Theoretical and Practical Approaches of Innovation at Regional Level in Romania

Content

1. Introduction

2. Theoretical and Conceptual Approaches (synthetic)
a. Innovation and invention
b. Innovation and creativity
c. Innovation and design
d. Innovation and exploitation
e. Innovation and change

3. Key-factors of innovation

4. Innovation at regional level

5. Techniques and methods of innovation evaluation at regional level

6. The analysis of the innovation on development regions in Romania
a. North West region
b. The Centre region
c. The North-East region
d. The South Muntenia region
e. Region Bucharest-Ilfoy
f. Region South West
g. West region

7. Innovation at national level

8. Innovation at European Union level

9. Innovation and the new features of the programming period 2014-2020

Conclusion

References

Abstract:

În ultima perioadă, inovarea a reprezentat obiectul central al unui număr foarte mare de studii şi analize, datorită impactului potenţial pe care îl poate avea asupra nivelului de dezvoltare al unei ţări sau regiuni. Acest aspect este relativ ușor de explicat: inovarea constituie o sursă importantă a competitivităţii regionale/naţionale, un factor modern al creşterii şi rezilienţei economice, dar şi obiectivul fundamental al actualei perioade de programare şi al Strategiei Europa 2020.

Potrivit teoriei, inovarea este un proces care are loc, cu precădere, la nivel micro-economic. Totuşi, abordarea ei la nivel regional câştigă tot mai mult teren în cadrul abordărilor economice, pornindu-se de la premisa că, performanţele inovative ale unei firme sunt dependente, direct şi într-o proporţie foarte mare, de potenţialul endogen local, dar şi de o combinaţie de factori de influenţă, determinaţi de specificul şi condiţiile zonei. Studiul îşi propune să analizeze, din punct de vedere teoretic şi practic, rolul procesului de inovare în cadrul dezvoltării și creșterii economice la nivel regional, național și comunitar.

Abstract:

During the last period, innovation represented the core topic of a wide number of studies and analyses due to the potential impact it could have on the development level of a country or a region. This aspect is relatively easy to explain: innovation represents an important source of regional/national competitiveness, a modern factor of growth and economic resilience, but also the fundamental objective of the current programming period and of the Europe 2020 Strategy.

According to theory, innovation is a process that takes place predominantly at micro-economic level. Still, its approach at regional level gains increasingly more room within economic approaches starting from the premise that innovative performances of a company depend directly and to a large share on the endogenous local potential, but also on a combination of factors of influence, determined by the specifics and conditions of the area.

The study intends to analyse from the theoretical and practical viewpoint the role of the innovation process within economic development and growth at regional, national and community level.

Cuvinte-cheie: inovare, cercetare, dezvoltare regională, Strategia 2020, regiunea inovativă Key words: innovation, research, regional development, Strategy 2020, innovative region

1. Introduction

During the last period, we witness an increasing trend of the interest given to innovation at regional level. Regarded - in a simplified manner - as an individual or entrepreneurial competence, innovation represents the way by which the intended future is created, as it is synonymous with an assumed risk of creating products: revolutionary technologies, and determining the emergence of new markets (Kao J., Innovation Nation, 2007).

At the same time, the approach of the current economic and social issues at regional level turns into a core element of the cohesion and regional development strategies and policies. In time, the evolution of the innovation concept was influenced by the level/capacity of some companies to invest, as its approach has a multidisciplinary character and various sources of financing (private and public). There are several categories of investments that may be regarded as innovative: investments in knowledge, in research, innovative technologies, high- and medium-tech, the scientific production, patents and IT specialisation, innovative clusters and regions, smart specialisation, etc.

Technological change was regarded as a key-element of economic growth by various schools of economic thinking (neo-Keynesianism - the Harrod-Domar model, post-Keynesianism, and neoclassicism - Solow’s Model).

Recently, Zaman Gh. et all¹ (2015) consider that there is considerable interest given to technological changes presented under the form of endogenous economic phenomena, the new theoretical approaches leading to reformulating the basic hypotheses of the economic growth models.

At community level, innovation plays a particularly important role within the process of implementing the Europe 2020 Strategy and of its stated goals: smart, sustainable and inclusive growth. Thus, the future of the European Union is deeply and indissolubly linked to the power of the regions and of the member-states to innovate and to the possibility of effectively implementing initiatives that are suggestively called innovation-friendly regions.

This study intends to analyse innovation, both from a theoretical viewpoint, and from a practical one, at regional level presenting the main shapes that its display takes during the current programming period, the allotted financial resources, but also the way in which Romania attempts to meet the requirements deriving from the European Union Strategy (EU-28), regarding innovation and knowledge at regional level.

2. Theoretical and Conceptual Approaches (synthetic)

In the neoclassic theory, innovation is regarded as a multifaceted concept that can be analysed and interpreted multi- and cross-disciplinary, being influenced to a large extent by localisation (the territorial component) and the endogenous potential.

In the New Oxford Dictionary of English (1998, pp. 942), innovation is regarded as a process of changing products or processes by introducing the novelty, a radical or partial change achieved by large companies, entrepreneurs or private individuals. Also, innovation can be relevant for the public sector (hospitals, social centres, town halls, etc.) but also for the private one, it can be incremental (as compared with doing nothing), radical (do everything), or at various approach levels (organisations, management groups and departments, regions, localities, individuals, etc.).

Another way of approaching the innovation concept is presented by OECD, as follows: innovation may represent the implementation of a new or significantly improved product, of new processes, of new marketing methods, or of a new method of organising trading practices, in organising the workplace or external relations (OECD, 2013).

From the viewpoint of achieved results (effects), innovation is assumed as the process of changing ideas into reality, fact that leads to increases in the (qualitative or quantitative) value of the product. In the innovation management process, creative destruction is just as important as innovation: each good idea replaces an obsolete one, the main target of each company being to develop and promote successfully, the best and newest ideas.

Recently, innovation is regarded in a dynamic and evolutionary way: the companies must continuously innovate and replace the old products/processes/technologies with new ones; it is a continuous knowledge process of the learning effects (to effectively learn how to innovate with the purpose of improving the existing process/product).

As a rule, innovation is correlated directly with novelty and originality (even if the novelty is, several times, subjective: if for a company a minimal change can be considered as significant, for a large-sized company this fact is almost unnoticeable).

In the following, we present briefly, a series of definitions for the innovation concept that might contribute to clarifying the way in which it can be analysed and interpreted:

- innovation - a larger or smaller scale change, radical or incremental, for certain products, processes and services which triggers an increase in more added value and knowledge;
- a practical/technical instrument by which (bigger or smaller) changes are brought to some products, processes and services, by introducing the novelty within the organisation and for its customers;
- a process built based on certain changes to something already set, by introducing something new, adding value and contributing to the development of the company’s knowledge;
- new thinking creating value (Lyons R., 1994);
- new products and processes, organic changes creating welfare (OECD, 2013);
- an instrument specific to entrepreneurs, an act by which is ensured that the endowment of the resources with new capacities triggers welfare (Drucker P., 1957);
- a deliberate and conscientious process (of new products, processes or services) the result of which (it might be an experiment or a study) has never before been created or used and which may be the outcome of individual ideas or of scientific research;
- research, discovery, experimenting, developing, imitation, adoption of new products, processes, and new organisational forms which trigger variety (diversity) and competition (Dosi G., 1982).

There are a series of elements that are assimilated to the innovative process, the relevant aspects of causality between them and innovation being presented hereunder.

a. Innovation and invention

According to some topical studies and researches, between innovation and invention there is a definite relationship which is under the impact of external forces.

The New Oxford Dictionary of English (1998, pg. 960) defines invention as something new, which never existed before. Innovation does not necessarily satisfy a need of the customer, nor makes reference to exploiting of a new concept on the market. Yet, a singular invention does not represent innovation, the latter presupposing both the activity of creating something new, and the exploitation of the benefit and the obtaining of added value. The invention is measured many times with the aid of the patents (ideas patenting).

The success or failure of an invention depends not only on the nature of the proposed ideas, but also on the way in which these are applied. As a rule, the invention is not desired by the customer, because the customer does not even know about its existence. A lot of inventions do not lead directly to innovation, up to the time when they are brought on and put to good use on the market. If an invention can be exploited and changed into value for the customer, than it turns into an innovation. On the other hand, there are several innovations that do not presuppose invention in relationship to originality, but also others that assume the use of techniques/technologies. Even if the invention does not determine directly the innovation, it could be argued that it represents a legitimate form of innovation.

b. Innovation and creativity

Creativity is regarded as a key-element of innovation, a mental process that leads to generating new ideas and adequate concepts that are useful and dynamic (Rosenfeld, Servo, 1984). The creative process assumes four distinct stages: preparation, incubation, illumination and verification (Wallas, 1926). The subsequent reviews of this process have added a final stage, respectively the elaboration (Kao, 1989). Creativity presupposes a certain level of originality and novelty that is essential for innovation. Even though creativity is a fundamental part of innovation, it cannot replace the latter.

Innovation encourages the exploitation of the creativity potential (ideas) allowing for exploiting its value by a development process

c. Innovation and design

In terms of innovation, design is defined as a “conscientious process of making decisions by which the information (ideas) are changed into tangible outcomes (products) or intangible ones (services, processes) (von Stamm, 2003, p. 11).

The design activity is based very much on creativity, on problem solving (for instance, aesthetics), on the shape and functionality of the final outcome. Thus, during the exploitation phase of the innovation process, the organisations engage in design activities that will ensure their optimisation, depending on the requirements of the market.

Even though design is an integral part of the exploitation stage, within an innovation process, it is only a singular aspect. Exploitation can include also other elements, such as the market development and preparation process, marketing, dissemination, etc.

d. Innovation and exploitation

Innovation represents an invention that can be marketed (Martin, 1994). According to this approach, the invention is something new which never existed before. The new creation derives from the creative capacity of the organisation, providing for new opportunities of use and being expressed with the help of the following formula: Innovation = Invention + Exploitation (Roberts, 1988). Consequently, innovation represents a systematic process of realising a creative environment based on discovery, invention and marketing. This approach presents a marked technological character, because several inventions are based on technologies. The replacement of the invention concept with the one of creativity makes it more applicable within organisations that are not actively engaged in the product innovation process. The formula which may best present this relational model is the following: Innovation = Creativity + Exploitation.

e. Innovation and change

Innovation cannot be equated with change. In order for the change to qualify as innovation, there must be a certain degree of intent (desirability) and intention (West & Farr, 1990). The change cannot have either a positive or negative impact on the organisation, because innovation by definition must be positive and show value for the customer. As result, it can be concluded that even though innovation may be regarded as a change, not any change can be regarded as innovation.

All aspects presented above represent important determinants of innovation. In the following figure, we present in a synthetic manner the innovation process and the relationship between this process and certain elements (labour force, capital, competitiveness and labour productivity increase, etc.).

Figure 1 - Innovation and its factors of influence

illustration not visible in this excerpt

Source: Compilation on László Halpern, Literature survey on the links between innovation, competition, competitiveness, entry & exit, firm survival and growth

Innovation is essential in the evolution and development process of the organisations, as it can be measured based on the increase in the turnover and profits, but also from the perspective of knowledge, experience, efficiency, product, processes and services quality increase, etc. at the same time, the innovation process implies, naturally, also those failed, risky and unsuccessful ideas.

These aspects were expressed, already at the beginnings of the neoclassic theory by Schumpeter J., who described innovation as a process of “destructive creation”, which is essential for economic growth. Moreover, Schumpeter defined innovation as a “new combination” of resources, knowledge, new or existing equipment (Schumpeter 1934, pp. 65).

Companies can learn by failure, and, when they can identify good, successful ideas, they shall be more adaptable than those who cannot do this. In managing the innovation process, destruction of the old is, very often, just as important as fostering the new. The destruction of older (obsolete) ideas determines the use of limited resources for obtaining new ideas.

Innovation determines economic growth, and is regarded as a final and concerted effort of putting to good use the economic and social, local and regional potential (Drucker, 1988). The effort leading to innovation can be obtained by means of several actions: increase in the quality of products or of the services, diminishment of costs, or avoidance of some high costs, increase in the turnover, etc. which, in their turn are determined by innovation.

In the specialised literature, several of the theories have proposed to analyse and explain the nature and factors of the economic growth process. If, in the beginning, in the framework of the main models of economic growth were identified three main, classic factors, of growth (labour, land and capital), thereafter, technological innovation began to make its presence felt and gain consequence. The fact that innovation will have an important role to play in the growth process, does not diminish the role of the other classic factors but, as it is also about continuing to maintain an important role for the labour force at high levels (quality of the human factor) and for the technologies.

In 1936, J. M. Keynes publishes his paper The General Theory of Employment, Interest and Money in his attempt to identify the factors triggering the crisis of the period 1929-1933 and the recovery possibilities after the Great Depression². Thus, by supplying some theoretical substantiation with respect to public expenditures deficit and demand management, he suggests new policy initiatives that could represent a necessary and useful instrument in counteracting the effects of a crisis of such amplitude.

Few decades later, after the emergence of new crises, but also due to the finding that existing theories cannot provide for answers and solutions, the need to identify some new directions regarding the variables imposed by the change in mentalities and policy directions resulted (Nelson, Winter, 1977). Among these is counted also the explanation regarding the investment opportunity which still, singularly, is not enough to explain the emergence of innovation in the framework of the debates about economic growth and competitiveness (it is especially valid for the period 1980- 1990).

Thus, by the beginning of the eighties, in the framework of some debates about the consequences of implementing new technologies on economic growth, Christopher Freeman emphasised the importance of some theoretical contributions for innovation brought by Adam Smith, Karl Marx and Joseph Schumpeter. Thereafter, Richard Nelson presented convincingly the limits of the models from the years 1950 and 1960 in relationship to the paradox of increasing productivity and to the challenges regarding competitiveness as determined by their static hypotheses (Nelson, 1981; Lynn

K. Mytelka, Keith Smith, 2001).

According to the classic theory, innovation is a linear phenomenon, where each aspect is considered as linear and disconnected from the other components of the innovative process. Two traditional ways can be reminded in this context for approaching innovation: (1) “technology-push” and (2) “demand-pull”, the latter being regarded as an exogenous variable. From the perspective of these approach angles, innovation is regarded as a reply to the demand for new or innovative products and processes (Andreanne Léger, Sushmita Swaminathan, 2007 ) (Figure 1).

Figure 1: Linear model of innovation

illustration not visible in this excerpt

Source: Compilation on Industry Canada, 1996-97, Performance Report

The limitative character of the traditional models and theories determined important changes regarding innovation (Mensch, 1979, Myer, Marquis, 1969).

At the beginning of the 80s, in Nelson’s and Wilson’s paper entitled In search of useful theory of innovation are presented and analysed innovative processes, their dynamics and impact on economic growth (Nelson, Winter, 1982). From the viewpoint of the theoretical evolution, according to Nelson and Winter, a series of models were developed for the innovation process, whose variables can take the form of: research, knowledge, inventions etc. (Kline and Rosenberg, 1986; OECD, 1992), all under the wide umbrella of uncertainty and unforeseeable (Rosenberg, 1976, 1990).

Analysed at institutional level, the interaction between knowledge and learning leads to the emergence of the so-called “innovation system” (Lundvall, 1992, 1995; Freeman, 1988; Freeman, Perez, 1998; Nelson, 1993; Pavitt, Soete, 1982). In this context, one model that should be reminded is the one promoted by Klein (the innovation model based on chain relations or links), is constituted based on the technical processes that take place in the framework of the innovation process under the impact of the external market forces, as well as based on complex interactions between the various stages of the processes (Figure 2).

Figure 2: The innovation model with chain links (the Kline-Rosenberg Model)

illustration not visible in this excerpt

Source: Kline S.J. and N. Rosenberg (1986), "An Overview of Innovation", in R. Landau and N. Rosenberg (eds). The Positive Sum Strategy. Harnessing Technology for Economic Growth, National Academic Press, Washington, DC, p. 289.

The paradigm of an open system of innovation, launched by Henry Chesbrough (2003) is built based on the tendency of the companies to explore the internal and external sources of innovation, integrated with the new skills and opportunities (Viskari, Salmi, și Torkkeli, 2007). Within the traditional theory, the innovation process of a company is considered as closed, the Research-Development-Innovation (RDI) departments being responsible for the development process and the design of new products. Meanwhile, under the influence of some external factors (such as, for instance, the emergence of opportunities, globalisation, competitiveness increase, etc.) the companies began to regard this process as an open one (Wu, Tsai, Chang, 2011). Recently, Chesbrough (2012) mentions an innovation system as an innovative innovation model. This open system, even if it presents similar conditions to other models is applied differently, depending on the approached research topic (Franke & Hipple, 2003). In order to valorise their own innovation potential, companies must take over a series of opportunities received from outside the organisation, resorting to various methods of combining them. Therefore, important aspects of the open innovation model are determined by the capturing, maintenance and valorisation of knowledge and ideas received from external sources of innovation (Cooke P., 2005) (Figure 3).

Figure 3: Open model of innovation

illustration not visible in this excerpt

Source: Cooke, P. (2005). Regional asymmetric knowledge capabilities and open innovation. Research Policy, 34

Based on the analysis of the theories regarding innovation, it results that these recorded two main trajectories: one linear and one dynamic; while the linear approach presents a single direction, on which innovation can be obtained (fundamental research, applied research, technological development, etc.), the dynamic approach expands the possible knowledge trajectories, allowing for feedback between fundamental research and development-innovation.

After 1990, the dynamic approach allowed for innovation to become a key-objective of policies and strategies for local, regional and national development by which was attempted to create some optimum conditions required for sustaining the innovation and technological diffusion mechanism (OECD, 1992).

Under these conditions, the innovation process became, to a large extent, dependent on the local specifics (localisation) contributing at the same time to significant economic growth in the regions which succeeded in obtaining competitive advantages from valorising the innovative potential.

3. Key-factors of innovation

Innovation plays a key-role in the process of economic growth, its evaluation and quantification representing an interesting and current topic. Still, the multidimensional nature of innovation makes difficult the precise analysis of its value, both at national and at regional level (especially, due to the lack of statistical data and information).

With the stated purpose of providing an as real as possible image of the innovation degree, various evaluation methodologies were launched based on a series of indicators/indices, that would catch as many determinant elements and factors as possible and to provide accurately information regarding this process. Most of these methodologies are elaborated by international bodies (OECD, WTO, the European Commission, etc.) in their attempt to provide various rankings on countries and large geographical areas.

Based on the existing methodologies, there were identified several factors influencing the innovation process that are synthetically presented in the following:

1. Quality of the human factor - without education, specialised training and competences, involvement, etc., innovation cannot take place³ ; according to WIPO (World Intellectual

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¹ Zaman Gh., Georgescu G., (coordonatori), ntonescu D., Goschin D., Popa F., (2015), Dezvoltarea economică endogenă la nivel regional. Cazul României, Editura Expert, ISBN 978-973-618-408-6, Bucureşti.

² The world economic crisis of 1929-1933 was the most severe period of economic depression from the industrialised western society, triggering fundamental changes in the structure of economic institutions, in macroeconomic policies, and in the economic theory. The outbreak in the USA of the Great Depression determined decreases of productivity, unemployment increase and deflation at world level.

³ OECD