The Spanish Cluster Policy Buzz

Geographically concentrated clusters of firms and other related agents (universities, research centres, training institutes, etc.) have become an extremely popular basis for policies that seek to foster competitiveness. Indeed, it is difficult to find a European country or region that doesn’t have some form of support for clusters, even when they are not explicitly called clusters.

Spain is no different, and cluster policies here are going through an interesting phase of resurgence. Mature cluster policies in regions such as Catalonia and the Basque Country – both celebrating a quarter of a century of support for clusters – are being renewed and refreshed, and new policies are emerging in regions such as Navarra and the Balearic Islands, where clusters haven’t been a strong part of the policy scenario until now. I have had the opportunity to engage with policy-makers and cluster practitioners at events in each of these regions over the last few months, and it seems that there is a renewed buzz around clusters in Spain.

It is an interesting moment to reflect, therefore, on the reasons why clusters are an attractive focus for competitiveness policy. Indeed, amidst the vast panorama of cluster initiatives and cluster associations it is easy to forget the socioeconomic arguments behind the cluster concept and the associated principles that should guide the actions of these institutions.

The basis for clusters is a fundamental principle of economic geography: related economic activities naturally tend to concentrate in specific places. The English economist Alfred Marshall first wrote about this in the early 1900s, based on his observations of English cities. He argued that industries were localised in specific towns and cities because of manufacturers’ needs for human and natural resources and specialised markets, and also because their proximity to one another created a ‘special atmosphere’ that gave advantages to firms.

It is the potentially potent blend of competition and cooperation among firms and other agents working in related economic activities and in close proximity that cluster policies seek to foster. While policies do not need to – and should not try to – create clusters from nothing, they can play a role in provoking their emergence based on existing regional assets and capabilities. They can also play a key role in overcoming some of the barriers to cooperation that prevent existing clusters from becoming even stronger engines of regional competitiveness.

Support for cluster associations is the most popular policy instrument to facilitate these roles. Such associations have been a key part of competitiveness policy in the Basque Country and Catalonia for a quarter of a century now, and support for cluster associations is also the route that Navarra has recently opted for in seeking to strengthen its cluster dynamics. It is important, however, for cluster associations not to lose sight of the fundamental principle of cooperation as a complement to competition and route to collectively improving competitiveness. It is this focus that marks the difference between cluster associations and sector associations or chambers of commerce, for example.

Cluster associations should not be focused on lobbying around their members’ interests or providing specific services for their members, although the latter often fits as a complementary activity. Their primary mission should be to facilitate cooperation among the cluster so as upgrade their collective competitiveness. This means supporting members in identifying and tackling shared problems or challenges where different agents have different parts of the answer, or where scale is important for providing a solution.

These types of shared challenges most commonly emerge around issues related to innovation, internationalisation and the provision of cluster-specific training or infrastructures, where individual efforts in isolation are unlikely to be as effective as cooperative efforts. However the benefits of cooperation can be quite intangible and are not easy for firms to see initially. A long-term approach that gradually builds trust and social capital is needed so that cooperation can become embedded alongside existing competitive dynamics.

With a focused approach to fostering cooperation over the long term, cluster policy and cluster associations can play a key role in enhancing the competitiveness of a wide variety of clusters; from traditional value-chain clusters such as automotive or aerospace; to transversal clusters such as environmental technologies or industrial transformation; to quite specific newly emerging clusters such as functional printing or sports industries. What is more, working with a cluster approach also has the potential to lead to better policy-making in other areas through the strategic intelligence that cluster associations can communicate to government. Indeed, the most successful cluster policies tend to be those that are seen as key vertebra of competitiveness policy, linking into a wide range of other policies that support business competitiveness.

This post is an adaption of an opinion article published in Spanish in the Diario de Navarra.

Posted in clusters, Competitiveness | Tagged , , , , , , , , | Leave a comment

Strategies for Shaping Territorial Competitiveness

The issue of territorial strategy is currently extremely popular among regional policy-makers. In Europe this popularity has been stoked by the European Commission’s adoption of the smart specialization concept and insistence that all regions that want to receive structural funds related to innovation have in place a research and innovation strategy for smart specialization (RIS3). The debate is relevant more widely, however, as around the world today we see policy discourse dominated by territories – whether they be cities, regions, countries or cross-border regions – looking to develop, implement and monitor the progress of distinctive strategies to boost their competitiveness and economic development.

Despite this popularity, there is a strong sense in which policy practice is racing ahead of conceptual and empirical understanding in the academic sphere of what territorial strategy-making actually entails. Our recently published book on Strategies for Shaping Territorial Competitiveness aims to move forward academic understanding of territorial strategies, while explicitly recognizing that academic reflection must build from and work with the wealth of evolving practice. As Christian Ketels argues in his recent blog post for the TCI network, regional strategy is difficult. We are at a moment when the academic and policy worlds need to collide more effectively so as to generate real improvements in how we ‘do’ territorial strategy for competitiveness.

As with corporate strategy, the central issue when it comes to constructing a territorial strategy is the choice around the type of socioeconomic activities that should be developed, both now and in the future. In this sense the debate around territorial strategy overlaps with literature on science and technology policy and with previous and currently re-emerging debates around industrial policy. Moreover, as with previous surges in interest in territorial strategy, current popularity has corresponded with a context of deep economic crisis in many parts of the world that renders making choices both more pressing and more difficult.

What is perhaps most challenging is that territorial strategies should articulate these choices in ways that address the multilevel and complex nature of each territory, where different goals, agents and interests co-exist in mutual dependence. This requires taking systemic or holistic approaches. In this regard, territorial strategy and indeed ‘new industrial policy’ should not be about the articulation of choices ‘top-down’ from government. Rather, it should be the result of diffused processes carried out among different agents and organizations within the territory; what in the smart specialization literature is referred to as processes of ‘entrepreneurial discovery’. Yet there remains a large gap in understanding around how these processes take place and how they can be articulated towards coherent strategies capable of shaping competitiveness in the specific contexts of different territories.

The book takes steps to bridge this gap in understanding by asking questions around what a territorial strategy is for, what it is, and how it happens. These are explored in abstract and then through reflections on a series of cases representing very different contexts in Argentina, Canada, Denmark, Spain, Sweden and the UK. The case analysis is particularly important because there can be no one size fits all strategy. In their very nature territorial strategies are context-, place- and path- dependent, which demands holistic approaches with long-term perspectives. Indeed a key finding is that the question of how territorial strategy takes place conditions what the strategy is and what the strategy is for. What is more, the question of how territorial strategy takes place always comes accompanied with related questions around when it takes place and who is involved.

As an example of the timing issue, we observe that territorial strategies have appeared mainly as government-led responses to external shocks or to economic crisis: in the early 1980s in the Basque Country (Spain), for example, and in the early 1990s in Wales (UK), Øresund (Denmark/Sweden) and Rafaela (Argentina). In each of these cases crisis was seen as an opportunity for change and to formulate a vision for the territory and a strategy to be developed. When these external shocks are absent, or the need for a strategy is not widely perceived – as for example in the Okanagan region of Canada – it takes much more time and effort to initiate the process. Returning to the current European debate around smart specialization strategies, we perhaps shouldn’t be surprised therefore that rapidly promoting a particular, structured approach to territorial strategy-making has led in some cases to governments scrambling around to demonstrate the existence of a strategy amidst considerable confusion around what that really means in their specific contexts.

The question of how territorial strategy should be formed in different contexts is a very difficult one precisely because it takes time to develop the required ‘dynamic territorial capabilities’, which ultimately are linked to people. In the cases of Rafaela and the Basque Country it was visionary politicians with a long-term horizon and sufficient political power who played an initial catalyst role, whereas in other spaces with weaker or fragmented institutional structures, such as the Okanagan or the Øresund, other actors in the university, business and civil society spheres assumed or are assuming that role. In particular the engagement and alignment of different territorial agents around common goals, and associated capacities for shared leadership, are revealed as critical in all these cases. Yet they take time, requiring significant learning and trust-building. Indeed, the cases of Rafaela and the Basque Country show that processes that started around the early 1990s did not begin to bear fruits until ten years or so later.

What, then, are some of the key elements that might guide how places look to learn in their pursuit of territorial strategies? Much more detail can be found in the book, but we would point especially to the following:

  • the ability to make the time-horizon of strategy independent – or partly independent – of the political cycle
  • the need to establish ‘spaces’ for dialogue and exchange of views and ideas
  • the importance of developing social capital among implicated agents
  • the evolution from individual leaderships to shared leadership
  • the significance of the ownership of the strategy being truly territorial, as opposed to pertaining to government or to any other unique agent

Moreover analysis in the book also highlights the roles that different forms of training and research can play in all of the above, and it concludes with a ‘call to arms’ to academics and academic institutions to be more engaged and involved in territorial strategy processes.

—-

This post by Jesus Mari Valdaliso and James Wilson was originally published at Orkestra’s Socioeconomic Competitiveness Blog  

Posted in Competitiveness | Tagged , , , , | Leave a comment

Socioeconomic innovation for socioeconomic competitiveness

I have often found the concept of social innovation to be ‘fuzzy’ and confusing, largely because of the different ways in which it is used by different people. A couple of weeks ago I participated in a panel discussion on this issue as part of Deusto University’s UNESCO programme, which provided an interesting opportunity to reflect further on what innovation means for socioeconomic competitiveness. Continue reading

Posted in Competitiveness, Uncategorized | Tagged , , , , | 1 Comment

Measuring territorial competitiveness: Why we should look behind the headlines

I was surprised to read in the newspaper earlier this week the headline that the Basque Country, where I live and work, has lost competitiveness since 1999. The surprise was not so much at whether or not this is true, but at such a simple headline for something that is in reality extremely complex and difficult to measure. What does it mean for a place to have lost competitiveness?

Looking in more detail at the article in question, it became clear that what was being measured in this case was a very crude form of ‘price competitiveness’. The article was based on this study by the Flores de Lemus Institute at the University Carlos III of Madrid. It compares the evolution of inflation in Spain’s 17 autonomous communities with the evolution of inflation in Spain as a whole, and finds that price increases over the last 13 years in most regions have been marginally greater than the average. The three exceptions are the Balearic Islands, the Canary Islands and Extremadura, where price increases have been lower. So does this mean that these three regions are now more competitive and the other 15 regions less competitive than they were in 1999? My answer would be a clear ‘no’, as the concept of territorial competitiveness is far more complex than any one measure can reflect and also depends critically on what the point of reference is.

Continue reading

Posted in Competitiveness, Uncategorized | Tagged , , , , , , | Leave a comment

Why territories also need a strategy

This week we welcome over 450 delegates from around the world to the Basque Country for the annual global conference of The Competitiveness Institute (TCI Network). This year’s conference seeks to address the critical issue of how to construct place-based competitiveness in times of rapid global change. Putting the conference together has been a real team effort, combining enormous amounts of energy and ideas from a whole range of stakeholders. The many months of planning, alongside other related research projects I have been working on recently, have led to some personal reflections on what it means to build place-based competitiveness.

Teamwork! (photo courtesy of Luis Silveira)

While it is common to talk about corporate strategies, it is much less common to analyse territorial strategies. This is perhaps strange given that cities, regions and nations are building blocks of the world economy. Competitiveness is essentially constructed from place: people, firms and other institutions all need the right environment to thrive, and yet it is they themselves that must create that environment in the places where they are based.

Indeed, while part of the international scrutiny of the Spanish economy in recent months has focused on the problems of devolving policy competences to regions, there are in fact large advantages from regions and cities taking control of policy if coordination issues can be overcome. In particular, well-functioning regions and cities bring decision-making closer to the people and firms that make up the economy, and can enhance accountability, efficiency and the chances of making the right decisions to boost competitiveness. See for example the conclusions of this recent ESPON project regarding cities and territorial development in Europe.

So what makes for a successful region or city? The key is to harness the creativity and energy of its people and firms towards a common set of goals. Above all it is important that there exists a coherent and evolving strategy with which government policies can be flexibly aligned. This is where regions have a big advantage, as such strategies are much more difficult to construct at national level, where there is more geographical (and sometimes cultural) distance and less opportunity for face-to-face interaction between stakeholders.

As with corporate strategy, the central issue when it comes to constructing a territorial strategy is the type of soicioeconomic activities that should be developed, both now and in the future. Experience in different parts of the world has uncovered some guiding principles. Firstly, a territorial strategy should build from what is already there; it is much easier to develop new activities from existing strengths. Secondly, it is important not to specialize too much in one activity; this leaves the region vulnerable to changes in demand, prices, technologies, etc..

In general, evidence suggests that successful regional strategies are based on an ‘intelligent diversification’ that seeks and creates synergies across different socioeconomic activities. These synergies strengthen the productive and social texture of the region, making it both more resilient to changing circumstances and more innovative. To achieve this, an inclusive process that builds linkages between different stakeholders is critical. While never an easy process, it should encourage continual exchange of ideas and visioning of the shape of the future economy to ensure that the region is always one step ahead and, most importantly, heading where it wants to go.

It is exciting to think that right now people are travelling from around the world to convene in the Basque Country to discuss these sorts of issues, and I am looking forward to learning a lot from the discussions and sharing of experiences over the coming days. Indeed, while place is important in constructing competitiveness, transcending place through such global networks of mutual learning is equally important and should be a key part of any territorial strategy.

A shorter version of these reflections was published in Spanish as an opinion article in elconomista.es.

Posted in Competitiveness | Tagged , , , | 1 Comment

Employment creation without fast growth

The economic scenario in Spain and throughout most of Europe at the moment is characterised by a depressing mix of low demand, restricted public and private investment, high and rising unemployment, and a general feeling of instability. What is most significant amidst all of this, however, is that we are being challenged in terms of our expectations from socioeconomic development. We are used to being part of economies that grow steadily, positioned within a fairly stable world economic order, and to not worrying too much about the environmental constraints of our activities. This has changed, raising new challenges and requiring a fundamental shift in attitudes and expectations.

A specific and urgent issue is how to generate and maintain good quality employment opportunities in this new context. If we are unable to meet this challenge quickly then we risk a ‘lost generation’ who don’t know the world of work, something with deep ramifications for economy and society. In Spain, where youth unemployment is already above 50% in some regions, a serious debate is needed around how to create employment opportunities in an economy that is unlikely to grow in the sense that we are accustomed in the coming years. There are many potential ideas to contribute to this debate, and here I want to highlight two that I have been reflecting on recently.

Firstly, I wonder if there is a need to re-think how we organise employment if we want to create jobs in a scenario of low growth. According to Eurostat’s Labour Force Survey, Spain is one of the European countries with the longest official working hours (and there are widespread tales of large unofficial hours). Perhaps individually we are working too much, and there is a case for redistributing work (and reward for work) to some extent. This would require a radically more open and flexible approach to the employment contract, alongside addressing inequalities at the top and bottom of wage structures. However the benefits could be enormous. The UK’s New Economics Foundation recently published a report suggesting that a normal 21 hour working week would address a range of urgent, interlinked problems including unemployment, over-consumption, high carbon emissions, entrenched inequalities and lack of time to live sustainably, to care for each other, and simply to enjoy life.

The second idea relates to the reality we face today in terms of more binding environmental constraints on our activities. While this requires a deep-rooted change of attitudes and expectations in our day-to-day lives, it also opens significant opportunities to generate employment from the re-direction of economic activity and the upgrading of our societies to be more sustainable. The International Labour Organisation has identified 8 key sectors – agriculture, forestry, fishing, energy, resource-intensive manufacturing, recycling, buildings, and transport – that will undergo major transformations as we move to a greener economy. These transformations can form the basis for significant employment opportunities.

In terms of a green transformation of society, employment opportunities fall broadly into two categories. Firstly there are opportunities locally as we solve environmental problems and ensure that all of our socioeconomic activities are sustainable. For example, a shift from private transport to efficient, coordinated and inclusive public transport systems has the potential to bring large gains in employment. Secondly there are opportunities globally from developing green technologies and innovative solutions to common problems that can be sold around the world, generating export-led employment. A clear example from the Basque Country region is a company like Gamesa, which has become a global leader in wind turbine manufacture. A key finding of the ILO report, however, is that outcomes from greening the economy in terms of employment will be largely determined by the policy instruments used and the institutions that implement them. Green upgrading neither creates nor destroys jobs per se; it all depends on how it is done.

One of the key challenges for social scientists is to understand which approaches, institutions and policy instruments are likely to have the best impacts on competitiveness, employment and socioeconomic development in specific territorial contexts. A first step in the Spanish context is to accept the reality of our predicament and to launch an informed debate around how we can rise to the challenge of creating quality employment in the absence of fast growth and the presence of binding environmental constraints.

Posted in Competitiveness | Tagged , , , , , | Leave a comment

Is Spain mortgaging its future competitiveness*

The last few weeks have seen a stream of bad news regarding European economies, from which it is clear that growth problems are no longer confined to the south of Europe. Just days after the Spanish economy officially slipped back into recession so did the UK economy, joining the Belgian, Dutch, Danish and Irish economies, and with predictions that Germany will soon follow. This has led to renewed intensity in the debate around whether or not austerity has been the correct response.

It could be argued that if there is a key difference between Spain and our northern neighbours, it is that they have greater choice over whether or not to pursue the austerity path; their immediate predicament in terms of public borrowing is not quite so constrained. However even in Spain there are choices over degrees of austerity and over where and how austerity measures bite. We may need to take some measures to balance budgets, but we have to do so in the context of a bigger picture. What good will drastic cuts serve if they jeopardise the competitiveness of our economy and society for the next ten or twenty years?

A case in point is policy for science, technology and innovation, a pillar of long-term competitiveness for any economy. A few weeks ago it was announced by the Spanish government that public funds destined for research and development in 2012 would be cut by a staggering 25%. Just days afterwards I listened to Maria Bendl from the Austrian Federal Ministry of Economy, Family and Youth explain to the European Cluster Conference in Vienna that Austria was planning to increase research and development spending in 2012, a trend that is also planned in Germany, for example. What does this mean for Spain?

In the short term it means that we will paint a poorer statistical picture, as we fall even further behind leading European countries in terms of how much money and effort is invested in science and technology. Given the long-term nature of research, it also means that the Spanish economy will incur a large ‘sunk cost’ with respect to the research that has been started over the last few years and now sees its funding cut; without continued investment a lot of previous investment is wasted.

To evaluate the long term effects we must reflect on why investment in science and technology is so critical. The widely-agreed answer is that in a highly competitive global economy our firms need to innovate in order to create products and services with added-value. In Spain this is particularly important if we want to avoid a drastic and long-term decline in wages; the increased productivity needed to compete globally has to come from somewhere. In short, the future viability of Spanish firms and the employment they are able to create depends on being able to innovate. This in turn requires strong foundations in science and technology, and above all a well functioning ‘innovation system’.

In the face of austerity measures, an interesting question is whether there is a ‘cheap route’ to a successful innovation system. We had the privilege of listening to Bjorn Asheim from Lund University give a seminar at Orkestra recently. He talked about the different Scandinavian approaches to innovation systems, highlighting a contrast between the investment intensive science and technology model of Sweden, and the Norwegian approach of facilitating strong capacity to absorb ideas and knowledge from elsewhere. This potentially opens the way to a cheaper approach to innovation focused on learning by doing, using and interacting. However it still requires a certain base of science and technology and a very strong and stable investment in education and training. Thus when I see the extent of the parallel education cuts planned in Spain, it makes me think that we really are dangerously mortgaging our future competitiveness.

* This post is an English version of an opinion article published in Spanish by El Economista on Monday 7th May 2012.

Posted in Competitiveness | Tagged , , , , , , | 1 Comment