Regional differences in R&D expenditure. Implications for regional governance Nico Groenendijk CES, University of Twente, Netherlands European Week of Regions and Cities Brussels, October 10, 2006, 9.00h-11.00h

OPEN DAYS 2006, WORKSHOP 10B02 2 Outline of presentation 1.The Barcelona target (Lisbon Agenda) 2.Challenging the basic assumption: From R&D to innovation to economic growth? 3.Differences in R&D expenditure levels 4.Implications for regional governance: the concept of local-global interfaces

OPEN DAYS 2006, WORKSHOP 10B Barcelona target At least 3% GDP has to be spend on R&D (of which 2%-point should be private R&D expenditure) Primarily a EU-wide target, but re-produced at domestic level (= each MS should spend at least 3% GDP on R&D) Increasingly reproduced within MS, on regional level, but vast differences!

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5 Core issues: Does it make sense to expect each and every of the 254 regions in the EU to spend 3% on R&D? What alternatives are there for regional policy to enhance competitiveness?

OPEN DAYS 2006, WORKSHOP 10B From R&D to innovation to growth? Assumption behind Barcelona target: linear relationship between a.R&D expenditure innovation (I) b.innovation economic growth (G) Assumptions a. and b. do not hold

OPEN DAYS 2006, WORKSHOP 10B02 7 R&D is not the prime driver of regional growth 1. Hard economic factors are often more important for growth (BAK report, 2003): Macro-economic framework at large Taxation Labor market regulation Intercontinental accessibility 2. Innovation is not solely technology driven (services sector!), but depends on social, institutional and organizational abilities of a region

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OPEN DAYS 2006, WORKSHOP 10B Differences in R&D-growth elasticity: - If R&D-growth elasticity < 1, improvement of that elasticity is just as important as raising R&D expenditure -Private R&D expenditure generally has a larger elasticity than public R&D expenditure 4. Are private and public R&D substitutes or complementary?

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OPEN DAYS 2006, WORKSHOP 10B Why are there differences in R&D expenditure? Barcelona target (and its reproduction on regional level) ignores: -the investment character of R&D expenditure (clustering of R&D activities makes perfect economic sense) -the more general process of economic divergence in Europe (Blue Banana, Sunbelt)

OPEN DAYS 2006, WORKSHOP 10B Implications for regional governance Lisbon Strategy has –inadvertently- led benchmarking for best practices for the establishment of high-tech economic clusters But there are (and can be) only a handful of successful high-tech clusters Most regions in Europe are: -Traditional industrial regions -Peripheral agricultural regions

OPEN DAYS 2006, WORKSHOP 10B02 14 Regional policy should avoid the pitfalls of traditional policy aimed at restructuring: -Mixture of conflicting goals (restructuring, prestige, employment) -Inertia due to subsidy-addiction by looking for creative combinations of local traditions and global trends

OPEN DAYS 2006, WORKSHOP 10B02 15 Examples of creative local-global interfaces RegionLocal traditionGlobal trendCreative combination Jutland, DenmarkFurniture-makingQuality, lifestyleDesign furniture Nord Pas-de- Calais, France Clothes-makingConvenience shopping Internet mail order services Krakow, PolandBuilding, paintingSustainabilityRestoration services

OPEN DAYS 2006, WORKSHOP 10B02 16 Local-global interfaces: -Do not require cutting-edge technology nor do they need large R&D investments -Require organization of processes in which firms, business associations, residents and governments work together

OPEN DAYS 2006, WORKSHOP 10B02 17 Acknowledgments Slides taken from EC, DG REGIO, Regions for economic change. Innovation through EU Regional Policy (June 2006) References of underlying research available from the author upon request