Smart specialisation: “ economic transformation strategies”

1. Smart specialisation: “economic transformation strategies” Raquel Ortega-Argilés Instituto Superior Técnico IST Universidade Tecnica de Lisboa UTL raquel.ortega.argiles@ist.utl.pt

2. Outline • Policy contextualisation • History/Background of the concept Smart Specialisation • Smart Specialisation elements: sectoral/regional perspective • What is smart specialisation? • Case studies/best practice examples of regional development strategies in line with Smart Specialisation logic.

3. European policy contextualisation • Europe 2020 Flagship Initiative Innovation Union [COM(2010)546] • The EU Budget Review [COM(2010)700] • Regional Policy Contributing to Smart Growth in Europe [COM(2010)553] • Investing in Europe’s Future: Fifth Report on Economic, Social and Territorial Cohesion, 2010 • Legislative package for cohesion policy for the period from 2014 until 2020

4. Policy background Flaship initiatives – Europe 2020: • Innovation Union • Industrial policy for the Globalisation Era >> which aims to ensure a strong, competitive and diversified manufacturing chain with particular emphasis on SMEs. • Digital Agenda • Youth on the Move • Agenda for New Skills and Jobs

5. Under the umbrella of Europe2020 • The smart specialisation principles are framed under the consecution of achieving a smart growth based in obtaining the most efficient innovation results with the most effective way of spending public resources. • The idea of smart specialisation is based on the notion that regions cannot do everything in STI, in particular in time of scarcity of resources, so it is important for them to focus and concentrate resources on certain domains of expertise.

6. Need for a change • The Commission's evaluation of past cohesion policy spendinghas shown many examples of added value and of growth- and job-creating investment that could not have happened without the support of the EU budget. • However, the results also show the effects of dispersion and lack of prioritisation. At a time when public money is scarce and when growth-enhancing investment is more needed than ever, the Commission has decided to propose important changes to cohesion policy.

7. New proposal of Cohesion Policy • Concentrating funding on a smaller number of priorities better linked to the Europe 2020 Strategy: smart, sustainable and inclusive growth. • Focusing on results, monitoring progress towards agreed objectives, increasing the use of conditionalities and simplifying the delivery are among the major hallmarks of the proposal.

8. Smart Specialisation: origins • ERA European Research Area and Innovation Union Flagship Programme • Knowledge For Growth Expert Group – nine policy briefs 2006-2009 • Smart specialisation concept – Bart van Ark and Dominique Foray – subsequently developed by Paul David, Bronwyn Hall, etc? • Measuring Smart Specialisation: The Concept and the Need for Indicators, David, P., Foray, D., and Hall, B., 2009

9. Smart Specialisation: the concept • Transatlantic productivity and growth gap since 1995 • Various reasons for the gap – labour markets, human capital, market segmentation, managerial practices, etc… • The R&D gap - and in particular in ICT and high technology sectors - is the best proxy for the gap – both in terms of levels and rates of return – with a lagged effect since 2000.

10. Evolution of the concept From: Emphasis in R&D - Multinationals’ R&D>>> Institutional and Governance issues relating to Science >>> To: Technological Specialisation based on the Adoption, Dissemination and Adaptation of GPTs (~ICTs). >>>>> Research Development

11. “Smart Specialisation, Regional Growth and Applications to EU Cohesion Policy” P. McCann and R. Ortega-Argilés http://www.rug.nl/staff/p.mccann/McCannSmartSpecialisationAndEUCohesionPolicy.pdf http://www.ieb.ub.edu/aplicacio/fitxers/2011/7/Doc2011-14.pdf http://ec.europa.eu/regional_policy/cooperate/regions_for_economic_change/index_en.cfm#4

12. Smart specialisation: key elements Sectoral perspective: Entrepreneurial search process Domain Relevant size Connectedness of the domain: access to learning Regional perspective: Embeddedness: specialised industrial structure Relatedness: diversification/ specialised technological diversif. Connectivity: access to market

13. Smart Specialisation: regional perspective • Embeddedness: can be captured by regional CGE models, regional Input-Output models, location quotients, case studies, longevity, social capital etc. • Relatedness: It is not about specialisation but diversification – specialised technological diversification Embeddedness + Relatedness = Relevant Size Domain

14. Smart Specialisation: regional perspective • Connectivity:inter-regional knowledge flows and intra-regional knowledge flows • Not just about interregional networking • Regional Smart Specialisation public policy design needs to move from a national, sectoral or technological innovation system logic to a regional innovation system logic

15. What is Smart Specialisation? • Evidence-based: what regions can realistically achieve building on their historic strengths and existing assets • Focus and concentration of resources on certain domains of expertise, where new R&D&I will complement the region’s other productive assets – potential competitive advantage/ Getting better/ excel with something specific • No top-down decision, but stakeholder discovery process • Priority setting in times of scarce resources avoiding fragmentation and duplication/imitation • Accumulation of critical mass: involving actors in the innovative cycle • Not necessarily focus on single sector, but cross-fertilisation

16. Smart Specialisation and Cohesion Policy • A smart specialisation approach to regional policy should be about promoting the generation of local ideas, and maximising both intra- and inter-regional knowledge spillovers in the relevant scale domains (embeddedness + relatedness) • “Embeddedness + Relatedness” focuses on the choice of innovation thematic priorities, concentration, targeting – based on a regional-structural way of thinking.

17. What aspects/steps should be smart? • Setting of realistic goals • Discovery of the industrial and socio-economic engines of the regional economic growth • The design of the prioritization process • Implementation of the regional strategy and monitoring of the process • Diagnosis and evaluation of the strategy

18. Setting of realistic goals:

19. Setting of goals • Navarra: regional modernisation development strategy to maintain and improve not only its regional competitiveness and GDP per capita records, also its human development and environmental sustainability levels by 2030 • Flanders: programme aiming to rank among the top 5 knowledge-intensive regions by 2020. • Limburg: strategy focus on employment generation by the matching of skill to till chains, «triple helix» main players involvement.

20. Discovery process: engines of regional economic growth

21. Discovery process • Searching process of the capabilities and potentialities (resources: human, natural, physical) • Identificationthe embedded sectors in the region (technological domains) • Analysis of the related industries and activities that complement the regional economic structure Objective: create the future regional domestic capabilityand interregional competitive advantage Built on their regional historic strengths and existing assets.

22. Discovery process: examples • Skåne (SE): network analyses in order to identify the level of relatedness among the industries located in the region • Limburg (NL): BAK Basel Economics study mapping the industrial and STI strengths of the regions at the TTR-ELAtregion • Lower Austria/Niederösterreich (AT): SWOT analysis: project – program- region • Navarra: + 50 interviews toregionswith similar industrial potentialitiesto do notduplicate!!

23. The design/implementation of the prioritization process

24. Design of the prioritization • Identify opportunities/advantages/barriers • Avoid fragmentation and duplication or imitation. • Be based on the accumulation of critical mass on certain regional domains of expertise, • Combine activities with potential growth development. • Involve connection (if needed) beyond the regional borders (inter-regional or international) SHOULD • Be based in one single sector or a single project: instead it should be a cross-fertilisation process • Be based in one one single stage of prioritization, evolutionary process of prioritization – long-term perspective SHOULD NOT

25. Restructuring the economy:

26. West Midlands (UK) • Technological and skills diversification, innovation, supply-chain upgrading • Automotive industry (dominant sector in the region) • To increased local job retention; movement away from traditional automotive supplies; new product and service innovations; technological and skills upgrading.

27. West Midlands (UK) • Main pillars of the strategy: • Enhanced business support services: manufacturing advisory service, grant funding for strategically important companies, networked R&D centres of excellence • Skills-training services: graduate intership programme and retail support programme • A regional communication campaign: comprising data, intelligence gathering and provision service, a monitoring and evaluation framework

28. Embedded and related industries: • Processes of modernisation and better development of embedded industries. • Navarra: prioritization of basic sectors linked to the economic growth and development of their region vs. “explorative” sectors linked to the economic growth and development of their region • Flanders: prioritization of the transportation-logistics services based on their privileged geographical location in Europe • Processes of technological diversification from the embedded industries to a related set of industries linked with the embedded ones. Navarra, Nord-pas-de-Calais and Skåne.

29. Navarra (ES)macro-sectors and human capital WHICH CLUSTERS?

30. Navarra (ES)macro-sectors and human capital Basic Clusters

31. Supporting processes • Processes of construction of new supporting infrastructures to helpthe industries in their development and to facilitate the Triple Helix collaboration: • The creation of different technopoles and technology and knowledge parks and centres (Nord-pas-de-Calais, Emilia Romagna and Lower Austria)

32. Defining new structures based on accumulated knowledge • Lower Austria (Technopol program, 5 clusters) • Navarra (Moderna plan, basic/strategic/future commitments/complementary) • Flanders (Pact2020, 6 clusters) • Berlin – Brandenburg (InnoBB, 5 Future fields) • Lahti (3 lines of expertise) • Nord Pas de Calais (Poles de Competitivite) • Silesia (8 technological areas and 4 development pathways) • Skåne (5 cluster development) • Emilia Romagna (10 technopoles)

33. Navarra (ES)macro-sectors and human capital Basic Clusters

34. Flanders (BE)Spearheads initiatives and clusters • Six clusters in knowledge – intensive fields selected + 30 high-priority technology domains in which Flanders could be leading Europe in 2015: • Transportation-Logistics-Services-Supply chain management • ICT and Services in Healthcare (e-health):Interoperability of ICT-systems: test and validation bed; Telemonitoring in Flanders • Healthcare: Transnational Medicine; Nutrition - Food-Health • New Materials-Nanotechnology-Manufacturing industry: • ICT for Socio-economic innovation: innovative services (e-health, e-gov, e-learning) • Energy and Environment: Flemish Smart Grids Platform (intelligent energy networks)

35. Supporting processes • Processes of connectivity: inter-regional and intra-regional knowledge flows (Limburg and the TTR-ELAt strategy, Berlin-Brandenburg strategy) or international development strategies (Skåne).

36. Province of Limburg (NL) • Cross-border cooperation on innovation between regions in the border area – unique regional cross-border concept of innovation. • Exploit territorial potential through innovation • Specific themes: Chemicals and Advanced materials, Health Science and High-tech systems. • Limburg focus: solar energy systems, health sciences (top referral care, toxicogenomics, brain imaging) and Agro food (nutritional horticulture) and Logistics

37. Province of Limburg (NL) • Ideas: • International competition/collaboration • Employment generation • “knowledge to skill to till” chains • Contribution of the main players “triple helix” : business/industry, knowledge institutions and government. • Stronger “value chain” of knowledge, expertise and finances

38. Berlin-Brandenburg (DE) • Joint-innovation strategy based on the collaboration in both German states in the following fields: • Health economy (medical devices and biotechnology) • ICT and media (creative economy and services) • Transportation technology, mobility and logistics • Optics • Energy

39. Berlin-Brandenburg (DE) • Joint strategy as a result of economic collaboration ove the last ten years • Economical interconnectedness. Industry-University linkages. Knowledge and technology transfer • Focus on: • Seamless innovation environment for enterprises • network building activities • funding accessibility for projects initialisation and strategic alliances • Innovation support measures cross-border

40. Berlin-Brandenburg (DE) • The way forward (SS): • Development and exploitation of synergies between two fields: Energy and transportation; ICT and optical technologies • Better use of cross-linked technologies • Generation of GPT with huge economic potential • National and Global networking to support identification (market potential)

41. Monitoring and Evaluation

42. Diagnosis and evaluation • Based in a detailed internal process of evaluation or subcontracting process to evaluate the success of the strategy. • Past-evaluation and scenario setting • Should include a well-defined list of realistic objectives and a set of indicators in which each objective can be reflected. • The principles and details of the construction of appropriate results indicators are given in Barca and McCann (2011). 

43. Lower Austria (AT)Measuring the past to evaluate the future • The methodology focuses on evaluation and explanation at the regional level, as it seeks to discover the impacts of concrete public policy interventions. • Projects >>> Programmes >>> Regional Level • From the sources to the beneficiaries. • Monitoring non-beneficiaries as well as to discover the reasons of their non involvement.

44. Lower Austria (AT)Measuring the past to evaluate the future • The Innovation Assessment Methodology Lower Austria, combines monitoring and evalution tools at all levels of the innovation policy impact assessment, from project to programme up to the regional level. • Qualitative (interviews, evaluation reports and interactive workshops with regional companies and intermediaries) • Quantitative (statistical tools, questionnaire survey)

45. Navarra (ES)Setting objectives • Based on scenarios (2006 and 2030) for the future (realistics goals can be defined). Indicators used by Navarra for setting objectives: • General ones: GDP, Unemployment, ... • Per capita income • Even distribution of the income: Gini index • OECD Human development index • Objectives based on data for consumption and sustainable transport, climate change and biodiversity.

46. West Midlands (UK) Some obtained results