Prof Slavo Radosevic Special Advisor to DG Regio Commissioner SMART REGIONS Conference Driving Smart Specialisation Investments in Priority Areas for European Growth 12 June 2016 Square Brussels ID: 790066
Download The PPT/PDF document "Transnational cooperation and value chai..." is the property of its rightful owner. Permission is granted to download and print the materials on this web site for personal, non-commercial use only, and to display it on your personal computer provided you do not modify the materials and that you retain all copyright notices contained in the materials. By downloading content from our website, you accept the terms of this agreement.
Slide1
Transnational cooperation and value chains
Prof. Slavo RadosevicSpecial Advisor to DG Regio CommissionerSMART REGIONS Conference: Driving Smart Specialisation Investmentsin Priority Areas for European Growth, 1-2 June 2016 – Square, Brussels
1
Slide2GVC: a neglected dimension of SS
GVC/FDI: the least developed part of the overall smart specialisation policy apparatus but probably the most important for the EU ‘periphery’Internationalization is considered ‘a crucial component of S3’ (SS Guide, 2012, pp. 94).‘Internationalization’ = integration of discrete national or regional spaces); ‘Globalization’ = functional integration (cf. Vanguard initiative)
RIS3 outward looking process is perceived primarily in terms of
internationalization of the design process, an international outlook in selection processes, and internationalization developed as a separate area of activity
(cf. internationalization of technology companies). A recognition of the importance of GVC has been recognised only very recently in research (cf. innovation and internationalization) and in policy (cf. EU clusters and value chains)There is a positive and strong correlation between the extent of involvement of firms in both international and innovation activities
2
Slide3Key challenge
: SS facilitate technology upgrading but …. how can the local production stage of GVC become a building block of RIS? View 1: GVCs are key to technology upgrading? Linking is everything.
View 2:
Link up only when you will be able to benefit
: first build endogenous technological capability and only than link upView 3: Beyond exclusive alternatives? GVC as levers of place-based growth
Different views on ‘
transationalizing
’ SS
Slide4Trade-offs of GVC based integration
PositivesGVC > reduced barriers to entry > opportunities for participation with new platforms for development and limited initial resources
(both capital and intellectual) >
access to complementary resources
that can accelerate development. Product innovation spur further separation of R&D and production which opens new ‘points of entry’ Initial fast learning > high productivityPotential for ongoing involvement in leading-edge technologies, standards, and industry best practices.
Challenges
Production systems have become
dis
-integrated and geographically dispersed
Traditional locally-integrated regions have
declined or evolved into more narrowly stage-specific focus
.
Modularity trap > great inequalities in profitability between the “lead firms”/ the “platform leaders” and contract manufacturers/subcontractors Erosion or depletion of regional industrial ecosystems and challenge of re-building themThe entire VC may never be captured i.e. fragility and dependence
4
Slide5Divergent degrees of integration of EU into GVCs
Foreign value added share of gross exports5
Source: OECD/TWO TIVA Database
Slide6The successful example of VC driven growth in the EU: German-Central European Supply Chain
The German automobile industry is one of the most prominent examples of supply chains in Europe (IMF, 2013)Among vertical investment driven by differences in factor prices, affiliate jobs in eastern Europe appear not to compete with jobs
in Austria and Germany (Marin, 2010).
Lower costs of eastern European affiliates help firms
to lower overall productions costs and to stay competitive.The example of bottom up VC driven clustering that led to ‘Win – Win’ outcomeHow can SS facilitate spreading of this model(s) to South and to the East?
6
Slide7EU28: diversity of industrial ecosystems
Rich and diverse: German, Austria, Sweden etc.Germany has rich industrial ecosystem with diverse set of complementary capabilities suppliers, trade associations, industrial collective research consortia, industrial research centres (See Berger, MIT 2014)Depleted: EU South
Almost 2mn jobs loss in manufacturing since 2008
Narrowly integrated or depleted
: CEEDual innovation systemsPlace based policies alone are insufficient response to this structural issue7
Slide8Supply side justification of EU inter-regional integration strategies
Demand side (size of the market) is obsolete argument for the EU integration The supply-side approach > regional integration as a necessary condition to create
scale economies and complementarities
that can drive more production and processing and thus
higher value exportsA potential for ‘combining different production functions’ within the EU28 GVC as leverage mechanisms > opportunities for LFRs to leverage low costs and proximity to large markets to build export capacities in specialized GVC niches (e.g., intermediate goods) in the context of the European (not only EU) production systems.
8
Slide9GVC oriented industrial innovation policy*
EU is ideal locus for GVC oriented industrial innovation policy: how to strengthen the export and technological position of regions/countries by sourcing inputs from regional neighbours?
Regional value chains
should become a new focus for investment planning by the EIB and by Structural Funds
The aim is not to recreate entire supply chains within a country/region but to utilize extraterritorial linkages that affect a region/country’s positioning in global or regional value chains.* Gary Gereffi (2014) A global value chain perspective on industrial policy and development in emerging markets, Duke Journal of Comparative & International Law,
vol
24:
9
Slide10How SS can help technology upgrading through and in cooperation with GVCs?: three paths
The creation of new VC that are suited to regional R&D&I and manufacturing or services capacities > Vanguard initiative: by
‘connecting smartly’ existing demonstration infrastructures and by
the creation of new demonstration facilities
Expanding access to the existing value chains to marginalized regions Assist firms/regions in the existing VC to ‘climb the ladder’ or move from (or along) process, to product, to functional or value chain upgrading.
Three paths should be region specific (cf. (
1
) ‘core’ regions, (
2
) South EU, (
3
) Central EU, (
2) East EU) …… all three paths require ‘industry commons’ or network of public – private infrastructures' oriented towards technology upgrading via value chains10
Slide11The emerging vision: Inter-regional ‘industry commons
From pilots to inter-regional industry ecosystems: individual projects are insufficient basis for further technology upgrading without some durable joint infrastructure (‘industry commons’) Creation of new VC
: pilot plants should act as the framework where new value chains are created (cf. the emerging Vanguard model).
Expanding access to the existing VC
: twinning projects to develop networks of local suppliers (in cooperation with the lead firms)Stimulating upgrading within the existing VCs: joint public – private programs to assist local firms climbing the VC ladder in the specific technology areas (in cooperation with the lead firms)There is not blueprint but policy experimentation
: ‘experimentalist governance’ (Charles
Sabel
)(cf. programs as portfolios of projects based on diagnostic monitoring)
11
Slide12Parts of vision are already in place:
the EU driven trans regional collaborationsA variety of tools available for inter-regional collaboration; in addition to Horizon 2020The major programmes supporting inter-regional collaboration in R&D&I:European Territorial Cooperation; ERA-Nets; Joint Technology Initiatives (JTIs); Knowledge and Innovation Communities (KICs); Joint Programming Initiatives (JPIs); European Innovation Partnerships (EIPs); ERA Chairs; Teaming for excellence and innovation; Twinning for excellence and innovation
However, they are largely focused on
upstream/R&D parts of innovation spectrum
Exception: INNOSUP-01-2016-2017 Cluster facilitated projects for new industrial value chains; INNOSUP-08-2017: A better access to industrial technologies developed overseas Inter-regional industry commons are about demand led initiatives and facilities which can be
combined with a stronger investment-oriented agenda
.
12
Slide13Towards the EU and countries/regions GVC oriented industrial innovation policy
SS on its own will not be enough to overcome the barriers to foreign actors’ engagement in ‘discovery processes’. This will need to be
complemented
by gradual building of the other elements of GVC oriented II policy:
Positioning internationalisation and innovation policies ‘under one roof (integrating FDI/GVC and innovation policy) Fostering demand driven FDI in R&D&I, i.e. R&D&I that is related to the implementation of improved products and processes which are produced or assembled in the LFRs. Focusing on the ‘quality’ of FDI and GVCs
Developing a strategic approach to the internationalization of R&D
Slide14Five take home messages
The neglect of ‘GVC as levers of place-based growth’ as policy and research issueUnderstanding of
tradeoffs of GVC integration
is essential for thinking about VC oriented industrial innovation policy
EU is appropriate context for VC oriented industrial innovation policy: how to strengthen the export and technological position of regions/countries by sourcing inputs from regional neighboursElements for integrating GVC into SS framework is still ‘work-in progress’
(policy as discovery process’/experimentalist governance)
GVC toolbox
- how to enhance internationalization dimension of SS- needs to be developed
14