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Cluster support in EU Cohesion Policy

Dr. Joerg LackenbauerRegional Policy DG (Hungary Unit), European Commission,

Brussels

ClusterCOOP conferenceBudapest, 13 July 2011

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Contents

1. Innovation and cluster support in EU Cohesion Policy

2. The case for cluster support in EU Cohesion Policy

3. Clusters and smart specialisation strategies

4. Some key observations from cluster support in EU Cohesion Policy

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1. Innovation and cluster support in EU Cohesion Policy

• Broad-based EU innovation strategy and Community Strategic Guidelines on Cohesion (both 2006): strengthening clusters as a strategic priority for successfully promoting innovation

• From 2007-2013, EU Cohesion Policy offers a total budget of EUR 350 billion to its recipients in the EU-27

• 51% of the total are dedicated to the 12 ‘new’ Member States (± EUR 180 billion)

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1. (cont’d)

• 25% of the total are dedicated to R&D, innovation, entrepreneurship and other related areas (± EUR 85 billion)→ much bigger emphasis on innovation than in 2000-2006→ EU Cohesion Policy is the biggest Community source of funding for R&D, innovation, SME support, clusters

• Various ‘new’ Member States have started cluster support programmes within their (mostly competitiveness) Operational Programmes

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1. (cont’d)

The Regional Operational Programmes for innovation set down by regions usually include actions related to the nurturing of clusters:• Cluster initiatives: networking activities

linking universities, SMEs, and studies to identify regional/national cluster profiles

• Cluster organisations: special agencies to launch or manage cluster initiatives, etc.

• Cluster infrastructures: Science parks, techno parks and incubators

• Clusters: Financial schemes to finance firms (usually through competitions)

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2. The case for cluster support in EU Cohesion Policy

The European Commission very much welcomes that many of the EU Member States are devoting Cohesion Policy resources also to cluster development in 2007-2013

• These efforts represent a move away from the classical grants/subsidies policy by focusing resources on actions of a more strategic nature instead of financing many small unrelated investments

• In many cases, clusters have the potential to contribute to the increase of competitiveness of industries, they are good supporters of technological transfer

• Moreover, the geographical concentration of specialized suppliers, service providers and competitors enables companies to save on input costs, e.g. on costs for designs, energy, or delivery time

• In many ways, clusters policy has a great potential to contribute to the objective of growth and jobs and to the objective of regional development

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2. (cont’d)

Clusters: businesses gain by…• Firms benefit from privileged access to a

specialized labor pool which provides them with a competitive edge

• Easier access to markets (common actions)• Better prices for raw materials and

intermediate inputs by sharing the costs or bundling collective buys

• Provision of specialized advanced services, from technology centers to incubators or technology transfer

• Easier access to financing (public and private)

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2. (cont’d)

Clusters: regions gain by…• Locations benefiting from clusters are better

placed to attract foreign investment and talent• Clustering may be used to ‘fix’ large

multinational companies in the region• The industrial policy is aligned with the

concept of smart specialisation – identification of priorities

• It should result in an economy reconverted to find niches of competitiveness in the global economy

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3. Clusters and smart specialisation strategies

What is smart specialisation?

= evidence-based: all assets = no top-down decision, but

dynamic/entrepreneurial discovery process inv. key stakeholders

= global perspective on potential competitive advantage & potential for cooperation

= source-in knowledge, & technologies etc. rather than re-inventing the wheel

= priority setting in times of scarce resources

= getting better / excel with something specific

= focus investments on regional comparative advantage

= accumulation of critical mass = not necessarily focus on a single

sector, but cross-fertilisations

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3. (cont’d)

• “…A particular case is made for selecting Innovation as a core priority. Place-based interventions, building on the strengths and taking account of the weaknesses of previous experience as regards cohesion policy in this area, could complement policies aimed at developing a European Research Area, by selecting in each region a limited number of sectors in which innovation can most readily occur and a knowledge base build up. Through such an approach – defined in the current policy debate as “smart specialization” - the most could be made of the present diversity of industrial agglomerations and networks, while their “openness” beyond regional or national boundaries would be promoted…” (“An agenda for a Reformed Cohesion Policy” – Barca Report (2009))

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3. (cont’d)

• COM Communication “Regional Policy contributing to smart growth in Europe 2020” (October 2010): “Clusters are an important element in smart specialisation strategies … Support for their development needs to be concentrated on areas of comparative advantage”

• Accompanying COM Staff Working Document: “Clusters can provide a fertile combination of entrepreneurial dynamism and contribute to the building of a knowledge-based economy, in line with the Europe 2020 strategy … Clusters can be an important tool for regional development, as long as they foster and build on regional strengths … Key areas that could be supported [by EU Cohesion Policy] include internationalisation of cluster firms … cooperation activities across sectors … transnational cooperation … The selection of new cluster initiatives should be built upon a detailed analysis of existing strengths, assets and potential of a region” smart specialisation strategies

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4. Some key observations from cluster support in EU Cohesion Policy

From the first experiences with cluster support under EU Cohesion Policy 2007-2013, certain prerequisites for cluster policies to deliver are emerging (these ‘lessons’ are of course not limited to Cohesion Policy)

• New cluster initiatives must be carefully designed, underpinned by regional strengths, specific competences, knowledge hubs, ideally already existing clusters

• Overarching policy objectives are important, but successful clusters cannot be defined in a pure "top-down" way, i.e. within a policy framework defined and implemented straight from the drawing board

• On the contrary, industry and service providers have to be actively involved within a "bottom-up" approach, not least for their information advantages; they must be given a say when programmes are designed

• Here, it is most obvious that EU Cohesion Policy's partnership principle is essential for policy design

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4. (cont’d)

• Moreover, a key ingredient for a cluster is the need for a few key individuals, e.g. successful entrepreneurs, experienced consultants, cluster managers, business angels providing private funding

• Also, the link to a university – or, better, linking universities and SMEs – is often a key factor

• Clustering is a market-driven process, but EU Cohesion Policy can be a facilitator, leveraging efforts on the way to market success

• Policymakers should avoid the proliferation of cluster initiatives, they should not artificially keep alive unsuccessful clusters → endless channel for subsidies → undermines competition and aggregate efficiency

• Regarding the need for funding, EU Cohesion Policy’s JEREMIE initiative (financial engineering tools providing – inter alia –venture capital) can be a very helpful instrument

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Thank you for your attention!

Dr. Joerg LackenbauerRegional Policy DG (Hungary Unit), European Commission,

Brussels

joerg.lackenbauer@ec.europa.eu