Innovation has long been recognised as a driving

Innovation
has long been recognised as a driving force behind economic development and
national prosperity. It is key to a country’s dynamic competitive advantage,
which can be shaped by dedicated policies as well as regulatory and
institutional framework (Asheim and Coenen, 2006). Until 1990s innovation
policy embraced a linear approach by prioritising technology transfer, R
infrastructure provision and supporting financial instruments (Tödtling and
Trippl, 2004). That linear model has subsequently become a subject of sharp
critique. By equating innovative capabilities with R intensity, it
neglected a complex interplay of various actors who contributed to rise of
innovative ecosystems. Since then policy-makers encompassed a holistic, system
wide approach to the formulation of their innovative agenda. National
innovation systems (NIS) (Lundvall, 1992) have become a common acknowledgement
that innovations are developed and implemented through a network of
interdependent actors underpinned by an institutional framework (Asheim and
Coenen, 2006). Innovation is seen as an evolutionary, nonlinear and dynamic
process, based on learning, interaction and collaboration between different firms,
institutions and organisations (Edquist, 2001). Firms do not generally innovate
in isolation (Edquist, 1997). They are embedded in a broader institutional environment,
including public agencies, research institutes, industry associations,
financing institutions, standard setting bodies and so forth.

 

Most public policies designed to foster innovative
capacities at the national level succeed in enhancing interaction among
different players and fixing common market failures, deterring private
innovation investments. Nevertheless, they lack a differentiated approach when
it comes to a specific region’s setting. “One size fits all” policies fail to
account for the fact that regions substantially differ in their innovation
potential, absorptive capacity and strengths. That limitation paved the way to
the emergence of the regional innovation system’s framework (RIS) that promotes
specific targeted policy measures to enhance capabilities and performance in
local firms, improve their business environment and boost competitive advantage
of regions (Doloreux and Parto, 2005). What both approaches share is systemic
character of innovation, which presumes that innovation processes increasingly involve sharing work and are
based on the chain-linked innovation model (Sternberg,
2007). Though, the concept of a regional innovation system
is based on the assumption that location and spatial proximity matter for
innovation activities (Cooke et al., 1997).  The argument for tailored regional policy is
also premised on innovation as being an inherently geographical process,
spatially concentrated and sustained through shared regional knowledge base
(Maskell and Malberg, 1999; Asheim and Isaksen, 1997, cited in Doloreux and
Parto, 2005).

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Since 2000s governments across both developed and
emerging economies have come to realise that national competitiveness depends on the ability of indigenous companies
to innovate. Measures endorsing development of industrial districts, innovative
milieu and clusters has topped regional policy agendas. One of the clearest
examples of this approach was Germany, which in 1995 announced the BioRegio
initiative to build and support innovative, regional biotechnology clusters,
that eventually helped to drag Germany up from its poor competitive position in
biotechnology commercialisation (Cooke, 2001).

 

Both
policy-makers and academia place greater emphasis on regional dimension of
innovation processes and its role in national economic growth and development.
Region is increasingly the level at which innovation is carried out through
regional networks of innovators, local clusters and research institutes
(Lundvall and Borra, 1997, cited in Asheim and Coenen, 2006).

Thus, prudent and well-articulated regional policy has
a significant stake in discovering and sustaining endogenous sources of
innovation. The mere presence of the system of actors and institutions that
embark on and influence innovation activities in the regions is not sufficient
to develop commercially viable and successful knowledge-intensive output. Rather
the quality of the policies that support production of innovative products and
services play a defining role. There has been important empirical and theoretical
contribution to the research on RIS. However, the research on the measurement
of the quality of RIS demonstrates predominance of empirical studies on
linkages between innovative actors, assessment of observable innovative inputs
and outputs such R expenditure, patents and publications. It lacks focus
on knowledge creation and entrepreneurial activity. It is argued that
innovative strength of regions depends on small and medium sized enterprises,
entrepreneurs that are willing to invest, and local research and education
institutes that provide skilled labour force. Nevertheless, they remain
excessively untouched by the national STI policies, but also receive inadequate
regional support. On the one hand, national STI policies are biased towards
major industry players. They allocate R funding and subsidies to a
handful of traditional large corporations. On the other hand, regional
administrations face budgetary constraints to support local players. The national
and regional policy measures are supposed to complement each other, however,
there are gaps that need to be fulfilled by either sound reallocation of
resources, diversification of policy tools or shift in responsibilities,
conferring more power to regional authorities.

Policy-makers
at different local and regional levels, being active at formulating regional
STI strategies, still have to encounter challenges such as limited access to
the full range of innovation policy instruments. The whole idea of developing
regional innovation strategies is relatively a new phenomenon, particularly in
the emerging and transition economies. Some of the regional STI strategies are
in their nascent forms yet. There is no solid experience or best practices to
learn from. Due assessment of their progress, thus, will reveal flaws and
limitations    and bring policies back to the right
trajectory. Essentially, it will help local authorities develop focused support
efforts, rather than generic actions. The aim of this paper is to investigate
regional policy initiatives and evaluate their effectiveness in unlocking and
activating local innovation potential, particularly in SMEs. It will discuss
the following questions: How effective are regional STI policy measures? Why are
there failures? How can the current policy set be further improved? The paper
will analyse policy instruments implemented by regional governance in Germany
(Berlin Brandenburg), Russia (Moscow region) and Kazakhstan (Akmola region). The
research will take a qualitative approach in order to bring expert opinion and
deeper insight into the issue under study. It will allow interpretation of the
research problem from the perspective of the regional policy-makers as well as
describe experiences of individual regions. Based on three case studies and a
number of interviews with local government officials, it will assess the
quality of the STI policy measures by regional governments, discover which policy
measures can be defined as best practices and which need specific alterations. The
overarching goal of the research is to propose recommendations in order to
change the status quo and lay foundations to a new innovation policy framework.

From
WB

Innovation
policy should comprise the core of governmental agenda.

Innovators
are, first and foremost, entrepreneurs (World Bank, 2010). Even though they
possess the skills to introduce new products and processes, they still require
basic support in their endeavours since innovation is a dynamic and
collaborative phenomenon. An enabling environment that tackles the problem of
underinvestment into research and innovation, network and cooperation issues, stemming
from information asymmetries, among firms, higher education and research
institutes, as well as institutional rigidities which stifle entrepreneurial
spirits. Large firms have long enjoyed state support, ranging from assistance
in precompetitive research to direct support and subsidies. Small and new
ventures have been deprived of this privilege, left to deal with their size
constraints, limited access to input factors and markets on their own. While
governments used in the past to underestimate the contribution of SMEs to
innovation dynamics, they have revised their priorities in the past decades, by
substantially raising preferential benefits and support for SMEs in their
programs (World Bank, 2010).

First,
innovation is increasingly taking place at a small firm level. SMEs lead
innovations in the major global industries such as biotechnology, ICT, AI and
renewable energy. While not all SMEs are inherently innovative, they are often
the primary source of new radical, Schumpeterian ideas. These are vital for
economic growth and enhanced national well-being, since they can work outside
the dominating paradigms, take advantage of commercial or technological
opportunities that have been neglected by more established firms or
commercialise knowledge that would otherwise remain commercialised in
universities and research institutions (OECD, 2017). For example. SMEs account
for 20 per cent of patent, one tangible measure of innovative activity, in bio-tech
related fields in EU (Eurostat, 2014). Second, they also play a major role in
value creation by adopting and adapting innovative solutions created elsewhere
to local context through incremental changes or catering to the needs of niche
customers and serving locations lacking large enough scale to attract larger
companies. Furthermore, the rise of the knowledge based-economy and emergence
of open or network-based types of innovation have also enabled SMEs to increase
their contribution to innovation (OECD, 2017). Knowledge spillovers, networks
and potential partnerships with other industry players, including established
firms, play a central role in innovative activities of SMEs. Thus, a key
challenge for them is to detect and partner with the appropriate external
networks and knowledge agents at the local, national and global level.

Although,
SMEs possess untapped potential for generating innovative solutions, not every
single one can fully exploit it. On the one hand, many face difficulties
mobilising large-scale resources, lack access to technological expertise,
funding, managerial or organizational capabilities to develop or adopt a new
technology.  On the other hand, for technology
providers and consultants, the costs of reaching smaller companies and
tailoring equipment to their needs are relatively high (World Bank, 2010).

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