This monthly selection of articles has been carried out by Philippe Gugler and Damiano Lepori, the Center for Competitiveness, University of Fribourg. The entire selection, carried out since 2013, can be consulted on the academic articles page of our web.

The spatial dimension of productivity: Connecting the dots across  industries, firms and places

By: A. Tsvetkova, R. Ahrend, J. Oliveira Martins, A. Lembcke, P. Knutsson, D. Jong, N. Terzidis. OECD Regional Development Working Papers No. 2020/01, 2020.

Executive summary: “Productivity is the main determinant of living standards. Productivity growth, however, has been falling since the beginning of the century in many OECD nations accompanied by the increasing interregional divergence in productivity performance within countries. The mainstream economics research, which studies the drivers of productivity at the level of industries and firms, appears to be ill-equipped to offer solutions that would reverse the widening gap across regions. An explicit focus on the spatial (subnational) dimension of productivity is needed in order to better understand the recent productivity dynamics and to devise policy solutions able to boost aggregate productivity growth and to decrease interregional inequality.

Despite being largely missing from the productivity discourse within the mainstream economics literature, the spatial dimension is an integral (but often untold) story of productivity performance. This paper offers a synopsis of the current productivity research and demonstrates how regional and local characteristics and dynamics are central to productivity outcomes across industries, firms and places.

The paper distils a (relatively narrow) range of productivity determinants from the mainstream economics research and describes the mechanisms of their effects on productivity. These determinants are R&D and technology; knowledge diffusion; business churning; human capital; institutions (both formal and informal, such as culture); policies and regulations and demographic profiles and trends. This discussion (based on the theoretical and empirical studies that omit the geographical dimension) is followed by a detailed overview of how spatial realities shape each productivity determinant in focus. Finally, several clearly spatial productivity drivers (geography and borders; agglomeration economies; infrastructure – traditional and digital; governance and the efficiency of public services provision) are presented as described mostly in the regional science research.” [EXECUTIVE SUMMARY FROM AUTHORS]

Place-Based Policies: principles and developing country applications

By: G. Duranton, A. J. Venables. Oxford University, Department of Economics Discussion Paper Series No. 893, 2019.

Abstract: “Many development policies, such as placement of infrastructure or local economic development schemes, are “place-based.” Such policies are generally intended to stimulate private sector investment and economic growth in the treated place, and as such they are difficult to appraise and evaluate. This paper sets the rationale for place- based policies and a framework for analyzing their effects and assessing their social value. It then reviews the literature on place-based policies in the contexts of special economic zones, transport policy, lagging regions, and local economic development policies.” [ABSTRACT FROM AUTHORS]

Endogenous effects and cluster transition: a conceptual framework for  cluster policy

By: M. Abbasiharofteh. European Planning Studies, DOI: 10.1080/09654313.2020.1724266, 2020.

Abstract: “The clustering of firms in related fields has a positive impact on economic performance and innovative behaviour. The cluster lifecycle model provides a framework in order to add a temporal dimension to this ongoing debate. This model conjectures that clusters undergo various phases, in each of which they exhibit distinct characteristics in terms of size, economic performance and knowledge sourcing pattern. While there is strong evidence of a dynamic interplay between knowledge networks and clusters, we know little about how the structural configurations of a knowledge network engender cluster transition, and how these dynamics can be captured and integrated into policies. First, this paper contributes to this debate by providing a conceptual framework that accounts for cluster evolution based on endogenous micro-forces that are immanent in a knowledge sourcing structure. Secondly, this article underlines the failures of recent network-related cluster policies and discusses how the developed framework alleviates these issues.” [ABSTRACT FROM AUTHOR]

The Role of R&D – intensive Clusters for Regional Competitiveness

By: R. Kosfeld, T. Mitze. MAGKS Joint Discussion Paper Series in Economics No. 01-2020, ISSN 1867-3678, 2020.

Abstract: “Modern cluster theory provides reasons for positive external effects that ac- crue from the interaction of spatially proximate firms operating in common and related fields of economic activity. In this paper, we examine the impact of R&D-intensive clus- ters as a key factor of regional competitiveness on productivity and innovation growth. In analogy to the industry-oriented concepts of related and unrelated variety (Frenken, Van Oort, Verburg 2007), we differentiate between effects of cluster specialisation and diversity. The identification of R&D-intensive clusters is based on a hybrid approach of qualitative input-output analysis and spatial scanning (Kosfeld and Titze 2017). Our empirical study is conducted for a panel of German NUTS-3 regions in 2001-2011. To comprehensive account for specialisation and diversity effects of clustering we adopt a spatial econometric approach, which allows us to identify these effects beyond the geographical boundaries of a single region. After controlling for regional characteristics and unobserved heterogeneity, a robust ‘cluster strength’ effect (i.e. specialization) on productivity growth is found within the context of conditional convergence across Ger- man regions. With regard to the underlying mechanisms, we find that the presence of a limited number of R&D-intensive clusters in specific technological fields is most strongly linked to higher levels of regional productivity growth. While we also observe a positive effect of cluster strength on innovation growth once we account for spatial spillovers, no significant effects of ‘cluster diversity’ can be identified. This indicates that some but not all cluster-based regional development strategies are promising pol- icy tools to foster regional growth processes.” [ABSTRACT FROM AUTHORS]

The scope of regional innovation policy to realize transformative change  – a case study of the chemicals industry in western Sweden

By: H. Martin. European Planning Studies, DOI: 10.1080/09654313.2020.1722616, 2020.

Abstract: “Economic geography and innovation studies are increasingly asking how regional industrial development paths develop. This paper addresses the scope of regional innovation policy to influence transformative change in regional industries, such as that needed to cope with grand societal challenges including climate change. We take a cross-disciplinary perspective using the regional innovation system framework, which is focused on innovation-based regional development, and complement this with insights from the sociotechnical transitions literature and its conceptualizations of sociotechnical regimes and niches. Empirically, we study the case of the chemicals industry in the Gothenburg–Stenungsund region, Sweden’s largest basic chemicals industry cluster. Shifting from discussion to action appears challenging for this regional industry, despite advances in technology development, ongoing co- operation between the region’s public and private sectors and its ambition to become an international leader in the production of sustainable chemistry products by 2030. Using this case, we present a broader view of path development, one that includes under- addressed policy approaches attempting to create new sociotechnical alignments that require co-evolving changes across technologies, infrastructures, regulatory frameworks and other societal dimensions, both within and beyond the regional context.” [ABSTRACT FROM AUTHOR]

The digital layer: How innovative firms relate on the web

By: M. Krüger, J. Kinne, D. Lenz, B. Resch. Leibniz-Zentrum für Europäische Wirtschaftsforschung, ZEW Discussion Papers No. 20-003, 2020.

Abstract: “In this paper, we introduce the concept of a Digital Layer to empirically investigate inter-firm relations at any geographical scale of analysis. The Digital Layer is created from large-scale, structured web scraping of firm websites, their textual content and the hyperlinks among them. Using text-based machine learning models, we show that this Digital Layer can be used to derive meaningful characteristics for the over seven million firm-to-firm relations, which we analyze in this case study of 500,000 firms based in Germany. Among others, we explore three dimensions of relational proximity: (1) Cognitive proximity is measured by the similarity between firms' website texts. (2) Organizational proximity is measured by classifying the nature of the firms' relationships (business vs. non-business) using a text-based machine learning classification model. (3) Geographical proximity is calculated using the exact geographic location of the firms. Finally, we use these variables to explore the differences between innovative and non-innovative firms with regard to their location and relations within the Digital Layer. The firm-level innovation indicators in this study come from traditional sources (survey and patent data) and from a novel deep learning-based approach that harnesses firm website texts. We find that, after controlling for a range of firm-level characteristics, innovative firms compared to non-innovative firms maintain more numerous relationships and that their partners are more innovative than partners of non-innovative firms. Innovative firms are located in dense areas and still maintain relationships that are geographically farther away. Their partners share a common knowledge base and their relationships are business-focused. We conclude that the Digital Layer is a suitable and highly cost-efficient method to conduct large-scale analyses of firm networks that are not constrained to specific sectors, regions, or a particular geographical level of analysis. As such, our approach complements other relational datasets like patents or survey data nicely.” [ABSTRACT FROM AUTHORS]

Smart Specialisation: insights from the North American periphery

By: A. Crawley, A. Hallowell. Regional Studies, DOI: 10.1080/00343404.2020.1711877, 2020.

Abstract: “Smart Specialisation (S3) has been the driving force behind the European Union’s regional innovation strategy for the last seven years. However, criticism has been levelled at the policy as lacking an evidence base. This paper tackles this gap in the literature by providing an empirical assessment of a strategy remarkably similar to S3: the Maine Economic Improvement Fund (MEIF). The paper finds that the MEIF has succeeded in increasing employment, but is less successful in increasing productivity. Given the similarity between the MEIF and S3, the paper provides important lessons for European practitioners and policy-makers implementing the strategy.” [ABSTRACT FROM AUTHORS]

Science Parks and talent attraction management: university students as a  strategic resource for innovation and entrepreneurship

By: H. Löfsten, M. Klofsten, E. Cadorin. European Planning Studies, DOI: 10.1080/09654313.2020.1722986, 2020.

Abstract: “This paper aims to expand our understanding of talent attraction management in Science Parks with a specific interest in university students/alumni as a human and strategic resource. The underlying rationale is how the links with universities can be supported and how the Science Park management can contribute to successful relationships with universities and university students/alumni, in order to develop tenant firms and the park itself. A questionnaire was sent out in 2018–120 parks. This study includes 25 variables, and four significant regression models are presented. The main finding is that Science Park talent attraction activities act as a mediating variable, which affects the informal and formal partnerships between students and firms/universities as well as how the park management can contribute to successful relationships. By attracting students, tenant firms can have a positive impact on their performance as well as Science Park development.” [ABSTRACT FROM AUTHORS]

Territorial capital as a source of firm competitive advantage: evidence  from the North and South of Italy

By: V. Morretta, S. Syrett, L. Sepulveda Ramirez. European Planning Studies, DOI: 10.1080/09654313.2020.1722067, 2020.

Abstract: “This paper investigates how territorial capital, defined as a ‘mix‘ of tangible and intangible local resources accumulated over time across different territories, becomes a source of competitive advantage for firms. The study draws upon semi-structured interviews with firms’ owner-managers operating in the North and South of Italy and shows how local resources generate firms’ costs and differentiation advantages through acting as territorial externalities or becoming an essential core asset to the firm. Results demonstrate how local resources are highly interconnected, making territorial capital unique in each place and not easily imitable, which ensures long term competitive advantages for those firms that benefit from its endowment. A mix of advanced local resources developed through long term investment is shown to be more valuable for firms than inherited resources, provided by ‘God’ or ‘ancestors’. Using the concept of territorial capital in this manner provides insights into understanding sources of firm competitiveness related to location and the persistence of territorial economic disparities.” [ABSTRACT FROM AUTHORS]

State governments as financiers of technology startups: Evidence from  Michigan´s R&D loan program

By: B. Zhao, R. Ziedonis. Research Policy, Vol. 49, Iss. 4, 2020.

Abstract: “State governments in the United States often fund and support technology startups within their borders. Yet little is known about the magnitude with which these place-based policy interventions shift the performance trajectories of entrepreneurial firms. We provide new evidence based on 241 startups that compete for advanced research and technology commercialization loans between 2002 and 2008 through a Michigan-based program. Among applicants with project scores near the threshold required for funding, we find that award recipients are 20%–30% more likely to remain in business four years after the competition relative to similar companies that seek but fail to receive funding. We also find that award receipt stimulates follow-on venture capital (VC) investments in surviving companies. The VC stimulus effect is, however, disproportionately driven by subsets of firms that are very young, relatively inexperienced at external fundraising, or located outside the dominant hub of entrepreneurial activity within the state. This distinctive pattern of heterogeneous effects remains visible for follow-on R&D financing from federal government sources, and for supplemental outcome measures that use news articles to track shifts in financing and business development activities. These findings are consistent with the view that public R&D programs are particularly beneficial when frictions in private resource markets are more severe.” [ABSTRACT FROM AUTHORS]