Competitiveness poles and publicprivate partnerships for innovation

At the request of the OECD, Technopolis Group has conducted a synthesis review of the objectives, nature, conditions of use and state-of-the-art of knowledge on impacts of traditional innovation policy instruments used in the context of regional innovation policies. This report is a contribution to the Joint OECD-European Union (EU) project A New Innovation Strategy for Regions. This paper has been drafted by Lorena Rivera Lon and Alasdair Reid of Technopolis Group.

1. Rationale, objective, target groups

A broad literature and empirical research on innovation systems has developed over the last two decades since the seminal articles of Freeman (1982) which provide a theoretical and conceptual under-pinning for public policies in favour of competitiveness poles (or clusters)1. Figure 1 summarises four main strands of research that contribute to the rationale behind competitiveness poles policy. Figure 1: theoretical underpinning of competitiveness poles
Regional Innovation Systems
The institutional infrastructure supporting innovation within the production structure of a region. Asheim and Gertler (2005)

Clusters

Geographic concentrations of interconnected businesses, suppliers, service providers, intermediaries and institutions like universities (Porter, 1998) Industry, universities and public actors as interrelated nodes in processes sustaining new firm creation and the establishment of critical mass (Etzkowitz and Leydesdorff, 1997)

Competitiveness clusters (poles)

Triple Helix & the entrepreneurial university

Sectoral Innovation Systems

A sectoral system of innovation is composed by the set of heterogeneous agents carrying out market and non-market interactions for the generation, adoption and use of (new and established) technologies and for the creation, production and use of (new and established) sectoral products. (Malerba, 1999)

The traditional market failure justification for government intervention in favour of R&D and innovation has been increasingly challenged by innovation system (Smith 2000) theory that underlines the importance interactions between agents and of
1 The term competitiveness poles is a literal translation from the French programme poles de

competitivit, and in English, the term pole is normally translated as cluster.

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policy tackling bottlenecks, or system failures, in innovation systems rather than isolated innovation events through subsidies to single agents (companies, etc.). A systemic approach emphasises the importance of the microeconomic business environment and of linking business, universities/research and public actors in what has been called a triple helix of innovation (Etzkowitz & Leydesdorff 1997). Figure 2: intervention logic for competitiveness poles

Source: authors

Studies of industrial districts in the so-called Third Italy (Becattini 1990, Garofoli 1997) preceded Porters seminal paper on clusters (Porter 1998), this line of thinking has influenced much of the current policy trends in favour of cluster management and cluster development. However, both the triple-helix and cluster theories, while important in underlining the need for interaction amongst different forms of stakeholders, risk creating islands of innovation within a region, unless they are integrated in a broader policy in favour of regional innovation systems to create what has been termed as the learning region (Morgan 2007). The literature underpinning the logic of intervention for competitiveness poles (and associated instruments such as clusters and competence centres) underlines a range of potential effects ranging from agglomeration forces through improved knowledge exchange, to technological (smart) specialisation and improved management of value chains. Equally, the literature has increasingly underlined that policies that focus exclusively on strengthening regional linkages are not optimal and it is important that involvement in such initiatives encourage firms to connect regional buzz to national and international networks by encouraging the growth of national and international pipe lines (McDonald et al 2007). One of the arguments, indeed, for linking up regional business people with their academic counterparts is that the latter often are active in international research networks and can act as bridges to a broader knowledge base. Finally, the intervention logic and types of effects of competitiveness poles types policies differ according to the three main target groups (see Table 1).

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Table 1: target groups of competitiveness poles

Target Universities (& public research centres) Logic of intervention Removing barriers and facilitating university researchers to interact more with regional SMEs in joint research and codevelopment in specific technology fields Developing internal capabilities of universities to act more as entrepreneurial universities Encouraging larger firms to embed their innovation activities regionally by joint R&D with SMEs or universities Overcoming barriers due to internal capability limitations or external constraints (e.g. financing) to smaller firms undertaking innovation Types of effects Increased revenue from licensing or equity returns from stakes in spin-offs/joint ventures Increased number of doctoral /post-grad students involved in industrial research with regional SMEs Improved interaction with regional firms on higher education curricula Increased regional business expenditure on R&D; Enhanced process of open innovation with resultant circulation of tacit knowledge Increased regional BERD; Upgrading of longer-term capacities of SME to undertake innovation

Large firms

SMEs

2. Regional dimension
The concept of clusters became a target for local and regional initiatives in the 1990s following Michael Porters The Competitive Advantage of Nations. The main argument was that firms and supporting organisations that operate with close proximity are often more competitive than isolated firms. It was argued that proximity improves industry and firm innovativeness by facilitating the creation and dissemination of knowledge and skills. This is due to competition and co-operation. Co-operation can be not only in the form of formal alliances, but also enterprises benefiting from tacit knowledge being exchanged between firms along the value chain, or through other form of social interactions. The regional dimension of competitiveness poles and public-private partnerships for innovation can be better understood using the concept of untraded interdependencies as described by Storper (1993, 1995, 1997). For Storper, when clustering occurs because of commonalities related to technological development, untraded interdependencies arise such as common coded language, norms, customs and practices. These common institutions facilitate trust and co-operation. Implicit is also the idea that there are ongoing interactions between key players in a spatially specific area. The above refers to the incremental nature of innovation at regional level, where each idea builds upon previous ideas, and thus every exchange contributes to a common knowledge base that can be the source of unique advantages to firms and other support institutions taking part of a cluster or competitive pole. The regional dimension of cluster programmes is particularly efficient in providing leadership in bringing firms together; helping firms in understanding the benefits of collective action; network efficiently knowledge organisations such as universities and research centres; and providing on-site technical assistance to run initiatives on the ground (Brookings, 2008). As it will be explained below, the dimension of the initiatives depends on the nature of the instruments and models used. While cluster programmes and competence centre programmes have a strong regional and localised dimension; competitiveness poles are more global and respond to the characteristics of global industries and global value chains.

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3. Evolution over time

The cluster concept, and cluster policies and programmes had evolved considerably over time. Starting with Marshalls concept of industrial districts, where geographically concentrated clusters can be explained by specialised labour, specialised intermediate inputs and knowledge spillovers; regional cluster policy has evolved and defended using concepts such as learning regions, innovative milieus and regional innovation systems, which stress learning as a key factor or regional competitiveness (Hospers, et al., 2002). As a consequence policy interventions have shifted from simply influencing the inputs of business activity to be more focussed on the relationships between industries, which underpin competitiveness. Thus, more attention has been given over time to supporting co-operation in favour of business innovation and the role of factors and structures at the regional level that promote innovation activities (Taylor et al., 2001). In Italy, cluster initiatives were launched in the 1970s and 1980s. Denmark was also a pacemaker with its Industrial Network Co-operation Programme launched in 1989. The programme served used as a basis for programmes in Australia and the USA (Technopolis, 2003). In countries across the world, the number of cluster initiatives and competitiveness poles initiatives has grown substantially in recent years. Well-known examples in the EU are the furniture clusters in Northern Italy, shoe making in the Veneto region, ceramics in Emilia-Romagna, and the automobile sector clusters in the Austrian regions of Styria and Upper Austria. There has been a big boost since about 2000 to public-private partnerships for innovation, and an upsurge in cluster initiatives. The Green book on cluster initiatives (Solvell et al., 2003) identified more than 500 cluster initiatives around the world, primarily in Europe, North America, New Zealand and Australia. This upsurge has not been nevertheless across the board and in some countries after an initial enthusiasm, interest waned (Greece, the Netherlands, the UK) at least in terms of a national policy promoting clusters. In the UK, clusters initiatives tend to be regional and linked to supply chain management (see West Midlands example below). The Netherlands also shifted its focus from cluster policy to supporting dynamic innovation systems, and the term cluster policy is now rarely used in Dutch innovation policy. The same is the case for Greece, where cluster policy is almost inexistent after initial interest in the 1990s (Technopolis, 2003). A forthcoming study (Stahlecker et al 2010) highlights that, based on the information contained in the ERAWATCH-INNO-Policy TrendChart database, there are more than 130 specific national measures supporting framework clusters policies across 31 European countries. Almost all EU Member States have developed cluster-specific measures or cluster programmes at a national and regional level. In the US, a recent review (Brookings, 2008) of existing cluster programmes shows that most of the initiatives were created since 2000. In 2008, the launch of the European Cluster Memorandum marked an important step towards encouraging cluster development at EU level, and building on the efforts of individual Member States. Other complementary EU initiatives include the High Level European Cluster Policy Group, the European Innovation Platforms for Clusters (Cluster-IP), the European Cluster Alliance, the European Cluster Excellence Initiative, and the European Cluster Observatory. The competitiveness poles concept has been most strongly developed in France from the mid-2000s and was quickly replicated in countries ranging from Belgium (Wallonia region), Greece (regional innovation poles), Hungary, etc. Equally, the competence centres type initiatives have become a popular tool across a number of EU countries, notably, during the last decade (Compera 2010).

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4. Complementarity and articulation with other policy instruments

Recent studies from the OECD (2007, 2009) show that most national and regional cluster programmes and competitiveness cluster programmes in OECD countries tend to focus on the drivers of national and regional growth or on the needs of the private sector, and most notably SMEs. Generally, other policy streams falling into the following categories support competitiveness cluster programmes: Regional development policy. The target is usually lagging regions; with a special focus on SMEs, the engagement of regional actors, and with a broad approach to sector and innovation targets. Science and technology policy. The focus is usually on high technology, the promotion of R&D instruments in support of commercialisation, and the reinforcement of spatial impacts of R&D investments. Industrial and enterprise policy, notably SME policy. The approach is on supporting the needs of firm groups and technology absorption, particularly in SMEs; and increasing competitive advantages in order to attract investment and promote knowledge spillovers. Higher education policy. The focus is on high technology following research budgets; emphasis on the commercialisation of research outputs; support to spin offs; joint research with the private sector; and the strong role of Higher Education institutes in supporting regional innovation programmes.

5. Nature of the instrument

As noted above, the competitiveness poles concept tends to overlap with other instruments aimed at academic-industry linkages, networking and clustering in national, regional or sectoral innovation systems. Currently, at least 3 different models can be identified: Competitiveness poles in the form of large and broad partnerships of industrial, public and academic research organisations located in a distinct region (occasionally inter-regional or cross-border). The best-known examples are the French competitiveness poles but a number of other countries or regions have also developed similar approaches including Wallonia (Belgium), Greece and Hungary. Cluster programmes are normally more business focused with an emphasis on support for exports, inter-enterprise co-operation, quality, promotion of business expenditures in R&D, etc. Examples of this type are in Germany (Spitzenclusters), Belgium (Wallonia Clusters), and Spain (AIE programme and Basque Cluster policy). Competence Centre programmes are organised as RTDI collaborations in strategic areas between academia and industry, and in some cases including public bodies. They comprise specialised smaller groupings of enterprises (notably SMEs) collaborating with one or more research teams at universities. Examples can be found in Estonia, Sweden and Northern Ireland.

There is a large diversity of implementation forms and instruments within these three models defined. Table 2 summarises the different families for each model.

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Table 2: Implementation forms of competitiveness poles models and PPPs

Models Competitiveness poles Industry-driven Large presence of big international groups investing massively in R&D Fundamental research outsourced to SMEs Integrated and local financing system International scope based on the capital of large industrial groups Implementation forms R&D-driven Strong and dynamic entrepreneurial activity Low risk environment for high risk projects Attractiveness of universities by R&D centres of international industrial groups Potential for the development of technological parks through a model industry on campus International scope based on universities and R&D centres capital Collaborationdriven Intensive collaboration between public and private sectors; and very active role of public sector Strong Entrepreneurship supported by investment funds of large industrial groups present at the local level International scope based on the collective dynamics of the system of actors

Cluster Programmes

Examples: BioValley Bassel (Switzerland); CARS in Stuttgart (Germany) Research Driven

Examples: Cambridge Examples: Medicon Silicon Fen (United Valley (Denmark and Kingdom); Tel Aviv Sweden); Silicon (Israel) Saxony (Germany) Business Development Focus is on growing regional industries to exploit attractive markets where the region has potential or existing strengths. The intervention logic of this type of cluster is generally linked to value chain management; sectoral lobbying, collective training, economic intelligence and export promotion activities. Cluster Managers are funded to improve inter-company networking and to create links with other clusters. Examples: United Kingdom, Mexico PPP or business sector driven Oriented towards valorisation through technology transfer and more applied science. Programmes are led by industry that empower researchers and research institutes in order to develop strategic R&D for the benefit of industry. They are normally created as distinct and independent legal entities. Examples: Estonia, Northern Ireland, Valencia, Flanders

Triple helix relationships between industry, research and local public authorities or government agencies (i.e. regional development agencies; science and technology agencies). A main focus is on encouraging joint R&D and technology transfer and research commercialisation. Science parks can be complementary, as an asset for the development and for exchange of knowledge that sustains the cluster. Examples: the EUs Regions Knowledge Programme, Japan Competence centre Programmes University driven/owned The aim is to develop (academic) knowledge production Based on arguments on entrepreneurial university-triple-helix. Usually integrated in a university. of

Examples: Sweden, Austria, Basque country

Notes: Based on DGCIS, 2009; Insogna et al., 2010; COMPERA, 2010.

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5.1 Competitiveness Poles

Competitiveness poles gather firms, research organisations, training institutes, specialist management services, and other expert support services, around specialised activities in order to set up powerful regional developments. Enterprises are not organised only to innovate, but are rather co-ordinated with each other, have strategic synergies and partnerships by claiming global excellence. Public bodies (national, regional, and local) are normally associated to the poles, and provide services to its members. The partnership is organised around a market and a related technology and aims at building a critical mass to be competitive and have international visibility. The keywords that best describe competitiveness poles are global networks, attractiveness and governance. Competitiveness poles vary in nature, size and budget. They were born to respond to challenges brought by globalisation, as a systemic approach to industrial policy for competitiveness. In the last decades, national and regional governments have put in place policies in support of competitiveness poles in order to stimulate local industries and increase the attractiveness of regions. A recent study by the Ministry of Economy, Industry and Employment of France (DGCIS, 2009) identified three determinants of world-class competitiveness poles: Competitiveness poles do not only include the three key actors of the knowledge triangle (enterprises, research centres and training centres); but also a strong network of investors and consultants; and local and national public bodies that make more dynamic the collaborations inside the pole. They are territorially anchored, a geographic concentration of actors, whose governance structures are based on the local industrial system that determines the co-ordination of the pole thanks to permanent human and financial resources. Collaboration between public and private actors facilitates the creation of enterprises and start-ups that contribute to the diffusion of innovation inside the pole, and are also the origin of employment growth.

In the European Union (EU), the most common example is the French concept of technopole, born in the 1970s following the Japanese and American examples. National policies in support of competitiveness poles started in 2005, following two strategic reports that gave increasing importance to the role of regions in the passage towards an innovative and competitive economy. The current French national policy on competitiveness poles, the Competitiveness Clusters Policy 2.0, is the second phase of the competitiveness cluster policy that covers the period 2009-2011, following the highly-known first phase launched in 2005. Since then, regions in France, following certification processes in 2005 and 2007, have implemented regional policies in support of their certified competitiveness poles. The region of Brittany in France is one of the regions that had embedded the French national policy in support of poles in their regional policy in support of RTDI. The competitiveness poles policy was complemented by policies supporting research and higher education, technology transfers, and the valorisation of research through collaborative projects. The main objective was to increase collaboration between enterprises, and research and training centres, in order to boost innovation in the region.

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Regional policies in support of competitiveness poles in Brittany, France In 2005 and 2007, the Inter-ministerial Committee for territorial development and regional attractiveness (CIADT, or in French Comit interministriel damnagement et de dveloppement du territoire et dattractivit rgionale) certified 71 competitiveness poles in the French territory. Four of these poles are located in the region of Brittany focusing in the automobile sector, agro-industries, ICTs, and a mix of themes regarding the sea industry (including shipping, biotechnology, cosmetology, environment and energy). In order to provide a policy framework in support of these competitiveness poles, the regional policy in support of research and innovation embedded its support to poles together with policies related to reinforcing research and higher education, and the promotion of technology transfers. In 2008, the competitiveness poles in Brittany joined more than 1,000 partners and 627 organisations (mostly research centres and SMEs) in 246 certified collaborative projects. 203 of these projects were co-financed with public funds, representing about 153m of a total of 465m invested. The policy, managed by the regional Council, represented about 22% (10.8m) of all R&D credits through collaborative projects in the region. The growth in membership of the poles was mainly thanks to SMEs, which represented about 57% of all new members between 2005 and 2008. An external evaluation of the regional policy in 2008 showed mixed results related to the integration of regional actors from pole to pole. In all cases, public research laboratories were central in pushing for collaborative projects. They gained in terms of financing, in reinforcement of their research capacity, and regional notoriety. The evaluation also showed that SMEs are the less prepared in participating in research projects, mainly because of administrative burdens and lack of capacity. The national government has extended the certification of all four competitiveness poles in Brittany for the period 2009-2011. Source: Conseil rgional de Bretagne, 2008

The Wallonia region in Belgium has implemented also a competitiveness poles policy that complements the Clusters approach developed in the region since 2000. It is the response of the regional government to the business structure in the region, characterised for having a small number of large enterprises and a large number of SMEs with limited capacities of R&D. The aim of the regional competitiveness poles policy is to create greater critical mass in the Walloon innovation system by federating different efforts in specific industrial sectors. The strategy is oriented towards connecting all relevant actors, creating new infrastructures, and giving greater value to R&D projects.
Competitiveness poles and the Walloon STI policy (Wallonia, Belgium) Since 2005, the competitiveness poles are a major plank of the Walloon STI policy with a budget from 2006 to 2010 of 280m. The measure is one of the five priorities of the Marshall Plan and is a major shift in the regional policy both in terms of the financial means mobilised as well as the process of design and implementation. Five sectors and corresponding poles were identified and officially recognised by the regional authorities: life sciences (Biowin); agro-food (Wagralim); mechanical engineering (Mcatech); transport-logistics (Logistics in Wallonia); aeronautics/space (Skywin). With the recent Marshall Plan 2.Green adopted in 2009 (2009-2014), a sixth competitiveness pole focusing on environmental technologies was launched. Each competitiveness pole has received budgetary funds that should enable it to implement various actions in line with its strategy. All funding is granted on the basis of calls for projects, which invited proposals including a mix of concrete research and contextual planning linking the research to an overall pole strategy. The support from the Walloon Region can take different forms: investments in infrastructure, buildings and equipments (50m); R&D funding (120m); investment grants (45m); training support (55m); attracting foreign investments (4,5m); and export promotion (5,5m). In 2008, an extra 42m were granted for financing

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projects related to sustainable development and energy efficiency. The participants of the poles retain, in addition, access to all existing forms of support for investment, R&D, employment measures, training and exports according to normal procedure for proposals presented outside of the cluster framework. Proposals presented within the framework of the cluster such as projects included in the business plan or subsequent work-programmes for spin-offs, qualify for the maximum aid and a specific top-up for some of the measures. The private sector has a key role in steering the competitiveness clusters in partnership with the French-speaking universities, which have the right to appoint a deputy chairperson to the board of each cluster. Regular calls for projects for the members of the five poles are organised by the Walloon Government. Between 2005 and 2008, the Government approved 55 research projects following four calls for projects. An external evaluation of the competitiveness poles done in 2008 by the Walloon Institute for Evaluation, Prospective and Statistics; showed that SMEs considered having more local partnerships than before; academic and industrial actors have learned working together; and the academic world has started adopting a vision more directed towards industrial use of research results. Source: Bayenet et al., 2009; BELSPO, 2010

The most common types of financial support provided to competitiveness poles are in the form of investments in infrastructure (buildings and equipment); R&D funding; investment grants; R&D credits through collaborative projects (financed partially by the private sector or through university funds); training support; support for attracting foreign investments; and export promotion. Public budgets varied from 280m for a five years period (2006-2010) in Wallonia, and 153m in Brittany for four years (2005-2008). The origin of funding depends normally on the regional institutional structures and the strategic approach of the policies. The source of funding in the Walloon case is the regional authorities. Whereas in the French case is a mix of public regional funds, and regional community funds. Other source of funding (i.e. non public) represented about 70% of all investments in the case of Brittany.

5.2 Cluster Programmes

Regional cluster are more business focussed (i.e. promotion of business expenditures in R&D, co-operation between enterprises, quality and internationalisation). Some of these programmes are also focused on the commercialisation of research results. They are characterised by giving emphasis to four premises (Hospers et al. 2002; Ganne et al., 2009): The importance of having a dynamic local context; that favours investment, upgrading (of processes and products), and a business policy that promotes competition-cooperation-and knowledge sharing. The availability of specialised high-quality inputs; including human resources, scientific and technological infrastructures, investment institutions and communication infrastructures. The availability of support structures; concretely including providers of specialised services in other industries, and other sectoral or inter-sectoral associations. The implementation of cluster programmes requires support institutions that push for collaboration between regional actors. This can take the form of PPPs. The existence of demand conditions; that serve as motors to the system, and that includes consumers (enterprises and individuals) of the products and services being produced.

The cluster approach was the key concept that inspired several regional competitiveness programmes in the 1990s. One example of this is the Basque Country in Spain. The cluster approach provided a systematic basis for a sector-oriented structural policy; which suited a double objective of assisting established and mature

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industrial activities while providing incentives to create new activities. Its basis is the Cluster Associations, which associate all enterprises in a given cluster, together with other support institutions such as universities and technology centres.
Cluster Programmes and Cluster Associations in the Basque Country (Spain) The Basque Country holds a historical experience in cluster policy, since in the early 90s the regional government decided to analyse the competitive advantages of the region and its longterm competitiveness potential, following a study by Michael Porters consultancy firm Monitor Company. In 1991, the Basque Government launched its Competitiveness Programme in the framework of its Industrial Policy 1991-1995. Working groups were created with enterprises and support institutions for the sectors of priority to the region: home electronics, equipment-machinery, steel, aeronautics, paper, auto motion components, tourism and foods. As a consequence of the first dynamic process of inter-relations between enterprises and support institutions, new measures were implemented. This included the creation of the Risk Capital Fund of the Basque Government (EZFTEN) as a tool of financing strategic projects; the creation of the Basque Foundation for Quality Improvement (EUSKALIT); the launch of the Technology Plan for the Basque Country; the launch of the RETO Programme (Strategic Reorientation and Operative Techniques) in order to generate strategic capacity in Basque firms; and a Programme in support of strategic alliances in order to promote the internationalisation of firms. Additionally, Cluster Associations were born, grouping all enterprises comprising a given cluster; and other support institutions such as universities and technology centres. Their mission is to increase, through co-operation, the competitiveness of the associated enterprises and sectors they represent. Each of the associations works on the basis of strategic plans (3 or 4 years) and has mainly three axes of activities: technology, quality, and internationalisation. Some of them include training as a priority area. In 2009, the Basque government gave a new impulse to its cluster policy, arguing that there were still economic activities that could be integrated and benefit from the Programme. A call for expressions of interest was launched with the aim of providing financial support to enterprises considering the creation of a sectoral pre-cluster. As a consequence, four new precluster associations were born: smelting; graphical arts; habitat and interior equipments and design; and biosciences. Nowadays, there are 12 cluster associations and 4 pre-cluster associations in the Basque country. The 12 main associations, dependent of the Department of Industry, Innovation, Commerce and Tourism represent about 6% of all enterprises and 7% of all industrial establishments in the Basque Country. Additionally, they hold 28% of employment and produce 32% of the regional industrial value added. An external evaluation of the clusters policy done in 2010 has concluded that with a relatively low public investment (around 2m) the policy has been able to generate valuable mechanisms for dialogue and co-operation in strategic areas between the public and private sectors. Additionally, the policy has helped in orienting other regional policies in support of enterprises, and had increased the awareness of enterprises on the existence of these policies. Source: Aranguren, 2010

In Quebec, the competitiveness clusters policy started in the 1990s. Promoted by the Ministry of Economy of Quebec, with the support of Michael Porter, the policy was launched as a way to restructure the economic activity of Quebec in a context characterised by the deceleration of productivity and the raise of unemployment. The competitiveness clusters strategy constituted an innovative approach that privileged synergies between specialised actors in key sectors. Currently, the Montreal agglomeration has 15 identified competitiveness clusters in key sectors to the regional economy.

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Aro Montral and competitiveness clusters policy in Qubec, Canada The national Canadian policy in support of competitiveness clusters was defined in the economic plan Avantage Canada of the Ministry of Finance in 2006; and it is made a priority in the Programme of the Ministry of Industry in 2007 in order to increase the Canadian potential in science and technology. The National Research Council of Canada is responsible of implementing the policy since 2000, by working with Canadian regions and agglomerations in order to reinforce the position of Canada in key technology sectors. Aro Montral is the result of an initiative launched by the Communaut Mtropolitaine de Montral (CMM) in 2003, which commended a study that constituted one of the strategic documents for the creation of the cluster programmes, and that resulted in the launch of the competitiveness clusters policy in 2006. Nowadays, the main local and regional actors involved in the Quebec competitiveness cluster policy are the CMM, which implemented funds for the support of competitiveness clusters with a budget of CAD18m; the Ministre des Affaires municipales et des Rgions du Gouvernement du Qubec (MAMR), which contributes through its development fund; and the Ministry of Economic Development, Innovation and Exports of the Quebec Government (MDERR) through its programme in support of partnerships and industrial agglomerations. Aro Montral is the third largest aerospace cluster in the world after those of Seattle in the United States and Toulouse in France. With a structure of more than 20 years, the cluster integrates today 236 enterprises; 4 universities; 2 specialised research institutes; and 10 public research centres, whose activities represented about 430m spent in R&D by the private sector in 2007. The management and co-ordination costs of Aro Montral were financed 58% by the public sector and 42% by the private sector for a total budget of CAD1m in 2007. This budget includes services contributions, which accounted to 25% of the budget in 2007, from which 16% was private and 9% public. In May 2008, Aro Montral signed a collaboration agreement with the French regions of MidiPyrnes and Aquitaine and the Aerospace Valley, in order to intensify the technological partnerships through the definition of a list of structured and strategic projects. Source: DGCIS, 2009

Regional cluster Programmes in Mexico are still in an infant stage, and they are more concerned with industrial and enterprise policy. Their effort is oriented in providing favourable framework conditions for Foreign Direct Investment (FDI) by providing physical infrastructure and low regulatory burdens for the establishment of firms. The general focus of states programmes is on technology upgrades and the mobilisation of innovation resources to the benefit of traditional sectors. Many of the existent cluster initiatives are focused on a model where a Multinational Enterprise (MNEs) anchors firms and suppliers. A recent study by the OECD (2009) has shown that there is still a lack of critical mass among many of the clusters that the different Mexican states seek to support. Some of the proposed cluster development instruments that could alleviate this lack include SME support (i.e. instruments for supplier development and supply chain linkages, export networks, quality certifications); and instruments for creating a stronger skilled labour force (i.e. vocational and university training).

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Regional Cluster and Competitiveness Programmes in Mexico Mexican states have made competitiveness a priority for state action. Specific sectors are a priority for different states, which has resulted in an emerging interest in the concept of clusters and the clusterisation of Programmes. Priorities to sectors are often highlighted in the State Development Plans. The automotive sector is a priority in the states of Chihuahua and Michoacan, which are specialised in design processes (i.e. software and electronic and electric devices for automobiles) and vehicle testing; whereas Queretaro has been consolidating the aerospace sector around its aerospace park that is supported mainly by Multinational Enterprises (MNEs). Some other states, like Colima and Yucatan, profiting from their natural entry and distribution point in Mexico, had centred their efforts in becoming logistic centres in order to increase their productivity. The state of Chihuahua has been a leader in supporting cluster programmes through research centres with the aim of becoming a national leader in the biotechnology sector. Cluster initiatives, although infant, also exist in the state of Nuevo Leon, which has created civil councils in strategic sectors (i.e. IT, automotive, medical services), involving Higher Education Institutions (HEIs) and the private sector. Notably, the local actors in the IT sector had developed action plans and performed assessments of the sector needs with the aim of remaining competitive. In Aguascalientes, cluster initiatives have a strong public support and are co-ordinated by the states Institute of Competitiveness. The state has focused in developing intermediaries that provide technical services needed by firms. Competitiveness Programmes in Mexican states are characterised for having a cross-sectoral approach to public sector mobilisation. For example, the state of Mexico has several competitiveness working groups, and secretariats involving private sector representatives and members of HEIs involved in dialogue and exchange of ideas. Also, in the state of Guanajuato, the Science and Technology Council of the state works in tight collaboration with the local government and notably with firms in relevant sectors to the states production networks. Source: OECD, 2009

Business development clusters programmes are also common in the United Kingdom. Over the last years, businesses in the West Midlands region had collaborated with each other in activities such as market exploitation, technology transfers, skills development, supply chain management, product development, exports and strategy planning. Cluster opportunity groups (COGs) and cluster managers provide a mechanism for steering and mobilising initiatives within specific sectors.
Business clusters in the West Midlands, United Kingdom The regional clustering Programme in the West Midlands was born as a tool for achieving the first objective in the new West Midlands Economic Strategy (WMES), aiming at developing markets and sectors with the most wealth and employment potential. Starting in 2005, the region currently implements the second cluster three-year programme through Advantage West Midlands, the Regional Development Agency for the West Midlands. There are currently 12 business clusters in the region: aerospace; automotive; building technologies; environmental technologies; food and drink; ICTs; interiors and lifestyle; medical technologies; rail; screen image and sound; specialist business and professional services; and tourism and leisure. The current phase of the programme focuses more on specific markets, where the region has strengths and where the region has sustained market share over the long term. Each cluster has specific plans for the period 2008-2011 in which specific markets are targeted with the objective of delivering critical mass and investment through specific actions. These are exploited by market focus groups, which provide a forum for clusters in order to collaborate in a specific number of market opportunities. Each cluster launches individual proposals in order to develop and implement some of the projects outlined in their cluster plans. An analysis of the impact of the first programme 2005-08 showed a significant increase in business confidence in the sectors where collaborations occurred as well as the creation of informal and formal networks; linkages with university departments and other network organisations that have direct access to sectors and markets. Source: Advantage West Midlands, 2008

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An example of research-driven programmes with a strong public-push is the Knowledge Cluster Initiative in Japan. Knowledge clusters are organised by local initiatives around universities and other public research institutions by establishing networks of individuals in academia, and in the public and private sectors through project planning, joint-research, and exchange of ideas. The Programme gives also a strong focus to the commercialisation of research outputs and patenting.
The Knowledge Cluster Initiative for Japanese regions The Ministry of Education, Culture, Sports, Science and Technology (MEXT) of Japan has been implementing the Knowledge Cluster Initiative since 2002 with the objective of revitalising regional economies. The Second and Third Science and Technology Basic Plans of 2001 and 2006 called for the creation of knowledge clusters and the support of regions that had the potential to develop world-class knowledge clusters. The Initiative promotes conducting joint research by industry, academia and government at university joint research centres in order to produce new technologies in light of corporate needs. It gives a strong emphasis on the patenting of research results, by fully implementing projects from R&D to commercialisation of research outputs. The Knowledge Cluster Initiative is divided in 2 programmes: Innovative Stage and 2nd Stage. Six Japanese regions are part of the Innovative Stage Programme, and 9 of the 2nd Stage, in knowledge clusters around green materials, life sciences, health and medicine, marine bio industries, nanotechnology, environment, and materials. Local universities have a directive role, and they set the minimum amount of expenditure by local actors. The 2nd stage Programme includes a sub-programme named Expansion Programme, which encourages collaboration with other regions in Japan and abroad. An example of international collaboration in the Fukuoka Kitakyushu Iizuka region is the Fukuoka Cluster for Advanced System LSI Technology development, which built collaboration networks in the Silicon Sea Belt, and the research achievements have been expanded through research collaborations with universities in Taiwan and Shanghai as well as with business associations in Bangladesh. The Knowledge Cluster Initiative is complementary to the Industrial Cluster Project promoted by the Ministry of Economy, Trade and Industry (METI). The achievements of MEXT policies have been applied and commercialised by METI, which has resulted in feedback of market needs and has led to new R&D. Source: Ministry of Education, Culture, Sports, Science and Technology of Japan, 2009.

The most common types of financial support provided to cluster programmes are in the form of R&D funding through public calls for projects and calls for tenders. Collaborative projects are most common. Other instruments (i.e. Germany) include funding of network management and projects in support of product and service development (single and co-operative projects) through subsidised loans (including interest allowances). Since the focus of cluster programmes is more business oriented, their source of funding is usually a mix of public and private funds. For example, in the case of the Basque Country, the enterprises that join the cluster associations also finance the functioning of the association. Relatively to the size of the enterprises, the private sector finance 40% of internal costs of the association and 50% of external costs. The rest of costs (60% of internal costs and 50% of external costs) are financed through public funds by the cluster policy of the Basque government. The cluster associations receive a maximum amount of 240k of public funds. The associations can also receive additional regional public funds through other programmes in the areas of technology, quality and internationalisation. In Montral, R&D collaborative projects are financed at least 25% by the private sector, while the rest is financed by public funds assigned to universities. Management and co-ordination costs are financed on a basis of 58% by the public sector and 42% by the private sector. In 2007, the total cost of R&D collaborative projects amounted to CAD36m (DGCIS, 2009), and the co-ordination costs were equal to CAD1m. The Japanese follows a two-stages funding scheme, with flexible budget allocations to regions in a first stage according to their R&D field and their degree of progress of

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between 300m to 600m per year over five years; and in a second stage budgets remain flexible while making consigning contracts with core organisations such as science and technology foundations designated by local governments, is highly promoted.

5.3 Competence Centre Programmes

Competence Centre Programmes are organised as RTDI collaborations in strategic areas between mainly academia and industry; and they usually bridge the gap between technological and economic innovation. Their aim is to achieve stronger impact and concentration of research efforts by creating research environments in which enterprises can participate actively and benefit from the results. They play thus an important role in innovation networks and clusters. This type of Programmes is normally used to strengthen regional innovation systems between university research and industrial R&D. Competence centre programmes are also characterised as publicprivate partnerships (PPP). Their activities include usually the pooling of knowledge, the creation of new knowledge by performing research, training and the dissemination of knowledge. Some programmes (i.e. Northern Ireland) are led by industry, which empower highly qualified researchers in association with research institutes and universities in order to develop strategic R&D for the benefit of industry. Competence centre programmes contribute to activate industrial participation in formulating strategic goals and most notably implementing academic research. They also contribute in enhancing the research profile of the involved universities, and strengthening long-term research collaboration networks. This type of programme became popular in the early 90s, for example in countries like Sweden, with its NUTEK (Swedish National Board for Industrial and Technical Development) Competence Centre Programme; and most recently in the years 2000s in Estonia with the Estonian Competence Centre Programme. There are two models of implementation: those that are created as distinct and independent legal entities; and those that are integrated in a university.
The Competence centre Programme in Estonia The Competence centre Programme in Estonia was among the measures introduced to improve the performance of the Estonian innovation system in the run-up to EU membership, and that was then integrated into a package of measures made possible through the European Regional Development Fund (ERDF). It funded five Competence Centres (CCs) for three years in a process that shifted from solely national to ERDF co-funding. The Programme tackles weaknesses in the Estonian innovation system, notably its low R&D capability. Its aim is to create technological strength in research and human capital, in order to position Estonian industry to become technologically more competitive. Through Enterprise Estonia (EAS), the Estonian government and the ERDF provides subsidies to the competence centres with a final public contribution of 75%. A mid-term evaluation in 2008 showed a significant success of the Programme. Three of the five funded centres managed to increase significantly their industrial income above expectations. The Programme is highly decentralised and allows the centres great flexibility in the way they spent their budgets individually. Some centres had chosen to build up a committed core team, while others had maintained a slim core and a fragmented periphery of researchers. The Programme has served to focus research attention and effort on specific areas of technology. It has also served in providing human resources to strengthen university and industrial systems. By 2008, the centres aggregate publication and patent outputs were growing, however they remain low. In July 2008, a new call for proposals was launched for a seven-year successor Programme. Source: Ministry of Economic Affairs and Communications of the Republic of Estonia, 2008

A recent survey study by COMPERA (2010), the ERANET on national and regional programmes and initiatives dedicated to the creation and support of Competence

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Research Centres, provides a characterisation of competence centres. Centres can be physical, or a centralised centre where the research is carried out and bundled on one or more specific locations (i.e. Valencia, Sweden); but also virtual, where research is carried out at various locations, most often in the research sites of one of the participating players (i.e. Germany, Flanders). Financial support is normally given in the form of grants, and subsidies through calls for projects and calls for proposals addressed to universities, institutes of technology and research groups within academic institutions. They can also take the form of open competitions, and in some cases planning grants are also funded for pre-selected projects. Regarding the source of funding and budgets, these vary according to the aims and scope of the programme. They are normally co-financed by the public and private sectors. In the European Union, the average annual research budgets of competence centres is 7.9m; from which 76% of total is public; and 24% is private coming from industry and research institutes (COMPERA, 2010). In Sweden the competence centres are integrated in a university, and one of the selection criteria was that a number of industrial partners supported financially the activities of the centre. The Swedish model followed a stepwise funding and follow-up: during the first two years of the competence centres, funding came entirely from public funds; after two years, the programme covered up to SEK 6 million per year of total expenses of the centre, while the industrial partners contributed at least with the same amount, including kind contributions. In the Estonian Competence Centre Programme, the centres were implemented as independent legal entities, and these are co-financed by the European Regional Development Fund (although the Programme was initially funded from solely national funding), with a budget for the period 2007-2013 of 1 billion kroons (64m), with an additional contribution from the project partners of between 30-35%.

6. Success conditions and data on implementation and impact

Unlike other innovation policy instruments, competitiveness poles and PPP have been systematically evaluated and their impact analysed largely. A recent compilation of macro-economic benefits from success stories on clusters initiatives in the European Union by the IRE subgroup (2008) shows two types of benefits from cluster initiatives: Those related to knowledge spillovers, including the creation of formal and informal linkages and networks between firms, research institutions, public agents and other local organisations; and Those related to the increase in the attractiveness of the hosting regions, including productivity rises, competitiveness enhancement, and in the longterm, economic growth and employment.

External mid-term and final evaluations of regional programmes have shown as immediate impacts evolutions of the cluster populations, notably increased participation of SMEs but also re-orientation of university activities towards economically more relevant research as well as boosting industrial doctoral studies (Arnold et al, 2008). Impacts related to knowledge spillovers include increases in cooperation processes between research institutes and the private sector; increase of partnerships in the private sector (BELSPO, 2010); and improvement of the linkages between public and private research institutes and groups. Public research laboratories had benefited substantially (Conseil rgional de Bretagne, 2008) and became central in pushing for collaborative projects, between the public and private sectors.

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Regarding processes in support of productivity rises at the regional level; impacts include the adoption of a more strategic vision by the academic world directed towards industrial use of research results. The initiatives had also helped in orienting and informing other regional policies in support of enterprises, and had increased the awareness of enterprises on the existence of these policies (Aranguren, 2010).
Results of the Evaluation of the French Competitiveness Clusters In the 2007-08 period, an independent mid-term evaluation was conducted for the French Competitiveness Clusters programme. The evaluation was based on both global policy and each cluster individually. Dedicated means, consistency with other public policies (R&D and innovation), cluster selection process, financing support processes, policy management at national and local levels, synergy between actors, first effects on local actors were evaluated on the policy level. In the evaluation of individual clusters, the following points were taken into consideration: Economic and international strategy; cluster government and animation, evolution of the cluster population; R&D projects and firm-public research-training synergy; territorial settlement and network strengthening, including structural projects; SMEs integration and new enterprises creation; Human resources training; and Green development approach. The evaluation results showed that 39 clusters had fully reached the objectives of the policy, 19 clusters have partially reached them but should devote more efforts in strategy definition and governance, and 13 clusters would benefit from an in-depth rearrangement. Between 2005 and 2008, the number of new entries into competitiveness clusters increased, and in particular of large firms and SMEs. Actors from public research were less numerous but acted usually as project leaders. In addition, partnerships between clusters and economic development operators had increased as well. The evaluation stressed that the competitiveness cluster policy has triggered or accelerated a cooperation process on innovative projects in all industrial sectors. It was also concluded that the competitiveness clusters can be an important boost to improve the links between public and private research and eventually strengthen the French strategic positions in the fields of research, development and innovation, and particularly abroad. On the basis of these results, the French government decided to launch a second phase of the competitiveness cluster policy (Cluster 2.0) for a further 3 year-period (2009-2011) with a total budget of 1.5 billion. According to the data published by the Ministry for the Economy, Industry and Employment at the end of the first round of the programme 71 Competitiveness Clusters were supported divided into three types: 7 global (Word class) Competitiveness clusters, 10 globally oriented Competitiveness clusters, and 54 Competitiveness clusters. In the original version of the policy, only 15 Competitiveness clusters should have been selected. Despite the fear that public funding would be spread amongst the 71 clusters, data show that funding focuses on the top clusters. 80% of the 36 million grant for the clusters functioning costs have been attributed to worldclass clusters. Clusters cover various thematic areas such as aeronautics, ICTs, life sciences; and other traditional sectors such as wood, construction and finance. 5,000 companies were cluster members in 2007, of which 80% were SMEs. 738 R&D projects with budget 3.9 billion and 14,000 researchers, have received 946 million public funding since 2005. 54% of funding goes to cluster SMEs, within the framework of the French Interministerial Fund and Oso (not including support for laboratories). 2,097 R&D projects received agency support (ANR and Oso) in 2006, 2007 and 2008. Source: BCG et al., 2008

Finally, the natural birth of a cluster is usually traced to historical circumstances, such as the availability of raw materials, specific knowledge in R&D organisations, and/or traditional know-how. The success implementation of competitiveness poles also depends on pre-existing scientific and/or industrial strengths at the regional level. In short, initial endowments matter (McDonald et al 2007).

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7. Key reference sources

Advantage West Midlands (2008), Summary Cluster Plans 2008-11, http://www.advantagewm.co.uk/Images/SUMMARY%20ALL%20CLUSTER%20PLA NS%20-%20Final%20-%20for%20publication%2014%20March%2008.doc_tcm916192.pdf Andersson T., S Schwaag-Serger, J Srvik, E Wise Hansson (2004) The Cluster Policies Whitebook Aranguren Querejeta M.J. (2010), Poltica cluster del Pas Vasco: lecciones aprendidas y retos, Revista EAN No. 68, Enero-Junio 2010, Bogota, Pp. 86-99. Arnold E., K. Mnnik, R. Rannala, A. Reid (2008) Mid-Term Evaluation of the Competence Centre Programme.
http://www.mkm.ee/failid/IS12_competence_center_programme_2008.pdf

Asheim, B. and Gertler, M. S. 2005. The geography of innovation: regional innovation systems. The Oxford handbook of innovation. 291, 317. Bayenet B., Wunderle M. (2009), Les poles de comptitivit wallons, Courrier hebdomadaire, Numro 2030, CRISP 2009 BCG; CMInternational (2008), Evaluation des poles de comptitivit, Synthse du rapport dvaluation. http://competitivite.gouv.fr/documents/archivesAncienSite/pdf/synthese_BCGCMI_evaluation_des_poles_de_competitivite.pdf Belgian Science Policy Office/BELSPO (2010), Belgian Report on Science, Technology and Innovation, June 2010 Becattini G. (1990) The marshallian industrial district as socio-economic notion In Industrial Districts and Inter-firm Cooperation in Italy (1990) edited by Pyke F., G. Becattini, W. Sengenberger. Brookings (2008), Clusters and Competitiveness: a new federal role for stimulating regional economies, Blueprint for American Prosperity, Metropolitan Policy Program at Brookings, by Mills K. G., Reynolds E. B., and Reamer A. COMPERA (2010), International cooperation of Competence Research Centres, Final report of the COMPERA joint study, Agency for Innovation by Science and Technology, by Boekholt P., van Til J., Arnold E., Jansson T., Rannala R., Ruiz Yaniz M., Tiefenthaler B., June 2010. Conseil rgional de Bretagne (2008), Evaluation de la politique rgionale des poles de comptitivit, Rapport Final, ITD et Technopolis Group. DGCIS (2009), tude sur les bonnes pratiques de dix poles de comptitivit trangers, Rpublique Franaise, Rapport final de ltude ralise pour la Direction gnrale de la Comptitivit, de lIndustrie et des Services (DGCIS) par la socit Algo, Mai 2009. Etzkowitz, H.; Leydesdorff, L. (eds.) (1997), Universities and the global knowledge economy: a triple helix of university-industry-government relations, Pinter, London, UK Freeman C. (1982), Technological Infrastructure and International Competitiveness, paper for the OECD Expert Group on Science, Technology, and Competitiveness. Ganne B., Lecler Y. (2009), From Industrial districts to poles of competitiveness, in Asian Industrial Clusters, global competitiveness and new policy initiatives, Chapter 1, World Scientific Publishing Co. Garofoli G. (1994) The industrial district of Lecco: innovation and transformation processes in Entrepreneurship & Regional Development, Vol. 6 issue 4, Pgs 371393

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Hjorth S. (2000), The NUTEK Competence Centre Programme, an effort to build bridges between science and industry in Sweden, Swedish National Board for Industrial and Technical Development Hospers G.J., Beugelsdijk S. (2002), Regional Cluster Policies: learning by comparing? KYKLOS Vol. 55 - 2002 Fasc. 3, 381-402. Insogna K., Wilhelm H., Borek C. (2010), Research Driven Clusters. Overview of RDC policies, methods and characterization and example of best practices, Trans Reg NCP Project. IRE subgroup (2008), Design of cluster initiatives an overview of policies and praxis in Europe, Regional clustering and networking as innovation drivers, Learning module 1. Malerba F. (1999) Sectoral Systems of Innovation and Production. Paper presented at the DRUID conference, June 1999. Mcdonald F., Q. Huang, D. Tsagdis, J.H. Tselmann (2007) Is There Evidence to Support Porter-type Cluster Policies?, Regional Studies, 41: 1, 39 49 Ministry of Education, Culture, Sports, Science and Technology of Japan (2009), The Knowledge Cluster Initiative, Cluster Brochure 2009, http://www.mext.go.jp/a_menu/kagaku/chiiki/cluster/1288448.htm Morgan, K. 2007. The learning region: institutions, innovation and regional renewal. Regional studies. 41, 147-159. OECD (2007) Competitive Regional Clusters, National Policy Approaches OECD (2009), 15 Mexican States, OECD Reviews of Regional Innovation Porter M. E. (1998) Clusters and competition: New agendas for companies, governments, and institutions. Division of Research, Harvard Business School Boston. Smith, K. (2000) Innovation as a systemic phenomenon: Rethinking the role of policy, Enterprise and Innovation Management Studies, 1(1): 73-102. Solvell O., Ketels C., Lindqvist g. (2003), The Cluster Initiative Greenbook, Ivory Tower, Stockholm. Stahlecker T., Kroll H., and Baier E (2010, forthcoming), Identification of Knowledgedriven Clusters in the EU, a Regional Key Figures of the ERA booklet for the European Commission, DG Research. Storper, M. (1993), Regional worlds of production: learning and innovation in technology districts of France, Italy and the USA, Regional Studies, 27: 433-456. Storper, M. (1995), The resurgence of regional economies, ten years later: the region as a nexus of untraded interdependencies, Journal of European Urban and Regional Studies, 2:191-221. Storper, M. (1997), The regional world: Territorial development in a global economy, New York: Guilford Press. Taylor S., Raines P. (2001), Learning to let go: the role of the public sector in cluster building in the Basque Country and Scotland, Regional and Industrial Policy Research Paper, Number 48, The University of Strathclyde in Glasgow. Technopolis (2003), Thematic Report on Cluster Policies, European Trend Chart on Innovation.

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