Lund University, Sweden. Towards a broad based regional innovation policy: Combining knowledge bases, modes of innovation and regional innovation systems Professor Bjørn Asheim, Deputy Director, CIRCLE (Centre for Innovation, Research and Competence in the Learning Economy), Lund University, Sweden. Keynote lecture at the 4th International Seminar on Regional Innovation Policies, Edinburgh, 2009

CIRCLE (Centre for Innovation, Research and Competence in the Learning Economy) New multidisciplinary centre of excellence in research on innovation and entrepreneurship at Lund University (established in July 2004) CIRCLE is financed by the Swedish Agency for Innovation Systems (VINNOVA), Lund University and Blekinge Technical University 2004-2010, and from 2006 for 10 years by the Swedish Research Council (Linnaeus grant) In autumn 2007 co-location of research and teaching in innovation and entrepreneurship together with LUIS (Lund University Innovation System) at LUCIE (Lund University Centre for Innovation and Entrepreneurship) Becoming one of the largest centres in Europe of its kind with 35 researchers employed http://www.circle.lu.se/ Bjørn Asheim, 2009

Origins of the innovation system approach Freeman, SPRU, University of Sussex: OECD work in 1982 (’Science, Technology and Competitiveness’) developing an alternative to mainstream, static economic’s view on international competitiveness as based on ’relative wages’. Instead a dynamic perspective on innovation and learning in the promotion of economic growth with an active role of government was proposed. Book on Japan (1987): Technology policy and Economic Performance: Lessons from Japan. Bjørn Asheim, 2009

Origins of the innovation system approach Lundvall, Aalborg university: Work during the last part of 1980s (also with Freeman). Edited book from 1992 on ’National Systems of Innovation: Towards a theory of innovation and interactive learning’ Nelson, Colombia university. Edited book from 1993 on ’National Innovation Systems: A Comparative Analysis’ Edquist: Edited book from 1997 on ’Systems of Innovation: Technologies, Institutions and Organizations’ Bjørn Asheim, 2009

Positive impacts of the innovation system approach New view on what constitutes ’international competitiveness’ from relative wages (low road or weak competition) to non-price competitiveness national policies of promoting innovation and learning (high road or strong competition) The ’system’ dimension of the IS concept moved attention from linear to interactive thinking of innovation (from science and technology policies to innovation policy) Bjørn Asheim, 2009

Definitions of innovation and system Innovation: Invention based on new combinations (and new knowledge) brought to the market + process of diffusion and use Product, process, organisational, market and raw materials. Making a distinction between technical (product and process) and organisational innovations important System: Innovation networks involving an intricate interplay between micro and macro Bjørn Asheim, 2009

Different modes of innovation ’How Europe’s Economies Learn. Coordinating Competing Models’ : Different modes of innovation and forms of work organisation (Lorenz and Lundvall, 2006) STI (Science, Technology, Innovation) – high-tech (science push/supply driven) DUI (Doing, Using, Interacting) – Competence building and organisational innovations (learning work organisation) market/demand/user driven Bjørn Asheim, 2009

Differentiated knowledge bases Characterise the nature of the critical knowledge which the innovation activity cannot do without (hence the term ’knowledge base’ understood as an ideal type) Makes it less relevant to classify some types of knowledge as more advanced, complex, and sophisticated than other knowledge (e.g. to consider science based (analytical knowledge) as more important for innovation and competitiveness of firms and regions than engineering based (synthetic) knowledge or artistic based (symbolic) knowledge). Different knowledge bases should rather be looked upon as complementary assets Bjørn Asheim, 2009

Differentiated knowledge bases: A typology Analytical (science based) Synthetic (engineering based) Symbolic (artistic based) Developing new know-ledge about natural systems by applying scientific laws; know why Applying or combining existing knowledge in new ways; know how Creating meaning, desire, aesthetic qualities, affect, intangibles, symbols, images; know who Scientific knowledge, models, deductive Problem-solving, custom production, inductive Creative process Collaboration within and between research units Interactive learning with customers and suppliers Learning-by-doing, in studio, project teams Strong codified knowledge content, highly abstract, universal Partially codified knowledge, strong tacit component, more context-specific Importance of interpretation, creativity, cultural knowledge, sign values, implies strong context specificity Meaning relatively constant between places Meaning varies substantially between places Meaning highly variable between place, class and gender Drug development Mechanical engineering Cultural production, design, brands Bjørn Asheim, 2009

Some empirical observations I Economic performance: Global competitiveness 2004 2005 2006-7 2007-8 Finland: 1 1 2 6 Sweden: 3 3 3 4 Denmark: 5 4 4 3 Bjørn Asheim, 2009

Some empirical observations II Promoting Innovation Systems approach: - Finland: Science and Technology Policy Council and TEKES - Sweden: VINNOVA (Swedish Governmental Agency for Innovation Systems) Share of R&D: - Finland: 3.7% - Sweden: 4.0% Bjørn Asheim, 2009

Nordic innovation strategies Finland: Science-driven high tech strategy focusing on radical product innovations, with NOKIA as the champion (STI mode of innovation) Sweden: Technology-based strategy of process innovations and complex product improvements, through R&D investments in large industries (STI mode of innovation) Denmark: Market (user)-driven entrepreneurialism characterized by non-R&D based, incremental product innovations especially within consumer goods sectors (DUI mode of innovation) Bjørn Asheim, 2009

Finland’s National Innovation Strategy: New proposal In order to meet global challenges, innovation policy must be broad-based and comprehensive: Innovation activity in a world without borders Demand and user-driven innovation policy (DUI mode of innovation) to complement the Systemic approach of science and technology policy (STI mode of innovation) Innovative individuals and communities (creative class/talents) Bjørn Asheim, 2009

Key governance policy measures The central government’s corporate steering renewed for the purpose of becoming a worldwide pioneer of systemic reforms: The Science and Technology Policy Council to become a wider Research and Innovation Council (STI & DUI) Content-oriented (strategic centres of science, technology and innovation) and regional centres of innovation (strategic strenghts of regions) driving renewal is to be formed (top down/bottom-up) Bjørn Asheim, 2009

TYPOLOGY OF POLICIES general specific Science policy Technology policy Principles of policies Types of Policy Indirect, general (framework cond.) Direct, specific Science policy Basic research in universities and research institutes/ (T-H) - IPR policy Technology policy Specific ‘strategic’ technologies and sectors - public procurement policy Innovation policy Tax relief policy - Norway Finland’s new innovation policy Bjørn Asheim, 2009

Policy challenges: Institutionally thin (peripheral) and old industrial (lock-in) regions Institutionally thin regions Less innovative in comparison to more agglomerated regions Less R&D intensity and innovation A less developed knowledge infrastructure (universities and R&D institutions) Suffering from institutional thinness Lock-in regions Overspecialised in mature industries experiencing decline (negative lock-in in specialised localisation economies) Few R&D activities, mature technological trajectories, cognitive lock-in University and public research oriented at traditional industries / technologies Bjørn Asheim, 2009 Source: Tödtling & Trippl (2005)

Policy challenges: Fragmented metropolitan and networked regions Fragmented regions Many and diverse industries/ business services Lack of dynamic clusters of (local) innovative firms and knowledge spill-overs (unrelated variety of urbanisation economies) R&D departments and headquarters of large firms Many and high quality universities and public research organisation but weak industry-university links (weak connectivity in RIS) Networked regions Regions with cutting edge technologies and a high level of R&D as well as high connectivity in RIS) Exposed to new challenges and competition from emergent economies Diversify into new but related industries (related variety/differentiated knowledge bases) New ways of continuous innovation support Bjørn Asheim, 2009 Source: Tödtling & Trippl (2005)

Regional Innovation Policies: A Classification of Policy Instruments Support: Financial and technical Behavioural change: Learning to innovate Financial support Mobility schemes Firm-focused Brokers Technology Regional System-focused centres innovation systems Bjørn Asheim, 2009

What is Regional Innovation Systems (RIS) – narrow definition: A RIS is constituted by two sub-systems and the systemic interaction between them (and with non-local actors and agencies): The knowledge exploration and diffusing sub-system (universities, technical colleges, R&D institutes, corporate R&D, technology transfer agencies) The knowledge exploitation sub-system (firms in regional clusters as well as their support industries) STI (Science, Technology, Innovation) mode of innovation – science driven; radical innovations Bjørn Asheim, 2009

What is a RIS - broad defintion : A wider system of organisations and institutions supporting learning and innovation, and their interactions with local firms Developmental (creative) learning: learning work organisations, interactive learning (user-producer relationships), inter-firm networks DUI (Doing, Using, Interacting) mode of innovation – market/demand/user driven; incremental innovations Bjørn Asheim, 2009

Varieties of Regional Innovation Systems (RIS) Territorially embedded RIS (’grassroots RIS’) – demand/user driven (less systemic university-industry relations) – broad definition of IS (learning regions) mainly doing incremental innovations (knowledge exploitation) Regionalised national innovation systems (’dirigiste RIS’) – science/supply driven – narrow definition of IS (technopolis, science parks) mainly focusing on generating radical innovations (knowledge exploration) Regional networked innovation systems (’network RIS’) – mixed supply/demand interaction (combined narrow and broad definition) carrying out a combination of radical and incremental innovation (knowledge exploration as well as exploitation) Bjørn Asheim, 2009

RIS TYPOLOGY Type of Analytical/ science based Synthetic/ knowledge Type of RIS Analytical/ science based Synthetic/ engineering based Symbolic/ artistic based Territorially embedded (grassroots RIS) IDs in Emilia-Romagna (machinery) ’Advertising village’ – Soho (London) Networked (network RIS) Regional clusters – regional university (wireless in Aalborg) Regional clusters – regional technical university (mechanical in Baden-Württemberg) Barcelona as the design city Regionalised national (dirigiste RIS) Science parks/ technopolis (biotech, IT) Large industrial complex (Norwegian oil and gas related industry) Bjørn Asheim, 2009

Modes of innovation and knowledge bases Lundvall argues that the STI mode of innovation could be associated with the analytical knowledge base, while The DUI mode of innovation could be related to the synthetic (and symbolic) knowledge base(s) However, is this dichotomisation to simplistic? Bjørn Asheim, 2009

Modes of innovation and knowledge bases The STI mode of innovation does not only represent basic research based on analytical (scientific) knowledge but also Applied research based on synthetic, engineering (and symbolic) knowledge base(s) as is carried out at technical universities. Engineering firms needs to do systematic knowledge creation and innovation in collaboration with universities and R&D institutes (technological development), and cannot only rely on interactive learning in user-producer relationships with customers and suppliers as part of the DUI mode of innovation (application development) Bjørn Asheim, 2009

Different forms of learning (DUI mode of innovation) Also the DUI mode of innovation is broader than normally understood as learning can be divided into: Developmental (creative) learning – the ’logic’ of knowledge exploration – learning work organisation Reproductive (adaptive) learning – the ’logic’ of knowledge exploitation DUI mode also found in analytical knowledge based industries (e.g. Biotech) making use of synthetic knowledge and interactive learning in specific phases of their innovation processes Bjørn Asheim, 2009

The combination of STI and DUI modes of innovation Research has shown that a combination of the two modes of innovation improve the performance of firms (Berg Jensen et al. 2007) Research has also shown that broad sourcing for knowledge for innovation (i.e. not only collaborating with R&D institutions or basing innovation only on experience based knowledge) makes firms more innovative (Laursen and Salter, 2006) Bjørn Asheim, 2009

The combination of STI and DUI modes of innovation Cognitive distance has to be reduced and absorptive capacity increased to achieve such a combination The STI mode including synthetic and symbolic knowledge bases as well as the DUI mode also present in the STI mode represent bridging mechanism reducing the cognitive distance Internal competence building through developmental learning in learning work organisations and organisational changes increase absorptive capacity Needs both narrow and broad RIS to be implemented Bjørn Asheim, 2009

What can be achieved at the regional level – the role of RIS narrowly defined Competitive research and innovation environments can only be established in a limited number of regions Such regions must have strong research universities, competitive industries and proactive regional governments building RIS These regions will be able to serve R&D intensive domestic industry as well as to attract R&D units from MNCs Bjørn Asheim, 2009

What about the ordinary industries in the ordinary regions – the role of RIS broadly defined RIS have other tasks than only supporting R&D intensive industries, as regions have other types of industries that are in need of innovation support from RIS (firms based on the DUI mode of innovation) Knowledge creation and innovation in all types of industries with different knowledge bases Easier to achieve optimal combinations of science and user driven innovation (STI and DUI mode of innovations) on the regional level due to spatial and social proximity especially favouring the DUI mode of innovation (interactive learning) Bjørn Asheim, 2009

Summing up: Broad-based innovation policy User-driven innovation in addition to science and technology driven (DUI+STI) – ‘Combined and complex mode of innovation’ (Isaksen and Karlsen) Exploitation of different modes of innovation and forms of learning Knowledge creation and innovation in all types of industries with different knowledge bases Resolve the potential contradiction between competition and social and regional cohesion Bjørn Asheim, 2009