Innovation has supported employment both during the economic downturn and in its aftermath. The most resilient regions are regions with strong performance in the three analyzed intellectual property rights (IPRs); patents, trademarks and design. Regional innovation systems that link technology-intensive innovation in industry to a strong service-intensive sector have emerged best from the economic crisis, according to a report ‘How to survive an economic crisis’ 2019) by the JRC. The differences between European regions have increased in recent years. This does not automatically concern differences between Eastern and Western Europe. In Eastern Europe, too, there are regions that have continuously improved their innovation performance and therefore perform better economically.

Innovation process has changed

The report examines two important phenomena that endanger European cohesion today. The first is the underlined process of structural change. This process has characterized the entire world economy over the past decade, driven by technological change and international integration.

The second is the Great Depression that started in 2008. Economic systems in most developed countries had a major transition from an economic paradigm focusing on the manufacturing sector combined with the Fordist mode of production as an engine of productivity, innovation and job creation, to a service-based economy organized around flexible specialization and rapidly adapting innovation processes.

In the Schumpeterian world, outlined in “Capitalism, Socialism and Democracy” (1942), large companies were the engine of technological innovation, developed in large R&D laboratories. However, the path is now paved for the emergence of flexible and lean organizations, which learn and innovate by relying on a number of different sources, both internally and externally of the company (Chesbrough et al., 2008; Freeman, 1998; Lundvall, 1998). The generation of science as the engine of technological innovation has also had major changes, moving from the so-called linear model of innovation to more complex and interactive modes of production (Archibugi and Filippetti, 2015; Gibbons et al., 1994; Leydesdorff and Etzkowitz, 1996; Rosenberg, 1994; Stokes, 1997).

Competitiveness of regions

This process of structural change was simultaneously influenced and enhanced by greater international integration. In the new globalization paradigm, most of the cross-border circulation of goods and knowledge is taking place within the global value chains of large transnational companies, who are looking internationally for the most suitable location for their production of goods and knowledge. As a result, the sources of economic development of regions, cities and peripheral areas have changed markedly.

Building infrastructures and pumping public money is no longer a viable policy. In fact, the convergence of labor productivity in European countries and regions has been driven mainly by the accumulation of fixed capital; lagging regions, on the other hand, have failed to close their technology gaps with the more advanced regions (Filippetti and Peyrache, 2015, 2013).

The search for competitiveness of places has emphasized the need for more tailor-made policies that could promote the endogenous process of economic growth. This shift in emphasis is clearly visible in cohesion policy, which has received increasing attention, towards a policy focused on intangible forms of investment, such as innovation, human capital, cluster policy, industry-university connections and, more recently, an emphasis on institutions.

The bottomline of this policy shift is the general emphasis on so-called place-based policy (Barca et al., 2012). A recent report prepared for the European Commission argues that since “regional economic divergence has become a threat to economic progress, social cohesion and political stability in Europe”, it is necessary to develop different development policies depending on the type of region.

What makes a region resilient?

In a world characterized by rapid and continuous change, the regional economic system’s ability to manage exogenous shocks is increasingly a concern for policy makers. The current pressing question is therefore: what makes a region more (or less) resilient? The crux of the question is whether it is better to deal with an economic crisis if a region is highly specialized, or by having a degree of variety in its industrial structure. The argument is that in the latter case regional economic systems are better positioned to adapt and move away from industries and sectors affected by the crisis in more profitable sectors.

This report introduces the role of innovation as a source of regional resilience in this debate. They base their hypotheses on Schumpeter’s argument long ago in an article, which has been relatively neglected compared to the other works of the Austrian economist. In his article “The Creative Response in History”, Schumpeter makes an important distinction between how economies respond to what we might describe as exogenous change today, and which was defined by Schumpeter as “a change in data.”

Schumpeter distinguished between adaptive response and creative response. The first is a response to a change “as traditional theory describes”; this is a form of change that can be predicted in advance from current economic theories. A creative response, on the other hand, is when “the economy or industry or some companies in a sector do something different, something that is beyond the scope of existing practice.” According to Schumpeter, the creative response has three characteristics. First, it can only be understood afterwards. Second, the long-term economic path. Third, it has something to do with the level of human capital and its behavior, especially the behavior of the entrepreneurs.

Measurement indicators for the innovation profile

The study bases its findings on examining three measurement indicators: patents, trademarks, and designs. Patents can be interpreted as an indicator of technological innovation, trademarks as an indicator of innovation in knowledge-intensive services (KIBS) and design registrations as an indicator of innovation in medium and low-tech industries in the manufacturing sector. A region with better patent performance compared to others is more focused on technological development and can be considered high-tech; conversely, a relatively stronger region in the trademark is more focused on “soft” knowledge than on technology.

In previous blogs I have made comments on rankings of countries based on these kinds of indicators, however, due to the application in this study, this study give another perspective. They looked at the correlation between the indicators.

In the period 2007-2016 there has been a qualitative transformation in the innovation profiles of European regions. A general trend has emerged confirming that many regions of central and eastern Europe have achieved relative performance for all three indicators of innovation. This suggests a general trend for these countries to improve their innovation activity, both in terms of technological innovation, service innovation and design-oriented innovation. In addition to this general convergence trend, another qualitative pattern also appears. There are a significant number of regions that have improved their scores in one indicator and decreased in another. A process of servitization of the economy also affects the underlying innovation activities of the regions, which as a result tend to innovate more than the knowledge-intensive sector.

The combination of technology and services works

The report also examines the extent to which innovation contributes to making European regions more resilient by looking at innovation’s role in regional employment performance during the 2009-2010 economic downturn (resistance) and their capacity to recover in the wake of the crisis during the period 2010-2016 (response). The results demonstrate the lack of clear geographic patterns of both resistance and response, apart from a general lack of responsiveness in the regions of southern Europe. Innovation has helped support employment both during the economic downturn and in its aftermath. In particular, the most resilient regions are regions with strong performance in patents, trademarks and design. This suggests a number of comparative advantages for those regional innovation systems that combine technology-intensive innovation in production with a strong service-intensive sector.

Het bericht Industry and services determines the sensitivity of regions to crises verscheen eerst op CreativeMV.

Number 1 and 2

For a few years now Switzerland is number 1 and leader of the index, followed by Sweden. Remarkable is the policy on creativity development of these countries and their none membership of the European Union.

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The Netherlands

The Netherlands rises from the sixth position to the fourth. Earlier the Netherlands is defined by the European Commission in their Green paper on Innovation (see the index on the right), as an innovation follower instead of an innovation leader. Countries, like Sweden, who early started with on policy strategy on development of creativity, are now the innovation leaders. The Netherlands preferred an industry strategy and not a general strategy for innovation progress. That is probally the lack of the Dutch policy, they change their opinion on policy strategy too often from general to specialised policy and vice versa. Furthermore the SME’s benefit to little of the economic policy choices and programmes, and large companies like Philips do. Lastly the attention is mostly drawn to technological innovation, instead of for instance open, social and creative innovation. Policy makers believe the biggest profits are in these business lines.

Fast mover US

The United States is the fastest growing country on innovation. They moved in the index from the tenth to the fifth spot. According to the report this is due to the education system of the US and strong base of top-ranked universities. And secondly US has seen strong increases in software spending and employment in knowledge-intensive services.

Think global and act local for innovation in your own country

As an advice to stimulate growth of innovation in your own country, they suggest to still think global but act local: realize the full potential of innovation in your own backyard. Don’t try to copy models from elsewhere, like Silicon Valley, because they might not be suitable for your country. Learn and improve your local systems of innovation. They also highlight in this report the importance of innovation hubs. Countries must create and provide an environment that unleashes the potential for innovation. This means knowledge and institutions must be available, stimulate start-ups, make seed capital possible for these kind of companies, facilitate access to soft and hard infrastructure and develop a business-friendly legal framework. But above all, create your own formula and innovation eco-system, just by locating the interest and need of the people and companies you want and need to attract.

If you’re interested in attracting creatives to your region. Read also my blog about the location choices creatives make and their benefits of locating in a hub. Recent research in The Netherlands presented another perspective on clustering and the output of these clusters.

Want to read the full report of GII 2013? Go to the site of The GII.

Do you need help with your policy making on innovation? Please contact me and I can advice you.

Het bericht The rise of nation’s innovation verscheen eerst op CreativeMV.

Richard Florida seems to be an important inspirer and worldwide driver of the opportunities of the creative industry with his book “The rise of the creative class” from 2002. However, the added value of creativity and the creative industry has been praised and criticized for a long time.

This is accompanied by a discussion about the definition of the creative industry. The discussion ranges from the flexibility of the term culture, of which one can wonder whether this applies to the cultural sector, from so-called high and low culture, to a broadly formulated business cycle that is involved in the cultural end product.

However, the discussion about the definition process is ignored and outweighed by the interests of the government to use the sector for other purposes. It has led to economic policies for the sector. The creative industry is used as a vehicle and is seen as a catalyst for the economy.

One size fits all?

The idea of ​​a cultural industry originated in the 19th century with the emergence of the bourgeoisie and mass production. German social philosophers Theodor Adorno and Max Horkheimer were the first to introduce the term “cultural industry”. It was an attempt to draw critical attention to the commercialization of the arts, as the legacy of the Enlightenment. The two philosophers already heralded developments in the future.

The position and significance of the arts was given a more dominant place by the establishment of the European Community. After WWII, European policy saw the opportunity, particularly in the arts, to promote democracy and aimed to make art accessible to the wider public. As a result, the cultural industry had the opportunity to grow and develop, partly thanks to the released subsidies. The emphasis was on specific sectors such as film, media and cultural heritage.

Australia as a creative nation

The Australian government led by Prime Minister Paul Keaton first spoke in 1994 of creating a creative nation. Keaton assumed that culture creates prosperity, adds value and contributes to innovation, marketing and design. The degree of creativity determines the ability to respond to new economic developments and pressures. This philosophy was soon adopted by countries such as Canada, New Zealand and England. Under the leadership of Prime Minister Blair, England brought the creative industry to Europe as an economic flywheel and established a Creative Industries Taskforce. In 2004, sociologist Hans Mommaas introduced the advantage of a creative cluster as a requirement for the developing knowledge economy in the Netherlands. In it, he emphasized city marketing, encouraging an entrepreneurial attitude to art and culture, encouraging innovation and creativity, breathing new life into old buildings, and promoting cultural diversity and democracy. The advantages of this cluster formation, for innovation and economic growth, had already been described by economist Schumpeter in his “Innovation Theory” (1912). The appeal for politicians to make a policy choice for the creative industry is still in this capacity for innovation.

European definition

Not only at national and regional level in The Netherlands there are differences in the definition of the creative industry, but also in Europe and its various Member States. Where in countries such as Spain and Italy, for example, gastronomy (food and wine) is part of the creative industry, some Scandinavian countries and England add ICT to the sectors.

The differences are in the definition used, the number of sectors and the combination of sectors. It seems very much that the definition of the creative industry by the various governments of the European member states is culture and purpose.

The European Union itself uses two different definitions. The published green paper ‘Unlocking the potential of cultural and creative industries’ by DG Education and Culture, part of the European Commission, defines the creative industry as an industry that produces and distributes goods and services that, given their specific nature, use or purpose , shape or communicate cultural expressions, regardless of their possible commercial value. In addition to the traditional art sector (performing arts, visual arts, cultural heritage including the public sector), they include film, DVD and video, television and radio, video games, new media, music, books and magazines. ICT and cultural tourism are excluded. Public and commercial organizations belong to the same group.
The second definition is from DG Enterprise of the European Commission and defines the creative industry as anyone involved in the creation of products, services and activities to be marketed that depend for their value on a creative or artistic input.

I can only draw one conclusion and that is that the definition has become diffuse. Is that bad? I don’t think many people will be awake. What I do notice in practice is that there is confusion for whom, for example, certain meetings or arrangements are intended. The differences in definition for research are also very inconvenient and not transparent. You quickly compare apples to pears. I also think that a wrong intention has emerged about the top sector creative industry and the related ambitions.

Het bericht One size fits all: defining the creative industry verscheen eerst op CreativeMV.

Development of entrepreneurship in Europe.

Only since a few years the importance, and the determinates of entrepreneurship in Europe is researched. Insight in the determinants of entrepreneurship is crucial for shaping public policies and the assessment of their merits. Interesting is the effect of demographic and other variables on latent and actual entrepreneurship. Latent entrepreneurship is measured by the probability of a declared preference for self-employment over employment. Other than demographic variables such as gender, age and education level, variables like country specific effects, the perception of administrative complexities and of availability of financial support and a rough measure of risk tolerance, are important for a set of right conditions to start a business.

The Global Entrepreneurship Monitor is, since 1999, an annual assessment of the entrepreneurial activity, aspirations and attitudes of individuals across a wide range of 70 countries. GEM explores the role of entrepreneurship in national economic growth and has become an important report. The last report (2011) shows that Russia and the United Arab Emirates, countries that place a high emphasis on extractive resources, exhibit the lowest entrepreneurial intention rates. In contrast, expectations to start a business are expressively high in some other emerging economies like China, Chile and Brazil. In the Dutch report it appears that about one third (34%) of the entrepreneurs was influenced in the decision to become an entrepreneur by (a) role model(s). In 2010 7.2% of all Dutch people (age 18-64 years) started of was active in their own company (exists <3,5 years.) Of all high developed economic countries The Netherlands now has the first place in Europe and globally the fifth, just behind the US. Ten years ago The Netherlands was only half of the index of the US, so we made a lot of progression through the years.

GEM gives as advice:

• For factor-driven economies, policy should center on improving macroeconomic stability, health and basic education, and public infrastructure.

• Policy recommendations that improve the flexibility of labor, communications and market openness while eliminating bureaucracy and red-tape will contribute to a more entrepreneurially-focused business environment.

• Stringent labor regulations and an onerous regulatory system negatively affect the number of high-impact entrepreneurs. This is a important point for all government policy makers to note because these entrepreneurs contribute greatly to job creation.

• Cultures that reward hard work and creativity, rather than political connections, will also encourage entrepreneurial development.

• Create an energy for making positive changes, societies must consider that entrepreneurship is not a heroic act of a few individuals, but the accomplishments of many people who pursue their ambitions in a supportive cultural and institutional environment.

What lacks in the researches is the dna of an entrepreneur (nature/nurture), which can be developed if someone has the drive to create and sees and grabs his opportunity for a market. The development of entrepreneurship by coaching has been researched in The Netherlands by ITS in, a former ESF-Equal project, IkStartSmart. But not yet at European level.

Money makes Europe go round

My problem with the system for financial support for projects to stimulate entrepreneurship, is that too much of the same is approved and the results are not that breathtaking. I believe that Europe has to define (like they do just now), what kind of companies we need for the future, what they would like to achieve and on what terms. We all know that to stimulate and support entrepreneurship you can choose from projects which contains training, coaching, one stop shopping advice, networking events, platforms etc. Of course it works for the small group of participants. But you will never know if they had also made it without the support, there is allways a selection. And the supported group often is too small to have an impact. If Europe wants to finance these initiatives, then they should dissaminate the knowledge of all projects of these past years and use and finance the best practises. Its saves costs on developing and projectmanagement on which a whole market is built. A database is already presented on the net, but doesn’t function in a proactive way nor as a term for approving new applies. And let the market do their job. Don’t financially support competitive voluntary initiatives. Even though they mean very well and have the right objectives.

Europe is a patchwork of different cultures.

In my years as a business advisor and policy maker for the Chamber of Commerce I was projectmanager of several large projects to stimulate entrepreneurship. These were all transnational projects and gave the opportunity to work with other countries and universities and learn more about their way of stimulating startups and entrepreneurship in general. This collobaration was fun and I learnt a lot about the culture of the different partners, but it was also very time-consuming. I remember, one trip we spent half of the time on defining entrepreneurship.

You just can’t compare Spain with Finland or the Netherlands. Our structure, culture and level of entrepreneurship is quite different. When Brussels wants to stimulate certain special groups, like woman, or unemployed, it just doesn’t always fit the needs of a certain country like The Netherlands. On European level we need to built a foundation and climate that stimulates entrepreneurship, not financing the low hanging fruit, which are nice to present, but not in the long term helps us built and grow. We should create a climate that stimulates all kinds of people with several backgrounds not just the people in a certain subordinated condition.

What should be done?

There are already made suggestions in the survey and in the GEM rapport on which I agree upon, and believe that they should immediately be started. For instance the improvement on access to finance and the improvement of legal, administrative and tax provisions for business transfers. Other things to do are:

• Entrepreneurial behaviour, skills and mindsets should be embedded in national/regional curricula at all levels –  primary, secondary, vocational, higher education and non-formal education and training, alongside integration of work-based teaching and learning in all disciplines and curricula. (already in the survey, very important)
• All young people to have one entrepreneurial experience before leaving secondary school (either as a formal part of the curricula or as an extra-curricular activity that is overseen by the school or a non-formal education body. (already in the survey, very important)
• Improve clearance of the legal position in the use of terms and conditions.
• Improve the information and advice of accountants and notary offices for (startup) businesses with more than one shareholder about their position towards each other, rights and possibilities with business transfers in this structure.
• Increase the responsibility of an accountant. For instance like in Germany.
• Work on comparing international legal forms.
• Awareness raising in business and finance community to remove stigma of failure.
• Define the growing and competitive markets for the future in Europe and invest in those markets.
• Underline the importance of creativity in line with new technologies.

If you would like to contribute, you can also fill in the survey of the European Committee and add you ideas and suggestions for this European agenda to stimulate entrepreneurship. Their call to action is open due to the first of october 2012.

Het bericht European agenda for Entrepreneurship 2020 verscheen eerst op CreativeMV.