Smart Specialisation Path in the Basque Country and the Cluster Policy Mari Jose Aranguren Mikel Navarro

TR3S Project Kick Off Meeting 27th March 2012

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1. Some key issues 2. Which has been the Smart specialisation Path in the

Basque Country? 3. How is cluster policy related to Smart specialisation

strategy? 4. What can be learned from the practice of cluster

policy for the construction of smart specialisation strategies (SSS)?

5. Conclusions

Structure of the presentation

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Some key issues: Territorial strategy

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Firm Strategy Territorial strategy 1. GOALS (narrow or broad) 2. POSITIONING AND BASIS • Which products • Which clients and needs • Which access • Which internal resources and

capabilities 3. PROCESS More or less participative,

but compulsory for all the members of the firm

1. GOALS (narrow or broad) 2. POSITIONING AND BASIS • Which activities and

technological areas (sector/clusters…)

• Which assets • Which agents • Which external relationships • Which internal articulation 3. PROCESS More or less participative,

but not compulsory for all the members of the territory

Some key issues: Territorial strategy

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Some key issues: Smart Specialisation Strategies (SSS)

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“Smart Specialisation is about placing greater emphasis on innovation and focusing scarce human and financial RTDI resources in a few globally competitive areas”. (p. 41) “Smart Specialisation Strategies entail a process of entrepreneurial discovery, identifying globally distinct niches and steering the RTDI and business innovation efforts of all stakeholders towards those areas” (p. 41) European Commission. Commission Staff Working Document. Document accompanying the Commission Communication on Regional Policy contributing to smart growth in Europe 2020 COM(2010) 553 final

Some key issues: S3 Content: activities and assets

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Goal: “specialised diversification”/“smart diversification and upgrading”

Narrow view: = General Purpose Technologies (GPT) = Leaders: invention; followers: co-invention = Risks (monopolies, less variety...) and less

flexibility to adapt and built capabilities in promising fields

Broad view: I&D and other innovation activities that make possible to innovate and increase productivity (see the new growth accountancy based on intangibles). Those non R&D based activities are particularly important in less developed regions, SMEs and creative industries.

Some key issues: ways of “smart diversification”

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Retooling (modernisation): support to technological and human resource upgrading within an already existing industry.How: applying GPT to a sector (nano to pulp and paper industry) but also, by cluster initiatives, renewal or restructuration…

Extending (diversification): some diversification of the knowledge base developed based on synergies and commonalities between two or more activities (e.g. moving from aeronautics to satellites and GPS technologies)

Emerging (radical foundation): the discovery of an entirely new niche which is likely to be viable and economically important. By applying research and innovation in a particular area (e.g. TICs in the maintenance of the archaeological and historical heritage) an attractive and profitable business activity appears.

Cross-sectoral (transition): a new combination of sectors helps generate innovative ideas for new products and services (e.g. collaboration inter-clusters)

Some key issues: S3 process: entrepreneurial process

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Narrow view: Government doesn’t select specialisation. Their role is: • Supplying incentives to (encourage) entrepreneurs who are involved in the

discovery of the right specialisations • Identifying and supporting the complementary investments to the right

specialisations (e.g. educational and training institutions) • Assessing the value of the identified specialisations, so that the support of a

particular line of business will not be discontinued too early nor continued so long that subsidies are wasted

• Provide information and facilitate coordination and connections, within the territory and with other territories

Broad view: beyond facilitating, takes part in the discovery process: • Sometimes local agents lack the capabilities needed for the discovery

process (usually, in less developed regions) • Local agents can have to much power and capture the process

But regional government might lack the powers and capabilities as well

Some key issues: The Cluster Concept

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A cluster is a geographically proximate group of interconnected companies and associated institutions in a particular field, linked by commonalities and complementarities. Porter (1998)

• Roots in other concepts with a long trajectory of analysis: – Agglomeration economies, industrial districts, innovative milieu ...

• Some practical problems: – Geographical scope? – Clusters versus cluster initiatives versus cluster organisations?

• ‘Chaotic’ concept, but commonly understood basis for policy: – Geographic proximity of agents in related industries – Hypothesised benefits from co-operative relationships, alongside competition

CURRENT PRACTICE: Extremely wide adoption by policy-makers at different administrative levels, but heterogeneity of approaches, lack of consolidation of clusters within Europe, and complex challenges in evaluating the effectiveness of policies

Some key issues: Trajectory of Basque Cluster Policy

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Launch (1990s): * Concerns around

Basque competitiveness & consultancy report in early 1990s

* Workgroups in 9 priority clusters

* Process leading to creation of cluster associations supported by a cluster policy

* Mixed private-public finance to cover the cost of the 10 resulting cluster associations

Consolidation (2000s): * Strategic reflection

about the policy * Formalisation of policy

mechanisms for the functioning of the public-private relationship

* Identification of three core working areas for the associations: quality, internationalisation and innovation

* Emergence of 2 further cluster associations

Adaption to New Realities (from 2010):

* New competitiveness plan (2010-2013)

* Changes in management and governance of the cluster policy

* Evolution of the policy to incorporate new activities: support for ‘pre-clusters’

* Establishment of an ‘inter-cluster’ initiative to reflect on the synergies between the activities of different clusters

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Activity Cluster Association Creation Number of Members

Policy Support

Home Appliances ACEDE 1992 8 Basque Gov (Industry)

Automotive ACICAE 1993 130 Basque Gov (Industry)

Energy Cluster de Energía 1996 88 Basque Gov (Industry)

Aerospace HEGAN 1997 37 Basque Gov (Industry)

Maritime Foro Marítimo Vasco 1997 163 Basque Gov (Industry)

Machine Tool Manufacturers

AFM 1992 86 Basque Gov (Industry)

Paper Cluster de Papel 1998 20 Basque Gov (Industry)

Environment ACLIMA 1995 82 Basque Gov (Industry)

Port of Bilbao UNIPORT 1995 144 Basque Gov (Industry)

Telecommunications GAIA 1996 240 Basque Gov (Industry)

Audiovisual EIKEN 2004 43 Basque Gov (Industry)

Transport and Logistics CLUSTERTIL 2005 88 Basque Gov (Transport)

Alimentation Cluster de la Alimentación 2008 31 Basque Gov (Industry)

Graphic arts Sector Association 2009 34 Basque Gov (Industry)

Iron and Steel foundry Sector Association 2009 68 Basque Gov (Industry)

Biosciences Biobasque 2006/2009 25 Basque Gov (Industry)

Habitat HABIC 2009 70 Basque Gov (Industry)

Forging and Casting Sector Association 2009 16 Basque Gov (Industry)

Construction Sector Association 2010 56 Basque Gov (Industry)

Hand Tools Herramex 2010 28 Basque Gov (Industry)

Steel production Siderex 2010 64 Basque Gov (Industry)

1980-1990 period: • New regional administration restructured the traditional metal industry by non R&D based

activities: investment in equipments and organisational improvements (retooling) • The completely new administration play a crucial role in the process, because firms were not

able. Adjustments were negotiated or consulted with unions. 1991-1998 period: • There is a formal industrial strategy. Regarding traditional sectors clusters are actively

fostered by the Basque Government (BG). • The outset of a diversifying policy: towards aeronautics and city renewal

(Bilbao/Guggenheim) (extendings not based on R&D) • The BG designed the overall strategy top-down, led the clustering process and the renewal

of cities, and backed the firms’ initiative in aeronautics. From 1999 until now: • Clustering is widened and upgraded (retooling). In 2011 cross-cluster initiatives are launched

(cross-sectoral) • Besides, an R&D based diversifying strategy is launched in bio, nano and energy • General strategic plans are designed in a more participative process. The role of BG varies

depending on the strength of other agents

Which has been the Smart Specialisation Path in the Basque Country

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Which has been the Smart Specialisation Path in the Basque Country: R&D based

diversification strategies

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Characteristics Biobasque Nanobasque Energibasque

Previous conditions and assets

Lack of previous traditional conditions for being a bio-region

Some research capabilities in universities and projects in firms

More than 350 firms were already established including industrial world- leaders

Ways of specialisation 1st step: creating a bio-sector (radical foundation) Next steps: Diversifying the machine-tool sector (extending) and applications in other sectors (retooling)

Introducing nano and micro applications in traditional sectors (retooling).

Upgrading and diversifying of existing activities (retooling and extending) and being present in future new sectors (emerging)

Entrepreneurial process and role of other agents

Role of other agents different to BG is now being developed

Need of external conditions. Role of other agents (mainly, university research groups) higher than in bios

Strategy based on firms’ and research centres’ activities

Role of government Crucial and unique role of the BG (Industry department)

Launched the strategy Coordination and support of activities developed by firms and other agents

• Both imply forms of cooperation between firms and other agents working in related/complementary sectors

• Both imply an underlying entrepreneurial process of discovery of synergies, opportunities and possibilities

• Both are place-specific: They rely on place-based assets, context and institutions, and are limited in working across territories

• Both are transformative, but subject to debate around the appropriate role of government in this transformation

• Both are systemic & require new types of leadership/governance

• Both are characterised by extreme difficulties in evaluating the effectiveness of associated policies

How is cluster policy related with S3: Some Similarities in Practice

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• Working across sectors is challenging, both within the framework of a cluster policy and with regards a SSS

• Experience with cluster policies shows that process is critical: – Which agents are involved? – How they are involved and how decisions are made? – What training/tools do they receive to understand the policy/concept? – Over what timescale have they been involved?

• Challenges in making cluster policies more sophisticated and in consolidating S3 are strongly related and reflect: 1. The need to better articulate the synergies between the two policies 2. The need to be patient with long-term processes

What can be learned from the practice of cluster policy for the construction of S3?

15 Bringing abstract concepts such as clusters or SSS alive in a policy context is not something that can happen overnight: the agents involved need to learn over time

• In a region more than a strategy might be launched, involving different roles from government and other agents

• Not all S3 must be drawn upon R&D or technological innovation, mainly in less developed regions, SMEs and creative industries

• Even when the usual conditions are not in place, by levering in other related local assets, a determined and persistent plan with a flexible focus, might prove to be successful

• R&D based diversifying strategies required a great deal of resources and government capabilities, maintained for long periods, lacking in most of the regions.

• Clusters and S3 are inherently related concepts • Important to exploit synergies between existing cluster policies and the

construction of S3 • There are many lessons for S3 from experience with cluster policy: above all, the

importance of process, governance and time

Conclusions

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Thank you!! Eskerrik asko!!

Emails: mjarang@orkestra.deusto.es and mnavarro@orkestra.deusto.es

www.orkestra.deusto.es

San Sebastián University of Deusto Campus

Bilbao CRAI Library, University of Deusto

Mundaiz, 50 20012 Donostia/San Sebastián

Ramón Rubial, 1, planta 8, aula 7 48009 Bilbao

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