CIRCLE Seminar Series University of Lund 4 June 2014 Smart specialisation and the “entrepreneurial state” thesis Kevin Morgan Cardiff University CIRCLE Seminar Series University of Lund 4 June 2014

Overview Debating the state in innovation Place-based innovation the neo-liberal critique critiques of the critique Place-based innovation territorial/relational conceptions of place triple challenge of smart specialisation Regional policy repertoires state-centric v network-based repertoires

Debating the state: the neo-liberal critique Politically based on a zero-sum conception (less state = more market) Theoretically based on Hayekian insights: Industrial policy will induce rent-seeking, so states should not engage in “picking winners” Informational: the state cannot be a surrogate for the decentralised information processing capacity of markets

Debating the state: the “entrepreneurial state” thesis A recent critique of the neo-liberal critique is The Entrepreneurial State, which aims to: change the way we talk about the state claims the state is innovative and risk-taking shows how the smart technologies of the iPhone (Internet, GPS, touchscreen display, SIRI etc) were all funded by the state But it uses DARPA to illustrate the thesis (ie. a unique mission-driven US defence agency) Big problems with mission-driven innovation policy (see Morgan & Sayer)

Debating the state: the experimentalist state A more persuasive critique of the neo-liberal critique is the social learning approach (eg Rodrik; Sabel; Gertler/Wolfe): the state lacks information, but so does the private sector! firms and states need to collaborate to learn together in a trial-and-error process of experimentation (the process being more important than the policy) the aim is to elicit information, find joint solutions, and evaluate outcomes as they emerge (drawing on the “embedded autonomy” thesis of Peter Evans)

Place-based innovation The “relational turn” in geography has enriched our understanding of the constitution of “place” But it does not help to juxtapose relational and territorial conceptions - places are bounded and porous, shaped by local and trans-local forces Spatial fetishism can be a problem in territorial conceptions of place - but regional governments act in and for their regions (ie. spaces are not agents but some agents act for their spaces)

Smart specialisation Smart specialisation concept has been heavily influenced by certain theories – the experimental state thesis (eg Foray draws on Rodrik et al for the self-discovery process) evolutionary economic geography (eg path dependence and related variety etc) relational turn (eg the role of trans-local factors and networks)

The triple challenge The challenge of smart specialisation is threefold: Conceptual challenge – do the core theoretical arguments stack up? Operational challenge – is the six-step approach feasible for poor state-centric regions? Political challenge - can the multi-level polity be synchronised for an integrated place-based approach to innovation and development?

Regional policy repertoires Too much variability to speak of “the region” or “the regional state” In politically constituted regions (where there is a mandated agency to act on behalf of the region) there are contrasting repertoires even in apparently similar regions: state centric repertoire (Wales) network-based repertoire (Basque Country)

State-centric repertoires Wales has fashioned a state-centric repertoire for two very different reasons: by default - because it has a weak indigenous business class and a dependent civil society, so economy and society looks to the state for a lead in a country which is a de facto one-party state by design - because it abolished its regional development agency (WDA) and absorbed its functions within the state, a move that reduced diversity, pluralism and the capacity for robust feedback (“speaking truth to power”)

State-centric repertoires State-centricity in a one-party state, combined with weak feedback mechanisms, led to very expensive disasters (eg the Technium Centres which cost more than £100 million) The big question is whether this state-centric system can rise to the S3 challenge, where non-state actors – business and universities - have been allotted a major role in the process of entrepreneurial discovery?

Network-based repertoires The Basque Country has a strong state system but the state is pervasive but not invasive (ie it respects subsidiarity) The BC has a stronger indigenous business community and a much stronger regional innovation system Intermediate institutions (technology centres and cluster organisations etc) co-design policy with the regional state and enhance diversity

Network-based repertoires But the BC regional innovation system has its own challenges in the S3 era Designed in an age of plenty, the RIS is now threatened by the age of austerity Already signs of institutional cannibalism as RIS bodies vie for funds and functions Other problems include a weak university system and an under-developed M&E system

Conclusions Conceptions of the state need to move beyond the caricatures of right and left The “entrepreneurial state” is a smart state (not the shrunken state of neo-liberalism) but it is not the public sector norm Place-based innovation needs to address new models of innovation - like social innovation and sustainability transitions etc The politics of regional innovation policy is poorly understood...the RIS literature remains very technocratic

References Foray, D. et al (2012) Guide to Research and Innovation Strategies for Smart Specialisation, European Commission Gertler, M. and Wolfe, D. (2002) (eds) Innovation and Social Learning, Palgrave Mazzucato, M. (2013) The Entrepreneurial State, Anthem Press Morgan, K. (2013) The Regional State in the Era of Smart Specialisation, Economiaz, 83(2) Morgan, K. and Sayer, A. (1988) Microcircuits of Capital, Polity Press Rodrik, D. (2004) Industrial Policy for the Twenty-First Century, UNIDO Sabel, C. and S. Reddy (2007) Learning to Learn, Challenge, 50 (5)