Could increasing regional specialisation boost innovation in the new Member States?

A new study on regional clusters in the 10 new EU Member States has found evidence of weaker cluster portfolios in these countries, and suggests that the EU can help by lifting barriers and providing tools for mobilising action. The report has been prepared by Europe INNOVA, ...

A new study on regional clusters in the 10 new EU Member States has found evidence of weaker cluster portfolios in these countries, and suggests that the EU can help by lifting barriers and providing tools for mobilising action.

The report has been prepared by Europe INNOVA, an initiative funded under the Sixth Framework Programme (FP6). It presents the first systematic mapping and analysis of regional clusters across the EU-10. It describes the differences in regional specialisation across 38 cluster categories, pattern changes over the last few years, and the nature of the leading locations in individual cluster categories.

The cluster sector created one million new jobs in the new Member States between 2000 and 2004 - an increase of around 10 per cent. This is good news in the eyes of the report's authors, who say that 'Regional clusters enable companies to reach higher levels of productivity and be more innovative.'

However, the lower specialisation within regional clusters, together with the lower geographic concentration is not so positive. 'If European regions suffer from weaker regional clusters and cluster portfolios than their peers elsewhere in the world, this might be an important factor keeping them behind in global competition,' reads the report.

The 10 countries that joined the EU in 2004 face a number of specific barriers to the efficient geographical allocation of economic activities across regions than their counterparts in the EU-15. All have faced trade, investment and mobility barriers in relation to the EU, and the eight Central and Eastern European countries also have the legacy of a planned economy system, which saw economic activities decided by politics, and not economic efficiency or entrepreneurship.

The study found 367 regional clusters meeting at least one of the criteria for size, specialisation or regional importance. These clusters represent some 5.86 million employees.

Budapest was the strongest regional cluster, followed by Warsaw, Katowice, Prague and Lithuania. The five largest cluster categories are: processed food, heavy construction services; transportation and logistics; financial services; and hospitality and tourism.

The report notes that the 10 countries studied have a different specialisation profile from that of more advanced economies. They have a stronger natural resource-driven sector, and a stronger bias towards labour-intensive and manufacturing-driven cluster categories, and are weaker in advanced services and knowledge-intensive categories.

Based on their observations, the report's authors make three key policy recommendations. First, enhancing geographical specialisation and the efficient allocation of economic activity needs to be a core element of European competitiveness policy, they say. The EU can help out here by dismantling barriers to trade, investment and labour mobility, they suggest.

The report notes that certain initiatives can increase the economic benefit of clusters, including organised efforts by companies, regional government agencies and regional education initiatives. These bodies can improve linkages, increase spill-overs, mobilise joint actions and increase international visibility, the report states. It goes on to suggest that the EU can support such initiatives by providing knowledge tools.

Finally, the report emphasises the importance of policies affecting the regional business environment. In particular, innovation policies, regional policies, investment attraction policies and policies aimed at small and medium sized enterprises (SMEs) can strengthen and develop regional clusters. The EU has many of these policies under its control.

A similar study of the 15 older EU Member States will be conducted in 2007 in order to provide a complete picture of the EU's regional competitive strengths.