International trade and aspects of smart specialization General Framework and case on (semi)peripheral region in Finland

1. International trade and aspects of smart specializationGeneral Framework and case on (semi)peripheral region in Finland Raine Hermans, Adj. Prof., PhD Tekes, raine.hermans@tekes.fi with Vesa Harmaakorpi and Tuomo Uotila, Lahti School of Innovation Lappeenranta University of Technology

2. RegionalInnovationStrategies (15 regionalworkshops) Tekes InvestmentStrategy (5000 contributors) National InnovationStrategy National and RegionalStrategiesComplementingEachOther • Tekes Aimed to • build a strong networked knowledge base • renew the economy and create new businesses • increase productivity in industries and service sector • enhance wellbeing in society and improve environmental sustainability • Challenges and Opportunities • Globalizationchangesperformance and valuecreationlogics of the valuenetworks • Criticalmass for onlyfewmultidisciplinary center • ManySpecializedcenters • National collaborationutilizescomplementarycompetencesoverregionalborders

3. Regional Innovation Platforms based on Future Lead markets: Examples on Center and Peripheral Regions Periphery: North Karelia: Scarce resources solutions related to timber harvesting and logistics; Solutions in clean energy use of wood; Intelligent nanotechnology solutions; Solutions of experientalindustry, social media and education technology in interactive communications Periphery: Lapland: Networked tourism and distant service concepts for well-being and health business; Scarce resources solutions in health care and social services; Customer-driven housing industry in arctic environment; Experientalor virtual systems and environments in tourism and Industrial services. Semiperiphery: Lahti Region Environment: Intelligent systems in vehicles and in materials handling, resource-saving solutions for waste recycling and housing, Clean water and water supply solutions; Industrial design services business. Practice based innovation activities and user oriented technology transfer to firms Center: Metropolitan Area: Well-being and development of a Healthy City; Construction of customer-driven, virtual services platforms and intelligent Identification systems; Development of service chains related to public procurement; ICT solutions for well-being.

4. Propositions from Trade Theories Comparative Advantage Proposition 1: There will be economic overall gains within a free trade area if an industry utilizes a resource and capability combinations that is regionally comparatively abundant. GeographicalEconomics Proposition 2: Region attracts companies and capabilities as a basis for value adding activities if there is a critical mass of capable resources and local [test] markets available. Infant Technology Argument Proposition 3: Short-term government support -to strengthen emerging resources and capabilities within an infant technology (or developing region)- aims to promote positive externalities and an economic upside in the long term. Cluster Dynamics Proposition 4: The interaction of highly specialized factors of production, demanding domestic customers, internationally competitive supporting industries and intensive domestic competition creates an innovative and competitive industrial cluster.

5. Synchronized proposition for smart specialization • Smart specialization • Create and utilize a related variety of or in • cross-cutting capabilities and infrastructure, • foresight-based demand driven business strategies and lead market themes, • internationally competitive supporting industries and • regional test markets providing feedback. • Strengthen temporarily those parts of the infant technology cluster which are critical for long-term growth and success. Hermans, Kulvik & Löffler (2009) Uotila , Harmaakorpi & Hermans (forthcoming)

6. The framework used in regional workshops Uotila , Harmaakorpi & Hermans (forthcoming)

7. The framework used in regional workshop Science and capabilities Wide-ranging environmental expertise; Metal and mechatronics expertise; Expertise associated with digital contents and e-learning; Food industry expertise; Expertise in industrial design; Skills in practical innovation activities. Intelligentsystems in vehicles and in materials handling; Services for the built environment; resource-saving solutions for waste recycling; Clean water and water supply solutions; Resource and energy efficient solutions; Services and tools for promoting well-being and health; Environment built from timber and resource-saving solutions for housing; Industrial design services business. The most advanced operating methods include the innovation policy package that serves networks, or innosessio, innohaavi, innolinkki, innoklubi, resource-based future research, Living Lab and Innosteel, IDEALA etc. The Helsinki Metropolitan area provides a good test market for various technological solutions and those associated with housing. Metal and mechatronics; Construction, Furniture, Food (especially cereals); Plastics; Textiles Practice and Businesses Lahti region will be a hub of sustainable innovations and environmental business based on a practical orientation, the competitiveness of which will be based on environmental, innovation and design expertise of an international standard.

8. Science-based and practice-basedinnovation (Harmaakorpi et al, forthcoming)

9. Mode 1 knowledgeproduction-> STI-mode of innovation Context of knowledgeapplication (companies and publicsectororganizations) Policyinstruments and toolsaiming at promotingknowledge transfer and utilization Mode 2 knowledgeproduction-> DUI-mode of innovation Bringing Science TechnologyInnovation STI- and DoingUsingInteractingDUI-modestogether • Finland needssectoralworldlevelknowhowcenters for STI-processes • Finland, as well as Finnishregions, needsalso to improveitsDUI-processes in order to betterabsorpthisscientificknowhow to facilitateinnovationprocesses in private and publicsectorcontexts • STI- and DUI-modesarecomplementingeachother, notcompeting Harmaakorpi , Hermans & Uotila 2010)

10. Cleantech / Environment (”keyorganizationalplayer”: Lahti Science and Business Park) Sustainableinnovation EcoDesign FinnovaatioSampo User-drivenR&D Design ”keyorganizationalplayer”: Institute of Design, Lahti university of Applied Science Practice-basedinnovationactivities (”keyorganizationalplayer”: LUT Lahti School of Innovation) Focus of RegionalInnovation Systemin Lahti Region Harmaakorpi & Uotila 2011)

11. ´Differentiation Environment EcoDesign Sustainableinnovation FinnovaatioSampo User-drivenR&D Design Practice-basedinnovationactivities Far-reachingimplications Organizationalinnovation- and performancecapability Damagedsoil and areas Far-reachingimplications Ecodesign Far-reachingimplications Furniture and packagingdesign Internationalproductdevelopment Differentiaton Innovations and productivity in publicsector Differentiation Multiactorinnovationprocessess Materialefficiency Energy efficiency Innovationservices New tools and methods tosupportinnovativeness Environmentalefficiency Regionalenvironment Industrial design Regional design Design knowhow Practise-basedinnovationenvironment Environmentalknowhow Sustainabledevelopment Harmaakorpi & Uotila 2011)

12. Strengths and weaknesses of Lahti region’s innovation environment Strengths • Practice-oriented innovation model • Rapidly strengthening and increasingly distinct know-how strong points • A working four-way relationship, i.e. close interaction between businesses, universities, the public sector (incl. financiers) and customers • Practical pilot and development environments • A firm metropolitan connection • Innovation-intensive growth companies • One of the most innovative public sectors in Finland • Extensive vocational education with good links to practical work • Individuals acting as dynamos Weaknesses •  Few strong know-how points • Low R&D investments in each sector • Few financing channels with a capability/interest in risk-taking • Obscurity of the innovation service network • Underdeveloped innovation infrastructure • Creative economy too underdeveloped to match the potential • Little international education and active research cooperation • Linking vocational education to the development of the innovation environment

13. Currentchallenges to betackled SustainableValueCreation ”Strategiclevel”: SVC at the core of regionaldevelopmentplans (”Whatdoesitmean in differentsectors?”) ”Operationallevel”: Three ”spearheads” or focusareas of regionalinnovation strategy (cleantech, practisebased innovationactivities, design) ”Tacticallevel”: Key projectsrelating to threefocusareasemphasizing cooperativestructures and contents betweenfocusareas

14. Strategictheses for Lahti region’sinnovationsystemdevelopment 2009-2015 • Practice-oriented innovation environment with international network connections • International CleanTech business and know-how centre • Functioning creative economy with design as its flagship • Internationally unique concept • Europe's most innovative public sector

15. Someconclusions • Elements of success in carrying out regional innovation policy: • A holistic analysis (a framework) of the regional innovation environment, in which different actors (and projects) have their own places. • A story built around this holistic analysis. • Perspectives not been restricted to the local/regional zero-sum game but adopting “a wider horizon” • Proper leadership; shared faith and hard work.