Regional Innovation ParadoxesRegions for Economic Change: fostering competitiveness through innovative technologies, products and healthy communities.

Brussels, 7- 8 March 2007 Michael KitsonDirector, Programme on Regional Innovation,Cambridge-MIT Institute

The Cambridge-MIT Institute (CMI)

• Strategic alliance between the University of Cambridge and the Massachusetts Institute of Technology

• Mission: to enhance the competitiveness, productivity and entrepreneurship of the UK economy– By improving the effectiveness of knowledge exchange

between university and industry

• CMI’s Programme on Regional Innovation– Addressing the issues facing regional economies in

influencing and sustaining knowledge-based growth.

• www.regionalinnovation.org.uk

Two Economic Paradoxes

• The Innovation Paradox

• The Location Paradox

IDEAS INNOVATION

Investors

Team

Entrepreneurs& Inventors

The Innovation (Solow) Paradox

• Economic growth is not apparently correlated with innovation

• “You can see the computer age everywhere these days, except in the productivity statistics". Robert Solow, 1987, (MIT, Nobel Laureate)

The Innovation (Solow) Paradox

• Answer?

– Innovation takes time to have a major impact on economic growth.

• Why?

– It is the use of technology not the generation of technology that has the biggest impact on growth

The Innovation (Solow) Paradox

• US Productivity growth 1995-2000: the three largest contributors to the productivity surge were, in order:– wholesale trade– retail trade– security and commodity brokers

(Solow, CMI Summit 2001)

IDEAS INNOVATION

Investors

Team

Entrepreneurs& Inventors

DIFFUSION

Bentonville AR.

Four pathways of regional innovation-led growth

A. KNOWLEDGE GENERATING LOCATIONS• Indigenous creation of new technologies

B. KNOWLEDGE USING LOCATIONS

II. Transplantation of new economic activity into region

III. Diversification of existing industry into new activities

IV. Upgrading of mature industries

Source: Based on Richard Lester, MIT

Developing New Technologies: the tale of two cities

• Strong biotechnology clusters in the Cambridges (USA and UK)

• But the development of the industry in the two cities reflects different trajectories and different challenges

• Indicates the importance of understanding the geography and history of place

1 mileSource: MIT Entrepreneurship Centre

8 miles

The Location Paradox

• Innovating business do not engage in extensive collaboration with other local businesses or institutions

Collaboration and Clusters• According to Porter (1998) clusters are ‘geographic concentrations of interconnected companies, specialised suppliers, service providers, firms in related industries, and associated institutions (for example universities, standards agencies, and trade associations) in particular fields that compete but also co-operate’

Collaboration and Clusters• The stress on ‘geographic concentrations’ of collaborators is misleading

• The Porter analysis is based on where firms are, not what firms do

• Local collaborative behaviour is not an important driver of innovation

• National and international collaborations are often more important than local collaborations

• Important to distinguish between ‘bridging and’ bonding’ networks – bridging networks that are outward looking may be more important for knowledge based activity