New Strategies for Regional Innovation in the US and Japan

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New Strategies for Regional Innovation in the US
and Japan
Trends, Contrasts, and Assessment

• Philip Shapira
• Professor, School of Public Policy, Georgia
  Institute of Technology, Atlanta, USA
• Presentation at National Institute of Science and
  Technology Policy, Tokyo, Japan
• March 10, 2005

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Overview

• New technology paradigms and regional roles
• Trends in US regional innovation policies
• Case of Georgia, USA Promoting innovation in a
  traditionally non-innovative region
• Japanese regional innovation policy comparisons
• Concluding points

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? New ParadigmsRD and innovation paradigm
shifts (US)
Adapted from Arnold
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New roles for regions and localities in innovation

• Complex systems, SMEs, Clusters

Tacit as well as formal knowledge
Human capital and competences
Economies of scope (flexibility, specialization)
Linkages and networks (vertical -gt lateral)
Knowledge spillovers, agglomeration economies
Entrepreneurship
Experimentation, learning
Regions as drivers of innovation
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Regional Innovation Intensity Measured by
Patents / mill pop.
Source US Patent and Trademark Office,
http//www.uspto.gov/
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Regional InnovationSearch for New Conceptual
Explanations
Example
Source F. Moulaert and F. Sekia, Territorial
Innovation Models A Critical Survey, Regional
Studies, 37.3, 289-302, 2003.
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? Trends in US Policies Search for new
development policy models

• US State policy waves
• (1) business attraction
• (2) business creation..
• (3) regional innovation system approach
• Innovation and technology emphasis
• Decentralized, multi-actor
• Emphasis on collaboration, partnerships
• Rediscovery of the foundation
• Integrated (within and between program areas)
• Benchmarking, comparison, learning

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Clusters and Creative Cities

• Regional Innovation Clusters
• (M. Porter)
• Geographic concentrations
• Connected companies
• Linked institutions
• Cluster types
• High Tech (new knowledge)
• Mature (know-how)
• Characteristics
• Knowledge spillovers
• Labor pool
• Competition cooperation
• Productivity innovation

• Creative Places
• (R. Florida)
• Geographic concentrations
• Talent
• Technology
• Tolerance
• Location (not corporation)
• Place to work
• Place to live
• Urban
• Lifestyle, quality of life
• Real amenities

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Council on Competitiveness, National Innovation
Initiative, 2004 www.compete.org
Innovation Hot Spots
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Regional prototypes (diverse)
Metropolitan complex Chicago
Hub-and-spoke region Seattle (WA)
Product cycle region Boston/Route 128 (MA)
Networked region Silicon Valley (CA)
Metropolitan complex New York (NY) (multi
innovation district)
Metropolitan complex Los Angeles (CA) (multi
innovation district)
Technopole Research Triangle (NC)
Emerging metro San Diego (CA), Phoenix (AZ)
Traditional cluster Dalton (GA)
High tech cluster Austin (TX)
Emerging metro Atlanta (GA)
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States as Laboratories

• Diversity of regional conditions
• Diversity of regional models
• Role of states and localities as laboratories
• Developing new policy approaches
• Experimentation
• Testing
• Exchange, benchmarking, evaluation
• Learning
• Deploying good practice (states, federal level)

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University roles in regional development

• Research knowledge creation
• expand regional knowledge pools, research
  inflows
• Education human capital formation
• build regional skill capabilities, less brain
  drain, more brain draw
• Know-how transfer to improve existing products
  and processes
• upgrade existing firms
• Technological innovation
• create and commercialize new products in region
• incubate new firms, diffuse new technologies

• Infrastructure
• regional facilities, equipment, electronic
  networks

• Knowledge flows
• improved information and people flows between
  universities, other institutions, and local firms
  
• Leadership
• in addressing regional problems and opportunities
• Regional milieu
• creation of a favorable context within region

Modified from Luger Goldstein, The Role of
Public Universities, in Bingham and Meier (eds),
Dilemas of Urban Economic Development (1997).
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? Case Study State of Georgia, USAContext

• Georgia, USA - basic statistics
• 7.5 million population - 3.5 million workforce -
  17 manufacturing 26 services 25 trade
• 12,000 manufacturers, 98SMEs, and growing...
• 600,000 manufacturing jobs, 66SMEs
• Not a traditional location of innovation
• Much Georgia industry is in traditional sectors
  (e.g. textiles, food processing) or in routine
  branch plants
• Poor educational performance
• Weak innovation culture
• Low industrial RD spending public RD dominated
  in past by defense procurement
• Trends towards increased innovation
• Great increase in state technology spending
• Innovative companies technology jobs growing
  (GA - a leader in tech job growth in 1990s) - but
  still a small share
• Innovative firms often locate in Atlanta suburbs,
  not in central city, mid-metros or outlying areas

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Georgia ManufacturersReturns to strategy (1999)
Source Georgia Manufacturing Survey 1999,
weighted responses of 727 manufacturers

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Georgia State innovation strategy a new
strategy with roots

• Develop a more technologically-advanced economy
• A goal with origins in post-civil war era
• Early steps include develop of technological
  institutions (Georgia Tech), state university
  system, technical colleges
• 1960s Know-how transfer to existing companies
  through a statewide industrial extension system
• 1970s Initial efforts to strengthen science and
  research base - benchmark with North Carolinas
  Research Triangle
• 1980 - First advanced technology incubator (ATDC
  at Georgia Tech) in Atlanta
• 1980s - Development of public technology
  incubators in other locations of the state, with
  mixed success
• 1990s - Evolution into a comprehensive
  technological development strategy, aimed to make
  Georgia a premier location for advanced
  technology development
• 2010 Vision Among top five states with a
  technology-based economy

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Strategies for Regional Technology Promotion in
GeorgiaExamples

• Development of entrepreneurial research
  universities
• Georgia Tech
• Creating knowledge pools for technological
  innovation
• Georgia Research Alliance
• Georgia Center for Advanced Telecommunications
  Technology
• Life sciences research centers bioengineering
  nanotechnologies
• Technological commercialization
• Georgia Tech Advanced Technology Development
  Center
• Other incubators
• Know-how transfer
• Georgia Manufacturing Extension Partnership
• Complementary actions
• Venture capital technology support associations
• Deployment of lottery funds
• HOPE Scholarships (access to higher education)
  ICAPP

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Example 1Entrepreneurial UniversitiesGeorgia
Institute of Technology

• Strategic transition
• technical institute to a technological
  university
• Expansion of capabilities
• research, facilities, networks
• research 5m (1970s) ? 350m (2004)
• Leadership to promote innovation
• emergence as an Innovation U
• Engagement with private sector
• university-industry centers, research
  partnerships
• promotion of entrepreneurship, tech transfer,
  research commercialization

• Engagement in state science and technology policy
  to promote economic development (as well as
  national policy)
• Growth of interdisciplinary programs, new
  teaching programs
• e.g. Management of Technology Global
  Engineering Sustainable Development CIBER -
  International Business Center European Center
• biomedical engineering (Georgia Tech Emory
  University)
• Incentives for faculty (and student) innovation

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Example 2Creating knowledge pools...
Georgia Research Alliance (GRA)

• Collaborative state initiative with 6 research
  universities in Georgia - established 1991
• Aim use research infrastructure to generate
  business and economic development in targeted
  technologies
• advanced telecommunications
• biotechnology
• environmental technologies
• existing industries
• emerging areas e.g. nanotechnology
• c.200m state funding (since 91)
• plus federal, private

• GRA Research Universities
• Georgia Institute of Technology
• Emory University
• University of Georgia
• Georgia State University
• Medical College of Georgia
• Clark Atlanta University

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for technological innovation
Georgia Research Alliance concept Building
critical mass to create jobs
Leading-edge industry-oriented research
at universities
Skilled workforce of scientists, engineers,
and technicians
Pool of Scientific Entrepreneurs
Industry clusters with major RD facilities
Supportive environment (capital, quality of
life, business atmosphere)
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Example 3Technological innovation venture
creation

• Advanced Technology Development Center (ATDC)

• One of first technology incubators in US
  (established 1980)
• Entrepreneurial services, space, and support for
  early-stage new technology companies
• Faculty research commercialization program
• Corporate RD support program (including landing
  parties)
• Part of Georgia Tech Economic Development
  Institute. 9 staff associates.
• State funding about 1.5 million a year
• 100 companies graduate 4,200 employees 1.75b
  revenues

• Original facility at Georgia Tech in Atlanta, now
  joined by facilities in mid-Georgia, GCATT, south
  Georgia, and Emory biotech collaboration

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Example 4Know-how transfer

• Georgia Manufacturing Extension Partnership

• Aim accelerate deployment of improved
  technologies and practices, to SMEs in Georgia
• 18 field offices 100 staff 1,400 firms aided
  per year
• Services quality, environment, manufacturing
  process, business systems, training, informatics,
  product development
• Partnership 7m budget (fed 2.5 m state 3m
  industry fees 1.5m)
• Linkages with faculty, SBDCs, Voc-Ed, Georgia
  Power, NASA, Federal labs, private consultants

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Example 5Greater Georgia Regional Learning
Network

• Multi-year effort - enhance technology-based
  economic development in mid-sized cities
• Regional industry cluster focus enhance local
  organizational, leadership, planning, and
  management capabilities for technology-based
  economic development
• Strengthen strategies and opportunities to grow
  and attract technology-based enterprises
• Ensure that participating cities are deploying
  world-class best practice approaches to fostering
  technology-based development
• Benchmark learning network with comparable
  European cities (2001-2004)
• Augusta (GA) Dundee (Scotland)
• Columbus (GA) Cork (Ireland)
• Macon (GA) - Heilbronn (Germany)
• Savannah (GA) Pisa (Italy)
• New counterpart EU program (in development)
• with University of Stuttgart

EU-NARI Network Activities for Regional Innovation
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Georgia caseInsights Fostering an innovative
regional economy

• Work in progress
• Greatest success in Atlanta metro area (but still
  much to do)
• Emerging strategies in other mid-size cities
• Challenges in rural areas and small towns
• Innovation policy strategy
• Long-term uses instruments of the state
• Promotes clusters, but is much more than clusters
• Building innovative institutions ? leadership
• Public-private relationships
• Decentralized and networked
• Builds complementary assets in the innovation
  system
• Finance information infrastructure
• Talent (though still major issues in K-12)

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? Japanese Case Some Comparisons Regions in
Japan and the New Regional Context
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SMEs in Japan Changing Positions and Roles
Subcontract outsourcing
Technology / expert input
Market / network innovation
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Japanese Case Transition types
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Public-Private Interface New Roles and Challenges

• Transition I Dual system to supply-chain
  foundation
• Technologies Process improvement, quality,
  precision, delivery, technical / vocational
  training
• Business support Loans, business mutual
  insurance, contractor relations (vertical supply
  chains), labor standards
• Public role level the field (standardization),
  disseminate knowledge and good practice
  (routinization) regional location development

• Transition II Supply chain to innovation leader
• Technologies RD, product development,
  technology pioneering, technology fusion, science
  and technology training
• Business support risk capital, clustering and
  networking (horizontal and lateral), labor
  mobility, internationalization
• Public role catalyst, broker (innovation),
  develop and appropriate knowledge,
  differentiation regional innovation systems

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Case Study 1Kohsetsushi Centers

• Public testing and research centers (kosetsu
  shiken kenkyu kikan)
• First established in late C19 expanded in C20
• Draw on US agricultural extension and engineering
  experimentation station concepts
• Activities - research technology guidance
  testing and analysis open laboratories
  training network groups
• Focus SMEs with under 300 employees
• Large network (180 manufacturing centers) -
  spread out widely
• Managed by prefectures and local governments, but
  under MITI (METI) guidance
• 1b system 7,000 engineers, researchers,
  other staff

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Case Study 1Kohsetsushi Centers

• Effective in Type I transition
• Especially Quality, testing, catch-up
  research, bridge for SMEs
• Established most Japanese regions as viable
  production locations
• Challenged by Type II transition
• Outdated skills and labor system rigidity (though
  increasing use of secondment and foreign
  researchers)
• With a few exceptions, RD lags leading
  international centers and the expertise of many
  SMEs
• Outdated facilities (though there have been a
  number of new and consolidated centers)
• Central guidance v. need to be flexible and
  adaptable
• Restrictive fee and financial structures
• Often risk averse

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Case Study 21990s Regional Technology Projects

• From Technopolis (1980s) to new public and
  "third-sector" (public-private) technology
  centers and projects (1990s-2000s)
• Fields include software development, new
  materials, biotechnology, and other emerging
  technologies
• Examples Research Core Key Facilities Concept
  (advanced services) New Media Community Science
  Parks Regional Techno-Centers and Techno Plazas
  Venture Incubators Cooperative Research Centers
• Sponsors MITI (METI) other ministries
  prefecture and local gov.
• Often organized though third-sector foundations
  usually have new buildings sometimes associated
  with Kohsetsushi
• Focused mainly to SMEs (though also involve large
  firms, including foreign firms)
• Aim to promote innovation, small business
  start-up, new technology development, networking

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Case Study 21990s Regional Technology Projects

• Effectiveness - Type II transition
• Added up-to-date research facilities incubator
  space also important symbolic values
• Issues
• Management and staffing - use of seconded
  personnel from government and large private
  companies - few public entrepreneurs
• Availability of research capability in local
  public universities, labs
• Financial basis - real-estate perspective
• Framework conditions relatively few established
  researchers and entrepreneurs willing to take
  risk of start-up companies (venture capital
  consequences of failure
• Poor economic climate since 1991 (though also a
  missed chance to promote innovation?)

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Case Study 3New Regional Initiatives

• Regional Cluster Projects (current)
• METI Industrial Clusters Enterprise networking
  
• 19 cluster projects, 5000 companies (esp. SMEs),
  200 universities
• Association, technical assist, coop RD, HR,
  industry-univ
• Example TAMA (Tokyo Advanced Metropolitan Area)
• MEXT Intellectual Clusters research centers,
  projects organize academic-lab-industry links in
  regions.
• 10 clusters, 4.2m per cluster year.
• Joint research, patenting, TTOs
• Special Zones for Structural Reform (current)
• Zones where regulations are relaxed, incl.
  ind-univ, education, IT, urban development. More
  than 300 zones approved to date.
• Reform of national universities potentially a
  fundamental regional change
• Two-Layer Extensive Areas (Proposal under
  discussion)
• New Decentralized Regional Blocs (6-10 m people)
• Metropolitan cities and groups (300k)
• Addresses decentralization, flexibility, ageing
  society

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TAMA Cluster
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Observations on new regional cluster initiatives

• Cluster approaches
• Ambitious, many public and private organizations
  involved
• Cut across jurisdictions (e.g. TAMA case)
• Plays to Japans strengths in technology,
  exchange
• Better than 1990s regional technology projects
• Investment is relatively small
• Cluster policies dont reach small and mid-size
  population centers
• Still a preponderance of guidance
• Limited local customizations
• Lack of experimentation limits learning?
• Multiple ministry programs, who can coordinate?

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Assessment of Japanese regional approaches...

• Regional SME support systems developed for Type I
  transition (e.g. Kohsetsushi) have yet to adjust
  to Type II demands
• New Type II mechanisms not proven yet as
  effective
• First round of 1990s Type II programs limited
  regional effects
• Assumed a flexible regional innovation framework
  that did not exist
• Second round of Type II programs (clusters,
  institutional reform)
• Show more promise
• But may be limited by lack of scale and leverage
  by limited real decentralization and soft
  systems that have yet to evolve
• Evaluation and accountability systems have
  evolved, but lack the punch to promote further
  major change
• Requires new leadership, champions, at local and
  national levels

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? Concluding PointsRegional Innovation Some
insights and implications

• In both the US and Japan
• Search for conceptual understandings of regional
  innovation systems is not complete
• Search for effective policies and practices is
  ongoing
• Customization and distinctiveness in regional
  innovation policies are critical
• Learning needs to be embedded
• Balance between center and locality is not easily
  found
• Important to address underlying barriers to
  improved regional innovation performance, as well
  as add new policy layers.

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The difficulty lies, not in the new ideas, but
in escaping from the old ones. John Maynard
Keynes, The General Theory (1936)