Regional Innovation Policy for Small‐Medium Enterprises

Citation

Mitra, J. (2005), "Regional Innovation Policy for Small‐Medium Enterprises", Journal of Small Business and Enterprise Development, Vol. 12 No. 1, pp. 140-144. https://doi.org/10.1108/14626000510579716

For well over a decade now regional innovation policy has been the subject of numerous investigations, discourse, and analysis among both policy makers and academics. Since such luminaries as Richard Nelson, Christopher Freeman, Luc Soete and Nathan Rosenberg took the initiative to assess national innovation systems, it was only a matter of time before the stage shifted to the regional level. Policy and decision makers, especially across Europe, were increasingly of the view that what takes place at the level of the region appeared to carry far more weight for the innovation process and for innovators than what took place at the national level. Regions were comprehensible units of analysis.

Lundvall (1992) and Nelson (1993) have focused on national innovation systems, while Saxenian (1994), Braczyk et al. (1998), and Cooke and Morgan (1998) have concentrated their attention on regional systems. Still others (Freeman and Soete(1997) have studied technological systems. The basic proposition of this literature is that the study of the institutional context of the firm and its relations with other firms is as important as the study of the innovation process in a single firm.

The “systemic” view has as it antecedents the Marshall (1920, 1923) notion of externalities where knowledge and its transfer to other economic stakeholders is a factor favouring spatial concentration of industries. The Marshallian idea of “knowledge spillovers” plays an important role in the regionalisation of innovation and is significant in a variety of contexts (Audretsch and Feldman, 1994). Manifesting itself within supply chain relationships, horizontally related firms, transfer of people and their skills, shared pools of knowledge of markets, research, etc., these spillovers are considered to benefit regions disproportionately. The economic rationale offered for the existence of such localisation (or indeed clusters) from Marshall (1920, 1923) onwards to Weber (1929), Krugman (1991), and Enright (1998), is to be found in this idea of special benefits coupled with that of the unique presence of natural resources, all of which help to reduce uncertainties and risks associated with innovation.

Knowledge spillovers, inter‐firm relationships, utilisation of shared resources, a well‐developed local skills base, and the evolution of the region through tacit and explicit knowledge exchange, are typical features of regional innovation systems. It is against this background that the book under review has been written.

Originating from a EU‐funded (targeted socio‐economic research programme) project called “SME Policy and the Regional Dimension of Innovation” (SEMPOL), the editors have compiled eight articles drawn from the work of seven research teams from several European regions, with the “ultimate goal of identifying good practice innovation policies of different types and in different kinds of regions”. All the participants in the project were academics from the STEP Group, Norway, Vienna University of Economics and Business Administration, Austria, the Southern Denmark Business School, Denmark, the Universita degli studi di Pavia, Italy, the University of Maastricht, The Netherlands, the Universidad autonoma de Madrid, Spain, and Middlesex University, UK. The book is organised in four parts, moving from a conceptual background to SMEs, innovation and regions, through to innovation processes and policy context, the evaluation of innovation policy instruments, to the designing of policies for SMEs, innovation and regions. As with most Edward Elgar publications the hardback book is well designed and well presented.

The editors claim that the authors had not only excelled in their academic discipline but had also developed good empirical knowledge of real world policies. Somehow they believed that that it was necessary to ensure a better flow of ideas between policy makers and academics. To achieve this end, the project and the book endeavoured to answer the following question: how should regional innovation policies targeted at SMEs be designed and implemented in order to improve their effects in terms of raising innovativeness in firms and regions. The regions, which fell under the microscope of the project, were Upper Austria, the triangle region in southern Jutland (Denmark), Lombardy and Apulia (Italy), Northern and South East Norway, Valencia (Spain), North London with adjacent parts of the outer metropolitan area in Hertfordshire and Essex, Wallonia (Belgium) and Limburg (The Netherlands). Overall 40 policy instruments were analysed falling into five broad categories:

1. 1.

   Direct support.

2. 2.

   Technology centres.

3. 3.

   Brokers.

4. 4.

   Mobility schemes.

5. 5.

   Upgrading of SMEs' suppliers.

Understandably, the book does not simply record the work of the project. It is structured in a way that allows conceptual foundations to be tackled first. This is done by way of a descriptive analysis of the specific characteristics of SMEs with regard to innovation and their role in contemporary European economies. Small, North and Vickers introduce this conceptual foundation by both differentiating and assessing the complementarity in the innovation process of large and small firms. The reader's attention is drawn to the resources issue of small firms, their typical constraints and their much‐vaunted notions of flexibility and adaptability. Drawing on the literature of small firms, the authors also reflect on the heterogeneity of small firms by pointing out, for example Rizzoni's (1991) six‐fold classification of manufacturing firms and the importance of the sectoral dimension, and Hassink's (1996) typology distinguishing between technology driven SMEs, technology following SMEs, and technology indifferent SMEs. We learn, therefore that the role played by different types of innovation in the competitiveness of SMEs varies considerably between sectors. A particularly interesting point made in this chapter is the idea of innovative activity being a function of size‐related characteristics at the micro level. This has implications for support needs and the way in which those needs are addressed.

The conceptual part is completed by a chapter on SMEs and the regional dimension of innovation by Asheim and Isaksen who discuss the broad concept of innovation, especially the interactive innovation model, and regional innovation systems as a framework for analysis and policy making. These two authors also emphasise the diversity of different innovation systems and claim that fostering interactivity within and among systems enables knowledge creation and diffusion. With due deference to the works of economic geographers and evolutionary theorists, the authors underscore the importance of the social and non‐linear processes in innovation. The authors make a useful point about abandoning concepts of low‐tech and high‐tech and adopting a more empirically relevant approach of a distributed knowledge base, while also making the case for a learning economy and business clusters.

In part II we find the presentation of an overview of both the national and regional contexts for innovation, by Arne Isaken. In describing the different national innovation systems and policy contexts of the 11 regions involved in the SEMPOL project, the author identifies commonalities and differences between the national cultures of innovation. The author looks at key indicators such as R&D systems, innovation results, patterns of industrial specialisation, and so‐called “national cultures”. This background is then used to draw a distinction between national and regional systems. In the next chapter (chapter 4), Kaufmann and Todtling, pick up the thread of policies and instruments with particular reference to the 11 regions and the innovation activities of SMEs, including the problems and barriers they face. The analysis is aimed at developing guidelines for policies regarding support systems. The authors reinforce the introductory point about diversity of approaches

In part III of the book, the reader moves from the generic to the peculiarities of specific regions when 40 of the policy instrument come under scrutiny. This exercise is accomplished by three chapters, the first of which, by Garofoli and Musyck, provides a typology of the different policy instruments – from firm‐oriented support schemes through to system‐oriented support schemes and process‐oriented support schemes. Typically, schemes such as technical personnel introduction schemes fall in to type A, technological centres fall into type B and upgrading of local innovation systems come under type C. The main objective here is to develop a systemic approach to innovation support and policy‐making.

Using a benchmarking process to identify the most successful policy instruments, Alfonso Gil, Saez Cala, Vazquez Barquero and Vinas Apaolaza, summarise the results and the lessons learnt from the evaluation of the instruments, distinguishing between the short and longer‐term impact of different types of tools. The authors draw specific attention to the typical changing characteristics of firms and the need to ensure that tools and instruments do not remain static because of institutional design. Pointing to some of the examples of good practice – KIM and RIT from Wallonia (both mobility schemes) – the authors find that their effectiveness lies in their ability to identify SME needs.

In the final chapter of this part of the book, Christensen, Cornett and Philipsen, reflect on the “ambiguous notion of coherence”. If coherent innovation policy provides solutions on specific issues in an integrated way, then traditional bureaucratic systems cannot afford the required flexibility because of their hierarchical governance structures. There is also a disconnect between being responsive to diverse regional needs and dynamic changes within SMEs. Coherence is, therefore viewed in terms of responsiveness and co‐ordination, reconciling the needs of responsiveness and flexibility on the one hand, and simplicity, transparency and stability in policy on the other.

Part IV contains the concluding chapter by Nauwelaers and Wintjes, in which the authors attempt to synthesise SME oriented innovation policies at the regional level. The authors argue that a “new paradigm” of interactive learning within the firms and within the regions is central to innovation policy in the future. This conclusion is arrived at after a further examination of the policy instruments, and the authors end the book by stating that by matching the context and SME needs pictures with the policy tools in each region, confronting the policy tools with the lessons of theory, and comparing results with a range of policy instruments in different environments, SME innovation support policies can be improved.

In bringing together the different aspects of their own learning, the editors have succeeded in adding to the growing number of case studies on regional innovation systems. By focusing early on policies and policy instruments the authors offer an opportunity to the readers to learn how different policy instruments have evolved in the 11 regions of Europe, This exercise should be useful for students exploring spatial and evolutionary aspects of innovation in the regional context. Where the book is deficient is in the lack of relevant empirical data. Given that most of the findings were derived from ostensibly original project work, hard data especially on take up and the efficacy of different instruments would have helped to substantiate and illustrate the observations. Some clarity of what constitutes an appropriate unit/units of analysis would have been helpful for researchers. It is tempting to take generic SME development issues and re‐examine them in a different context, and it would have helped enormously, if this could have been avoided. Finally, if part of the rationale for book was to engage policy makers with academics, then it would have been useful to obtain selective feedback from the former group on the issues raised in the book, especially when some of the authors correctly point to the disconnect between the aspects of innovation at the regional level (involving disparate organisations) and the features of innovation at the level of the firm.