Rethinking Regional Innovation and Change: Path Dependency or Regional Breakthrough?
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1 University of Manchester From the SelectedWorks of Philip Shapira 2005 Rethinking Regional Innovation and Change: Path Dependency or Regional Breakthrough? Gerhard Fuchs Philip Shapira Available at:
2 RETHINKING REGIONAL INNOVATION AND CHANGE: PATH DEPENDENCY OR REGIONAL BREAKTHROUGH
3 Economics of Science Technology and Innovation VOLUME 30 Series Editors Cristiano Antonelli University of Torino Italy Bo Carlsson Case Western Reserve University U.S.A. Editorial Board: Steven Klepper Carnegie Mellon University U.S.A. Richard Langlois University of Connecticut U.S.A. J.S. Metcalfe University of Manchester U.K. David Mowery University of California Berkeley U.S.A. Pascal Petit CEPREMAP France Luc Soete Maastricht University The Netherlands The titles published in this series are listed at the end of this volume. Economics of Science Technology and Innovation
4 RETHINKING REGIONAL INNOVATION AND CHANGE: PATH DEPENDENCY OR REGIONAL BREAKTHROUGH edited by GERHARD FUCHS and PHILIP SHAPIRA Springer
5 ebook ISBN: Print ISBN: Springer Science + Business Media, Inc. Print 2005 Springer Science + Business Media, Inc. Boston All rights reserved No part of this ebook may be reproduced or transmitted in any form or by any means, electronic, mechanical, recording, or otherwise, without written consent from the Publisher Created in the United States of America Visit Springer's ebookstore at: and the Springer Global Website Online at:
6 CONTENTS List of Figures List of Tables Contributors Preface Acknowledgments vii viii ix xi xix 1. Beyond path dependency and competitive convergence: Institutional transfer from a discourse-analytical perspective Christoph Scherrer 1 2. Tacit knowledge path dependency and local trajectories of growth Meric S. Gertler Regional transformation and regional disequilibrium: New knowledge economies and their discontents Philip Cooke Switching ties recombining teams: Avoiding lock-in through project organization? Gernot Grabher Knowledge-intensive services as a key sector for processes of regional economic innovation: Leapfrogging and path dependency Hans Joachim Kujath Entrepreneurship as a source of path dependency Udo Staber Geographical proximity and the diffusion of knowledge. The case of SME s in biotechnology Delphine Gallaud and André Torre 127
7 vi 8. Continuities ruptures and re-bundling of regional development paths: Leipzig s metamorphosis Harald Bathelt and Jeff Boggs Can less favored regions change their destiny? Lessons from Europe Lena J. Tsipouri Innovation challenges and strategies in catch-up regions Philip Shapira Path dependency in Baden-Württemberg: Lock-in or breakthrough? Gerhard Fuchs and Sandra Wassermann Rethinking regional innovation policy Ron Boschma On the role of global demand in local innovation processes Anders Malmberg and Dominic Power The regionalization of innovation policy: New options for regional change? Knut Koschatzky 291 Index 313
8 LIST OF FIGURES 8.1 Relationships between regions and technological trajectories Sequence of events leading from crisis to re-bundling Firms of Leipzig s book publishing industry 1939 Firms and institutions of Leipzig s new media industry Regional relative to U.S. per capita income BEA regions Dispersion in state per capita income in the U.S annual standard deviation State of Georgia major cities 202 Per capita income trends Georgia and other reference areas Corporate strategies and associated returns Georgia manufacturers 1999 Georgia per capita income trends Products with high technology content and Baden- Württemberg s share of world exports in this category (by sector). Elaboration of a regional innovation strategy
9 LIST OF TABLES Growth in engineering and science graduates Types of knowledge conversion within the framework of knowledge services Types of knowledge services in Berlin and Munich 2002 Spatial distribution of customers of knowledge service providers Berlin Munich Spatial distribution of knowledge sources Berlin Munich Temporary and permanent geographical proximity in technological co-operation processes The variable geometry of the European less favored regions (LFRs) The size of the informal sector selected European countries The cleaned less favored regions in descending order of GDP change and Regions that grew fast from Relative position population density and European regional support in the winning regions Levels of R&D inputs in the winning regions Institutional thickness and regional growth Summary of Georgia technology programs (2000) Georgia s economic development and technology performance Stuttgart - Mittlerer Neckar: Employment and sales turnover of the most important sub-sectors of the manufacturing sector (2000) Importance of high technology commodities in selected countries and regions (Nominal scale) New fields of activities in the region of Stuttgart Two types of evolutionary change Two ideal-types of regional innovation policy Spatial concentration of industrial R&D in selected countries
10 CONTRIBUTORS Harald Bathelt is Professor of Economic Geography in the Faculty of Geography Philipps-University of Marburg Germany. Jeff Boggs is a Doctoral Candidate in the Department of Geography University of California Los Angeles USA. Ron Boschma is an Associate Professor of Regional Economics Faculty of Geographical Sciences Utrecht University The Netherlands. Philip Cooke is Professor of Regional Development and Director of the Centre for Advanced Studies at Cardiff University United Kingdom. Gerhard Fuchs is Deputy Director of the Department of Technology Organization and Work Center for Technology Assessment Stuttgart Germany. Delphine Gallaud is a Doctoral Candidate with the Institut National de la Recherche Agronomique (INRA) and Institut de Recherche Interdisciplinaire en Socioéconomie (IRIS) Université Paris Dauphine (Paris IX) France. Meric S. Gertler is Goldring Chair in Canadian Studies and Professor Department of Geography and Program on Globalization and Regional Innovation Systems University of Toronto Canada. Gernot Grabher is Professor of Economic Geography and Head of the Research Area Socio-Economics of Space at the University of Bonn Germany. Knut Koschatzky is Head of the Department of Innovation Services and Regional Development at the Fraunhofer Institute for Systems and Innovation Research Karlsruhe Germany. Hans Joachim Kujath is Head of the Department of Regionalization and Economic Spaces at the Institute for Regional Development and Structural Planning Erkner Germany. Anders Malmberg is Professor in the Department of Social and Economic Geography Uppsala University Sweden.
11 x Dominic Power is Associate Professor in the Department of Social and Economic Geography Uppsala University Sweden. Christoph Scherrer is Professor of Global Political Economy Faculty of Social Sciences University of Kassel Germany. Philip Shapira is Professor of Public Policy at Georgia Institute of Technology Atlanta USA. Udo Staber is Professor of Organizational Studies and Chair of the International Management Area at the Stuttgart Institute of Management and Technology Germany. André Torre is Professor of Economics and Research Director at the Institut National de la Recherche Agronomique (INRA) Paris France. Lena J. Tsipouri is Associate Professor in the Department of Economic Sciences University of Athens Greece. Sandra Wassermann is an Assistant Professor in the Department of Political Science at the University of Stuttgart Germany.
12 Preface RETHINKING REGIONAL INNOVATION AND CHANGE: PATH DEPENDENCY OR REGIONAL BREAKTHROUGH? Gerhard Fuchs and Philip Shapira The extent to which regions can diverge from established paths of economic development continues to be a matter for heated debate. There are potent arguments that any new constitution of regional economies is determined to a considerable degree by institutional and industrial structures that have emerged in the course of regional industrialization history often spanning hundreds of years. Such structural lineage is often considered to hinder the adjustment to new challenges. The increasing globalization of national and regional economies the rise of supra-national economic blocs ongoing developments in technology and new organizational strategies are among the elements that individually and collectively add new spins to this path dependency debate. Simultaneously these challenges bring along new possibilities of innovation transfer and the adaptation of knowledge. New technologies offer new perspectives and institutional structures learning systems and policy mechanisms might serve as change factors that promise fresh opportunities for regions to pursue new development trajectories. This encourages the intrinsic optimism of many policy makers and local and regional economic developers for regions especially those that are currently less favored to depart from established development paths and to generate higher levels of value-added activity. At the same time change may expose limits to adaptation within regions presenting challenges of industrial restructuring regional crisis continued regional lag or the inability to capitalize on apparent new opportunities caused at least in part by deep-rooted economic social or political traditions that constrain adjustment and development. The contribution of a volume such as this is to reconsider and advance theories and practices in understanding regional innovation and change in developed societies. We seek to cast light both on the importance of economic-structural and institutional path dependencies as well as on the conditions under which divergence from a path dependent development is viable. In so doing we hope to advance both intellectual debate and policy thinking. Concepts of path dependency and their relationships to structural processes of change at the regional level will be explored and complemented by regional
13 xii Gerhard Fuchs and Philip Shapira case studies from various countries providing important implications for policy and practice. The joint starting points are considerations on how to frame and understand contemporary regional development. All contributions probe the assumption that there are both technological (cf. Dosi 1982) and regional trajectories. Technological knowledge is not only organized in largescale technical systems (Hughes 1987) in branches or in professions but frequently also in regional economic areas where it is embedded in a broad institutional and cultural context. Knowledge incorporated in regional production clusters cooperative relations institutions and policy patterns does not usually develop in great leaps and bounds but incrementally in a mostly evolutionary manner. However prior to discussing the application of path dependency ideas to these processes of regional development it is instructive if not essential to begin by exploring the concept of path dependency and how it developed. Thus in the opening contribution to this volume (chapter 1) Christoph Scherrer provides us with an introduction to the theoretical background of path dependency emphasizing the influence of historical institutionalism. Scherrer further conceptualizes and explores a range of possible trajectories between institutional lock-in and institutional breakthrough. Given today s global economic conditions and frequently expressed notion of knowledge society the development and institutionalization of collaborative mechanisms of learning is assuming increasing importance elevating the importance and role of collective levels of reflection. Along this line of thought the book seeks to expose typological classifications concerning preconditions and different courses that processes of learning follow at the regional level. Several contributors to this volume explore how regions can be differentiated with regard to their industrial development paths and their present problems as concrete expressions of regional learning curves and learning requirements. It has been observed that technological capabilities... reflect local regional and national contexts and environments (Storper 1995: 897). However while we assume that technical knowledge and technological learning are influenced by context and region this still raises issues about the extent to which learning processes track a path dependent course and if so exactly how that learning path correlates with and is bounded by the development paths of technologies and regions. Meric Gertler (chapter 2) examines the notion and concept of tacit knowledge and relates this to the question of whether tacit knowledge can be learned. The chapter points out the limits of reflection: according to Gertler s arguments actors are not aware of their knowledge since tacit knowledge cannot be separated from its institutional and cultural context. In this perspective knowledge cannot be transferred from one region to another and it is therefore impossible for policy makers to implement regional learning by referring
14 PREFACE xiii to more successful comparable regions. However this argument is challenged by Philip Cooke s analysis of regional transformation (chapter 3). Cooke highlights both the necessity and the opportunity for integrating innovation and learning in regional systems. In so doing Cooke observes that best practice can be transferred to catch-up regions and thus will generate new opportunities for development. It is apparent that regionally-developed assets that may be embedded in densely woven networks of interactive and exchange relationships must be comprehended as the precondition for understanding regional problems and regional capacities for taking action. This would seem to be one best practice that is transferable. However to what extent does this observation imply that the future development of every region is pre-structured by the technological economical cultural political and social history that underpins its current array of assets? Based on the assumption that pre-structuring is not complete several authors explore the dimensions of the space for the policyinduced reorganization and development of regional technological capabilities. As mentioned above Cooke sees considerable capacities for regional actors initiating economic development. Similarly Ron Boschma (chapter 12) and Knut Koschatzky (chapter 14) focus on the roles that regional innovation policy can play in transforming regional structures and innovation capacities. Boschma distinguishes between localized and structural change arguing that different policies are needed to address these varied conditions. According to his typology localized change requires an evolutionary type of policy whereas structural change asks for revolutionary policy methods. In the first case policy makers are charged with reducing the risk of following regional paths that lead to lock-in situations. Whereas in the second case there is the demand for policy makers to actively stimulate diversity and increase returns. Koschatzky s contribution explores how innovation policy actors at different levels have transformed their objectives throughout the 1990s as a reflection of academic research. He observes that studies and concepts of regional innovation have had decisive effects on policy practice causing the convergence of European federal and state policies into regional innovation policies. Yet new research suggests that some premises of these concepts should be rethought as they may be misleading or at least less crucial than implicitly assumed. According to Anders Malmberg and Dominic Power (chapter 13) there are weaknesses in the geographical theories of the rediscovered economist Alfred Marshall and his present-day adherents that proximity is a precondition for innovation. Instead Malmberg and Powers argue that the economic structures and networks that develop at regional levels do so for other reasons and may not be precursors or promoters of innovation. The authors provide an alternative demand-driven explanation for innovation
15 xiv Gerhard Fuchs and Philip Shapira and point out that in the course of the globalizing economy additional extraregional and international contacts and networks are crucial for regional innovation systems to secure their innovation capabilities as nowadays firms have to respond to global demand. Delphine Gallaud and André Torre (chapter 7) reinforce this critique of current regional development concepts. Like Malmberg and Power they also question frequently stated ideas about the relationship between geographical proximity and regional innovation and cooperation. According to Gallaud and Torre geographical proximity only influences the innovative performance of firms if there is effective interaction between the agents. They argue that the key element in the transmission of knowledge is the characteristics of a firm s organization rather than its geographic closeness to other enterprises. One means of increasing regional innovative capacity is by strengthening re-orientating or creating institutions fostering in effect what Ash Amin and Nigel Thrift (1994) have termed institutional thickness. They remind us that this concept has multiple implications. First the staying power of institutions is of considerable significance in regional development. Second the local construction and enrichment of a reservoir of shared knowledge is a notable element of regional dynamics. Third the capacity for learning and change is inherent to institutional flexibility within regions. Fourth the innovative capacity of companies is viewed as a shared characteristic of a given region. Fifth regional interactions are firmly based on trust and reciprocity. Finally regions give rise to a consolidated feeling of belonging among their inhabitants reinforcing regional social capital. For Amin and Thrift regional trajectories are secured partly by established economic structures and production clusters and partly by regional institutions. Particularly in innovation research which tends to concentrate on industrial and technological changes the importance of the region as a collective sphere of economic activities institutional and social relationships and political negotiations cannot be underestimated. This line of argument suggests that economic position of a region within the context of global competition is partly the result of path-dependent developments but is also influenced by current institutionally-anchored governance structures that influence the regional innovation capacity. The institutions of the regional innovation system not only serve as a resource for firms to draw on (technological know-how qualified workforce cooperative labor relations etc.) but also fulfill important orientation and governance functions for regional actors in industry science and politics. As institutional thickness increases and gives rise to institutional inertia the industrial development paths of a region also become institutionally stabilized; technological path dependencies are thus accompanied by institutional ones. Given this we have to explore how to deal with the challenges involved in reforming and
16 PREFACE xv developing regions and their industrial innovation learning and institutional systems. The concept of institutional thickness and its relationship to path dependency is empirically tested by Hans Joachim Kujath s study of the newly developed knowledge economies of the cities of Munich and Berlin (chapter 5). While economic restructuring in Munich still can be interpreted in the context of old economic structures and paths the recent development of the knowledge economy in Berlin is quite different. Following German reunification in 1990 Berlin had to overcome its largely de-industrialized starting point and an outmoded institutional and structural context. Kujath views the case of Berlin as an example of regional breakthrough. This study can be contrasted to Lena Tsipouri s research on European less favored regions (chapter 9). According to the concept of institutional thickness lagging regions that have not yet developed deeply woven institutional structures should have a greater chance of development success since it is easier for them to adapt to new challenges. However in a comparison of traditionally lagging European regions Tsipouri notes that Ireland has experienced more recent success than seen in Greece or Portugal attributing this at least in part to historically-developed educational structures that have enabled Ireland to develop a knowledge-based economy. However it often proves difficult to develop a new regional identity and to generate synergy effects between institutional and technological development paths. This is the task facing especially those regions which have been very successful up to now and which have achieved a high level of technological competence in the so-called mature industrial sectors. For these regions the hitherto established institutions and the institutional thickness thus achieved can even become a problem in themselves since training research and funding facilities tend to stabilize the traditional patterns of industrial development. Against a background of intensified global competition this problem of institutional inertia and restrictions deserves special attention. Research findings reveal interrelationships between technical and industrial development paths and regional institutions. This means that technical innovations usually need to be accompanied by institutional innovations. In some cases institutional innovations such as initiatives for establishing and facilitating regional innovation networks may be necessary preconditions for further technical innovations. Within the context of globalization national and regional actors in industry and politics are faced with the challenge of constantly reappraising the functional and operational principles of regional innovation systems and if necessary devising strategies for reforming the institutional and industrial order (cf. Cooke 1998; Drache 1996). Several chapters in the volume focus on the role economic actors play in restructuring regional paths. Gernot Grabher building on his earlier works on
17 xvi Gerhard Fuchs and Philip Shapira regional lock-in explores project ecologies as a strategy of economic actors in order to provide flexible economic structures (chapter 4). Similarly in their study of Baden-Württemberg in southwest Germany Gerhard Fuchs and Sandra Wassermann point out that dominant economic actors are capable of creating guiding models and thus are actively involved in shaping new paths of development (chapter 11). However this argument takes a further twist in the chapter by Udo Staber where he observes that entrepreneurs can and do contribute to regional lock-in (chapter 6). Staber argues that entrepreneurs only rarely leave established paths and in so doing limit the selfdevelopment of innovative structures. According to Staber entrepreneurial activities thus have to be accompanied by efforts from political actors to ensure an adequate institutional framework is available to foster innovation and flexibility. Harald Bathelt and Jeff Boggs offer a structural approach to regional path dependency rejecting the assumption that regional trajectories are to be considered as homogeneous paths (chapter 8). Instead in their view regional development paths consist of bundles of technological trajectories some dominant some operating on the region s periphery. Sectoral or technological crisis as well as political ruptures may induce regional actors to re-bundle local capital and thus enable the occurrence of a regional breakthrough. Philip Shapira (chapter 10) further takes up the challenge of interpreting and attributing diverse development trends in his assessment of innovation challenges and strategies in catch-up regions. Drawing on the experience of the state of Georgia in the southeastern United States Shapira finds that policy structures and local economic development organizations in some locations can evolve and become more innovative but in other areas these institutions are not only well established but also locked-in to traditional strategies. This reinforces regional development inequities even within a single state. At the same time Shapira notes the role that leadership institutional development and sustained new policies can play in explaining how some previously noninnovative places have broken through. Despite their differences according to the focus (structure-actor; role of economy; role of policy) all concepts and studies collected in this volume have in common the assumption that reflexive practice at the regional level is a crucial tool in (re)orientating regional development. Drawing on empirical information and theoretical interpretations we suggest that there is an axis of regional development along which regional pre-structuring plays out in diverse ways. At one pole we observe regions where new industries economic activities and organizations emerge in successive if not organic ways due to the existence of strong predecessor industries and institutions. These predecessor structures may through spinout and knowledge transfer be influential in creating the supply base for new activities or as they evolve may generate
18 PREFACE xvii demand for new activities. Within this logic the pre-existing industrial and institutional structure in a given region is of crucial importance. As this structure usually develops over long periods of time a strong element of pathdependency comes in to play here. There is also a second pole on the axis of regional development where agency assumes a crucial role over structure. In such circumstances regional development strategies institutional initiatives and other policies seek to promote new economic activities. The desired form of these activities may vary although often policy makers have the final goal of creating a selfsustaining innovative regional industrial cluster. Again policy support may address both supply and demand sides (Eisinger 1988). This second logic is a counter-argument to pure path-dependency: even if the past development and the present economic structure of a given region have created unfavorable preconditions efforts to realize a reorientation may be successful. In practice we recognize that most regions are positioned somewhat between these two poles. Moreover as regions placed more towards the second pole seek to move towards the first those placed towards the first pole frequently recognize that specific kinds of agency interventions are necessary for example to remove bottlenecks on growth or to sustain opportunities for new technology development (see Braczyk Fuchs and Wolf 1999). Recognizing that each region is different we suggest that these complexities of position and change call for a reflexive policy practices (see Schon 1983; Benz et. al. 1998) through which policy action while informed by wider theory and practice is grounded in (yet in many cases must also challenge) the distinctiveness of regional conditions. Several of the chapters of this volume feature strong cases where such policy practice has led to desired results with the lesson being not necessarily that other regions should pursue the same policy mechanisms but that regions require and should develop customized policies that reflect their own conditions and opportunities for development. REFERENCES Amin A. Thrift N. Globalization Institutions and Regional Development in Europe. Oxford: Oxford University Press Benz A. Fürst D. Kilper H. Rehfeld D. Regionalisierung. Theorie Praxis Perspektiven. Opladen: Leske Braczyk H.-J. Fuchs G. Wolf H.-G. Multimedia and Regional Economic Restructuring. London: Routledge 1999.
19 xviii Gerhard Fuchs and Philip Shapira Cooke P. Introduction: Origins of the Concept. In Regional Innovation System H-J Braczyk P. Cooke and M. Heidenreich eds. London: UCL Press 1998: Dosi G. Technological Paradigms and Technological Trajectories: A Suggested Interpretation of the Determinants and Directions of Technological Change. Research Policy 1982; 11: Drache D. Governance and Public Policy in a Global Economy. A Report on Jobs and Investment Strategies in Canada. Toronto Canada: York University (unpublished) Eisinger P.K. The Rise of the Entrepreneurial State. Madison: University of Wisconsin Press Hughes T.P. The Evolution of Large Technical Systems. In The Social Construction of Technological Systems W.E. Bijker ed. Cambridge MA: MIT Press 1987: Schon D.A. The Reflective Practitioner: How Professionals Think in Action. New York: Basic Books Storper M. Regional Technology Coalitions: an Essential Dimension of National Technology Policy. Research Policy 1995; 24:
20 Acknowledgments The editors wish to thank the Center for Technology Assessment in Stuttgart Germany for providing financial assistance to support the workshop on which this book is based as well for the preparation of the book itself. At the Center for Technology Assessment Sandra Wassermann helped greatly in organizing the initial workshop and in the first initial preparatory steps for publication of this book. Andreas Koch provided additional assistance in preparing the book. Acknowledgements are also due to Monika Baumunk for reading the whole manuscript and correcting typing errors and to Lina Salkauskyte for collating checking and initial indexing of the manuscript and communicating with the authors. At Georgia Tech in Atlanta the editors appreciate the help of Jue Wang in further checking editing and final indexing.
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