Local focus for European innovation

Promoting innovation at a local level may seem a paradoxical response to the challenges of globalisation but the thinking in the European Commission is that regional concentrations of a specific industry hold the key to innovation and international competitiveness.

Nikos Pantalos is a Commission official helping the establishment of the European Cluster Alliance, which aims to turn these regional concentrations, the phenomenon of "clustering", into one of the driving forces of innovation in the EU.

With a critical mass of specialised knowledge, skill and resources, clusters are "fertile environments for innovation", explains Pantalos. Adding to the paradoxes, innovation in clusters often stems from business co-operation within a competitive context. The interconnectedness of businesses, universities and public agencies eases the diffusion of innovations within the cluster, which is linked in turn to the international market. Automotive clusters in Germany are a prime example.

The alliance seeks to bring cohesion to a patchwork of national policies promoting clusters. Representing 55 different institutions across Europe, four umbrella groups funded under the Commission’s Pro Inno innovation policy initiative will make up the alliance.

Jens Erik Lund co-ordinates a policy alliance for Baltic-area clusters, one of the four. In developing successful clusters, says Lund, "innovation is key". It is not only research and development that makes clusters centres of innovation. Concentrations of different industries located near each other may collaborate on products that are a combination of different areas of expertise such as biotech and information technology (IT), or food and IT. "There you have the emerging ideas of innovation," says Lund.

Along with the alliance, the Commission is funding a massive effort to identify every cluster in the EU, Iceland, Norway, Switzerland, Turkey and Israel. The mapping project will use 38 different sector categories to identify clusters, from furniture to financial services. The European Cluster Observatory, to be launched next month, will incorporate the mapping effort to "take a first picture", using the methods of Michael Porter, a cluster expert and a business professor at Harvard University. According to Pantalos, it will also monitor the development of cluster policy in Europe.

Örjan Sölvell, who co-ordinates the mapping project, says that labour market effects are part of what make clusters centres of innovation. A university in an automotive cluster might establish a professorship for automotive safety, says Sölvell, turning out "skilled labour that has specialised talent". He also attributes innovation to "cluster leakages and technological spillovers" that occur in tight networks of buyers and suppliers.

Strong clusters, according to Sölvell, are places where wealth is created, and tend to have higher gross domestic product per person. They are "attracting poles" of knowledge, foreign direct investment and venture capital. And clusters are also important in integrating small- and medium-sized enterprises into international markets.

But Pantalos and Sölvell both say that one of the biggest obstacles to creating stronger clusters in Europe is a fragmented market. "Taking away fragmentation means that you get more clusters," says Sölvell. Freer movement would also allow stronger clusters to consolidate.

Until the fragmentation problem has been solved, the alliance can at least promote better flow of knowledge and policy ideas about clusters. Many different policies are used to promote clusters across Europe, with varying success. Some of those stem from regional differences. Northern European countries often seek to foster competition within a given industry, while some southern European policies promote clusters as a way to protect national champions, says Lund. According to Pantalos, the least successful policies are those that try to create new clusters from scratch - better to "make the strong stronger" and connect local clusters to international networks, he says.

The Commission will produce a European cluster memorandum - a commitment to support transnational co-operation between clusters. Member states are to sign the memorandum in November and December. The memorandum and other reports will be presented at a conference on clusters in Sweden scheduled for January, at which officials from the Commission, Sweden and Slovenia - which will be holding the presidency of the EU - will be present.

Many European clusters are weaker than their international competitors and the Commission wants to make sure that regional policies to help clusters do not leave out the trans-national dimension as a promising way to create world-leading clusters in Europe.

Streamlining EU programmes such as the new structural funds, the framework programme for research and the Competitiveness and Innovation Programme together with national and regional programmes ought to help.

Promoting innovation at a local level may seem a paradoxical response to the challenges of globalisation but the thinking in the European Commission is that regional concentrations of a specific industry hold the key to innovation and international competitiveness.