Innovation processes and the formation of rapid-growth firms Is the regional level an important arena? Eirik Vatne Department of Economics Norwegian School of Economics and Business Administration

Innovation and regional policy Advance formation of enterprises that will flourish and grow and create solid job opportunities in all regions In high cost environments growth is supposed to happen in firms focused on high skills or capabilities, learning and innovation

Academic debates on growth firms, innovation and location Specifically focused on territorial environments with fast growth companies  Business clusters/dynamic agglomerations  Science park/university environments and the formation of new ventures in high tech industries: Information and Communication Technology, Biotechnology, Nanotechnology  Urban environments with fast development of knowlegde intencive business services (KIBS)

Innovation - more than high tech Radical or incremental new product Radical or incremental new process Introducing new organizational arrangement  Knowledge system, management structure, interorganizational arrangement Introducing new market arrangement  Design/packaging, market channel, market segment, internationalization Community Innovation Survey (CIS)

Rapid-growth firms Most surviving new firms will never grow to an enterprise with > 20 employees (typical finding: 70 % of population) Only a few firms will be classified as “fast flyers”, “expanders” or “gazelles” (typical findings: 2-4 %) These are often based on entrepreneurship, specific skills and capabilities, and innovative activities Phases of growth are unevenly distributed during the life span of a firm Some are new, entrepreneurial firms, others existing enterprises with a strategic renewal of some sort Some grow fast in expanding markets, others caused by unique capabilities and increased market shares Many rapid-growth firms still find a market in traditional industries Rapid-growth firms are territorially more evenly distributed than firms in “new” industries

Regional distribution of gazelles, new ventures and firms - by county. Shares of national numbers of firms, 2007

Innovative firms, new ventures and gazelles-share of county total

Rapid-growth firm per inhabitants

Rapid growth, entrepreneurship and innovation Dependents on characteristics of founder/owner/manager, their industrial and entrepreneurial experience, education, creativity and social and professional network A strategically focus on growth, risk taking, aggressive competition and a leading performance An ability to gather and process information more quickly Develop deeper interorganizational relationships - networking with more groups and more frequently Focus on a narrow set of markets and customers - to create value for customers Achieved with superiority in product quality and unique innovative capabilities Training/developing staff and active us of incentives to involve and sophisticate the firm’s human resources

Based on heterogeneous set of knowledge Unique understanding of the demand in specific markets – understand your customers Informed by and mastering the “newest” technologies in specialised segments that add value to customers Skills in hiring a competent staff and build a unique achievement based and change oriented organization Knowledge of how to communicate with the market Unique understanding of the dynamics of the industry, the competitors behaviour and own strategy Unique capabilities in acquiring none traded knowledge through networking

Competency and corporate entrepreneurship Innovation – to recognize opportunities  Need domain-specific knowledge, cognitive ability, education- training-practical experience, and creativity Brokering – to access and implement new information and knowledge  Exploring div. knowledge domains, learning from them, linking knowledge from different domains to solve problems, and implement ideas Championing – extraordinary confidence in themselves and their project  Context specific, transformational leadership skills, ability to influence and negotiate with others, use of informal networks Sponsoring – accessing resources needed for venture  Deep technological and business knowledge, risk tolerance, persistence and passion, and transformational leadership skills

Where do these competencies thrive? In market or technology driven rapid-growth firms? In regional environments dominated by specific industries? In locales with a heterogeneous flow of information, capabilities and capacities? Are networking related to these competencies dependent on proximity: socially, territorial or both?