News from the IPL
INTRODUCTION
This newsletter is published by The Innovation Policy Lab at the Munk School of Global Affairs, University of Toronto, and sponsored by the Ministry of Research and Innovation. The views and ideas expressed in this newsletter do not necessarily reflect the views and policies of the Ontario Government.
ANNOUNCEMENTS
Canada-Chile Science, Technology and Innovation Action Plan
The Government of Canada is committed to fostering international partnerships in science, technology and innovation with a view to bringing new and innovative ideas to the marketplace which generate jobs, growth, long-term prosperity and social benefits in Canada. To this end, the government recently announced that Canada and Chile will strengthen their co-operation in these areas by signing a new, two-year Canada-Chile Science, Technology and Innovation Action Plan. This Action Plan is a key priority under the Renewed Canada-Chile Strategic Partnership Framework.
Editor's Pick
Re$earch Money
This report provides a summary of the paper presentations and panel discussions from the 2013 annual conference. Overarching themes included: large vs. small, direct vs. indirect R&D support; building on the Jenkins report; procurement and the private sector; an overview of the 2013 budget; the Canadian innovation system in comparative contexts; and priorities for action.
Innovation Policy
From Curiosity to Wealth Creation: How University Research Can Boost Economic Growth
Peter Howitt, C.D Howe Institute
Canadian universities lag behind their US counterparts in generating technology transfer between academic research and companies, and improved policies are needed to address the problem. This report recommends how governments can improve the incentives for universities and their researchers to pursue research lines that can eventually be commercialized.
Three New NIST Economic Briefs: Technology Topics
National Institute on Standards in Technology (NIST)
Three new Economic and Policy Analysis summaries from NIST explore technology’s impact on economic growth, policy options for increasing industrial productivity, and the federal role in fostering the formation of technology clusters. “Beyond the Business Cycle: The Need for a Technology-Based Growth Strategy” discusses the central role of technology in long-term productivity and economic growth. “Some Evidence of Technology’s Impacts on Economic Growth” argues that technology is one of the most important drivers of long-term growth and that government and industry roles in the development of technology are complementary. The third report, “The Federal Role in Cluster Formation” distills research on the government roles in encouraging the formation and growth of technology clusters.
R&D, Patenting and Growth: The Role of Public Policy
Brian Westmore, OECD
This paper uses panel regression techniques to assess the policy determinants of private sector innovative activity – proxied by R&D expenditure and the number of new patents – across 19 OECD countries. The relationship between innovation indicators and multifactor productivity (MFP) growth is also examined with a particular focus on the role of public policies in influencing the returns to new knowledge. The results establish an empirical link between R&D and patenting, as well as between these measures of innovation intensity and MFP growth. Innovation-specific policies such as R&D tax incentives, direct government support and patent rights are found to be successful in encouraging the innovative activities associated with higher productivity growth. However, direct empirical evidence of the positive effects of these policies on productivity is less forthcoming. A pervasive theme from the analysis is the importance of coupling policies aimed at encouraging innovation or technological adoption with well designed framework policies that allow knowledge spillovers to proliferate. In particular, the settings of framework policies relating to product market regulation, openness to trade and debtor protection in bankruptcy provisions are found to be important for the diffusion of new technologies.
UK BIS
This strategy sets out a plan for government and industry to continue to work together to promote the success of the UK information economy sector. Its main themes are:
- a strong, innovative information economy sector exporting UK excellence to the world
- UK businesses across the economy making smart use of information technology and data
- ensuring citizens benefit from the digital age
- underpinning the information economy in the UK
A new Information Economy Council, made up of representatives from government, business and academia will set the agenda for actions towards this strategy and monitor progress. Businesses and users across the economy can contribute on the actions they would like to see and how a strong information economy can be built in the UK.
Cities, Clusters & Regions
Newark’s Manufacturing Competitiveness: Findings and Strategies
The Brookings Institution
Newark manufacturing is a small but promising sector that stands at an important crossroads. Yet, in recent years, trends regarding the structure, scale, and value of the sector to the city and region have neither been well-documented nor well understood. Instead, as in many American cities, misconceptions about manufacturing persist in Newark, compounding challenges for businesses and resulting in lost economic opportunities. This report seeks to alter that paradigm. It is the culmination of the initial year of the Newark Manufacturing Initiative (NMI), which has included a collaboration with the Brookings Metropolitan Policy Program. This collaboration has focused on the development of transformative strategies to improve the local and regional climate for manufacturing. Informed by both in-depth quantitative analysis of Newark’s manufacturing sector and engagement with local stakeholders, this report argues that Newark manufacturing can play a key role in supporting a local and regional transition to a more resilient “next economy”—one driven by the creation of quality jobs and broad-based inclusion in innovative, low-carbon, export-intensive industries.
Helen Lawton Smith, Saverio Romeo and Rupert Waters
This paper focuses on how regions become entrepreneurial and the extent to which the actors in the triple helix model are dominant at particular stages in development. It uses the case studies of Oxfordshire and Cambridgeshire in the UK to explore this theme. Both can now be described as ‘regional triple helix spaces’ and form two points of the Golden Triangle of Oxford, Cambridge and London universities. As entrepreneurial regions, however, they differ in a number of respects. This is not surprising given their differing geo-historical contexts. However, by comparing the two similar counties but which have their own distinctive features this article is able to explore different dynamics which lead to the inception, implementation, consolidation and renewal of regions characterized by very high levels of technology-based entrepreneurship.
Christian RIchter Ostergaard and Eun Kyung Park
Most studies on regional clusters focus on identifying factors and processes that make clusters grow. However, sometimes technologies and market conditions suddenly shift, and clusters decline. This paper analyzes the process of decline of the wireless communication cluster in Denmark, 1963-2011. The longitudinal study reveals that technological lock-in and exit of key firms have contributed to impairment of the cluster’s resilience in adapting to disruptions. Entrepreneurship has a positive effect on cluster resilience, while multinational companies have contradicting effects by bringing in new resources to the cluster but being quick to withdraw in times of crisis.
Statistics & Indicators
Insight: Untangling Regional GDP and Population Growth
The Martin Prosperity Institute
As metropolitan areas try to attract Creative Class occupations in order to succeed within the knowledge economy, it is necessary to analyze the relationships between the Creative Class, innovation, production and population across geographies. When examining the growth of place, population and GDP are generally cited as being two interrelated metrics, as an increase in one is thought to lead to an increase in the other, and vice versa. Metropolitan areas are becoming increasingly complex and diverse, but as this Insight will demonstrate, there is, in fact, relatively no clear relationship between GDP growth and population growth.
The Hidden STEM Economy: Key Findings
Jonathan Rothwell, The Brookings Institution
Workers in STEM (science, technology, engineering, and math) fields play a direct role in driving economic growth. Yet, because of how the STEM economy has been defined, policymakers have mainly focused on supporting workers with at least a bachelor’s (BA) degree, overlooking a strong potential workforce of those with less than a BA. This report presents a new and more rigorous way to define STEM occupations, and in doing so presents a new portrait of the STEM economy.
Policy Digest
Impact of TEKES Activities on Productivity and Renewal
TEKES
Tekes – the Finnish Funding Agency for Technology and Innovation – is the most important publicly funded expert organization for financing research, development and innovation in Finland. Tekes operates on the idea that the success and continuous renewal of the Finnish industries is a precondition for sustainable growth and the wellbeing of people and the environment. The aim of Tekes operations is to create new growth enterprises, and particular focus is placed on small- and medium-sized enterprises (SMEs) that seek international growth. Tekes funds research and development (R&D) and innovation, which play a pivotal role in the renewal of the companies and thus the national economy. The purpose of this study has been to analyse how Tekes has succeeded in reaching its key objectives, productivity and renewal of industries, through its innovation activities.
Firm-specific analysis and Tekes main target groups
Renewal
Tekes funding can contribute to renewal at the firm level by enabling the development of existing business, diversification and internal processes. Renewal can be additionally approached through changes in industry structures through the creation of new enterprises and markets/industries. The Tekes special interest groups (SMEs, NIY funded enterprises and pre-seed program enterprises) gain, on average, more value added from Tekes-funded projects than the ‘baseline’ large enterprises. Especially NIY and pre-seed enterprises see a significant impact on dimensions regarding technology and product quality and productivity. A general feature of Tekes-funded enterprises is that they are larger in terms of number of employees and volume than SMEs on average. Combining the case findings together with the other data, it appears that many of the Tekes-funded R&D projects have little behavioural additionality according to the enterprises’ report. However, some special groups, particularly the New Innovative Enterprises, show significantly better results compared with the average. In the case of NIY enterprises, three out of five productivityraising projects and nine out of ten of the others did not have significant additionality.
Productivity
The econometric analysis of productivity examined the causal effect of public R&D subsidy on firm productivity. To minimize selection bias, combined matching and difference-in-differences method (CDID) was used. With this method, the productivity of each Tekes-funded firm is not compared with average firms but with a control group that is as similar as possible.The effect of Tekes funding is ambiguous when considering the whole population; however, examination of disaggregation analysis provides greater insight. The main result from disaggregation is that the effect of the Tekes funding is conditional to the location of the firm. Firms that are located in regional centres experience statistically significant faster productivity growth than the control group. Five years after the subsidy, productivity has grown approximately 5 per cent more in the Tekes-funded group in regional centres than in the control group. By contrast, firms that are located outside of the regional centres experience a deep and long-lasting decline in productivity (3-4 per cent cumulative productivity growth difference over a four-year period after the subsidy). Consistently, the enterprises that have received consolidated ERDF funding from Tekes exhibit similar impacts. The subsidy effect is also different conditional to firm size. The results for small firms seem to be slightly more positive those for medium-size firms. The initial productivity decline is small and not statistically significant for small-size firms, whereas medium-size firms have larger, longer-lasting and statistically significant initial productivity decline. In addition, smaller firms have experienced faster productivity growth compared to the control group after five years than medium-size firms. However, the productivity growth difference compared to the control group is not significantly
different from zero.
Discussions and recommendations
When considering the results at a glance, it may seem that the average Tekes funding intervention has a relatively small impact on the productivity and renewal of the enterprise. However, a deeper analysis reveals that Tekes funding has a significant impact on productivity and, by extension, on the renewal of firms that are well positioned to use the outputs of the R&D funding. The averages also hide the great heterogeneity among innovation projects. Although there are several projects with low observed success and, consequently, low impact, the successful projects appear to produce promising additionalities.
Significant factors that contribute to the effectiveness of the funding seem to be both exogenous and endogenous to the firm. The importance of exogenous factors is exemplified by the regional disaggregation of productivity analysis, as we observe that centrally located enterprises benefit more from the funding. This may be because of their better network connections, more intense
competition that enhances selection, which forces weaker enterprises to exit, better availability of labour and/or stronger local demand. An examination of the special interest groups provides evidence of endogenous factors, as we observe that groups that extract more benefit out of funding interventions. Especially NIY-funded enterprises report significant impact. We hypothesise that this is because they are commercialisation and internationally oriented and the R&D projects that they undertake are aligned with business and R&D strategy. However, NIY enterprises have the benefit of public business development funding and R&D project funding, as well as typically private investments, which makes it difficult to distinguish the actual net effect of Tekes funding.
Thus, the first recommendation is for additional research that investigates why peripherally located enterprises either suffer a downright setback as a result of R&D funding or experience a significantly longer payback period than other Tekes-funded enterprises. This research could also give more definitive answers to the question of how to best steer public R&D investments for the benefit of the whole economy. The report also recommends further study of the impact of R&D funding on large enterprises along with an analysis of how many tangible results and spillovers come from the projects and how many of them are actually new and radical, as opposed to to incremental innovations. This data should be compared with the results already compiled for SMEs. Finally, these findings raise the question of whether productivity is the best firm-level indicator, especially for R&D and growth intensive SMEs.
Events
16th Uddevalla Symposium 2013: Innovation, High-Growth Entrepreneurship and Regional Development
Kansas City, 13-15 June, 2013
The critical role of innovation and entrepreneurship in regional economic development in terms of productivity and employment growth has been well documented theoretically as well as empirically by researchers in recent decades. The specific mechanisms through which innovation stimulates regional economic development are less well established. It is often assumed that entrepreneurship in the form of new firm formation and the growth of newly established firms plays a critical role, but how, why, when and under what conditions is less clear. Empirical studies show that a limited share of new business ventures have the capacity to rapidly up-scale and to generate substantial new jobs in the regions where they are launched. From the perspective of regional policy makers, this implies that it is critical to understand what regional economic milieus are capable of generating innovations that can be the basis of high-growth entrepreneurship as well as provide the right environment for entrepreneurs to launch entrepreneurial initiatives.Against this background, we seek papers that, in particular, topics related to exploring these themes.
Experience the Creative Economy
Toronto, 18-21 June, 2013
The 6th Annual Experience the Creative Economy conference is a forum for emerging scholars who are engaged in research related to the creative economy. The conference brings together up to 25 individuals from around the world to share and discuss their research. In particular, the small and focused setting provides participants with the opportunity to: present their work; receive feedback; refine and develop research methods; and join an ongoing network of collaboration and exchange.
Knowledge-Based Entrepreneurship, the Triple Helix and Local Economic Development
London, UK, 10 July, 2013
The creation of innovative new firms and the development of SME innovation are strongly influenced by the extent to which localities offer environments that favour the transfer of knowledge to local business and provide the other resources required for innovative firm development, including skills, finance, advice, and supply chain partners. The concept of the ‘triple helix’ captures the interplay of government, research and industry in the promotion of business innovation and provides a framework for policymakers seeking to understand how to promote local knowledge-based entrepreneurship. The workshop will use this framework to examine the policy actions that governments can take to promote innovative new firm creation and SME innovation in local economies by improving conditions for knowledge transfer and knowledge-based entrepreneurship.
Brighton, UK, 10-12 July, 2013
Europe’s relations with the wider world are continuously undergoing change. The urban and regional significance of these changing relations remains surprisingly poorly understood. The global financial and economic crisis, the dramatic events of late 2010 and 2011 in the Middle East and North Africa, the continuing crisis in Europe, and the global rise of ‘new powers’ are each impacting on how Europe, its citizens, and its cities and regions are connected to the wider world. The 9th European Urban and Regional Studies conference aims to consider a wide range of consequences of these changes as well as other themes relating to European urban and regional change.
16th TCI Global Conference – Designing the Future: Innovation Through Strategic Partnerships 
Kolding, Denmark, 3-6 September, 2013
Throughout the world, cluster companies are working on turning new ideas into new products and services that lead to higher turnover and growth. As a consequence we are witnessing new forms of innovation partnerships between companies, research institutions and public authorities in clusters. In designing this year’s conference program, the TCI aims at getting a better understanding of how innovation partnerships work in practice, what can be learned from them, and how they add value to clusters.
Regional Innovation Policy Dynamics: Actor, Agency and Learning
Manchester, UK, 23-24 September, 2013
The network seeks to advance the understanding of regional policy dynamics, the role of agency and leadership in policy change and institutionalisation, and associated challenges for policy evaluation. The workshop in Manchester builds on previous workshops in San Sebastian in 2012 and Tampere in 2013 and seeks to explore new methodologies, concepts and evidence that contribute to the understanding of public policy processes and regional dynamics.
2nd European Colloquium on Culture, Creativity and the Economy
Berlin, Germany, 10-11 October, 2013
During the past decades myriad links between culture, creativity and economic practice have become major topics of interdisciplinary debates. No longer restricted to a few sectors, there is a growing consensus that the intersections between these spheres and symbolic and culturally embedded values in particular, pervade the global economy. Indeed, the formerly distinct logics of the cultural and the economic have become increasingly indiscernible. Similarly, the notion of creativity, once used to express exceptional talent, activities and outcomes, is now considered a key component to success in all fields of economic activity. At the same time, the Internet has revolutionized the conditions under which cultural production and distribution as well as creative collaboration can be undertaken. Despite the high degree of uncertainty about future developments, policy makers as well as business managers are highly optimistic, if not enthusiastic, about the ability of symbolic values and creativity to drive sustained economic growth and regional development. This colloquium will take up and continue an international and interdisciplinary debate on these topics.
Atlanta Conference on Science and Innovation Policy
Atlanta, GA, 26-28 September, 2013
The Atlanta Conference on Science and Innovation Policy provides a showcase for the highest quality scholarship addressing the multidimensional challenges and interrelated characteristics of science and innovation policy and processes. This year’s sessions will explore the research front addressing the broad range of issues central to the structure, function, performance and outcomes of the science and innovation enterprises.
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This newsletter is prepared by Jen Nelles.
Project manager is David A. Wolfe.