The IPL newsletter: Volume 7, Issue 141

MRI Strategic Plan

Ontario Ministry of Research and Innovation

As part of its mandate, the Ministry of Research and Innovation has developed a strategic plan to position Ontario as an innovation leader. This document marks a commitment to make sure researchers, entrepreneurs and visionaries have the tools they need to transform creative ideas into the products and services that create jobs for Ontarians and help build a stronger society.The purpose of this plan is to trigger discussion among all of the Ministry’s partners — businesses, academic institutions and government ministries.The strategic plan highlights, and proposes action on, five key innovation goals for the province. These include fostering an innovation culture and providing an attractive policy environment; improving Ontario’s R&D presence as well as the transition from lab to marketplace; increasing private sector investment in innovation; improve the quality and diversity of the workforce through training and support; and improve the coordination of innovation policies to ensure maximum impact.

A Matter of Size: Triennial Review of the National Nanotechnology Initiative

Committee to Review the National Nanotechnology Initiative, National Research Council

Considerable evidence, presented in this report, indicates that the NNI is successfully coordinating nanoscale R&D efforts and interests across the federal government; catalyzing cooperative research and technology development across a spectrum
of disciplines from engineering and the physical sciences to biosciences and biomedicine; and opening a host of new opportunities for scientific discoveries at the nanoscale with, for example, a suite of nanoscale national facilities, laboratories, and research support programs. In addition, the NNI-participating agencies have made significant progress toward establishing a national R&D infrastructure to support innovation at the nanoscale.

Community Framework for State Aid for Research and Development and Innovation

European Commission

The European Commission has adopted a new Framework to clarify to Member States how best they can give state aid to not only research and development but also innovation projects, without infringing EC Treaty state aid rules. This new Research, Development and Innovation (R&D&I) Framework will help Member States wishing to use state aid as a complementary instrument to boost Research, Development and Innovation. The Framework sets out a series of guidelines for specific types of state aid measures – such as aid for R&D projects, aid to young innovative enterprises and aid to innovation clusters – that could encourage additional R&D&I investments by private firms, thus stimulating growth and employment and improving Europe’s competitiveness. The new Framework is due to apply from 1st January 2007.

OECD Science, Technology and Industry Outlook 2006

OECD

This report offers a comprehensive review of key trends in science, technology and innovation policy, and an examination of recent policy developments in OECD countries. In addition to examining main trends across the OECD, the report delves into specific topics that are high on the agenda of innovation policy makers, including the role of intellectual property rights and technology licensing markets in innovation performance, policies to enhance benefits of the globalisation of business R&D, human resources for science and technology, and the evaluation of innovation policy.

Determinants of Long-Run Regional Productivity: The Role of R&D, Human Capital and Public Infrastructure

Raffaello Bronzini and Paolo Piselli
This paper estimates the long-run relationship between regional total factor productivity, R&D, human capital, and public infrastructure between 1980 and 2001. Empirical evidence shows that there exists a long-run equilibrium between productivity level and the three kinds of capital; among them, human capital turns out to have the strongest impact on productivity. Regional productivity is found also to be positively affected by R&D activity and public infrastructure of neighboring regions.

2006 R&D Scoreboard: Top UK and Global Companies by R&D Investment

DTI

The 2006 R&D Scoreboard contains extensive data on the top 1250 global R&D investing companies and the top 800 from the UK. The Global 1250 is dominated by companies based in a few major economies (82% of R&D is from companies based in the USA, Japan, Germany, France and the UK), by large companies (61% of the R&D is done by the top 100 companies) and by companies in major R&D sectors (70% of R&D is in the top 5 sectors: technology hardware, pharmaceuticals, automotive, electronics and software).

OECD Territorial Review: Competitive Cities in the Global Economy

OECD

The report studies the 78 largest metro-regions in the OECD, ranging from Tokyo with close to 35 million inhabitants to Auckland with about 1.5 million. The OECD average is just over 5 million. Of the 25 wealthiest cities, as measured by GDP per capita, 22 are in the United States and the others are London (in 13th place), Paris (18th) and Dublin (23rd).

Successful cities attract talented young highly-skilled workers, are centres of innovation and entrepreneurship and are competitive locations for global and regional headquarters. The proximity of universities to research and production facilities means cities are where new products are developed and commercialized. More than 80% of patents are filed in cities.

However, cities are not always synonymous with success. Cities can falter. Berlin, Fukuoka, Lille, Naples, and Pittsburgh perform below the national average for income, productivity, skills, and employment. And there is some evidence that mega-size cities – those more than 7 million people such as Seoul, Mexico City, Istanbul and Tokyo – have outgrown the economies of scale normally associated with cities.

This report argues that there is no ‘one size fits all’ policy for cities. But the report makes recommendations that can be tailored to meet specific needs. These cover a wide range of policy “dilemmas” identified in the report. The combination of economic advantages and difficulties posed by the rise of metro-regions present a number of strategic choices that confront policy-makers. Large cities have acquired growing economic and demographic importance, and function as the key loci of transnational flows on the international market. Yet, large cities are also associated with negative externalities, such as congestion, pollution, social segregation or high crime rates. These trends raise issues about the long-term sustainability of urban regions. The following “dilemmas” and proposals, address some of these key issues.

1. The Impact of Metro Areas

This report examines some of the supposed effects of large urban agglomerations on society and the economy. For example, it finds that:

• The causal relationship between levels of urbanization and per-capita income growth are not clear – that is, creating larger cities does not necessarily lead to growth in per capita prosperity. Although, larger urban agglomerations tend to have greater internal diversity, making them more likely to foster innovation.

• The impact of metro areas on the rest of the country is not clear – While cities may generate wealth and positive externalities, they may also drain other areas of key resources (such as talent).

• Reconciling national and dominant-region interests can be a positive sum game – the redistribution of wealth from dominant to flagging regions in the form of subsidies often misses the mark. Regional strengths should be supported to create diverse specializations.

• Synergies can be created by building networks between cities and other regions.

2. Policy Approaches

This section examines the extent to which policy makers can contribute to a comprehensive strategic vision for their metro regions without playing a direct role in economic planning at the local level. The report finds that:

• A strategic vision is required – Cities must constantly reinvent themselves in order to maintain prosperity. This requires a long-term vision, and partnerships that extend beyond the urban region.

• A diversified cluster approach could help limit risks – a strategic vision should support diversity and encourage a wide range of cluster initiatives. However:

• Cluster strategies should be tailored to each metro area – a cookie cutter approach to every metro area ignores local distinctiveness, strengths and weaknesses. There is no one magic policy that will accommodate every city.

• Clusters require a diversity of local ‘public goods’ – Policy should focus on diversifying and constructing local public goods. For example, transportation networks (roads, public transit, rail, air etc.) should be made more efficient. Other interventions can be sector specific. It is worth noting that strong clusters rely on diversity in public research infrastructure, instead of just one strong institution.

• Not all metro areas will succeed in high-tech – therefore, each strategic vision should seek out local advantages and global niches.

• Public policy should involve a wide variety of actors – and should focus on identifying key local actors, networks and associations to help shape and implement local policies.

3. Environment and Sustainability

What choices should policy makers be aware of? The report argues that:

• A good and attractive environment may not be an alternative to economic success – but can contribute to it. There is no clear evidence that higher tax rates that help maintain positive environmental conditions deter firms from investing in a region. Locational factors that influence firm location include environmental attractiveness.

• The timing of investment is important – For example, delaying transportation decisions can cause years of congestion costs.

• Urban renaissance strategies also contribute to attractiveness and livability – New projects in the inner city can increase the attractiveness of cities lacking historical interest, while preservation and restoration can enhance the character of historical assets.

• Attractiveness is key to attracting FDI – low taxes are not the only consideration to firm location, and there are several examples of highly successful cities with high tax rates (i.e. Stockholm and Helsinki). Low tax incentives may attract certain firms, but these may just as easily leave without having made any long term improvement to the local economy.

• Poverty and spatial polarization are the most difficult challenges – success of metro regions depends not just on environmental and physical attractiveness, but also on social cohesion. The effectiveness of policies that address the former depends on the strength of the latter. Specific policies are necessary to improve social cohesion and reduce polarization. But:

• Policies that address distressed neighborhoods have had mixed outcomes – effective policies to address social cohesion require real committment of state actors, and innovative approaches. Effective and sustained leadership and visionary thinking by public actors is critical to the success of these social policies – it is not just a question of money.

4. Governance

Should policies aim to create authority at the level of the functional urban region, or as close to citizens as possible? The report discovers that there are:

• A wide variety of governance models – the most radical of which involve large scale institutional reorganization. However, more informal, and less disruptive, approaches do exist.

• Different models have different trade offs – flexibility, efficiency and authority are issues that need to be considered in each case. Where it may be easier and faster to get things done, as well as easier to coordinate and monitor, in formal regional institutions, cooperative mechanisms can be more efficient and responsive.

• Public support and legitimacy will determine the success of a reform – Models that are imposed may lead to confrontation and undermine the goals of the reform. Most successful reforms are those where the localities and public are supportive, or have helped to shape the form of new institutions.

• The participation of local actors is essential – to deal with social conflicts and relieve tensions. The levels of government closest to the citizens must be capable of assuaging local concerns. The devolution of finances and responsibilities can help ensure that development reflects local character and encourage participatory democracy.

5. Intergovernmental Relations

Strengthening the local level may lead to the potential for intergovernmental conflict. While this may be the case, it is clear that:

• Higher levels of government are essential to building metropolitan cooperation – only rarely have initiatives for local government reforms come from the local level. National and state/provincial levels have been critical in imposing or encouraging reform, and often help provide the legal basis that support legitimacy.

• New tools of vertical relations between governments are being developed – in particular, legal measures that help support contracts between municipalities. These are most effective when supported by negotiations that involve multiple levels of government, and encourage collaboration.

6. Funding

Metro areas require significant infusions of money to encourage and maintain development. However, these can lead to inequalities. It is important that policy makers realize that:

• The specific challenges of metro regions require an urban lens on local public finance – Local taxation systems must be adapted to local responsibilities. Underfunding can result in the deterioration of the local infrastructure and environment. On the revenue side, municipalities should have sufficient autonomy to determine tax levels and priorities. On the expenditure side, the assignment of responsibilities should be appropriate to the level of government and resources available to support them.

• Equalization may have perverse effects – and create disincentives at the local level, rather than encouraging metropolitan development and equality.

Rethinking national urban strategies:

The above analysis outlines some of the key issues that policy makers must consider in developing national urban strategies. What is clear, in this report, is the importance of metro regions to national prosperity, as well as the necessity for greater visibility for urban issues on the national and regional levels.