Smart Specialisation & the Bioeconomy

Dr Alessandro RosielloInnogen Institute – University of Edinburgh

ICABR - Ravello 21/06/2013

Economic Growth

• Neo-classical Economy (Solow 1950-70)– Capital-driven growth; trade-off between scale and efficiency; Chandler’s

visible-hand

• Neo-classical Economy (Romer 1980-90)– Knowledge-driven; spill-over effects

• Entrepreneurial Capitalism (1990 – present)– New sources of economic growth– New firm entry: radical innovation, technological diffusion, competitive

advantage based on knowledge creation, exchange and recombination – Placed-based development– The Entrepreneurial University/Triple helix

“Entrepreneurs are agents of change and growth in a market economy and they can act to accelerate the generation, dissemination and application of innovative ideas… Entrepreneurs not only seek out and identify potentially profitable economic opportunities but are also willing to take risks to see if their hunches are right “ Audretsch DB Keilbach M (OECD1998) - Entrepreneurship Capital and Economic Growth

Evidence studies

• Rodrik and Hausmann (2003)– First-mover advantages associated with

“entrepreneurial departures” – Growth requires smart specialisation

• Evolutionary Economics– Avnimelech and Teubal (2006): ICT cluster in

Israel (+ GDP: 4%)– Bresnahan and Gambardella (2004): 7

worldwide cases of ICT clusters– Cooke, Feldman, Rosiello and Niosi: several

case studies of Biocluster emergence worldwide

– Saviotti (2008-12), Porter et al (2012), Boschma & Martin (2010), OECD (2010): clusters in various industries/countries

Driving Factors:• Spillovers• Localised learning• Path dependency• Related Variety• Market pull

CONSEQUENCES• Structural change• Emergence of new

clusters/systems• Knowledge asymmetries

across locations

OECD (2012) new sources of growth…

• IP, brains and multi-purpose technologies >> productivity + structural change

• Created, accumulated and stored in specific locations

• Shaped by techno-scientific institutions• Tacit/non-codifiable knowledge > hard to

transfer > regional quasi-monopolies• Incremental dynamics/Critical Mass

Placed-based growth/Structural Change

OECD (2009) Clusters, Innovation and Entrepreneurship

EU COM (2007-2010) Innovation Clusters in Europe• up to 40% of jobs in clustered areas (especially

in innovative sectors)• Majority of newly created jobs in innovative

start-ups• Statistically significant relationship between

clustering on innovative firms and prosperity (EU 2007-10)

Innovation & Growth

Source: Mikel Navarro et al, Basque Competitiveness Institute 2010

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Region types…

OECD 2011 – regional knowledge specialisation

Industrial production zones

Non-S&T-driven regions

Knowledge hubs

Source: Ajmone Marsan G and Maguire K (2011), Regions and Innovation Policy, OECD publishing

Extra-regional links• Local buzz within Global networks

– Multinationals with similar/complementary activities in various countries - providing differentiated products to national/regional markets;

– Multinationals with differentiated subsidiaries worldwide – Companies with geographically dispersed specialisations - whether or

not dictated by local market specialisation; – globally-connected companies, with links to various centres of

excellence Sources of competitive advantage “indigenous” not “endogenous”

• Knowledge generators and users plus public government actors must work together > holistic strategy regional innovation!!

• European SMEs not working together/not exchanging knowledge (Autant-Bernard et al, Research Policy, 2013)

“Knowledge producers and exploiters also participate in their external networks, and the value to them of regional co-operation is in providing a means to secure a unique knowledge advantage that is not as easily secured elsewhere” OECD (2011) Strengthening Global-Local Connectivity in Regional Innovation Strategies

SMART Specialisation

• Too much specialisation: locked-in dead-ends!• Too much diversity: fragmentation and/or lack

of critical mass!• Knowledge/asset variety: key driver for cluster

emergence and growth• Diffusion of multi-purpose technologies• Targeting areas of strength…without picking

winners!

SMSP & Regional Growth

• Emerging clusters drivers for economic growth

• Cohesion policies: entrepreneurship & innovation have the potential to– Revitalise declining regions– Uplifting lagging-behind regions

• Drop barriers to– Trans-regional collaboration– Access to innovation markets

• In line with Grand Challenges & EU Strategic Priorities

Cohesion Policy 2014-2020

• ERDF + ESF + CF: €201 billion• RIS3 – conditionality• Cohesion < Smart & Inclusive Growth

• 1. Smart & inclusive growth (€491bn)

• 2. Sustainable growth, natural resources (€383bn)• 3. Security and citizenship (€18.5bn)• 4. Global Europe (€70bn)• 5. Administration (€62.6bn)

Education, Youth, Sport

Connecting Europe Cohesion

Competitive Business SMEs

Horizon 2020€80 billion

EU Multiannual Financial Framework 2014-2020 €1,025 Billion

Policy rationale: market or systemic failure? or neither of them?

• Business R&D expenditure• Spillovers• Financial gaps

• Excessive cognitive distance/Information asymmetries• Dynamic coordination failures• Local/extra-regional networks• Inappropriate institutional structure• Lack of critical mass

• Neither top-down nor bottom-up• Policy-mix coordination• Entrepreneurship: main translator of knowledge capacity > growth

“A successful smart specialisation strategy will not be found by reading the tables of contents of the most recent issue of Science or Nature but rather by observing the structures of the economy and supporting the processes of discovery undertaken by the firms and other organisations operating in this economy” Foray et al (2011) –MTEI-Working Paper

Eco-system management

Approach

SMSP - Policy mix

SMART Industrial

Policy

• Specialisation vs Diversification

• Policy Mix• Effective coordination• Pro-active strategy

Approach

• Picking winners X• Selecting Sectors X• Patterns• Transition, Modernisation, 2 types

of discovery • Entrepreneurial departures • Targeting functional areas• Multi-level governance

RATIONAL

E

• About diffusion/application of GPTs to revitalise declining regions/areas of the economy

• Not about deciding which sectors of the economy R&D should focus on; about improving the mechanisms through which R&D innovation structural change growth

Problems with SMSP

• Specialisation…• A realistic perspective for lagging behind regions?

– Entrepreneurial discovery?– Dynamic coordination failures: how?

• 3 types of regions?• (Lack of) absorptive capacity• What kind of advantage?• Multi-level governance

Source: Innovation Clusters in Europe, DG Enterprise and Industry Report 2010

Discovering the right domains is by no means trivial and technology foresight exercises or critical technology surveys ordered by administrations tend to produce the same ranking of priorities, without any consideration of the context and specific conditions of the “client” for whom the exercise is carried out. Too many regions have selected the same technology mix – a little bit of ICT, a little bit of nanotech and a little bit of biotech – showing a lack of imagination, creativity and strategic vision. Foray et al (2011) – MTEI WP

Smart Specialisation: Policy – EU Commission 2012, RIS3 Guide

What are the main requirements?:

• Leadership: a long-term commitment of national and regional authorities

• Strategy: a plan with clear objectives and measurable deliverables based on a SWOT-analysis

• (Tough) Choices: select few priorities on the basis of international specialisation and integration in international value chains

• Competitive Advantage: mobilise talent by matching RTD + i and business needs & capacities

• Critical Mass: identify areas where scale and scope can be developed (e.g. foresight exercises)

• Stakeholder involvement / Ownership of the strategy

Cohesion policy: 11 Thematic Objectives towards 2020

• Strengthening research, technological development and innovation• Enhancing access to, and use and quality of, information and communication

technologies• Enhancing the competitiveness of small and medium-sized enterprises, the

agricultural sector (for the EAFRD) and the fisheries and aquaculture sector (for the EMFF)

• Supporting the shift towards a low-carbon economy in all sectors• Promoting climate change adaptation, risk prevention and management• Protecting the environment and promoting resource efficiency• Promoting sustainable transport and removing bottlenecks in key network

infrastructures• Promoting employment and supporting labour mobility• Promoting social inclusion and combating poverty• Investing in education, skills and lifelong learning• Enhancing institutional capacity and an efficient public administration

Innovating for Sustainable Growth: A Bioeconomy for Europe – EU Commission 2012

• Bioeconomy crucial to deliver EU Cohesion Policy, especially in restructuring/lagging-behind regions– Transition towards more sustainable production– Transition towards increased environmental

stability– Security in food supply (p.20/21)

• Bio-based industries– Animal-bio, agro-bio, industrial-bio, marine-bio

(knowledge enabling technologies – KETs)• Health-bio not included; however better health in

Europe part of the Oslo GCs