The Challenge and the Opportunity of Smart Specialisation: a chance for Europe Dr Dimitri CORPAKIS Head of Unit, Spreading Excellence and Widening Participation Connecting Research and Innovation to Regional and Urban policies Directorate for the Innovation Union and the ERA DG Research and Innovation European Commission Vilnius,

Policy Research and Innovation Research and Innovation Setting the scene  The knowledge economy is here – with a price  Globalisation has pushed the boundaries and has changed traditional ways for dealing with regional development  Global value chains have redrawn the map of conceiving and producing products and services  Countries / regions that are not able to adapt will see their economies being marginalised  Global positioning necessary  Need for a new growth proposition based on knowledge assets 2

Declining EU share of knowledge production Evolution of World R&D expenditure in real terms, PPS€ at 2000 prices and exchange rates, EU-27 US Japan Rest of the World PPS€2000 (billions) Stagnating business R&D Average annual growth as % of GDP, EU-27, US, Japan, South Korea & China, Globalisation of knowledge EC SECURITY ACCESS REQUEST - DAA. USA

Globalisation of knowledge: the European response  Develop world-class excellence  Attract investment through better support and framework conditions  Establish strategic cooperation with world partners

Economic and financial crisis EU lost six million jobs, €1000 Bn annual GDP due to crisis  Invest in future growth EU target of 3% of GDP for R&D in 2020 could create a net 3.7 million jobs and close to €800 Bn annual GDP by 2025  Make the most of available resources through leverage effects, integration and cooperation

Societal challenges Climate change Health and ageing Use of natural resources Energy security Clean transport Land use Powerful drivers of change in economy and society Major global market opportunities Requiring EU-scale approaches From research to market New needs  new ideas  new markets

Policy Research and Innovation Research and Innovation The EU Innovation Champions’ League (2015) 7

Policy Research and Innovation Research and Innovation

How European regions invest in R&D  Out of a total of 266 regions in the EU, only 35 had in 2009 an R&D intensity (R&D investment as a % of their GDP) above 3%  Taken together these 35 regions accounted for 45% of all R&D expenditure in the EU  10 of the most R&D intensive regions in 2009 were located in the Nordic member States, totalising 9,3% of total R&D expenditure in the EU (source EUROSTAT regional yearbook 2012)  Out of a total of 266 regions in the EU, only 35 had in 2009 an R&D intensity (R&D investment as a % of their GDP) above 3%  Taken together these 35 regions accounted for 45% of all R&D expenditure in the EU  10 of the most R&D intensive regions in 2009 were located in the Nordic member States, totalising 9,3% of total R&D expenditure in the EU (source EUROSTAT regional yearbook 2012) EC DG RTD.B.5 DC

Europe’s innovation divide undermines competitiveness  Large parts of the EU out of ‘sync’  Modest and Moderate Innovators holding back the EU as a whole  Grand policy designs at risk without a sound and functioning base  Identification of priorities and strategies of crucial importance – yet still, among the major bottlenecks EC DG RTD.B.5 DC11

Innovation Union flagship initiative aimed at creating the best conditions for Europe's researchers and entrepreneurs to innovate A broader approach to innovation: meshing research and technological development with -Product innovation, service innovation, innovation in design etc., including process and organisational innovation -Social innovation, public sector innovation, eco-innovation etc. -Exploration of new business models > Both technological & non-technological > Both incremental & disruptive innovation  Improving framework conditions for innovation to flourish  34 commitments: Speeding up standardisation, Making better use of and 'modernising' public procurement procedures, Creating a real internal market for venture capital, Agreeing on a unified European patent, Completing the European Research Area (ERA) Innovation Union flagship initiative aimed at creating the best conditions for Europe's researchers and entrepreneurs to innovate A broader approach to innovation: meshing research and technological development with -Product innovation, service innovation, innovation in design etc., including process and organisational innovation -Social innovation, public sector innovation, eco-innovation etc. -Exploration of new business models > Both technological & non-technological > Both incremental & disruptive innovation  Improving framework conditions for innovation to flourish  34 commitments: Speeding up standardisation, Making better use of and 'modernising' public procurement procedures, Creating a real internal market for venture capital, Agreeing on a unified European patent, Completing the European Research Area (ERA) We had a dream: turning the European Union into an Innovation Union

Policy Research and Innovation Research and Innovation The Promise of Smart Specialisation

The Policy Context for Smart Specialisation Courtesy Raquel Ortega-Argilés (2012)

Smart Specialisation: the Policy Context (II) Courtesy Raquel Ortega-Argilés (2012)

An era of change: the advent of General Purpose Technologies (GPT/ICT) Courtesy Raquel Ortega-Argilés (2012)

Policy Research and Innovation Research and Innovation A backgrounder on Smart Specialisation (I)  The concept of smart specialisation traces its origins back to the debate on the transatlantic productivity gap. Initially conceived by Dominique Foray and Bart van Ark, and later given additional impetus by other co -authors Paul David, Bronwyn Hall and by other members of the “Knowledge for Growth” expert group (2009).  Transatlantic differences in R&D intensity used to explain differences in growth terms between USA and Europe reflected also on differences in the way new technologies diffuse in the broader economy, with a special emphasis on ICT. That was thought to explain largely the productivity differences observed.

Policy Research and Innovation Research and Innovation A backgrounder on Smart Specialisation (II)  Concept of smart specialisation central to economic development and growth policy  A central pillar of the Europe 2020 Strategy (see also Flagship Initiative Innovation Union [COM(2010)546] and the EU Budget Review [COM(2010)700]  A central element in the development of a reformed European Cohesion Policy, which is based on the principles of ‘smart’, ‘green’, and ‘inclusive growth’.  Regions / MS are required to identify the sectors, technological domains, where they would seem to have competitive advantage,  and then to focus their regional development policies so as to promote innovation, based in these fields. This development would then be rooted on knowledge assets.

D.Foray, P.A. David and B.Hall : Smart Specialisation: the Concept Knowledge for Growth expert group for the EC

Policy Research and Innovation Research and Innovation A simple idea (KfG brief no 9, 2009)   “It should be understood at the outset that the idea of smart specialisation does not call for imposing specialisation through some form of top-down industrial policy that is directed in accord with a pre-conceived “grand plan”. Nor should the search for smart specialisation involve a foresight exercise, ordered from a consulting firm.   We are suggesting an entrepreneurial process of discovery that can reveal what a country or region does best in terms of science and technology. That is, we are suggesting a learning process to discover the research and innovation domains in which a region can hope to excel. In this learning process, entrepreneurial actors are likely to play leading roles in discovering promising areas of future specialisation, not least because the needed adaptations to local skills, materials, environmental conditions, and market access conditions are unlikely to be able to draw on codified, publicly shared knowledge, and instead will entail gathering localized information and the formation of social capital assets.”

Courtesy Raquel Ortega-Argilés (2012)

Policy Research and Innovation Research and Innovation Smart Specialisation is not what you usually think it is Smart Specialisation is not what you usually think it is It is not about pure specialisation – since this involves huge risks about potential lock-insIt is not about pure specialisation – since this involves huge risks about potential lock-ins It is not about selecting and favouring only a few sectors – but this might be an intermediate stageIt is not about selecting and favouring only a few sectors – but this might be an intermediate stage It is rather about identifying the new opportunities that often emerge at the intersection of existing sectors and technologies – the target of the "entrepreneurial discovery process"It is rather about identifying the new opportunities that often emerge at the intersection of existing sectors and technologies – the target of the "entrepreneurial discovery process"

Policy Research and Innovation Research and Innovation Key points on Smart Specialisation: Stimulate innovation through entrepreneurship, modernisation, adaptation Dare to introduce innovative governance solutions Think about strategic technological diversification on areas of relative strength and potential Increase diversification – promote new linkages, synergies and spillovers Adapted from Philip McCann (2012)

Policy Research and Innovation Research and Innovation Step 1: Analysis of regional potential for innovation-driven differentiation Step 2: RIS 3 design and governance – ensuring participation & ownership Step 3: Elaboration of an overall vision for the future of the region Step 4: Selection of priorities for RIS3 + definition of objectives Step 5: Definition of coherent policy mix, roadmaps and action plan Step 6: Integration of monitoring and evaluation mechanisms Steps to RIS3 (6) Monitoring (5) Policy mix (4) Priorities (3) Vision (2) Process (1) Analysis RIS 3 Strategy

RIS3 assessment

Policy Research and Innovation Research and Innovation Horizontal issues and policy delivery instruments for RIS³  Green Growth: only sustainable is smart – Eco-innovation & Energy efficiency  Digital agenda: enabling knowledge flows throughout the territory –connected regions  Clusters for regional growth: business ecologies that drive innovation  Innovation-friendly business environments for SMEs: good jobs in internationally competitive firms  Social Innovation: new organisational forms to tackle societal challenges  Stronger focus on financial engineering: not only grants  Lifelong Learning in research and innovation: support knowledge triangle (KICs) and university-enterprise cooperation  Key Enabling Technologies: systemic potential to induce structural change  Research infrastructure/centres of competence: support to ESFRI and EU wide diffusion of leading edge R&D results  Creativity and cultural industries: innovation beyond technology and outside manufacturing  Public Procurement for market pull: pre-competitive PP to open new innovation friendly market niches

Policy Research and Innovation Research and Innovation Example: Bremerhaven (DE)  Economy based on shipbuilding & commercial fishing in strong downturn end of 1990’s  Selection of ‘offshore wind energy’ as new development: clear & integrated industrial strategy and clustering of competencies  Strong existing synergies between ‘shipyard’ & ‘offshore wind’ sectors  Now Bremerhaven = major hub of offshore wind in DE, 4 major manufacturers, already 1,000 jobs created

Regional Policy Steering Team RIS3 initiative – the driving forces 28 DG REGIO JRC-IPTSJRC-IPTS DG AGRI DG CNECT DG ENTR DG EMPL DG MARE DG EAC DG RTD European Parliament World Bank Academics Intermediary organisations & networks Intermediary organisations & networks Mirror Group Expert groups of other DGs (KETs, Cluster Alliance …)

Policy Research and Innovation Research and Innovation Smart specialisation: Commission assistance RIS3 Platform innovation/s3platform.cfmhttp://ipts.jrc.ec.europa.eu/activities/research-and- innovation/s3platform.cfm Established by the Joint Research Centre (IPTS) in Seville Facilitator in bringing together the relevant policy support activities in research, regional, enterprise, innovation, information society, education and sustainable policies. Information and communication on related funding opportunities under the relevant EU funding programmes. Direct feed-back and information to regions, Member States and its intermediate bodies. Provides methodological support, expert advice, training, information on good practice, etc. Mirror Group of International experts Outside the Platform: Commission has supported expert contracts for specific assistance to regions and Member States

Policy Research and Innovation Research and Innovation Possible implications for H2020  Possible impact on Horizon 2020 future Work Programmes in all Priorities (especially Industrial Leadership and Societal Challenges)  Feedback from National and Regional Research and Innovation Strategies for Smart Specialisation could influence areas for future Topics and vice versa  Involvement of flagship Horizon 2020 projects and stakeholders in RIS3 should not be excluded although of course not compulsory and largely unpredictable. But this depends also on policies by MS and regions involved (active involvement policies maybe supported by the Structural Funds)  RTDI projects can be simultaneously or consecutively supported by H2020 and the ESI Funds

Innovation and its bottlenecks  Designing and delivering innovation policy in a context of global uncertainty  EU policies provide a conceptual and an implementation framework  Structural deficiencies across Europe may prevent these policies to run to their full potential 31

Policy Research and Innovation Research and Innovation Major issu e s on planning ahead Structural deficiencies in the planning authorities at national and regional level Structural deficiencies in the planning authorities at national and regional level Absorptive capacity - Difficulties of small players in integrating global innovation value chains Absorptive capacity - Difficulties of small players in integrating global innovation value chains Difficult or non-existent cooperation between universities and the business communities Difficult or non-existent cooperation between universities and the business communities Spiral of marginalisation and lack of ambition Spiral of marginalisation and lack of ambition Huge gaps in research and innovation investments correlate with gaps in innovation performance Huge gaps in research and innovation investments correlate with gaps in innovation performance Commission response: emphasis on better planning tools and on institutional networking with no compromise on excellence Commission response: emphasis on better planning tools and on institutional networking with no compromise on excellence 32

Policy Research and Innovation Research and Innovation Things do not happen. Things are made to happen John F. Kennedy 33

Policy Research and Innovation Research and Innovation Thank you !