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1
Smart Specialisation as Regional Policy - How to Make it Work?
Philip McCannSpecial Adviser to the European Commissioner for
Regional Policy, Johannes Hahn
University of Groningen, The Netherlands
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Smart Specialisation: Concept
• ERA European Research Area and Innovation Union Flagship Programme
• Knowledge For Growth Expert Group – nine policy briefs 2006-2009
• Smart specialisation concept – Dominique Foray, Bart van Ark – subsequently developed by Paul David, Bronwyn Hall
• Transatlantic productivity gap since 1995
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Smart Specialisation: Concept
• Emergence of the ‘gap’ at precisely the time when we would expect the opposite
• Various reasons for the gap – labour markets, human capital, market segmentation, managerial practices etc
• 1990s - the R&D gap in ICT-producing sectors• 2000s - adoption and adaptation of new
technologies by IT-using sectors • Market barriers and fragmentation limit
opportunities for knowledge flows
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Smart Specialisation: Concept
• Context matters for technological evolution – knowledge ecology – in terms of pathways for innovation
• Depends on existing institutional structures and innovation systems
• Actors and agents are entrepreneurs, universities, research institutes, multinational firms etc
• Governance (MLG) and policy innovation• ‘Self-discovery’ (Hausman and Rodrik 2004) and
self-awareness are critical
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Smart Specialisation: Concept
• Smart specialisation elements:• Smart specialisation emphasises the issues of
potential within a domain• Elements
- Entrepreneurial search process
- Domain
- Relevant size
- Connectedness
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Smart Specialisation: Concept
• The entrepreneurial search process leads to the identification of the distribution of potential opportunities (for GPT-ICT technological improvements)
• Relevant size relates to the potential magnitude of the innovation outcomes.
• Connectedness determines the potential for learning about the opportunities and the magnitudes.
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Smart Specialisation: Concept
• Smart specialisation aims to foster innovation via entrepreneurship, technoligical adaptation and governance innovation
• Smart specialisation – strategic technological diversification on areas of relative strength and potential
• Smart specialisation is about increasing diversification – promoting new linkages, synergies, spillovers
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Smart Specialisation: Regional Context
• Shift from a sectoral discourse to a regional discourse
• Measuring Smart Specialisation: The Concept and the Need for Indicators, David, P., Foray, D., and Hall, B., 2009
• Philip McCann and Raquel Ortega-Argilés: Smart Specialisation, Regional Growth and Applications to EU Cohesion Policy
http://ec.europa.eu/regional_policy/cooperate/regions_for_economic_change/index_en.cfm#4
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Smart Specialisation: Regional Context
• Need to move from a national, sectoral or technological innovations systems logic to a regional innovations system logic
• Translating smart specialisation into a operational tool at the regional or national level uses three economic geography concepts – Embeddedness– Relatedness– Connectivity
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Smart Specialisation: Regional Context
• Embeddedness: can be captured by regional CGE models, regional Input-Output models, location quotients, case studies, longevity, social capital etc.
• Relatedness (Related Variety): It is not about promoting specialisation - but specialised technological diversification
• Embeddedness + Relatedness = Relevant Size Domain
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Smart Specialisation: Regional Context
• Connectedness translates to connectivity• The sectoral approach interprets connectedness
in terms of networking and access to learning – whereas economic geography sees connectivity in terms of access to markets – with the danger of centripetal forces and the Krugman shadow effect on non-core regions
• Connectivity: inter-regional knowledge flows and intra-regional knowledge flows
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Smart Specialisation: Regional Context
• Economic Geography implies core regions offer a greater potential rewards to entrepreneurial search processes in terms of:– Distribution– Magnitude– Capacity for learning
• Lagging regions exhibit combinations of problematic features.
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Smart Specialisation: Regional Context
• On face value a sectoral or space-neutral approach to smart specialisation implies funding in dominant locations
• OECD (2011) Regions and Innovation Policy approach on the links between local institutions, capabilities and economic geography
• In reality smart specialisation is particularly suited to non-core and weaker regions which are already relatively specialised
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Smart Specialisation: Policy
• Smart specialisation is really about a policy process – how we prioritise
• Why is this being done? On what basis – current and future?
• How are we to monitor and evaluate? • How are we to learn? • How are we to adjust?• How are we to ensure engagement and
commitment?
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Smart Specialisation: Policy
• Transfer the onus of responsibility to local stakeholders and policy-designers to identify bottlenecks, market failures, missing links
• Responsibility for monitoring the policy• Results/outcomes and results/outcome
indicators• This is not because the outcomes are known in
advance but to drive the policy process correctly (Rodrik 2004)
• Smart specialisation is explicitly a results and outcome oriented agenda - not an input or outputs oriented agenda
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Smart Specialisation: Policy
• Smart specialisation is not about promoting specialisation – unless it is clear that this offers the greatest rewards – via first-moved advantages in emerging technologies and specialist niches
• It is not about championing sectoral policies• It is about finding the new and emerging
technologies, linkages which offer the greatest medium and long-term local entrepreneurial opportunities
• May or may not have a cluster logic to it
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Smart Specialisation: Policy
• A smart specialisation approach to regional policy should be about promoting the generation of local ideas, and maximising both intra- and inter-regional knowledge spillovers in the relevant scale domains (embeddedness + relatedness)
• Embeddedness + relatedness: focuses on the choice of innovation thematic priorities, concentration, targeting – based on a regional-structural logic
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Smart Specialisation: Policy
• Types of interventions• Innovation vouchers• Dissemination of GPT-ICTs may well be a core
priority but not necessarily• Supply chain system upgrading• Skills-matching and redesign of local labour-
training systems• Institutional reform - promotion of local
university-industry linkages• Network or cluster development
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Smart Specialisation: Policy
• How to promote smart specialisation while avoiding rent-seeking?
• Rent-seeking can be sectoral or scattered and local
• Incentive to limit openness and to restrict variation and specialised diversification
• Need to avoid central government ‘capture’ or sectoral capture by strong institutions
• Multi-level governance• Governance innovation
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Smart Specialisation: Policy
• Picking winners?• ‘Knowledge for Growth’ expert group argue that
modern industrial policy – nascent or fledgling industries - may be necessary at the regional level
• NRC spatially distributed (space neutral → place based) funding scheme
• Fledgling industry argument is on a powerful footing
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Smart Specialisation: Conclusions
• Policy process is central• Smart specialisation emphasises strategic and
specialised diversification• It is an excellent tool for policy prioritisation –
powerful ‘lens’ to ensure thematic concentration• Place-based regional approach or a national-
sectoral-regional approach to policy• ‘Self-discovery’ (Hausman and Rodrik 2004) and
self-awareness are critical
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Smart Specialisation: Conclusions
• Highly influential in the smart growth component of Europe 2020 and in the EU Flagship Programme Innovation Union
• Consistent with the Barca report• Implementation as a conditionality in EU
Cohesion Policy reforms• S3 platform• OECD Smart specialisation initiative