Regional Innovation Policy - Essay Example

Regional Innovation Policy With the revolutionizing economic scenario in the global context, the innovation is not concentrated in a single firm or institution. To remain competitive and make substantial economic and industrial developments, it is indispensable that efficient transfer of knowledge and technology takes place between and amongst all the actors of the economy. For this purpose, the regions should be so developed that all these actors work together for a common goal of bringing prosperity and economic development by making their respective contributions. To promote such mutual trust and cooperation within the economic players in a region, the state needs to design and initiate such policies that result in an interactive learning process. Innovation offshoots from such learning and are stimulated with cooperation and speedy knowledge transfer. Any regional initiative must evolve from a partnership of business, governments, non-profits and education/training institutions. In the Cleveland area, a partnership in North-eastern Ohio undertook a project to identify industry "clusters" within the region that were competitive in the global economy. The project, the Northeast Ohio Regional Economic Development Strategies Initiative (NOREDSI), is a partnership of the Akron Regional Development Board or ARDB (the Chamber of Commerce for the Akron area), Cleveland Tomorrow (a committee of the CEO's of the region's largest companies), and the Greater Cleveland Growth Association or GCGA (the Chamber of Commerce for the City of Cleveland). NOREDSI's goal was to promote industrial clusters in the region, so as to become more globally competitive. This initiative sought to generate a bottom-up, private sector program in which interrelated private firms within an identifiable "cluster" could work together to identify and resolve common needs and concerns. This research identified six industry clusters (metalworking, plastic products and chemicals, motor vehicles and equipment, insurance, biomedical products, and instruments & controls) that were relatively competitive or had competitive advantages in the region. In a series of cluster forums with these industries, private sector participants identified six main issues as barriers to retaining regional competitive advantages. They were: workforce/education; technology/R&D; entrepreneurship; regulatory/tax policies; quality of life; and, infrastructure. Unfortunately for the Cleveland area, the need for human capital development appears to be especially great if its major industries are not to wither. If a region is attempting to be globally competitive, a well-trained workforce is essential to increasing the levels of productivity. One of the public sector's most vital economic development initiatives, first, is to reach consensus with regional industries on the skill sets needed by firms and, then, to adopt policies ensuring that students can attain them in all districts throughout the region. Another very important area is constituted by the services that state and local governments provide to businesses directly. These include promoting entrepreneurial skills and technological upgrading, providing an advanced physical infrastructure, and helping businesses through tax and regulatory relief. Finally, state governments should develop and encourage taxing policies, which benefit regions. The most commonly used example of tax policy designed to enhance the economic development benefits to a region is Minnesota's shared tax base. Put simply, economic benefits (e.g., taxes) generated by a firm's location in a city in the region accrue to all cities in the region. The regional level may be important for firms attempting to achieve global competitiveness. The question arises as to what strategies local communities can commence, and what policies local or state governments can initiate, in order to raise the innovativeness and competitiveness of regional firms. Regional innovation policy and its relationship with the region’s economic and industrial development is proven to a good extent from success stories like Italian industrial districts with their centres of real services, Baden-Wurttemberg with its Steinbeis Stiftung and Silicon Valley with its Stanford University. These examples do portray that having certain industries and its related institutions and value chain members located in the same geographical setting is the guide to development of that particular industry. However not all regions are apt to becoming science parks or technology districts. A good deal of research has been conducted which helps understanding of the nature and range of interaction among firms and organisations engaged in innovation (Edquist 1997; Braczyk et al 1998; Cooke and Morgan 1998; de la Mothe and Paquet 1998; Acs 2000) and policy is moving towards a notion of the region as an important level at which strategic innovation support is appropriate (Cooke 1992; Todtling and Sedlacek 1997; Cooke, 2000a; Cooke et al 2000). While deciding on which policy instruments to incorporate in the regional innovation policy, it is important to take into account the specific problems faced by that particular regional economy. There is no one set of policy instruments or a one-size-fits-all policy portfolio that suit all types of region. From the systems perspective, innovation policy instruments must be adapted to distinctive characteristics in individual regions, building on analyses of regional innovation system barriers, e.g. factors which inhibit the regional industrial environment, its institutional set-up, barriers related to attitude towards innovation and entrepreneurship, etc. According to this perspective, how the regional innovation takes place and flourishes depends, to a large extent, on how firms utilise the experience and knowledge of other firms, research organisations, government sector agencies etc. in innovation processes, and on how they blend this with the firms' internal capabilities. Innovation performance does not only depend upon the capability of individual firms, although the know-how and attitude of entrepreneurs, managers and workers can be decisive. In order to make a region significant and central in terms of economic coordination, it requires a setting comprising of a good number of firms, as well as knowledge infrastructure capable of supporting collective learning. The absence of such a setting that is favourable for inducing regional innovation, can be seen particularly where industrial locations are not in close proximity with relevant knowledge organizations. However, regions differ in their capacity to build organisations to stimulate firms' innovation activity; this lack of relevant organisations can be a consequence of a region's decision-making powers, financial resources or policy orientation (Todtling and Kaufmann 1999). Even though where a region has been a strongly developed location for such innovation systems, there may still arise a situation when things start to look sour. This may specially happen if the players of this regional innovation system continue to dedicate themselves for a technology that is mature or is declining. Such a regional production and innovation system, which has become technologically mature, must upgrade its knowledge base and promote product innovations in order to break path dependency (Cooke 1998). There is also an inherent danger of lock-in in regional innovation systems owing to a homogenisation of world-views (Grabher 1993), and these views may become an obstacle to adjustment when technological course and global economic conditions change. If a region is facing such a situation, the right policy to cope up with the trouble may be to create strong regional networks, to restructure local organisations, to force local district away from the technology and knowledge that is either declining or has become outdated, and to promote right to use resources outside the region. Regional Innovation policy may also aim to encourage and support new firm establishment as offshoot from existing organisations. In order to develop innovation in totality and in its completeness, the main contributing factors at the regional level are the extent of regional economic power in relation to governance capacities and the extent to which the regional economy is internally expressed. While the national or federal level is clearly imperative in setting the panorama for innovation and constructing the rules of the game for incentives, it may also create conditions, which either do little to stimulate regional innovation or may pursue policies that act as barriers to it. In a case where regional policy aptitude is relatively higher than the regional budgets may permit, innovative governance may search for support for innovation through focusing downwards to the local level, or upwards to the EU level. It is also of substantial weight, that combining the innovative policy initiative and management to breed the urge to seek ways of supporting general innovation, the culture of that region is kept in consideration. The interaction of the regional policy and the culture of the regional network must be rhythmic in a sense that consultation, association and inclusion come to pass. In words of Philip Cooke (2001), “Policies that sought to promote interaction between different innovation actors that had good reasons to interact, such as universities or research institutes, small start-up firms and larger customer firms, as practised in Scandinavia, Germany and Austria produced more satisfactory results in relation to less ambitious goals. Innovative policy thinking has evolved towards a broadening of the network approach to encompass regional innovation systems. These may embody localised interactive networks but also include the wider business community and governance structure to maximise the financial and associational assets of regions for the promotion of innovation. But a reasonably high degree of regional economic and policy autonomy, a willingness to recognise the multi-level nature of innovation governance, an inclusive and consultative policy mentality and an associative culture attuned to the importance of innovation for growth and jobs, are important ingredients in the successful promotion of innovation for the future.” Industrial innovation is a direct and specific goal of German government policy, focusing on doing things better rather than doing things first. The emphasis is on markets that have been the nation's traditional sources of economic power. Technology diffusion is a top priority. Germany's industry and professional associations excel at providing industrially relevant training. Its industrial research cooperatives, industry groups, and trade associations help set the government's national research agenda. While being adamant that the private sector must be the primary driver of industrial R & D, the German federal government leverages industrial R & D through subsidiary funds and tax incentives. However, Germany must determine how to counter the growing manufacturing sophistication of foreign competitors. Germany’s speciality of high quality at high cost may not be enough. It must match the high quality and low cost of many Asian manufacturers, especially Japan. Second, Germany may not be able to continue looking to traditional manufacturing industries for economic growth, unless it devotes considerable attention and resources to newer crosscutting technologies such as semiconductors and information technology that apply to a range of industrial sectors. As Lindblom (1977) points out, governments cannot command business to invest, they must induce. States subsidize firms directly through grants, loans, and various forms of interest subsidy. States also induce business indirectly by giving tax breaks, providing infrastructure to support new or expanded enterprises, offering information or technical assistance, and regulating the business environment through land use controls or by determining permissible employment practices (Sternberg, 1987). The most sophisticated and compelling evidence that states adopt coherent economic development policy strategies comes from the work of Saiz (2001). His data strongly suggest the existence of two general and distinct economic development strategies pursued by state governments: an industrial recruitment strategy characterized by policies that attempt to reduce costs to business but in a non-targeted and administratively passive manner; and an entrepreneurial strategy that seeks to improve the capacity of local firms and/or specifically targets entrepreneurs and growth-producing economic sectors identified by Sternberg (1987, p. 159). However, as Jones and Bachelor (1986) point out, governments pursue development policy under conditions of uncertainty. Unsure of the needs of the firms they are trying to attract (or keep) and concerned with the effects of incentives offered by other governments, local officials offer more than is necessary to make their community the more attractive location. Mander (1996) has argued that globalisation involves the most fundamental redesign of political and economic arrangements since the Industrial Revolution. In order to be successful in a global economy, state and local policy must also be redesigned to operate in the emerging new environment. Innovative strategies of regional industrial development are becoming increasingly vital to maintain or develop economic competitiveness in a global setting. Both the public and private sectors must understand and act as an economic region. States should be more flexible in easing regulations and opening up more creative financing and taxing mechanisms. The non-profit, foundation, and university communities should be the neutral facilitators of regional thinking. Finally, all of these activities should be focused on establishing creative partnerships for competing in a global environment. References Asheim, B.T. and A. Isaksen. 2000. 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