Can policy transform regions into entrepreneurship and innovation hubs?

Contributed by Professor Helen Lawton-Smith

The speakers were

  • Professor Roy Sandbach, ‘Innovation North East… building regional prosperity’
  • Dr Elvira Uyarra, ‘Key challenges of ‘smart’ policies for regional transformation’
  • Dr Adrian Healy, ‘From principles to practices in Smart Specialisation: Lessons from European Regions’
  • Professor Bjorn Asheim, ‘Smart Specialisation – an innovation driven strategy for economic diversification’
  • Rupert Waters, ‘Challenges for policy-makers in Buckinghamshire’
  • Professor Jeremy Howells, ‘Innovation intermediaries and innovation: Changing dynamics and future perspectives’
  • Dr Federica Rossi, ‘Evaluating the performance of regional innovation intermediaries: insights from the experience of Tuscany’s “innovation poles”’
  • Dave Waller,’What makes a successful innovation ecosystem: great innovation and technology; great policies; plenty of investment funds; great culture or none of the above: just leave it to the market’
  • Dr Ana Colovic, ’Why are cluster policies created and how do they work? A comparison between Austria, France, Japan and Sweden’
  • Dr Rosa Fernandez, Chair of final discussion session

The following five themes were addressed throughout the day:

  1. Is it possible for regions to be transformed into Entrepreneurship and Innovation Hubs?

Policy makers everywhere are under pressure to transform lagging regions into leading centres of entrepreneurship, while continuing to support already successful areas of innovation. Roy Sandbach opened the workshop, drawing on the North East Strategic Economic Plan of 2013. The Plan encouraged the North East to ‘become an exemplar for open innovation and Smart Specialisation’, through innovation which would create economic value, social good or both. The Plan hoped to create the conditions and networked solutions to transform the region.

Other speakers argued that the role of policy is to develop new paths for policy, extend existing ones, and create an entrepreneurial state embedded in the economy. Jeremy Howells suggested that the role of policy makers is primarily to change the behaviour of firms, in order to convince them that it is in their interests to innovate.

Adrian Healy spoke on the political reality of delivering Smart Specialisation, using experience from a seven country FP7 Smart Specialisation Project. He argued that innovative and entrepreneurial regions develop independently of politics. Healy cited evidence from academic studies that 80% of economic growth is demand-led, so that only around 20% of structural change could be addressed by policies. He also suggested that policy can sometimes follow practice, such as when private sector developments are imitated by policies which provide supporting infrastructures. In addition, he argued that public procurement can have a crucial role in stimulating entrepreneurship. An example he gave of this was the North East subsea programme, which was not part of the regional development strategy.

Dave Waller also shared his own experience of local innovation policy and practice in England. He demonstrated the dissonance between local politics and economic theory, using an example from Oxfordshire. The result was wasted resources, duplication and fragmentation. Waller suggested more international benchmark evidence was required, building on work such as mapping research and innovation in Amsterdam.

The first theme was not without controversy therefore, and Sandbach concluded with a lesson for the Northern Powerhouse; ‘We must drive the Powerhouse as an economic vision fuelled by innovation rather than as a political item with insular, local devolution debates at the heart.’

  1. How important is analysis, international comparison and evaluation in developing appropriate policies?

In order to make effective policies, all the speakers agreed that policy makers need to be exceptionally focused on analysis. This might include analysing the national and regional context, the area’s potential for innovation, current programmes, global benchmarking, networks, entrepreneurial activity, university strengths or local corporate innovation strategies.

The workshop heard about geographical disparities, which result in varied difficulties for policy-makers in different regions. A major problem in the North East, for example, is that it has the lowest Business R&D expenditure in the UK and business formation rates have fallen by 10% in the past year. The North East is ranked lowest of 12 regions, and 89th in Europe on Attitude, Ability, Aspiration analysis, and thus presents a particular set of challenges. By contrast, London is ranked second on the 2014 Santander Enterprise Index. Analysis must also relate to the theoretical underpinnings of policy.

That there is a dialogue between academic practitioners and policy makers was very clear. Policy practitioners draw on academic theories (often developed by economic geographers) such as the theory of ‘anchor firms’. Anchor firms are different bases of analytic, symbolic and synthetic knowledge. Elvira Uyrrara argued that analysis should also relate to the formulation of programmes, including their scale of delivery and their tools for measuring and evaluating. She highlighted the diverse set of concepts that underpin Smart Specialisation and argued that the theoretical underpinnings are still in progress.

  1. What is the significance of Leadership, Engagement and Collaboration within and across regions?

There was a general consensus after Roy Sandbach’s presentation that the basis of an effective strategy relies on the set-up of a sound and inclusive governance structure. Entrepreneurial strategy requires a shared vision about the future of the region and the thorough integration of monitoring and evaluation mechanisms.

A contested issue, however, was whether Roy Sandbach was right to suggest that business leadership would always be the driving force in regional transformation, Bjorn Asheim argued that in some contexts, the public sector or universities can be directive. In some areas, it was claimed that local entrepreneurs were disinterested in the policy-making process, such as the SMEs in the North East.

In Europe, Smart Specialisation (SMART) is the single largest attempt at an orchestrated, supranational Innovation and Entrepreneurship strategy, which requires leadership, engagement and collaboration. Dave Waller, having faced the challenges of regional innovation strategies for Smart Specialisation, argued that SMART should be about addressing structural weaknesses and facilitating conversations between the right people.

SMART relies on networking, and the support of regional stakeholders. Elvira Uyrra pointed out that SMART has been criticised for not having a fully developed theoretical framework and for being too vague in terms of its target and mix of policies.

The points resonated with Jeremy Howells and Federica Rossi’s presentations on innovation intermediaries. Howells argued that intermediaries are a conceptual lens through which to view the dynamics and evolution of systems of innovation, and are of major policy significance as catalysts within a system.

Federica Rossi also identified intermediaries as important for changing the behaviour of firms and thus indirectly changing the capacity of regions to innovate. Using the case of Tuscany’s innovation poles, which aimed to provide a range of knowledge intensive business services and to strengthen the regional innovation system, she highlighted critical problems in evaluating interventions. These included a lack of sector differentiation, inadequate indicators and missing activities.

  1. What are the social and economic priorities of regional transformation?

Although innovation and job creation are obvious priorities of regional transformation, Bjorn Asheim highlighted other areas of focus, such as gender, migration and diversity. Adrian Healey also spoke about gender profiles of different sectors, as some are predominately male, and others dominated by women. It was concluded that equality of opportunity certainly needs to form part of any policy-making agenda.

Ana Colovic highlighted national differences in approaches to the design and implementation of cluster policies. She questioned whether cluster policies need to be designed if innovation is going well independently. In addition, she noted some of the challenges for policy makers in reality, such as considering whether all the policy tools available and variety of implementing agencies are made clear to actors. Colovic concluded by thinking about the contrasting budgets allocated in different countries for innovation strategies, and questioned what the appropriate level of budget would be to meet both local and national priorities.

  1. What would success look like?

Rosa Fernandez told the workshop that for Roy Sandbach, success would mean 60,000 new jobs created in the North East – but where would they come from? Dave Waller recognised success more in stronger leadership and governance, the development of useful tool kits, better spatial, temporal and more granular mapping of economic activity, and the application of Smart Specialisation principles to all aspects of EU programming.

Adrian Healey, on the other hand, measures success in terms of the gains made from shared governance, shared leadership, common objectives, overcoming fragmentation and getting beyond existing structures. He argued that success would rely on changing the mind-set of local authorities, as the only part of the system not fully connected is the public sector.

The biggest challenge for regions is to build capacity. However, as Henry Etzkowitz argued, the sheer scale of Silicon Valley’s financial and talent resources makes it difficult for Europe to compete. Maybe it need not all be bad news however, as the UK and Europe could yet be a Land of Opportunity.

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