Innovation in small and medium-sized centres and rural areas: what potential for stronger linkages with the centres? Sara Davies Open Innovation Forum, Kouvola, August 2010 Research funded by the UK Innovation Centre (BIS, ESRC, NESTA and TSB)

Sara Davies, European Policies Research Centre, University of Strathclyde 2 Outline Traditional views of linkages and innovation Changing context for linkages and innovation Challenges for rural areas Kinds of innovation seen in rural areas Urban-rural innovation linkages Policy support for urban-rural linkages Policy challenges

Sara Davies, European Policies Research Centre, University of Strathclyde 3 Traditional views of linkages and innovation Linkages in agglomerations promote innovation: –Knowledge spillovers, labour pooling and input-output links -> increasing returns for firms in large markets (Marshall) –As fixed costs fall, other areas with good linkages enjoy spread effects (Myrdal) –Regional networks and institutions support innovation (Aydalot, Storper) Linkages promote innovation by: –Facilitating access to multiple sources of information –Allowing more intense interaction –Challenging existing ways of doing and thinking –Increasing scope for specialisation

Sara Davies, European Policies Research Centre, University of Strathclyde 4 Changing context for linkages and innovation ICT increases scope for linkages across distance –More and stronger interactions between people –Distance working (and specialisation) –Firms can supply more distant markets –More challenges to existing ways of thinking/doing Lower barriers to international trade & capital flows –Increased international interactions between/within firms –Concentration of some activities (economies of scale) –More geographically integrated production relations Focus on openness (Chesbrough; cf. Granovetter; Grabher) –Facilitates cooperation between different people –Allows information from different sources to be combined

Sara Davies, European Policies Research Centre, University of Strathclyde 5 Challenges for small and medium centres and rural areas ICT and changes in economic integration -> –New opportunities (eg. attraction of new firms) –New challenges (eg. increased competition) Sparse local population means: –Limits on linkages within the area –Fewer linkages to external sources of knowledge –Greater need for openness Ongoing relations of dependence –Business and policy decisions are often taken elsewhere and in the interests of people located elsewhere –(Human, natural…) resources often flow out of the region –Firms are often price-takers not price-setters

Sara Davies, European Policies Research Centre, University of Strathclyde 6 Kinds of innovation in rural areas: Definitions International differences in definitions of ‘rural areas’ –National and regional population density –Level of demographic & economic concentration –Number, size and functions of regional centres –Income and employment levels Differences in definitions of innovation –R&D innovation is usually weaker in rural areas –Less clear for broader categories of innovation

Sara Davies, European Policies Research Centre, University of Strathclyde 7 Patent applications/mn pop, 2007, National & 2 rural regions (Source: Eurostat)

Sara Davies, European Policies Research Centre, University of Strathclyde 8 R&D spend as % of GDP, 2007, National & 2 rural regions (Note: France & Italy data are for Source: Eurostat)

Sara Davies, European Policies Research Centre, University of Strathclyde 9 Business R&D spend as % of GDP, 2007, National & 2 rural regions (Note: Germany & Italy data are for 2005, France for Source: Eurostat)

Sara Davies, European Policies Research Centre, University of Strathclyde 10 EU innovation policies and urban-rural linkages Framework Programme 7 –Mainly focused on EU R&D excellence –Some support for regional clusters and Convergence regions Competitiveness & Innovation Programme –May support urban-rural linkages e.g. innovation service centres, transnational networking, use of ICT services Cohesion policy / Structural Funds –Some programmes support infrastructure, SME advice etc –National programmes mainly support national development –Most regional programmes do not directly target urban- rural linkages –Regional programmes may constrain interregional openness –Division of tasks between ERDF/ESF and EAFRD

Sara Davies, European Policies Research Centre, University of Strathclyde 11 National/regional policies for urban-rural linkages Not usually an explicit goal of national/ regional innovation policies –National/regional strengths –National/regional capacities –International networking Often institutionalised divides –Between national innovation policy and regional policies –Between urban and rural policies –Between different regional programmes But in practice there are policies that help to build urban-rural linkages for innovation

Sara Davies, European Policies Research Centre, University of Strathclyde 12 National/regional policies: Basic conditions for openness Investment in infrastructure –Interregional transport networks & services –ICT networks, broadband availability & quality Encouraging openness to new ideas from elsewhere –Schools, universities, foreign languages –International events in small/medium centres Ensuring good institutions in order to promote trust and low corruption

Sara Davies, European Policies Research Centre, University of Strathclyde 13 Business use of broadband, 2009 (Source: OECD)

Sara Davies, European Policies Research Centre, University of Strathclyde 14 Households with broadband, 2009 National & 2 rural regions (Note: UK data are for 2008; Source: Eurostat)

Sara Davies, European Policies Research Centre, University of Strathclyde 15 Openness to foreign ideas (Source: NESTA, 2009: IMD WCY Survey)

Sara Davies, European Policies Research Centre, University of Strathclyde 16 National/regional policies : Forums for interregional interaction Interregional business forums (eg. Germany) Hub-and-spoke cooperation for innovation (eg. some of Norway’s Arena projects) Formal urban-rural institutions (eg. multi- site University of Cumbria in UK) Interregional linkages between local networks –Policy-makers (eg. ÖROK in Austria) –Funders (e.g. business angels in UK)

Sara Davies, European Policies Research Centre, University of Strathclyde 17 National/regional policies : Direct brokerage Local offices help innovative firms find –Customers (eg. Innovation Norway) –Funding (eg. Sweden’s Norrlandsfonden) –Help with new ideas/products (eg. Germany) –Information (eg. Austria’s Regional Managements) Local/regional offices intervene actively –Package and market the natural & human resources of rural areas to customers in the centres (e.g. Scotland-UK)

Sara Davies, European Policies Research Centre, University of Strathclyde 18 National/regional policies: Build rural capacity to link with urban areas Enhance key organisations e.g. universities & colleges (eg. VINN Excellence Centres in Sweden) Promote local networking between businesses and researchers (eg. Finland’s Regional Centres programme) Reduce the outflow of human resources (via higher education and graduate placement schemes) Attract leading firms (via aid, infrastructure and advisory packages)

Sara Davies, European Policies Research Centre, University of Strathclyde 19 Policy challenges Draw on best practice to support urban-rural linkages in the national/regional context –Basic conditions for openness –Forums for urban-rural interaction –Direct brokerage of linkages –Rural capacities to interact Overcome institutional obstacles to urban-rural interaction –Between EU policies –Between national policies –Between regional programmes

Sara Davies, European Policies Research Centre, University of Strathclyde 20 Thank you for listening!