Innovation in Peripheral Areas Sara Davies and Rona Michie Scottish Parliament Cross Party Rural Policy Group, 26 January 2011 UK Innovation Centre (BIS, ESRC, NESTA and TSB)

Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde 2 Ongoing debates Innovation is seen to be fuelled by the concentration of people - sharing ideas, knowledge and skills – so in cities not peripheral areas? Is co-location enough? Do cluster policies work? Does ICT end the benefits of F2F? Does it generate new kinds of proximity? Other challenges for businesses in peripheral areas – cost of reaching suppliers & customers – small labour pool

Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde 3 Few exceptional places with leading firms in global markets (e.g. Finland, Norway) – long-term policy R&D-driven innovation based on immobile natural resources (e.g. sea, cold) – external expertise Solutions to local problems (e.g. tele-medicine, social enterprise) - potential wider application Image-based innovation (e.g. food, tourism) – selling to large external markets – role of ICT New ways of working (e.g. business/knowledge services) - serving large external markets – ICT Innovation in the periphery differs because sectors differ

Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde 4 Innovation in the periphery differs because the context differs (Source: Miles et al., 2009) Entrepreneurship Skills Finance Public research Competition Demand Openness

Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde 5 Policy recommendations (1): Support existing strengths Questions over value-for-money of cluster policies – path dependence Not impossible to create world-leading innovation in the periphery but it takes long-term political commitment & funding Focus targeted support on existing strengths –Innovation linked to immobile natural resources (e.g. sea, cold, dark, space) –Innovation linked to solving local problems with a potential wider application (e.g. tele-services, social enterprise)

Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde 6 Policy recommendations (2): Build openness Core problems for peripheral areas are –Few people –Distance to other people Many weaknesses in the innovation context can be overcome via openness –Broadband (& transport) infrastructure –Human brokering E.g. Norway: external R&D and funding plus own human and natural resources

Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde 7 Openness: Broadband infrastructure Firms can find out about and access: –External finance –External research, knowledge & ideas –External customers –External competitors Significant demand in peripheral areas –Coverage and speed High priority in many small peripheral countries; also in Wales and Cornwall

Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde 8 Broadband lines per 100 inhabitants, 2009 (Source: EUROSTAT)

Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde 9 Households with broadband (%) 2008 (Source: EUROSTAT)

Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde 10 Household download speed (Mbps) (Source:

Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde 11 (a) Threshold=512Kbps (b) Threshold=1Mbps (c) Threshold=4Mbps (d) Threshold=8Mbps Areas with download speed lower than the threshold indicated (Source: Bernardi & Marina, 2010)

Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde 12 Openness: Human brokering to external excellence To access private finance outside the region –Not a major focus –Regional venture capital (e.g. Sweden’s Norrland Fund) may increase capacity to broker to external funders To work with excellent researchers in UK / internationally –E.g. Tekes (Finland) helps firms access universities and research centres abroad To find out about world class competitors in UK / world –E.g. 15 ELY centres (Finland) help firms to find information on competitors abroad via searches, seminars, funding for trade fairs To engage with leading users and customers –E.g. 20 Innovation Norway offices help innovative SMEs find customers and manage contracting

Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde 13 Policy recommendations (3): Develop human capital Core problems for peripheral areas = few people and distance to other people Innovation = generation, adaptation and absorption of knowledge –Often not about radical ideas but about combining and applying existing knowledge Depends on high level of skills across the whole population – so high quality education for all QoL to retain/attract people & facilitate returning

Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde 14 Highest qualifications by Scottish school-leavers, %, (Source: Scottish Government, 2010)

Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde 15 Mathematics, average score, 15 year olds (Source: PISA, 2009)

Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde 16 Reading below Level 2, % of 15 year olds (Source: PISA, 2009)

Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde 17 Education in Finland (OECD, 2010) Consistently close to top of international league tables since 2000 with small differences between top and bottom students (and schools) Gradual reform to a comprehensive (non-streamed) system from 1970s, with: –Commitment to ensuring that each child achieves, concern beyond education –Highly qualified, autonomous teachers –Systems of professional accountability –Emphasis on creativity, problem-solving, teamwork, self-direction –Modest funding focused on the classroom Difficult socio-economic context –Precarious history & difficult Cold War situation –Poorer than neighbours & banking crisis / recession in 1990s –Internal socio-cultural & political divisions

Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde 18 Innovation policy for periphery in time of fiscal constraints Key context factors for innovation in peripheral areas are openness and skills Policy recommendations –Support existing strengths (esp. where the periphery has real advantage) –Upgrade broadband coverage and speed –Build policy capacity to broker to external excellence on behalf of firms –Work to improve education standards for all

Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde 19 Thank you for listening

Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde 20 Sources & useful links Bernard G and Marina M (2010) BSense – a system for enabling automated broadband census, University of Edinburgh, Miles et al. (2009) The wider conditions for innovation in the UK, Report for NESTA, London OECD (2010) Strong performers and successful reformers in education, Paris Scottish Government (2010) SQA Attainment and school leaver qualifications in Scotland: 2008/09, Edinburgh