a Austrian Research centers Seibersdorf, Systems Research Technology†Economy†Environment, A-2444 Seibersdorf, Austria b Department of City and Regional Development, University of Economics and Business Administration, Roã auer Laâ nde 23
A-1090 Vienna, Austria Abstract SMES are confronted with particular problems constraining their innovation activities. How their needs are fulfilled by support
competition, both for small and large firms. It is often argued that SMES innovate in specific ways, different
on dominant customers, the more likely is the incremental character of their innovation activities Most clients tend to stick to already known solutions
The strategies of competition. Competition through improved quality and new functions favours inno -vation whereas price competition is less stimulating
Smallbone et al. 2000). ) Competition based on design leads to frequent product innovations, but they are usually incremental
This heterogeneity is one of the reasons why there are contradictory results comparing the levels of innovative
cities of Linz (the capital of the province), Wels, and Steyr. Outside this core area there are peripheral areas
technology policy and investment marketing in the region, the Technology and Marketing Corporation in Linz.
system concern technology transfer services and inno -vation management consultancy 3. The innovation process of SMES and typical
well as producer services, was conducted in 1998. A total of 204 firms answered which corresponds to a
-sponds approximately to the regional economy. As far as the industrial structure is concerned, the metal-and
anyway, regarding capital as well as time and know-how of the employees SMES are engaged less often in research than large
of sales and profits through other products (â€oecash cows†to the same extent as large firms, too few or insuf
environment than large firms (Smallbone et al. 2000 One of the consequences †as far as established firms
Customers, in particular play an important role in guiding the innovation activi -ties of their suppliers (von Hippel, 1988.
within the business sector, customers and suppliers being most important, less service firms and horizontal relations. A limited number of durable and selective
Furthermore, customers are often unwilling or not ready to assess unfamiliar inno -vations or to formulate an explicit need for them (von
dominant customers †or small markets for specialized Table 2 External relations in the innovation processa
Customers 78.6 48.6 87.5 53.1 Suppliers 60.7 40.7 79.7 39.1 Other firms (horizontal relations) 27.1 10.0 37.5 15.6
products or services, without being able to substitute for other products if this market crumbles.
firms†business relations †customers, suppliers, and horizontal relations †whereas in the case of service
of the regional economy are the reasons why the region is an important spatial level in innovation systems
on clients in the case of producer services. Second, the smallest SMES (with less than 10 employees) and those
Dominating external demands (clients) 7. 1 3. 1 Secrecy requirements of clients 4. 3 3. 1
is the narrow focus of many SMES on their customers making their innovation process dependent on them.
search activities concerning new market opportunities. It is important not to neglect other types of problems than
4. Support services offered by the investigated instruments 4. 1. Regional technology centres From the six technology centres in Upper Austria two
close to the capital of Linz. It is a technology and research centre for software development, industrial
mathematics, and related services, exclusively focusing on this technology field. The SWP was founded in 1987
consultancy or technical services. These centres are located in Linz (with 46 firms and organizations), Wels
and consulting services. There are hardly any manufacturing companies and only a few high-tech firms. The R&d intensity is rather low.
Services or functions which are less profitable are performed not, which restricts the potential of these centres to support innovation activities
development of prototypes. The FFF is an autonomous funding institution under the control of the Austrian
scheme than in the Austrian economy. Accordingly more mature industries like metal products, textiles, fur
than the share of SMES in the Austrian economy. Fur -thermore, SMES received only half of the funds provided
Mostly the services of the centres are used only by the firms which are located there. The centres confine themselves, intentionally or
actually, to the function of incubators (see also OÂ ster -reichisches Institut fuâ r Raumplanung, 1998.
providers and do not indicate further services supporting their innovation activities Table 4 shows that the use of technology centres is
services a Source: SMEPOL-survey Upper Austria as an indication of the innovation support schemes not
or using services of Upper Austrian technology centres 6. 7 20.0 73.3 Radical innovatorse 17.1 29.3 53.7
the co-funding of investments, followed by the co-fund -ing of personnel. As far as the co-funding of external
consulting services is concerned, however, the clear majority of SMES did not think that the support
investments Funding of personnel 50.7 54.2 Funding of external 31.3 33.3 consulting services Provision of technical 18.2
know-how Technical services 9. 1 Provision of 4. 5 infrastructure a Source: SMEPOL-survey Upper Austria
156 A. Kaufmann, F. Toâ dtling/Technovation 22 (2002) 147†159 support more on personnel than other direct support
schemes which aim more at investments In contrast to direct support, the effectiveness of tech -nology centres seems to be far worse as far as the pro
-vision of technical know-how and technical services is concerned. Such services are provided either not or of
little value for the firms. The provision of infrastructure seems to be taken for granted by firms located in the
would offer additional services like innovation con -sultancy, knowledge transfer, and mediation of risk capi
and services of the SMES responding to the SMEPOL survey in Upper Austria show that the FFF reaches dis
machinery, and services (frequently software) while only 19 belong to the metal-and-steel industry, metal pro
communication technologies, chemicals, data pro -cessing, and electrical equipment. Of course, there is no simple correspondence between industry and technologi
services targeting these deficiencies are still missing The support instruments in Upper Austria †direct
-vation services. Most Upper Austrian technology centres except for the research activities of SWP and FAZAT
concentrate on services which can easily be put on the market. Therefore, important support services are not
offered or are in short supply, because they do not yield immediate or sufficient returns. In the case of direct sup
funds for investments, personnel, 76.9 38.5 Financial problems: lack of finance, too high risk consultancy, reduction of risk
technical services, technical know-26.9 10.3 Technological problems: lack of technical know-how how inavailable or too expensive technology
dominating customers, secrecy requirements firms or science of clients a Source: SMEPOL-survey Upper Austria
The availability of venture capital has been increasing in Austria in the recent past, but the major innovation support schemes have not yet adopted the
-ply but also the lack of demand. In order to be effective in these cases support instruments have to raise aware
here predominantly the customers †SMES have few external relations in the innovation process. The lack of
Learning regions in a globalised world economy towards new competitive advantages of industrial districts? In:
Innovative Environments: The European Experience. Routledge London Braczyk, H.,Cooke, P.,Heidenreich, R. Eds. 1998.
The Globalising Learning Economy Implications for Innovation Policy. Report to the DG XII, TSER Brussels
The new flexible economy: shaping regional and local institutions for global competition. In: Bertuglia C.,Fischer, M.,Preto, G. Eds.
Technological Change, Economic Development and Space. Springer, Heidelberg Meyer-Krahmer, F.,Schmoch, U.,1998. Science-based technologies
Culture and Competition in Silicon valley and Route 128. Harvard university Press, Cam -bridge, MA Smallbone, D.,North, D.,Vickers, I.,2000.
The resurgence of regional economies, ten years later: the region as a nexus of untraded interdependencies.
Global economy. Guilford Press, New york Toâ dtling, F.,1994. Regional networks of high-technology firms †the
Environment. His research interest concerns innovation, technology, and economic develop -ment and organization. In several, partly Euro
-versity of Economics and Business Adminis -tration. He has been doing research on industrial change, innovation,
Regional Studies, Environment and Planning, Papers of the Regional Science Association, European Planning Studies, Research Policy, and
Creating a RTD Investment Policy for Regions in Emerging and Developed Economies Contract no: 029746-CRIPREDE
Baltic International Centre For Economic policy Studies (BICEPS), Latvia: Alf Varnags, Zane Ledusk -rasta Impressum Prof.
From Rural area to High-tech Economy...52 4. 2. 8. Prato: Flourishing Industrial District of Traditional Industry...
-ing the role of dynamic entrepreneurs and enterprises, regardless of firm size, for eco -nomic development (Schumpeter Mark I hypothesis). Following Schumpeter, there has
and products than larger enterprises, thus emphasising the flexibility of a small firm size. Based on US data, Acs and Audretsch (1990) provided further empirical support
large enterprises (Craggs and Jones 1998: Across Europe the proportion of innovating firms by size class varied from 73%of large firms, 49%of medium sized firms to 37
largest enterprises have consistently been a disproportionately important source of in -novation in the manufacturing sector in the UK (Tether et al. 1997
and dynamic complementarities exist between large and small enterprises Tether et al. 1997; Rothwell 1983 This variety across firm size has led some authors to attempt to classify the various
software industry frequently carry out product innovations, often together with customers And finally, science-based producers (e g.,
design could be innovations in sectors with broadly standardised customers demand such as textile industry or furniture production;
contain the introduction of new software products and services or the development of new customer segments.
imitative products which however are new for the enterprise. Examples for a higher degree of innovation would be products and services
which are new for the market or industry as happened for example during the transition towards market economies in
environment which includes for example the scientific and institutional infrastructure of regions and localities as well as the institutional density of the territory. 7 An ideal-type
inherent division of labour between enterprises and institutions, in short: the overarching innovation systems. The main characteristics of any such system are its enterprises
public research institutions and transfer organisations, the educational system, the legal and institutional framework and public policy (Fritsch and Lukas 1999.
6 RTD is seen as part of chain R&d †Innovation †Entrepreneurship †Market/Regional performance
development paths of industry and enterprises (Breschi 2000. For example, research seems to indicate that the German innovation system favours high-tech incremental
enterprises often are used not to articulate R&d needs, which leads to a low level of R&d, partly due to a lack of trust and
circle of low demand for R&d and poor matched public funding 2. 1. 3. The Development Paths Of high-Technology Industry
, through the investment decisions taken on the kinds of research undertaken in specific institutions. Of particular importance in this regard for the de
-search, the overall quality of human capital and the numbers of star scientists employed in regional institutions and universities.
2005) concentrate on the role entrepreneurship plays in triggering the emergence of high-tech agglomerations. In contrast to the development of territo
In the second phase, entrepreneurship, organi -sations and institutional arrangements co-evolve, reinforcing themselves, while in the
linkages of small and large enterprises alike, including the international migration of highly skilled personnel (e g.,
-stitutional thicknessâ€, cumulative causation, agglomeration economies, localisation economies, fungeability, labour market dynamics, quality of life and environmental amenity, and the role of regional and local governance
9 We have condensed these factors and processes into the following major categories namely knowledge and processes of learning (cf. chapter 2. 2. 1), the role of networks
and in adapting research results to an enterprise context. As such, knowledge is needed an input for regional RTD,
favourable RTD environment. In this regard, universities, science parks and the like may influence the level of RTD
environment conducive for learning processes. Recent research picked up this topic in discussing collective learning which is understood as the learning process between differ
-ent agents (enterprises, public research institutions, etc. rather than organisational or in -dividual learning. Collective learning includes the regional accumulation of knowledge
-tions and interactions among stakeholders within a particular context, which has lead some authors to introduce the concept of the †learning region†as a region where external
between firms, customers and suppliers (e g.,, Camagni 1991, Florida 1995, Harrison 1994, Malmberg et al. 1996
With regard to RTD, this draws attention to both the environment which is needed for technical and scientific knowledge to be existent
and opportunities to meet new people. Thus, weak ties †represent local bridges to dis
Uzzi (1997) pointed out that strong ties contribute to †economies of time†as they add to an individual†s capability to quickly capitalize on market opportuni
investments in R&d, measured by corporate patenting by region within ICT industries in regions in the UK, Germany and Italy, are agglomerated highly (Santangelo 2002
specialised niches, sector-specific localisation economies and general effects of ag -glomeration, public support for training and technical initiatives,
12 Embeddedness is a concept widely used in entrepreneurship research. Granovetter (1985) used this concept to explain how economic actions are grounded in social connections and milieus
-tracting human capital and fostering technological regional development, which be -comes visible in spatial patterns of a so-called †geography of talentâ€.
-fies a triangular relationship between his three †tâ€, namely talent (human capital tolerance and high technology growth:
opportunity, low entry barriers (i e.,, good entrepreneurial environments) and high diver -sity of social groups. For example, this is reflected in the general attractiveness of a re
-gion and measured by the †gay†or the †bohemian†index, which represents the toler
policies to innovation policies and promoting a supportive environment, often in the context of regional development,
enterprises. Another example concerns science parks which often were not able to re -cruit sufficient firms or they have been recruiting the †wrong†firms, i e.,
context of globalisation and increasing international competition, its aim is to strengthen the innovation capability and competitiveness of European industries.
new products, services and processes in markets or inside private and public organiza -tionsâ€. Nowadays, a main objective of innovation policy is to foster
emphasizes the role that regional and national environments play in influencing RTD and innovation in firms.
-ters of innovative enterprises and the role of the external environment in fostering innova -tion (Lawson 1997.
knowledge to be codified externally and immigration of †talents†to profit from new ideas. Policy-makers can promote regional development best through upgrading
an attractive environment for living 2. 3. 2. Is there a Role for Policy The question remains whether and in which ways regional agglomerations and regional
-man technical capital and knowledge. Secondly, policy can contribute by supporting the global connectedness of local development,
-tion and entrepreneurship in a wider meaning. In drawing on Moulaert and Nussbau -mer (2005: 91), territorial innovation models (TIM) are used as †a generic name for
but also competition between actors (Lorenz 1992, Dei Ottati 2005. Examples of well-known industrial districts in Italy include the
economies. For example, this happened in Prato where the traditional textile industry was able to survive
-tional pressure on local economies as well as the post-industrial transition process. For industrial districts to successfully cope with at least some of these fundamental
-try and along the value chain (vertical cluster) or horizontally with enterprises competing in the same sector. 17 Spatial concentration is explained by drawing on ag
For enterprises, clusters have sev -eral advantages (Maskell 2001, Malmberg and Maskell 2002: Firms are able to draw
competition within clusters pushes their innovation capacities; they share costs of infra -structure; spatial proximity reduces transaction costs and problems with free riders
-sociations offering specialised services or financing institutions such as venture capital fonds and business angels. Cluster research differentiates between miscellaneous
clusters are external economies of scope and scale with industrial districts being one sub-category of this cluster form.
The horizontal dimension covers issues of competition and variation, which the author considers crucial in understanding the cluster phenomenon.
-plementary products and services more competitive through cooperation, and of un -traded interdependencies (Storper 1995) such as the effects of embeddedness and lo
the constant flow of information and communication exposing firms to new information without actors consciously having to search for relevant information (Bathelt 2004
the development of the cluster, regardless of market chances and opportunities Menzel and Fornahl 2005
such as science and technology commercialisation programmes, venture capital initia -tives, or consulting in intellectual property rights and internationalisation.
local environment is characterised by extensive inter-and intraregional linkages as well as 31 by comprehensive co-operation between large and small firms (Sternberg and Tamasy
The milieu is seen as an incubator for innovations and the creativity needed to renew and develop regions
although those need to be integrated into the local society and economy (Camagni 1995, Ritsilã¤1999.
-portance during periods of rapid technological change or intense global competition (De -Martino, Mchardy Reid and Zyglidopoulous 2006:
successfully adapt to new changing environments and hasten their declineâ€. Audretsch 2000, cited in Demartino et al. 2006: 7). This also implies that regional actors need to
-cause of its SME-structured economy and vertically organised added value; the in -dustry in Oresund is younger.
university environment, and Boston/Route 128, which has been chosen for its dem -onstrated potential to overcome a crisis
Bangalore, known as the †Garden City†of India, is the capital of the Indian state of
-tion) and IT (esp. international computer hardware and software enterprises that have operations in Bangalore. The enterprise structure consists of many branches of MNCS
e g. Texas instruments, Infosys Technologies Ltd..In total, Bangalore is the most im -portant centre of civil and military aircraft and aerospace industry and IT in India.
In a historical context, the US major enterprise Texas instruments that †discovered†Bangalore as a location is of great importance.
Bangalore†s success is only a result of the foreign investment because of low cost ad -vantages and has not a real impact on economic development and local entrepreneur
helped to settle technology orientated public enterprises in Bangalore, the latter made the settlement of foreign MNCS possible.
For instance, a lot of investments were made in infrastructure (e g.,, data net -works) that supported the settlement of foreign enterprises.
In Bangalore subsidies were given on an enterprise level (e g.,, free trade area and establishment of the †Soft
-ware Technology Parkâ€) so that the support reached the beneficiaries directly Balasubramanyam and Balasubramanyam 2003. Furthermore, the government sup
enterprises were focused mainly very and centralised, vertically high integrated sys -tems locked into an inefficient technological trajectory (Bathelt 2001.
competition could lead to cutthroat behaviour, instead in Boston it created a †virtuous cycleâ€:
worldwide (increasing importance of sectors like biotechnology, internet services etc dislocation of emphasis from hardware to services) was a benefit for Boston that †was
ideally poised to take advantage of the rise in returns to skill that so marked the last
impact on local entrepreneurship and innovation. In general, Boston†s regional culture is characterised by technological awareness and optimism, a valuable basis for re
is seen not as an obstacle for starting a new venture †Boston†s continuing survival is the result of repeatedly successful responses to ad
new market opportunities and the change of technological focus (lately, emergence of biotechnology and internet services
Summing up, Boston is seen especially as a †good practice†because â€...high tech -nology industries have proven that they are capable of readjusting and rejuvenating
services for enterprises 93. 500number of employees in the 14 lead and growth sectors 1, 20
services for enterprises 93. 500number of employees in the 14 lead and growth sectors 1, 20
and entertainment), health care services and environmental economics etc. The busi -ness start-up initiative †B. E g.
capital of the region Languedoc-roussillon and administrative capital of the HÃ rault department (cf. Figure 4). There are 225,000 inhabitants in the city and 397,000 in the
Today, ca. 33,200 enterprises, mainly SMES, are settled in the urban community and Montpellier has one of the highest firm
important impact on the local economy: In the 1960s, the repatriation of Algerian -French people †who were typically industrious and often possessed ressourcesâ€
enterprise to the city†(Hansen 1999: 94. Apart from that, the increase of students and
1998). 13 business parks, 6 incubator and technology parks (the flagships are †Cap Al
Since 1987, more than 300 enterprises have been accompa -nied by the CEEI within the Montpellier agglomeration with an above-(national) average
A major strength of Montpellier is its communication and outreach strategy. Image campaigns successfully stress the combination of life quality, business infrastructure
and environment as key arguments for investing and living in Montpellier. This is ac -47 companied by special support services for firms planning to localise in Montpellier
Lasch 2006 Another success factor for the economic development is the regional identity, which can be characterised by a traditional sense of rivalry with the capital Paris and a strong
The economy is dominated by SMES with a heterogeneous economic structure. There is still a fairly large share of low-tech indus
is focused on production and development of mobile communications equipment, cord -less systems, modem and fax equipment for wire and wireless systems as well as vari
-ous equipments for maritime communications and navigation (Dalum et al. 1999; Stoer -ring and Dalum 2006
approach like the Norcom cluster where enterprises/spin-offs originally were the 50 main actors or a kind of †top down†approach Biomedico represents with institutions
some others with large R&d investments and good collaboration with universities OECD 2001 Oresund is home to one of the worlds†best biotechnology clusters.
-sitioned to attract industrial and financial investments in the biomedical area†(Boston Consulting Group 2002.
It is the most important investment region in Scandinavia and ranked number three in Europe when it comes to the number of investment projects
Oresund Region 2006 A main issue for the region is knowledge and learning, which helped making this re
-operation climate between research and economy help fostering knowledge spillovers Boston Consulting Group 2002 The engagement of private actors (e g.,
enterprises in Medicon Valley) is a main element fostering economic development Toedtling et al. 2006), but effective collaboration between local parties has its positive
area, acts as an intermediate between universities, enterprises, and authorities aiming for promoting the medical sector (Sornn-Friese and Sorensen 2005
From Rural area to High-tech Economy The county Oxfordshire, consisting of five districts, is located in the south east of Eng
†dramatic transformation in its economy in the last 40 years†from †being a rural county
This high-tech economy is rooted in its industrial past when motor car and compo -nent manufacturing, food industries and blankets were the leading sectors.
small but significant part of the high-tech economy in Oxfordshire (Lawton Smith 2004 The high-tech orientation shows itself also in the employment structure:
Knowledge and science is of great importance for Oxfordshire†s economy. The resi -dent workforce is amongst the most highly qualified in the country.
For example, the Trust has an innovation centre with incubator units and runs business seminars (Lawton Smith et al. 1998
-munes and its capital is the city of Prato (cf. Figure 8). Overall, there are approx
because of the worldwide decrease of demand for textile products (Dei Ottati 2004 Bellandi and Romagnoli 1994.
Today, Prato†s economy is still based mainly on the textile industry despite a marked reduction in terms of establish
in the international competitive environment (Dei Ottati 2004, 1996b. For instance, as a reaction to the downturn phase in the 1980s, the business models changed:
While in the past the enterprises in Prato had a high degree of productive self-sufficiency nowadays some intermediate production is being subcontracted to
or bought from out -side the district, often from countries with a lower level of labour costs.
and fast growth of firms specialised in producer services due to, for example, the out -sourcing of activities before and after the production process or the emergence of new
As in every industrial district, the enterprise structure in Prato is characterised by an extensive division of labour.
This means the enterprises are highly dependent on one another to be able to carry out their own tasks.
The enterprises †have to construct a network (â€) of business relations with other firms for the most part possessing complimentary specialisations. †(Dei Ottati
As most enterprises in the industrial district Prato are SMES they are also highly de
According to this, in Prato†s enterprises an atmos -phere of high collaboration and absolute trust can be observed, although lately some
The example of Prato shows how a region in a traditional economic environment with a rather low R&d level can perform well by benefiting from spatial and social prox
-ity, entrepreneurship and creativity that can be found in the local system, precisely thanks to that fabric of trust relations in which economic transactions are embedded. â€
) The two biggest enterprises within the cluster offer nearly half of all jobs, only 42
enterprises employ more than 20 employees, and more than 200 enterprises do not have any employees at all.
Because of the high specialisation and concentration there is also high competition within the cluster (Nadvi and Halder 2005;
Halder 2005. But Tuttlingen†s producers also benefit from economies of agglomeration in the cluster
e g.,, economies of scale and scope, low transaction costs, good reputation in the global market, and linkages worldwide through many local traders and buyers (Halder
like the US dollar exchange rates) and international demand (Binder and Sautter 59 2006). ) Tuttlingen keeps global linkages to e g.,
But on the other hand this could foster increasing competition and the danger of loos -ing specialised know-how to the subcontractors abroad and therefore threaten Tut
from leading enterprises (†pipelinesâ€) import new knowledge into the region. This is fol -lowed by the so-called †buzz†in the cluster:
and the hard competition and mistrust within the cluster are a stimulus for entrepreneurship and innovation (†structural mistrustâ€.
Therefore, multilat -eral cooperation within the SMES in the cluster is not working at all â€
†The majority of the firms are avoiding direct competition by pursuing a niche strategy
but also to satisfy even smaller demand vol -umes. This in itself is a success factor for the cluster again
successfully in a globalised economy. Furthermore, the regional endeavours to foster cluster specific education and knowledge could be a good example for other regions
Infrastructure, human capital, institutional capital Regional image and identity Market re -sources Size, customer base, distribution channels Openness of customer base for new
processes, products, services Industry resources Age, size of industry base, technology orien -tation and level of technology use
Creation of social capital in the form of trust-based and reciprocal relationships within re
Creation of social capital in the form of trust-based and reciprocal relationships within re
its natural environment determining the quality of life within 63 a region, its industry base and market structures.
Tuttlingen, or the settlement of major multinational enterprises such as IBM in Montpellier †Big pharma†in North Jutland and Texas instruments in Bangalore.
-prises, this also results in strong technological commonalities of enterprises, thus reducing the probability of radical innovations.
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