Experts meet at FAPESP to discuss geography of innovation
August 23, 2017
By Maria Fernanda Ziegler and José Tadeu Arantes | Agência FAPESP – The Erie Canal was opened in 1825 to connect the Hudson River to Lake Erie and thus create a navigable route between New York City on the Atlantic Coast and the Great Lakes on the US-Canadian border. It was extraordinarily important to the development of the US Northeast, opening up the interior to immigrant workers, facilitating the flow of goods and the spread of enterprises to new regions, and transforming incipient urban settlements into large cities.
The canal’s peak year was 1855, when 33,000 commercial shipments took place. Chicago, founded in 1833 with a tiny population of some 200 souls, received from it the initial impetus to become one of the world’s leading business centers.
The example of the Erie Canal was used by science and entrepreneurship policy expert Chris Hayter, a professor at Arizona State University, to introduce his presentation to the international symposium on “Entrepreneurship and the Geography of Innovation” held at FAPESP (São Paulo, Brazil) in July.
The symposium, which brought together researchers from Brazil, the Americas, Europe and Asia, was coordinated by Nicholas Spyridon Vonortas, a professor of economics and international affairs at George Washington University, as part of the project “Innovation systems, strategies and policies” led by Vonortas at the University of Campinas (UNICAMP) through FAPESP’s São Paulo Excellence Chair (SPEC) program.
“The example of the canal is very useful to an understanding of why certain regions attract or enable the creation of more businesses than others,” Vonortas told Agência FAPESP. “In the early twentieth century, British economist Alfred Marshall (1842-1924) talked about the importance of agglomerations of industry. What has changed since then is that our interest has shifted from manufacturers to clusters of technology- and knowledge-intensive firms. These are what really matter now.”
According to Vonortas, we tend to forget how different countries and regions really are. “In Brazil, for example, there’s a huge difference between São Paulo State and Ceará. The same is true of the differences between countries and between regions within large countries such as the United States, China, and so on. This is why we invited experts from so many different regions to the event,” he said.
“How to create policies, how to encourage people, how to draw attention to business activities? All this depends to a large extent on the culture of the place. Not all programs will work equally well anywhere in the world. Brazilians don’t need to mimic what the Americans do or what the French do. You listen, understand, learn, and find your own way to do things. This is exactly the point.”
In this perspective, Michael Stampfer, the managing director of the Vienna Science & Technology Fund (WWTF), a private Austrian nonprofit science and research funding institution, spoke during the event about European regions that spill over national borders. He stressed that economically viable regions do not necessarily coincide with administrative regions. In the current European context, business activities are mainly cross-border, rather than confined to specific countries.
“This is also the case for the regions of a big country like Brazil, where certain activities cross the border between states like São Paulo and Rio de Janeiro or São Paulo and Minas Gerais,” Vonortas commented. “What should be done if the vital economic regions don’t coincide with administrative regions but cross the borders of states with different governors? The Europeans have had to deal with this situation, and I believe they’ve found some interesting solutions.”
“There are elementary differences,” Stampfer told Agência FAPESP. “One is the size of the regions. Another is how technologically advanced they are, where they are on a certain development path toward high technology, international value chains, and so on. There are also basics, like the rule of law, business practices, or how innovation is valued in the society. It’s the combination of all these factors that makes this huge difference.”
In his presentation, Stampfer compared the innovation potential of Centrope, an incipient European cross-border region comprising parts of Austria, Slovakia, Hungary and the Czech Republic, with Vienna as its hub, and four already-consolidated cross-border regions: Øresund (parts of Denmark and Sweden), ELAt (parts of the Netherlands, Belgium and Germany), TMO (parts of France, Switzerland and Germany), and IBK (parts of Germany, Switzerland and Austria). As Centrope’s main weaknesses, he noted a lack of leading high-tech universities; areas that copy, rather than create, innovations; a brain drain from Slovakia, Hungary and the Czech Republic to the world’s most developed centers; and low student mobility within the region.
Leaving aside the contrast in size and despite many geographical, historical, cultural and other differences, the diagnostic model presented by Stampfer could be highly useful in comparative surveys of the potential of Brazilian regions or cross-border regions between South American countries.
Concentrations of advanced higher-education and research institutions and highly innovative firms, like the clusters seen in the Campinas and São José dos Campos regions of São Paulo State, have become one of the most important variables in the formulation of public policies and in the strategies of development agencies and research funding organizations.
With regard to firms, such concentrations are known as “entrepreneurial ecosystems,” in a nod to biology. “The reason why very innovative firms tend to concentrate in space is so that they can benefit from each others’ presence in the same area,” said Ron Boschma, Full Professor of Regional Economics at the University of Utrecht in the Netherlands and a professor of innovation studies at the University of Stavanger in Norway.
In his presentation, Boschma identified possible technological diversification and innovation strategies for European regions depending on existing capabilities. Focusing on synergies among firms and their degree of complexity, he analyzed in detail the potential of three different regions: Île-de-France, with Paris as its hub; Lancashire in northwest England; and Extremadura in southwest Spain.
He showed several plots of complexity and relatedness for firms in industries such as chemistry, electrical engineering, instrumentation and mechanical engineering, clearly evidencing the potential of the three regions, with the French, English and Spanish regions ranked in descending order.
“The scenarios outlined show you can’t simply start from scratch,” Boschma told Agência FAPESP. “You have to identify capabilities and opportunities, which you can explore, use and diversify to arrive at new solutions.”
According to Boschma, São Paulo State has a highly diversified economy and offers many opportunities for knowledge-intensive entrepreneurs to make new combinations. “The main message is that knowledge-intensive firms in the São Paulo region should connect,” he said. “Complementarity can optimize resources. The existing capabilities can be mapped, so that knowledge-intensive firms can target them in the context of development programs and partnerships that foster these links and expand their competencies.”
Support for innovative small and medium enterprises
The development policies in place and the results accumulated over the years are other important variables. A good example is innovation research by small and medium enterprises (SMEs), supported by funding programs such as Small Business Innovation Research (SBIR) in the US. Approaches of this kind were discussed by a panel comprising specialists from Austria, Brazil, South Korea and Russia. FAPESP has a lengthy track record in this field, mainly through its own Innovative Research in Small Business (PIPE) program, which was launched in 1997.
Sérgio Robles Reis de Queiroz, a professor in UNICAMP’s Department of Science & Technology Policy (DPCT) and a member of FAPESP’s Innovation Research Panel, took stock of PIPE, which is commemorating its 20th anniversary in 2017. “Some 1,800 projects have been approved, and more than 1,100 SMEs have received support to date, with non-repayable grants of over R$1.2 million per project,” he said.
PIPE’s impact on the labor market has been significant, he added: it has increased the number of people in paid work by 30% in direct terms and by 41% if including contractors, outsourced services and associated activities. He summed up the program’s economic impact as a return of six to one on FAPESP’s investments.
However, there are important differences between SBIR and similar programs across the various countries that have them, even when countries as large as Brazil and Russia are compared. Whereas PIPE is solely for startups and other private-sector emerging firms with up to 250 employees, Russia’s innovation policy focuses mainly on state-owned enterprises. “A recent process has been the acquisition of SMEs by state-owned corporations,” said Dirk Meissner, a professor at Russia’s National Research University Higher School of Economics in Moscow.
The geography of innovation has itself become a highly innovative topic on the agenda of policymakers. With the themes and subthemes mentioned and many others addressed in presentations, roundtables and panel sessions, the international symposium on “Entrepreneurship and the Geography of Innovation” brought the subject very much to the fore.
The presentations of several participants can be downloaded from fapesp.br/11060.