News from the IPL
EVENTS
An Evolutionary Approach to Regional Development Traps: An Empirical Analysis of European Regions
October 7, 2025 | 5:00PM - 6:30PM, Online & in-person, Campbell Conference Facility, Munk School, 1 Devonshire Place, Toronto ON and online via Zoom
Recently, the development trap concept has been introduced to identify regions that get caught in persistent patterns of low economic growth and stagnation (Iammarino et al. 2020). Evolutionary scholars have indicated that self-reinforcing dynamics can limit the capacity of regions to innovate and develop new growth paths (Arthur 1989, 1994). However, an evolutionary approach to regional development traps is still underdeveloped. We build on but also go beyond recent work by Pinheiro et al. (2022), among others, that argue that regions might become trapped in low-complexity activities, because their opportunities to develop high-complex activities are very limited, since relevant capabilities are missing.
A novel concept of regional traps is proposed that is embedded in evolutionary thinking, and that accounts for the persistent weak ability of many regions to develop new activities and upgrade their economies into more complex activities. We build on the relatedness/complexity framework (Balland et al. 2019) to measure and identify regional traps and to develop a new typology of regional traps. We aim to shed light on the possible links between regional ‘development traps’ (low growth/stagnation traps) as defined by Iammarino et al. (2020) and our new typology of “regional traps”, following an evolutionary approach (Balland et al. 2019).
We discuss the policy implications, like what to do about regional traps, how to successfully escape them, and how to avoid them in the future. This is crucial for regional innovation policy in places that find themselves trapped or run the risk of falling into a trap.
About the Speaker: Ron Boschma is full professor in Regional Economics at Utrecht University, and Professor in Innovation Studies at UiS Business School of Stavanger University. Boschma has been full professor at Lund University where he was director of the Centre for Innovation, Research and Competence in the Learning Economy (CIRCLE).
RESEARCHERS
Redefining Energy and Compute in the AI Age
Leah Lawrence
This paper is written by IPL Affiliate Leah Lawrence. In our rapidly evolving digital landscape, data centres play a pivotal role, yet their burgeoning energy consumption presents a significant challenge as we seek sustainable solutions. This White Paper explores the intricate balance between advancing artificial intelligence (AI) and mitigating its environmental footprint. We delve into the impacts of AI on energy demand and the role of innovative technologies in transitioning to carbon-neutral digital infrastructures. Key discussions, led by experts in the field, examine the limitations posed by our current technological parameters and propose strategic frameworks to reconcile the growing computational needs with the finite nature of our energy resources. Through workshops and expert panels, this document outlines potential solutions, such as improving energy efficiency, harnessing waste heat recovery, and moving computing operations to more efficient systems, including edge computing. As the AI industry stands at a crossroads between vertical integration and an ecosystem-based approach, our analysis points to the importance of resource allocation, talent acquisition, and collaborative innovation in shaping a sustainable future. This Working Paper serves as both a call to action and a guide for stakeholders looking to foster an energy-efficient and environmentally responsible AI ecosystem.
Iain Stewart
This paper is written by IPL Affiliate Iain Stewart. Canada faces a productivity crisis that threatens our economic future. After decades of lagging behind international peers in business innovation and productivity growth, the need for improvement has intensified. The challenge is multifaceted. This commentary is focused on improving the effectiveness and impact of these federal business innovation subsidy programs. While these tools are not sufficient to on their own to change economy-wide business innovation outcomes, the programs represent a substantial annual federal expenditure, and this commentary argues that improvements can be made to increase their beneficial impact. After reviewing four “core” federal business innovation support programs (SR&ED, IRAP, ISC, and the SIF), this paper concludes that Canada would benefit from establishing a dedicated business innovation agency, such as the Canada Innovation Corporation announced in Budget 2022 (but not yet implemented). This new agency could improve the client experience by consolidating and coordinating programming, strengthen evaluation by compiling and analyzing program data, and, in so doing, become a centre of expertise and advocate for program experimentation.
Editor's Pick
Canada hopes to build a sovereign cloud to counter US dominance. It won’t be easy
Madison McLauchlan, Betakit
At the third annual ALL IN conference on artificial intelligence (AI) in Montréal, Canada’s AI minister called digital sovereignty “the most pressing policy and democratic issue of our time.” This article summarizes recent developments in the federal government's strategy to exert more control over Canadian digital infrastructure, which experts warn is dominated by American tech giants. Prime Minister Mark Carney announced this month that he plans to build a sovereign cloud through the Major Projects Office. The announcement comes amid larger governmental efforts to fund “sovereign AI” where Canadian companies run data-hosting services rather than rely on US players. Minister Solomon previously announced that Canada is putting together an AI strategy task force made up of “innovative thinkers from across the country.” The task force has 30 days to add to a collective consultation process in areas including research, talent, commercialization, safety, education, infrastructure, and security. The group will report back to Solomon in November, fuelling the federal government’s refreshed national AI strategy, which the AI minister pledged would be tabled this year.
Cities & Regions
Maria Abreu & Vadim Grinevich, Regional Studies
This article explores how student entrepreneurship ecosystems enable or constrain the entrepreneurial activities of recent university graduates, with a focus on ‘missing’ entrepreneurs with non-mainstream characteristics. The authors argue that today’s university, with its emphasis on equality, diversity and inclusivity, is an important vehicle for enabling this ‘missing’ entrepreneurship and its economic impacts. The analysis is based on the quantitative study of large-scale micro-data from the UK Graduate Outcomes survey, and a newly assembled university-level database. The results indicate that student entrepreneurship ecosystems are critical drivers of entrepreneurship among university graduates with non-conventional entrepreneurial profiles in terms of gender, ethnicity and socio-economic background.
Statistics
Alex Coad, Stjepan Srhoj, Research Policy
This commentary deals with methodological approaches to assessing entrepreneurial ecosystems' impact on high growth firms. The authors respond to an attempt to replicate their previous study van Dijk et al. (2025) . First, their replication (in Study 1) uses three datasets, but none of the three are suitable for the task. Second, there is confusion about the time period covered by the data, and confusion about whether growth is measured over three years or two years. Third, ideally, the replication should use an indicator that has the same denominator, and also the same numerator. Fourth, the proposed indicator of persistence in Study 2 seems incapable of distinguishing between cases of positive persistence and negative persistence, which is of course a fundamental requirement of a persistence indicator. To summarize, they refer the reader instead to their own recently-published replication on 20 EU countries, that finds different results.
M&As, Innovation and Superstar Firms
European Commission
Rising market concentration and the dominance of `superstar' firms have sparked concerns about declining competition and innovation. While technological change and globalisation are key drivers, mergers and acquisitions (M&As) may also play a role. This paper investigates whether firms use technological M&As — acquisitions of innovative subsidiaries with patent portfolios — to enhance market power. Using a global panel of 8,314 publicly listed firms from 2008 to 2020 and a staggered difference-in-differences approach, the authors find that such acquisitions increase acquiring firms’ markups by 2% on average. Effects are stronger among top R&D investors, US-based firms, and those in high-tech manufacturing. The main mechanism appears to be greater insulation from competitors via acquired patents, which limit knowledge spillovers and raise entry barriers. These findings highlight the need for antitrust policies that balance innovation incentives with the risks of growing market power.
Innovation Policy
Bridging the gap between publicly funded research and markets
Kyle Briggs & David Durland, Policy Options
This commentary argues that Canada's fragmented approach to intellectual property is blocking innovation. The US Bayh-Dole Act dramatically changed how IP at universities and federal labs was handled, and helped kickstart an economy that was in a downward spiral. It allowed post-secondary schools and private research institutions, rather than the government, to own the patents arising from their research. It also required that they work with the domestic private sector. This framework has led to countless inventions arising from research and development (R&D), including drugs and vaccines, Google’s search algorithm and Honeycrisp apples. But would a similar approach be successful in Canada in today’s context? Would it help us better capitalize on research funded with taxpayer dollars? The authors assert that Canada’s lack of a universal policy for governance of federally funded intellectual property (IP) makes tech transfer difficult and blocks good ideas from getting to market.
Canada’s Productivity Challenge: The Hidden Costs of Resource Abundance and U.S. Dependence
Julien Martin, University of Calgary School of Public Policy
Canada’s labor productivity growth has lagged 19 percentage points behind the United States between 2001 and 2021. This policy brief reveals how Canada’s apparent economic strengths - abundant natural resources and privileged U.S. market access—may paradoxically constrain productivity growth. The Canadian economy remains highly specialized: 55 per cent of exports are resource-based, 75 per cent are directed to the U.S., and energy efficiency lags behind other OECD countries due to persistently low energy costs. To close the productivity gap, Canada should foster production of more complex goods in sectors adjacent to existing strengths, while implementing mixed incentives and scheduled taxation to accelerate adoption of energy-efficient technologies. Improving existing transport infrastructure will be key to expanding international trade, and targeted financial assistance can sustain private investment despite ongoing trade policy uncertainty.
OECD
Research Infrastructures (RIs) play a prominent role in advancing research in all scientific domains. However, individual RIs do not host all the equipment and resources required to tackle complex scientific or societal challenges, particularly when these are multi- or inter-disciplinary in nature. The development of integrated RI ecosystems offers new opportunities for enhancing the scope, impact and efficiency of individual RIs, but requires significant incentives to overcome the practical challenges that hinder their creation and sustainability. This policy report identifies and analyses good practices and presents a set of recommendations and guidance to help policymakers and RI managers support RI ecosystems across research disciplines and enhance the added value of RIs for society.
Policy Digest
Building for the Future: How Industrial Policy Can Strengthen Canada’s Economy and Sovereignty
Institute for Research of Public Policy
This report summarizes the final findings of IRPP's two-year research project providing analysis and expert insight on the future of industrial policy in Canada. Over more than two years and four workshops, IRPP's program received insight and advice from a range of experts, stakeholders and rights-holders. Also see the IRPP's related article series Industrial policy and the path to a stronger Canada.
Recommendations
The report recommends that when pursuing industrial policy governments should:
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Develop a strategy that identifies priority objectives, or “missions,” and a limited number of supporting strategic initiatives, projects, sectors and technologies to meet those objectives.
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Analyze what is holding private investment back from the targeted areas and focus on eliminating those barriers.
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Review existing industrial policies across all departments and Crown corporations to evaluate the effectiveness of programs, and where appropriate, reallocate funds toward the priority objectives/missions and the most successful programs.
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Select and design industrial policies to promote Indigenous Economic Reconciliation and full economic participation across Canada.
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Establish a Centre of Excellence on industrial policy to support departments in effective and efficient design and implementation.
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Leverage the capacity and expertise of skilled arm’s-length institutions such as Crown corporations.
Priorities for Industrial Policy
As Canada’s federal, provincial, and territorial governments grapple with responses to a continually changing trade and geopolitical context, there are certain areas where industrial policy can play a key role. Prime Minister Mark Carney, for example, outlined seven priorities in his May 2025 mandate letter to government. Many of those priorities, such as housing and defence, can be supported by industrial policy.
The report proposes six priority policy objectives or missions to pursue as part of an overarching industrial policy strategy for Canada:
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Defending Canadian sovereignty: strengthening defence production capacity and domestic supply chains while expanding dual-use infrastructure;
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Diversifying Canada’s international trade: reducing reliance on trade with the United States while reducing supply chain risks;
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Creating a future-ready, sustainable economy: positioning Canada’s economy to thrive through structural changes to the global economy from a changing climate, the transition toward a low-carbon economy and the rise of artificial intelligence;
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Advancing Indigenous Economic Reconciliation and self-determination: addressing barriers that Indigenous communities, businesses and people face to access affordable capital and fully participate in the economy;
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Promoting full economic participation: removing obstacles to economic opportunities for people based on racial, gender, or socio-economic characteristics, and ensuring that no region of the country is left behind;
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Accelerating innovation to address Canada’s housing crisis: leveraging prefabrication, modular housing, 3D printing and other ideas to double the rate of housing construction.
Events
EVENTS
6th International ZEW Conference on the Dynamics of Entrepreneurship (CoDE)
October 9-10, 2025, Mannheim
The aim of this conference is to discuss recent contributions to entrepreneurial research. It focusses on the formation, growth and exit of young firms linked to innovation, environmental sustainability, or entrepreneurial finance. The conference also addresses the challenges and opportunities of entrepreneurship policies. You are welcome to participate in the conference and contribute theoretical, empirical and/or policy-oriented papers on all areas of entrepreneurship research. Interested researchers are invited to submit a paper (or extended abstracts of at least 4,000 words are also welcome) to entrepreneurship2025@zew.de. Submission deadline: 31 May 2025
Twin Transition, Ecosystems, and Disruptive Innovation
October 23rd-24th 2025, Venice School of Management - Ca’ Foscari University of Venice, San Giobbe - Economic Campus.
The 19th edition of Regional Innovation Policies Conference will take place in Venice, Italy.
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This newsletter is prepared by Travis Southin.
Project manager is David A. Wolfe