Regions for Economic Change is a “programme” launched some 4 years ago which has its annual high point each year in the form of a conference and doling out of some trophies to good practice .Since its initiation, the world has changed but the REC event remains the same the only difference being is that when it was launched it was focused on the (now failed) Lisbon strategy, whereas today it is focused on EU2020( which has yet to fail).
So naturally the focus this year was on one of the 3 key pillars of EU2020, namely “smart growth”. Indeed its obligatory these days inside the Brussels bubble to prefix everything with the adjective “smart”. So we have now got smart cities, smart growth and now smart specialisation to go along with the smart and not so smart people inside the Brussels bubble.
Dirk Ahner, who I like very much, hit the nail on the head when he highlighted that the use of “smart” meant that we also needed to define what “stupid” meant. I suspect in the nature of such discussions it will end up being “scales “of smartness. Smart level 1(another way to say dumb) to Smart level 5.
Smart specialisation (SS) is the new “bullet” in regional policy. But what is it? Professor Foray, who is credited as one of the academics who have “fast tracked” this new concept from the lecture hall and academic journals into the core of Cohesion policy, tried to spell out why we need SS and what were its key ingredients .
Here is what he said. We need SS because regions cannot do everything, they have to concentrate their resources by developing distinctive and specific specialisations and in so doing, avoid regional competition.
The key ingredients he said are:
• Entrepreneurial discovery
• Supportive regional policy
• Decentralised market development
• Emulation/multiplication possibilities
So in a nut shell, its about finding a market niche by specialising in something that already goes on and that through a process of transition can become something that creates SS.
Having done the why and the what, the professor naturally had to deal with the how. Here’s where the concept became somewhat problematic. Here is the recipe for creating an SS.
First establish an “entrepreneurial process of discovery”. This means establishing a “learning process to discover the research and innovation domains in which a region can hope to excel. In this learning process, entrepreneurial actors are likely to play leading roles in discovering promising areas of future specialisation, not least because the needed adaptations to local skills, materials, environmental conditions, and market access conditions are unlikely to be able to draw on codified, publicly shared knowledge, and instead will entail
gathering localized information and the formation of social capital assets.”
The problem is that the recipe is silent on how you would undertake this step, apart from the fact that participation by entrepreneurs would need to be incentivised. Infact the professor acknowledges that this poses a “public policy problem.”
Second,( and here I am now drawing on the professors briefing paper quoted above as in his presentation he glossed over this step) use “specific properties of General Purpose Technologies (GPTs) ..(to)..define aframework that helps to clarify the logic of Smart Specialisation (SS).”
You can easily find a GPT because ,”in fact, the characteristics of a GPT are horizontal propagation throughout the economy and complementarity between invention and application development. Expressed in the words of an economist, invention of a GPT extends the frontier of invention possibilities for the whole economy, while application development changes the production function of a particular sector.”
Third, create a grouping of leader regions and follower regions. The “leader region(s)” will have to “invest in the invention of a General Purpose technology (GPT) or the combination of different GPTs , follower regions often are better advised to invest in the « coinvention of applications » - that is – the development of the applications of a GPT in one or several important domains of the regional economy.
Fourth and finally, you need lots of government to do the following:
• “Supplying incentives to encourage entrepreneurs and other organizations (higher education, research laboratories) to become involved in the discovery of the regions’ respective specialisations.
• Evaluating and assessing effectiveness so that the support of a particular line of capability formation will not be discontinued too soon, nor continued so long that subsidies are wasted on otherwise non-viable enterprises.
• Identifying complementary investments associated with the emerging specialisations (educational and training institutions, for example) in the case of a region investing in the co-invention of applications of a General Purpose Technology (GPT). Supporting the provision of adequate supply-responses (in human capital formation) to the new “knowledge needs” of traditional industries that are starting to adapt and apply the GPT, by subsidizing the follower region’s access to problem-solving expertise from researchers in the leader region, and by attending to the development of a local personnel that can sustain the incremental improvement, as well as the maintenance of specialised application technologies in the region.”
In discussion with other delegates at the coffee break, it became clear that I was not the only one to be left about confused by what exactly is SS? What make it different from what “smart” entrepreneurs already do? How can you create this entrepreneurial discovery process? What about would be entrepreneurs? What makes it different from existing “smart” strategies? How transferable is it to the real policy context? How viable is it?
These questions , I thought would emerge in the post coffee session. Indeed, John Bensted-Smith, Director IPTS, asked some key questions to an assembled panel: Given financial retrenchment is SS viable? Can all regions engage in SS? He also added some additional requirements for SS. In particular the need for finance, an integrated approach, recognition of local strengths and weaknesses and using the phrase from Schumpeter, the need for “creative destruction”.
Unfortunately the panel that responded to these questions simply were not able to add anything more substantial. Indeed, some of the contributions were just vacuous. I must quote here the rapporteur for Innovation Europe from the EP who said “competition is good, finding each other is better”. She must be a facebook fan to come out with such banality . More significantly, though, one of the other two politicians on the panel highlighted the problem of “timescale”. How can you realise the SS recipe within a political short term cycle? No one answered that point.
In addition the politician from PACA, like most of us, had failed to understand what the hell SS is as he equated the 29 clusters that have been regionally created as SS’s. The bad news is an SS is not a cluster as the professor was at pains to state. Clusters are in fact “bureaucratically”driven forms of specialisation and co-operation. They do not have the SS “umph” which is all in the iterative process of top down and bottom up.
I left still wholly unclear about SS. Indeed, I left with a view that SS is best left as an academic tool and not one that can be transferred into the policy domain in the way envisaged. The world as envisaged from the SS perspective does not correspond to the reality of the economic and political crisis that we are in the grip of. Moreover, SS has a purely, functionalist approach to growth. SS offers simply a technological fix , when its not the technology we lack its actually an appropriate model for economic growth in a post crash Europe that is facing multiple challenges which requires a different value base to the way we do economics. Smart growth cannot simply be about economic development. We have had not so smart growth for the last 30 years , for SS to work we have to change the way we do politics and pursue economic development that reduces the huge inequalities that EU2020 is creating and Lisbon and its predecessors have created.
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