A Commissioned Reinterpretation

1. The Second Warsaw Conference: "The Future of European Regions" Panel: “The European regions as a field of path dependency and path creation”Warsaw, June 2, 2007 A Commissioned Reinterpretation Roman Galar Institute of Computer Engineering, Control and Robotics Wrocław University of Technology

2. In the Regio-Futures Europe Volume Two texts: • Gerd Schienstock, Path Dependency and Path Creation in Finland, p: 91-106 • Roman Galar, The Path Dependency and Path Creation Concepts, Related in Terms of Evolutionary Adaptations, p: 107-118

3. The Opening Position • Failure of conventional theories of intentional innovation • A search for objective explanations • Absence of a clearly specified model • A lot of mantras flying in the thin air • Helpful evolutionary models:preemptive assumption of gradualism • Economy as an overlay on creativeness

4. The Schienstock’s relation (1) • Old path of development: Finland dominated by technologies, organization forms, social institutions and cultural patterns of the resource-based forest cluster. • Few linkages between the academic-traditionalist science system and the economy. • Crisis of 1992: Finland GDP drops 7%. • New path of development emerges based on telecommunication.

5. The Schienstock’s relation (2) • During the 1990s Finland moves from the period of path dependent development to a period of path creation. • ICT cluster specializing in telecommunications, global role of the core company, market-based financing, network of dependent SMEs, high R&D investments, close science-industry cooperation, modern organization, well educated workforce, firm-centred innovation policy. • Finnish economy becomes a knowledge-intensive economy.

6. Old Nokia • 1970s and 1980s: Nokia is a conglomerate with a lot of divisions, producing nearly everything with hardly any synergy. • People speak of Nokia as a "junk shop". • End of 1980s: major economic problems with consumer electronics; the forest part does well. • Yet, Nokia got into a position in which the knowledge accumulated by the international competitors gave them no advantage.

7. New Nokia • 1992 Mobile Phone Division takes over Nokia and declares a new vision of 2000: “focused, global, telecom-oriented and value-added production”. • Till the end of 1990s Nokia grows by about 30% a year. • Global capital markets forced Nokia to continuously improve its productivity and competitiveness. • Company transformed from a centrally governed into a network structure. • One third of the Nokia workforce engaged in R&D, concentrating on applied research and development. • Cooperation with universities and research organizations flourishes. • Less influenced by the Finnish institutional setting.

8. When did it happen? • In 1992 the Nokia breakthrough product, the GMS phone hits the market • In 1991 the first GSM mobile phone network was supplied • In 1989 Nokia got its first GSM order. • In the beginning of the 1980s, Finland chooses the ICT as the core technology for developing an endogenous knowledge base. • Nokia engagement with electronics goes back to 1960s, with telecommunication to 1970s.

9. US Patent 5,265,158Abstract A stand-alone portable radio telephone unit, includes an upper part, and a lower part. The upper and lower parts have similar peripheral shapes and in combination include all of the components necessary to form a handset for connection with a main unit in a mobile phone system. An intermediate part is located between the upper and lower parts and includes radio frequency components, an antenna and battery means. The upper, lower and intermediate parts in combination include all of the components necessary to form a stand-alone portable radio telephone unit. Bringing the three parts into abutting engagement completes the required electrical connections between the parts.

10. How did it happen? • It is said that clusters are the key determinants of national competitive advantage, because they create an environment of pressure and challenge which forces companies to innovate. • Yet, it is also pointed out that the forest cluster produced rather moderate pressures:Paper and timber producers colluded to reduce mutual competition and profited significantly from strong state intervention channelled through huge national programmes.

11. The Crucial Question • How to explain that the old Nokia, this relatively clumsy organization, this “junk shop”, has turned out to be the new Nokia incubator??? • Especially, as a number of the more “competent” attempts to get into the first league of ICTs were made in the same period, all around the world. • And most of these attempts have failed, especially in Europe, where the Nokia case remains a shining exception. • Might it happen again within the New Nokia?

12. Technology Pros Discuss What Comes After the Fall, NYT Jul 29, 2001 ESTRIN: Typically, when you're in a time like we are now, what gets you out of it is some new technology, some real breakthrough that is not incremental. We have a lot of work to do on the Internet. If you look at the next three to five years, it is good incremental, but it is incremental progress. It's not the cell phone where the cell phone didn't exist. It's not PC's where PC's didn't exist.

13. The Nokia example is a beacon of hope for believers in the path creation potential of European regions.

14. Modes of Development • Path dependent development • À la carte development • Cargo type development The Holy Grail of economy and ahistorical illusion: development that is continuous and sustainable.

15. random fluctuations area of forced competition random drift Evolutionary scheme of development area of path creation area of path following

16. Upward Progress Path following Exploitation of the known possibilities Fruits Obvious Predictable Progress Technology Forward Progress Path creation Exploration of the unknown of possibilities Seeds Tacit Surprising Progress Ecology Development: Two Problems not One

17. Regional path creation potential • Regions more diverse among them and more uniform within than the states. • Regions big enough to raise financial capital and small enough to raise human capital. • Regions more inclined than states to invest in their identity; this might include R&D. • Regions afford longer perspectives and greater diversification than corporations. • Regions might provide the right shelters for innovators attempting risky endeavors.

18. European Benefits from the Regional Development • Proliferation of innovative fronts beyond the present lamentable few. • Parallelization of innovative searches. • More of creative development based on leadership, less of the imitative development based on follow-up. • Increased cultural vitality resulting from the „mainstream of progress” participation. • Diversity of criteriafacilitates adaptation to particular market niches. Cohesion: being close but different – the adaptive search engine.

19. Regional Path Creation Benchmarks • inventive courage based on the positive local identity; • local challenges that demand specific reactions; • a distinct pool of competences; • innovative achievements of the educated in the region; • individualistic attitudes within the culture of cooperation; • public spirit embodied in informal networks; • low procedural entanglement enabling learning by trials and errors; • institutions and traditions of patronage offering long term creative freedom.

20. As far as imitative or innovative future is concerned, the humble cultural factors might turn out to be the necessary ingredient of the long term success. This aspect seems very important, if only because it is so often overlooked.The End

21. The Darwinian rules • reproduction: in consecutive periods of time the existing population of individuals is replaced by the population of their descendants; • random mutation: new variants appear as slightly modified replicas of their predecessors; • random selection: the chances of any individual to produce an offspring are proportional to its fitness.