Smart Specialisation and Europe s Growth Agenda

Transcription

1 Smart Specialisation and Europe s Growth Agenda Matching strategies for common ambitions This report is based on a High-Level Conference that took place on 08 November 2013 at the European Parliament and Committee of the Regions, dubbed Regions as motors of new growth through smart specialisation matching strategies for common goals. It was organised jointly by the European Commission s Regional Policy Directorate-General and the Region of Flanders. All quotes in this document were delivered by high-level speakers at the conference. What is Smart Specialisation? Against the backdrop of declining competitiveness and a deep-seated economic crisis, there is a new realisation that countries in general and regions in particular need to raise their game when it comes to innovation, productivity and growth. In view of the heightened urgency, policymakers across Europe are committed to using the projected 322 billion earmarked for European Structural and Investment Funds between to maximum effect. That is why a minimum of 30% of this money, or 90 billion of the European Development Funds, is to be invested in innovation in the wider sense, i.e., for research and innovation, SME competitiveness, ICT, as well as energy efficiency and renewable energy. With the benefit of hindsight, there is a broad consensus that rather than an orchestrated, top-down strategy primarily involving public authorities, this new innovation investment agenda needs to be a bottom-up, collaborative effort of entrepreneurial discovery that builds on inherent strengths and comparative advantages that every region possesses, a process and targeted knowledgebased investment drive that Smart Specialisation makes possible. "My vision is for every euro spent in Cohesion Policy in the next seven years to be strategically targeted and results oriented. This is why Research and Innovation Strategies for Smart Specialisation are one of the main pillars of the reformed Cohesion Policy." Smart Specialisation is the right way forward. Industry has to focus on domains where they can compete on a global scale. Kris Peeters, Minister-President, Government of Flanders A Smart Specialisation strategy is a major policy process that we must take 1

2 seriously. Danuta Hübner, Chair of the Committee on Regional Development, European Parliament How does Smart Specialisation Work in Practice? While innovation tends to suggest an emphasis on new versus old, high-tech versus low- and medium-tech, startup over established family business, Smart Specialisation is more nuanced and tries to build on the inherent strengths and/or comparative advantages that every region possesses. Smart specialization strategies focus on upgrading the innovation potential and productivity performance of key sectors and on driving new research/innovation activities that can complement existing productive assets. But rather than focusing only on new activities, the key insight for Smart Specialisation is that innovation is more likely to occur at the intersection of different disciplines and sectors; that therefore cross-clusering and crossfertilisation as well as the interplay between private and public actors, including the knowledge providers (universities), is essential to any economic transformation process. Local context clearly matters for innovation policies and measures, which is why targeting funds and efforts on (a limited amount of) thematic priorities (per region) is so crucial. But having an international perspective and coordinating investment strategies and roadmaps across borders is equally important for positioning regions in new value chains and growth markets. We have to realise that the competitiveness of Europe s industry, is about more than wage and energy costs. It is about more than increasing productivity by cutting costs. It is more than ever, about innovation. Kris Peeters, Minister-President, Government of Flanders Smart Specialisation offers the possibility of a third way between oldfashioned industrial policy, trying to pick winners and support conglomerates and improving the general framework for business. Smart Specialisation is about enabling every region to be part of this game according to its opportunities. What is the Link between Smart Specialisation and Europe s Growth Agenda? Europe s ongoing economic and financial crisis has led to a whole slew of new economic governance mechanisms. This has for the most part stabilised 2

3 a very fragile and volatile situation, which at times seemed to threaten the integrity of the single currency. However, the macroeconomic situation cannot be stabilised on a sustainable basis without microeconomic reforms that have the potential to kick-start growth and employment. In other words, there is a great urgency to better connect the micro with the macro and finding ways to get the real economy growing again, which is ultimately the only way of overcoming the crisis for good. And nothing drives growth in advanced economies as much as innovation, which accounts for up to 85% of productivity increases. With most European countries undergoing a necessary process of budgetary consolidation, public investments have come under much scrutiny and doing more with less has become a new mantra for policymakers and regional authorities. It brings with it the twin challenge of seeking to target investments and focusing them on inherent (regional) strengths while also broadening the approach to incorporate many more actors, be they universities or SMEs and clusters of companies and knowledge institutes. Smart Specialisation is precisely the strategic approach to better target these efforts for driving new growth opportunities. We need innovation policies as a crisis exit strategy. Danuta Hübner, Chair of the Committee on Regional Development, European Parliament "Smart Specialisation enables a new quality of growth and this growth is transformative. And it enables every region to be part of this game according to their own capacities and opportunities. In this sense Cohesion Policy is the new Growth Policy." "It is through Smart Specialisation that regions will not only get stronger and more competitive by building on their strength and specific advantages but where they can also contribute to making Europe stronger and more competitive." Smart Specialisation is a good yardstick for identifying growth priorities. Máire Geoghegan-Quinn, European Commissioner for Research and Innovation Key Target Groups Smart Specialisation places much emphasis on the private sector and different but equally valid and mutually reinforcing pathways to economic transformation: transition from an existing sector or activity to a new one, modernisation and diversification and radical breakthrough innovation. These can be characterized as in the Smart Specialisation video by: 3

4 Sleeping giants, which are the large companies that have often failed to innovate and move up the value chain, leading to significant losses in competitiveness and global market share. Excited goblins, which are young, innovative and technology-intensive companies that are often based in high-tech clusters. They tend to be small and under-funded, have above-average innovation potential but lack scale and global reach. Hungry dwarfs, which describes low-tech SMEs that make up the vast majority of companies in Europe (over 99% of companies in Europe are classified as SMEs; of which over 90% are so-called microenterprises with less than 10 employees). These companies, which are in many ways the backbone of the economy, tend to be poor in technology adoption and innovation but nonetheless need policy attention due to their sheer volume and importance as employers. While a straight-forward innovation policy would likely exhibit a bias towards excited goblins, which by all accounts have a better performance on innovation and technology adoption, Smart Specialisation realises that the sleeping giants and hungry dwarfs also need to be addressed with targeted policies. These will help them generate more value-added, improve their competitive standing and better reap the benefits of globalisation and market integration while mobilising all relevant resources of all regions, according to their specific strengths. In addition, Smart Specialisation can and should be used to foster greater interaction between these corporate players, be they young startups, internationally operating multinationals or old-established, traditional family businesses. Again, the value of Smart Specialisation is facilitating greater collaboration, exchange and cross-fertilisation between the sectors public and private, public and public, as well as private and private along the identified strengths of the regions. To pursue an active Smart Specialisation policy, to enable firms, regions and countries to build sustainable competitive positions in world markets and to participate in the global value chains, we need to set up what I could call a collaborative model. A model bringing all stakeholders together. Herman Van Rompuy, President, European Council "Smart specialisation can [...] help innovation and competitiveness in all regions in Europe, even the least developed. Innovation is certainly not just about high-tech." Máire Geoghegan-Quinn, European Commissioner for Research and Innovation 4

5 The Importance of Public Authorities at National and Regional Level Smart Specialisation requires public authorities that are not only keenly aware of the importance of innovation but also manage to walk the talk of modernising, streamlining and improving their own processes and structures. In practical terms, it means that public authorities become catalysts for action; hubs for collaborative projects involving many diverse actors; facilitators of a journey of entrepreneurial discovery that mixes established strengths with new strategies and technologies. These enlightened public authorities don t pick winners or govern top-down but instead provide the groundwork and strategic investments for others to succeed on merit and competence. But in the end it is public-private partnerships that will make the difference, involving company clusters and education and research organisations to create unique environments for new growth opportunities. A practical concern and concrete challenge may be how to handle this increase of actors involved in cohesion policy, which arguably can have upsides and downsides. A positive element of this new, more inclusive approach is the opportunity to tap into entrepreneurial insights and experience, working with people and organisations who are much closer to the market and who ultimately generate the growth and jobs that regional authorities strive towards. However, more actors inevitably increase complexity and make hitherto linear processes more fragmented, dispersed, and difficult to maneuver. On balance also taking past experiences into consideration the benefits reaped from the inclusive approach of Smart Specialisation more than offset whatever challenges regional authorities may encounter in managing a process that involves more actors than was formerly the case. However, as previously stated, it will be important that public authorities are aware of and comfortable with and capable of this new collaborative role that they should play. Most importantly perhaps, and ultimate proof of their internalisation of this new regime, will be the alignment between the strategic objectives of Smart Specialisation and the concrete funding decisions undertaken. "My vision is for every euro spent in Cohesion Policy in the next seven years to be strategically targeted and results oriented. This is why Research and Innovation Strategies for Smart Specialisation are one of the main pillars of the reformed Cohesion Policy." One risk is that the Smart Specialisation strategy is in place and the funding is being channeled in a parallel process. This must be avoided. Danuta Hübner, Chair of the Committee on Regional Development, European Parliament 5

6 The Need for Policy Alignment and Cooperation Smart Specialisation by definition could easily lead to overlap and duplication with other EU, national and regional programmes and funds designed to support innovation, in particular with Horizon 2020, the so-called framework programme for research and innovation. Against this backdrop and given the sizable sums of money involved it will be of utmost importance to align strategies and activities targeting similar or complementary opportunity areas or fields of specialization and maximize the synergies within the countries and externally across borders with other regions and countries as well as at the European level with EU initiatives and public-private partnerships. In particular, the synergies between cohesion and research policy on the one hand and structural and research funds on the other call for maximum collaboration and mutual exchange not only between the responsible European commissioners and European Commission directorates but also at other levels. This is in many ways a prerequisite for presenting Smart Specialisation as a well-designed, holistic European strategy (rather than a fragmented, isolated DG Regio / DG Research strategy) vis-à-vis the EU member states, the regions and key third parties that are important for the wider innovation eco-system and whose ownership is critical to make Smart Specialisation a success. But the real promise of Smart Specialisation is a better alignment of strategic investment efforts among regions because of their differentiation and complementarity in feeding international value chains. The matching of strategies of regional clusters at European level will allow regions and their companies to better find their competitive spot. We are looking forward to stimulating many more strategic cooperation activities across borders. These will help to align and match strategies and actions for more coherence and synergies. The Importance of Digital Technologies and Internationalisation Digital technologies are a general-purpose technology the 21 st century equivalent to what electricity was in the 19 th century or the steam engine in the 18 th century. It is important that public authorities come to grips with these developments; that they understand that information technologies are a crosscutting, horizontal area of utmost importance to all sectors, all companies and all public authorities. That is why Smart Specialisation will place particular emphasis on technology adoption and use, considering both a prerequisite for improving innovation, productivity and ultimately growth performance. 6

7 One of the beneficial side effects of digital technologies is that it enables internationalisation at a speed and cost that was hitherto unfathomable. As internationalisation is widely considered a key driver of innovation, it presents a unique opportunity in the context of the European single market, where it is well documented that a minority of companies trade cross-border, let alone with third countries. This is a huge, under-exploited potential that can be addressed with Smart Specialisation policies which have an explicit mandate to foster greater internationalization and exchange between regions even foreseeing a facility to spend funds assigned to one region in another, provided that it facilitates knowledge sharing and delivers tangible benefits. Digital economy is part of innovation. As Smart Specialisation is: supporting strategic growth agendas; focusing on the microeconomics of competitiveness; and mobilising the innovation and entrepreneurial opportunities in each region. Herman Van Rompuy, President, European Council "Smart Specialisation strategies will also help regions to be more outward looking, to encourage internationalisation and build stronger, world-class clusters. We all know that this type of open co-operation is the life-blood of innovation and growth in our globalised economies." Smart Specialisation Platform The Smart Specialisation Platform has been developed and is managed by the Institute for Prospective Technological Studies (ITPS), one of seven research institutes managed by the Joint Research Centre (JRC) of the European Commission. In essence, this platform was set up to provide an overview of the envisaged research and innovation priorities and projects of all European regions. The underlying idea is to enable regions to exchange information, to position themselves and compare their objectives with that of their peers, as well as seek partners for collaboration. As of November 2013, the Smart Specialisation Platform has recorded the entries of over 140 regions and 13 countries, making it a rich repository of data and information. One of the key functions of the platform is that regions can solicit comments and engage in a peer review process, checking their own benchmarks and goals with others to ensure that they are sufficiently ambitious and distinctive. At a later stage, it is envisioned that the platform which is accessible to all via its website can help monitor and evaluate the various regional and national Smart Specialisation strategies. The public nature of the platform can be useful in bringing greater transparency and attention to actual performance, which might be useful in stimulating mutual 7

8 learning between public authorities to deliver what was promised in their respective Smart Specialisation strategies. To learn more about the Smart Specialisation Platform, visit Monitoring and Conditionality Smart Specialisation strategies need to set real objectives, as well as articulate indicators that are sufficiently ambitious and that can be verified. Otherwise, any monitoring effort will be meaningless and even futile. At the same time, they need to be living documents with maximum flexibility built into the various strategies to allow projects to adjust, if necessary. As any entrepreneur can verify, no business plan is ever executed in its original version, as there needs to be constant adjustment and realignment to account for changing market conditions, user sentiment, unforeseen developments, etc. It should also be noted that failure is an integral part of innovation and must therefore be an accepted element of Smart Specialisation, a strategy that is purposefully designed to be experimental, to take risks and to prod regions into new areas. Against this backdrop, it is crucial that conditionality not be used to punish regions that have failed despite making a concerted and demonstrable effort. In a policy environment that is serious about the pursuit of innovation, failure must be treated as a necessary by-product of experimentation and risk-taking as well as a necessary condition to do it better next time. In addition, Smart Specialisation needs an unequivocal understanding that it cannot pick winners and it cannot make companies and other organisations dependent on open-ended subsidies. All investments should have a clear time limit and should be seen as a catalyst to enter new areas. Any activities that do not exhibit an element of entrepreneurial discovery and a genuine pursuit of new actions should not qualify for funding. Entrepreneurial discovery, going hand in hand with the private sector, is the key word here Only through such a structured process of partnership can we create ownership and make sure our investments fall on fruitful ground. If every Smart Specialisation strategy is deemed a success, the overarching policy agenda will have failed. Ann Mettler, Executive Director, The Lisbon Council 8

9 Next Steps for Smart Specialisation Only a handful of strategies have so far been delivered, however it is expected that most regions will do so in order not to risk the delay of the start of their ERDF funding programmes. These can also be existing but revised strategies and documents that comply with the criteria laid down in the conditionality. Those who do not manage and need more time for the process have the opportunity to lay down in an 'action plan' the steps for the planned delivery of the RIS3 strategy. However, having a strategy is only the first step towards Smart Specialisation. Once the European Commission gives green light for strategy implementation, it is up to the Member States and regions to deliver on their promises as best as they can. A lot depends on how much the Member States and regions are invested in the process and how much they are willing to properly monitor and possibly review the fulfilment of their self-prescribed objectives. This is not trivial and obstacles abound. While a lot of effort will need to be spent on coordinating between various stakeholders, the ultimate onus will be on the regional authorities to translate shared goals into a limited number of targeted support measures and smart investments (instead of providing funds indifferently across the board to nonstrategic projects and initiatives) and deliver concrete, tangible results of industries that are increasing their innovation and productivity performance; of citizens that receive better, more tailor-made services or clusters that substantially improve their international exposure and commercial trackrecord. In other words, the coordination and collaboration is not an end in itself but a means to strive for better outcomes, more innovation and greater impact. It is the latter that will ultimately count and that the European Commission as well as citizens will hold public authorities accountable for. Smart Specialisation gives ownership to the regions to develop strategies for generating new specialisations and driving the wider process of structural economic transformation. Rather than providing concrete suggestions or even fully-fledged development blueprints, the European Commission takes the role of facilitator, providing guidance and mentorship, as well as a methodology to evaluate impact and success. It is important that Member States and regions know that they are not delivering their Smart Specialisation strategies for the European Commission; to the contrary, they will only compromise themselves and their future prospects if they underachieve and not seize the opportunity for structural advancement that this strategic investment can make possible. It is through Smart Specialisation that regions will not only get stronger and more competitive by building on their strength and specific advantages but where they can also contribute to making Europe stronger and more competitive." "The Commission wants national and regional authorities across Europe to 9

10 draw up research and innovation strategies for Smart Specialisation, to ensure that the EU s Structural Funds can be used more efficiently and synergies can be found between different EU, national and regional policies, as well as public and private investments." Máire Geoghegan-Quinn, European Commissioner for Research and Innovation Box 1: Flanders Spearheads Vanguard Initiative The region of Flanders teamed up with nine other regions to create a vanguard initiative on the future of industry in Europe. Pledging to use their Smart Specialisation strategies to raise competitiveness of their respective industrial sectors, these regions have committed to share information to initiative bottom-up vanguard initiatives, to develop common roadmaps and multi-level approaches to stimulate investment and enable local clusters with global potential to develop into world-class clusters. Politically, this Vanguard Initiative is designed to influence and inform the European Council in February 2014, dedicated to industrial policy, as well as explore future investment opportunities in priority areas for the future of industry in Europe. The initiative is open to all other regions that are prepared to go the extra mile to upgrade their economic performance and subject themselves to rigorous peer review and performance measurements. In the coming weeks and months, leading up to February s European Council, we have to bundle our efforts We are ready to lead Europe to a prosperous, new industrial era. Kris Peeters, Minister-President, Government of Flanders Box 2: Active and Healthy Ageing and Smart Specialisation The number of senior citizens in Europe will almost double by the year 2060, which will bring about significant hurdles for healthcare and pension systems, and their financial sustainability. To turn this challenge into an opportunity, Europe needs to raise its game in promoting health, preventing diseases, ensuring a solid supply of health professionals to the labour market, and bringing forward innovative solutions and technologies, like personalised care and cure. Smarter investment in research and innovation can not only improve quality of life, but also spur growth and create jobs. Smart Specialisation offers regions a strategic and integrated solution that maximises the regional research and innovation potential by building on specific strengths and competitive advantages. While at least 30 European 10

11 regions have identified health in their Smart Specialisation strategies as an area of competitive advantage, the magnitude of the healthy ageing challenge requires a more integrated and coordinated approach. Regions have to provide more focused platforms that deal with particular issues related to personalized care and cure and cooperate across borders to develop common actions and pilots, strengthen health care clusters and scale up local solutions, potentially to global market levels, including through joint financial engineering. They should also link up, where possible, with European-level initiatives and roadmaps as Europe is currently not reaping the full benefits from all ongoing initiatives as many of them are small in scale, remain within their own local or national healthcare system and do not benefit from good practices already developed elsewhere. Box 3: Advanced Manufacturing and Smart Specialisation The European manufacturing sector is a key driver of innovation, and a major source of employment and external competitiveness. Yet the challenges it is facing today range from increased global competition, to environmental and sustainability issues, lack of investment and a shortage of skilled human capital. Advanced manufacturing, as one of the six Key Enabling Technologies (KETs) prioritised by the European Commission, will play a central role in bringing forward the Third Industrial Revolution. Smart specialisation is a policy approach that will fit well with advanced manufacturing, due to its knowledge-intensive nature, its association with high research and development rates, short innovation cycles, high capital expenditure and high-skill employment. Fostering the market uptake by manufacturers of process innovations in advanced manufacturing technologies represents the biggest challenge faced by the sector. The European Commission has put in place several financial and co-operation instruments to tackle this challenge, among which is the Task Force for Advanced Manufacturing, Horizon 2020 and the European Technology Platforms with the example of Manufuture. Experience from those initiatives has shown that synergies between the different funding instruments, between different levels of government and from both public and private sources can be a major driver of innovation and an enabler of market uptake. The regional paradigms showcased at this workshop convincingly demonstrated how synergies between industry and education, between regional and local governments and even between different economy sectors such as ICT, transport and mobility can have transformative impact on the economy. Box 4: Sustainable Energy and Smart Specialisation Achieving smart and sustainable energy is a key societal challenge, placed at the heart of the European Union s Europe 2020 strategy. At the same time, 11

12 the energy sector is a significant source of growth and job creation. Thus, many funding and policy initiatives have been put into place and at all governance levels to promote technological, organisational, financial and social innovations in the field. With the European Commission s review of the Strategic Energy Technology Plan (SET Plan) now well underway, this workshop took a timely look at the challenges faced by policy makers, and the role of regions as motors for economic growth and promoters of research and innovation. The workshop showcased three successful examples of smart specialisation in the energy sector from the regions of West Normandy (France), Brandenburg (Germany) and the Louth County Council (Ireland), and concluded with a roundtable discussion on the lessons learnt and the steps ahead. The debate underlined the need to stimulate private investment in the sector; promote training activities and exchange of good practices among stakeholders; and create synergies between different sources of funding as well as between the various levels of governance. The discussions revealed that bottom-up entrepreneurship as a cornerstone of Smart Specialisation policy is vital in stimulating private investment in the energy sector, and that projects for smart cities and communities have great potential in integrating different sectors, technologies and funding schemes. Box 5: Bio-Based Value Chains and Smart Specialisation With the gradual depletion of fossil fuels, Europe needs to move forward towards a post-petroleum economy. The bio-economy can significantly help the European Union in making this transition, which is why this workshop examined the best ways to synchronise bio-based value chains with research and innovation strategies for Smart Ppecialisation (RIS3). The general consensus was that there is no one-size-fits-all model for developing the bioeconomy in a region or country, but that regions must set their own way forward. For this purpose, the European Commission s S3 platform will help regions identify their strengths and specific comparative advantages. A bottom-up and integrated approach is crucial, particularly when it comes to integrating SMEs into the value chain. Also, a broad engagement of varied actors should be stimulated in order to reach critical mass. The discussion revealed the opportunity to turn declining industries into new, emerging sectors, and to make better use of funding instruments, by bridging Horizon 2020 and the European Regional Development Fund (ERDF), as well as by linking public-private partnerships to ERDF funding. Above all, the debate emphasised the need for cross-sectoral, inter-regional and global cooperation, as well as the need for radical innovation. Box 6: Smart specialisation in a nutshell Five videos illustrate what smart specialisation is all about. The first is a cartoon introducing the concept of smart specialisation while the other four 12

13 are examples of how smart specialisation works in practice in different European regions. The video can be seen in full in each case by copypasting the weblink into a browser. Video 1: Unusual cartoon/animation-style video to explain smart specialisation and entrepreneurial discovery to general audiences: The film depicts the King of Smart wondering what to do to revive the fortunes of his kingdom. A girl at his court proposes a smart specialisation strategy to feed the hungry dwarves, unleash the excited goblins and wake-up the sleeping giants. Weblink: Video 2: Marche, Italy: Modernising the shoemaking industry through advanced manufacturing and customisation (e.g offering made to measure shoes thanks to 3D scanners). Weblink: Video 3: Lower Silesia, Poland: Flaris project example that focuses in particular on the entrepreneurial discovery process. Flaris is the name of a five-seater family jet-plane made out of extremely light composite materials and developed with the co-operation of specialists from different European countries. Weblink: Video 4: Canary Islands, Spain: PLOCAN - Radical innovation with a focus on oceanography. PLOCAN is a competence centre for marine issues providing an infrastructure to develop cutting edge research and advanced ocean technology. Weblink: Video 5: Flanders, Belgium: Transition to personalised health care solutions via breakthrough research and innovation. Flanders has brought together clusters from biotechnology and nanotechnology to preserve the healthcare system and to diversify the economy thanks to these innovative solutions. Weblink: 13