Innovation Regions in Europe

CONTENTS

LIST OF FIGURES

1 I

2 Spatial aspects of innovation - Why innovations occur in clusters
2.1 Sharing of tacit knowledge
2.2 The role of metropolitan regions
2.3 Services and intermediaries
2.4 Systematic innovation and insitutional

3 European high-tech regions as empirical evidence
3.1 The Cambridge Phenomenon
3.2 Munich - Leading high tech region in Germany
3.3 Baden Württemberg - A successful region facing challenges
3.4 Tampere - From resource-based to knowledge-based economy
3.5 Grenoble - France’s Leading edge technology

4 C

REFERENCES

LIST OF FIGURES

Figure 1: Knowledge loop by Takeuchi/N

Figure 2: Venture capital investments in H1 2007 in government

Figure 3: Distribution of employment in technology industries in M

1 Introduction

Ever since Schumpeter’s work on the business cycles, innovation is widely claimed to be a central aspect of economic development. With market expansion reaching its limits and mass production being relocated into low cost countries, the role of innovation gained more and more importance in order to maintain growth in western industrial countries. In contrast to the industrial processes, innovation is not a process, which can be standardised or routinised. It does not follow mathematically ascertainable schemes, but is rather a dynamic process, which is formed by several factors interacting and enforcing each other (Cooke and Morgan, 1998). The aim of this paper is to shed light on empirically determined factors that promote innovation in certain regions. Eventually some remarkable examples of innovative regions in Europe will underline and verify their importance

2 Spatial aspects of innovation - Why innovations occur in clusters

2.1 Sharing of tacit knowledge

As a result of technological progress, information and knowledge from all over the world is virtually available everywhere, but still, with the sector of long distance business travel growing steadily, there must be reason for seeing each other (Storper and Venables, 2005). In this context it is important to highlight, that different kinds of knowledge do exist and that this is only the case for codified or explicit knowledge. On the other hand, there is knowledge, which is not codified yet or nearly impossible to be codified, the tacit knowledge (Kujath, 2009)

Skills can hardly be transported by description and certain knowledge cannot be articulated due to inadequacies of language. Some skills simply cannot be transported from one individual to another with explaining, but rather need to be shown. Exemplarily the master-apprentice-principle with observation, imitation, correction and repetition seems to be the way to go (Nonaka, 1991). Lundvall et al describe it as a process of doing-using-interacting (DUI) in a community with skilled people (Lundvall et al., 2007). Figure 1 shows the principles of the learning processes. Consequently one can say, that codified knowledge is global and tacit knowledge is local. Learning certain values follows the same principle. They need to be learned and internalised and they are crucial in order to act as member of a community and gain knowledge from it. Sometimes even the skilled worker him- or herself might not know about his or her skills to the full extend. So the tacit knowledge might not even be obvious (Takeuchi and Nonaka, 1995). Thus it is not easily shared and therefore a rare good, which is important for success (Gertler, 2007)

illustration not visible in this

Figure 1: Knowledge loop by Takeuchi/N

Learning is an interactive, socially embodied and localized process. To gain tacit knowledge or even transform into general knowledge embodied in new and innovative products, it needs embeddedness of the learner in a local community (Lundvall et al., 2007). Being a part of a creative system with a lot of input and creativity is a fertile ground for further development of own ideas, receiving support and knowledge about what the market accepts or desires (Gertler, 2007). Following this logic, tacit knowledge is the prime determinant of the geography of innovative activity. A diversity of tacit knowledge tends to concentrate in metropolitan regions, which serve as gateways of functions and processes and thus attract people from different regions and backgrounds. There one finds universities and other scientific institutions and a stable and rich resource of skilled people from different cultural backgrounds. This cultural and educational diversity leads to a formation of a brain pool and a high density of knowledge available in metropolitan regions and as a consequence the knowledge spillovers occur. Breschi and Malerba see an empirical proof of new knowledge occurring more efficiently among geographically closely related actors (Breschi and Malerba, 2005). Audretsch and Feldman support this statement, when they say, that as a consequence, production of innovation has the tendency to happen in clusters, where knowledge inputs are available (Audretsch and Feldman, 1999). Knowledge simply rubs off on people in innovative places (Storper and Venables, 2005). People might not even be aware of the learning, just by interacting with people of certain skills and capabilities (Maskell, 2005). So it is obvious that knowledge can only effectively be transmitted via interpersonal contacts, which is eased by close geographical and cultural proximity (Breschi and Malerba, 2005). Thus it requires spatial and relational proximity to share tacit knowledge and to create leading edge technology. This is the case for high-tech knowledge as well as low-tech knowledge like skills in management, logistics, sales, marketing, in fact all the day-to-day business drivers, which are crucial for success. Consequently, proximity is the precondition for effective transmission of tacit knowledge (Amin and Cohendet, 1999). A concentration of certain knowledge or skills within a region acts as an attractor for skilled people or specialists from other regions and countries. They move to the area in order to gain from the abundance of knowledge and at the same time contribute to the knowledge pool. So the facilitation of further growth of the cultural and knowledge assets in a region is inherent to regions with such characteristics. This accumulation of knowledge, by generating new knowledge, keeping knowledge and attracting new knowledge to the region makes a region a flourishing place of innovation (Milberg et al., 1996). This phenomenon is evidence, that geographical and relational proximity has advantages, which otherwise would hardly be available (Cooke, 2005). One needs to be an insider in order to know certain firms and consider cooperation and ventures or gain from knowledge. Thus, those lacking this connection do not even see the potential and the opportunity (Sorensen, 2005). Even if knowledge spillovers happen locally and spread into the wider area or even the world in time, far away distances are subject to a time lag, which leads to remote participants being less competitive (Jaffe et al., 1993)

2.2 The role of metropolitan regions

The metropolitan region is an area formed by a cluster of metropolitan functions independent from administrative boundaries. These regions are not formed by administrative boundaries, but rather reach to suburbs and neighbouring cities, villages and areas in regards of the connection of certain factors like infrastructure, services or commuting of labour. They are sources and outlet of material and immaterial streams such as goods, money or knowledge (Grabow and Becker, 2009). While serving as nodal points, metropolitan regions carry strategic functions, such as being center for innovation and competition, a center for decision and control, a gateway with major traffic knots like highways, major train stations, airports, harbours and other factors regarding logistics. They are center of finance, communication with trade fairs or congress centers for example and center of cultural diversity, which form due to a high share of migrants. There are pull factors like jobs, political stability and cultural openness that attract people to certain regions. Furthermore they take up the role of a symbol, standing for norms and rules shaped there or for a creative milieu due to their cultural diversity and thus establish trends through their cultural scene and capture public imagination as think tanks (Blotevorgel and Danielzyk, 2009; Feldman, 2005)

Due to the accumulation of important factors, which are carried in the streams inside these centers, there are certainly advantages in terms scale and network. Anyhow, in regards of innovation the most important fact is, that in these regions with a concentration of factors, knowledge spillovers do occur. Tacit knowledge is shared and spread throughout the region through fluctuation between companies and social life that brings together people of a common background. Even though relational proximity is sometimes considered more important than regional proximity, the combination of both aspects is the ultimate form of an innovation friendly environment (Kujath, 2009)

The flows of all the mentioned streams form what people call pulsating (Grabow and Becker, 2009). The region is vibrant and lively; it is a breathing and developing system (Grabow and Becker, 2009). This vivid explanation does also illuminate, why Cooke and Morgan refer to a metropolitan region as a nexus of processes. A region creates links and connections between processes that form a lively system. It thus creates a system that is capable of generating innovations (Cooke and Morgan, 1998). This is why global firms often establish their regional headquarters in metropolitan areas (Blotevorgel and Danielzyk, 2009)

All innovative regions have a starting point from which they grow. But why do they grow? Workers come to work, gain knowledge, maybe start up own business and attract more workers this way. The influx of people and new companies to a region creates an increase in the demand of tertiary sectors, such as shopping, housing and other services. Innovative clusters benefit from these reinforcing processes (Feldman, 2007). Another factor, why certain technologies tend to form in clusters are spin-offs, employees leaving their company to start up a business of their own. Most likely the business will be according to his or her skills, so in a sector like his old company (Klepper, 2007). In consequence, the likelihood of path dependency is quiet high. If a region has grown to a cluster of certain technologies or businesses, its fate is closely linked to the products typical for the region. So a product life cycle easily develops to be regional life cycle. This underlines the fact, that innovation is needed to sustain the wellbeing industry and the region (Thomas, 2005)

2.3 Services and intermediaries

Innovations are commercialised inventions and the knowledge communities are the starting point for innovations. Ideas are commercialised in already existing companies or start-up businesses. Start-ups mostly need certain forms of support like financing, legal service or management consulting. A regional nexus is needed to facilitate contacts and collaboration among potential business partners (Cooke and Morgan, 1998). Being embedded in a network or community means, they not only are visible to other stakeholders, like banks or venture capitalists that are interested in promising investments. Furthermore this embeddedness induces a form of mutual trust and a loss of anonymity. This altogether creates an environment of reliability, accountability and thus trustworthiness of the ideas and businesses and consequently makes it more interesting for investors and lenders (Storper and Venebales, 2005). Networking and interacting is a crucial force, which attracts individuals and firms into clusters, where skilled workers, other firms and formal and informal collaborations are present. A company’s or individual’s ability to interlink and to socialize and communicate within the local community is crucial for their success in taking part in innovation. They need to be embedded in a thick network, which is sharing knowledge (Breschi and Malerba, 2005). To systematically maintain the arrangement of contacts among potential partners, intermediaries are often necessary. These intermediaries like associations, institutions, formal networks or dedicated individuals are the nodes between the potential partners (Baxter and Tyler, 2007)

Up to now we mostly acted on the assumption, that individuals follow this process. In fact, the same applies to multinational enterprises that establish subsidiaries in certain areas. They gain access to local knowledge through there subsidiaries and get embedded in a local community (Blanc and Sierra, 2007)

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