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Building the Oslo Life Sciences Cluster:
A New Agenda for Norwegian
Innovation-Driven Entrepreneurship
Scott Stern
MIT and NBER
1
Norway has emerged as among the most prosperous nations in the world
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60
80
100
120
140
160
180
200
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
GDP PPP Per Capita Source: OECD Statistics
Denmark
Finland
Germany
Netherlands
Norway
Sweden
United Kingdom
Beyond leveraging abundant natural resources,
Norway has established a strong foundational
level of competitiveness
3
Measure Rank
Social Infrastructure and Political Institutions 4
Macroeconomic Policy 1
Microeconomic Competitiveness 11
National Business Conditions 11
Company Strategy 7
Foundational Competitiveness 4 Based on 2013 HBS ISC Competitiveness Rankings
Drawn from MIT-Harvard Observabory of Economic Complexity
But declining oil prices have placed the need to invest in an innovation-driven Norway going forward….
Historically, Norwegian prosperity has not been matched by overall leadership in measured innovation
5
0,00E+00
5,00E-05
1,00E-04
1,50E-04
2,00E-04
2,50E-04
3,00E-04
3,50E-04
4,00E-04
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
WIPO Patents per Capita Source: OECD Statistics
Denmark
Finland
Germany
Netherlands
Norway
Sweden
United Kingdom
Norway has realized leadership in certain areas such as climate change technology
6
0,00E+00
5,00E-07
1,00E-06
1,50E-06
2,00E-06
2,50E-06
3,00E-06
3,50E-06
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
PCT Patent Applications Per Capita by Applicant Country of Residence Class: Technologies Specific to Climate Change Mitigation
Source: OECD Statistics
Canada
Denmark
Finland
Germany
Netherlands
Norway
Sweden
United Kingdom
United States
Russia
Amid questions about business dynamism, rate of entrepreneurship has varied widely over the past decade….
7
0
2
4
6
8
10
12
14
2004 2005 2006 2007 2008 2009 2010 2011 2012
New Business Density Source: World Bank Entrepreneurship Statistics
Australia
Denmark
Finland
France
Germany
Netherlands
Norway
Sweden
United Kingdom
The oil shock has only reinforced the need for a new “Beyong Oil” Norwegian Competitiveness Agenda
8
“Life sciences increase our understanding of the nature of life…. but life sciences have an even greater potential. They represent a platform for new industry in Norway and transition to a greener economy with new jobs, products and services for the benefit of society, particularly in the health sector,” Ole Petter Ottersen Rector, University of Oslo
The Oslo Life Science Cluster Challenge
• Norway has made enormous progress in transforming itself into an emerging innovation-driven economy
• In the face of declining resource prices, an urgent agenda to leverage latent strengths and areas of potential comparative advantage
• By investing in innovation that leverages and extends cluster strength, Oslo can chart a new path for economic development
• The Oslo Life Sciences Initiative must leverage existing strengths, integrate researchers, knowledge, students, new infrastructure, and convene the entire range of the Oslo ecosystem
• But what kind of life sciences cluster should Oslo build?
10
Building the Oslo Life Sciences Cluster:
A New Innovation Agenda for Norway
• Clusters and Innovation-Driven Entrepreneurial Ecosystems
• IDE Ecosystems and Regional Economic Strategy
• The Oslo Life Sciences Cluster: Towards an IDE-Driven Economic Strategy for Norway
Lessons from the MIT Regional
Entrepreneurship Acceleration
Program (reap.mit.edu)
Mens et Manus:
• Not simply an “ivory tower” perspective although the work is based on a systematic framework and nearly 20 years of empirical research
• Not simply “learning by doing” although we do develop & run ecosystem programs
=> Interplay between thinking & doing
12
MIT REAP Framework
System
Stakeholder Strategy
13
MIT REAP Framework: System
E-Cap I-Cap
Economic Impact Social Progress
Cluster Based Comparative Advantage
IDE Ecosystem Potential
Foundational Institutions
14 #MITREAP
15
E-Capacity
Ability to start and build new to
the world businesses from
inception to maturity.
Strong I-Cap:
Universities, Central R&D,
Network of researchers,
Medical Centers
Strong E-Cap:
Entrepreneurs, Mentors,
Founding Teams
Investors at all stages
I-Capacity
Ability to develop new to the
world innovations from inception
through to the market.
Innovative Capacity & Entrepreneurial
Capacity Are Distinct Regional Assets
Japan
Israel Finland Korea, Rep. Switzerland
Sweden Germany
Canada
Singapore Iceland Netherlands Denmark
Australia Austria United Kingdom France Luxembourg Belgium Hong Kong SAR
Ireland New Zealand Italy
Slovenia Spain Hungary Malaysia
Malta
Czech Republic Lithuania
Croatia Bulgaria Greece
0
50
100
150
200
250
300
0 2 4 6 8 10 12 14 16 18 20
Pat
en
t p
er
mill
ion
pe
op
le '0
8
New Firm Registration/1,000 working people '08
Patent Rate (I-Capacity) vs. Business Formation Rate (E-Capacity)
Innovation and Entrepreneurship are
Related but Different
17
Innovative Capacity and Entrepreneurial Capacity
Reflect Distinct Investments, Policy and Norms
I-Capacity
PERFORMANCE
PEOPLE
FUNDING
INFRASTRUCTURE
POLICY
CULTURE &
COMMUNITY
DEMAND
Entrepreneurship output (new firms & growth)
Pool of entrepreneurs
Quality of entrepreneurial education
Accessibility of entrepreneurial capital
(government, private, equity, debt, grants)
Physical infrastructure (space, transportation)
Availability of key services (internet, training)
Clear rules on new business creation
Clear rules on business operations and growth
Culture of entrepreneurialism and failure
Societal support, ties and recognition
Government, corporate and consumer demand for
new products and services
Innovation output (patents and papers)
Pool of innovators
Education in tech and ommercialization
Funding for research
Government programs
Physical infrastructure
Example: hi speed internet
Clear rules around patents
Clear support for STEM education
Celebration of invention and innovation
-Rewards to innovation – tenure process
Nature of established companies in region
E-Capacity
18
Assessing Norwegian Innovative Capacity
I-Capacity
Not simply a matter of low patenting…
19
0,00E+00
5,00E-05
1,00E-04
1,50E-04
2,00E-04
2,50E-04
3,00E-04
3,50E-04
4,00E-04
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
WIPO Patents per Capita Source: OECD Statistics
Denmark
Finland
Germany
Netherlands
Norway
Sweden
United Kingdom
Norway’s R&D expenditures have historically been low relative to peers
20
0
0,5
1
1,5
2
2,5
3
3,5
4
4,5
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
R&D Expenditures as Percent of GDP Source: OECD Statistics
Denmark
Finland
Germany
Netherlands
Norway
Sweden
United Kingdom
And its innovation workforce is in the “middle of the pack”….
21
0,00%
0,10%
0,20%
0,30%
0,40%
0,50%
0,60%
0,70%
0,80%
0,90%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Reseachers (FTE) per capita Source: OECD Statistics
Denmark
Finland
Germany
Netherlands
Norway
Sweden
United Kingdom
Relative to peers, Norwegian R&D depends disproportionately on government…
22
15
20
25
30
35
40
45
50
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Percentage R&D Expenditures Financed by Government Source: OECD Statistics
Denmark
Finland
Germany
Netherlands
Norway
Sweden
United Kingdom
But a relatively low fraction of research has historically been conducted by the university sector
23
0,2
0,3
0,4
0,5
0,6
0,7
0,8
0,9
1
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Higher Education R&D Expenditures as Percent of GDP Source: OECD Statistics
Denmark
Finland
Germany
Netherlands
Norway
Sweden
United Kingdom
The Norwegian IDE Ecosystem
24
E-Cap I-Cap Linkages
IDE Framework
Atop a strong foundation of competitiveness and social progress, Norway still needs to achieve a first-tier position in innovative capacity
25
Assessing Norwegian Entrepreneurial Capacity
E-Capacity
Norwegian entrepreneurship is more variable than many peer countries…
26
0
2
4
6
8
10
12
14
2004 2005 2006 2007 2008 2009 2010 2011 2012
New Business Density Source: World Bank Entrepreneurship Statistics
Australia
Denmark
Finland
France
Germany
Netherlands
Norway
Sweden
United Kingdom
Norway is a better place for doing business than for starting businesses
27
Economy Ease of Doing Business Rank
Singapore 1
New Zealand 2
Hong Kong SAR, China 3
Denmark 4
Korea, Rep. 5
Norway 6 United States 7
United Kingdom 8
Finland 9
Australia 10
Economy Starting a
Business Rank New Zealand 1
Canada 2
Macedonia, FYR 3
Armenia 4
Georgia 5
Singapore 6
Australia 7
Hong Kong SAR, China 8
… …
Norway 22
Drawn from World Bank Doing Business Indicators
Mapping Silicon Valley: Population-level predictive Analytics
Oslo seems to be at the cusp of embracing
the start-up energy that has emerged across
many IDE ecosystems…
29
What would the map for Oslo look like? Is the ecosystem producing a consistent stream of science-driven start-ups with the potential for global scalability…
The Norwegian IDE Ecosystem
31
E-Cap I-Cap Linkages
IDE Framework
Atop a strong foundation of competitiveness and social progress, Norway has yet to achieve a first-tier position in innovative capacity
A favorable business environment for established firms still has too many obstacles for global growth start-ups
The third pillar of the IDE Ecosystem is the role of
clusters that enhance opportunities for innovation
and entrepreneurship and define the
entrepreneurial comparative advantage of regions
E-Cap I-Cap
32
Clusters Are Everywhere
A cluster is a regional concentration of
related industries connected through
various types of linkages and spillovers
and supporting institutions
33
Motion Pictures – LA Semiconductors - Taiwan
Fashion & Textiles -
Milan
Do Clusters Matter for IDE Ecosystems?
Do Clusters Matter?
• Cluster theory suggests agglomeration arises across related economic units (Porter, 1990, 1998, 2003)
• Our Approach: If clusters matter, then the growth of an industry in a region will be increasing in the strength of the regional cluster within which that industry operates
• Cluster-driven agglomeration could arise in
different channels: – Across related industries Within a Cluster, – Across Related Clusters – Across the Same Cluster in Neighboring Regions
35
Note: Average Region-Industry Annualized Employment Growth over 1990-2005. Region (EA) and Industry (4-digit SIC).
N=55083. Cluster specialization variable is measured by Location Quotient. High means above the median of the variables.
INDUSTRY SPECIALIZATION
Low High
CLUSTER
SPECIALIZATION
Strength of Regional
Clusters (presence of
related industries)
Low
+13%
0%
High
+20%
+1%
36
Clusters and Jobs
• Industries within stronger clusters are associated with higher levels of job growth from the early 1990s to the mid-2000s
• We test the role of clusters by estimating region-industry employment growth over 1990-2005 as a function of the initial Industry Specialization and Cluster Specialization (outside the industry) in a region, and a set of region and industry fixed effects
Clusters and the IDE Ecosystem
– Industries that are part of a strong cluster environment register
• higher level, growth and sustainability of start-up activity
• higher level and impact of innovation
Level, Growth,
and Surivability of Start-ups
Level and Impact of Innovation
Source: Delgado/Porter/Stern, Clusters and Entrepreneurship, Journal of Economic Geography, 2010
CLUSTER
ENVIRONMENT
Within a Cluster
Related Clusters
Neighboring Clusters
37
Clusters and Regional Identity
38
Norway boasts extraordinary cluster strength,
supported by engaged cluster organizations
39
Importantly, Norwegian science and innovation
leadership is closely connected to cluster strength
40
0,00E+00
1,00E-06
2,00E-06
3,00E-06
4,00E-06
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
PCT Patent Applications Per Capita by Applicant Country of Residence
Class: Technologies Specific to Climate Change Mitigation
Source: OECD Statistics
Canada
Denmark
Finland
Germany
Netherlands
Norway
Scientific Articles on "Fuel Technology"
Articles per million citizens
Norway 37.66 Denmark 33.26
Finland 17.37
Netherlands 11.88
United Kingdom 11.29
United States 9.87 Germany 6.94
Russia 6.34
While Oslo is current a small but vibrant health life sciences cluster, stronger global leadership in Norway in Ocean Industries….
The Norwegian IDE Ecosystem
42
E-Cap I-Cap Linkages
IDE Framework
Atop a strong foundation of competitiveness and social progress, Norway has yet to achieve a first-tier position in innovative capacity
A favorable business environment for established firms still has too many obstacles for global growth start-ups
A strong and engaged cluster environment reinforces Norwegian foundational competitiveness, allowing Norway to escape the
“resource curse” and achieve a high and stable level of prosperity
Building the Oslo Life Sciences Cluster:
A New Innovation Agenda for Norway
• Clusters and Innovation-Driven Entrepreneurial Ecosystems
• IDE Ecosystems and Regional Economic Strategy
• The Oslo Life Sciences Cluster: Towards an IDE-Driven Economic Strategy for Norway
How does our understanding of the IDE Ecosystem impact
regional strategy and stakeholder engagement?
Regional Value Proposition
What is the distinctive competitive position of a
geographic area given its location, legacy, existing and
potential strengths?
Develop Unique Strengths
What do we do that is different or that
provides sustainable competitiveness in
international markets?
Achieve and Maintain Parity with Peers
What weaknesses must be addressed to
remove key constraints and achieve parity
with peer locations?
A Move Towards Regional Economic Strategy
Policy Improvement
• Implementing best practice in each policy area
• A huge number of policy areas matter
• No region should try to make progress in all areas simultaneously
• Often divorced from private sector concerns
A Regional Economic Strategy is Not Just
“Good Policy”
Regional Economic
Strategy
• A prioritized agenda to create a
unique position, based on its
particular circumstances
• Collaborative effort of across
stakeholders
• Leveraging regional strengths
through innovation and
entrepreneurship
This means making hard choices…
About what to do and what NOT
to do!
An IDE Ecosystem Strategy is…
Investing in Your Entrepreneurial Comparative Advantage
What does this mean for the Oslo Life Sciences Cluster?
The Norwegian IDE Ecosystem
50
E-Cap I-Cap Linkages
IDE Framework
Atop a strong foundation of competitiveness and social progress, Norway has yet to achieve a first-tier position in innovative capacity
A favorable business environment for established firms still has too many obstacles for global growth start-ups
A strong and engaged cluster environment reinforces Norwegian foundational competitiveness, allowing Norway to escape the
“resource curse” and achieve a high and stable level of prosperity
The Oslo Life Science Value Proposition
What is the distinctive value of the Norwegian a
geographic area given its location, legacy, existing and
potential strengths?
Develop Unique Strengths
Establishing unique linkages and
competencies in areas such as marine
technology, environment, energy, and
ocean industries. A unique approach to
life sciences innovation
Achieve and Maintain Parity with Peers
Investing in traditional biosciences and
drug development targets. Establishing a
leading biocluster by the standard of
traditional metrics
An Oslo Life Sciences Cluster Strategy
IDE Ecosystem Strategy Must be Shaped and Realized through Stakeholder Engagement
52
The Oslo Life Sciences Agenda Going Forward…
• Public and Private Cooperation to Nurture and Build Innovative and Entrepreneurial Capacity
• Distinguish between policies and initiatives focusing on SMEs versus IBEs
• Balancing Traditional Life Science Innovation with Areas of Unique Norwgian Strength (Ocean, Energy)
• Investing to Create a Unique and Distinct Oslo Life Sciences Cluster
• Do not try to be a leader in all areas. Instead, focus on areas of latent comparative advantage and areas that leverage prior strengths
• De-emphasize top-down policies. The Oslo Life Sciences Cluster will succeed by engaging all IDE Stakeholders
• Be patient. Establishing global cluster leadership as the basis for a true knowledge-based economy is a long process.
Priority Items Warnings!
Choosing the Future of the Oslo Life Sciences Cluster:
What is the Must-Win Battle?
54 #MITREAP
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