A Neo-Schumpeterian Evolutionary Perspective on the Smart Specialisation Strategy of the European Union

Tina Schivatcheva |

 

This article is based on research presented at the UACES Graduate Forum 2023 (8-9 June, at IBEI, Barcelona). The conference was supported by the Erasmus+ Programme of the European Union. The European Commission’s support for the production of this publication does not constitute an endorsement of the contents, which reflect the views only of the authors, and the Commission cannot be held responsible for any use which may be made of the information contained therein.

 

The European Union’s (EU) innovation policies are characterized by their evolutionary dynamics and remain a subject of substantial scholarly attention. A report of the European Parliamentary Research Service (2016) explains that initially, innovation was primarily associated with the establishment of a research-related policy, which later became connected to industrial policies. The first action plan that aimed to promote innovation at the European level was only adopted 1996. This plan was specifically developed to address the ‘European paradox,’ which refers to Europe’s limited ability to transform scientific advancements into successful industrial and commercial outcomes.  

Subsequently, policy recognition of the role of technological innovation has increased, being spurred by rising concerns about Europe’s technological leadership and technological sovereignty. Yet, despite seemingly greater policy attention, in 2012 Lipkova observed that the EU lags behind the world’s leading innovators – the United States, Japan and South Korea. A more recent 2021 analytical report, prepared for the European Parliament, cautioned that Europe faces challenges in commercialising scientific research achievements. According to the report’s global comparative perspective, non-European enterprises are responsible for the bulk of currently successful business models and products. 

 

Fostering Innovation

The EU’s commitment to fostering and promoting innovation has now become a cornerstone of its economic and social policies, driving growth and development. However, understanding the conceptual strengths and weaknesses of pan-European innovation policy requires re-engagement with classical scholarship. Joseph Schumpeter’s seminal work on the theorization of the dynamics of economic change– as a result of long-term technological change and attendant productivity enhancement– is particularly relevant. His concept of ‘creative destructionis noteworthy as it captures the process by which new innovations and ideas displace established ones, leading to the destruction of old industries and the creation of new ones. However, despite its merits, Schumpeter’s classical analysis has been criticised for placing technology in a ‘black box’ – i.e., neglecting to theorise it comprehensively. While acknowledging the importance of innovation and technological capabilities for productivity growth, Neo-Schumpeterian scholars argue for a more systemic and broader contextual understanding of the innovation process. Inspired by this approach, this discussion will explore the the relevance of neo-Schumpeterian analytical perspectives on understanding the evolution of European innovation policy. 

 

Smart Specialization Strategy (S3)

One of the key mechanisms through which the EU has sought to promote innovation is the Smart Specialization Strategy (S3), which aims to identify and build on the unique strengths and competitive advantages of different regions within Europe. According to the United Nations Economic Commission for Europe (UNECE), governments adopt the S3 to create policies that are responsive to market signals. This approach enables governments to harness the skills, resources, and competencies of the enterprise sector, thereby fostering innovation and creating new comparative advantages. 

Since its conceptualisation in 2009, the S3 has played a significant role in shaping the EU’s regional cohesion and innovation policy. Dominique Foray (2018), an eminent theorist of the strategy, explains that each region is distinguished by its capacities, requirements, and possibilities. The scholar argues in favour of a particular type of regional specialisation: one that capitalises on regional assets or potentials, rather than a strategy that disperses Research & Development (R&D) funding thinly across a number of frontier technologies and research sectors. According to Foray, David and Hall (2009), if European regions attempt to create similar programs in an imitative manner, this could result in an overabundance of duplicated Research & Development and educational investment, ultimately reducing ‘the potential for complementarities within the European knowledge base.’  

While existing literature on S3’s strategy suggest that it is grounded in a Schumpeterian emphasis on innovation and economic growth, the mechanism for innovation aligns more closely with neo-Schumpeterian perspectives on the critical roles of technological change and knowledge creation as key drivers of economic growth and development. As a result, the S3 strategy makes several significant contributions to European innovation policy.  

 

The Benefits of the S3 strategy

Firstly, shifting the focus from individual entrepreneurs to regional strengths, S3 re-scales the innovation process from a Schumpeterian entrepreneurial micro-scale or a pan-European policy landscape to the scalar construct of European regions. This encourages regions to focus on their key advantages in order to develop innovative solutions that can create new economic opportunities. The S3 framework also highlights the systemic nature of innovation as a process within Regional Innovation Systems (RIS), while emphasising the need for policy efforts to promote RIS. Moreover, the strategy acknowledges the complex and dynamic nature of innovation by stressing the importance of fostering diverse interactions among various RIS stakeholders.  

Furthermore, collaboration is highlighted as an important mode of interaction among the innovation system’s actors– universities, research institutes, and businesses– as it facilitates the development and implementation of innovative solutions to regional challenges. Emphasising the role of knowledge and learning in the innovation process, the strategy valuably recognises the importance of continuous knowledge exchange among stakeholders. Finally, by embracing a symbiotic connection between the key concepts of the S3 strategy, European regions can enhance their competitiveness and innovation in the global market. Adopting this strategic approach enables all actors involved in an innovation system to leverage their strengths and work together more effectively. 

 

Conclusion

This article accentuates the significance of neo-Schumpeterian analytical perspectives for understanding the evolution of European innovation policy. The Smart Specialisation Strategy (S3) has become attuned to the regional diversity of the European innovation landscape, as well as to the diversity of RIS stakeholders and their interactions. In recognising and developing regional strengths and capacities, the S3 policy aligns with neo-Schumpeterian approaches to innovation, thereby emphasising the symbiotic nature of key RIS characteristics. In summary, the S3 framework provides a useful lens for understanding the evolution of European innovation policy and the importance of RIS in driving economic development forward.