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«Heidi Wiig and Michelle Wood R-01 • What Comprises a Regional Innovation System? An 1995 Empirical Study Heidi Wiig and Michelle Wood STEP ...»

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ISSN 0804-8185

STEP rapport / report

Heidi Wiig and Michelle Wood

R-01

• What Comprises a Regional

Innovation System? An

1995 Empirical Study

Heidi Wiig and Michelle Wood

STEP

Storgaten 1

N-0155 Oslo

Norway

Paper prepared for Regional Association Conference. ‘Regional Futures: Past

and Present, East and West’, Gothenburg, Sweden, 6-9th May 1995

Oslo, May 1995

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67(3 6WRUJDWHQ  1 2VOR iii Preface Acknowledgements Thanks to Keith Smith and colleagues at the STEP-Group for their suggestions and support during the completion of the study and in the writing of this paper. Thanks also to Andy Pike for constructive comments on an earlier draft of this paper.

Contact addresses:

Heidi Wiig Michelle Wood STEP-Group Dept. of Geography Storgaten 1 University of Durham 0155 Oslo Sciences Site, South Road Norway Durham DH1 3LE, UK v Abstract This paper is based on an empirical study of a region, both as an economic space and an innovation environment; it tests whetherthe concept of the ‘regional innovation system’ can be given a quantitative basis. The paper argues that the focus for research on regional innovation should move beyond 'successful' regions and hightechnology regions, and accordingly explores innovation activity in a region of mainly 'traditional' industry and relatively peripheral location. A subsidiary aim of the paper is to explore innovation policy issues for regions of this type.

The study is based on a comprehensive survey of innovative activity amongst manufacturing firms in Møre and Romsdal, a coastal region in central Norway. The survey covered all manufacturing firms in the region, collecting data on R&D and non-R&D expenditures on innovation at firm level, and on innovation outputs (measured as proportions of sales deriving from new and improved products). It discusses factors which are perceived by firms as important their innovation activities, and identifies where problems may exist in terms of the economic and technological system in the region. The evidence indicates that although the region is important as a base for firms' commercial activities, and although firms in Møre and Romsdal are innovative, technological links between firms and with other institutions (both within and beyond the region) are limited. There is little evidence to illustrate the existence of a strong 'regional innovation system' in terms of interactions directed specifically towards innovation, and there is some evidence to suggest that strong user-producer interactions in this region do not necessarily favour innovation. The overall agenda of our research was set both in relation to existing empirical and theoretical work in the area of regional innovation systems as well as in relation to current objectives of regional policy in this region and in Norway as a whole. This paper forms part of a wider research project into regional innovation funded by the Ministry of Local Government and Labour (KAD) in Norway, and conducted by the STEP-Group in Oslo.

vii

Table of contents

PREFACE

Abstract

TABLE OF CONTENTS

1. INTRODUCTION

2. STUDIES OF INNOVATION AT A REGIONAL LEVEL

2.1 Conceptual and empirical bases

2.2 The statistical approach

3. THE MØRE AND ROMSDAL REGION

3.1 Industrial base of the region





3.2 Economic links and innovation

3.3 Role of external links

3.4 Availability of a skilled workforce

3.5 Regional technological infrastructure

3.6 Role of public support for innovation

4. SUMMARY AND CONCLUSIONS

APPENDIX: METHODOLOGY

1. Introduction This paper examines the innovation activities of manufacturing firms at a regional level, focusing on the county of Møre and Romsdal in central Norway. A key basis for research into regional innovation systems, exemplified by the great amount of attention this has received, is an awareness of the implications of disparities which exist between regions in terms of economic and technological growth and development1. By determining what distinguishes growth regions from less-dynamic regions it may be possible to address the problems of those regions with lessdeveloped economic and technological bases, which are often geographically peripheral regions.

The importance of innovation is also reflected in a shift in focus in regional policy away from purely economic issues and toward science and technology concerns2.

The basic idea here has been expressed as follows by the European Commission:

Regional economic performance depends upon the progressive introduction over time of innovations in products and processes to enhance the competitiveness of the regional economic base in an increasingly competitive world.3 This perspective has also emerged as a key issue arising from regional policy objectives in Norway: as policy makers are increasingly concerned with reducing regional disparities, this focal shift towards science and technology aspects of regional industrial activity is reflected in changes in regional policy objectives4.

But, how should science, technology and innovation perspectives be incorporated into the analysis of regional economic performance? One of the key insights of modern innovation theory is that innovation is systemic, in the sense that firm-level innovation processes are generated and sustained by inter-firm relations, and by a wide variety of inter-institutional relationships. Innovation and the creation of

technology involve systemic interactions between firms and their environments:

central links include those with customers and suppliers, science and technology infrastructures, finance institutions and so on. Such ideas have been central to the 'national innovation systems' literature5, which can be extended to the regional case.

CURDS (1987) ’RTD in the less-favoured regions of the Community’ STRIDE Final Report, CEC, April 1987; Landabaso, M. (1995) ’The promotion of innovation in Regional Community Policy: lessons and proposals for a Regional Innovation Strategy’ Presentation to NISTEP International Workshop on Regional Science and Technology Policy Research RESTPOR ’95, Japan, Feb.13-16th 1995 Logue (1995) ’The Role of Research and Technological Development in the Regions’ Presentation to NISTEP International Workshop on Regional Science and Technology Policy Research RESTPOR ’95, Japan, Feb.13-16th 1995 CEC (1991) ’Four Motors for Europe. An analysis of cross-regional cooperation’ Fast Occasional Paper no.241 CEC, DGXII, vol.17 White Paper (1992-1993) By og land hand i hand (City and district hand in hand) White Paper no.33.

for example, Lundvall B-Å (1992) (ed.) National Systems of Innovation, Pinter, London; Nelson R.

(1993) (ed) National Innovation Systems, OUP, New York

2 STEP rapport / report R-01/1995

A major problem, however, is to build an adequate empirical basis for conceptual work focusing on ’regional innovation systems (see Section 2). Much existing work is marked by the overall lack of comparable and comprehensive empirical evidence6, and the absence of a developed theory that might provide a framework for further work in this area7. Although these problems highlight major objectives for future work, as part of our research we aim to contribute to a further theoretical and empirical understanding of ’regional innovation systems’ and to establish and test a research methodology that may be used in future regional innovation studies. As yet, however, there has been limited empirical evidence concerning regional technological diversities within Norway and existing studies from other countries are often of little relevance for the Norwegian case; mainly because of the special geography (spatially extensive, with many fjords, mountains and rural areas) and industrial base (often ’traditional’ sectors) that exists there. Such factors have made it difficult to find directly comparable and comprehensive empirical analysis from other European regions. Accordingly, our survey is based on a structure and approach which has already been widely used to generate harmonised innovation data at national level in Europe, the approach of the so-called Community Innovation Survey. Our intention is to use this approach to start mapping differences between regions within Norway and, by developing an understanding of these differences, to suggest more effective and diversified policy measures. This study of Møre and Romsdal provides an initial step in this process.

This paper is structured as follows. First, a brief background of studies of innovation at a regional level is undertaken in order to provide both empirical and conceptual bases for our research on Møre and Romsdal. Following this, an overview of the Møre and Romsdal region is provided, suggesting why it was selected for this study.

This is followed by a more analytical discussion of technology-related issues associated with the 'regional innovation system', including an investigation of the region as a base for firms' innovation activities and the actual innovation activities and capabilities of firms located there. Specific regional factors which affect innovation activities of firms are examined. Lastly, a summary and conclusions are drawn from the analysis suggesting possible policy responses. An outline of the research methodology used is given in the appendix.

Alderman N. and Wood M. (1994) ’Surveys of Regional Innovation? A Feasibility Study for Europe’ EIMS Publication no.09, SPRINT, CEC, DGXIII; Higgins T. (1995) ’The Spatial Allocation of S&T Assets and their Management - Measurement Indicators and Evaluation’ Presentation to NISTEP International Workshop on Regional Science and Technology Policy Research RESTPOR ’95, Japan, Feb.13-16th 1995 Landabaso, M. (1995) op cit; Higgins (1995) op cit.

2. Studies of innovation at a regional level

2.1 Conceptual and empirical bases There have been longstanding efforts to understand, in theoretical terms, the economic and technological dynamics of industrial systems operating in particular regions.8 The role and importance of geography or locational factors in this often forms a prime focus, where spatial proximity is a key factor in determining the outcome of the activities of firms’ activities. This may enable the exploitation of "dynamic relative advantages" of a given territory9, arising from synergetic relationships between actors in the ’innovation system’ and economies of scale in the provision of innovation services and support. This is emphasised by Storper who states: "Innovation and modification of products and processes..... rests on an extraordinary complex variety of institutions, social habits, ideologies and expectations, and even firm and market structures are to a certain extent outcomes of these underlying social structures"10 where the social structures are seen to be bound to specific regions. Alternatively, geography is present in analyses in the sense that studies are often explicitly or implicitly ’place specific’ and base their concepts on observations from particular regions or localities where the ’innovation system’ is highly visible, for example, Silicon Valley in California, the ’Third Italy’, Baden Württemberg in Germany11 and other 'innovative milieux'. 12 As a result of this there has arguably been an overemphasis on core regions and hightech industries in the literature, and the sporadic nature of such studies often results in inconsistency in the use of conceptual tools across different studies. This also creates difficulties for the application of findings from such studies of core areas particularly when attempting to analyse innovation systems or innovation dynamics see Brusco, S. (1990) ’The idea of the industrial district. Its genesis’ in F.Pyke, G.Becattini and W.Senenberger (eds) (1990) Industrial districts and interfirm cooperation in Italy, International Labour Organisation, Switzerland pp10-195; A.Amin and K.Robins (1990) ’Industrial districts and regional development: Limits and possibilities’ in F.Pyke, G.Becattini and W.Senenberger (eds) (1990) Industrial districts and interfirm cooperation in Italy, International Labour Organisation, Switzerland pp185-219;



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