Smart specialisation strategy is far more complex than originally described, say innovators

The European Commission struck a positive let’s-go-out-and-innovate tone in front of Europe’s regions in Riga last week, but several researchers and small businesses said there is a gap between political rhetoric and the reality on the ground.

The EU’s new thinking on how to stimulate job creation in poorer regions, outlined at the Innovative Regions in Europe conference on 5 and 6 June, says that universities, research institutes, regional authorities and business should write roadmaps on how to make the best use of available resources to achieve some form of competitive advantage, in a smart specialisation strategy.

This has previously been welcomed as a bold change in direction for EU regional policy, which is primarily interested in helping weaker regions close the gap with stronger ones. However, there have been complaints the Commission is embroidering a few claims about its new €100 billion plan. 

And research and technology organisations (RTOs) say the process is far more complex than originally described. There is not just the customary bureaucracy to battle but unfavourable reimbursement rules.

Without large take-up from RTOs, policymakers have acknowledged the new policy will not work. “You will need to have managers who [can] make business out of research. RTOs can offer this,” said Muriel Attané, secretary-general of the European Association of Research and Technology Organisations.

Delegates were also unhappy about the Commission’s suggestion that regions should consider combining local funds with EU Horizon 2020 research money. Wolfgang Burtscher, deputy director-general of the Commission’s directorate for research and innovation, said that researchers who fail to get funding under Horizon 2020’s SME Instrument could try and win money from the regional pot. However, one RTO member countered, “But wouldn’t that go against state aid rules?” Because the SME Instrument manages grants that are so big, between €500,000 and €2.5 million, clarity is necessary, the participant added.

Cristina Oyón, who is in charge of strategic planning for the Basque Government in the area of science and innovation has been administering regional funding for years. She said it is, “not at all easy” to tap both regional and Horizon 2020 funding.

However, she does not agree it is the Commission’s job to offer more guidance. “It’s hard for them to judge – all regions have different circumstances.”

A new experiment

One problem Europe’s regions would like to solve is how can they stop good people with good ideas leaving.

Latvia does not have the answer. Jānis Vucāns, chairman of the education, culture and science committee in the Latvian Parliament, recounted a bittersweet story of a new anti-cancer compound discovered by his country’s scientists but later commercialised in the US.

And after spending billions across decades to help Europe’s poorer regions catch up, the European Commission last year announced it was no closer to finding the formula.

Talent-magnets like Cambridge or Oxford cannot be bought off the shelf, it seems. There will always be tech valleys that draw wistful gazes from policymakers, but emulating them is, “really impossible,” said Ray O’Neill, vice president for innovation at Ireland’s Maynooth University.

The contrast in the performance of regions in Europe really stands out when you look at two figures, says Dutch member of the European Parliament Lambert van Nistelrooij. “Ninety per cent of EU Horizon 2020 research money is going to old member states, 80 per cent of regional funding is going to new member states. This is Europe.”

Starting this year, the Commission has made a break with its old watering can approach, where regional money is sprinkled around widely and ineffectively. Instead of handing out cash for regions to go after one-off projects, like building a new motorway, it is challenging them to find their niche and plough efforts into that.

It will take a while before results are felt, with some delegates saying  smart specialisation could take 10 – 20 and 20 years to bear fruit. Markku Markkula, president of the European Committee of the Regions said, “It’s not a plan. It’s a learning process.”

To help motivate regions to draw up new strategic plans, the volume of funds under the regional programme put aside for research and innovation has been increased. Between 2000 and 2006, it was €29.5 billion. Today it is up to €100 billion, exceeding the total R&D spend under the EU’s €77 billion Horizon 2020 research programme.

Finding out what works

For some regions, it is clear where strengths lie. Germany’s Saxony region has microelectronics, Poland’s Podkarpackie has an impressive aviation cluster, and Czech Republic’s South Moravia is the country’s life science and material research stronghold.

These regions have been working with their own innovation roadmaps for years, so the new steer from Brussels won’t feel too disorientating. 

Skåne in Southern Sweden, with five business parks, four universities and 12 incubators, is another place already well placed to attract both talent and finance. But it wasn’t always a bridgehead for new companies, it had to start somewhere. A few years ago, “It was clear we were not that good at networking,” said Camilla Christensen, a project manager at the Lund University Open Innovation Centre. “Instead of competing for the same government money, a group of businesses and universities thought they’d collaborate.”

Päivi Ekdahl, a development director at the Regional Council of Lapland said her region will consider giving money to projects that stretch across country borders: “If our University of Applied Sciences tells us they wanted to work with a Spanish research institute, we’d be willing to fund that, provided there was a benefit for our region.”

This is music to the ears of policymakers in Brussels extolling more partnerships and bigger ambitions.

But for other regions, the trick is to find what works. It is an inconvenient fact that regions most in need of innovation investment are those least able to do it.

Embrace the new strategic mind-set, says the Commission, but  as one administrator from a Finnish region said, “It’s about getting this new mentality into our minds. It’s not fully in there yet.

“We have all these empty pulp and paper factories. What do we put in them? We’re being asked to think down the road, even ten years… which is very challenging.”

Regions that have traditionally struggled to spend regional funding money will be the closely watched to see if smart specialisation works.

Commentators say it is going to be very challenging, especially for regions in the South and East of Europe. “Many administrators have been trained at pains to process and allocate European funding…but have no sufficient professional background in designing and running strategy processes,” wrote Fraunhofer Institute’s Henning Kroll in a recent report on smart specialisation.

And old habits die hard. The Commission has already turned away a proposal from an unnamed Greek region to splash public money on a new 5-star hotel.

Getting SMEs on board

Although it is sacrosanct in Brussels to claim every new policy turn benefits SMEs, many are not likely to apply for it.

Commissioner for Regional Policy Corina Creţu may have said this week, “I do not want to hear again that an SME is no longer interested in receiving our support because it finds it too lengthy, bureaucratic and cumbersome.” But show start-ups a Commission policy brief with “ex-ante versus ex-post conditionalities” scrawled across it and they may reply they don’t have the time to learn what any of that means.

Gert Franke, who runs a Dutch design agency called CLEVER°FRANKE, said, “If we were to make use of structural funds, we’d have to scale up [we’re 15 people].”