Regional differences in R&D expenditure.

Implications for regional governance

Nico GroenendijkCES, University of Twente, Netherlands

European Week of Regions and CitiesBrussels, October 10, 2006, 9.00h-11.00h

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Outline of presentation

1. The Barcelona target (Lisbon Agenda)

2. Challenging the basic assumption: From R&D to innovation to economic growth?

3. Differences in R&D expenditure levels

4. Implications for regional governance: the concept of local-global interfaces

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1. Barcelona target• At least 3% GDP has to be spend on R&D (of

which 2%-point should be private R&D expenditure)

• Primarily a EU-wide target, but re-produced at domestic level (= each MS should spend at least 3% GDP on R&D)

• Increasingly reproduced within MS, on regional level, but vast differences!

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4

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Core issues:

Does it make sense to expect each and every of the 254 regions in the EU to spend 3% on R&D?

What alternatives are there for regional policy to enhance competitiveness?

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2. From R&D to innovation to growth?

Assumption behind Barcelona target: linear relationship between

a. R&D expenditure innovation (I)

b. innovation economic growth (G)

Assumptions a. and b. do not hold

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R&D is not the prime driver of regional growth

1. “Hard” economic factors are often more important for growth (BAK report, 2003):

Macro-economic framework at largeTaxationLabor market regulationIntercontinental accessibility

2. Innovation is not solely “technology driven” (services sector!), but depends on social, institutional and organizational abilities of a region

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Regional innovation performance

SouthEast

Stockholm

Etelä-Suomi

Bratislavskýkraj

Lisboa

Mazowieckie

Wien

Noord-Brabant

Közép-Magyarország

Lazio

Î le deFrance

Comunidadde Madrid

Attiki

Oberbayern

Praha

VlaamsGewest

NorthernI reland

MellerstaNorrland

Åland

VýchodnéSlovensko

Região Autónoma da Madeira

Podkarpackie

Burgenland

Friesland

Dél-Alföld Calabria

Corse

I llesBalears

Notio Aigaio

Dessau

Severozápad

RégionWallonne

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

EL PT MT LV CY PL LT SK EE ES HU CZ IT LU IE AT SI FR BE NL DE UK DK FI SE

Best performing region Country mean Worst performing region EU mean

2006

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3. Differences in R&D-growth elasticity:

- If R&D-growth elasticity < 1, improvement of that elasticity is just as important as raising R&D expenditure

- Private R&D expenditure generally has a larger elasticity than public R&D expenditure

4. Are private and public R&D substitutes or complementary?

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3. Why are there differences in R&D expenditure?

Barcelona target (and its reproduction on regional level) ignores:

- the investment character of R&D expenditure (clustering of R&D activities makes perfect economic sense)

- the more general process of economic divergence in Europe (Blue Banana, Sunbelt)

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4. Implications for regional governance

Lisbon Strategy has –inadvertently- led benchmarking for best practices for the establishment of high-tech economic clusters

But there are (and can be) only a handful of successful high-tech clusters

Most regions in Europe are:- Traditional industrial regions- Peripheral agricultural regions

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Regional policy should avoid the pitfalls of “traditional” policy aimed at restructuring:

- Mixture of conflicting goals (restructuring, prestige, employment)

- Inertia due to subsidy-addiction

by looking for creative combinations of local traditions and global trends

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Examples of creative local-global interfaces

Region Local tradition Global trend Creative combination

Jutland, Denmark Furniture-making Quality, lifestyle Design furniture

Nord Pas-de-Calais, France

Clothes-making Convenience shopping

Internet mail order services

Krakow, Poland Building, painting Sustainability Restoration services

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Local-global interfaces:

- Do not require cutting-edge technology nor do they need large R&D investments

- Require organization of processes in which firms, business associations, residents and governments work together

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Acknowledgments

Slides taken from EC, DG REGIO, Regions for economic change. Innovation through EU Regional Policy (June 2006)

References of underlying research available from the author upon request