Description
Description related to thoughts on the quest for regional excellence in a globalised knowledge based economy.
1.
THOUGHTS ON THE QUEST FOR REGIONAL EXCELLENCE
IN A GLOBALISED KNOWLEDGE-BASED ECONOMY
Introduction
Chapter 1 Strategies based on Regional Business Demand
Chapter 2 Regional Assets
Chapter 3 Business Support Service Provision
Chapter 4 Innovation in Public Business Support Services
Chapter 5 Investing in Support for Intangible Equity to Secure Regional
Comparative Advantages
Chapter 6 Value Chains: A Business Support Services Toolkit
Chapter 7 Regional Marketing
Chapter 8 Preventing the Risk of Globalisation Casualties
INTRODUCTION
Economic globalisation triggers different reactions among stakeholders depending
on whether they perceive this trend as delivering advantages or disadvantages.
There are many examples of Heads of States, Ministers and regional Presidents who
rush to emerging countries to sell technology “made in” their country only to
complain the minute they are back, about exponential imports of cheap
convenience goods from the exact same emerging economies. Sometimes they
oppose hostile takeover bids on national companies considered to be of strategic
importance – even if all they sell is yoghurt – even as they celebrate successful
takeovers of foreign companies by national firms.
Also widespread are the examples of (consumer/worker) citizens who sing the praise
of hard discount retailers (ALDI, LIDL, Walmart) and capital goods (cameras, cars,
textile, clothing, etc.) produced in emerging countries while simultaneously
deploring the loss of their jobs to relocations and closures of production units whose
competitive edge is partly or completely gone.
One consequence of economic globalisation that is felt in all regions is that it forces
the latter to develop a unique competitive advantage in an ever-changing
environment. This is only possible in regions that both promote an environment which
supports entrepreneurship and innovation and have the necessary critical mass to
deliver synergies among key stakeholders.
2.
In regions – i.e. where citizens live and politicians are rooted –, harnessing
globalisation is increasingly critical in order to (i) predict and anticipate opportunities
and threats; (ii) manage profit and (iii) predict the social cost of restructuring.
To this end, the quest for regional excellence has become an essential precondition
of regional survival.
Looking for regional excellence calls for a number of changes affecting mentalities,
strategic choices, necessary methodologies as well as the typology of support to be
provided to potential users, the financial resources to be earmarked and even
possibly the segmentation of beneficiaries and the evaluation of action to be
undertaken.
The main determinants of regional excellence include:
Human resources: education, training and creativity;
Technological resources: infrastructure, interfaces and the ability to develop
and leverage knowledge;
Financial resources: loans, guarantees, venture capital;
Social assets: formal and informal networks built with key public and private
local, national and international stakeholders;
Good governance and leadership;
Physical capital.
It is possible to allocate these determinants to four broad categories: human capital,
infrastructure, finance and creativeness, whose various components are listed in the
table below:
Human Capital Infrastructure Finance Creativeness
Education
Training
Talent
Leadership
Adaptability
Risk acceptance
Physical
Educational
Knowledge-related
Intangible
(networks,
interfaces)
Subsidies
Loans
Guarantees
Venture capital
Knowledge
Innovation
Entrepreneurship
Culture
Design
As for the typology of potential users, it can be segmented according to the
differences between:
local players without international ambitions;
global players;
medium-sized regional players for whom internationalisation – and hence
innovation – must become an asset, failing of which they will stagnate or
disappear in the long run.
Therefore, public policies need to allow small businesses – and in particular
innovative start-ups – to grow and become leading medium-sized companies
(employing at least 50 and yielding a minimum turnover of €25 million) in their niche
market.
Thus, the challenge of regional excellence consists in generating a constant flow of
new ideas and unique comparative advantages both at entrepreneurial level and
in terms of services that support the fabric of the regional society and economy. This
requires technical, technological, business model, social, partnership and
administrative innovation.
3.
What is meant by administrative innovation is:
Constant improvements in governance;
A contract-based approach to the tasks entrusted to intermediary bodies. The
era of an “obligation of means” is over and must make way for an “obligation
of result”. Such contracts should cover a period of at least five years;
The definition of business support strategies that are geared toward the future
(innovation, RTD, training, exports, development of new businesses and support
for business growth from small to medium-sized) rather than the preservation of
existing activity (employment support) and the advent of an approach that is
based on an analysis of demand for – rather than a diversification of the range
of – business support services;
Recourse to loans and financial engineering instead of grants;
Improved regional marketing.
Regional strategies must rest on the premise that their aim is to increase the
profitability of regional businesses. In some cases, a prerequisite to achieve this will
be to support the development of new businesses while in others it will be to
anticipate the collateral damage caused by globalisation.
This means that to a greater extent than in the past, the measures to be
implemented need both to be tailored to the needs of regional businesses and to
deliver as much added value as possible for them. This in turn signifies that the
development of regional strategies needs to change completely from supply- to
demand-oriented. The obvious objection to this is that support service provision is
based on expressed support service user needs. However, it is worth noting in this
respect that the needs expressed by the latter are often subjective or incomplete or
motivated by passing fashions (science parks, incubators, clusters, one stop shops,
etc.).
In future, businesses in the developed world (EU, US, J apan, etc.) will be evaluated –
and sometimes punished by the market – in terms of their ability to generate added
value rather than the number of jobs their create of retain. Indeed, company stock
prices tend to go up whenever restructuring plans carrying job losses are announced
because operators expect productivity gains as a result of such plans.
Public authorities too, will need to develop – in addition to market innovation
strategies – services aiming to help turn around those businesses that have become
the casualties of globalisation. In this context, there is a need for more effective
account to be taken of the support requirements of small businesses and crafts.
Regions will need to acquire the necessary tools to allow all regional stakeholders –
including themselves – to accurately determine the exact location of their real
competitors. Such perceptiveness will in many cases help eliminate reluctance to
cooperate locally. To this end, it is important to be able to identify existing local
competences and harness them to deliver synergies or leverage market
opportunities that have the potential to be shared by regional businesses.
4.
CHAPTER 1 STRATEGIES BASED ON REGIONAL BUSINESS DEMAND
The only way to improve business profitability is to increase profits, which in turn
requires altering prices or sales.
The diagram below progressively needs to become the frame of reference for ex
ante evaluation of measures contemplated to support existing businesses or
stimulate the development of new ones. Indeed, it seeks to describe the resources
needed to achieve the profit and growth objectives that drive all businesses.
Figure 1: Matching business aims and support services
• Process
innovation
• Business
model
innovation
• Outsourcing
• J ust in time
delivery
• Participation
in networks /
clusters
• Technological
innovation
• Value chain
innovation
• Branding
• Process
innovation
• Business
model
innovation
• Value chain
innovation
• ISO 9000
• Branding &
marketing
• Design
innovation
• Technological
innovation
• RTD
• Access to
knowledge
• Economic
intelligence
• Access to
finance
• Access to
consulting
services
• Technology
transfer
• IP Protection
• Proof of
concept
• Talent,
creativity &
design
• J oint
development
• Business
model
innovation
• Participation
in networks
• Economic
intelligence
• Skills,
languages &
marketing
• Internationa-
lisation
• Technological
innovation
• Integration of
new
technologies
• RTD
• Talent &
creativity
Profit
Growth
margins
turnover
costs prices quality
New
products
New
markets
Market
niches
5.
Worth recalling is that in theory, the recipes of business success are straightforward:
cost control, regular product range renewal (i.e. constant product, process and
business model innovation), distribution and attention to market (design,
functionality, price perception, etc.) and careful marketing expenditure. However, a
German study
1
clearly shows that despite this apparent simplicity, 93% of innovative
business projects fail. The causes of such failures are multiple: development
strategies focusing exclusively on technological aspects, lack of market knowledge,
inadequate product characterisation, over-engineering, etc.
Obviously, the above figure needs to fit in a more global context addressing the
framework regional conditions that have to be in place for business activities to
flourish and unique competitive advantages to emerge for regional players.
Figure 2: Regional Framework Conditions for Entrepreneurship
Entrepreneurs Agile public
Innovators services
2
Business angels Intermediary
Consultants organisations
Talent and Basic
competences infrastructure
3
Venture capital and Community-
Finance based business
Technological infrastructure
4
Capital
Social capital
(networks and clusters)
University/research
centre/business interfaces
Triple Helix +(*)
Public Private Education
sector sector and RTD sector
1
Les Echos, 7 February 2007, quoting IAI survey of 1,200 companies.
2
Entrepreneurship and SME supportive framework conditions.
3
Water, energy, transport, RTD, ICT, quality of life, education, health.
4
Nurseries, incubators, industrial parks, technological parks, technical/ technological centres.
* Private investors have been added to the three traditional components of the Triple Helix concept.
Entrepreneurship
Capital
Governance
Intangible
regional capital
Tangible regional
capital
Business
Innovation and RTD
capital
6.
Expressed in operational terms, acceptance of these frames of reference for
regional development requires both provision of strong value-added support
services and a new approach to the definition of the regional development vision.
According to a study conducted in Belgium
5
, the expected outcomes of company
managers when using business support services include:
Improved product or service added value;
Business modernisation;
Business differentiation v. competitors;
Adjustment to business environment (i.e. competition) changes;
Reduced activity-related risks;
Optimised internal business organisation;
Increased flexibility;
Diversified activity;
Reduced costs;
The ability to innovate;
Procurement of information and expertise.
The findings of this survey show a strong correlation with the items listed in Figure 1
above.
Public intervention to improve the take-up or solvency of support service demand
emanating from local business is mapped out in the diagram below.
Figure 3: Public policies in response to the demand for business support services
5
Services aux entreprises et développement régional (“Business Support Services and Regional
Development”), Camal Gallouj, Fabienne Leloup, Bernadette Mérenne-Schoumaker and Laurence
Moyart, De Boeck, 2006, p. 182.
6
PMEKMO.be, 05 J anuary 2007. According to IBM, the term Business Intelligence has two meanings:
Applications and technologies used to access and process data;
The availability of information that supports strategic decision-making.
Subsidies for
user
companies
Support for
establishment
of RTD and
innovation
centres
Support for
clusters and
networks
Support for
economic and
business
intelligence
6
Grants for
in-house
development of
competences
and investment
in RTD
Support for
interfacing
and
intermediary
bodies
Public authorities
7.
CHAPTER 2 REGIONAL ASSETS
As illustrated in Figure 2 above, the main assets of regions are:
Its industries;
Talent;
Infrastructure;
Entrepreneurs;
Venture capital;
Networks
Specific regional productive and cultural features.
Some of those assets are natural and others cultural; many are developed or
stimulated by the private or public sectors or even possibly through public-private
partnerships.
Self-evidently, it is the combination of these assets rather than their sole presence or
juxtaposition in a geographical area that allows regions to acquire the necessary
competitive advantages.
These days, regional assets must be appraised in light of a number of challenges
including the opening up of markets, economic globalisation and the competitive
advantages derived from the utilisation of knowledge.
Worth remembering is that upon analysing the impact of the Single Market or of the
successive EU enlargements, the matrix below (see Figure 4) was widely used to try
to determine how sensitive the fabric of the regional society and economy was to
the opening of its market to competition from the entire Community.
Based on this matrix, it is possible to conclude that the more heavily reliant the
make-up of the regional society and economy is upon companies operating in
sectors that are protected by non-tariff barriers and may therefore disappear when
regions are mainstreamed into the Single Market, the more likely it is that they will
experience at least some of the side effects of market liberalisation.
There is a need to develop a similar matrix today to evaluate how vulnerable the
main regional industries are to globalisation or an acceleration of innovation.
By means of such an analysis, individual regions may be able to determine the
potential vulnerability of their social and economic fabric to competition based
either or prices/ costs or on innovation. The model of this analysis may for instance
rest on the exposure of individual industries to globalisation. Figures 5 and 6 below
illustrate the matrix developed by McKinsey in their report entitled Donner un nouvel
élan à l'industrie en France.
8.
Figure 4: Spotting sensitive industries
7
: a tentative typology
INTRA EEC
8
PENETRATION RATE
I
M
P
A
C
T
O
F
N
O
N
-
T
A
R
I
F
F
B
A
R
R
I
E
R
S
L
O
W
Low High
Potash and phosphate salts
Salt mining
Other minerals and peat
Construction materials manufacturing: terracotta,
cement, lime, plaster
Construction materials: concrete, cement, plaster
Structural steelwork
Metal tools and end articles
Soap, detergent, perfume
Watches, clocks, spare parts
Cattle slaughter, meat preserves
Fruit and vegetable preserves
Grain processing
Bakery, pastries, biscuits
Sugar
Feedstuffs
Miscellaneous foodstuffs
Tobacco
Leather and assimilated articles
Wooden furniture
Paper processing, cardboard
Printing and related industries
Publishing
Artificial fibres
Optical instruments, photographic equipment
Vegetable and animal fats
Fish and other seafood preserves
Dairy industry
Starch-based products
Wool industry
Cotton industry
Carpets, linen and waxcloth
Footwear
Clothing and accessories
Clothing and other textile industries
Rubber industry
I
N
T
E
R
M
E
D
I
A
T
E
Glass industry
Ceramics industry
Agricultural machinery
Tools and machine tools
Industrial food and chemical machinery
Aircraft design, construction and repairs
Car manufacturing and assembly
Cycles and motorcycles
Household chemicals
Consumer electronics, radio, TV
Electric household appliances
Lights and lighting equipment
J ewellery & goldsmithing, stone silversmithing
Games, toys, sports equipment
H
I
G
H
Coppersmithing
Mining and steel industry materials
Ship building and maintenance
Railway equipment
Medical, surgical and orthopaedic equipment
Pharmaceuticals
Pasta
Cocoa, chocolate, confectionery
Wine and wine-based products
Breweries, malting industry
Still and fizzy waters
Office and data processing equipment
Telecommunications, computers, electro-medical
equipment
7
Intermediate goods are not included in this matrix
8
The eight countries covered (B, D, F, I, UK, NL, L and DK) represent 91% of Community GDP (1985).
9.
Figure 5: Five groups of industries with specific competitive issues
Figure 6: Examples of industries per group
Competing
through Cutting-edge technology industries
innovation R&D: long cycles and heavy budgets
Competing through product innovation and intellectual property
Industries in which the brand is key and supported by innovation
in product aesthetics and design
Proximity to key markets in order to understand and set trends
Industries in which production must be close to market (due to
prohibitive transport costs or high degree of logistical complication)
Competing mostly on cost (innovation may exist for production
technology)
Industries facing both quality and price competition in product
innovation
Variable – but declining – need for close markets (R&D and
product) among industries
Industries in which competition is mostly price-driven
Structural disadvantages of France
Competing Closeness to market is no longer a must, at least when it comes
through costs to production
Source: McKinsey
INNOVATION
LEADERS
BRANDED
INDUSTRIES
CONTINENTAL
INDUSTRIES
UNSTABLE
INDUSTRIES
HIGHLY-
EXPOSED
INDUSTRIES
Competing through
innovation
Competing
through costs
Source: McKinsey
INNOVATION
LEADERS
CONTINENTAL
INDUSTRIES
UNSTABLE
INDUSTRIES
HIGHLY-
EXPOSED
INDUSTRIES
Commercial aeronautics, defence High-tech medical and scientific
and aerospace equipment
ICT(semiconductors) Railway construction
Nuclear technology
pharmaceuticals (excl. generic drugs)
BRANDED
INDUSTRIES
Home equipment (high-end) Perfume, cosmetics
luxury (leather)wear Publishing
Pleasure boats
Chemicals, rubber and plastics (basic) Printing
Fuel refining Soap and detergents
Gas and power production Water production and distribution
Mechanical capital goods (basic) Wood and paper
Mineral products (basic) Meat and dairy, grain processing, drinks
Car and 1
st
tier equipment manufacturers Steel and downstream aluminium
Communication networks Electrical equipment (medium voltage)
Specialty chemistry
Mechanical equipment goods (specialties)
2
nd
and 3
rd
tier car equipment
Small electrical equipment
Clothing and leather (basic)
Consumer electronics
Home equipment (medium- and low-
end)
10.
The assumption of the McKinsey model is that regions whose social and economic
fabric mostly consists of businesses operating in industries exposed to strong cost-
driven competition will increasingly be confronted with restructuring and
consequently will need to develop appropriate strategies to enable local businesses
to build their capacity to generate innovation and/or strong brands.
In this context, the regional ability to encourage the development of entrepreneurial
growth companies (EGCs or gazelles) becomes a key factor of regional
competitiveness. Indeed, such businesses are often geared toward international
operations right from the start. Thus, innovative businesses tend to better survive
globalisation than those with declared national or regional ambitions.
Several studies argue that comparatively more newly-developed US than EU
businesses achieve market dominance in their industry. It appears than in 2000,
those businesses from among Business Week
9
’s Top 1000 that were set up after 1980,
64 were US companies while only 9 were European. Of the 64 US businesses,
45 operated in just three industries: (i) electronics & computers; (ii) telecom; and (iii)
business services.
9
A Policy for Industrial Champions: From picking the winners to fostering excellence and the growth of
firms. Industrial Policy and Economic Reform Papers N° 2
11.
CHAPTER 3 BUSINESS SUPPORT SERVICE PROVISION
It is possible to discuss business support service provision by examining the following
typologies of market segmentation according to:
Business categories:
growing businesses;
start-ups;
entrepreneurial growth businesses;
businesses without much potential for growth;
businesses undergoing a transition;
Business support services addressing different stages of the business lifecycle:
(pre-)commercial stage of innovative concept development;
(non-)financial services;
infrastructure or intangible services;
individualised or shared services;
basic or high value-added services;
Categories of users involved in delivery mechanisms:
public authorities;
intermediary bodies;
universities, research centres;
private businesses;
Stage in the development cycle of a new product or service:
definition;
proof of concept;
initiation;
development/Growth;
maturity;
Delivery methodology:
pilot projects, one shots, multi-annual programmes;
calls for tenders or desks/centres;
subsidies, repayable short-term loans, guarantees, equity participation, loans;
direct or indirect investment or consultancy support;
Support service aims:
supporting the development of low value-added businesses;
supporting the development of innovative businesses;
supporting the development of entrepreneurial growth businesses;
supporting the development of spin-outs/offs;
supporting local infrastructure (nurseries, incubators, enterprise real estate,
industrial or tech parks, technical centres, etc.);
supporting technology transfer and the utilisation of RTD outcomes (patents,
licensing, etc.);
supporting the coordination of business networks (clusters, clubs, etc.);
supporting organisation, market-driven or human resource-related techno-
logical development;
12.
Support service quality:
basic touch-and-go (information) v. specific (advisory) support services;
high value-added services;
Nature of available support:
financial: subsidies, loans, guarantees, equity participation, tax relief, etc.;
other: advice, auditing, training, etc.
These days, the aims of support service provision – whether public or private – must
include:
reducing the cost of accessing knowledge, research and innovation, whether in
terms of capacity, ability or even effort-sharing;
increasing access to technology and knowledge;
shortening product/service time-to-market;
improving the recruitment of talent and trained staff;
facilitating access to sources of finance and venture capital;
reducing the risks of developing new products and services, marketing new ideas
and even leveraging research outcomes;
encouraging medium-sized businesses to grow and develop in-house research
and development capacities;
reducing the disadvantages of SME status including size, absence of critical mass,
distrust among public procurement contract adjudicators, asymmetrical
information (v. principal contractors or equity investors), etc.;
consolidating barriers of access to regional markets – while complying with fair
competition and State aid rules;
facilitating the incubation of innovative businesses
stimulating fast growth among gazelles (entrepreneurial growth start-ups).
Figure 7 below illustrates how public authorities can encourage SME take-up of
support services.
13.
Figure 7: Public policy to improve take-up of support services
Aims
Means
Incubators
Technological parks
Technical centres
Cofunding of joint
activities including in
RTD&I
Innovation vouchers
Shared-cost RTD
projects
Repayable short-
term loans
Shared stalls at
exhibitions
Premiums for
recruitment of
researchers
Investment readiness
programmes
Contribution toward
coaching and
monitoring costs
Training vouchers
One stop shops
“No wrong
door” system
Technology
transfer centres
RDAs, CCIs, etc.
Clusters
Encouraging the
development of
local
infrastructure
Encouraging
membership of
clusters
Encouraging
take-up of high
value-added
service provision
Development of
and support to
intermediary
bodies
Public authorities
14.
CHAPTER 4 INNOVATION IN PUBLIC BUSINESS SUPPORT SERVICES
In recent years, changes have been in evidence in public business support service
design. An illustration of these is provided in Figure 8 below, comparing so-called
traditional and new intervention categories.
Figure 8: Innovation in public business support policies
Traditional types of interventions New types of intervention
Awareness and legal framework
Individualised services
Information services
Grants
Top-down approach based on the range
of available public support services
Generic provision (“one-size-fit-all”)
Economic and technological intelligence
Identifying and harnessing businesses’
potential
Shared services, networking, clusters
High valued-added advisory services
Access to finance and venture capital,
investment readiness
Bottom-up approach based on a careful
analysis of business demand
Tailored provision for individual market
segments
It seems however that the trend described above has not peaked yet. Indeed, the
following shortcomings are still in evidence among public business support services,
which severely constrain the effectiveness of regional business support service
provision systems:
excessively fragmented provision due to a plethora of intermediary bodies;
absence of integrated provision, of a vision as well as of any analysis based on
the public intervention value-chain (see Chapter 6);
poor interpretation and use of the one-stop-shop
10
concept and lack of
integration of the no-wrong-door concept
11;
absence of investment readiness programmes addressing the lack of symmetry
between businesspersons and investors, adjudicating authorities, grant
influencers, RTD and university circles, etc.;
lack of systematic evaluation of public service delivery effectiveness and
opportunity costs;
mitigated outcomes of programmes focusing on EGCs (entrepreneurial growth
companies). Too many companies in incubators remain medium-sized (5-6 staff
and a turnover below €5 million);
inadequacy of business retention schemes;
lack of adequate projects to systematically dig up entrepreneurial and
innovative business concepts lying dormant in research labs, universities and
medium-sized regional companies;
10
One Stop Shops simply represent a concept whereby foreign (i.e. non local) businesspersons or
investors can perform in a single place all procedures required to set up and legally operate a
commercial enterprise
11
The aim of the “no-wrong-door” concept is to leverage a joint needs evaluation system to guide
businesspersons to the specialist regional organisations that are best equipped to advise them.
15.
overrepresentation of grant-based provision v. loans, guarantee schemes and
adequate seed capital funds and investment capital;
lack of support mechanisms for applied research, protection of intellectual
property rights and encouragement of branding
12
and design;
embryonic public-private partnership practice when it comes to business
support services as well as RTD and innovation infrastructure;
problematic delivery of support services that match new strategic business
attitudes including lean manufacturing
13
, joint development and drastic
rationalisation of subcontractor pools.
There is therefore a need for public authorities to better harness the three basic
segments of the business support service provision market, i.e.:
adjusting offer to demand;
improving demand quality;
matching offer with demand.
Illustrations of this are provided in Figures 9-12 below, which try to clarify the nature
of intervention according to each of the three segments above.
Figure 9: Non-financial support service provision
Information, economic and technological
intelligence
Corporate real estate, technical centres
Auditing and diagnostics
Mentoring and coaching
Protecting and leveraging intellectual
property
Internationalisation
Promoting innovation
University/research centre interfaces
Business retention
Training
12
Branding is either collective (made in …, geographical indications of origin) or individual (brands
owned by businesses).
13
The method implemented by Toyota: reducing stocks and outstanding debt, subcontractor
accountability, J IT, etc.
Support service
provision
16.
Figure 10: Financial support service provision
Tax relief
Risk capital (Business Angels,
Seed and venture capital,
mezzanine, spin-outs)
Finance (loans, grants, guarantees,
repayable short-term loans, etc.)
Access to expertise
Figure 11: Improved demand
Networking
Investment readiness
Training to take-up external expertise
Figure 12: Matching offer with demand
Incubation
Interface
Clusters, competitiveness centres
Mentoring and coaching
Diagnostics
Local infrastructure
Worth noting is that in future, universities will come to play an increasingly important
role in all three of the above segments of the business support services market.
Indeed, they will be called upon to:
train talent;
promote entrepreneurship;
acquire consultancy expertise;
generate, leverage and transfer knowledge;
manage RTD and innovation infrastructure (pre-incubators, laboratories, etc.);
participate in support schemes (clusters, interfaces, seed capital funds, etc.);
enhance public-private partnerships (PPPs);
attract and retain talent;
contribute to regional influence and marketing abroad.
Financial support
provision based on
the principle “All
money is not the
same”
Improved demand
Intermediary
bodies:
facilitators,
catalysts,
“no-wrong-door”
17.
CHAPTER 5 INVESTING IN SUPPORT FOR INTANGIBLE EQUITY AS A SOURCE OF
REGIONAL COMPARATIVE ADVANTAGES
The knowledge-based economy rests on intangible assets. Indeed, company value
– including market capitalisation – no longer necessarily depends on physical
production tools. These days, value is generated by a number of intangible assets
including brand, innovation capacity, closeness to customers and patent
exploitation.
This realisation presents public authorities with challenges belonging to three
different categories:
a) development of programme or service strategies to stimulate business
investment in intangible assets;
b) investment in the reinforcement of businesses’ own intangible assets;
c) stimulation of regional knowledge production, utilisation and
internationalisation.
For memory, intangible business assets include:
Human assets:
- staff education and training levels;
- support for staff in-service training;
Knowledge assets:
- RTD activities;
- patents and other rights deriving from intellectual property: brands, designs,
copyright, trade secrets;
- innovation capacity (product, process and business model);
- licences, franchising agreements;
- software;
- expertise;
- knowledge utilisation;
Process assets:
- engineering;
- governance;
- database management;
- remuneration of innovative ideas;
- production or import quotas;
Customer assets:
- marketing and distribution networks;
- customer-related services;
- customer loyalty plans or client/supplier lists.
Worth underscoring is that a number of companies are “going intangible” is the
sense that they no longer own any real estate (Apple, Accor Hotels, Mariott, etc.).
The resources these companies free up in doing so are invested in branding, design,
management, international marketing, intellectual property and know-how
activities that all generate added value. Traditional business support schemes will
progressively need to adjust to the requirements of this new business model.
Public authorities can help businesses grow their intangible assets by taking action in
a number of areas, e.g.:
18.
technological, commercial and competitive watch and intelligence;
systems to strengthen creativeness, design and different intellectual property
protection tools;
innovative public policy delivery and evaluation methods;
know-how regarding the establishment and coordination of networks and
public-private partnerships;
transnational contacts;
decompartmentalisation of administrations, private sector, universities and
intermediary bodies;
provision of permanent training tools in tune with strategic regional industries;
ability to coordinate observatories and foresighting efforts;
designations of geographical origin.
To do this, they can rely on interfaces, industrial competence centres, industrial
prototyping and product development and testing facilities as well as intangible
assets utilisation centres.
It is also in the interest of public authorities to develop their own intangible assets,
including notably:
the quality of their governance;
their social capital;
partnerships with other regions;
their marketing and image built with potential “customers”;
their attractiveness and quality of life;
their entrepreneurial and innovation culture;
their ability to enter into public-private partnerships;
the agility
14
of their public administration.
In the early 21
st
century economy, the most precious forms taken by intangible
assets are knowledge and talent. Like businesses, individual regions will from now on
be able to harness their ability to generate or leverage knowledge for the purpose
of regional differentiation.
Figure 13 below seeks to introduce the mechanisms and conditions needed to
develop or leverage knowledge within businesses. Understanding this process should
enable public authorities to deploy support services that are appropriate, able to
reinforce the competitive advantages of businesses or the regional attractiveness
for knowledge-intensive companies.
14
According to consultants A.T. Kearney, the six factors of administration / public body agility are:
1. Organizational capacity allowing change; 2. Leadership: value shared by employees and
stakeholders; 3. Culture and values: capturing and sharing knowledge and applying what they
have learned to achieve an overall vision; 4. Customer services: cost-effective channels to deliver
services and offer customer incentives to use the services; 5. e-Government – using technology to
drive transformation; 6. Performance management.
19.
Figure 13: Mechanism to develop and leverage business knowledge and potential
backing from public business support services
Internal External Internal External
(“in house”)
Reinvestment
of profits or
turnover
Grants
through
public RTD
programmes
RTD contracts
J oint
research
Innovation from
knowledge
developed in-
house
Innovation from
technology
transfer
licensing
patenting
joint ventures
joint
development
Through
marketing of
knowledge
developed in-
house
Utilisation unit
licensing
patenting
Expertise in
intellectual
property rights
Human
resources
Access to
infrastructure
Technological
intelligence
Financing
Intellectual
property
rights
Networks and
partnerships
In-house
innovation
culture
Financing
Intellectual
property
protection
Economic
intelligence
Access to
prototyping
centres
Financing
Expertise in
intellectual
property
rights
Technological
and economic
intelligence
T.T. interfaces
Clusters
Interfaces
International
cooperation
Business and
knowledge
GENERATION
UTILISATION
20.
Figure 14 below illustrates the components of the three innovation process “circles”,
i.e. research, innovation and market. Public authorities can have a major impact on
the emergence of interactions between those three circles for the purpose of
ensuring that the outcomes of research activities actually deliver products and
services that are accepted by the market.
Figure 14: The components of the three innovation process “circles”
Sources: Dümmler 2005, Crédit Suisse Economic Research, Economic Briefing N° 44
There is a need for innovation in delivery to back the evolving paradigm of support
service provision described above.
Thus, innovation can take one of the following forms:
use of public procurement to steer innovation;
organisation of investment readiness sessions;
use of intermediary body systems based on the “no-wrong-door” principle
reinforcement of platforms of key organisations and interfaces between them.
In theory, effective delivery of innovative approaches of this type is possible through
a clustering policy, provided that basic cluster features are reflected, including:
good governance;
maximisation of resources;
SWOT analyses of industries to be clustered;
critical mass of players;
effective cooperation between the public and private sector and knowledge
development or utilisation centres.
Innovation process
Degree of research
independence
Research
circle
Introduction,
utilisation,
commercial
maturity
Technology
push
Demand
pull
Implementing
circle
Marketing
and sales
Invention
Research
Concept
Discovery
Detailed product
design, prototype
testing
Re-design and mass
production, process
reorganisation
Current
techniques
and
processes
21.
CHAPTER 6 VALUE CHAINS: A BUSINESS SUPPORT SERVICES TOOLKIT
Since the mid-90s, the concept of benchmarking has become a standard tool to
compare public policies aimed at supporting economic development. However,
benchmarking very often appears to be a ranking method rather than a tool to
analyse and improve project and programme effectiveness. Furthermore,
benchmarking public policies cannot reckon with local contexts and environments.
In addition, it is becoming increasingly clear that it is the integrated approach itself
as well as its managers that make the difference rather than individual chain links.
For these reasons, there is a growing belief that public authorities must focus equal
attention on an analysis of the different value chains that support the various
regional development policies and on a comparison of their respective practices
with their peers’. Indeed, analysing value chains has the following advantages:
identifying interactions between service value chain links and their weak links;
identifying environmental weaknesses as well as key framework conditions of
effective public policy delivery;
understanding delivery mechanisms;
identifying regional flexibility and governance.
Below are reproductions of value chains addressing the following aspects of public
business support policies:
regional competitiveness value chain;
regional SME finance value chain;
regional RTD-intensive cluster value chain;
regional innovation value chain;
regional entrepreneurship value chain.
In addition to those five regional value chains, three examples are provided of
industry-specific value chains developed by Deloitte Consulting for the Silicon Valley
Partnership. Worth mentioning with respect to the latter is the pervasiveness of
“talent” as a parameter.
Also worth mentioning is that there is a need for any regional value chain analysis to
include consideration of the four parameters below:
a) The separate links of individual value chains;
b) The prerequisites of value chain deployment;
c) Delivery mechanisms;
d) Tools.
It is useful to dwell on the prerequisites of value chain deployment. Indeed, it is
crucial to ascertain the strengths and weaknesses of public, private and
intermediary players (triple helix), to evaluate their cooperation methods and to
jointly work out a set of shared objectives and vision for regional or industrial
development.
R
R
e
e
g
g
i
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o
o
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n
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a
l
l
C
C
o
o
m
m
p
p
e
e
t
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s
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s
V
V
a
a
l
l
u
u
e
e
C
C
h
h
a
a
i
i
n
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I nfrastructure Basic Activities Training Talent Finance Possible University Role
• Training centres
• Technology transfer agencies
Entrepreneurship training,
general advice and support,
spin-offs, technology transfer
Culture of innovation and
Awareness programmes
Entrepreneurship training
• Technology centres
• Innovation centres
• University/SME interfaces
• Laboratories
• Prototyping
Proof of concept, leveraging the
outcomes of research and
innovative concepts
Assistance with registering new
businesses
First advisory stop shops
Business consulting
Subsidy programmes, (pre-)
seed and venture capital
Spin outs and spin-offs
Creation of laboratories
Provision of expertise
University-based seed capital
funds
• industrial parks
• Incubators
• Science parks
• Provision of premises on
flexible lease terms
Access to start-up equity and
business infrastructure
Investment readiness schemes
Entrepreneurship advisory
programmes
Bank loans
Subsidy programmes
FFF (Friends, family, fools; i.e.
co-founders)
(Pre-)seed
Business angels
Venture capital
Guarantees
Leasing
Micro-credits and other forms of
start-up capital
Mezzanine
Incubators
Technological parks
Access to initial clients and
markets
Tutoring
Providing assistance to
entrepreneurs in overcoming
the “valley of death”
Competitiveness support
schemes
Access to growth capital and
advanced support services to
introduce innovation
Advanced support services
Advanced advisory services
University/business
interfaces
• Clusters Involvement in clusters
Global market player
Needs-oriented auditing
Venture capital, IPO
F
F
i
i
n
n
a
a
n
n
c
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a
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l
l
V
V
a
a
l
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h
h
a
a
i
i
n
n
Banks
Guaranties
Leasing
Factoring
Infrastructure:
business angels networks,
incubators, etc.
Advice: investment
readiness, tutorship
Expertise:
professional fund
managers
Own resources
FFF
VC
Loans on trust
Pre-seed
Loans for inventors
Reimbursable advance
payments
University spin off
Proof the concept
IPO
BA
Corporate
Venturing
Seed
capital
FFF : Family, Friends, Founders
BA : Business angels
VC : Venture capital
IPO : Initial Public Offering
Grants
Micro-credits
Other public support
Prerequisites
Tools
Mezzanine
Pre-requisites Triple Helix
Source : EURADA Round Table of Practitioners in Economic Development and RIC Expert Group
V Va al lu ue e c ch ha ai in n
R Re es se ea ar rc ch h I I n nt te en ns si iv ve e c cl lu us st te er r
Awareness
and
Investment
readiness
Organisational
infrastructure
Private,
Public and
Academic RTD
infrastructure
Market-
driven
and
applied
research
activities
Protection of
intellectual
property and
availability of a
technology
transfer
organisation
Entrepreneurial
training and
culture.
Consultancy
and added
value support
services
Spin offs.
Spin outs.
Commercialisation
of research
outcomes
Public knowledge
Access to
funding
sources
Proof of
concept
Market
J obs,
Incomes
Assets
Human capital
Technological
capital
Financial and
equity capital
Social capital
Infrastructure
Public sector
Interinstitutional collaboration
Governance
Leadership
Vision
Attractiveness
Investment willingness
Private sector
Capacities
Critical mass
Sound financial enterprises
Investment readiness
Engagement in a research regional
agenda
Intermediaries
Quality infrastructure
Competences
Capability
Networking
and
clustering
Implementation
- Consensus building
- Strategy design to support research intensive firms and commercialization of research results
- Delivery mechanism of the strategy
Skills. Training,
Education.
Placement of
students into
businesses
Workforce
development
RTD INSTRUMENTS OUTPUTS
S
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u
u
p
p
p
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l
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t
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i
i
n
n
S
S
M
M
E
E
s
s
Preconditions
• Awareness
• Intermediaries
• Profitability
• Public support
Innovation
Awareness
& Audits
Market
pressure
Outsourced
RTD
In-house
innovation
Risk shared
innovation
Seed capital
Proof of
concept
IPR
protection
Investment in
human
capital
Productive
investment
Market
Tools
• Financial schemes
• Technology & technical centres
• IPR supports
• Clusters
• SME – Universities interface
Technology
transfer
Incubation
S
S
u
u
p
p
p
p
l
l
y
y
c
c
h
h
a
a
i
i
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n
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s
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h
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i
p
p
• Awareness campaigns, communication
• Reception of potential business developers
• Assistance with drafting business plans
Culture
Awareness
among the
general
population
Validation
of the
business
concept
Assistance
with the
incorpo-
ration
process
Overcoming
the Death
Valley
Support
growth
phases
Taking up
innovation
• Training and management
• Advisory services
• Access to finance
• Pre(incubation)
•Access to enterprise real estate
27.
28.
29.
CHAPTER 7 REGIONAL MARKETING
Another consequence of economic globalisation is to exacerbate competition
between regions when it comes to attracting mobile investment (FDI) and talent
(entrepreneurs, researchers, students, creative minds, etc.).
Due to its make up (infrastructure, quality of life, demography, proximity to markets,
education, skills, centres of excellence, formal and informal networks, range of
public grants, availability of business support services, etc.), regional provision
resembles the product range available in supermarkets. Therefore, regional
marketing officers are able to draw inspiration from retail marketing aims, messages
and techniques. Worth recalling is that as a matter of priority, retailers seek to
achieve:
awareness and image goals;
differentiation in a competitive environment;
delivery of a key message (e.g. Casino: Zéro souci pour ses clients, “zero
customer complaints”);
joint branding operations.
Worth highlighting is that the marketing budgets available to Belgian regions total
€4-6 millions, which hardly compares with those of just a few large French retail
groups in 2005, i.e. €172 million, €231 million and €58 million respectively in the cases
of Carrefour, E. Leclerc and Casino
15
.
Like retail marketing, regional marketing needs to be increasingly targeted. A
tentative list of the different regional marketing market segments could include:
1° “Exogenous” segment:
production units;
research centres;
logistics and distribution centres;
corporate headquarters;
support services (call centres, etc.);
2° “Talent” segment:
foreign students;
foreign researchers;
expatriates;
3° “Endogenous” segment:
potential business developers;
inventors.
Worth underscoring are FDI motivations, which are still to:
access markets;
control production costs;
access equity and talent;
access innovation and creativeness;
secure a stable environment.
15
Source: J ournal du Dimanche, 24 December 2006.
30.
Precious few joint branding efforts are in evidence in regional marketing to date,
even at cross-border or transnational level. A number of initiatives including Leuven
(B), Eindhoven (NL) and Aachen (D) within the framework of initiative ELAT as well as
Sendai (J PN) and Oulu (FIN) in the wellness industry will be worth monitoring.
Preferred regional marketing techniques among US firms
16
include:
meetings with business managers;
websites and the internet;
public relations and advertising operations;
specific events;
fairs and exhibitions;
direct marketing (direct mail);
advertising;
telemarketing.
The same study lists the following ideal features of regional marketing websites:
information on available grants;
information on demographics;
directory of available sites and buildings;
list of major local employers;
updated comparative data on the region and its competitors;
information on target industries;
information on educational establishments;
information on recent trends in the field of development;
pictures and maps of the region;
description of quality of life;
testimonials by local businesses.
Finally, regional marketing managers can be advised to reckon with the two
significant messages below:
regions are sources of innovation;
the reason why the value for money of regional operational expenditure is
good is regional specificity.
16
See Andy Levine, Corporate America Speaks.
31.
CHAPTER 8 PREVENTING THE RISK OF GLOBALISATION CASUALTIES
In light of the challenges described in previous chapters, there is a need to be
aware of the very real and objective danger that a number of players may be
excluded from or damaged by, economic globalisation.
The following three categories of threatened stakeholders are discussed below:
people;
businesses;
regions.
The above categories of threatened stakeholders are respectively characterised by
the key features below:
people: least skilled or integrated on the labour market;
businesses: least innovative, unspecialised, labour intensive and non-leaders on
their market segment (even on a purely local influence basis);
regions: the fabric of whose society and economy mostly consists of people and
businesses that are exposed or vulnerable when it comes either to regional
assets or their ability to generate a comparative advantage according to the
matrices presented in Chapter 2 above.
To minimise the negative impact of economic globalisation, regional public
authorities will need to further consider a number of factors including:
education and training;
meeting local needs;
social innovation;
local business retention and expansion.
While there is no need to explain the first two factors above, it is useful to briefly
dwell on the latter two.
“Social innovation” can be defined as including all innovation activities (relating to
products and services) motivated by a desire to meet the needs of people who are
left behind by market economy or labour market developments. It is different from
economic innovation in the sense that its aim is not necessarily to maximise profits.
This being said, social innovation also needs in the longer run to reduce the public
cost (incurred by national, regional and local government) of globalisation
casualties by offering them occupational and personal development opportunities.
However, this approach raises the issue of demand solvency as it will either cause
the welfare state to implode or public deficits to reach such proportions that
reducing social spending or privatising a growing share of existing public products
and services will become inevitable.
The term “business retention” is understood as applying to strategies aiming to avoid
or delay the closure or relocation of businesses operating in a region. The objective
of such strategies is early identification of the strategic weaknesses of individual
businesses or production units of international organisations to either correct them
by bringing new competitive advantages to bear or to work out a smooth
turnaround strategy for the region. Such strategies may also apply to existing SMEs
with a view to stimulating their growth, especially in rural areas.
32.
Below are a few suggestions for such strategies:
a) preventing potential threats of business closure or delaying the inevitable
process of their relocation abroad;
b) accompanying the relocation of non strategic operations and production of
non competitive components. This support may be crucial to the long-term
survival of businesses that are unable to reduce component costs. In this case,
the challenge is to determine what can be relocated without loss of quality or
negative impact on brand.
c) retaining in the region the decision centres and production activities of new
businesses incubated locally or developed from the outcomes of research
funded by regional authorities;
d) retaining talent;
e) improving regional attractiveness to new endogenous business developments in
the knowledge-based economy while proceeding with the search for new
foreign investment.
Regions may usefully look at the potential of micro-businesses and craftsmanship.
Indeed, the contribution of such businesses may be important in terms of jobs.
Furthermore, they operate in industries whose vulnerability to global competition or
relocations is fairly low.
33.
REFERENCES
Nicola BELLINI, Business Support Services. Marketing and the Practice of Regional
Innovation Policy. Oak Tree Press, 2002
Marc LHERMITE, Ernst & Young, Présentation aux conférences WIC La Baule.
Camal GALLOUJ et al., Services aux entreprises et développement régional, De
Boeck, 2006.
McKinsey Global Institute, Donner un nouvel élan à l'industrie en France,
October 2006.
Silicon Valley Partnership,
Andy LEVINE, Corporate America Speaks, The IEDC Economic Development J ournal,
Summer 2006.
Deloitte, IAS Plus Web Site.
Crédit Suisse Economic Research, Economic Briefing N° 44.
doc_464844908.pdf
Description related to thoughts on the quest for regional excellence in a globalised knowledge based economy.
1.
THOUGHTS ON THE QUEST FOR REGIONAL EXCELLENCE
IN A GLOBALISED KNOWLEDGE-BASED ECONOMY
Introduction
Chapter 1 Strategies based on Regional Business Demand
Chapter 2 Regional Assets
Chapter 3 Business Support Service Provision
Chapter 4 Innovation in Public Business Support Services
Chapter 5 Investing in Support for Intangible Equity to Secure Regional
Comparative Advantages
Chapter 6 Value Chains: A Business Support Services Toolkit
Chapter 7 Regional Marketing
Chapter 8 Preventing the Risk of Globalisation Casualties
INTRODUCTION
Economic globalisation triggers different reactions among stakeholders depending
on whether they perceive this trend as delivering advantages or disadvantages.
There are many examples of Heads of States, Ministers and regional Presidents who
rush to emerging countries to sell technology “made in” their country only to
complain the minute they are back, about exponential imports of cheap
convenience goods from the exact same emerging economies. Sometimes they
oppose hostile takeover bids on national companies considered to be of strategic
importance – even if all they sell is yoghurt – even as they celebrate successful
takeovers of foreign companies by national firms.
Also widespread are the examples of (consumer/worker) citizens who sing the praise
of hard discount retailers (ALDI, LIDL, Walmart) and capital goods (cameras, cars,
textile, clothing, etc.) produced in emerging countries while simultaneously
deploring the loss of their jobs to relocations and closures of production units whose
competitive edge is partly or completely gone.
One consequence of economic globalisation that is felt in all regions is that it forces
the latter to develop a unique competitive advantage in an ever-changing
environment. This is only possible in regions that both promote an environment which
supports entrepreneurship and innovation and have the necessary critical mass to
deliver synergies among key stakeholders.
2.
In regions – i.e. where citizens live and politicians are rooted –, harnessing
globalisation is increasingly critical in order to (i) predict and anticipate opportunities
and threats; (ii) manage profit and (iii) predict the social cost of restructuring.
To this end, the quest for regional excellence has become an essential precondition
of regional survival.
Looking for regional excellence calls for a number of changes affecting mentalities,
strategic choices, necessary methodologies as well as the typology of support to be
provided to potential users, the financial resources to be earmarked and even
possibly the segmentation of beneficiaries and the evaluation of action to be
undertaken.
The main determinants of regional excellence include:
Human resources: education, training and creativity;
Technological resources: infrastructure, interfaces and the ability to develop
and leverage knowledge;
Financial resources: loans, guarantees, venture capital;
Social assets: formal and informal networks built with key public and private
local, national and international stakeholders;
Good governance and leadership;
Physical capital.
It is possible to allocate these determinants to four broad categories: human capital,
infrastructure, finance and creativeness, whose various components are listed in the
table below:
Human Capital Infrastructure Finance Creativeness
Education
Training
Talent
Leadership
Adaptability
Risk acceptance
Physical
Educational
Knowledge-related
Intangible
(networks,
interfaces)
Subsidies
Loans
Guarantees
Venture capital
Knowledge
Innovation
Entrepreneurship
Culture
Design
As for the typology of potential users, it can be segmented according to the
differences between:
local players without international ambitions;
global players;
medium-sized regional players for whom internationalisation – and hence
innovation – must become an asset, failing of which they will stagnate or
disappear in the long run.
Therefore, public policies need to allow small businesses – and in particular
innovative start-ups – to grow and become leading medium-sized companies
(employing at least 50 and yielding a minimum turnover of €25 million) in their niche
market.
Thus, the challenge of regional excellence consists in generating a constant flow of
new ideas and unique comparative advantages both at entrepreneurial level and
in terms of services that support the fabric of the regional society and economy. This
requires technical, technological, business model, social, partnership and
administrative innovation.
3.
What is meant by administrative innovation is:
Constant improvements in governance;
A contract-based approach to the tasks entrusted to intermediary bodies. The
era of an “obligation of means” is over and must make way for an “obligation
of result”. Such contracts should cover a period of at least five years;
The definition of business support strategies that are geared toward the future
(innovation, RTD, training, exports, development of new businesses and support
for business growth from small to medium-sized) rather than the preservation of
existing activity (employment support) and the advent of an approach that is
based on an analysis of demand for – rather than a diversification of the range
of – business support services;
Recourse to loans and financial engineering instead of grants;
Improved regional marketing.
Regional strategies must rest on the premise that their aim is to increase the
profitability of regional businesses. In some cases, a prerequisite to achieve this will
be to support the development of new businesses while in others it will be to
anticipate the collateral damage caused by globalisation.
This means that to a greater extent than in the past, the measures to be
implemented need both to be tailored to the needs of regional businesses and to
deliver as much added value as possible for them. This in turn signifies that the
development of regional strategies needs to change completely from supply- to
demand-oriented. The obvious objection to this is that support service provision is
based on expressed support service user needs. However, it is worth noting in this
respect that the needs expressed by the latter are often subjective or incomplete or
motivated by passing fashions (science parks, incubators, clusters, one stop shops,
etc.).
In future, businesses in the developed world (EU, US, J apan, etc.) will be evaluated –
and sometimes punished by the market – in terms of their ability to generate added
value rather than the number of jobs their create of retain. Indeed, company stock
prices tend to go up whenever restructuring plans carrying job losses are announced
because operators expect productivity gains as a result of such plans.
Public authorities too, will need to develop – in addition to market innovation
strategies – services aiming to help turn around those businesses that have become
the casualties of globalisation. In this context, there is a need for more effective
account to be taken of the support requirements of small businesses and crafts.
Regions will need to acquire the necessary tools to allow all regional stakeholders –
including themselves – to accurately determine the exact location of their real
competitors. Such perceptiveness will in many cases help eliminate reluctance to
cooperate locally. To this end, it is important to be able to identify existing local
competences and harness them to deliver synergies or leverage market
opportunities that have the potential to be shared by regional businesses.
4.
CHAPTER 1 STRATEGIES BASED ON REGIONAL BUSINESS DEMAND
The only way to improve business profitability is to increase profits, which in turn
requires altering prices or sales.
The diagram below progressively needs to become the frame of reference for ex
ante evaluation of measures contemplated to support existing businesses or
stimulate the development of new ones. Indeed, it seeks to describe the resources
needed to achieve the profit and growth objectives that drive all businesses.
Figure 1: Matching business aims and support services
• Process
innovation
• Business
model
innovation
• Outsourcing
• J ust in time
delivery
• Participation
in networks /
clusters
• Technological
innovation
• Value chain
innovation
• Branding
• Process
innovation
• Business
model
innovation
• Value chain
innovation
• ISO 9000
• Branding &
marketing
• Design
innovation
• Technological
innovation
• RTD
• Access to
knowledge
• Economic
intelligence
• Access to
finance
• Access to
consulting
services
• Technology
transfer
• IP Protection
• Proof of
concept
• Talent,
creativity &
design
• J oint
development
• Business
model
innovation
• Participation
in networks
• Economic
intelligence
• Skills,
languages &
marketing
• Internationa-
lisation
• Technological
innovation
• Integration of
new
technologies
• RTD
• Talent &
creativity
Profit
Growth
margins
turnover
costs prices quality
New
products
New
markets
Market
niches
5.
Worth recalling is that in theory, the recipes of business success are straightforward:
cost control, regular product range renewal (i.e. constant product, process and
business model innovation), distribution and attention to market (design,
functionality, price perception, etc.) and careful marketing expenditure. However, a
German study
1
clearly shows that despite this apparent simplicity, 93% of innovative
business projects fail. The causes of such failures are multiple: development
strategies focusing exclusively on technological aspects, lack of market knowledge,
inadequate product characterisation, over-engineering, etc.
Obviously, the above figure needs to fit in a more global context addressing the
framework regional conditions that have to be in place for business activities to
flourish and unique competitive advantages to emerge for regional players.
Figure 2: Regional Framework Conditions for Entrepreneurship
Entrepreneurs Agile public
Innovators services
2
Business angels Intermediary
Consultants organisations
Talent and Basic
competences infrastructure
3
Venture capital and Community-
Finance based business
Technological infrastructure
4
Capital
Social capital
(networks and clusters)
University/research
centre/business interfaces
Triple Helix +(*)
Public Private Education
sector sector and RTD sector
1
Les Echos, 7 February 2007, quoting IAI survey of 1,200 companies.
2
Entrepreneurship and SME supportive framework conditions.
3
Water, energy, transport, RTD, ICT, quality of life, education, health.
4
Nurseries, incubators, industrial parks, technological parks, technical/ technological centres.
* Private investors have been added to the three traditional components of the Triple Helix concept.
Entrepreneurship
Capital
Governance
Intangible
regional capital
Tangible regional
capital
Business
Innovation and RTD
capital
6.
Expressed in operational terms, acceptance of these frames of reference for
regional development requires both provision of strong value-added support
services and a new approach to the definition of the regional development vision.
According to a study conducted in Belgium
5
, the expected outcomes of company
managers when using business support services include:
Improved product or service added value;
Business modernisation;
Business differentiation v. competitors;
Adjustment to business environment (i.e. competition) changes;
Reduced activity-related risks;
Optimised internal business organisation;
Increased flexibility;
Diversified activity;
Reduced costs;
The ability to innovate;
Procurement of information and expertise.
The findings of this survey show a strong correlation with the items listed in Figure 1
above.
Public intervention to improve the take-up or solvency of support service demand
emanating from local business is mapped out in the diagram below.
Figure 3: Public policies in response to the demand for business support services
5
Services aux entreprises et développement régional (“Business Support Services and Regional
Development”), Camal Gallouj, Fabienne Leloup, Bernadette Mérenne-Schoumaker and Laurence
Moyart, De Boeck, 2006, p. 182.
6
PMEKMO.be, 05 J anuary 2007. According to IBM, the term Business Intelligence has two meanings:
Applications and technologies used to access and process data;
The availability of information that supports strategic decision-making.
Subsidies for
user
companies
Support for
establishment
of RTD and
innovation
centres
Support for
clusters and
networks
Support for
economic and
business
intelligence
6
Grants for
in-house
development of
competences
and investment
in RTD
Support for
interfacing
and
intermediary
bodies
Public authorities
7.
CHAPTER 2 REGIONAL ASSETS
As illustrated in Figure 2 above, the main assets of regions are:
Its industries;
Talent;
Infrastructure;
Entrepreneurs;
Venture capital;
Networks
Specific regional productive and cultural features.
Some of those assets are natural and others cultural; many are developed or
stimulated by the private or public sectors or even possibly through public-private
partnerships.
Self-evidently, it is the combination of these assets rather than their sole presence or
juxtaposition in a geographical area that allows regions to acquire the necessary
competitive advantages.
These days, regional assets must be appraised in light of a number of challenges
including the opening up of markets, economic globalisation and the competitive
advantages derived from the utilisation of knowledge.
Worth remembering is that upon analysing the impact of the Single Market or of the
successive EU enlargements, the matrix below (see Figure 4) was widely used to try
to determine how sensitive the fabric of the regional society and economy was to
the opening of its market to competition from the entire Community.
Based on this matrix, it is possible to conclude that the more heavily reliant the
make-up of the regional society and economy is upon companies operating in
sectors that are protected by non-tariff barriers and may therefore disappear when
regions are mainstreamed into the Single Market, the more likely it is that they will
experience at least some of the side effects of market liberalisation.
There is a need to develop a similar matrix today to evaluate how vulnerable the
main regional industries are to globalisation or an acceleration of innovation.
By means of such an analysis, individual regions may be able to determine the
potential vulnerability of their social and economic fabric to competition based
either or prices/ costs or on innovation. The model of this analysis may for instance
rest on the exposure of individual industries to globalisation. Figures 5 and 6 below
illustrate the matrix developed by McKinsey in their report entitled Donner un nouvel
élan à l'industrie en France.
8.
Figure 4: Spotting sensitive industries
7
: a tentative typology
INTRA EEC
8
PENETRATION RATE
I
M
P
A
C
T
O
F
N
O
N
-
T
A
R
I
F
F
B
A
R
R
I
E
R
S
L
O
W
Low High
Potash and phosphate salts
Salt mining
Other minerals and peat
Construction materials manufacturing: terracotta,
cement, lime, plaster
Construction materials: concrete, cement, plaster
Structural steelwork
Metal tools and end articles
Soap, detergent, perfume
Watches, clocks, spare parts
Cattle slaughter, meat preserves
Fruit and vegetable preserves
Grain processing
Bakery, pastries, biscuits
Sugar
Feedstuffs
Miscellaneous foodstuffs
Tobacco
Leather and assimilated articles
Wooden furniture
Paper processing, cardboard
Printing and related industries
Publishing
Artificial fibres
Optical instruments, photographic equipment
Vegetable and animal fats
Fish and other seafood preserves
Dairy industry
Starch-based products
Wool industry
Cotton industry
Carpets, linen and waxcloth
Footwear
Clothing and accessories
Clothing and other textile industries
Rubber industry
I
N
T
E
R
M
E
D
I
A
T
E
Glass industry
Ceramics industry
Agricultural machinery
Tools and machine tools
Industrial food and chemical machinery
Aircraft design, construction and repairs
Car manufacturing and assembly
Cycles and motorcycles
Household chemicals
Consumer electronics, radio, TV
Electric household appliances
Lights and lighting equipment
J ewellery & goldsmithing, stone silversmithing
Games, toys, sports equipment
H
I
G
H
Coppersmithing
Mining and steel industry materials
Ship building and maintenance
Railway equipment
Medical, surgical and orthopaedic equipment
Pharmaceuticals
Pasta
Cocoa, chocolate, confectionery
Wine and wine-based products
Breweries, malting industry
Still and fizzy waters
Office and data processing equipment
Telecommunications, computers, electro-medical
equipment
7
Intermediate goods are not included in this matrix
8
The eight countries covered (B, D, F, I, UK, NL, L and DK) represent 91% of Community GDP (1985).
9.
Figure 5: Five groups of industries with specific competitive issues
Figure 6: Examples of industries per group
Competing
through Cutting-edge technology industries
innovation R&D: long cycles and heavy budgets
Competing through product innovation and intellectual property
Industries in which the brand is key and supported by innovation
in product aesthetics and design
Proximity to key markets in order to understand and set trends
Industries in which production must be close to market (due to
prohibitive transport costs or high degree of logistical complication)
Competing mostly on cost (innovation may exist for production
technology)
Industries facing both quality and price competition in product
innovation
Variable – but declining – need for close markets (R&D and
product) among industries
Industries in which competition is mostly price-driven
Structural disadvantages of France
Competing Closeness to market is no longer a must, at least when it comes
through costs to production
Source: McKinsey
INNOVATION
LEADERS
BRANDED
INDUSTRIES
CONTINENTAL
INDUSTRIES
UNSTABLE
INDUSTRIES
HIGHLY-
EXPOSED
INDUSTRIES
Competing through
innovation
Competing
through costs
Source: McKinsey
INNOVATION
LEADERS
CONTINENTAL
INDUSTRIES
UNSTABLE
INDUSTRIES
HIGHLY-
EXPOSED
INDUSTRIES
Commercial aeronautics, defence High-tech medical and scientific
and aerospace equipment
ICT(semiconductors) Railway construction
Nuclear technology
pharmaceuticals (excl. generic drugs)
BRANDED
INDUSTRIES
Home equipment (high-end) Perfume, cosmetics
luxury (leather)wear Publishing
Pleasure boats
Chemicals, rubber and plastics (basic) Printing
Fuel refining Soap and detergents
Gas and power production Water production and distribution
Mechanical capital goods (basic) Wood and paper
Mineral products (basic) Meat and dairy, grain processing, drinks
Car and 1
st
tier equipment manufacturers Steel and downstream aluminium
Communication networks Electrical equipment (medium voltage)
Specialty chemistry
Mechanical equipment goods (specialties)
2
nd
and 3
rd
tier car equipment
Small electrical equipment
Clothing and leather (basic)
Consumer electronics
Home equipment (medium- and low-
end)
10.
The assumption of the McKinsey model is that regions whose social and economic
fabric mostly consists of businesses operating in industries exposed to strong cost-
driven competition will increasingly be confronted with restructuring and
consequently will need to develop appropriate strategies to enable local businesses
to build their capacity to generate innovation and/or strong brands.
In this context, the regional ability to encourage the development of entrepreneurial
growth companies (EGCs or gazelles) becomes a key factor of regional
competitiveness. Indeed, such businesses are often geared toward international
operations right from the start. Thus, innovative businesses tend to better survive
globalisation than those with declared national or regional ambitions.
Several studies argue that comparatively more newly-developed US than EU
businesses achieve market dominance in their industry. It appears than in 2000,
those businesses from among Business Week
9
’s Top 1000 that were set up after 1980,
64 were US companies while only 9 were European. Of the 64 US businesses,
45 operated in just three industries: (i) electronics & computers; (ii) telecom; and (iii)
business services.
9
A Policy for Industrial Champions: From picking the winners to fostering excellence and the growth of
firms. Industrial Policy and Economic Reform Papers N° 2
11.
CHAPTER 3 BUSINESS SUPPORT SERVICE PROVISION
It is possible to discuss business support service provision by examining the following
typologies of market segmentation according to:
Business categories:
growing businesses;
start-ups;
entrepreneurial growth businesses;
businesses without much potential for growth;
businesses undergoing a transition;
Business support services addressing different stages of the business lifecycle:
(pre-)commercial stage of innovative concept development;
(non-)financial services;
infrastructure or intangible services;
individualised or shared services;
basic or high value-added services;
Categories of users involved in delivery mechanisms:
public authorities;
intermediary bodies;
universities, research centres;
private businesses;
Stage in the development cycle of a new product or service:
definition;
proof of concept;
initiation;
development/Growth;
maturity;
Delivery methodology:
pilot projects, one shots, multi-annual programmes;
calls for tenders or desks/centres;
subsidies, repayable short-term loans, guarantees, equity participation, loans;
direct or indirect investment or consultancy support;
Support service aims:
supporting the development of low value-added businesses;
supporting the development of innovative businesses;
supporting the development of entrepreneurial growth businesses;
supporting the development of spin-outs/offs;
supporting local infrastructure (nurseries, incubators, enterprise real estate,
industrial or tech parks, technical centres, etc.);
supporting technology transfer and the utilisation of RTD outcomes (patents,
licensing, etc.);
supporting the coordination of business networks (clusters, clubs, etc.);
supporting organisation, market-driven or human resource-related techno-
logical development;
12.
Support service quality:
basic touch-and-go (information) v. specific (advisory) support services;
high value-added services;
Nature of available support:
financial: subsidies, loans, guarantees, equity participation, tax relief, etc.;
other: advice, auditing, training, etc.
These days, the aims of support service provision – whether public or private – must
include:
reducing the cost of accessing knowledge, research and innovation, whether in
terms of capacity, ability or even effort-sharing;
increasing access to technology and knowledge;
shortening product/service time-to-market;
improving the recruitment of talent and trained staff;
facilitating access to sources of finance and venture capital;
reducing the risks of developing new products and services, marketing new ideas
and even leveraging research outcomes;
encouraging medium-sized businesses to grow and develop in-house research
and development capacities;
reducing the disadvantages of SME status including size, absence of critical mass,
distrust among public procurement contract adjudicators, asymmetrical
information (v. principal contractors or equity investors), etc.;
consolidating barriers of access to regional markets – while complying with fair
competition and State aid rules;
facilitating the incubation of innovative businesses
stimulating fast growth among gazelles (entrepreneurial growth start-ups).
Figure 7 below illustrates how public authorities can encourage SME take-up of
support services.
13.
Figure 7: Public policy to improve take-up of support services
Aims
Means
Incubators
Technological parks
Technical centres
Cofunding of joint
activities including in
RTD&I
Innovation vouchers
Shared-cost RTD
projects
Repayable short-
term loans
Shared stalls at
exhibitions
Premiums for
recruitment of
researchers
Investment readiness
programmes
Contribution toward
coaching and
monitoring costs
Training vouchers
One stop shops
“No wrong
door” system
Technology
transfer centres
RDAs, CCIs, etc.
Clusters
Encouraging the
development of
local
infrastructure
Encouraging
membership of
clusters
Encouraging
take-up of high
value-added
service provision
Development of
and support to
intermediary
bodies
Public authorities
14.
CHAPTER 4 INNOVATION IN PUBLIC BUSINESS SUPPORT SERVICES
In recent years, changes have been in evidence in public business support service
design. An illustration of these is provided in Figure 8 below, comparing so-called
traditional and new intervention categories.
Figure 8: Innovation in public business support policies
Traditional types of interventions New types of intervention
Awareness and legal framework
Individualised services
Information services
Grants
Top-down approach based on the range
of available public support services
Generic provision (“one-size-fit-all”)
Economic and technological intelligence
Identifying and harnessing businesses’
potential
Shared services, networking, clusters
High valued-added advisory services
Access to finance and venture capital,
investment readiness
Bottom-up approach based on a careful
analysis of business demand
Tailored provision for individual market
segments
It seems however that the trend described above has not peaked yet. Indeed, the
following shortcomings are still in evidence among public business support services,
which severely constrain the effectiveness of regional business support service
provision systems:
excessively fragmented provision due to a plethora of intermediary bodies;
absence of integrated provision, of a vision as well as of any analysis based on
the public intervention value-chain (see Chapter 6);
poor interpretation and use of the one-stop-shop
10
concept and lack of
integration of the no-wrong-door concept
11;
absence of investment readiness programmes addressing the lack of symmetry
between businesspersons and investors, adjudicating authorities, grant
influencers, RTD and university circles, etc.;
lack of systematic evaluation of public service delivery effectiveness and
opportunity costs;
mitigated outcomes of programmes focusing on EGCs (entrepreneurial growth
companies). Too many companies in incubators remain medium-sized (5-6 staff
and a turnover below €5 million);
inadequacy of business retention schemes;
lack of adequate projects to systematically dig up entrepreneurial and
innovative business concepts lying dormant in research labs, universities and
medium-sized regional companies;
10
One Stop Shops simply represent a concept whereby foreign (i.e. non local) businesspersons or
investors can perform in a single place all procedures required to set up and legally operate a
commercial enterprise
11
The aim of the “no-wrong-door” concept is to leverage a joint needs evaluation system to guide
businesspersons to the specialist regional organisations that are best equipped to advise them.
15.
overrepresentation of grant-based provision v. loans, guarantee schemes and
adequate seed capital funds and investment capital;
lack of support mechanisms for applied research, protection of intellectual
property rights and encouragement of branding
12
and design;
embryonic public-private partnership practice when it comes to business
support services as well as RTD and innovation infrastructure;
problematic delivery of support services that match new strategic business
attitudes including lean manufacturing
13
, joint development and drastic
rationalisation of subcontractor pools.
There is therefore a need for public authorities to better harness the three basic
segments of the business support service provision market, i.e.:
adjusting offer to demand;
improving demand quality;
matching offer with demand.
Illustrations of this are provided in Figures 9-12 below, which try to clarify the nature
of intervention according to each of the three segments above.
Figure 9: Non-financial support service provision
Information, economic and technological
intelligence
Corporate real estate, technical centres
Auditing and diagnostics
Mentoring and coaching
Protecting and leveraging intellectual
property
Internationalisation
Promoting innovation
University/research centre interfaces
Business retention
Training
12
Branding is either collective (made in …, geographical indications of origin) or individual (brands
owned by businesses).
13
The method implemented by Toyota: reducing stocks and outstanding debt, subcontractor
accountability, J IT, etc.
Support service
provision
16.
Figure 10: Financial support service provision
Tax relief
Risk capital (Business Angels,
Seed and venture capital,
mezzanine, spin-outs)
Finance (loans, grants, guarantees,
repayable short-term loans, etc.)
Access to expertise
Figure 11: Improved demand
Networking
Investment readiness
Training to take-up external expertise
Figure 12: Matching offer with demand
Incubation
Interface
Clusters, competitiveness centres
Mentoring and coaching
Diagnostics
Local infrastructure
Worth noting is that in future, universities will come to play an increasingly important
role in all three of the above segments of the business support services market.
Indeed, they will be called upon to:
train talent;
promote entrepreneurship;
acquire consultancy expertise;
generate, leverage and transfer knowledge;
manage RTD and innovation infrastructure (pre-incubators, laboratories, etc.);
participate in support schemes (clusters, interfaces, seed capital funds, etc.);
enhance public-private partnerships (PPPs);
attract and retain talent;
contribute to regional influence and marketing abroad.
Financial support
provision based on
the principle “All
money is not the
same”
Improved demand
Intermediary
bodies:
facilitators,
catalysts,
“no-wrong-door”
17.
CHAPTER 5 INVESTING IN SUPPORT FOR INTANGIBLE EQUITY AS A SOURCE OF
REGIONAL COMPARATIVE ADVANTAGES
The knowledge-based economy rests on intangible assets. Indeed, company value
– including market capitalisation – no longer necessarily depends on physical
production tools. These days, value is generated by a number of intangible assets
including brand, innovation capacity, closeness to customers and patent
exploitation.
This realisation presents public authorities with challenges belonging to three
different categories:
a) development of programme or service strategies to stimulate business
investment in intangible assets;
b) investment in the reinforcement of businesses’ own intangible assets;
c) stimulation of regional knowledge production, utilisation and
internationalisation.
For memory, intangible business assets include:
Human assets:
- staff education and training levels;
- support for staff in-service training;
Knowledge assets:
- RTD activities;
- patents and other rights deriving from intellectual property: brands, designs,
copyright, trade secrets;
- innovation capacity (product, process and business model);
- licences, franchising agreements;
- software;
- expertise;
- knowledge utilisation;
Process assets:
- engineering;
- governance;
- database management;
- remuneration of innovative ideas;
- production or import quotas;
Customer assets:
- marketing and distribution networks;
- customer-related services;
- customer loyalty plans or client/supplier lists.
Worth underscoring is that a number of companies are “going intangible” is the
sense that they no longer own any real estate (Apple, Accor Hotels, Mariott, etc.).
The resources these companies free up in doing so are invested in branding, design,
management, international marketing, intellectual property and know-how
activities that all generate added value. Traditional business support schemes will
progressively need to adjust to the requirements of this new business model.
Public authorities can help businesses grow their intangible assets by taking action in
a number of areas, e.g.:
18.
technological, commercial and competitive watch and intelligence;
systems to strengthen creativeness, design and different intellectual property
protection tools;
innovative public policy delivery and evaluation methods;
know-how regarding the establishment and coordination of networks and
public-private partnerships;
transnational contacts;
decompartmentalisation of administrations, private sector, universities and
intermediary bodies;
provision of permanent training tools in tune with strategic regional industries;
ability to coordinate observatories and foresighting efforts;
designations of geographical origin.
To do this, they can rely on interfaces, industrial competence centres, industrial
prototyping and product development and testing facilities as well as intangible
assets utilisation centres.
It is also in the interest of public authorities to develop their own intangible assets,
including notably:
the quality of their governance;
their social capital;
partnerships with other regions;
their marketing and image built with potential “customers”;
their attractiveness and quality of life;
their entrepreneurial and innovation culture;
their ability to enter into public-private partnerships;
the agility
14
of their public administration.
In the early 21
st
century economy, the most precious forms taken by intangible
assets are knowledge and talent. Like businesses, individual regions will from now on
be able to harness their ability to generate or leverage knowledge for the purpose
of regional differentiation.
Figure 13 below seeks to introduce the mechanisms and conditions needed to
develop or leverage knowledge within businesses. Understanding this process should
enable public authorities to deploy support services that are appropriate, able to
reinforce the competitive advantages of businesses or the regional attractiveness
for knowledge-intensive companies.
14
According to consultants A.T. Kearney, the six factors of administration / public body agility are:
1. Organizational capacity allowing change; 2. Leadership: value shared by employees and
stakeholders; 3. Culture and values: capturing and sharing knowledge and applying what they
have learned to achieve an overall vision; 4. Customer services: cost-effective channels to deliver
services and offer customer incentives to use the services; 5. e-Government – using technology to
drive transformation; 6. Performance management.
19.
Figure 13: Mechanism to develop and leverage business knowledge and potential
backing from public business support services
Internal External Internal External
(“in house”)
Reinvestment
of profits or
turnover
Grants
through
public RTD
programmes
RTD contracts
J oint
research
Innovation from
knowledge
developed in-
house
Innovation from
technology
transfer
licensing
patenting
joint ventures
joint
development
Through
marketing of
knowledge
developed in-
house
Utilisation unit
licensing
patenting
Expertise in
intellectual
property rights
Human
resources
Access to
infrastructure
Technological
intelligence
Financing
Intellectual
property
rights
Networks and
partnerships
In-house
innovation
culture
Financing
Intellectual
property
protection
Economic
intelligence
Access to
prototyping
centres
Financing
Expertise in
intellectual
property
rights
Technological
and economic
intelligence
T.T. interfaces
Clusters
Interfaces
International
cooperation
Business and
knowledge
GENERATION
UTILISATION
20.
Figure 14 below illustrates the components of the three innovation process “circles”,
i.e. research, innovation and market. Public authorities can have a major impact on
the emergence of interactions between those three circles for the purpose of
ensuring that the outcomes of research activities actually deliver products and
services that are accepted by the market.
Figure 14: The components of the three innovation process “circles”
Sources: Dümmler 2005, Crédit Suisse Economic Research, Economic Briefing N° 44
There is a need for innovation in delivery to back the evolving paradigm of support
service provision described above.
Thus, innovation can take one of the following forms:
use of public procurement to steer innovation;
organisation of investment readiness sessions;
use of intermediary body systems based on the “no-wrong-door” principle
reinforcement of platforms of key organisations and interfaces between them.
In theory, effective delivery of innovative approaches of this type is possible through
a clustering policy, provided that basic cluster features are reflected, including:
good governance;
maximisation of resources;
SWOT analyses of industries to be clustered;
critical mass of players;
effective cooperation between the public and private sector and knowledge
development or utilisation centres.
Innovation process
Degree of research
independence
Research
circle
Introduction,
utilisation,
commercial
maturity
Technology
push
Demand
pull
Implementing
circle
Marketing
and sales
Invention
Research
Concept
Discovery
Detailed product
design, prototype
testing
Re-design and mass
production, process
reorganisation
Current
techniques
and
processes
21.
CHAPTER 6 VALUE CHAINS: A BUSINESS SUPPORT SERVICES TOOLKIT
Since the mid-90s, the concept of benchmarking has become a standard tool to
compare public policies aimed at supporting economic development. However,
benchmarking very often appears to be a ranking method rather than a tool to
analyse and improve project and programme effectiveness. Furthermore,
benchmarking public policies cannot reckon with local contexts and environments.
In addition, it is becoming increasingly clear that it is the integrated approach itself
as well as its managers that make the difference rather than individual chain links.
For these reasons, there is a growing belief that public authorities must focus equal
attention on an analysis of the different value chains that support the various
regional development policies and on a comparison of their respective practices
with their peers’. Indeed, analysing value chains has the following advantages:
identifying interactions between service value chain links and their weak links;
identifying environmental weaknesses as well as key framework conditions of
effective public policy delivery;
understanding delivery mechanisms;
identifying regional flexibility and governance.
Below are reproductions of value chains addressing the following aspects of public
business support policies:
regional competitiveness value chain;
regional SME finance value chain;
regional RTD-intensive cluster value chain;
regional innovation value chain;
regional entrepreneurship value chain.
In addition to those five regional value chains, three examples are provided of
industry-specific value chains developed by Deloitte Consulting for the Silicon Valley
Partnership. Worth mentioning with respect to the latter is the pervasiveness of
“talent” as a parameter.
Also worth mentioning is that there is a need for any regional value chain analysis to
include consideration of the four parameters below:
a) The separate links of individual value chains;
b) The prerequisites of value chain deployment;
c) Delivery mechanisms;
d) Tools.
It is useful to dwell on the prerequisites of value chain deployment. Indeed, it is
crucial to ascertain the strengths and weaknesses of public, private and
intermediary players (triple helix), to evaluate their cooperation methods and to
jointly work out a set of shared objectives and vision for regional or industrial
development.
R
R
e
e
g
g
i
i
o
o
n
n
a
a
l
l
C
C
o
o
m
m
p
p
e
e
t
t
i
i
t
t
i
i
v
v
e
e
n
n
e
e
s
s
s
s
V
V
a
a
l
l
u
u
e
e
C
C
h
h
a
a
i
i
n
n
I nfrastructure Basic Activities Training Talent Finance Possible University Role
• Training centres
• Technology transfer agencies
Entrepreneurship training,
general advice and support,
spin-offs, technology transfer
Culture of innovation and
Awareness programmes
Entrepreneurship training
• Technology centres
• Innovation centres
• University/SME interfaces
• Laboratories
• Prototyping
Proof of concept, leveraging the
outcomes of research and
innovative concepts
Assistance with registering new
businesses
First advisory stop shops
Business consulting
Subsidy programmes, (pre-)
seed and venture capital
Spin outs and spin-offs
Creation of laboratories
Provision of expertise
University-based seed capital
funds
• industrial parks
• Incubators
• Science parks
• Provision of premises on
flexible lease terms
Access to start-up equity and
business infrastructure
Investment readiness schemes
Entrepreneurship advisory
programmes
Bank loans
Subsidy programmes
FFF (Friends, family, fools; i.e.
co-founders)
(Pre-)seed
Business angels
Venture capital
Guarantees
Leasing
Micro-credits and other forms of
start-up capital
Mezzanine
Incubators
Technological parks
Access to initial clients and
markets
Tutoring
Providing assistance to
entrepreneurs in overcoming
the “valley of death”
Competitiveness support
schemes
Access to growth capital and
advanced support services to
introduce innovation
Advanced support services
Advanced advisory services
University/business
interfaces
• Clusters Involvement in clusters
Global market player
Needs-oriented auditing
Venture capital, IPO
F
F
i
i
n
n
a
a
n
n
c
c
i
i
a
a
l
l
V
V
a
a
l
l
u
u
e
e
C
C
h
h
a
a
i
i
n
n
Banks
Guaranties
Leasing
Factoring
Infrastructure:
business angels networks,
incubators, etc.
Advice: investment
readiness, tutorship
Expertise:
professional fund
managers
Own resources
FFF
VC
Loans on trust
Pre-seed
Loans for inventors
Reimbursable advance
payments
University spin off
Proof the concept
IPO
BA
Corporate
Venturing
Seed
capital
FFF : Family, Friends, Founders
BA : Business angels
VC : Venture capital
IPO : Initial Public Offering
Grants
Micro-credits
Other public support
Prerequisites
Tools
Mezzanine
Pre-requisites Triple Helix
Source : EURADA Round Table of Practitioners in Economic Development and RIC Expert Group
V Va al lu ue e c ch ha ai in n
R Re es se ea ar rc ch h I I n nt te en ns si iv ve e c cl lu us st te er r
Awareness
and
Investment
readiness
Organisational
infrastructure
Private,
Public and
Academic RTD
infrastructure
Market-
driven
and
applied
research
activities
Protection of
intellectual
property and
availability of a
technology
transfer
organisation
Entrepreneurial
training and
culture.
Consultancy
and added
value support
services
Spin offs.
Spin outs.
Commercialisation
of research
outcomes
Public knowledge
Access to
funding
sources
Proof of
concept
Market
J obs,
Incomes
Assets
Human capital
Technological
capital
Financial and
equity capital
Social capital
Infrastructure
Public sector
Interinstitutional collaboration
Governance
Leadership
Vision
Attractiveness
Investment willingness
Private sector
Capacities
Critical mass
Sound financial enterprises
Investment readiness
Engagement in a research regional
agenda
Intermediaries
Quality infrastructure
Competences
Capability
Networking
and
clustering
Implementation
- Consensus building
- Strategy design to support research intensive firms and commercialization of research results
- Delivery mechanism of the strategy
Skills. Training,
Education.
Placement of
students into
businesses
Workforce
development
RTD INSTRUMENTS OUTPUTS
S
S
u
u
p
p
p
p
l
l
y
y
c
c
h
h
a
a
i
i
n
n
f
f
o
o
r
r
i
i
n
n
n
n
o
o
v
v
a
a
t
t
i
i
o
o
n
n
i
i
n
n
S
S
M
M
E
E
s
s
Preconditions
• Awareness
• Intermediaries
• Profitability
• Public support
Innovation
Awareness
& Audits
Market
pressure
Outsourced
RTD
In-house
innovation
Risk shared
innovation
Seed capital
Proof of
concept
IPR
protection
Investment in
human
capital
Productive
investment
Market
Tools
• Financial schemes
• Technology & technical centres
• IPR supports
• Clusters
• SME – Universities interface
Technology
transfer
Incubation
S
S
u
u
p
p
p
p
l
l
y
y
c
c
h
h
a
a
i
i
n
n
F
F
o
o
s
s
t
t
e
e
r
r
i
i
n
n
g
g
E
E
n
n
t
t
r
r
e
e
p
p
r
r
e
e
n
n
e
e
u
u
r
r
s
s
h
h
i
i
p
p
• Awareness campaigns, communication
• Reception of potential business developers
• Assistance with drafting business plans
Culture
Awareness
among the
general
population
Validation
of the
business
concept
Assistance
with the
incorpo-
ration
process
Overcoming
the Death
Valley
Support
growth
phases
Taking up
innovation
• Training and management
• Advisory services
• Access to finance
• Pre(incubation)
•Access to enterprise real estate
27.
28.
29.
CHAPTER 7 REGIONAL MARKETING
Another consequence of economic globalisation is to exacerbate competition
between regions when it comes to attracting mobile investment (FDI) and talent
(entrepreneurs, researchers, students, creative minds, etc.).
Due to its make up (infrastructure, quality of life, demography, proximity to markets,
education, skills, centres of excellence, formal and informal networks, range of
public grants, availability of business support services, etc.), regional provision
resembles the product range available in supermarkets. Therefore, regional
marketing officers are able to draw inspiration from retail marketing aims, messages
and techniques. Worth recalling is that as a matter of priority, retailers seek to
achieve:
awareness and image goals;
differentiation in a competitive environment;
delivery of a key message (e.g. Casino: Zéro souci pour ses clients, “zero
customer complaints”);
joint branding operations.
Worth highlighting is that the marketing budgets available to Belgian regions total
€4-6 millions, which hardly compares with those of just a few large French retail
groups in 2005, i.e. €172 million, €231 million and €58 million respectively in the cases
of Carrefour, E. Leclerc and Casino
15
.
Like retail marketing, regional marketing needs to be increasingly targeted. A
tentative list of the different regional marketing market segments could include:
1° “Exogenous” segment:
production units;
research centres;
logistics and distribution centres;
corporate headquarters;
support services (call centres, etc.);
2° “Talent” segment:
foreign students;
foreign researchers;
expatriates;
3° “Endogenous” segment:
potential business developers;
inventors.
Worth underscoring are FDI motivations, which are still to:
access markets;
control production costs;
access equity and talent;
access innovation and creativeness;
secure a stable environment.
15
Source: J ournal du Dimanche, 24 December 2006.
30.
Precious few joint branding efforts are in evidence in regional marketing to date,
even at cross-border or transnational level. A number of initiatives including Leuven
(B), Eindhoven (NL) and Aachen (D) within the framework of initiative ELAT as well as
Sendai (J PN) and Oulu (FIN) in the wellness industry will be worth monitoring.
Preferred regional marketing techniques among US firms
16
include:
meetings with business managers;
websites and the internet;
public relations and advertising operations;
specific events;
fairs and exhibitions;
direct marketing (direct mail);
advertising;
telemarketing.
The same study lists the following ideal features of regional marketing websites:
information on available grants;
information on demographics;
directory of available sites and buildings;
list of major local employers;
updated comparative data on the region and its competitors;
information on target industries;
information on educational establishments;
information on recent trends in the field of development;
pictures and maps of the region;
description of quality of life;
testimonials by local businesses.
Finally, regional marketing managers can be advised to reckon with the two
significant messages below:
regions are sources of innovation;
the reason why the value for money of regional operational expenditure is
good is regional specificity.
16
See Andy Levine, Corporate America Speaks.
31.
CHAPTER 8 PREVENTING THE RISK OF GLOBALISATION CASUALTIES
In light of the challenges described in previous chapters, there is a need to be
aware of the very real and objective danger that a number of players may be
excluded from or damaged by, economic globalisation.
The following three categories of threatened stakeholders are discussed below:
people;
businesses;
regions.
The above categories of threatened stakeholders are respectively characterised by
the key features below:
people: least skilled or integrated on the labour market;
businesses: least innovative, unspecialised, labour intensive and non-leaders on
their market segment (even on a purely local influence basis);
regions: the fabric of whose society and economy mostly consists of people and
businesses that are exposed or vulnerable when it comes either to regional
assets or their ability to generate a comparative advantage according to the
matrices presented in Chapter 2 above.
To minimise the negative impact of economic globalisation, regional public
authorities will need to further consider a number of factors including:
education and training;
meeting local needs;
social innovation;
local business retention and expansion.
While there is no need to explain the first two factors above, it is useful to briefly
dwell on the latter two.
“Social innovation” can be defined as including all innovation activities (relating to
products and services) motivated by a desire to meet the needs of people who are
left behind by market economy or labour market developments. It is different from
economic innovation in the sense that its aim is not necessarily to maximise profits.
This being said, social innovation also needs in the longer run to reduce the public
cost (incurred by national, regional and local government) of globalisation
casualties by offering them occupational and personal development opportunities.
However, this approach raises the issue of demand solvency as it will either cause
the welfare state to implode or public deficits to reach such proportions that
reducing social spending or privatising a growing share of existing public products
and services will become inevitable.
The term “business retention” is understood as applying to strategies aiming to avoid
or delay the closure or relocation of businesses operating in a region. The objective
of such strategies is early identification of the strategic weaknesses of individual
businesses or production units of international organisations to either correct them
by bringing new competitive advantages to bear or to work out a smooth
turnaround strategy for the region. Such strategies may also apply to existing SMEs
with a view to stimulating their growth, especially in rural areas.
32.
Below are a few suggestions for such strategies:
a) preventing potential threats of business closure or delaying the inevitable
process of their relocation abroad;
b) accompanying the relocation of non strategic operations and production of
non competitive components. This support may be crucial to the long-term
survival of businesses that are unable to reduce component costs. In this case,
the challenge is to determine what can be relocated without loss of quality or
negative impact on brand.
c) retaining in the region the decision centres and production activities of new
businesses incubated locally or developed from the outcomes of research
funded by regional authorities;
d) retaining talent;
e) improving regional attractiveness to new endogenous business developments in
the knowledge-based economy while proceeding with the search for new
foreign investment.
Regions may usefully look at the potential of micro-businesses and craftsmanship.
Indeed, the contribution of such businesses may be important in terms of jobs.
Furthermore, they operate in industries whose vulnerability to global competition or
relocations is fairly low.
33.
REFERENCES
Nicola BELLINI, Business Support Services. Marketing and the Practice of Regional
Innovation Policy. Oak Tree Press, 2002
Marc LHERMITE, Ernst & Young, Présentation aux conférences WIC La Baule.
Camal GALLOUJ et al., Services aux entreprises et développement régional, De
Boeck, 2006.
McKinsey Global Institute, Donner un nouvel élan à l'industrie en France,
October 2006.
Silicon Valley Partnership,
Andy LEVINE, Corporate America Speaks, The IEDC Economic Development J ournal,
Summer 2006.
Deloitte, IAS Plus Web Site.
Crédit Suisse Economic Research, Economic Briefing N° 44.
doc_464844908.pdf