Location matters for innovation. Over 33% of Research and Development (R&D) and around 25% of skilled employment occurs in the top 10% OECD regions (large-scale regions), and the top 10% OECD regions generate 58% of the patent activity (small-scale regions). Various measures of the benefits of innovation activities find that the strongest interactions take place in close proximity, within a radius of approximately 200 kilometres.
The increasing globalisation of innovation forces regions to think beyond their borders. The share of patents with a foreign co-inventor has doubled from 10% to 20% over the past three decades. The share of scientific publications with an international co-author has tripled from around 7% to 22%. Many firms innovate with international partners, but that rate is much higher for large firms than for small or medium enterprises. Firm collaboration with a cross-border neighbour can be a stepping stone to wider global reach. However, borders remain a barrier, even for neighbouring regions.
Cross-border policy efforts have previously focused on border barriers, but considering border opportunities is a newer approach. In the field of innovation policy, there are many unknown factors but also many possibilities. To support innovation-driven growth, innovation policy tools are an addition to the toolbox for cross-border regions.
What is the OECD project Regions and Innovation: Collaborating Across Borders?
The OECD launched the project Regions and Innovation: Collaborating across Borders in 2012 with six cross-border regions to investigate these issues. The findings draw extensively on six peer-reviewed case studies of cross-border areas that vary according to stage of development in regional innovation policy, settlement patterns (from capital cities to rural areas) and assets allocated to innovation. Four of these areas included one or both sides of borders involving Nordic countries.
The process began in September 2012 with a meeting of representatives from the case study areas to set project goals. These representatives completed an extensive questionnaire to gather background information. An intensive three-day mission was then arranged in each case study area. The OECD project team and peer reviewers from one other cross-border area then asked questions in meetings with public officials, university staff, representatives of firms and firm associations/cluster organisations, technology centres, and others involved in the innovation system.
A workshop in September 2013 brought together participants from the case study regions and cross-border areas to review what had been learned. The lessons from the case studies, other research and the workshop were published in a final report, which along with the individual case studies was published in December 2013.
Why and when is it advantageous to collaborate in cross-border innovation?
There are three main forms of international collaboration among regions that support research, product development and innovation:
- Cross-border collaboration (contiguous regions);
- Transnational collaboration (macro-regions); and
- Interregional collaboration (international, non-contiguous).
The project focuses on the first: contiguous cross-border areas that co-operate with neighbours seeking to take advantage of close proximity. This form is also closest to that of a functional region, where the economic development benefits are more tangible, and which is the most relevant for developing innovation strategies and joint policy instruments.
There are many reasons why it may be advantageous for public authorities to collaborate with a cross-border neighbour. Some regions seek to address issues of positive or negative externalities that cross the border, whether these are benefits from a science facility for industry in another region or tax arrangements to compensate for the use of cross-border commuting services. Another set of rationales reinforces regional efforts to overcome peripherality. Cross-border regions seek greater visibility with national policymakers as well as global competitiveness for firms and talent (Table 1).
Table 1. Benefits of cross-border collaboration in innovation
| Economic concept |
Driver |
Explanation |
| Economies of scale |
Critical mass |
Larger labour markets and access to wider business and knowledge networks to increase critical mass are characteristics associated with agglomeration economies.
|
| |
Political power |
Political power increases the recognition of areas of strength (or special needs) in regions that are far from capitals so they may better compete for resources from higher levels of government. |
| |
Specialised services |
Innovation support services can be more specialised and thus of higher quality. |
| Economies of scope |
Complementarities |
Complementarities are built on a diversity of assets in the form of research, technology and economic bases, and are also known as "related variety", and can include supply chain linkages; in some cases, complementarity may also be due to differences in price levels, cost structures or functions. |
|
Public and club goods
|
Regional identity |
Regional identity increases internal recognition of the cross-border area for greater integration and social capital (including knowledge of the partners on the other side of the border). |
| |
Regional branding |
Attractiveness and recognition of the area to firms and skilled labour both within the cross-border area and beyond are enhanced by regional branding. |
| |
Specialised infrastructure |
Shared science and technology facilities reduce financial costs and risks for the regions or countries involved and allow access to a greater number of researchers. |
| Externalities |
Border challenges |
It is necessary to address the day-to-day issues associated with flows of people, goods and services (including public services) across the border for both positive and negative spillovers. |
Before collaboration can begin, the 'functional' area for cross-border regional innovation policies needs to be defined. Some evidence or data are required to understand cross-border flows, from the number of daily commuters to information on firm collaborations and university research ties. Rarely do these data exist, and often support from national statistics agencies is necessary. Some balance is required between innovation and politics.
Key recommendations for defining a relevant cross-border area include the following:
- Understand what the data show, but do not wait for complete data to begin collaborating.
- Only pursue the cross-border element when it is reasonable to do so.
- Allow a degree of flexibility in the definition of areas to avoid creating unhelpful new borders.
- Do not under-estimate the importance of other "hard" and "soft" factors beyond innovation.
How can public and private actors work together cross-border (governance)?
A first step is for the areas on either side of the border to understand the possible benefits in their context. This requires discussion among public and private actors to reveal opportunities. The report suggests reviewing 10 domains regarding frameworks, the innovation system, and the governance/policy context to assess the favourability of conditions for collaboration.
However, innovation policy is a field that does not allow for easy calculations, given the upfront costs and the uncertainty associated with many innovation investments. Furthermore, complementary action can be taken over time to increase economic returns. The cost of not collaborating may actually be higher, but this is rarely considered.
Public action may be required at local, regional, national—and in some cases, supranational—levels of government. The local and regional levels therefore have the job of informing national and supra-national policymakers how they can help or hinder co-operation.
Collaboration that focuses on maximising economic and social benefits implies governance arrangements that require trust. It is a long‑term commitment, implemented day-to-day, year after year. The arguments about juste retour, or getting back what one puts in, focus on the individual project and not the long-term relationship.
Collaborations take the form of both formal and informal governance arrangements. Most collaborations are governed by voluntary associations and committees, with formal institutions being the exception. Some form of secretariat, even if virtual, is necessary to create the public goods required for cross-border governance to work. Special capacities for public authorities are also needed; if not through formal boards, the private sector, higher education institutions, and in some cases citizens may be engaged in consultation bodies or working groups.
Key recommendations for the governance of cross-border collaborations include the following.
- Give politicians a reason to care about the issue, understanding that their time horizons and motivations are generally short term.
- Identify areas in which national (or supra-national) governments can assist cross-border efforts.
- Understand the various costs and benefits, and the alignment of those across the border, for cultivating long-term collaboration that builds trust.
- Engage non-public actors in governance, with some form of secretariat—even an informal one—to underpin the work of the official governance body.
What are the policy instruments for cross-border innovation collaboration?
There are a number of instruments for regional innovation policy that have generally been applied on a cross-border basis. They are more likely to have an impact if they contribute to a broader strategy or action plan. It helps if this strategy is supported by data, mapping of relevant actors' activities, and other forms of policy intelligence.
Sometimes cross-border policy instruments are experimental. They can serve as test cases for mainstreaming, whereby cross-border actors can participate in traditional innovation programmes. However, given that public funds typically stop at the border, an alternative is to align instruments across the border to facilitate work among actors from different jurisdictions. Instruments that seek to force actors to collaborate when they have disincentives to do so (regulations, funding, or lack of partners of sufficient quality) will not be sustainable. International experience with a variety of policy instruments highlights their respective advantages and disadvantages so that lessons learnt can inform other regions.
Key recommendations to make cross-border instruments effective include the following:
- Devote considerable effort to strategic development and policy intelligence.
- Mainstream the cross-border element in national and regional innovation strategies and policy instruments, or at least align programme rules.
- Make greater use of opportunities created by the border.
- Publicise success stories of cross-border instruments.
Back to Nordregio News Issue 5, 2013