Innovation in the context of rural economic development

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Innovation in the context of rural economic
development

• University of Akureyri Research Institute
• Rannsókna- og nýsköpunarhús við Norðurslóð
• 600 Akureyri, Iceland
• Tel. [phone], Fax [phone]

Some lessons from Iceland
Economic Development and Innovation in the Nordic
Periphery Ketilhúsið, Akureyri, October 22,2004
Elín Aradóttir elina_at_unak.is
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Overview

• Overview of current activities of RHA in the
  field of innovation studies
• What do we mean by innovation in the context of
  rural economic development
• Small firms and innovation Selected research
  findings

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I) Current activities of RHA
Two ongoing projects Project 1
Community morale and its influence on innovation
processes Project 2 Innovation systems and
the periphery (ISP)
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I) Project 1 Community morale and its influence
on innovation processes

• To explore innovation activity among firms in two
  selected rural
• regions in Iceland.
• Participation in innovation.
• Future plans for innovation.
• Perceptions of hindering factors for innovation.
• To explore the appearance of selected
  socio-cultural features among the public in the
  same two regions (community morale).
• Optimism
• Attitudes towards novelties
• Tradition
• To explore the relationship between innovation
  activities among firms and the appearance of
  selected socio-cultural features in the same two
  regions.

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I) Project 1 Presentation of results
The 3rd of November, 2004
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I) Project 2 the ISP project

• Research partners
• University of Akureyri Research Institute (RHA),
  Iceland
• NIFU STEP, Norway
• Royal Institute of Technology (KTH), Sweden
• Chydenius Institute, Kokkola, Finland
• Danish Centre for Rural Research and Development,
  Denmark
• Reference group
• A group of experts representing key policy actors
  and/or support service providers in the field of
  innovation facilitation and economic development
  in the five countries

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I) Project 2 the ISP project

• Goal
• To explore how innovation capabilities of firms,
  in selected traditional and mature industries in
  periphery regions can be enhanced through the
  means of innovation and regional policy, and the
  strengthening of innovation systems
• Key themes
• Innovation activity
• Knowledge and competence base
• Cooperation and networking
• Innovation conditions
• Industry focus Tourism, agrifood production,
  manufacturing
• Study area (IS) The Northwest region (Norðurland
  vestra)

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II) What do we mean by innovation
An innovation means implementing a novelty
for the purpose of strengthening or improving the
competitive status of the entity (firm) in
question. Example of this is when a firm
introduces a new or significantly improved
product (good or service) to the market, or when
a firm designs or utilizes a new or significantly
improved process or method. Innovation is
based on the results of new technological
development, new combinations of existing
technology or knowledge, or utilization of other
knowledge acquired by the firm.
Innovation is defined from the perspective of
each firm, i.e. it has to be new to the firm but
not necessarily to the market (locally,
nationally or in an even wider context). It does,
therefore, not matter whether the novelty was
developed by the firm or by another entity.
Level of novelty In house, local
level, regional level, national level,
international level
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II) What do we mean by innovation?
Based on this understanding of the concept
of innovation, innovation is applicable in every
industry sector, in small and large firms and in
rural and urban locations. But how does
innovation appear in small firms in traditional
sectors in rural regions? Lets look at a
few examples
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II) Firm 1 Móðir jörð

• Móðir jörð, lífræn ræktun
• Eymundur Magnússon and family
• 1979, Vallanes in Fljótsdalshérað East Iceland
• Approximately 5 man-years
• Production of organic food products (farming and
  processing)
• Pioneer in his field in Iceland
• Products available at all major food retailer
  across the country, under own brand
• The innovation

• Product barley for human consumption, organic
  products
• Process Processing at the farm

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II) Firm 2 Skagavör ehf.

• Bjarni Egilsson and family
• 1993, Hvalnes on Skagi, North Iceland
• Approximately 2 man-years
• Processing of various food products, according to
• old Icelandic traditions, access to 40 of
  the
• Icelandic consumer market

• Product innovation Smoked herring (red herring)
• Product uniqueness The firm has taken a raw
  material which does not play a big part in the
  every day cuisine of Icelanders and applied old
  traditional Icelandic processing methods to those
  raw materials
• New combinations of existing knowledge
• Through innovation, the firm has broadening its
  product range, which has resulted in a better
  competitive status of the firm.

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II) Firm 3 Sjúkraþjálfun Sigurveigar ehf.

• Sigurveig Dögg Þormóðsdóttir
• 1998, Sauðárkrókur, North Iceland
• Physiotherapy clinic
• Approximately 1,5 manyears
• Servicing Skagafjörður district/county
• The innovation
• Product/service Introduction of acupuncture
• therapy to the
  regional market

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III) Selected research findings

• Results from project 1 and project 2
• Plenty of examples of innovation can be found
  among firms in traditional and mature sectors in
  the rural regions studied.
• Approximately one out of every four firms, in the
  Northwest region and Snæfellsnes and Dalir
  districts, have been active in innovation in the
  past 24 months.
• Turnover was found to have considerable effects
  on innovation activity as innovation activity
  generally increases with higher turnover.

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III) Selected research findings, cont.
Innovation activities and revenue
r0,23 p lt 0,001
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III) Selected research findings, cont.

• Results from project no. 1
• There are some indications that the smallest
  firms do not perceive themselves as participants
  in innovationand that they do not believe that
  the idea of innovation applies to them.
• I chose not to answer this questionnaire
  because innovation has nothing to do with my
  operation, because it is primarily just based on
  fishing
• Quote from a representative of a small firm in in
  Northwest region
• I am just a regular working guy in the
  field of maintenance and electrical
  installations. I leave it to others to deal with
  innovations and I do not feel that this
  questionnaire applies to me
• Representative of a small firm in Snæfellsnes
  district

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III) Selected research findings, cont.

• Results from project 2
• The study in the Northwest region indicates that
  the visibility of various policy initiatives as
  well as support programs and services might be
  quite low among small firms (e.g. based on the
  views of representatives of tourism firms).
• The representatives of different support service
  providers were generally somewhat familiar with
  the national policy environment. They, however,
  in some cases expressed that in their experience
  too little attention is paid to the traditional
  sectors of rural regions within the overall scope
  of policy and innovation support design.

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III) Selected research findings, cont.
I find it incredibly annoying how much attention
the high-tech companies receive in the general
discussion on innovation in this country, in
comparison to companies in the primary sector.
The reason for that I find this so annoying is
because we have seen that high-tech companies all
over the world are more and more moving their
operations to countries where salaries are low.
The same applies to companies which provide
services to the users of high tech equipment
they seem also to be leaning towards countries
such as India or China. In my opinion, that is if
we are going to sustain our economic growth and
to continue to grow and live up here, we have to
put a greater emphasis on those aspects that can
not be taken away from us. Those aspects include
our magnificent nature and ways of food
production. These aspects are also
interconnected. No one, except us, can offer a
product, such as a tour to the Gullfoss-Geysir
area associated with an Icelandic lamb steak
dinner at local restaurant. These aspects offer
opportunities that can not be taken away from
us. Þorsteinn Broddason, a local economic
development officer in the Northwest region, June
02, 2004
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III) Conclusion

• Although in recent years several development
  projects and support services have been initiated
  by various organizations, with the aim of
  facilitating innovation among firms in rural
  regions, there are some indications that we need
  to do better
• Visibility of the existing services needs to be
  improved. Support service providers might need to
  take up a more proactive approach in the
  promotion of service offers and opportunities
• Also in the general discussion of innovation in
  society, it has to be emphasized that innovation
  is applicable in every firm, regardless of size,
  industry sector, and location
• Public policy makers, governmental organizations,
  and research and educational institutes have an
  important role in shaping the discussion of the
  topic
• Industry associations and grassroots groups also
  have a role in initiating an encouraging
  discussion of the importance of innovation within
  their membership base
• Firms need to buy into the idea of innovation
  and make it their own

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More Information

• A handout included in the conference package
• Contact information
• Elín Aradóttir, Rannsóknastofnun Háskólans á
  Akureyri
• E-mail elina_at_unak.is
• Tel. [phone]

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II) Selected research findings, cont.

• Results from project 1
• In the past 24 months, did your firm introduce
  onto the market any new or significantly improved
  products (goods or services) for your firm?
• In the past 24 months, has your firm introduced
  any new or significantly improved production
  processes including methods of supplying services
  and ways of delivering products?