Innovation Recommendation: Levelling up and Place-based Innovation

By Stuart Thompson, Analyst, Innovation Insights & Policy

“Place” has become part of the political conversation and KTN welcomes the place-based innovation strategy in the Government’s R&D Roadmap. We believe this policy direction is more than an academic consideration. While we run a universal service, we still operate locally but add a national perspective. Therefore, our experience tells us that for a place-based innovation strategy to be successful, there are two areas which need to be addressed – how things are organised, and how things are funded.

But first, why all this talk about “Place”?

The idea of “place” as part of an innovation strategy stems from the need to address the fact that the UK is one of the most regionally unequal countries in the OECD – a move known as “levelling up”. Often this seems to be focussed on redistribution but still recognises that poorer-performing parts of the country have real potential.

How we got here

It’s important to realise that this discussion is part of an international policy trend. Old regional development policies focused on top-down approaches, assuming that the whole country operated in the same way and giving grants to less-favoured parts of the country to compensate for their disadvantages. Over the last two decades, many countries have abandoned this approach and moved towards a “place based” one or “smart specialisation”, based on the unique competitive capabilities of each area.

There are a number of reasons for this:

• Realisation that old approaches have not worked: lagging regions have generally not converged with more prosperous regions.
• Globalisation has had an impact on both supply chains and innovation networks, so that regions in other countries are often more important for regional trade and connectivity than activities in other parts of the same country.
• Inequality between regions had increased, in part due to cuts in public spending. This has spurred on the development of local and regional strategies.
• There has been a trend towards some devolution which has prompted corresponding regional strategies.

A “place-based” approach is more than simply the creation of regional and local innovation strategies. Partnerships between public and private bodies are now most common, operating in regions corresponding to functional economic areas rather than administrative boundaries. The activity is also more often integrated and related to soft support than traditional investment in grants and infrastructure.

What needs to change?

1. The way the strategy is organised

KTN’s experience of operating the Smart Specialisation Hub showed us that regional bodies responsible for innovation (such as Local Enterprise Partnerships, or LEPs, in England) often produce strategies which are relatively inward looking and do not reflect the advantages to be gained from connections further afield. For example, universities often have both national and international connections but are seen as purely local assets.

LEPs were not initially set up for the purpose of managing devolved funds, and our experience has therefore shown that, while some have managed to succeed, others require support and coordination to be properly effective. We recommend creating a national co-ordinating body, as demonstrated by the effectiveness of the Smart Specialisation Hub, to be a centre of expertise in Place-based innovation. This would join up the innovation capacity across Combined Authorities, LEPs and universities. It would benchmark different areas and avoid situations where every LEP claims to be a leading area in the same sector, and if aligned and connected with other UK national innovation organisations, would allow for efficient sharing of best practice.  KTN is in a good position to make this happen, using our extensive network as well as the experience of the Hub.

2. The way the strategy is funded

Another important action which will help the redress of regional inequality is to take a different approach to funding. Let’s start with universities. There is spare absorption capacity in R&D in regional academia – not only are there real specialist institutions and capability outside the “golden triangle” but also the typical size of grants per researcher is smaller, suggesting unused capability. Rebalancing of funding should also ensure it is available to key R&D organisations only if it includes partnership with institutions in more needy regions. So, the degree of reallocation of funding to make things more equal presents a huge challenge, which cannot happen overnight.

Similarly, the market for business investment does not necessarily work adequately to support rebalancing – business investors are also disproportionately based in the South East of the country and make their investments in the same region. While support organisations such as KTN can help businesses in more peripheral regions to make contact with investors and perfect their pitches, more will need to be done either by providing incentives to private investors or by creating and strengthening public investment funds in the regions.

For more examples of KTN’s experience and some interesting reports on a number of countries outside the EU, visit the Hub’s archived website at http://smartspecialisationhub.org/.