Innovation in small and medium-sized centres and rural areas: what potential for stronger linkages with

the centres?

Sara Davies

Open Innovation Forum, Kouvola, 23-24 August 2010

Research funded by the UK Innovation Centre

(BIS, ESRC, NESTA and TSB)

Sara Davies, European Policies Research Centre, University of Strathclyde2

Outline

• Traditional views of linkages and innovation

• Changing context for linkages and innovation

• Challenges for rural areas• Kinds of innovation seen in rural areas• Urban-rural innovation linkages• Policy support for urban-rural linkages• Policy challenges

Sara Davies, European Policies Research Centre, University of Strathclyde3

Traditional views oflinkages and innovation

• Linkages in agglomerations promote innovation:– Knowledge spillovers, labour pooling and input-output

links -> increasing returns for firms in large markets (Marshall)

– As fixed costs fall, other areas with good linkages enjoy spread effects (Myrdal)

– Regional networks and institutions support innovation (Aydalot, Storper)

• Linkages promote innovation by:– Facilitating access to multiple sources of information– Allowing more intense interaction– Challenging existing ways of doing and thinking– Increasing scope for specialisation

Sara Davies, European Policies Research Centre, University of Strathclyde4

Changing context forlinkages and innovation

• ICT increases scope for linkages across distance– More and stronger interactions between people– Distance working (and specialisation)– Firms can supply more distant markets – More challenges to existing ways of thinking/doing

• Lower barriers to international trade & capital flows– Increased international interactions between/within firms – Concentration of some activities (economies of scale)– More geographically integrated production relations

• Focus on openness (Chesbrough; cf. Granovetter; Grabher)– Facilitates cooperation between different people– Allows information from different sources to be combined

Sara Davies, European Policies Research Centre, University of Strathclyde5

Challenges for small and mediumcentres and rural areas

• ICT and changes in economic integration ->– New opportunities (eg. attraction of new firms)– New challenges (eg. increased competition)

• Sparse local population means:– Limits on linkages within the area– Fewer linkages to external sources of knowledge– Greater need for openness

• Ongoing relations of dependence– Business and policy decisions are often taken

elsewhere and in the interests of people located elsewhere

– (Human, natural…) resources often flow out of the region

– Firms are often price-takers not price-setters

Sara Davies, European Policies Research Centre, University of Strathclyde6

Kinds of innovation in rural areas:Definitions

• International differences in definitions of ‘rural areas’– National and regional population density– Level of demographic & economic

concentration– Number, size and functions of regional centres– Income and employment levels

• Differences in definitions of innovation– R&D innovation is usually weaker in rural areas– Less clear for broader categories of innovation

Sara Davies, European Policies Research Centre, University of Strathclyde7

Patent applications/mn pop, 2007,National & 2 rural regions

(Source: Eurostat)

0

20

40

60

80

100

120

140

160

180

200

Germany France Italy Austria Finland Sweden UK

Sara Davies, European Policies Research Centre, University of Strathclyde8

R&D spend as % of GDP, 2007,National & 2 rural regions

(Note: France & Italy data are for 2004. Source: Eurostat)

0.00

1.00

2.00

3.00

4.00

5.00

6.00

Sara Davies, European Policies Research Centre, University of Strathclyde9

Business R&D spend as % of GDP, 2007,National & 2 rural regions

(Note: Germany & Italy data are for 2005, France for 2004. Source: Eurostat)

0.00.51.01.52.02.53.03.54.04.55.0

Sara Davies, European Policies Research Centre, University of Strathclyde10

EU innovation policiesand urban-rural linkages

• Framework Programme 7– Mainly focused on EU R&D excellence– Some support for regional clusters and Convergence regions

• Competitiveness & Innovation Programme– May support urban-rural linkages e.g. innovation service

centres, transnational networking, use of ICT services• Cohesion policy / Structural Funds

– Some programmes support infrastructure, SME advice etc– National programmes mainly support national development– Most regional programmes do not directly target urban-rural

linkages– Regional programmes may constrain interregional openness– Division of tasks between ERDF/ESF and EAFRD

Sara Davies, European Policies Research Centre, University of Strathclyde11

National/regional policiesfor urban-rural linkages

• Not usually an explicit goal of national/ regional innovation policies– National/regional strengths– National/regional capacities– International networking

• Often institutionalised divides– Between national innovation policy and regional

policies– Between urban and rural policies– Between different regional programmes

• But in practice there are policies that help to build urban-rural linkages for innovation

Sara Davies, European Policies Research Centre, University of Strathclyde12

National/regional policies:Basic conditions for openness

• Investment in infrastructure– Interregional transport networks & services– ICT networks, broadband availability & quality

• Encouraging openness to new ideas from elsewhere– Schools, universities, foreign languages– International events in small/medium centres

• Ensuring good institutions in order to promote trust and low corruption

Sara Davies, European Policies Research Centre, University of Strathclyde13

Business use ofbroadband, 2009

(Source: OECD)

80828486889092949698

100

Sara Davies, European Policies Research Centre, University of Strathclyde14

Households with broadband, 2009National & 2 rural regions

(Note: UK data are for 2008; Source: Eurostat)

0102030405060708090

100

Sara Davies, European Policies Research Centre, University of Strathclyde15

Openness to foreign ideas(Source: NESTA, 2009: IMD WCY Survey)

0123456789

10

Nether

lands

Canada

Sweden

Finlan

d

United S

tate

s

United K

ingdom

Germ

any

South

Kore

a

Franc

e

Sara Davies, European Policies Research Centre, University of Strathclyde16

National/regional policies :Forums for interregional interaction

• Interregional business forums (eg. Germany)

• Hub-and-spoke cooperation for innovation (eg. some of Norway’s Arena projects)

• Formal urban-rural institutions (eg. multi-site University of Cumbria in UK)

• Interregional linkages between local networks– Policy-makers (eg. ÖROK in Austria)– Funders (e.g. business angels in UK)

Sara Davies, European Policies Research Centre, University of Strathclyde17

National/regional policies:Direct brokerage

• Local offices help innovative firms find– Customers (eg. Innovation Norway) – Funding (eg. Sweden’s Norrlandsfonden)– Help with new ideas/products (eg. Germany)– Information (eg. Austria’s Regional

Managements)

• Local/regional offices intervene actively– Package and market the natural & human

resources of rural areas to customers in the centres (e.g. Scotland-UK)

Sara Davies, European Policies Research Centre, University of Strathclyde18

National/regional policies:Build rural capacity to

link with urban areas

• Enhance key organisations e.g. universities & colleges (eg. VINN Excellence Centres in Sweden)

• Promote local networking between businesses and researchers (eg. Finland’s Regional Centres programme)

• Reduce the outflow of human resources (via higher education and graduate placement schemes)

• Attract leading firms (via aid, infrastructure and advisory packages)

Sara Davies, European Policies Research Centre, University of Strathclyde19

Policy challenges

• Draw on best practice to support urban-rural linkages in the national/regional context– Basic conditions for openness– Forums for urban-rural interaction– Direct brokerage of linkages– Rural capacities to interact

• Overcome institutional obstacles to urban-rural interaction– Between EU policies– Between national policies– Between regional programmes

Sara Davies, European Policies Research Centre, University of Strathclyde20

Thank you for listening!

Sara.Davies@strath.ac.uk

http://www.eprc.strath.ac.uk/irr/