Smart Specialization: A Regional Innovation Strategy
Smart specialization is an innovative policy concept that emphasizes the principle of prioritization in a vertical logic. It defines a method to identify desirable areas for innovation policy intervention. Its rationale involves:
- The fact that, even in the information age, the logic of specialization is intact.
- The argument that the task of identification (of what should be prioritized) is very difficult and therefore needs a sophisticated policy design.
It seeks robust and transparent means for nominating those new activities, at the regional level, that aim at exploring and discovering new technological and market opportunities and at opening thereby new domains for constructing regional competitive advantages. The crucial question is whether a certain region would benefit from and should specialize in certain R&D and innovation projects in some lead activities such as tourism or fisheries.
Understanding Smart Specialization
Smart specialization centers on a vertical and non-neutral logic of intervention. It involves logic. It is a process of identification and selection of desirable areas for intervention. This new strategy is particularly welcome in the information age because the logic of specialization is intact. Significant returns to size and critical mass in R&D. In short, regions should practice resource concentration and focus by developing distinctive and original areas of specialization.
Prioritizing certain technologies or domains always entails a risk because this implies predicting the future development of technologies and markets. Horizontal policies mean that the risk of being wrong is minimized. The identification of desirable areas of intervention in a more vertical fashion – what technology, what sub-systems – is extremely difficult and entails a great risk.
Minimizing Risks in Smart Specialization
Business-as-usual strategies to minimize these risks are of two sorts:
- Café para todos: Politicians like to spread the money over all constituencies and dislike having to make choices between them.
- California: Imitating other regions: if the choices are wrong and failures occur, at least these are failures that all the other regions will experience.
The central insight of smart specialization is that, beyond the horizontal programs essential to improve framework conditions and general capabilities, it is crucial to set priorities. Resources should be concentrated in specially selected domains dealing with particular kinds of technology, field, disciplines, sub-systems within a sector, or at the interstices of different sectors.
Natural Candidates for Prioritization
- Show potential.
- Have scale and agglomeration economies or produce the characteristics of coordination failures (profitable activities can fail to develop unless both upstream and downstream investments are made simultaneously).
Key Policy Principles of Smart Specialization
The above principles are very general. At least five policy principles are important:
- Granularity: The point here is to identify the right level, between sectors and very micro-activities, at which it is possible to observe in detail the pieces of the knowledge economy that a region can take as a basis for smart specialization.
- Entrepreneurial Discovery: Smart specialization involves a self-discovery or entrepreneurial discovery process that reveals what a country or region does/will do best in terms of R&D and innovation.
- Priorities Emerging Today Will Not Be Supported Forever: It is expected that future discoveries will be made in other parts of the regional system and the subsequent emerging activities will also be supported. After several years, new activities, whether they have failed or whether they have successfully reached maturity, are no longer new. At this time, they should no longer be a priority for the smart specialization strategy.
- Smart Specialization is an Inclusive Strategy: One cannot only look at the most dynamic and productive part of the economy to search for entrepreneurial discoveries and select priorities as it is precisely the less dynamic parts of the economy that desperately need structural changes.
- The Experimental Nature of the Policy and the Need for Evaluation: Clear benchmarks and criteria for success and failures are needed. Evaluation is therefore a central policy task so that only viable projects are supported.
Goals of Smart Specialization
The principles that form the baseline of the policy process make it very similar to the agenda of the so-called new industrial policy. Smart specialization goals involve:
- Facilitating the emergence and early growth of new activities that are potentially rich in innovation and spillovers.
- Diversifying regional systems through the generation of new options.
- Generating critical mass, critical networks, and critical clusters within a diversified system.
The relevance of goals for different people means different things for different types of regions, followers, and leaders.
Policy Dilemmas
Is it the space and the time for smart specialization?
Conclusions on Smart Specialization
A smart specialization strategy attempts to make two critical and somewhat conflicting requirements compatible:
- Identifying priorities in a vertical logic (specialization).
- Keeping market forces working to reveal domains and areas where priorities should be selected (smart).
Implementing such a policy requires good institutions and strong policy capabilities at the regional level.