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This paper examines the challenges associated with fostering regional innovation via place-based innovation policies in a context where a country previously had little or no real place-based thinking or policy framing. The UK displays a combination of both high interregional inequalities and a high centralisation and top-down governance system. For many years the national policy was based on the assumption that knowledge spillover effects from the London economy would naturally diffuse throughout the country. In contrast, recently, there has emerged a realisation that this has not happened. Instead, devolution-related governance reforms are required to foster regional development, but the over-centralisation of the system itself militates against this. Here we discuss the economic development and governance-reform challenges associated with a shift towards more devolved policy making in a setting of good institutions which are ill-designed for the challenge.

Financial inclusion, defined as the proportion of individuals and firms making use of formal financial services, has become a central theme in discussions about how to achieve so-called inclusive development. Inclusive development refers to striving for equal development of all individuals, particularly including marginal- ized (that is the very poor) groups. According to many, financial inclusion plays an important role in achieving inclusive development. Unequal access to financial ser- vices can exclude people from the process of economic growth. This chapter studies the role of financial inclusion in the development process, taking a cross-country perspective in South East Asia as well as an interregional perspective using data from Indonesia. We first develop a conceptual model, linking financial inclusion operationalized as bank branch access, to economic growth. Based on this concep- tual model, the empirical part of our analysis consists of three sections. First, we use an Asian cross-country comparison to enrich our understanding of the main patterns of financial inclusion and inclusive growth. Second, turning to the case of Indonesia, we first discuss the processes of restructuring and regionalization of the banking sector. These processes have led to substantial changes in access to banking ser- vices, particularly in nonurban areas. Third, we provide econometric evidence on the relationship between regional access to bank branches and regional economic development, demonstrating that financial inclusion is associated with per capita economic output at the provincial level. The Indonesian regional analysis relies on a panel regression of 33 provinces over 5 years (2011–2015). We find that financial access is significantly and positively associated with the regional economic level of development in Indonesia, controlling for the general economic circumstances and development level of the region. These results suggest there is a definite challenge for the government to shift the development approach toward inclusive growth through financial inclusion. This finding may help developing targeted interventions aimed at increasing the regional bank branch coverage in Indonesia.

In 2019, the European Commission introduced sustainability and European values at the centre of its long-term policy agenda. The European Green Deal sets out the direction for the EU to become climate-neutral by 2050. The UN Sustainable Development Goals will orient policy efforts and reforms in the years to come, in Europe and beyond. This is an innovation-driven policy agenda for new systemic solutions and employment creation reaping the opportunities from the ecological and digital transitions. The challenge now facing the EU is to implement it.The JRC is the science service of the Commission. We provide science for policy supporting public policy makers at all levels in the EU. JRC Directorate B, led by Mikel Landabaso, develops scientific evidence for innovation and growth policy relevant for all Commission priorities. Unit B3, under the leadership of Alessandro Rainoldi, focuses on territorial development. How can regions, cities and communities engage in the EU policy agenda in a bottom-up approach to create jobs and value added for its citizens? How can scientific evidence ensure continuous policy learning, detecting the effects of EU policies across Europe, and enabling policies to be refined for the benefit of society? For a successful implementation of the European Green Deal, these questions are more relevant and timely than ever.To construct the academic and conceptual base for these questions, JRC turned to two internationally recognized experts in innovation and place-based policy, Professor Philip McCann and Professor Luc Soete to explore how science for policy can support the implementation of the European Green Deal and the new EU policy for sustainable development. Their report presents their reflections, backed up by a consultation with a broader academic community gathering expertise in both innovation policy and regional development policy.

The new Commission has made “sustainable development”, together with the digital agenda, the core element of its overall growth strategy for the present decade. From a global perspective the European Green Deal (European Commission 2020a,b) represents on the one hand the EU’s contribution to the Sustainable Development Goals (SDGs) – Europe’s Moonshot mission of the 21st Century – and on the other hand the EU’s “smart specialization strategy” – Europe’s attempt to develop at world level a leading position in sustainable development. The Paris Convention provides from this perspective the overall European framework for national, regional and local city commitments with the EC designing and organizing the accompanying financial and regulatory incentive schemes (such as the climate pact, the Green Deal investment plan and the Just Transition fund, the necessary reforms in the European semester, etc.). Viewing the European Green Deal as a combination between a European 21st Century “Moonshot mission” and an internal, “smart specialization strategy” raises though also many, new challenges as to the respective governance responsibilities of the different actors. In this short paper, we present some first reflections on the way insights from science, technology and innovation studies on the one hand and regional studies on the other could help in the design of “green deal” policies at European, national and regional/urban level and pulled together provide an intellectual framework for multi-level governance. Such “science for policy” reflections can serve as basis for more in depth discussions between EU policy makers as well as research scholars in the academic community. In a first section, we first review some of the arguments as to why the European Green Deal represents today primarily an innovation-led development strategy for Europe. We describe how historically the new EGD strategy represents a re-arranging of priorities, making sustainable development as the overriding strategic priority: the opportunity for Europe to position itself globally and locally as green specialisation area through innovation. Second and more specifically at the governance level, the new EGD strategy raises several crucial multi-level governance challenges. Players who were not really at the centre of the European integration process such as regions; or totally absent, such as cities and communities are now likely to play a crucial role. We claim that an effective innovation-driven policy with a directionality requires a proper division of tasks between the EC, national and regional/local governance levels. Third, we focus on how to detect and overcome possible trade-offs involved in prioritizing such a green development strategy compared to the more traditional objective of smart growth as put forward in the previous EU strategies. Through a more explicit recognition and analysis of these trade-offs, we believe a better framework can be sketched for the real, new growth opportunities linked to the Green Deal. In the second section of the paper, we discuss in more detail each of the relevant challenges and trade-offs facing different types of regions in their movements towards the goals of the Green Deal and the issues which will need to be explicitly considered in the appropriate design of regional policy schemes. Second, we address the particular role cities might play in this process. Contrary to many other regions in the world, Europe’s population is heavily urbanized with cities accounting for the majority of carbon production and consumption-related emissions. This observation provides again greater opportunities for targeted interventions aimed at enhancing sustainability. For the Green Deal to be embraced locally throughout Europe it will be essential to engage all cities and regions across the EU. We argue that the accumulated experience of smart specialization strategies is very valuable in this context, but that these will need to take the next step embracing transformative innovation for systemic transitions, reaping the opportunities and alleviate the threats of the global ecological and digital transitions. We make some concrete proposals, what we call “learning modules” on how this could be done. In a third section, we address the need for a continuous “science for policy” approach, particularly in case of a radically new strategic policy framework such as the European Green Deal. The implementation and design of the European Green Deal would benefit, we argue from a Science for Policy Platform on Place-based innovation for Sustainability. This platform could both support local actors and channel findings on local innovation barriers or early trade-off alerts to the EU and national policy making., JRC.B.3-Territorial Development

This paper discusses the various potential impacts of Brexit on UK regions and outlines the sub-national governance challenges these potential impacts raise. In the light of these, the types of activities that UK sub-national governance bodies have initiated in preparation for Brexit are then reviewed. The conclusions suggest that the UK sub-national institutional system is largely unprepared for the post-Brexit realities.

Any form of Brexit will impact heterogeneously in terms of sectors and regions on the competitiveness of firms in both the UK and Europe. The ongoing uncertainty about the conditions under which the UK will be leaving the EU, creates difficulties in structurally estimating these impacts. Using uniquely-detailed interregional trade data on goods and services for the EU, we apply a novel methodology that disentangles region-sector sensitivities (elasticities) of firms’ competitiveness to (non)tariff barriers from the implications of different post-Brexit UK-EU trade scenarios. This enables us to derive the impact of Brexit on the competitiveness of firms along with the degree of uncertainty that surrounds these impacts, independently from the scenarios. Our analysis demonstrates that the adverse international competitiveness shocks on UK firms are much larger than those on the rest of the EU due to the dependency of the UK on the EU via global value chains. The competitiveness shocks mean that within the UK, Brexit is likely to increase both interregional inequalities and also intra-regional inequalities. In contrast interregional inequalities across Europe may actually fall, depending on the nature of the post-Brexit UK-EU trading arrangements.

Occupational choice and heterogeneous managerial ability enter a spatial Dixit-Stiglitz setting, linking location, wages and regional entrepreneurship rates. Market potential has a positive partial effect and wages a negative partial effect on the regional supply of entrepreneurs, both balancing in equilibrium with endogenous wages. Market potential increases profits, but also the opportunity cost of entrepreneurship. In the long-run equilibrium with perfect mobility, the cut-off level of ability determining selection into entrepreneurship will be the same across regions; moreover, regional differences in entrepreneurship rates depend only in differences in average fixed costs of firms. An empirical application is provided for Chile.

Disasters have the potential to shake societies and their governance systems not only temporarily, but often for years afterwards as well. Studying disaster governance through lenses of social-ecological systems can provide essential insights in disaster contexts, as disasters occur through the interactions between nature and societies. Drawing upon debates on environmental governance, we examine the interactions between different spatial and temporal levels of governance in the face of disasters. Our analysis is based on an in-depth case study of Christchurch, New Zealand, in the aftermath of the 2010 and 2011 earthquakes. International experts usually regard Christchurch as an exemplary recovery process. However, frustration is widespread among people in the city as they call for a more socially inclusive process. These diverging views can be explained by the variety of challenges that the earthquakes pose on the society and the consequent different needs and wishes related to different temporal stages and geographical areas. Homogenous governance approaches for post-disaster recovery for all stages and areas are therefore inadequate, calling for hybrid, more flexible and sustainable governance constellations. A social-ecological approach highlights the dynamic and complex interactions between nature and society, and the hybrid, multi-level character of governance, which both shapes and is shaped by the behaviour and responses of citizens. Regarding hybrid governance as a social-ecological system can therefore help to better understand post-disaster realities and support the design of tailored, time- and place-specific governance systems aiming for enhanced resilience and sustainability. Copyright (c) 2017 John Wiley & Sons, Ltd and ERP Environment

Knowledge Intensive Business Services (KIBS) are widely perceived as being important drivers of technological progress and innovation. KIBS are generally understood as depending, driving and thriving on knowledge exchanges and therefore, geographical proximity to markets, customers and suppliers would be expected to be a critical factor in their performance. This paper investigates how the innovation performance and processes of KIBS firms are related to their distance from the nearest city and also to the size of the nearest city. For this purpose we make use of detailed firm level data and consider Germany as a research field. While most current evidence on this topic emerges from Canada, we complements and add to this existing literature on the geography of KIBS by examining these issues in the German spatial setting which largely conforms to a textbook type of spatial urban hierarchy. Our probit results indeed find that there are very strong distance decay and city size effects, and these also vary according to the innovation type. Wissensintensive unternehmensnahe Dienstleistungsunternehmen (KIBS) entwickelten sich als bedeutende Treiber für technologischen Wandel und Innovationen. Aufgrund der besonderen Arbeitsweise, welche auf Interaktion und Wissensaustausch aufbaut, spielt die räumliche Nähe zu Kunden, Partnern und Anbietern eine bedeutsame Rolle für die Wirtschaftlichkeit und Innovationsfähigkeit von KIBSUnternehmen. Die vorliegende Arbeit betrachtet das Innovationsverhalten in Abhängigkeit der Distanz zur nächstgelegenen Stadt und unterscheidet hierbei verschiedene Stadtgrößen. Dafür werden detaillierte Daten von deutschen KIBS-Betrieben verwendet. Die Ergebnisse indizieren, dass Distanzeffekte mit der Stadtgröße variieren und für verschiedene Innovationsarten unterschiedlich stark ausgeprägt sind. Insbesondere profitieren KIBS-Betriebe von der Nähe zu anderen Marktteilnehmern und sind besonders innovativ in Zentren. Eine gezielte Förderung von Start-Ups in Zentren erscheint daher sinnvoller als in weniger dicht besiedelten Räumen, in denen das Angebot an wissensintensiven Gütern geringer ist.

The chapter reviews the literature on the nature, role and links between RD, innovation and productivity. The authors examine innovation from the perspective of the resource-based view of the firm, and discuss how non-spatial approaches explain the ways in which the characteristics of knowledge and technological regimes shape the evolution of the firm’s innovative behaviour. The analysis then moves on to set the insights of these non-geographical approaches squarely in the context of economic geography allowing for a discussion on the spatial effects of the prevailing technological regimes on urban and regional economic systems.

Traditionally, the effectiveness of European Cohesion Policy has been evaluated in terms of GDP growth rate. In this paper, we consider the effect of the regional policy in terms of its impacts on two specific fields of intervention, namely research, technological development and innovation', and transport infrastructure'. Our econometric approach involves the use of a non-parametric regression discontinuity design technique to a uniquely-disaggregated Cohesion Policy dataset broken down according to the specific objectives of each stream of funding. The analysis considers different time intervals and sub-samples. Our results demonstrate a positive impact of Cohesion Policy interventions in these two specific fields of intervention.

This paper analyses a uniquely detailed data set of social integration characteristics of immigrants belonging to four non-native ethnic groups (i.e., Turks, Moroccans, Surinamese, and Antilleans) living in Dutch neighborhoods. It is well known that an individual's level of social integration is related to the ethnic composition and economic development of an immigrant's residential locality, as well as the generation of the immigrant. Yet, what is not known is whether the social and economic characteristics of adjacent or neighboring localities also influence an individual's level of social integration. Using a multilevel hierarchical analysis with spatial interaction effects, we examine the extent to which four social integration aspects of the bridging social capital of these immigrant groups are related to their ethnicity, their generation, their immediate locality, and the effects of the neighboring localities. Our findings regarding the effects of the ethnic concentration and economic development of the immediate locality along with the immigrant's generation broadly concur with existing studies. At the same time, however, we also find that the features of neighboring localities exert an additional influence on an individual's social integration over and above those related to the immigrant's generation and immediate locality. These additional spatial spillover effects are broadly in line with those associated with the immediate locality, but they are also sensitive to particular proxies for social integration which are employed. These spatial spillover effects on social capital and social integration have not been observed before.

The intended objectives of Smartspec Work Package 1 are firstly to identify related variety and value chain components within EU regions to inform specialisation choices and secondly, to identify the role of organisations and their interaction for the development of entrepreneurial discovery and to assess the role of network connectivity in facilitating intra- and extra-regional asset combination. In order to examine the various questions regarding the network and institutional factors enhancing or mitigating entrepreneurial search processes, in this work package we employ a twin-track multimethodology approach comprised of two parallel streams of enquiry, one of which is primarily empirical and quantitative in nature, and one of which is rather more conceptual and qualitative in nature. Each of these parallel streams of work is designed to progress and develop alongside the other, with various junctures built into the programme for mutual reflection and cross-fertilisation of ideas.

The Brazilian economy has gone through a remarkable transformation since the difficult times of the last quarter of the twentieth century. Brazil is now seen as one of the engines of global economic growth and together with Russia, India and China makes up the often cited BRIC acronym. During the current decade, Brazil is expected to overtake the economies of Britain and France and become the world’s fifth largest economy, with São Paulo possibly the world’s fifth wealthiest city.