strategy projects were launched in 1994 to help regions to embrace innovation as part of their economic development activities and to boost the innovation capability of those regions of the EU which were lagging behind the innovation performance of the most advanced ‘core’ regions. The RIS were also designed to address the gap that existed between public innovation supports and the actual needs of companies and innovators. The approach piloted by the original regional innovation strategy exercises have been more or less continuously revised, refreshed and relaunched, most recently in the form of RIS3 or Smart Specialisation exercises.

Understanding where the RIS process came from, what drove it forward and how it has evolved will help us see Smart Specialisation in the correct policy making context and help us to develop better policies as a result.

During the 1980’s and early 1990’s growing gaps between the economic performance of European regions and the recognition that innovation performance is often an indicator of regional economic health, led policy makers to find ways to improve the way in which, at both a regional and national level, support for innovation was provided.

In addressing this need, the early emphasis in innovation policy was based on the creation of new technologies – typically through research and development - and focused on strengthening the ‘supply’ of science and research results.

However, by the mid 1990’s the policy focus shifted to, first, a focus on improved dissemination of technology results across the wider economy, and then to stimulating demand for innovation in traditionally non-innovative firms. Demand-side stimulation focused on building the capacity of firms to be more innovative and on building more of an innovation culture within the regions.

Mikel Landabaso of DG Regio, writing in 1993, expressed this shift in thinking like this: "..technology cannot be expected to assist in resolving the problems of competiveness unless it functions as part of a system which is institutionally and organisationally capable of adapting to changing demands on a continuous basis" - (Landabaso, 1993)

The shift in emphasis had much to do with an increasing focus on the importance of healthy and functioning regional innovation systems as a key factor in explaining regional disparities[1]. This was particularly important when considering the old, heavy industrial, regions of the UK, Eastern Germany, Northern Spain and Northern France and Belgium. Here the lack of innovation arising from decades of low diversity in industrial activity and the predominance of heavy industry and outdated skills were seen as barriers to closing the gaps in economic performance amongst regions across Europe. The addition to the European Union of countries from the former Eastern bloc countries with similarly mono-industrial structures, traditions and skills, was recognised as a looming problem as the 1990’s progressed.

The European Commission was critical to the launching of a series of pilot actions, funded under Article 10 of the ERDF Regulations. This Article allowed regions to trial experimental and innovative actions. The concern of the European Commission was to use Article 10 to encourage regions to experiment and to find ways of mobilising, at the regional level, so called ‘social capital’ that would balance the large amounts of financial capital being invested in the regions through Structural Funds programmes.

The initial Regional Innovation Strategy pilots were funded between 1994 and 1996 beginning with just 4 pilots (initially referred to as Regional Technology Plans) and then rapidly growing to almost 150  Regional Innovation Strategy exercises over the next 15 years.

The initial RIS pilots were designed to:

  1. redefine policy frameworks and instruments for innovation
  2. focus on the needs of firms
  3. be based on public-private partnerships  and involve the key regional ‘players’
  4. have a demonstration character that would allow the policy actions to be tested
  5. exploit inter-regional cooperation networks
  6. embed a learning process amongst regional actors that would help build a consensus around innovation as a key driver of regional growth and competitiveness

The pilot regions were assisted by the European Commission and a network of experts to develop their strategies over, usually, two-years of research, consultation and policy development.

In particular, the RIS research was aimed at better understanding the needs of the region’s firms, and in particular SMEs, by a process of research and discussion within the region – usually described as ‘bottom-up’ - leading to policies and instruments that would favour innovation activity and investment. While not excluding technology related investments, the emphasis was expected to be on the satisfying the less radical, more basic innovation needs of non-research performing firms particularly SMEs.

Through the regular interchange between the RIS pilot regions, experts and the European Commission a shared understanding and experience quickly grew. In most regions by engaging stakeholders in the process of better understanding the needs of firms, it became clear that a stronger ‘innovation system’ could be developed at the regional level that would take investments and policy forward to enhance the competitiveness of firms and the region itself.

In the case of the first region to complete their RTP pilot in 1996, Wales in the UK, the experience was summed up in an interview given by the author of this note, also the Wales RTP Project Director from 1993 to 1996;

“So we gradually built up a picture where the really important thing for innovation for companies in Wales is that it is driven by the market, driven by customers, what they want, what they need, what are their competitors doing, planning to do, how can companies get a competitive advantage in the market by innovation.

Innovation proved to be much more than technology; it’s much more than product, it’s around business processes, as well as physical production processes and, in some cases, the way in which companies present themselves to the market place…the way in which they construct their brands, image, their business model.

We all know this now but in 1994, in policy circles and amongst many business leaders, this was radical thinking. It meant that innovation could be supported across the region not just in ‘technology hot-spots’.”

Regional Innovation Strategies and the processes behind their development and implementations have continued to evolve. Today, probably the majority of Europe’s regions have undertaken something similar to a Regional Innovation Strategy process. Gradually however, the process of exploration, research and debate amongst stakeholders at the regional level has tended to become shorter the scope of the exercise more restricted so that many regions have published their Regional Innovation Strategies based on just months, or even, just weeks of work.

There is an element of ‘going through the motions’ for many policy makers where a RIS is needed to complete a bureaucratic process to access funding or to meet a political commitment.

The instigation of the RIS3 principles - or Smart Specialisation - is, in many respects, redressing this lack of effort by policy makers and regional stakeholders. Smart Specialisation demands fresh thinking and clear priorities and crucially, a strong element of exploration or ‘entrepreneurial discovery’ at the heart of Smart Specialisation.

The definition favoured by the EC tells us that smart specialisation strategies should be integrated, focused in specific places (i.e. regions) and offer a prescription that will lead to economic transformation. To achieve this, Smart Specialisation strategies (European Commission, 2012) need to:

  1. focus policy support and investments on key national and regional priorities
  2. build on each region’s strengths
  3. support technological as well as ‘practice-based’ innovation
  4. get stakeholders fully involved and encourage innovation and experimentation
  5. be evidence-based and include sound monitoring and evaluation systems

These are familiar principles  reminiscent of those set out in 1994 for the early regional innovation strategy pilots under Article 10 of the ERDF Regulations.

 

Step in the RIS process


all

 

What can be expected?


RIS exercises across the EU have been instrumental in embedding, in the minds of policy makers and innovation stakeholders, that innovation is a valuable and effective concept around which to build investment programmes and their economic transformation policies. 

The successful RIS exercises not only led to a better understanding of innovation needs amongst firms but also stimulated the innovation capacity in those firms, and in so doing, stimulated the demand for innovation. RIS challenged firms and other regional actors to be truly innovative.

 

How to implement it?


The 6 step approach offered by the EC (European Commission, 2012) for regions to design and deliver their strategies covers:

  1. analysis of the regional context and framing the potential for innovation
  2. set up a sound and inclusive governance structure
  3. produce a shared vision about the future of the region
  4. select a limited number of priorities for regional development
  5. establish suitable policy mixes
  6. integrate monitoring and evaluation mechanisms

 

A quote


 “The Action Plan (RIS) will not only act as a framework for decision making and prioritisation of resources but will also ….demonstrate the commitment to innovation of many companies and organisations”. - Wales Regional Technology Plan – Action Plan 1996

 

References


  • Morgan, K. and Nauwelaers, C. (eds)(1999) “"Regional Innovation Strategies: The Challenge for Less-Favoured Regions", London
  • Landabaso, M. (1993) "The European Community’s Regional Development and Innovation: promoting Innovative Milieux in Practice" - European Planning Studies 1: 3 1993, London
  • Cooke, P. and Morgan, K. (1994) "The Creative Milieu: A regional Perspective on Innovation", in Dodgson, M. and Rothwell, R. (eds) - "The Handbook of Industrial Innovation" - Aldershot
  • European Commission (2012) Guide to Research and Innovation Strategies for Smart Specialisation (RIS 3), European Commission, Brussels
  • Interview given by Meirion Thomas to Ms R. Pugh for her PhD thesis at the University of Wales (2010)

 

Mr Meirion Thomas


Meirion Thomas

 

Meirion Thomas has over 30 years experience in economic development and SMEs where his expertise covers a range of interests including innovation, knowledge transfer, social enterprise, venture capital, and sustainable development. After holding senior positions in the Welsh Development Agency and Cardiff University, Meirion also established and became a director and partner in CM International Group, a strategic innovation and management consultancy with offices in Paris, Lille and Cardiff.

Since 1990 Meirion has led a wide range of innovation and economic development assignments and projects across Europe, North America and Southern Africa and in recent years he has also acted as a Director of Finance Wales plc and Chairman of the Cardiff-based specialist advisory group, the Cultural Enterprise Service Ltd.

m.thomas@cm-intl.com

 

Experts' comments


Intellectual rigour and a sound base in research and practice are vital for the credibility of economic development policy. This article on regional innovation strategies provide these qualities well.

The importance of innovation and of innovation in small firms in particular, has been understood for a long time as a vital driver for economic growth and job creation in modern western economies. This has led to public policy interventions seeking to improve the supply of finance to SMEs over several decades. Programmes to boost the performance of small businesses in other ways have long been at the core of modern economic development. The recognition of the importance of regions, and the subsequent growth of regional development agencies, created the opportunity for policy on small firm support to be tackled at this level, leading to the idea of regional innovation strategies.

The value of such strategies is well documented. The article gives a full account of this, backed by the history and the experience of how this approach to economic development has assumed its current importance.

But as with many areas of public policy, there is a danger that something which is known to add value (in a context where the benefits of a lot of policy are less clear) can attract too much attention and raise expectations beyond its capacity to deliver. This can undermine its credibility in the medium term.

Mr Thomas notes that the European Commission places a definition on smart specialisation strategies as a prescription which will lead to economic transformation. Apart from, perhaps, a very few micro situations, there no examples in advanced western economies where regional economic development interventions have “transformed” the economy in the sense that growth and job creation have replaced a pattern of decline[2].  Things may have been improved over what they might otherwise have been, along with the life chances and circumstances of some residents, but this is not “transformation”.

A longer historical view and a broader appreciation of political and social trends may be helpful in providing some context here. If we consider the old, heavy industrial regions of Europe which have rightly been a high priority for programmes of economic development policy for decades, it is worth remembering that these were once hotbeds of small firm innovation, coupled with other geographical advantages, which made them some of the greatest generators of economic growth and jobs that the world had experienced. In Britain during three decades in the middle of 19th century roughly a third of the population migrated  from largely less productive agricultural regions to improve what they saw as their life chances. For the last half century, there has been a flow of people out of these regions to more successful areas, again by people in pursuit of a better life and employment prospects. These are regions where more modern industries have taken root and where entrepreneurship and successful small business formation are part of the pattern of the economy.  Such migration has taken place in response to strong market pressures and often against the thrust of public policy which has sought – usually in vain - to avoid perceived dangers of congestion in successful regions, and to shore up the prospects of problem regions. 

As regional economies diverge in this process, it is certainly true, as Mr Thomas pints out, that the old industrial regions have insufficient levels of innovation in their commercial sectors. It is also clearly demonstrable that public policy to boost innovation can produce positive results. However, it cannot be claimed that even the most effective programmes have the capacity to “transform” such regional economies and halt their relative decline.  Sadly, despite the rhetoric, economic developers and policy makers the world over have failed in this endeavour. There is usually much more than a lack of innovation to explain why these regions are in decline. The strength of the free market forces driving regional growth and decline are almost always underestimated.

The reasons for this should be clearer than many policy makers seem to realise. We know that innovation largely depends on SMEs, but in declining, old industry regions, the population of SMEs is relatively small.  This means that the capacity for achieving a significant aggregate impact by improving the levels of innovation is diminished. Also, natural advantages which contributed to the success of once thriving regions now may have a negative impact. For example, a coastal location was a great benefit when the bulk of trade and passenger traffic was carried by ships. To be near coal or other mineral resources was similarly advantageous. These factors may now mean that a region is remote centres of business development and growth. Just as these formerly successful regions attracted population, it is not surprising that they should now face decline when other regions offer comparatively better prospects.

The role of public policy here should be to ease the negative social and economic effects of regional decline.

One way it can achieve this is by doing as much as it can to boost business performance in struggling regions[3]. Much of what passes as regional economic development should be seen in this context, including regional innovation strategy, even though the language used may suggest that it is capable of delivering rather more than that. 

Worrying about the use of language in this way may seem a trivial point, but it can have serious consequences. Hyperbole appeals when the aim is to generate political support for programmes of public policy, but excessive claims can come back to bite when raised expectations are not satisfied. If it could really be demonstrated that regional innovation strategies were capable of achieving “economic transformation” in struggling regions, political leaders would be full enthusiasm for them, especially in today’s economic climate. Instead we have seen the dismantling of regional economic development in England and Wales, and its down-grading across Europe in favour of austerity and the consequent further increase in regional economic divergence. The claims for economic development policy have simply not been believed.

We must learn not to put at risk the clear benefits of well-run regional innovation and economic development strategies, modest though they may be, by making excessive claims for them.

 

Mr David Walburn


 

After a career in business David Walburn joined Greater London Enterprise in 1986 where he was responsible for venture capital and other small business support, before becoming Chief Executive of the organisation. He was the Chair of the London Business Angels Network and played a key role in the setting up of the European Business Angels Network. He has worked with the UK government and the European Commission on developing public policy initiatives to improve the financing of small and medium-sized enterprises. He was the Chair of Capital Enterprise, the umbrella body for organisations supporting micro business development in London, until 2012.

For the last ten years he has been a Visiting Professor at London South Bank University where he headed the Local Economy Policy Unit and was the managing editor of the journal Local Economy.

He has served as President of EURADA, and been a member of a number of advisory bodies of the European Commission.  He has been an active member of the International Economic Development Council in Washington DC and has a wide range of international contacts with economic development organisations. 

He continues to write and lecture on small business finance and regional economic development.

davidwalburn@europe.com



[1] For example by regional development theorists such as Cooke and Morgan (1994)

[2] If the writer is mistaken in this view, he would be pleased to receive details oh where this has happened.

[3] Although it may go against the grain for many people committed to regional economic development, other policies which assist people to move out of poorer regions to improve their life chances elsewhere should also be considered as part of the toolbox – and not the antithesis of what regional development is about.

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Regional Innovation Strategies by Meirion Thomas is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License.

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