Innovation policies for economic restructuring: combining actor based and system based strategies

Industrial restructuring requires changes in new and established firms and in parts of the environment which in different ways support the firms' restructuring, i.e. in innovation systems. The project reviews the knowledge status within research on regional (sub national) industrial restructuring. Restructuring occurs in firms, regional localized industries, regional clusters and innovation systems. Firms are included in national and global production and innovation networks, are affected by national rules and politics, are dependent on global regulations and so on. However, the project is focused on how regional industry restructure within national and global framework conditions. Restructuring can, in principle, occur in two ways. First, through the upgrading of existing industry; changes in existing industries by use of new technologies, business practices or organizational principles. The second type of restructuring is the development of new industries in a region. This can take place through diversification in which a new industry in a region develops through the linking of existing competencies and other resources found in and possibly outside the region. A new industry can also be developed from scratch in a region. The development can start through investments, entrepreneurs and competencies that arrive to the region from outside or through the commercialization of research results or innovative ideas from regional actors. The project employs the regional innovation systems (RIS) model to illustrate how industrial restructuring is supported, but also hampered, by regional conditions. Regional (and national) innovation systems, with educational programmes, research activity, laws and regulations, are particularly geared to support strong regional and national industries. This has been key to provide competitiveness for the Norwegian oil and gas industry, aquaculture and other strong national industries. Existing, well-functioning RIS will not necessarily provide relevant support for new industries. Regional restructuring may therefore also require that RIS are developed and modified. When restructuring is seen to require 'system changes', the project introduces two types of actors and actions as the basis for regional industrial restructuring. The first type of actors is those commonly seen as the initiators of new industrial activities. These are firm entrepreneurs who start new, innovative firms or innovate in existing firms. Restructuring is based on firm entrepreneurs with new ideas. However, for a new regional industry that is robust and provides many jobs to develop more than some 'isolated' initiatives are required. New and 'restructured' innovative firms in emerging industries must, among other things, find relevant knowledge at R&D-institutes and competent labour from educational institutions, and laws and regulations must be adapted to new business models. This leads to the understanding that regional industrial restructuring also needs change agents at the system level. There are persons or organizations that mobilize resources, competence and decision-making power to create new organisations, new instruments, or change existing institutions. These actors feel responsibilities beyond their own organization and intend to improve, for example, small technology firms' possibilities to grow. Based on this framework, two different roads to regional industrial restructuring are outlined. The first approach starts when firm entrepreneurs come up with ideas, inventions or innovations that potentially can result in a new regional industry or upgrading of an existing one. For this to happen, the innovation must be applied and, possibly, adapted by several other entrepreneurs so that a so-called critical mass of new and existing firms that use a new technology, produce a new product or service and so on emerge. Then, the regional innovation system needs to evolve and change as a new industry starts growing, or an existing industry is upgraded. The second road starts when change agents develop and adapt regional innovation systems to better suit potential new industries, for example, through support for new research groups, support for technology development or through making regulations to protect firms in new market niches. The idea is then that entrepreneurs in new and existing firms are taking advantage of new opportunities, which will lead to the fact that more entrepreneurs and firms use the new knowledge and that a new or restructured industry can emerge. This understanding means that policy for industrial restructuring should include instruments aimed at entrepreneurs and firms but also contribute to changing the competence and willingness of restructuring in the regional environment.

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The project will result in a scooping paper about economic restructuring. The research questions are how economic restructuring is shaped through the joint effort of niche entrepreneurs and system entrepreneurs in creating new growth paths that are supported by relevant innovation systems, and how this view of economic restructuring can be transformed into policies that combine actor based and system based strategies. The project conceptualises economic restructuring as new path development; the transformation of existing industries or the creation of new industries for a region or nation. A main idea is that new path development requires both actors that start new firms or initiate innovation activities in existing firms and organisations and the further development and reorganisation of innovation systems, that also requires entrepreneurial activity from e.g. regional leaders. Innovation systems tend first of all to support the further development of existing strong regional or national industries. Individual entrepreneurs are also not able to create new growth path or fuel major path changes on their own as long-term growth has to be sustained by innovation systems adapted to emerging industries. Based on this understanding, the project aims to develop new knowledge about how economic restructuring can be boosted by new policy approaches. The project includes five main activities: 1) Literature review and conceptual work within the main research themes of regional innovation system and path development, and niche and system entrepreneurs' role in economic restructuring, iii) creation of an analytical framework that combines this research themes into an alternative understanding of economic restructuring, 3) discussions of policy implications, 4) identifying research designs and methods used in empirical studies within the research themes, and 5) based on point 1-4, suggestions for future research agendas on economic restructuring.