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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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Howells, J. and Wood, M. (1993) The Globalisation of Production and Technology, Belhaven, London Chesnais, F. (1988) 'Technical co-operation agreements between firms' STI Review, 4, 51-119;

Pike A. and Charles D. (1995) 'The impact of international collaboration on UK university-industry links' Industry and Higher Education (forthcoming) 16 STEP rapport / report R-01/1995 In terms of markets elsewhere in Norway, the neighbouring regions to Møre and Romsdal, Trøndelag, Sogn og Fjordane and Hordaland, all have minor importance (accounting for 10% of all sales); and there is slightly more emphasis on markets in the Oslo region (12%) and elsewhere in Norway (17%).

As well as differing in terms of size of firm, with larger firms being more outwardlooking, there is variation according to industrial sector. Thus the basic metals and metal products, chemicals and food, beverage and tobacco sectors are more exportoriented than other sectors (Figure 8), although in terms of national links, textiles and wood/wood products sectors are also relatively externally-oriented, contributing to domestic consumption needs within Norway.

Second, looking more specifically at innovative products in international trade, firms were asked to estimate what proportion of their exports in 1993 was accounted for by altered and unaltered products. Of the 40 firms that reported international trade, only 20 said that their turnover included altered products. Thus, it appears that very few firms have innovative products amongst their exports. This may because firms do not rely on export markets and are satisfied by supplying only regional and domestic needs. Conversely, there may be a lack of awareness amongst firms as to the potential openings for product innovation associated with gaining access to wider, and more competitive, export markets.

Figure 8. Share of sales to different markets by industry (n=350) Pulp and paper, graphical prod.

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(Source: STEP-Group survey of Møre and Romsdal) Third, investigation of external ownership of firms indicates that only 2 firms have parent companies outside of Norway. Overall, there are limited foreign direct investment links with firms in Møre and Romsdal, implying that international competitive pressures for indigenous firms to innovate, arising from proximity to foreign-owned firms, are limited. Thus, although overall firms in the region export 40% of total sales outside the region, the proportion of export differs between size and sector of firms. In addition, few firms have innovative products in their exportWhat Comprises a Regional Innovation System? An Empirical Study 17 market. Other external links such as ownership relationships or via inward investment contacts appear to be extremely limited within firms in Møre and Romsdal.

3.4 Availability of a skilled workforce A key requirement of any regional economy and technological system is the availability of labour41, and particularly staff with the necessary skills and quality.

The questionnaire asked firms to rank the importance of various factors affecting innovation activity, most importantly skills. In the context of Møre and Romsdal, several labour-related issues are important. These include the need to obtain labour with relevant skills, suitably qualified labour, and labour with special technical skills.

This emphasis on labour issues is shown in Figure 9, where the two most important factors affecting firms' activities in the region are access to local labour and the quality of labour in terms of training (over 50% of firms); the fourth main factor is access to labour with special skills (about 49% of firms).

Figure 9. Importance of regional labour factors for firms’ activities: postal responses only (n=121)

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0% 10 % 20 % 30 % 40 % 50 % 60 % 70 % 80 % 90 % 100 % (Source: STEP-Group survey of Møre and Romsdal) Other, more general evidence indicates that there are negative perceptions throughout industry in the region regarding the availability of skilled labour and the ability to get young people to take on apprenticeships within local industry or to take special courses set up in the region42. In addition, there seem to be perceptions amongst people such as school-leavers and particularly those who follow further education that there are poor opportunities for following a ’career-path’ or being able to obtain Nam, Ch.W., Nerb G. and Russ, H. (1990) 'An empirical assessment of factors shaping regional competitiveness in problem regions' IFO Main Report, CEC, Luxembourg Newspaper article in Aftenposten August 1994, and interviews on the radio (16/8-94 in NRK P2) of the leader of a labour organisation for furniture producers in Møre.

18 STEP rapport / report R-01/1995 jobs involving higher skills, or with possibilities for training, within industry in the region. There is some evidence that high-skilled youths leave the region to seek jobs in the bigger cities, such as Oslo, Bergen and Trondheim. These have important implications for the regional labour market suggesting that there are problems for renewing the skills base of the region.

In addition, the changing educational preferences of young people have led to a decreasing proportion of secondary level pupils going into vocational training. The share of young people taking higher education has risen dramatically the last couple of years, and the labourforce in industries is changing. The share of workers having background in mechanical- and electroengineering has decreased, and the share of workers having administration, economy, social sciences and law qualifications has risen.43 Regional industrial activity which is strongly oriented toward natural resources, and thus demanding a high vocational intensity, has become less attractive for young people as increasing numbers are opting for more generally oriented education. This has been a problem for the furniture industry of Sunnmøre; an industry which has experienced great problems in recruiting youths for apprenticeships. "Today’s youths want to educate themselves and ‘be somebody’ - if we want to attract the youth to the furniture industry it must get a higher status."44 There are also problems associated with having insufficient apprenticeships in certain industries, for example, in Møre and Romsdal. In the 4 years plan for Møre and Romsdal45, the focus is on the need for cooperation between industry and high schools, in order to support the needs in industry apprenticeships that should be offered in these areas. These may include offering more apprenticeships, with a greater technical basis, or more closely integrating the activities of schools, technical colleges and industry, as it has been attempted within the shipbuilding industry in Sunnmøre (initiated by the Mechanical Engineering Association in the Ulstein district) in Møre and Romsdal. Pupils visit different shipbuilders in the third and again in the sixth grade (8/9 years old and 11/12 years old). In the ninth grade (14/15 years old) pupils are allowed to choose a course at school were they both have theoretical teaching and then work at the shipyard and supplier firms. In upper secondary school (videregående) the pupils who choose shipbuilding will automatically get an apprenticeship, after this you are eligible to continue further into college. In general, the County (Fylkeskommune) wants to strengthen the vocational training in Møre and Romsdal, so that the industry in the region can raise their competence level and be able to compete on the national and international market.

When it comes to vocational training it is also necessary to provide the kind of education that makes it possible to continue higher education, such as into university studies.

As the evidence indicates, labour factors (particularly skill shortages) are highly problematic to firms' activities in the region, and for many industries there are problems with getting younger people interested to work in these industries.

However, there are strategies to overcome the lack of young people interested in following an apprenticeship: for example forging links between schools and industry Not corrected data based on administrative register Aftenposten (1994) 'Ikke fint nok å lage møbler'.24. August 1994.

District Plan for Møre and Romsdal 1992-1995 What Comprises a Regional Innovation System? An Empirical Study 19 at an early age (i.e. visits from schoolchildren to local industry), setting up apprenticeships for young people in firms, and fostering special links within certain sectors such as ship-building to allow young people to gain work experience.

3.5 Regional technological infrastructure The role and importance of the technological infrastructure in the region in providing support for firms’ activities was also examined. Geographical proximity, good communication networks, a common cultural background and a well developed infrastructure act as a catalyst for the utilisation and regional innovation potentials46.

Many firms in the survey indicate that more general infrastructural provisions related to the quality of telecommunications and proximity to key transport links are important. Of the firms, 38% perceived quality of telecommunication as the most important regional infrastructural factor to firms activities, and 61% looked upon frequent and reliable transportation services as most important (Figure 10). The importance of these factors to the technological infrastructure is evident from many other studies in this field and, in the case of Møre and Romsdal, this is largely due to the special geography of the region, where towns are on different sides of fjords or mountains, so transportation links are of the utmost importance for firms.

However, although basic infrastructural factors are important to firms in the region, other technology-related factors such as proximity to higher education, technical colleges and research institutions are not perceived as important to their activities;

this is especially true for the small firms, where 70% look upon this as least important, but only 45% of the largest firms has the same view. There are no particular difference between the industries in how they perceive proximity to higher education, technical colleges and research institutions. Other evidence shows that 70 firms have been in contact with, for example, the research institution in the region (Møreforskning). We found only 11 of these firms among our respondents, of which 7 firms are seen to be innovative according to the criteria discussed above. In addition, the size distribution differs from our sample, in that there is a majority of large firms that have been in contact with Møreforskning, 5 of these 11 firms have more than 100 employees, only 2 firms had less than 20. Thus, even though they have been in contact with Møreforskning, most of these firms responded to our survey as seeing proximity to research institutions as least or mid-important for their activities. This emphasises the results found earlier in the paper that showed that firms R&D expenditures are only 12% of total innovation costs. This confirms that ‘incremental innovations’ through internal activities or in cooperation with other firms are important for the firms in the region.

More specifically in technological terms, it is evident from elsewhere, that links between industry and the external technological infrastructure, such as universities and HEIs are beneficial for innovation activities47. For firms in Møre and Romsdal, in terms of public support for innovation, the most important 'formal' source of support in the region is what is known as 'Møre and Romsdal firms' counselling' and the regional offices of the State Industrial and Regional Fund (SND) (Figure 11).

These institutions are regionally based and are acquainted with the region, Koschatzky K. (1994) op cit, 23 Charles, D. and Howells, J. (1992) Technology Transfer in Europe: Public and private networks, Belhaven, London 20 STEP rapport / report R-01/1995 organisations and institutions located and operating there and barriers to innovation which may exist. As such, these institutions seem to have a positive effect on the establishment of links between firms and technological infrastructure. Other organisations, such as higher education institutes (HEIs), and technical colleges and schools, which could potentially offer a source of technological support and expertise for firms located in Møre and Romsdal are not perceived as strongly important by firms. This again may be due to a lack of awareness amongst firms and education institutes as to the potential benefits of collaboration.

Figure 10. Importance of regional infrastructural factors to firms’ activitites: postal responses only (n=121), 1994 Proximity of HEI/research centres/science parks/ technology

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0% 10 % 20 % 30 % 40 % 50 % 60 % 70 % 80 % 90 % 100 % (Source: STEP-Group survey of Møre and Romsdal)

Figure 11. Sources of information, expertise or support for innovation activities:

responses to telephone survey (n=121) Entrepeneur School

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Our findings suggest that firms place little emphasis on external sources for innovation support but, are more likely to rely upon internalisation of innovation processes. This is suggested by findings indicating the history of entrepreneurship amongst firms, reliance primarily upon internal funding for innovation, concentration on incremental innovation or a lack of awareness as to the possibilities of obtaining external knowledge or support through for example collaborative projects with colleges or research institutes. The 'entrepreneural spirit' that exists in parts of Møre and Romsdal has been discussed elsewhere48 implying that the owners of firms are conscious that they are self-sufficient in undertaking innovation. Most firms have little internal research, conducting mainly development-related preproduction or trial work, and therefore seldom see the work of HEIs (at the more basis end of R&D) of use to their activities. In addition, the data from Møreforskning shows that innovative large firms look more to external environment for support for their innovation activity.

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