Transcript The trend towards decentralization

Regional innovation policy and multi-level
governance in developing countries
José Guimón
Department of Development Economics
Universidad Autónoma de Madrid, Spain
[email protected]
Presentation outline
1. Conceptual background and global trends
2. Advantages and risks of decentralization
3. Closing cross-regional income gaps through innovation
4. Division of responsibilities between levels of government
5. Mechanisms for national-regional coordination
6. Conclusions
1. Conceptual background and global trends
Regional innovation systems
Theories on ‘regional innovation systems’ as intellectual
anchoring for decentralization of innovation policy
• Industrial districts and clusters
• Regional policy necessary to foster “agglomeration effects” and
“interactive learning”
• Bringing scientific knowledge closer to local industrial needs
“Despite continued predictions of ‘the end of geography’,
regions are becoming more important nodes of economic and
technological organization in this new age of global,
knowledge-intensive capitalism.”
Florida, R. (1995) “Toward the learning region.” Futures, 27, p. 528
Multi-level governance
 Innovation policy as a complex, multi-level, multi-actor domain
 Relevant levels:
• Vertical (local-regional-national-multilateral)
• Horizontal (across different ministries and agencies)
• Public-private
• Regional-national levels are interdependent and complementary
Smart Specialization
 Concentrating resources in a limited set of priority areas that are
clearly aligned with regional strengths and competitive
advantages
 Beyond industrial targeting, priority areas can be “activities” or
“key enabling technologies” cutting across several industries
• Activities: e.g. advanced manufacturing, clean energy, e-health, research
labs, design, headquarter functions
• Key enabling technologies (KET): e.g. ICT, nanotech, biotech, etc.
 RIS3 policy framework in the European Union
• Regional strategies as ex-ante conditionality to receive EU funding
• Applicable in developing countries?
IPP Hot Topic
https://innovationpolicyplatform.org/content/smart-specialization?topic-filters=11394
Large differences across countries
Regional share of public R&D expenditure
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Austria
Denmark
Korea
Spain
China
Germany Belgium
Note: data from a 2009 survey to 15 OECD members. This indicator is only available for the 7 countries shown
Source: Based on OECD, 2011 “Regions and Innovation Policy”
Trends in developing countries
 Developing countries have adopted regional innovation policy
strategies more recently than developed countries
• Lower levels of investment in R&D and innovation
• Higher need to build critical mass
• Higher levels of diversity, income inequality, and institutional weakness
 Since the 1990s large emerging countries have decentralized
further science and innovation policy
• e.g. China, Brazil, Russia, India
 In Latin America this has become a hot topic in recent years, in
countries like Brazil, Mexico, Colombia and Chile
 In Africa decentralization of innovation policy is at its infancy, but
some initiatives with regional scope have emerged
• e.g. Cape IT Initiative (Western Cape, South Africa, 1998)
• e.g. Innovation Cities program (Morocco, 2011)
2. Advantages and risks of decentralization
of innovation policy
Risks of decentralization
 Wasteful duplications, fragmentation of public investments in
R&D, implemented separately and uncoordinated in different
regions
• Need for critical mass in STI
• Risk of “cathedrals in the desert” syndrome
 Central level necessary to coordinate a national R&D agenda and
to fill gaps in regional strategies
• Risk of public value failures because of gaps in the STI agenda of the
regions (e.g. if no region wants to specialize in tropical medicine but it is
considered necessary at national level)
 Proliferation of public support programs can result in higher
transaction costs, bureaucracy and complications for target firms
Advantages of decentralization
 Because they are “close to the ground”, regional governments
may be better placed to identify opportunities and mobilize their
knowledge bases
 Decentralization may promote a process of bottom-up discovery
of national technological strengths and priorities by bringing
together regional strategies
 Decentralization may promote a healthy competition among
regions that stimulates aggregate innovation performance
 Decentralization may reduce the technology gap between regions
3. Closing cross-regional income gaps
through regional innovation policy
The geographic concentration of innovation
 Distribution of national R&D efforts is often concentrated in a few
regions
• e.g. In Colombia 2 of 32 departments account for 70% of gross expenditure
in R&D (Bogota and Antioquia)
• e.g. In Spain 3 of 17 regions account for 60% of R&D expenditure (Madrid,
Catalonia and Basque Country)
 Regional imbalances within a country are difficult to overcome
• Cumulative nature of technological capabilities
• Economies of scale and indivisibilities
• Critical mass
 Positive link between innovation and economic growth implies
that in order to close income gaps across regions, policies should
seek to close innovation gaps
Innovative regions outpace national average
Source OECD, 2011
Trade-off between excellence and cohesion?
 Policymakers need to balance two objectives:
• Promoting scientific excellence through regional competition and
concentrating resources in the core regions
• Encouraging convergence and equality among regions by nurturing lagging
regions (Link between innovation and economic convergence)
 Excellence programs and performance-based funding lead to
higher concentration of resources in core regions
 “Regional innovation paradox” (Oughton et al. 2002)
• Comparatively greater need to spend resources on innovation in lagging
regions but relatively lower capacity to absorb public funds
• Importance of capacity building and inter-regional collaboration
A policy challenge in Russia…
 Large heterogeneity in income levels and innovation capacities
across its 83 regions (or “federal subjects”)
 Trend towards concentration of STI resources in core regions
• R&D funding allocation system continues shifting from block funding based
on soviet-era central planning decisions towards a competitive, projectbased R&D funding system
• 2012 Cluster Initiative: central government provides matching funds to the
most promising and technologically advanced regional clusters
 At the same time, policy programs to support backward regions
• Federal Strategy of Diminishing Disparities Between Regions Until 2015
• Council for Research for Productive Forces has developed four new
programs targeting innovation in less developed regions
…and also in China
 Fiscal decentralization in China has been accompanied by
significant increases in regional inequality (Qiao et al. 2008).
 Central government trying to revert mounting income inequalities
across regions by providing more support to innovation in
backward regions
 e.g. Revitalization Plan for Higher Education Institutes in Mid- and Western
China (2012-2020) funds R&D projects in order to strengthen universities
in less developed regions.
4. Division of responsibilities between
levels of government
Asymmetric decentralization across policy instruments

The degree and mode of decentralization depend on the type of
policy instrument

Some innovation policy instruments are best provided at the
national level, while in other cases it makes more sense to
decentralize
National/regional scope of innovation policy intervention
More often national
Mode of innovation Knowledge generation
More often regional
Knowledge diffusion and exploitation
Public research labs,
universities, large firms
Small firms, startups, spinoffs
Infrastructure
Universities, public R&D labs
Incubators, science parks, special
economic zones, technology transfer
offices
Regulations
Intellectual property rights
Building permits, infrastructure
development
Economic transfers
Tax deductions, large grants to Smaller grants to fund business
new R&D projects
innovation
Soft instruments
Standardization, codes of
conduct
Networking and brokerage services
Human capital
Higher level education,
postgraduate scholarships
Technical training, lifelong learning,
internships
Linkages
International linkages,
scientific collaboration
Public-private partnerships, cluster
development
Target groups
Large overlap in the kind of policy instruments used
Number of instruments used by
national and regional
governments, and common
instruments (Source OECD,
2011, p. 121)
Smart vs. stupid overlap
 Overlapping national-regional policy instruments creates
synergies if both levels complement each other
• Complementarity in the way policy instruments are structured (target
actors, eligibility criteria, etc.)
• Joint-programming and co-financing of policy instruments
• Information sharing and dissemination at regional and national level
 Overlapping national-regional policy instruments is negative if it
creates redundancies
• Lack of awareness of the instruments developed at another level of
government
• Failure to distinguish between target groups or topics in the instruments
offered
• Increase in complexity and bureaucracy for potential beneficiaries of
public support (firms, research institutions, etc.).
Regions as targets of national policy instruments
 Shift towards national innovation programs where beneficiaries
are regions rather than firms or universities directly
 Example: Competitive regional cluster initiatives
https://innovationpolicyplatform.org/document/competitive-regional-clusters-nationalpolicy-approaches-oecd-reviews-regional-innovation
5. Mechanisms for national-regional
coordination
National-regional coordination
 Coordination should be fostered at all stages of the policy cycle
• Agenda-setting processes (e.g. high level policy councils)
• Design and implementation (e.g. joint programming, joint funding)
• Evaluation (e.g. information sharing and reporting)
 Instruments of co-ordination can be based on regulation, incentives,
norms and information
• High level policy councils, regional development agencies, territorial
representatives
• National-regional contracts for joint programming and co-financing
• Excellence programs, cluster initiatives, smart specialization strategies
• Capacity building, guidelines
New regional innovation agencies in Chile
 National innovation agency (CORFO) is establishing regional
offices across 15 regions, since 2014
 They will have high levels of autonomy and will depend on
regional governments
 CORFO is providing capacity building support to regional
governments
 “Smart specialization program” to support the development of
clusters throughout the regions
Ruta N, Medellin
 Created by Medellin City Council in 2009
 Financed through a 7% levy on the annual profits of EPM
 To implement the City’s new STI Plan (2011-2021) aimed at becoming “the
innovation capital of Latin America”
 Among other initiatives, it leads the development of the new Medellinnovation
District
Colombia’s new Royalties Fund for STI
 Since 2012, new Fund for STI with 10% of national royalties from mineral
resources (around US$500 million per year)
 Distributed to regions based on their population and income levels
(redistributive effect)
 Administered by Colciencias (national R&D funding agency), but projects are
selected by regional governments
 Less advanced regions receive a larger part of the funds, but they lack the
absorptive capacity required to design and develop the right kind of projects to
promote innovation
 Colciencias has established an Office of Regionalization that has supported so
far the drafting of 27 regional development plans for STI
 Lack of collaboration between regions, fragmentation, duplications
Mixed Funds, Mexico





Jointly established in 2002 by the central and regional governments as a trust
fund for science and innovation projects
The objective is to foster innovation capacity at regional level and to better
articulate federal and regional support for innovation.
Each fund has its own technical committee and evaluation commission to
issue calls for proposals and select projects for funding within their respective
regions
As of 2013, more than 35 mixed funds had been established across the
Mexican States and also in some municipalities (Ciudad Juarez, La Paz, Puebla)
Total budget for the 2001-2012 period was $US 580 million (45% regional and
55 % national)
6. Conclusions
Rethinking the role of national innovation policy in an
increasingly decentralized landscape
 Shift in orientation of central governments from control to
facilitation, capacity building and support
 Promoting a bottom-up, participative approach while ensuring
coherence of regional innovation strategies, searching for
economies of scale and reducing fragmentation
 Managing the trade-off between efficiency/excellence and
regional convergence/equality
 Building flexible governance systems that allow for an asymmetric
decentralization across regions and across policy instruments
 Decentralization and the associated institutional reforms should
be sequential, in tandem with the development of regional
capacities