KIT Knowledge, Innovation and Territory

1. KIT Knowledge, Innovation and Territory ESPON 2013 Programme Internal Seminar Evidence-based Cohesion Policy: Territorial Dimensions 29-30 November 2011 Kraków, Poland

2. The project team • Lead Partner (LP):BEST, Politecnicodi Milano, Italy: • Project Coordinator: Prof. Roberta Capello (Full Professor in Regional Economics) • Project Manager: Camilla Lenzi (Assistant Professor) • Prof. Roberto Camagni (Full Professor in Urban Economics) • Dr. Andrea Caragliu (Post-Doc Fellow) • Project Partner 2 (PP2):CRENOs, University of Cagliari, Italy: • Prof. RaffaelePaci (Full Professor of Applied Economics) • Proff. EmanuelaMarrocu and Stefano Usai (Associate Professors of Econometrics and Economics) • Dr. Alessandra Colombelli (Post-Doc Fellow) • Dr. Marta Foddi (Research Assistant) • Project Partner 3 (PP3): AQR, University of Barcelona, Spain: • Prof. Rosina Moreno (Full Professor in Applied Economics) • Prof. JordiSuriñach (Full Professor in Applied Economics) • Prof. Raúl Ramos (Associate Professor in Applied Economics) • Dr. Ernest Miguélez (Technical Researcher and PhD student)

3. The project team • Project Partner 4 (PP4):LSE, Great Britain: • Dr. RiccardoCrescenzi (Lecturer in Economic Geography) • Prof. Andrés Rodríguez-Pose (Professor in Economic Geography) • Prof. Michael Storper (Professor in Economic Geography) • Project Partner 5 (PP5): University of Economics in Bratislava, Slovakia: • Prof. Milan Buček (Full Professor in Regional Economics and Policy) • Dr. Miroslav Šipikal (Coordinator - Senior Lecturer) • Dr. Rudolf Pástor (Lecturer) • Project Partner 6 (PP6):University of Cardiff, Great Britain: • Prof. Phil Cooke (Full Research Professor in Regional Economic Development) • Dr. Selyf Morgan (Researcher) • Julie Porter (Support Coordinator)

4. General goal of the KIT project To contribute to the understanding of: • diffusion processes of knowledge and innovation and • the socio-economic impacts of innovation and knowledge in space, • in order to identify the best innovation policies to foster a “smart Europe”.

5. Main ideas throughtout the project • R&D (and formal knowledge in general) does not necessarily equal innovation; • innovation does not necessarily equal regional growth. • these linkages are strongly mediated by local territorial assets.

6. A) Main spatial trends of innovation and knowledge B) Territorial elements explaining the spatial trends C) Impact of the different modes of innovation and knowledge on regional performance D) Case studies E) Policy implications for the development of a successful knowledge economy Specific goals of the KIT project

7. A) Main spatial trends of innovation and knowledge B) Territorial elements explaining spatial trends C) Impact of the different modes of innovation and knowledge on regional performance D) Case studies E) Policy implications for the development of a successful knowledge economy Specific goals of the KIT project

8. Definition of the Knowledge Economy Basic idea: knowledge-based economy has not got a unique interpretative paradigm. Different approaches are necessary: • A1. Sectoral approach(presence in the region of science-based, high-technology sectors). • A2. Functional approach(presence in the region of functions like R&D, patents, human capital). • A3. Relation-based approach(presence in the region of interactive and collective learning processes).

9. Technologically Advanced Regions in EU In 2007 technologically advanced regions, hosting both high-tech manufacturing industries and KIS, are the minority of regions. Moreover a relatively high number of regions are specialised in low-tech sectors.

10. Scientific regions In 2007 scientific regions, hosting both human capital and research and activities functions, are limited. What is even more striking is the high number of regions with no specialisation in knowledge activities.

11. Knowledge networking regions In 2007 there were quite a number of networked regions, both un-intentional (spatial) and intentional (non necessary spatial). Non-networked regions are especially poor and peripheral areas. External sources of knowledge acquisitions are diffused all over Europe.

12. Knowledge Economy in Europe The Knowledge Economy in Europe is a very fragmented picture. What is striking from this map is the high number of regions in which the knowledge economy is still in its infancy.

13. Spatial trends of innovation in Europe • Innovation • productinnovation; • processinnovation; • product and/or processinnovation; • marketing and/or organisationalinnovation • environmentalinnovation • social innovation • Source: CIS/EUROSTAT

14. Spatial trends of innovation in Europe Product innovation only Process innovation only

15. Social innovation adoption and use Broadband penetration rate On-line orders

16. Environmental innovation

17. Share of innovation by type of knowledge-economy regions

18. R&D expenditures on GDP and innovation R&Dexpenditure / GDP Share ofinnovatingfirms

19. R&D expenditures on GDP (average 2006-07) In 2007 33 regions had achieved 3% of R&D expenditures on GDP (11% of NUTS2, representing 16% of EU GDP) and concentrated in a few countries in the North of Europe. Moreover, a very high number of regions belong to the lowest class, with R&D on GDP lower than 0.5% (representing 5% of GDP). Do we really take advantage from an innovation policy with a common aim for all countries/regions?

20. Patenting activity: comparison with China and India

21. … and USA The spatial concentration of R&D in order to exploit economies of scale seems to be the model followed by emerging countries, re-launching in a decisive way the debate of the importance of the identification of an European Research Area.

22. Results ad questions from the descriptive analysis Results: Only a fewregionshaveachieved the 3% ofR&D/GDP, and most are below 0.5%. Only a fewregions show a pattern ofinnovationthatgoesfromR&Dtoinnovation. Questions: How do regions innovate withoutR&D? Which are the territorialpreconditions in orderforregionstomovefromknowledgetoinnovation and togrowth?

23. A) Main spatial trends of innovation and knowledge B) Territorial elements explaining spatial trends C) Impact of the different modes of innovation and knowledge on regional performance D) Case studies E) Policy implications for the development of a successful knowledge economy Specific goals

24. Territorial patterns of innovation • A territorial pattern of innovation is a combination of context conditions and of specific modes of performingthe different phases of the innovation process. • Context conditions: • Internal generation • External attraction • Different phases of the innovation process: • - from information to knowledge • - from knowledge to innovation • - from innovation to regional performance of knowledge and innovation

25. An endogenous innovation pattern REGION J • European research area: • basic general purpose technologies Basic, general purpose knowledge Basic, general purpose knowledge Education, human capital, accessibility, urban externalities Education, human capital, accessibility, urban externalities Specific, applied knowledge 2) Knowledge diversification area: high patent activities in diversified applied technology fields Territorial receiptivity Cognitive proximity Relational capacity Collective learning Education, human capital, accessibility, urban externalities Territorialpreconditions and channels for interregional knowledge flows and innovation diffusion Best practice governance Product and process innovation Economic efficiency REGION I Entrepreneurship Basic, general purpose knowledge

26. A creative application pattern REGION J 3) Smart specialisation area External specific technologies that enhance the upgrading of specific local knowledge Basic, general purpose knowledge Education, human capital, accessibility, urban externalities Specific, applied knowledge Territorial creativity Openness to innovation 4) Smart upgrading diversification area Specific technologies used by local entrepreneurs Territorialpreconditions and channels for interregional knowledge flows and innovation diffusion REGION I Collective learning Specific, applied knowledge or capabilities Best practice governance Product and process innovation Economic efficiency Entrepreneurship

27. An imitative innovation pattern REGION J Collective learning Basic, general purpose knowledge Product and process innovation Education, human capital, accessibility, urban externalities Specific, applied knowledge Entrepreneurship Territorialpreconditions and channels for interregional knowledge flows and innovation diffusion Territorial attractiveness: FDI Best practice governance Product and process innovation Economic efficiency REGION I 5) Creative imitation area Innovation imitation through FDI

28. Territorial patterns of innovation Pattern 1= European research area Pattern 2 = Knowledge diversification area Pattern 3 = Smart specialization area Pattern 4 = Smart upgrading diversification area Pattern 5 = Creative imitation area

29. Territorial conditions associated to each pattern Regional preconditions for knowledge and innovation creation Regional preconditions for external knowledge and innovation acquisition

30. A) Main spatial trends of innovation and knowledge B) Territorial elements explaining spatial trends C) Impact of the different modes of innovation and knowledge on regional performance D) Case studies E) Policy implications for the development of a successful knowledge economy Specific goals

31. Selected questions to be answered • Whatis the returnofR&Dexpendituretoknowledge production? • Do knowledgespillovers play a role in producinginternalknowledge? • Doeshuman capital participateto the production ofnewknowledge and innovation? • Doesformalknowledge create innovation? • Doesinnovation impact on employmentgrowthrates? • HasR&Dan impact on GDP growth? • DoesR&D generate increases in GDP growthrates? • Doesinnovation generate increases in GDP growthrates?

32. What is the return of R&D expenditure to knowledge production? Map: Elasticity of knowledge production to R&D The return of R&D expenditure to knowledge production increases by increasing R&D expenditure up to a certain level, then it starts decreasing.

33. Do knowledge spillovers play a role in producing internal knowledge? Map: Elasticity of knowledge production to inventors mobility Map: Elasticity of knowledge production to research networks

34. Does human capital participate to the production of new knowledge? Map: Elasticity of knowledge production to human capital Increasing returns up to a certain threshold, then decreasing returns.

35. Does human capital participate to the production of new innovation? Map: Elasticity of innovation to human capital Innovation rate increases with the increase in human capital, which requires a critical mass to generate positive effects.

36. Does formal knowledge create innovation? Patents Innovation 0.05 Patents in: European Research Area 0.16 Knowledge Diversification Area 0.01 Smart Specialization Area 0.03 Innovation Smart Upgrading Diversification Area -0.04 -0.05 Creative Imitation Area

37. Does innovation impact on employment growth rates? • Map: Elasticity of employment growth to product innovation • In general, product innovation is a labour saving activity but: • it creates jobs in regions where production functions are present • (new products need to be produced)

38. Does innovation impact on employment growth rates? • Map: Elasticity of employment growth to process innovation • In general, process innovation is a labour saving activity: • especially in regions where knowledge intensive services are present. • (i.e. in those sectors where process innovation is more adopted)

39. Does R&D expenditure generate GDP growth? Map: Elasticity of GDP to R&D A critical mass is required in order to achieve increasing returns (U-shaped form).

40. Does R&D expenditure generate increases in GDP growth rates? R&D GDP growth rate 0.05 R&D in: European Research Area 0.0023* Knowledge Diversification Area 0.0013* Smart Specialization Area 0.0009 GDP growth rate Smart Upgrading Diversification Area 0.0006 -0.0016 Creative Imitation Area * Significant at conventional level

41. Does innovation generate increases in GDP growth rates? Yes, but if innovation achieves a critical mass! Imitative innovation generates lower GDP growth rates than new innovation

42. A) Main spatial trends of innovation and knowledge. (both endogenous knowledge creation and flows from outside) Output: typologies of innovative regions WP 2.1 and 2.2 B) Territorial elements explaining spatial trends. Different modes of innovation and knowledge creation and diffusion. A comparison with other regional knowledge economies in more advanced and emerging countries Output: typologies of territorial patterns of innovation WP 2 3.1 and 2.5 C) Impact of the different modes of innovation and knowledge on regional performance. Output: typologies of regional performance based on innovation and knowledge WP 2.3.2 D) Case studies WP 2.4.1 and 2.4.2 E) Policy implications for the development of a successful knowledge economy WP 2.6 Case studies

43. 12 case studies • 6 case case on best practiceofknowledgecreation: • - Electronics (Pisa, Tuscany) • Automotive in Piedmont • Biotech in Oxford • ICT in Cambridge • ICT in Kosice • ICT in Bratislava • 6 case studies on best practiceofknowledgeacquisition: • Wine in Tuscany area; • Wood processing in BanskaBystrica region • Digital media in Cardiff (Wales) • Foodsector in West Wales • ICT Milan (Lombardy) • Automotivein Bratislava region

44. Value added of the case studies Territorialelementsexplaininnovationpatterns more than the sectoralelements. Case studies have provided an in-depth analysis of the territorial elements behind patterns of innovation. Case studiesdemonstrated the dynamicsofregionsfromone pattern ofinnovationtoanother. Inductiveanalysiswitnessesthat the territorialelementssupporting the differentinnovationpatterns are thoseconceptuallyidentified.

45. A) Main spatial trends of innovation and knowledge B) Territorial elements explaining the spatial trends C) Impact of the different modes of innovation and knowledge on regional performance D) Case studies E) Policy implications for the development of a successful knowledge economy Specific goals of the KIT project

46. Key policy messages (1) • Key messages useful to build innovation policies emerge: • the knowledge-economy shows a very differentiated and fragmented spatial pattern in Europe; • for many European regions the knowledge economy is still in its infancy; • “scientific regions”, where most of R&D is located, innovate just slightly more than all other knowledge economy regions in Europe; • the way to a smart growth - calling for the achievement of 3% of the EU’s GDP (public and private) to be invested in R&D/innovation - is still a long way off;

47. Key policy messages (2) • the spatial concentration of R&D in order to exploit economies of scale seems to be the model followed by emerging countries, re-launching the debate of the importance of the identification of an European Research Area; • 6. the pathways towards innovation and modernization are differentiated among regions according to local specificities; • R&D and higher education are special features of only some of the possible innovation paths; • R&D is translated into GDP growth in regions where a critical mass of R&D is located;

48. Key policy messages (3) • innovation has a labour saving nature, but in some areas the effects can be positive according to specific functions and sectors; • knowledge spillovers play a role in those areas where a critical mass of local knowledge is available; • innovation has an impact on GDP growth if a critical mass of innovation is present in the region; • 11. a single overall innovation strategy is unlikely to provide the right stimuli and incentives in the different contexts; • 12. in order to increase its regional innovation capacity, Europe needs normative interventions towards thematically/regionally focused innovation policies.

49. Towards a summary of policy suggestions

50. Thank you very muchfor your attention!