On the Basque Model of Regional Specialisation

1. On the Basque Model of Regional Specialisation

2. 1. REGIONAL, NATIONAL AND INTERNATIONAL POLICIES THAT HAVE BEEN DECISIVE FOR PRIORITISATION OF DOMAINS INNOVATING PUBLIC POLICY

3. 1.1. An Advanced Industrial Area • .. High density of population and urban profile • 2.162.944 inhabitants • 7,234 km2 (299 inhabitants/km2) • 67% of inhabitants in the three main cities • .. High aging rate with low immigration flows • .. Above the Spanish and EU27 media in GDP (136%) • .. Comparative good behavior of the labor market (10,7%) but with occupancy rate (68,5%) slightly below the European media INNOVATING PUBLIC POLICY

4. 1.1. An Advanced Industrial Area • .. Strong weight of the industrial sector as a distinctive element • .. Very focused in industries in low-medium technological intensity • .. High degree of external openness: 50% of sales out of the country. • .. Business fabric mainly composed by small businesses with some enterprises being leaders in their niche market. • .. High percentage of population with college education but with a relatively small number of third degree graduates. INNOVATING PUBLIC POLICY

5. 1.1. An Advanced Industrial Area • .. Much to be done about English language • .. Low levels of poverty and good position in terms of human development index • .. Basque society has a high level of satisfaction with life • .. Higher level of CO2 emissions and minor role of renewable energy INNOVATING PUBLIC POLICY

6. 1.2. Priority setting in the governance system • .. During the 30 years of Basque political autonomy, sectoral prioritization criteria have kept evolving over time. • .. During the first two decades, the main goal was keeping alive the regional industrial fabric. This led to the amortization of heavy industry (steel, shipbuilding) as well as to the defense of the whole fabric of SMEs in other sectors. INNOVATING PUBLIC POLICY

7. 1.2. Priority setting in the governance system • .. During the last decade, the basic approach has been to raise the technological capacity and innovation of Basque industry. With this approach, sectoral policies have been defined based on the need to promote new areas of high added value. INNOVATING PUBLIC POLICY

8. 1.3. Key Policy Instruments and Investments • .. The basic tools of sectoral policies in the Basque Country have been mainly determined by internal strategic analysis of the region, rather than S3 strategies. • .. The amortization of traditional heavy industry was mainly managed by the Central Government... On the other hand, both the defense during the 80s and 90s of the industrial sectors in the country -other than heavy industry- and the creation and promotion of the network of technological centers were developed under the leadership of the Basque Government. INNOVATING PUBLIC POLICY

9. 1.3. Key Policy Instruments and Investments • .. Both the network of technological centers and the coordinated action of Basque and Provincial governments have been essential for the promotion of applied research. • .. The university scientific equipment is high but somewhat uncoordinated with the Basque business reality. This is one of the key factors that led to the changing of focus towards new industry sectors of high added value. INNOVATING PUBLIC POLICY

10. 1.3. Key Policy Instruments and Investments • .. Entrepreneurship: Very efficient fabric of small businesses. In a socially and politically difficult context, and with a low technological equipment, these businessmen have been quite efficient in the management of SMEs INNOVATING PUBLIC POLICY

11. 1.4. Coordination activities to support S3 • .. In the future, we are going to need a new socio-political "consensus" in the Basque Country. • .. In particular, we must ensure that the provincial industrial policies are consistent with the policies of the Basque government. • .. In particular, alignment of tax policy –in the hands of the 3 provinces- with sectoral policy objectives is essential. • .. New focus on social and environmental requirements, necessary for this new “consensus”. INNOVATING PUBLIC POLICY

12. 1.5. Measuring the effects and impacts • .. Industrial and I+D+I plans (PCTI 2015, clusters strategies) set clear and measurable sectoral goals, tools and resources. • .. But the general objectives are mainly established and measured on results, regardless of the necessary assessment of costs from a comparative perspective. This makes impossible a true evaluation of the efficiency of the policies developed, except on an intuitive or approximate level. INNOVATING PUBLIC POLICY

13. 2. FUTURE DEVELOPMENT GRAS- PING THE OPPORTUNITIES FOR SMART SPECIALISATION INNOVATING PUBLIC POLICY

14. 2.1. Current status of the specialisation and prioritisation in the region • .. The most important factor for the renewal of the precedent sectoral "diversification" strategies will probably be the widespread awareness of the dubious results of these strategies. • .. So, new government plans (2010 and 2011) has not opted ​​for aggressive goals in favor of “new” sectors. Instead, the established new goals are mainly linked to the development of activities that are complementary to the existing ones. INNOVATING PUBLIC POLICY

15. 2.2. Ambitions, strategic plans and catalysts in the innovation eco-system • .. Basic Objectives of industrial and innovation policy:- Address the crisis in international demand • - Raise the level of technological equipment / boost basic-oriented research • Strategic Plans:- Business Competitiveness Plan 2010-2013- Science, Technology and Innovation Plan 2015 • - Strategies of clusters, universities and technology centers. INNOVATING PUBLIC POLICY

16. 2.2. Ambitions, strategic plans and catalysts in the innovation eco-system • .. Institutional aspects of sectoral policies can be essential (relationship among public institutions, university policy, ...)Some key issues:.. Loss of strength of the previous policy of "diversification" into new sectors of high added value. • .. Possible consolidation of the biotechnology sector • .. Nanotechnology: From sectoral to horizontal policy, as a technology to be promoted in different industrial sectors. • … INNOVATING PUBLIC POLICY

17. 2.2. Ambitions, strategic plans and catalysts in the innovation eco-system • Some key issues:… • .. New "sectors” policy: Refocusing existing industries rather than promoting new ones. As a consequence: Promotion of development projects of such new activities, like renewable energy or electric vehicle... Continuation of the policy of clustering as a tool both for strategic analysis and for development and implementation of strategies. INNOVATING PUBLIC POLICY

18. 2.6. Bottlenecks and threats for the innovation eco-system • .. Political fragmentation will be a threat for leadership and consensus during the next years. • .. Risk of insufficient coordination between public institutions • .. Difficult situation in Spain may have direct effects in Basque industry: demand / financial sector. • .. The challenge of increasing basic-oriented research –or its institutional challenges- has not been addressed. Need for adequate consensus for this purpose. • .. University policy on need of improving efficiency and focus INNOVATING PUBLIC POLICY

19. 3. LESSONS LEARNED AND CONCLUSIONS FOR POLICY INNOVATING PUBLIC POLICY

20. 3.1. Decisive drivers for the eco-system • .. Strong budgetary efforts of the Basque Government. • .. Creating an efficient network of technology centers • .. High training level • .. Industrial tradition • .. Endogenous development and singular weight of active and efficient SMEs INNOVATING PUBLIC POLICY

21. 3.2. Processes, tools and mechanisms • .. Strategy definition in the Basque Government:- Plans for Industrial Policy (2009)- Plans for R & D & I (2011) • .. Bottom-up strategy process (clusters) • .. Working directly with experts and universities • .. Prospective analysis • .. Involvement of the public and private actors from the first steps of the strategy process INNOVATING PUBLIC POLICY

22. 3.3. The role of RD&i policy in multi-level governance • .. Multi-level governance is quite complicated in the Basque Country: • a) historically difficult relations with the central government • b) the region is divided in three “provinces” with high powers in development policy and taxation. • .. In the field of innovation and specialisation policies, relationships among Basque government and the three provinces have not been particularly difficult. INNOVATING PUBLIC POLICY

23. 3.3. The role of RD&i policy in multi-level governance • .. But some structural disputes have been periodical among Basque and Central governments. • .. Of particular relevance have been the difficulties in relation to the transfer of resources in R & D from the central government, which finally occurred in 2011 • .. In some way, the peculiar political situation of the region has made easier the necessary leadership and consensus in industrial and innovation policies. In a somehow artificial context, leadership and consensus have been achieved for decades around the governments led by the Basque Nationalist Party. INNOVATING PUBLIC POLICY

24. 3.3. The role of RD&i policy in multi-level governance • .. But the political context has changed during last years and the current real plurality requires a new consensus on industrial policy as a whole. Social and conceptual bases of this consensus are not necessarily complex. But an active position of the different political groups in this regard is needed. • .. In particular, we need a political agreement on the government funding of RD&i and on the goals to be established for the financial resources recently transferred in this field from the Central Government. INNOVATING PUBLIC POLICY

25. 3.3. The role of RD&i policy in multi-level governance • .. At another level, we need a more in-depth review of sectoral policies, very especially when assessing the efficiency of the efforts deployed in biotechnology and nanotechnology. • .. The key aspect: not to take into account only the results (number of new enterprises, sales, ...) but also financial investments, expenses and alternative options. INNOVATING PUBLIC POLICY

26. 3.3. The role of RD&i policy in multi-level governance • .. From the point of view of RD&I policy, a boost is needed in basic-oriented research, both from the point of view of the amount of public funds involved and, above all, from the perspective of institutional changes needed in the Basque Innovation System -University- and also in the efficiency of the management of public resources applied to RD&i. INNOVATING PUBLIC POLICY

27. On the Basque Model of Regional Specialisation