Smart specialisation in the European Union’s regional policy

Regional policy is the EU’s main investment policy, and it targets all regions to support economic growth and sustainable development and improve citizens’ quality of life (EC, 2021a). The EU regional policy, also referred to as cohesion policy, is probably the largest set of regional development policies in the western world operating under the same institutional framework (D’Adda et al., 2020). Support transfers are organised through funds, where the structural funds and Cohesion Fund subsidise infrastructure, education and labour markets (Becker et al., 2018). The allocation of funding follows EU strategic directions. The policy provides a framework for strategies, which, in turn, deliver more concrete plans towards action.

Theoretical background 19 In response to major economic challenges, the Europe 2020 strategy was set up by the EC in 2010 (EC, 2010a; Foray et al., 2012). The grand challenges identified in the Europe 2020 strategy, including climate change, energy and resource efficiency, raw material scarcity and demographic ageing, are addressed through the regional policy and its funding instruments (EC, 2010a, 2010b). Creating favourable conditions for innovation, education and research is seen as capable of unlocking the growth potential of the EU regions. The core of the strategy is about investing more in research, innovation and entrepreneurship, which are seen as crucial elements to support “smart, sustainable and inclusive growth” (EC, 2010a). Regional level policy plays a key role as a principle of action in the strategy because it highlights a place-based bottom-up approach (EC, 2010a;

Foray et al., 2012). The cohesion policy and structural funds are central delivery mechanisms of the strategy (EC, 2010a), while the strategy sets a plan for actions.

In the Europe 2020 strategy, “smart specialisation” was introduced as a key element for place-based innovation policies (EC, 2010a; Foray et al., 2012). The smart specialisation approach was developed as a reaction to the large research and development gap between Europe and its important trading partners (Camagni and Capello, 2013). National and regional governments were encouraged to develop smart specialisation strategies in order to maximise the impact of regional policy and other EU policies (EC, 2010b). Currently, smart specialisation is the dominant approach to regional innovation policy in Europe (Pugh, 2018).

Smart specialisation is based on two fundamental ideas: a) “specialisation”, a region should ensure a more effective use of public funds by concentrating resources on a few key priorities instead of spreading the support thinly across several areas; and b) “smart”, regional growth possibilities should be built around current capabilities, which are further developed together with stakeholders through research, development and innovation (Barca, 2009; EC, 2010b; Foray, 2014; Balland et al., 2018; D’Adda et al., 2020). Smart specialisation is a process of setting priorities in national and regional research and innovation strategies where the aim is to achieve competitive advantages and build a base for an economic transformation driven by innovation (Landabaso, 2014).

Smart specialisation is turned into policy by organising a process where these new opportunities are recognised and supported in a targeted governmental process (Foray, 2014). The aim of a Research and Innovation Strategy for Smart Specialisation, also shortened as RIS3 or S3 (in this research hereafter referred to as “smart specialisation strategy”), is not to narrow down possibilities but to generate new options and specialities in order to develop the structures of the regional economy (Foray, 2014; Landabaso, 2014;

Foray, 2016).

An existing smart specialisation strategy was set as an ex-ante condition for receiving funding from the EU structural funds for research and innovation investments in the 2014–2020 programming period (EU, 2013; EC, 2014). Through this cohesion policy, the EC pushed the member states and regions to proceed with smart specialisation.

Theoretical background 20

According to Morgan (2017), this was the start of a whole new era in European regional policy.

The design of the smart specialisation strategies introduces two main novel approaches.

First, it emphasises “entrepreneurial discovery”, which calls for public-private collaboration and a bottom-up approach in which the region discovers its capabilities (Capello and Kroll, 2016; Pugh, 2018). Smart specialisation addresses the challenge of regional prioritising and allocating resources by involving entrepreneurial actors in the cooperation (Foray et al., 2012). The entrepreneurial discovery process means including regional stakeholders, such as businesses, networks of companies, universities and research institutes, in setting up the regional strategy (Foray et al., 2012; EU, 2013; Foray, 2016; Asheim, 2019). In practice, input from companies could come through cooperative networks rather than individual companies. The entrepreneurial knowledge and collaboration in each region are built based on regional features. Through the entrepreneurial discovery, areas with the greatest innovation potential in the region should be discovered (Capello and Kroll, 2016). The second novelty is that regional actors are encouraged to focus on certain regional domains rather than industry sectors (Foray et al., 2011; D’Adda et al., 2020). This is seen to enhance innovation and diversification by creating new openings. The new fields most frequently appear at the interface where a current strong sector is discovered in a new innovative way and thus transformed.

Furthermore, support should be concentrated on activities rather than on companies.

Smart specialisation can happen spontaneously, but if it does not, a smart specialisation strategy process to facilitate this dynamic is necessary (Foray, 2014). Originally, the smart specialisation approach was defined as a six-step process: (1) analysing the regional situation and potential for innovation, (2) agreeing on an appropriate governance structure, (3) setting up a future vision for the region, (4) identifying and selecting priorities, (5) creating a suitable policy mix, roadmap and action plan and (6) integrating monitoring and evaluating mechanisms (Foray et al., 2012). Foray (2016) later explained that, in the big picture, a smart specialisation strategy has two main faces: forming local capabilities to drive changes and making the actual structural changes. To simplify the process of smart specialisation, Foray (2019) redescribed it as a three-step procedure: (1) identifying thematic priority areas, (2) modifying the priority areas into roadmaps and (3) setting up an action plan for implementation of the activities. Roadmaps and action plans are strategy documents in which the thematic priority areas are translated to the implementation phase. Roadmaps define the nature, scope and meaning of the investments within the priority area (Foray, 2019). The action plan phase focuses on information related to funding research, development and innovation activities, investments, involved actors (names of organisations), schedules, monitoring and evaluating the results, as well as developing a plan for updating the content (Foray, 2019).

Foray (2019) also pointed out that the step from priority area to roadmap is the most challenging in the smart specialisation process, as it cannot happen if all actors are not committed to moving in the same direction or if the direction is unknown by the actors.

The sustainability of a smart specialisation strategy depends on the suitability and

Theoretical background 21 coordination of policy actions and on regional governance, where the ways of engaging the stakeholders play a central role (EC, 2010b).

According to Morgan (2017), the smart specialisation concept is the most ambitious regional innovation programme in regard to resources and how it demands the public sector to organise a collaborative process to involve stakeholders. To support the member states in the implementation of the smart specialisation process, the EC has established a smart specialisation platform: the “S3 platform”. The platform provides advice and guidance for regional actors to develop, implement and review their smart specialisation strategies (EC, 2021c). While the platform is mainly directed towards policymakers, actors representing regions and member states are advised to sign up to receive support with their smart specialisation strategy process. The platform is designed to facilitate capacity building in the regions, which is essential for upgrading and developing their capabilities (McCann and Ortega-Argilés, 2016). In addition, the platform also contributes to the academic discussion and development of smart specialisation through research on EU policy (EC, 2021c).