Smart specialisation: Learning how to do ‘new industrial policy’

Research on what are known as ‘smart specialisation strategies’ has very rapidly become a core element of our work at Orkestra over the last few years. Smart specialisation strategies are part of the trend towards a ‘new industrial policy’, following many years in which the best industrial policy was widely accepted to be none at all. The emergence of the new industrial policy is heavily influenced by Dani Rodrik’s 2004 paper on Industrial Policy for the 21^st Century, in which he highlighted a rare historic opportunity to build an economic policy agenda between the typical choices of government-centred or market-centred dogma. New industrial policies recognise that it is important for territories to have strategies, which means making choices around which economic activities to support. Where they break from old industrial policies is in emphasising that making those choices is not the job of government alone, but must build new forms of private-public interaction.

In Europe the smart specialisation debate has particular resonance at regional level, where the European Commission has pushed for all regions to develop and implement a ‘research and innovation strategy for smart specialisation’ (RIS3). In line with the principles of the new industrial policy there are two key features of these strategies.

1. They should prioritise investments in research, development and innovation within the region. These priorities should support strategic structural change in the economy that builds from existing strengths and responds to emerging opportunities.
2. They should identify which areas to prioritise through an entrepreneurial discovery process that engages key regional stakeholders from business, government, research/university and civil society.

While it is fairly easy to agree on the first feature, it is very difficult to put into practice the second feature, and this is where much of our current research is focused.

Last month, as part of the FP7 Smartspec project, we hosted at Orkestra an international workshop to explore the governance, leadership and institutional requirements for operationalising smart specialisation strategies. Governance, understood as the processes surrounding the making of choices or decisions that orient strategy, is critical. Smart specialisation implies a strategy that is ‘alive’, constantly evolving, and constantly engaging a broad range of agents in its definition, implementation and evaluation. This requires new, dynamic and networked forms of decision-making that break with the more static and hierarchical governance forms that governments and other agents are used to when making strategic plans in relatively ‘top-down’ processes.

The workshop brought together around 20 experts from inside and outside of the project, and it was revealing that discussion very quickly turned to clarifying the smart specialisation concept itself, and in particular the nature of the regional entrepreneurial discovery process. This is something that I have seen mirrored in a whole range of debates at different forums and conferences across Europe over the last couple of years. It emphasises that we are dealing with an imprecise concept that is open to multiple interpretations. This creates particular challenges for moving from the vague idea of having a regional strategy and even defining one, to the actual practice of implementing it.

It is with this in mind that the workshop sought to dig deeper around some of the practical issues involved in setting in motion multi-stakeholder regional prioritization processes. The research presented and the debates around it threw up a number of specific considerations, among which two groupings stand out.

Firstly, there was much discussion around challenges related to the human element of governance relationships. These include the transience of the actual people involved in smart specialisation governance processes, the development of the personal capacities and capabilities needed to lead and/or participate in these processes, and recognition of the power/relevance of different narratives to speak to different audiences (public, private, research). In particular, there was agreement on the importance of individual leaders emerging from different sectors (government, business, research, civil society), acknowledging that some people have a strong interpretative power that is able to affect the dominant perceptions of their communities. A key then is identifying and engaging the right people at the right moments in the process of developing and implementing regional strategies.

Secondly, there are important considerations around the connections between decision-making processes in different parts of the regional economy. We know that it is critical to work across innovation domains, but we also know that agents in these different domains are not used to talking to each other. This is true within the business community (different sectoral or technological mind-sets), between the business and government or business and research communities, and also within government and research institutions (where a silo approach to departments/disciplines still prevails). International connections are also important for effective smart specialisation governance; the need to look beyond the region to exploit synergies and avoid ‘lock in’. Moreover, we must also look more deeply within the region to understand governance processes at sub-regional administrative levels. Cities, in particular, are becoming extremely influential building-blocks of the global economy, and often exhibit quite different governance relationships that are detached from the wider regions where they are located.

Overall, a key argument emerging time and again throughout the workshop was that smart specialisation strategies or RIS3 demand extremely sophisticated regional governance, something that doesn’t happen overnight. In this sense we are immersed in a learning process, and perhaps the most important question is whether regions are making positive steps towards a more strategic approach to research, development and innovation, and not whether they have found perfect solutions. Indeed, changes in mental frameworks are a first step in this learning process, but are something that is very difficult to measure and may not yet be demonstrating tangible results.

While smart specialization is by no means a clear-cut concept – being negative it can be argued that it has created considerable confusion – it should be measured in time on whether or not it has prompted and helped regions to take a more strategic and engaged approach to their economic development. There are certainly many regional governments that are using smart specialization as a focal point to question how they are doing things, and to try to make improvements to governance so that the innovation investments of firms, universities and government can be better aligned. The Basque Country is a leader in this respect, as Kevin Morgan noted in an interview conducted during the workshop. Having defined a starting set of priorities, the emphasis in the Basque Country right now is on implementing the strategy, engaging stakeholders through pilot groups to uncover more specific niches where research, development and innovation investments will prove fruitful (see this recent talk in Spanish by Mikel Navarro for more detail). These are exciting times, therefore, as we get deeper into the learning process and start to forge a new industrial policy.