Regional industrial development: Moving beyond specialisation

The impact of the current economic crisis is contributing to reshape the industrial structure of various OECD economies and beyond. Manufacturing sectors are particularly exposed to competition from emerging countries (OECD 2012) and fiscal pressures are pushing governments to reflect on how to invest more strategically in new domains of growth. Regional administrations are increasingly seen as key actors to design resilient economies in the face of global competition (Barca, 2009; OECD 2011a; Hudson 2010; Birch et al 2011). While this renewed interest in regional development coincides with a shift away from old structuralist or neo-classical approaches to industrial policy, a number of questions regarding the conceptual strength and practical implementation of some recent approaches to regional development and policy need to be addressed. Our central concern is with the strategic approach termed ‘smart specialisation’ (SmSp) and its focus on prioritising economic activities with greater potential for growth by relying on processes of ‘entrepreneurial discovery’ (Foray et al 2011; Foray and Goenaga 2013), a notion that draws on Hausmann and Rodrik’s (2003) view of development as a “self-discovery process”. However, not enough advancement has been made in either the theory or the practice of SmSp (Mastroeni et al 2013). There are unresolved issues regarding how to deal with the complexity of institutional structures and internal and external networks that make up innovation systems, and the approach does not deal with the constantly evolving nature of the institutional structures as new practices are established, new market niches opened, and new functions needed to help the process of innovation to continue. We will put forward the challenges that face regional innovation policy and the features that will be necessary for an effective framework, and illustrate these with empirical examples in the area of venture capital and risk finance policy.