Keynote, IV Clusters, Cluster Policies & European Networking Conference

Santiago de Compostela, 7th May 2014

WHERE NEXT FOR CLUSTERS AND CLUSTER POLICY?

James Wilson

Orkestra and Deusto Business School

jamierwilson

Motivation: We can’t stay still

?The world never stops moving and our competitiveness landscape is always changing …

… so becoming and remaining competitive requires continual transformation

In competitiveness policy we need to

constantly questionwhat we are doing

and how we are doing it

Esbjerg, Denmark

Belfast, Northern Ireland

Policy must evolve with challenges

• Industrial Restructuring

•Response to economic crisis

• Investment in key STI infrastructure

1980s

•Clusters

•Focus on efficiency-driven competitiveness

•Proactive policy to improve business environment

1990s

• Innovation

•Evolution of cluster policy

•Foundations of smart specialisationstrategy

2000s

An example: Evolution of competitiveness policy in the Basque Country

Today in the Basque Country we are at another important juncture … where next?

Clusters and cluster policy

The cluster concept in its current form has been around for a quarter of a century now, and remains a fundamental guide for competitiveness policy …

… But like all policy constructs, it requires constant reflection on how it should adapt and evolve to fit with today’s and tomorrow’s competitiveness challenges

Two types of reflections are

particularly important at this moment in time How are the emergence of ‘smart specialisation

strategies’ affecting how we work with clusters? Do we need to re-think clusters in for the RIS3 era?

How can we better evaluate what we are doing with clusters so as to generate learning around what works, in what contexts, and why?

1.

2.

An important distinction

Clusters

• A real socioeconomic phenomenon

• Agglomeration in a certain geographical area of firms & other agents engaged in related activities, characterized by the development of cooperative relationships

Cluster Policies

• A set of coordinatedpublic and/or privateactions designed to support the developmentof relationships betweenagents within existingand/or emergent clusters

• These may be formal and/or informal, and can use a variety of ‘instruments’

Cluster Policy Instruments

• Specific tools used to operationalise clusterpolicies

• Support for individual cluster associations isone such tool

• Others include supportfor projects in cooperation and directmanagement of variousclusters from a central agency

Clusters can exist with or without supporting policies

Cluster policies & instruments are the main focus for evaluation & learning

Clusters and cluster ‘initiatives’ or ‘associations’ are not the same thing …

Need for government policy?

Scenario Policy Rationale

No existing agglomeration

Questionable rationale for government policy, except in very specific circumstances (e.g. strategic positioning where there are strong related clusters)

Existing agglomeration but weak institutional elements

Government policy can help to maximise cluster potential, but in a long term process that fits the existing socio-institutional context

Existing agglomeration and functioning institutional elements

Government policy may generate ‘additionality’ depending on the specific socio-institutional context, but there are greater dangers of crowding out

Three broad scenarios:

Context is critical and there is an important role for evaluation processes that enable policy-makers to understand the evolution of context as it interacts with the policy

Source: Aragón el al (2014)

Cluster policy complexity

• The explosion of cluster policies around the world over the last 20 years has generated critique focussed on the impreciseness or ‘messiness’ of the concept and its indiscriminate adoption as a policy panacea

• There is huge heterogeneity in cluster policy approaches and overlaps in the implementation of cluster policies

• The Spanish cluster policy landscape is a microcosm of the global landscape

Significant differences in approach in

the 17 autonomous communities

Elements of cluster policy

also at national & European

levels

Specific cluster initiatives at

sub-regional or city levels in many cases

Clusters are part of policy systems

• Cluster policies overlap with many other competitiveness and innovation policies in complex ‘policy systems’

• These policy systems are also clearly ‘multi-level’

Source: Magro & Wilson (2013)

Cluster evaluation is challenging

• Cluster policies interact in complex, multi-level policy systems• Cluster policies typically contain a mix of tangible and intangible objectives• The existing socio-economic structure (the context) both conditions networking

behaviour in clusters and is changed by it

• These characteristics make it very difficult to isolating cause-effect relationships and determine the impact of cluster policy instruments

• It is therefore not easy to demonstrate the value of cluster policies– We rely on a mix of empirical studies with limitations, case-based analysis and

anecdotal evidence– There is a “pick and mix of research evidence” (Perry, 2005) that arguably re-

enforces clusters as a policy panacea

Choosing an evaluation approach

• Some form of logic model is often used to order indicators:

• But there is an important set of questions to ask first: Why do we want to evaluate? Who is the audience? What are their needs?

• This will determine the evaluation criteria and guide the evaluation approach– Concrete measures of Return on Investment (ROI)?– Indicators that support learning among the cluster management and agents?

Summative evaluation: measures outcomes for accountability purposes

Formative evaluation: Geared towards learning and

ongoing change

Impact, learning, or both?

• Impact evaluations typically seek to quantitatively measure outputs (observable networking behaviour) and/or outcomes (firm-level productivity) to demonstrate the impact of the cluster policy inputs:

– Statistical techniques (such as matched samples) enable us to disentangle the impacts of specific policy instruments and arrive at ‘headline figures’ for impact

– Techniques such as social network analysis are also useful for analysing the relationship between different elements of cluster policy in ‘policy systems’

• Yet these approaches suffer from two main limitations:

1. They rely on good data, which often is not available2. They don’t tell us much about why or how the policy is (or isn’t) working

The key to overcoming the challenges of cluster evaluation is in using mixed methods

Participatory evaluation

Conventional Participative

Who? External experts. Beneficiaries, business people, policy-makers,evaluation team.

What? Success criteria and informationnecessities are pre-determined.Evaluation by objectives.

Participants identify their own informationnecessities and determine their own successcriteria.

How? Distance from the evaluation teamand other participants

Shared methods and results from theinvolvement of participants

When? In general, when the policy orprogramme is finished

Frequently, throughout the duration of thepolicy. Continuous evaluation.

Why? Summative evaluation. Should thepolicy or programme becontinued?

Formative evaluation to generate actions ofimprovement. Continual learning.

Participatory evaluation is a form of ‘action research’ that can be particularly powerful for evaluating cluster policies because its process has synergies with the systemic nature of clusters themselves …

Source: Diez (2012)

Participatory evaluation in practice

Planning

• Literature review

• Development of conceptual framework

• Interviews with policy-makers & cluster association management

Application

• Participatory workshops with cluster stakeholders

• Definition of evaluation framework & indicators

• Data collection

Reflection

• Analysis of results by research team

• Results workshop with stakeholders

• Sharing of project experience with others

A social capital evaluation framework

Source: Aragón el al (2012)

The experience demonstrated how a deeper appreciation of the realities and behaviour of targeted firms can support policy learning

A change in paradigm

• Evaluation is too often seen as a threat or challenge to policy because it is associated narrowly with accountability

• We need to understand evaluation as learning

• It should be an integral part of the policy process, not something that is done ‘afterwards’ to justify activities

• The emergence of the smart specialisation paradigm is one such change, where learning from and with clusters can make the difference between a realistic, embedded and ‘live’ strategy and one that remains as a ‘plan’

Cluster evaluation can generate valuable learning that will help us to improve what we are doing and to proactively embrace changes that might affect our activities

In a nutshell, smart specialisation is about placing greater emphasis on innovationand having an innovation-driven development strategy in place that focuses on eachregion’s strength and competitive advantage. It is about specialising in a smart way, i.e. based on evidence and strategic intelligence about a region’s assets and the capability to learn what

specialisations can be developed in relation to those of other regions.

DG Regional Policy, European Commission (2011)

• The concept has been embraced and taken forward rapidly, and today all European regions are required to have a RIS3 in place to receive structural funds related to innovation

– These developments are supported by a Guide to RIS3 and an S3 Platform

• Strategies should emerge from an ‘entrepreneurial discovery process’, with priorities identified in the nexus of economic activities, technologies and market opportunities

Smart specialisation strategies

Businessmanufacturing and services, primary sectors, financial sector, creative

industries, social sector, large firms, SMEs,

young entrepreneurs, students with business ideas, cluster and

business organisations, etc.

Researchpublic and private research

bodies, universities,science and technology

parks, NCPs,Technology transfer offices, Horizon2020

committee members, regional ESFRI roadmaps, etc.

Different departments,if relevant at different

government levels, agencies e.g. for regional development,

business advice, public procurement offices,

incubators, etc.

Public administration

NGOs and citizens’ initiatives related to

societal challenges for which innovative solutions

would be helpful, consumers

associations, Talents!, etc.

Civil society / Users

Entrepreneurial in Composition and Spirit (risk-taking, broader view

beyond boundaries …)

Source: Katja Reppel / DG Regio presentation, January 2014

Entrepreneurial Discovery Processes

Smart specialisation and clusters

• For many years clusters have sought to work beyond traditional boundaries, and there are many synergies between the concepts:

– Both imply forms of cooperation between firms and other agents working in related/complementary areas

– Both are systemic and require new forms of leadership & governance

– Both rely on place-specific assets, context and institutions

– Both seek to be transformative & require processes of prioritization

– Both are subject to debate about the appropriate role of government

– Both are characterised by challenges in evaluating their effectiveness

But pre-existing clusters & policies embody important elements of

entrepreneurial discovery processes that RIS3 can build from

Foray et al. (2012) argue that “vibrant innovative clusters” are a “classic

outcome” or an “emergent property” of a RIS3

Clusters & the six steps to RIS3

Steps to RIS3 design Contribution from clustering experienceStep 1: Analysis of regional context & innovationpotential

Strategy rooted in regional specificities

Looking beyond regional boundaries

Entrepreneurial dynamics: prospects for a

process of entrepreneurial discovery

Existence of cluster policy and functioning cluster initiatives can provide a strong basis for analysis and knowledge about regional context, through for example existing diagnostic processes within clusters, cluster mapping exercises, and in-depth cluster case analyses

Step 2: Governance to ensure participation & ownership

“Quadruple helix”

Collaborative leadership

Boundary Spanners

Clusters themselves exhibit a long experience with ensuring participation and effective governance, and there is significant potential to learn from and improve these governance structures and processes in the development of RIS3

Step 3: Elaboration of an overall vision for the future of the region

Constructing the vision: scenarios…

Communicating the vision

The strategic reflection processes of existing clusters can provide lessons in constructing common vision, and the clusters themselves are important vehicles for construction and communication of a regional vision

Steps to RIS3 design Contribution from clustering experienceStep 4: Identification of priorities

Combine top-down and bottom up approach

Vertical and horizontal type priorities

Inter-cluster approaches and collaboration among and between KET actors and clusters can play an important role in facilitating the coordination of bottom-up and top-down input into prioritization processes

Step 5: Definition of coherent policy mix, roadmaps and action plan

Experimentation possibilities

Cluster policies have followed a similar path, and experience shows the importance of policy flexibility and mechanisms to ensure sophisticated policy intelligence

Step 6: Integration of monitoring and evaluation mechanisms

Monitoring to follow the process of

experimentation

Evolve and adjust according to changes in

economic and framework conditions

Experience with cluster policy evaluation suggests the importance of mixed methodologies and a policy learning focus

Clusters & the six steps to RIS3

Source: Aranguren & Wilson (2013)

Re-thinking clusters in the RIS3 era?

• Boundaries between clusters are becoming more porous as new opportunities emerge in the nexus of economic activities, technologies and market opportunities

• Inter-cluster collaboration takes on a new importance in this context

– Within region

– Across regions (a dimension often neglected in RIS3)

• Rigid clusters can present barriers to the cross-fertilisation of ideas

• In some cases cluster policies may need to adapt and be more flexible

Above all RIS3 and future cluster development should go hand-in-hand, embracing each other in a context of learning and improvement and building from their synergies

Closing Message

• Cluster policies, like clusters themselves, have lifecycles• The competiveness environment is constantly changing, requiring renewal• The emergence of RIS3 reflects this renewal process and presents

opportunities for clusters• Overcoming the fears and challenges of evaluation has a key role to play in

renewal processes, generating learning and ensuring that clusters are able to adapt, improve and continue to add value to regional competitiveness

WHERE NEXT FOR CLUSTERS AND CLUSTER POLICY?

James Wilson

Orkestra and Deusto Business School

jwilson@orkestra.deusto.es jamierwilson

THANK YOU

Keynote, IV Clusters, Cluster Policies & European Networking Conference

Santiago de Compostela, 7th May 2014