Regional Innovation
Systems
Dr. Lisa De Propris
Birmingham Business School
Institute for Economic Development Policy
Content
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Sources of competitiveness
What in innovation?
– Definition
– Types of innovation processes
– Features of innovation
Regional innovation system
Cambridge: a successful case
Birmingham: a RIS in the making
Levels of competitiveness
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National
– Macro-economic indicators (trade
advantages, employment (GDP per capita)
and productivity)
– Social, political, administrative and legal
framework
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Local/ regional
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Firm
Definition EU
Competitiveness
infrastructure
human capital
innovation
Business competitiveness: “capacity of a regional
economy to generate, diffuse and utilise knowledge
and so maintain an effective regional innovation
system; a business culture which encourages
entrepreneurship and the existence of cooperation
networks and clusters of particulars activities”
Third Cohesion Report, 2004:37
Definition Porter
“Competitive strategy is the search for a favourable competitive position in
an industry, the fundamental arena in which competition occurs …. aims to
establish a profitable and sustainable position against the forces that
determine industry competition”
(Porter, 1985:1)
Business strategy,
market structure
and competition
Competitive advantage = diamond
Factors of
production
Domestic demand
Related and
supporting industries
therefore, clustering of competitive industries or interrelationships among
related businesses
Porter (1990)
Sources of regional competitiveness
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Trade advantage / productivity
– price competition
– non-price competition: quality, variety and
novelty
innovation and productivity
Only innovative firms/regions can be
competitive
What is innovation?
Innovation is:
“The search for, and the discovery, experimentation, development,
imitation and adoption of new products, new production processes
and new organisational set-ups”.
Dosi et al (1988), Technological Change and Economic Theory
Product innovation
Technology pull innovation
Demand push innovation
Process innovation
Cost savings
Increase productivity
Radical innovation & incremental innovation
Innovation process: linear model
BASIC RESEARCH
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APPLIED RESEARCH
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DEVELOPMENT
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ADOPTION
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DIFFUSION
Innovation process: circular model
CIRCULAR MODEL
RESEARCH
KNOWLEDGE
potential
market
invent/
product
design
detailed
design and
test
Source: Kline and Rosenberg (1986)
redesign
and
produce
distribute
and market
Features of innovation
R&D is risky, uncertain and expensive
Innovation = information= knowledge (tacit vs.
codified)
Innovation depends of human, social and relational
capital
Innovation is cumulative and partly immobile
Innovation is learning (by doing, by using and by
interacting)
Camagni (2002)  technical progress is not a public
good; it is not perfectly mobile and accessible to
everybody
Therefore, the innovation process is not mobile but
embedded
systemic innovation capacity
The competitive advantage of regions/localities
depends on the immobility of some production
factors: knowledge and innovation
Three models: Innovative milieux, RIS and industrial
district
Regional innovation system
PROXIMITY: face-to-face contacts create informal, trustworthy and long term
networking
NATURE OF LINKAGES BETWEEN FIRMS:
–Cooperation over innovation: JV, joint projects, joint training
– Horizontal and vertical cooperation over innovation between firms
(supply chain)
–Linkages between firms and knowledge centres and business support
organisations
LEARING AND KNOWLEDGE SHARING
HUMAN CAPITAL: Knowledge is embodied in human capital
APPROPRIABILITY Withdraw innovation from competitors to appropriate the
full returns
VS.
DIFFUSION: cost of being first-mover; if technology –pushed innovation, need
to create demand and to set new standards; and need for diffusion
DEVELOPMENT PATTERN: spontaneous or exogenously driven
Institutional RIS vs. Entrepreneurship RIS
EU Study on Factors of
Competitiveness , Martin
Why policy matters?
1.INNOVATION
PROCESSES ARE IMMOBILE
•core – periphery divide
2.SYSTEMIC INNOVATION CAPACITY
•The attractiveness and competitiveness of
localities depend on macro context and local HC,
SC and RC
determine the learning capacity
of the system
3.PICKING WINNERS or HORIZONTAL SUPPORT?
Krugman is critical of Govt’s ability to choose ‘strategic
sectors’, however support can be horizontal through
‘real services’
Innovation policy
Barcelona European Council 2002
Objectives:
 Increase R&D investment to 3% of GDP by 2010
 Encourage investment in human capital and intangible
assets
 Create and support innovative clusters and networks
 Create and support regional innovation systems
Employment
hi-tech 2002
< 7.45
< 7.45 – 9.55
< 9.55 – 11.65
11.65 – 13.75
>= 13.75
No data
Average = 10.6
Standard Deviation = 4.30
Sources: Eurostat
Cambridge innovation system
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Bottom up development (human capital from Cam Uni, business
community and support infrastructure)
Born in 1960, 350 firms in 1985, 2000 in 2000 and 3500 in 2003
Information tech, biotech, nano tech/materials
Great transport and comms infrastructure
Institutional infrastructure
– 6 UniCam research centres
– Cam-MIT link
– 11 regional agencies (e.g. GOE, EEDA, chamber of commerce)
– Local venture capital network (17 funds)
– 9 science parks
– 3 incubators
– Business support firms (law, accounting, patent, consulting,
banks)
14 initial companies  attraction of big players (e.g Hitachi,
Microsoft, Toshiba and GSK)
Massive govt funding via the Cam Entrepreneurship Centre
Birmingham innovation system
Bham in not a RIS
Transitional economy from manufacturing to knowledge
intensive activities/services
Institutional infrastructure: 6 Universities, about 50
colleges, chamber of commerce, many sector associations,
RDA
POLICY is focusing on cluster development but:
Too many clusters
Clusters chosen because ‘fashionable’
Still embryonic
It will take time
Sector make up
High-value added consumer products (jewellery,
china, clothing)
Screen image and sound
Environmental technologies
Building technologies
Transports
Business services
Food and drink
Tourism and leisure
Manufacturing
ICT
Medical technologies
Sector make up
High-value added consumer products (jewellery, china,
clothing)
DOWN
Screen image and sound
EMBRYONIC
Environmental technologies
UP
Building technologies
UP
Transports
DOWN
Business services
EMBRYONIC
Food and drink
EMBRYONIC
Tourism and leisure
EMBRYONIC
Manufacturing
DOWN
ICT
EMBRYONIC
Medical technologies
EMBRYONIC
Reading list
Core
Becattini, G., Bellandi, M., Dei Ottati, G. and Sforzi, F. (2003) From Industrial Districts to Local
Development, Cheltenham, Edward Elgar – ch 9
R. Camagni, (2002) On the concept of territorial competitiveness: sound or mis-leading? Urban
Studies, Vo. 39, No. 13.
P.Cooke, M. Gomez Uranga and G. Etxebarria (1997) Regional Innovation Systems: Institutional and
Organisational dimensions, Regional Policy, No 26
M.E. Porter (2001) Regions and the New Competition, in A.J. Scott, Global City-Regions. Trends,
Theory and Policy, OUP, Oxford.
Additional
R. Camagni (1993) Inter-firm Industrial Networks. The Costs and Benefits of Cooperative Behaviours,
Journal of Industry Studies, Vol.1 No. 1
P.Cooke, M. Heidenreich and H. Braczyk (2004) Regional innovation systems, Routledge, London, Introduction pp.1-18 and conclusion pp.363-389
P.Cooke (2001) Regional Innovation Systems, Clusters and the Knowledge Economy, Industrial and
Corporate Change, Vol 10 No. 4.
L. De Propris, N. Driffield and S. Menghinello (2005) Local Industrial Systems and the Location of FDI
in Italy, International Journal of the Economics of Business, Vol. 12, No.1
S. Meghinello (2004) Local Engines of Global Trade: The case of Italian industrial districts, in G.
Cainelli and R. Zoboli (Ed.) The evolution of industrial districts, Physica-Verlag
OECD (2001) Innovative clusters: drivers of NIS