Cooperation and innovation as factors of regional competitiveness. A comparative study of eight European regions

Gerd Schienstock, Mika Kautonen, Petri Roponen




1. Regional competitiveness - some theoretical remarks

1.1 Introduction

This report is based on a company survey in eight European regions; a total of 758 firms from these regions participated. The report will focus on the question of regional competitiveness, but it will also deal with the co-operation and innovation patterns of companies as these are seen as key aspects of regional competitiveness.

Since Womack et al. (1990) published their book 'The machine that changed the world', in which they propagated the message that European car-makers have fallen far behind Japanese and also US firms, there has been animated discussion about global competitiveness. Globalisation is more than a growth in border crossing trade, it indicates the increasing integration and interpenetration of markets worldwide. 'Global' means an economy with the capacity to work as a unit in real time on a planetary scale (Castells 1996: 92). When using this term we must be aware of the fact that up to now global markets and competition can only be found in some industries such as the car industry, electronics and, to a lesser extent, chemicals (Howells and Wood 1991). Furthermore, up to now it is more appropriate to talk about an asymmetrical instead of a global economy as the interdependence and interpenetration of economic processes has taken place only in Europe, Southeast Asia and the USA, and to a lesser extend between these continents. However, to judge globalisation as a myth (Ruigrok and Tulder 1995) underestimates the clear trend towards integration in world economy (Hirst and Thompson 1996, Howells and Wood 1991).

In the following the concept of competitiveness will be used to evaluate the quality of regional innovation systems. So far hardly any attempt has been made to analyze the functioning of a regional economy. Furthermore, the concept of competitiveness has so far been mainly used on the company level. The new literature, however, makes the interesting proposition that the economic success of companies depends significantly on a well-functioning system of supportive organizations and institutions in the regional environment (Sabel et al. 1987). Therefore we will first raise the question of how to analyze competitiveness on firm level and on regional level and how to integrate both.

One can still hesitate to use the concept of competitiveness on the regional level. Regions do not compete in the same way as companies do. There is no market on which regions could compete. Competition between regions, however, takes place insofar as they try to influence the investment strategies of firms. By improving their setting of supportive organizations, regions try to attract new companies to settle in their territories and to keep firms in their territory from moving production to other parts of the world.

In the literature 'competitiveness' on the firm level is defined as the capability to deal with rival companies on the global market (Ruigrok and v. Tulder 1995). Global competitiveness is often identified with an increasing market share or a high return on investment. These factors are closely linked to each other though sometimes they may develop in opposite directions.

Against the use of such factors to measure global competitiveness one can argue that they do not reveal the causes of global competitiveness. In this context the unit labor costs are mentioned in the first place as key factors.

Undoubtedly to measure competitiveness by referring to labor costs only must be seen as too one-dimensional. At first competitive advantages cannot be realized through low labor costs alone, a reduction of other production costs such as capital costs, costs of raw material, supplied parts or costs of energy, for example, can also help companies to become more competitive. Furthermore, not only has price and cost competition between companies intensified as national or regional oligopolies began to break down, but also new criteria of competition such as quality, user friendliness of products, time of delivery and after sales services are becoming more important.

These criteria, however, must be seen mainly as entrance barriers to the global market, which have to be fulfilled by all companies to enter the global market. Nowadays companies from all over the world can manufacture products of high quality at low costs, sell them for a reasonable price and deliver them within a short time period. Success within the global market mainly depends on the capability of companies to rapidly and continuously produce new products and services; innovativeness is the number one factor in global competition. Besides this, environmental aspects are becoming more and more important, as can be seen by the broad diffusion of the ISO 9000 norm. Therefore to analyze the global competitiveness of companies we have to do away with one-dimensional concepts.

The factors we have mentioned so far do not explain the long-term capability of companies to be successful in the global market. If we are interested in this aspect of competitiveness we have to refer to organizational and management aspects which can be seen as measuring the development potential. Furthermore, companies hardly innovate in isolation, instead they cooperate with supplier and customer firms but sometimes even with competitors and they also cooperate with supportive organizations such as universities, investment banks, technology transfer institutions and others. Therefore we can assume that firms' competitiveness very much depends on the competitiveness of the territory of which they themselves are a part.

1.2 Regional competitiveness

Competitiveness has different meanings for the firm and the regional level. The competitiveness of a regional economy - like that of a national economy - is often judged in the light of foreign trade criteria such as a high export rate particularly concerning high-tech products or positive terms of trade. Against the application of such criteria we can argue that competitiveness is then seen as a one-dimensional concept. Besides that, it is not realistic to assume that it is in the interest of the people within a region to sell as many products abroad as possible. A broader definition of territorial competitiveness also stresses the importance of socio-political indicators such as real income, the equipment with consumer goods or a low unemployment rate (OECD 1990). We can also include a high regional revenue as an indicator of competitiveness as this is needed to fulfill internal and international obligations. Concerning these socio-political criteria we must, however, be rather careful as they often depend on deliberate political decisions. Again, these factors do not reveal the causes of global competitiveness. As major factors of influence, we can mention state R and D expenditure or the skill level of the work force.

In the literature a differentiation is made between short term criteria of competitiveness and long term site or infra-structural and locational factors. The availability of production factors, institutional density, the geographic location, communication infrastructure, cultural patterns, the legal and social framework and institutional density are often mentioned as important site factors. This list clearly shows that the concept of location factors must be characterized as somewhat arbitrary.

So far we have analyzed global competitiveness separately on two levels: the company and the territorial level. Here we can identify similar trends: an approach based on short term output factors has been replaced by an approach based on long term input factors; furthermore, the one-dimensional concept has been developed into a multidimensional concept. The long term potential of survival and economic strength built into organizational and institutional factors has become the key aspect of competitiveness. Still, the interdependence between the two levels has not so far been taken into account.

Some attempts have been made to develop a holistic approach, which tries to connect both levels. This approach takes into account that the competitiveness of companies not only depends on their own organization forms and management practices but also on the environmental structure in which they are embedded. The following organizational and institutional aspects are mentioned as key factors that can give companies an edge in global competition and at the same time improve the economic situation within a region: "i) the successful management of production flows and raw material and component stocks; ii) the successful organization of effective interactive integrating mechanisms between market planning, formal R&D, design, engineering and industrial manufacturing; iii) the capacity to blend in-house R&D and innovation-related activities with R&D co-operation with universities and other firms; iv) the capacity to incorporate closer definitions of demand characteristics and the evolution of markets into design and production strategies; v) the capacity to organize successful networking and joint venture with component and materials supplier firms upstream and with retailers downstream; vi) the steps taken by firms to enhance workers' and employees' skills through investment in vocational training; vii) the premium placed on quality, "zero fault" production and so on greater degrees of worker responsibility in production (OECD 1990: 15)."

The basic idea of this concept is that successful and unsuccessful business strategies followed in a domestic economy might affect these factors and so influence the performance of firms (OECD: 10). In this respect the authors speak of 'structural competitiveness'. The 'industrial district model' can also be seen as an elaboration of this concept as it combines business practices with regional factors, which are seen as supporting companies in their attempt to regain or to retain global competitiveness (Sabel et al. 1987, Pyke and Sengenberger 1994).

One can criticize the concept of structural competitiveness for the fact that it includes no dynamic perspective. Competitiveness, however, cannot be seen as a stable state which can be secured for a longer time by taking specific organizational or institutional measures, instead it should be viewed as a phenomenon which has to be produced and reproduced continuously. Therefore companies and other regional actors, in their attempt to stay competitive in the global market, cannot limit their activities to the first and final installation of a "one best way" model of organizational or inter-organizational governance. To retain or regain competitiveness means a never-ending process of organizational and institutional change and adaptation, inspired by a continuous, collective learning process. The above considerations emphasize the importance of the evaluation of processes taking place in regional innovation systems. A more dynamic concept of competitiveness is needed, which we will call 'process competitiveness'. Here we can use the co-operation within and among firms as well as with support organizations as indicators of process competitiveness.


Table 1. Indicators to measure competitiveness

firm level regional level
output factors - market share- export rate
- high return on investment - distribution of consumer goods
- unemployment rate
influencing factors - labour or production costs
- quality of products
- R and D expenditures
- skill level of the work force
and services
- new products and processes
potentiality factors - organization forms - legal framework
- management practices - communication infrastructure
- institutional density
- cultural patterns
structural competitiveness
- organization forms and management practices
- environmental structures
process competitiveness
- co-operation within firms
- co-operation among firms
- co-operation of firms with supporting organizations



2. Empirical results

In our research project we did not cover all the indicators of competitiveness mentioned in the conceptual discussion. We can differentiate between two types of indicators of competitiveness, subjective and objective. Subjective indicators reflect the competitive advantages firms assume to have compared with their competitors.

Concerning the objective indicators, a distinction can be made between input indicators such as R&D expenditure of companies and output indicators such as innovations announced by companies. We will include the two types of indicators in our analysis. Furthermore, we will use both static indicators such as R&D expenditures measured by turnover as well as dynamic ones such as the development of employment over a specific period of time. Concerning outputs we will use direct indicators such as product and process innovations carried out by companies as well as indirect indicators such as the development of employment and turnover in a specific period.

As for innovation inputs, we can identify three main features of the measurement problem: (1) R&D expenditure input measures do not show the efficiency by which innovation inputs are transformed to innovation outputs; (2) they do not indicate the significance of the innovations produced; and (3) they do not indicate the complexity of the outputs towards which they are channeled. Output indicators are equally problematic. Innovation indicators such as new product or process announcements, for example, may be biased towards small firms. Due to this critique, the evaluation of innovation activities within regional innovation systems will also be based on structure and process-related indicators.


Table 2. Indicators of competitiveness used in the survey

subjective indicators - competitive advantages firms assume to have
- type of competition
- strategies to sustain competitive advantages
objective indicators
influencing factors - R and D intensity (R and D budget by turnover and R and D personnel by the whole workforce)
- changes in R and D budget and in R and D personnel
output factors- innovativeness (new product and process technologies)
- unemployment and turnover
structural competitiveness - new organization forms and management practices introduced
process competitiveness - co-operation among firms and of firms with supportive organizations

2.1 Subjective factors of competitiveness

2.1.1 How companies perceive their competitive advantage

Our research clearly indicates that European firms perceive 'quality' as their most important competitive advantage. Nearly 80% of all companies in the overall sample argue that their strength in global competition is the quality of their products or services. About 50% of all companies assume they have an edge concerning 'time of delivery' as well as 'innovativeness' and 40% of all firms define 'after sales services' as their competitive advantage. Somewhat surprisingly, only one third of all companies see themselves ahead in price competition. And only few companies define 'user friendly products' and 'ecological aspects' as their competitive advantage.

These findings seem to indicate that firms in Europe have already adapted quite well to some of the new competition criteria. On the other hand, they seem to have more problems to stay ahead in traditional price competition. Besides this, 'customer orientation' is obviously a weak aspect of European firms' global competitiveness, indicated by the low share of companies which see 'user friendliness of products' and 'after sales services' as their advantage. So far only few companies have realized that in the future environmental aspects may become an important dimension of global competition.

2.1.2 How companies try to sustain competitive advantages

European companies obviously see a 'skilled workforce' as a guarantee to sustain their competitive advantages. Nearly three out of four companies mention a skilled workforce as an important factor which can help them to successfully compete on the global market. To 'increase R&D' is also seen by companies as a promising measure to keep up with their competitors. The third important factor to sustain competitiveness is 'organizational restructuring'. Although companies admit that in customization they are rather weak they are still not prepared to put more emphasis on marketing. So far the network concept has not yet found expression in companies´ strategies to sustain or regain competitiveness; they have not realized the advantage of horizontal co-operation. This is indicated by the fact that only 38% of all firms mention 'close co-operation' with other firms as a measure to be taken to sustain competitive advantages. Co-operation with supportive organizations is seen as even less important in this respect; only 10% of all companies rely on this factor to sustain their competitive advantages.

On the regional level some differences occur. Particularly companies in the Tampere Region stress that to have a highly skilled workforce is an important measure to sustain competitiveness (85%), while in the Basque Country (27%) and in Centro (41%) less that half of all companies are of the same opinion. In Baden Württemberg (68%) and in the Tampere Region (66%) many companies give high priority to 'increasing R & D' as a strategy to sustain competitive advantages. Tampere Region is the only region where more than 50% of all companies mention the 'improvement of marketing' as an important strategy in this respect. When it comes to organizational restructuring as a strategy to sustain competitiveness companies in the Centro Region (66%), Wallonia (61%) and in Wales (58%) are doing quite well. 'Close co-operation with other companies' is important for about every second company in Wales (55%), Tampere Region (50%) and Styria (46%).


Table 5. Measures to sustain competitive advantages (%)

Region

Measure
Wales

(UK)
Styria

(AU)
Wallonia

(BE)
Brabant

(NL)
Tampere

(FIN)
Basque Country

(SP)
Baden-Württem-berg(FRG)
Centro

(PRG)
Total
Internal R&D
49
51
45
34
66
42
68
39
51
Owning basic patents/ licenses
18
12
18
4
3
12
21
7
12
Marketing
39
37
31
22
66
19
42
41
39
Skills/knowledge of labor force
70
70
67
73
85
27
67
41
66
Organization of production
58
39
61
25
50
39
49
66
48
Close co-operation with firms
55
46
30
26
50
27
28
18
38
in the region
31
18
3
17
27
16
17
9
19
in the country
33
18
15
10
29
7
14
4
18
in the EU
20
29
17
9
22
15
15
7
18
in the rest of the world
16
14
12
2
14
3
9
5
10
Support of other institutions
21
5
6
6
18
4
3
5
10
Close co-operation with foreign firms
24
31
20
9
26
15
16
11
20
(N)
(103)
(105)
(87)
(82)
(139)
(74)
(81)
(56)
(727)

2.2 The analysis of objective indicators

2.2.1 Input factors: R&D -related indicators

As has been said earlier, the analysis of objective factors of global competitiveness may include different types of factors. We will first concentrate on so-called input factors; these are factors related to R&D activities. Although most countries have faced a severe crisis during the 1990s only few companies in the overall sample have reduced their R&D activities during the period between 1990 and 1995, regardless of whether we choose the R&D budget or R&D personnel as indicator. Only about 10% of all companies have cut back their R&D budget or R&D personnel during that time, while at the same time nearly 70% of all companies have spent more money on R&D and about 50% of all companies have increased their R&D personnel.

We must admit, however, that the R&D intensity of companies is often rather low. About 40% of the companies which mentioned that they perform R&D activities must be characterized as less R&D intensive in 1995, no matter whether we take R&D budget by turnover or R&D personnel by the whole workforce as an indicator. On the other hand, about 30% of all companies can be classified as R&D intensive if we choose the R&D personnel indicator and about 35% if we look at the R&D budget indicator.

Baden-Württemberg has by far the highest share of R&D intensive companies measured by the R&D budget related to turnover in 1995, while only about 15% of all companies in this region must be judged as less R&D intensive. The opposite situation can be found in Centro. Only 10% of all companies in this region show high but nearly 60% low R&D intensity. The situation in Brabant is quite similar, here even more than 60% of all companies have an R&D budget which is below 1% of their turnover. A more polarized situation can be found in most other regions.

If we measure R&D intensity by the share of R&D personnel compared to the whole workforce we get a slightly different picture. This time Brabant (46%), Styria (34%) and Tampere Region (35%) have the highest number of R&D intensive companies, while Baden-Württemberg (27%) is placed only in the middle of the sample. In Centro, which is placed last in this respect, two out of three companies must be judged as of low R&D intensity. Wales (53%) also has a rather high number of less R&D intensive companies. In most other regions the situation again seems to be more polarized.


Table 6. R&D intensity (R&D budget of turnover and R&D personnel of whole workforce) in 1995 by region (%)

Region

R&D intensity
Wales

(UK)
Styria

(AU)
Wallonia

(BE)
Brabant

(NL)
Tampere

(FIN)
Basque Country

(SP)
Baden-Württem-berg (FRG)
Centro

(PRG)
Total
R&D budget intensity*
Low
58
30
42
62
33
43
16
57
39
Medium
11
28
27
15
33
23
27
33
25
High
31
42
31
23
35
33
56
10
36
(N)
(84)
(81)
(52)
(26)
(89)
(30)
(68)
(21)
(451)
R&D personnel intensity**
Low
53
39
41
40
38
48
26
65
43
Medium
18
27
38
14
27
39
47
19
28
High
30
34
22
46
35
13
27
16
29
(N)
(95)
(70)
(37)
(35)
(92)
(31)
(62)
(37)
(459)

* Low x 1, medium 1< x 4 , and high x > 4 percent of turnover.
** Low x 3, medium 3 < x 10, and high x > 10 percent of total employees.

The share of R&D intensive companies is highest among small companies, particularly if we look at the R&D personnel compared to the whole work force. In more than 50% of all small companies the share of R&D personnel is higher than 10% but only 10% of all large firms can be characterized as R&D intensive in this respect. If we look at the R&D budget by turnover small companies still form the most competitive group.

For long-term regional competitiveness the share of companies which plan to expand their R&D activities is an important indicator. Only about 25% of all companies in the overall sample are planning to increase their R&D activities. The share is highest in Centro (37%) and Wales (34%). On the other hand the lowest share in this respect can be found in Baden-Württemberg. Only about 15% of all companies have plans to increase their R&D activities in this region. Large companies more than small ones plan to become more active concerning their regional R&D activities.


Table 8. Plans to increase R&D budget by region (%)

Region
Wales

(UK)
Styria

(AU)
Wallonia

(BE)
Brabant

(NL)
Tampere

(FIN)
Basque Country

(SP)
Baden-Württem-berg (FRG)
Centro

(PRG)
Total
Yes % of firms
34
28
25
18
28
29
14
37
26
(N)
(103)
(103)
(85)
(78)
(133)
(69)
(79)
(49)
(699)

2.2.2 Qualification of the work force

We have already mentioned earlier that companies of almost all regions rely heavily on the skills and competence of their workforce to keep or improve their position on the global market. Therefore the educational level and the actual qualifications of the workforce must be seen as a useful indicator to evaluate structural competitiveness. To measure this we have built an indicator which classifies companies according to the education and skill level of their workforce. Here we argue that a high share of companies which have a workforce of more than 50% unskilled workers indicates low structural competitiveness.

In the overall sample the share of companies with a predominantly unskilled workforce is 32% and more than 40% of all companies employ a majority of skilled workers. On the other hand less than 10% of all companies belong to the category of companies with a majority of highly educated workers having a university degree.

The share of those companies with more than 50% unskilled workers is highest in Centro (50%), Wales (49%) and Wallonia (48%). According to our definition these three regions must be defined as less competitive. Baden-Württemberg (11%) and Brabant (8%) can be characterized as highly competitive if we look at the skill level as an indicator of structural competitiveness. We have to stress, however, that in Baden-Württemberg we can find only very few companies which have a majority of well educated workers, where more than 50% of the workforce has a university degree. Here Styria and Wales dominate (11% and 13%)


Table 9. Skill level within companies by region (%)

Region
Qualification*
Wales

(UK)
Styria

(AU)
Wallonia

(BE)
Brabant

(NL)
Tampere

(FIN)
Basque Country

(SP)
Baden-Württem-berg (FRG)
Centro

(PRG)
Total
Highly educated
11
13
2
7
8
7
4
-
7
Further educated
13
23
2
49
5
34
6
5
21
Skilled
27
41
23
37
50
24
80
45
41
Unskilled
49
23
48
8
37
36
11
50
32
(N)
(75)
(87)
(52)
(74)
(96)
(62)
(55)
(40)
(541)

* ( % of firms where 50% of the personnel belong to one of the categories)

We can find the highest share of companies with a low-skilled workforce among the large companies. About 50% of all large companies have a workforce with more than 50% of unskilled workers. Among the small companies we find the lowest share of firms with a low-skilled workforce. At the same time more than 10% of all small companies have a workforce with more than 50% of workers having a university degree.

2.2.3 Output indicators

Direct indicators: Innovativeness

Among the output related indicators of competitiveness innovativeness, measured by the reported new products and process technologies, is the most important one. A product as well as a process innovation may be new only to the company which has introduced it, or also new to the market. Of course companies will announce fewer innovations new to the market than those only new to them.

About 25% of all companies in the overall sample have not introduced any innovation, neither new products nor new processes in the last three years (1992-1995). The share of non-innovative firms increases quite significantly if we only count those innovations which are new to the market; then 50% of all companies in the overall sample must be judged as non-innovative.

Those companies which have introduced both new products and new process technologies during the last three years can be defined as highly innovative firms. It is not seldom the case that major product innovations can only be introduced if new process technologies are installed at the same time. If we count innovations new to the company, then we can classify nearly 40% of all companies as highly innovative. The number of companies which have introduced both products and process technologies new to the market is, of course, significantly lower; then only 10% of all companies can be classified as highly innovative. Many more companies have introduced new products only, while there are a few which have introduced new process technologies only. Concerning these isolated innovations the share of companies is nearly the same whether we take products and process technologies new to the firm only or also new to the market. In both cases about 10% of all companies have introduced new process technologies only, but about 30% have introduced new products.

The highest share of non-innovative companies can be found in Brabant. About 50% of all companies in this region have not introduced any type of innovation either new products or new process technologies during the last three years. This share increases significantly if we count only innovations new to the market; then three out of four companies in Brabant have not been innovative. The distance to the other regions is quite significant. Surprisingly the greatest share of highly innovative companies can be found in Centro; here more than 50% of all companies report introducing both process and product innovations during the last three years, while only 10% of all companies in the region must be judged as non-innovative. The picture changes a little bit if we only look at innovations new to the market. Here the share of non innovative companies is lowest in Baden-Württemberg (34%). At the same time more than 50% of all companies in this region have introduced product innovations which are new to the market, either alone or together with new process technologies.


Table 10. Introduction of innovations during the last 3 years by region which are new to the firm and which are new to the market (%)

Region

Innovation
Wales

(UK)
Styria

(AU)
Wallonia

(BE)
Brabant

(NL)
Tampere

(FIN)
Basque Country

(SP)
Baden-Württem-berg (FRG)
Centro

(PRG)
Total
New to firm
No
25
23
19
50
18
21
22
11
24
New process
13
10
7
13
6
8
-
13
9
New product & new process
39
33
35
15
42
49
39
54
28
New product
24
34
39
22
34
22
39
23
30
(N)
(102)
(97)
(83)
(82)
(138)
(72)
(79)
(56)
(709)
New to market
No
46
44
47
73
59
65
34
45
52
New process
9
7
8
6
12
6
-
7
7
New product & new process
11
14
10
2
9
8
13
16
10
New product
34
34
35
18
21
21
53
32
31
(N)
(102)
(97)
(83)
(82)
(138)
(72)
(79)
(56)
(709)

Indirect indicators: Employment and turnover

The development of employment and turnover, of course, is only indirectly related to innovation activities. Still it is useful to integrate these aspects into the analysis of regional competitiveness. An indicator has been used, which compares the development of turnover with the development of employment during the last five years (1990-1995).


Table 12. Turnover and employment change 1990-1995 by region (%)

Region
Turnover & employment change
Wales

(UK)
Styria

(AU)
Wallonia

(BE)
Brabant

(NL)
Tampere

(FIN)
Basque Country

(SP)
Baden-Württem-berg (FRG)
Centro

(PRG)
Total
T+&E+ over 50%
32
14
15
36
24
25
16
18
22
T+&E+
32
33
44
32
40
28
21
38
34
T+&E-
26
36
15
26
25
35
25
27
27
T-&E-
11
17
25
7
12
13
38
18
18
(N)
(66)
(66)
(59)
(31)
(96)
(40)
(68)
(34)
(460)

Slightly more than 20% of all companies in the overall sample can be characterized as rapidly growing firms with an increase in turnover and employment of more than 50% in five years. Brabant has by far the highest share of these rapidly growing firms (36%). Styria (14%), Wallonia (15%), Baden-Württemberg (16%) and Centro (18%) have a comparably low share of such dynamic firms. If we take all companies that have increased turnover and employment Wales (64%), Brabant (68%) and Tampere Region (64%) are ranked highest, while Baden-Württemberg (37%) has the lowest share. On the other hand by far the greatest share of companies with decreasing turnover and employment can also be found in Baden-Württemberg (38%) followed by Wallonia (25%).


2.4 Process competitiveness: co-operation patterns

Firms are much more important as co-operation partners than supportive organizations, independent of whether we look at the more general aspects of information gathering about technological progress or at concrete co-operation in innovation projects. For example 50% of all companies report customer firms and 36% supplier firms as an important source to stay informed about innovation opportunities while all types of support organizations are only mentioned by about 10% of all companies as a key information source. Besides keeping close contacts and exchanging information with customer and supplier firms companies very often stay informed about technological progress and scientific developments by reading technical literature (44%) and attending conferences (51%).


Table 17. Source of information on innovation by region (%)

Region

Source
Wales

(UK)
Styria

(AU)
Wallonia

(BE)
Brabant

(NL)
Tampere

(FIN)
Basque Country

(SP)
Baden-Württem-berg (FRG)
Centro

(PRG)
Total
Journals/technical literature
52
55
45
29
39
23
52
54
44
Conferences/ exhibitions/fairs
43
57
54
24
50
46
70
69
51
Customer firms
45
55
30
51
59
50
70
30
50
Supplier firms
40
50
39
25
35
29
26
35
36
Consultants
9
4
3
5
6
6
1
10
5
Industral associations
21
4
12
10
10
13
12
13
12
Technology transfer agency
4
2
2
3
6
26
6
9
7
Universities
19
15
13
8
15
6
7
4
12
Higher education institutes
8
-
2
1
1
3
4
-
2
Other
10
11
6
3
6
3
4
4
6
(N)
(103)
(105)
(87)
(75)
(135)
(70)
(81)
(54)
(710)

Of course there are only few firms which do not co-operate more directly in one way or the other with customers (12%) or suppliers (25%) in innovation processes. Among the supportive organizations universities (39%) and consultants (35%) are the most important co-operation partners for firms in innovation processes.

2.4.1 Co-operation among firms

There are only two regions, Centro (46%) and in Styria (43%), in which more than 40% of all companies are co-operating quite extensively with other firms. Wallonia on the other hand has the highest share of companies which co-operate very little or not at all with other firms (27%).

If we look at co-operation within innovation projects separately we can hardly find any regional differences. For companies in Wallonia (63%) customer firms are less important as co-operation partners than they are for companies in other regions. The same is true for companies in Brabant (64%) and Tampere Region (65%) with respect to supplier firms.


Table 18. Main partner in innovation processes by region (%)

Region

Main partner
Wales

(UK)
Styria

(AU)
Wallonia

(BE)
Brabant

(NL)
Tampere

(FIN)
Basque Country

(SP)
Baden-Württem-berg (FRG)
Centro

(PRG)
Total
Customer firms
82
95
63
96
93
85
99
85
88
Supplier firms
72
76
75
64
65
82
85
94
75
Consultants
36
43
26
16
17
50
56
58
35
Contract research organizations
17
40
9
3
32
44
53
52
30
Universities / HEIs
39
51
34
16
30
37
53
64
39
Technology transfer institutions
11
20
9
10
6
63
48
44
22
Providers of (venture) capital
11
31
1
18
12
13
38
42
19
Providers of subsidies
19
50
28
18
33
2
44
50
31
Government agencies
32
19
22
12
4
41
38
48
24
Trade associations, similar institutions
24
46
22
22
7
22
44
50
27
Training programs /institutions
26
33
17
15
9
46
38
60
27
Other
8
15
8
3
3
2
11
10
7
(N)
(100)
(93)
(76)
(67)
(138)
(54)
(73)
(52)
(653)

Regional differences become bigger when we look at firms as sources for innovation-related information. Customers (70%) are most often mentioned by firms in Baden-Württemberg as an important source to stay informed about technological progress, while the share of companies which see supplier firms as key informants on innovation opportunities is highest in Styria (50%).

Not surprisingly, co-operative companies, as far as co-operation with other firms is concerned, can be found more among large firms (57%) than among the small ones (27%). However, whether we look at firms as a source for information on technological progress or as main partners in innovation projects, we can find only slight differences between firms of different size.

2.4.2 Co-operation with supportive organizations

The overall indicator shows that co-operation of firms with support organizations is most extensive in Wales (24%), Styria (21%), Basque Country (23%) and in the Centro Region (19%). In these regions the share of companies co-operating extensively with support organizations is above average. The other extreme is represented by Wallonia and particularly by Brabant; in Brabant only 2% of all companies co-operate extensively, while the great majority of companies in the region (62%) has hardly any contact with supportive organizations.


Table 19. Co-operation with supportive organizations index by region (%)

Region
Co-operation with organizations index
Wales

(UK)
Styria

(AU)
Wallonia

(BE)
Brabant

(NL)
Tampere

(FIN)
Basque Country

(SP)
Baden-Württem-berg (FRG)
Centro

(PRG)
Total
Low
35
46
54
62
48
39
38
23
44
Middle
41
33
39
36
38
39
52
59
41
High
24
21
8
2
14
23
10
19
16
(N)
(100)
(95)
(78)
(58)
(135)
(62)
(71)
(53)
(652)

Large firms have more extensive co-operation with supportive organizations than small ones. Here the fact that more than 50% of all small companies hardly cooperate at all with supportive organizations is a rather striking result.

Only in some regions, mainly Wales and the Basque Country can we find single supportive organizations that play a significant role as a source for information on technological progress. In Wales these are industrial associations (21%) and universities (19%) and in the Basque Country these are technology transfer agencies (26%). As had been said earlier support organizations are more important as partners in concrete innovation projects. Here the regional differences are quite significant. Companies in Baden-Württemberg, the Basque Country and Styria mention supportive organizations more often as key partners in innovation projects and processes than companies from other regions.


2.4.3 Co-operation of companies with universities

In general one can argue that co-operation of companies with universities is still fairly low as about 3 out of 4 companies hardly co-operate at all. Only in Styria can we find a significant number of companies which co-operate quite extensively with universities (26%). On the other end we have Brabant and Centro, both regions in which about 90% of all companies have only little or no contact with universities.

The overall indicator may be misleading, however, as the most important aspect of co-operation is partnership in innovation projects. Of all companies 40% mention universities as key partners in innovation processes. Here we can find companies in Centro in a leading position, as 2/3 of all companies see universities as a key partner in the development of new products and process technologies. In Baden-Württemberg and in Styria more than 50% of all companies also see universities as one of their key partners in innovation projects. In the Tampere Region and in Wallonia this group comprises only about 30% of all companies and in Brabant this group is even smaller.


Table 20. Co-operation with universities index by region (%)

Region
Co-operation with universities index
Wales

(UK)
Styria

(AU)
Wallonia

(BE)
Brabant

(NL)
Tampere

(FIN)
Basque Country

(SP)
Baden-Württem-berg (FRG)
Centro

(PRG)
Total
Low
64
52
67
91
75
80
72
89
72
Medium
23
22
23
8
18
11
18
11
18
High
13
26
10
1
7
9
10
-
10
(N)
(103)
(104)
(87)
(77)
(140)
(66)
(78)
(55)
(710)
Average (max 10)
1.9
2.8
1.7
0.9
1.5
1.5
1.7
1.1
1.7

In general companies prefer to co-operate with regional and national universities. Only in Styria and to a lesser extent in the Basque Country have companies chosen more often universities from other European countries and from abroad as main co-operation partners in innovation processes (43% and 17%). No more than 10% of all companies use universities as an important source to stay informed about technological progress. The share of companies is much higher than the average in Wales (19%) and particularly low in Centro (4%).

Not surprisingly big companies more often have a partnership with universities than small ones. They use universities more often as a source to get knowledge about technological progress but also as main partners in developing new product and process technologies. Among large companies there are also only few which have established co-operation in innovation processes with universities outside of their country.

2.4.4 Co-operation and innovativeness

In the following we will analyze whether co-operation between firms and with supportive organizations has an impact on their innovation activities. To measure innovativeness we will look at new products and processes introduced by companies; both innovations new to the firm which has introduced it and innovations new to the market are taken into account. The overall trend, however, seems to be quite clear: co-operation of any kind has a positive influence on firms' innovation activities.


Table 21. Cooperation intensity by type of innovations (%)

Innovations new to the firm
Innovations new to the market

Co-operation
No
New product
New product & new process
New process
Total
(N)
No
New product
New product & new process
New process
Total
N
Overall co-op.
Low
35
32
25
8
100%
(229)
63
25
6
6
100%
(229)
Medium
19
32
39
10
100%
(277)
48
31
13
7
100%
(277)
High
10
27
55
8
100%
(184)
40
39
13
9
100%
(184)
Co-op. with firms
Low
33
22
34
12
100%
(101)
56
27
7
10
100%
(101)
Medium
22
36
33
9
100%
(324)
54
32
9
5
100%
(324)
High
12
29
52
8
100%
(231)
41
36
14
9
100%
(231)
Co-op. with organizations
Low
28
35
28
10
100%
(267)
59
29
7
6
100%
(267)
Middle
15
32
46
7
100%
(263)
42
37
13
8
100%
(263)
High
8
26
56
10
100%
(98)
42
35
14
9
100%
(98)
Co-op. with univ.
Low
26
32
32
10
100%
(484)
57
28
9
6
100%
(484)
Middle
12
22
60
6
100%
(123)
33
39
16
12
100%
(123)
High
6
36
50
8
100%
(72)
32
47
11
10
100%
(72)

Among those companies which hardly co-operate at all with other firms about every third has not introduced any innovation during the last three years, neither a new product nor new process technology. In the group of companies which have intensive co-operation with others only 12% have not been innovative during the last three years, while every second company in this group can be characterized as very innovative, as product and process innovations have concurrently taken place.

If we look at only those innovations which are new to the market, the trend persists, but of course the share of non-innovative firms increases, independently of whether firms co-operate intensively (41%) or not (56%). If we use this more strict concept of innovation only 14% of all co-operative and only 7% of all non co-operative firms can be characterized as highly innovative. What these figures also tell us is that co-operation with firms is more important when it comes to gradual improvements which are new to the firm than for innovations new to the market.

As has been said earlier, the general trend that co-operation supports innovation activities also holds true when we look at co-operation of firms with supportive organizations. The share of companies which have neither introduced new products nor new processes is highest among those companies with little co-operation (28%) while intensive co-operation with supportive organizations is more often associated with high innovativeness (56%), characterized by the concurrent introduction of new products and new process technologies. If we use a more restricted concept of innovation, counting only those innovations which are new to the market, we can identify the same trend.

Not surprisingly, the argument that co-operation leads to increased innovativeness is also true if we look at co-operation with universities separately. Only 6% of those companies which co-operate extensively with universities have not introduced any innovation during the last three years. On the other hand among non-co-operating companies we find the highest share of non-innovative firms (26%). Those companies which have concurrently introduced new products and process technologies in general have contacts or even close co-operation with universities. Again we can identify the same trend when we look only at products and process technologies which are new to the market.


3. Some conclusions

The results of the research are somewhat puzzling. The picture they give is far from clear. Baden-Württemberg, a region with companies which show the highest R&D intensity has at the same time the highest share of companies which have lost turnover and have reduced their workforce. Another region, Brabant, in which the number of non innovative firms is extremely high and in which companies do not assess themselves to be very competitive has the highest share of very dynamic companies, which have increased both turnover and employment by more than 50% within a period of five years. Centro, a region with a fairly large share of companies with predominantly unskilled work force is the most innovative region according to the judgement of the firms themselves. In the case of Wallonia high export orientation seems to have little influence on firms' assessment of their own strength. In the case of the Tampere Region, where companies show a fairly high dynamic of R&D activities, innovativeness, at least if we only count products and process technologies which are new to the market, is comparatively low. All these examples demonstrate that global competitiveness is a rather complex phenomenon which cannot adequately be analyzed by one-dimensional measures.

Of course the concept of global competitiveness is itself rather vague. Besides the factors we have used in our research, others can be taken into account as well. Problems occur, for example, because of the fact that output indicators are not always linked with input indicators. Whether an increased R&D budget will lead to more product innovations is by no means clear. The traditional cascade model, which would assume such a relationship, has been criticized very often and has been replaced by an interactive concept of innovation which stresses the fact that innovation is an ubiquitous phenomenon which may also occur without major R&D activities.

Another problem arises from the fact that to measure global competitiveness the firm and the regional level must be linked in some way or other. Firms are often successful because they are able to exploit the specific advantage of a region's supportive environment. This, of course, also means that there is no general strategy for companies to regain competitiveness. There is another problem involved in measuring global competitiveness: We need to apply a dynamic concept as competitiveness is not something which can be reached once and for all. As global markets are very dynamic, so must the companies be very adaptive to keep up with their competitors. Even more are the supportive organizations too under continuous pressure to change and to adapt. To analyze competitiveness as a dynamic phenomenon, however, is difficult to realize and has hardly ever been done.

However besides the fact that the complexity of the concept makes it very difficult to come up with clear results, we also have to admit that for regions there is no "one best way" towards global competitiveness. Regions are different and they may be forced to apply different strategies to retain or regain global competitiveness. At least two aspects have to be taken into account in this respect: structural differences and differences in the stage of economic development. The first aspect concern for example the structure of companies in the region. With respect to the second aspect we have to take into account that regions with newly emerging industries or clusters need other support organizations than those with growing industries or those with maturing industries.

For the first aspect Brabant is a good example. The sample characterizes Brabant as a region with a clear focus on small and medium-sized firms. One may have doubts whether for companies of this size the capability to continuously innovate can become a competitive advantage at all, as to innovate often is also a very costly undertaking. For small supplier companies it may be more important to improve the quality of their products and to deliver their products and services more rapidly to their customers. The supportive organizational environment for such kind of business structure, of course, may look very different from one which is built to support big firms exposed to stiffening innovation competition.

Concerning the second aspect we may learn something from Baden-Württemberg. For this region the innovativeness of the local companies seems not to be the most pressing problem. R&D intensity is fairly high and the companies define innovativeness as their major advantage. Still, the region has the highest share of companies which have reduced employment and turnover or even both. This could be seen as indicating that the region needs to expand into new industries with more growth potential to come to grips with the unemployment problem. Then the concept of an innovation system with close and exclusive ties may actually become a hindrance to economic growth and more employment. Thus the question for regional prosperity is not only whether or not innovative firms exist, but also whether they are located in growing high-tech or maturing industries.

For Baden-Württemberg the main problem is obviously not how to establish close contacts among firms and with supportive organizations but how to loosen ties in the dominating industrial customers to have free resources for the development of new industries. To free the region from path dependency probably needs another policy than to support a better exploitation of the existing development path.


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