Innovation in Peripheral Areas Sara Davies and Rona

Innovation in Peripheral Areas Sara Davies and Rona Michie Scottish Parliament Cross Party Rural Policy Group, 26 January 2011 UK Innovation Centre (BIS, ESRC, NESTA and TSB)

Ongoing debates • Innovation is seen to be fuelled by the concentration of people - sharing ideas, knowledge and skills – so in cities not peripheral areas? • Is co-location enough? Do cluster policies work? • Does ICT end the benefits of F 2 F? Does it generate new kinds of proximity? • Other challenges for businesses in peripheral areas – cost of reaching suppliers & customers – small labour pool 2 Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde

Innovation in the periphery differs because sectors differ • Few exceptional places with leading firms in global markets (e. g. Finland, Norway) – long-term policy • R&D-driven innovation based on immobile natural resources (e. g. sea, cold) – external expertise • Solutions to local problems (e. g. tele-medicine, social enterprise) - potential wider application • Image-based innovation (e. g. food, tourism) – selling to large external markets – role of ICT • New ways of working (e. g. business/knowledge services) - serving large external markets – ICT 3 Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde

Innovation in the periphery differs because the context differs (Source: Miles et al. , 2009) • • 4 Entrepreneurship Skills Finance Public research Competition Demand Openness Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde

Policy recommendations (1): Support existing strengths • Questions over value-for-money of cluster policies – path dependence • Not impossible to create world-leading innovation in the periphery but it takes long-term political commitment & funding • Focus targeted support on existing strengths – Innovation linked to immobile natural resources (e. g. sea, cold, dark, space) – Innovation linked to solving local problems with a potential wider application (e. g. tele-services, social enterprise) 5 Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde

Policy recommendations (2): Build openness • Core problems for peripheral areas are – Few people – Distance to other people • Many weaknesses in the innovation context can be overcome via openness – Broadband (& transport) infrastructure – Human brokering • E. g. Norway: external R&D and funding plus own human and natural resources 6 Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde

Openness: Broadband infrastructure • Firms can find out about and access: – – External finance research, knowledge & ideas customers competitors • Significant demand in peripheral areas – Coverage and speed • High priority in many small peripheral countries; also in Wales and Cornwall 7 Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde

Broadband lines per 100 inhabitants, 2009 (Source: EUROSTAT) 8 Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde

Households with broadband (%) 2008 (Source: EUROSTAT) 9 Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde

Household download speed (Mbps) (Source: www. netindex. com) 10 Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde

Areas with download speed lower than the threshold indicated (Source: Bernardi & Marina, 2010) (a) Threshold=512 Kbps (b) Threshold=1 Mbps 11 (c) Threshold=4 Mbps (d) Threshold=8 Mbps Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde

Openness: Human brokering to external excellence • To access private finance outside the region – Not a major focus – Regional venture capital (e. g. Sweden’s Norrland Fund) may increase capacity to broker to external funders • To work with excellent researchers in UK / internationally – E. g. Tekes (Finland) helps firms access universities and research centres abroad • To find out about world class competitors in UK / world – E. g. 15 ELY centres (Finland) help firms to find information on competitors abroad via searches, seminars, funding for trade fairs • To engage with leading users and customers – E. g. 20 Innovation Norway offices help innovative SMEs find customers and manage contracting 12 Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde

Policy recommendations (3): Develop human capital • Core problems for peripheral areas = few people and distance to other people • Innovation = generation, adaptation and absorption of knowledge – Often not about radical ideas but about combining and applying existing knowledge • Depends on high level of skills across the whole population – so high quality education for all • Qo. L to retain/attract people & facilitate returning 13 Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde

Highest qualifications by Scottish school-leavers, %, 2008 -09 (Source: Scottish Government, 2010) 14 Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde

Mathematics, average score, 15 year olds (Source: PISA, 2009) 15 Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde

Reading below Level 2, % of 15 year olds (Source: PISA, 2009) 16 Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde

Education in Finland (OECD, 2010) • Consistently close to top of international league tables since 2000 with small differences between top and bottom students (and schools) • Gradual reform to a comprehensive (non-streamed) system from 1970 s, with: – Commitment to ensuring that each child achieves, concern beyond education – Highly qualified, autonomous teachers – Systems of professional accountability – Emphasis on creativity, problem-solving, teamwork, self-direction – Modest funding focused on the classroom • Difficult socio-economic context – Precarious history & difficult Cold War situation – Poorer than neighbours & banking crisis / recession in 1990 s – Internal socio-cultural & political divisions 17 Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde

Innovation policy for periphery in time of fiscal constraints • Key context factors for innovation in peripheral areas are openness and skills • Policy recommendations – Support existing strengths (esp. where the periphery has real advantage) – Upgrade broadband coverage and speed – Build policy capacity to broker to external excellence on behalf of firms – Work to improve education standards for all 18 Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde

Thank you for listening Sara. Davies@strath. ac. uk http: //www. eprc. strath. ac. uk/irr 19 Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde

Sources & useful links • Bernard G and Marina M (2010) BSense – a system for enabling automated broadband census, University of Edinburgh, http: //broadbandforall. net • Miles et al. (2009) The wider conditions for innovation in the UK, Report for NESTA, London • OECD (2010) Strong performers and successful reformers in education, Paris • Scottish Government (2010) SQA Attainment and school leaver qualifications in Scotland: 2008/09, Edinburgh • www. netindex. com • www. pisa. oecd. org • http: //www. ukirc. ac. uk/ 20 Sara Davies and Rona Michie, European Policies Research Centre, University of Strathclyde