Southwest Norway - a Culture for Innovation? Soft Institutions and Regional Innovation

1. Southwest Norway - a Culture for Innovation?Soft Institutions and Regional Innovation Rune Dahl Fitjar

2. Outline • Background for the project • Southwest Norway management culture • Indicators and comparisons • The relationship between soft institutions and innovation • Research questions, hypotheses and theoretical perspectives • Main findings

3. Background • Scenarios 2020 • 2006 project outlining the past, present and future of regional development in four regions: • Southern Norway • Dalane/Lister • Stavanger • Haugalandet • Conducted by IRIS (Gjelsvik, Nødland, Leknes and Holmen), Agder Research (Hidle) and Berrefjord & Thomassen (Berrefjord, Thomassen and Dinesen)

4. Scenarios 2020 – main findings • The Stavanger region as a model of innovation-driven regional development • The impact of cooperation • Private-public partnerships • Inter-municipal cooperation • Formal and informal networks • A set of regional values and attitudes serving as the basis for cooperation and innovation • See next slide

5. Values and attitudes The Nordic Model • Egalitarianism, providing production of welfare • Trust, providing sharing of knowledge and information • Short distance to power, providing management based on participation and influence of workers • Inclusion, providing a wide basis of competence • Open-mindedness, providing flexibility, curiosity and the ability to change • Protestant work ethic, providing diligent and efficient workers who take personal responsibility

6. Attitudes of Regional Managers • 2007 project examining • whether the values and attitudes outlined by Scenarios 2020 are actually present in the four regions • the innovativeness of companies in the region • Based on survey data of regional elites • Businesses: CEOs of companies with 5 employees or more • Public sector: Senior officials in regional councils and schools • Politicians: Representatives on municipal & county Exec boards • The survey was completed in two stages: • Telephone interviews (Oct/Nov 2007): 1670 in total. • Online questionnaires (Nov/Dec 2007): 706 completed.

7. The sample

8. Attitudes of Regional Managers – main findings • No major value differences between the four regions • If there is a regional management culture, it is common across Southwest Norway • Some indications of cultural cleavages with rest of Norway: • Higher levels of trust, flexibility and openness • Lower levels of egalitarianism • An elite culture that differs from mass culture in the region • Lower levels of egalitarianism • Less respect for authority • Higher levels of flexibility and openness • A stronger presence of values and attitudes that are characteristic of the region

9. Regional Innovation Cultures • Project financed by the Stavanger Centre for Innovation Research • Purpose: Examine the relationship between soft institutions, cooperation and regional innovation in Southwest Norway • Based on the data from the Attitudes of Regional Managers project, and testing key hypotheses of the Scenarios 2020 project • Conducted by IRIS (Fitjar) and LSE (Rodríguez-Pose)

10. Soft Institutions of Innovation • Innovation as a territorially embedded process • Need to understand social and institutional conditions of the space in which it takes place (Rodríguez-Pose and Crescenzi 2008) • Unique set of circumstances in each region • Institutions, policies, networks, social values and norms act as conditions rendering some courses of action easier than others (Morgan 2004) • How do the soft institutions in SW Norway affect collaboration and innovation?

11. The Soft Institutions of SW Norway Regional self-perceptions: • ”The Harmony Culture” • Intra-group trust and collaboration • Absence of conflict • ”The Open Port” • Open-mindedness to foreign influences • Implementation of new ideas

12. Indicators of ”the Harmony Culture” • Politicians and public sector managers trust in each other, themselves and business managers to a large extent • Business managers trust a lot more in each other than in the authorities • High level of agreement on the importance of maintaining regional employment rather than profit maximisation • Local authorities have a more positive perception of their relationship with regional businesses than do business managers • The differences between the three regions are small

13. Trust:Most people can be trusted, % agree

14. I trust politicians in this region, balance of opinion Don’t trust politicians Trust politicians

15. I trust public officials in this region, balance of opinion Don’t trust public officials Trust public officials

16. I trust business managers in this region, balance of opinion Don’t trust business managers Trust business managers

17. It is sometimes right to let employees get their way even where other options would have been better Not right to let employees get their way when other options are better Right to let empl get their way

18. If employees participate in decision-making processes, they often block the chances to reach a decision Employees don’t often block decisions Employees often block decisions

19. It is often easier to cooperate with local or regional actors than people from other parts of the country Not easier to cooperate with locals Easier to cooperate with locals

20. It is important to maintain employment in the region, even if it should hurt the business’ profits Business’ profits most important Important to maintain employment in region

21. We have good relations with businesses / with local authorities, balance of opinion Not good relations Have good relations

22. We / Local authorities provide a good framework for regional businesses / our company, balance of opinion Don’t provide a good framework Provide a good framework

23. Businesses / Local authorities are on our side in developing the region, balance of opinion Not on our side On our side

24. Indicators of ”the Open Port” • Some indications of a greater openness to new ideas and foreign cultures than the national average • The differences are partly, but not fully, explained by levels of urbanisation • Elites tend to be more open-minded than the general public • Public-sector managers and politicians tend to be more open to foreign cultures than business managers

25. The old and proven is usually better than newfangled ideas, balance of opinion The old and proven Newfangled ideas

26. I need to improve my understanding of other countries’ cultures, balance of opinion Don’t need to improve understanding Need to improve understanding

27. I am most comfortable around people who are open to change and new ideas, balance of opinion Not most comfortable around open people Most comfortable around open people

28. I wish Norway and Norwegians were more open to the world around us, balance of opinion Wish that Norwegians were more open Does not wish that Norwegians were more open to world

29. Work should always come first, even if that means less leisure time, balance of opinion Work shouldn’t always come first Work should always come first

30. The impact of the soft institutions • There are some indications that ”the Harmony Culture” and ”the Open Port” form part of the regional management culture in Southwest Norway • How does this affect innovation? • Do the managers’ values affect innovation? • Is collaboration helpful to innovation? • Do the managers’ values affect cooperation?

31. Research Questions ”Does collaboration affect innovation, and if so, does the physical proximity of partners affect innovation?” ”Do soft institutional factors (regionalised values and attitudes) affect innovation?”

32. The importance of collaboration • Collaboration matters for the innovative capacity of firms • Open innovation (Chesbrough 2003): External search for technology prior to internal R&D • User-driven innovation (von Hippel 1986, 2005) • ”Creative Commons” • Wikinomics (Tapscott and Williams 2006) • Value chains • ”The Strength of Weak Ties” (Granovetter 1973) • Absorptive capacities (Cohen and Levinthal 1990)

33. Regional cooperation • The location of partners matters • Differences across regions in levels of economic development and innovation in spite of globalisation and ”the end of territory” • Benefits of regional cooperation: • Face-to-face contact (Florida 2005) • Relational assets, untraded interdependencies (Storper 1997) • ”The Associational Economy” (Cooke and Morgan 1998) • Non-substitutable locational assets (Brenner 2002) • Territorially concentrated clusters (Porter 1990)

34. Global cooperation • The location of partners does not matter • ”The World is Flat” (Friedman 2005): Innovate without having to emigrate • Benefits of international cooperation: • Knowledge spillovers regardless of national borders (Audretsch and Feldman 2004) • Personal networks are increasingly international (Huber 2007) • Global value chains and production networks (Gereffi and Korzeniewicz 1994) • Regions as hubs

35. Hypotheses H1: Collaboration with a wide range of partners has an impact on the innovative capacity of firms H2A: Collaboration within the region is most important H2B: Collaboration with international partners is most important

36. The social filter • Trust and open-mindedness as soft regional institutions in SW Norway • Values affect the absorption and diffusion of knowledge among businesses • Form part of regional ”social filter” determining the innovation proneness of the region (Rodríguez-Pose 1999) • Technological learning capacity of firms in the region dependent on presence of innovative components in the social filter • Collective attitude towards innovation and social change form an important part of the filter (Crescenzi, Rodríguez-Pose and Storper 2007)

37. Innovation Proneness and the Social Filter Rodríguez-Pose 1999: ”Innovation Prone and Innovation Averse Societies”

38. Trust and open-mindedness • Trust • Important for cooperative interaction (Fukuyama 1995) • Promotes mutual assistance and diffusion of technical innovations (Putnam 1993) • Open-mindedness • Important for allowing ideas to develop • Realising potential in unexpected places • Accepting diversity of opinions and ideas • This affects capacity for • Product innovation • Radical product innovation • Engaging in collaborative innovation networks

39. Hypotheses (cont.) H3: Trust and open-mindedness of the manager affects firm’s capacity for innovation H4: Trust and open-mindedness of the manager affects firm’s propensity to collaborate with external partners H5: Trust is more important for collaboration within the region, while open-mindedness is more important for collaboration with international partners

40. Analytical Model • Trust • General • Work-related Cooperation Innovation Geographical orientation of cooperation • Open-mindedness • General • Work-related

41. Operational variables Dependent variables • Product innovation • Has your company during the past 3 years introduced into the market new or significantly improved products (goods or services)? • Radical product innovation • Were any of these product innovations new to the market?

42. New products in the last 3 years Radical product innovation Yes 227 (52.7 %) 85 (19.7 %) No 204 (47.3 %) 346 (80.3 %) N 431 431 Measures of Regional Innovation

43. Regional Innovation Forms • Dominant forms of innovation • Innovation in-house • New products and processes are developed within individual businesses in the region • Innovation in collaborative networks • New products and processes are developed in cooperation between multiple partners • Innovation through adoption or assimilation • New products and processes are developed through copying and/or improving on someone else’s innovations • What is the dominant form in SW Norway?

44. Innovation Forms in SW Norway

45. Operational variables (cont.) Cooperation variables • Has your company cooperated with other companies and/or organisations on innovations over the last 3 years? If so, what kinds of partners have you used and where were they located? • Three location types: Local/regional, national and international • Seven partner types: Other companies within the conglomerate, suppliers, customers, competitors, consultancies, universities and research institutes

46. Cooperation at different geographic levels

47. Use of partner types by geographical location

48. Trust – dimensions created through PCA

49. Open-mindedness – dimensions created through PCA

50. Control variables • Manager’s level of education • Manager’s age • Company size • No. of company directorships held by manager • Share of company held by foreign owners