Entrepreneurship, Innovation and Actor Constructed Regional Innovation Systems By Christos Kalantaridis and Zografia Bika

Introduction Innovation matters. At the macro-level it drives economic development: indeed, Schumpeter (1928) famously suggested that what we call „economic progress means essentially putting productive resources to uses hitherto untried in practice, and withdrawing them from the uses they have served so far. This is what we call “innovation”‟ (ibid, 378). At the micro-level innovation is often viewed as one of the foremost means of developing and maintaining competitive advantage (OECD, 1997; Stock et al, 2002; Becheick et al, 2006).

In response, the field of innovation studies has grown rapidly in the past fifty years or so. As Fagerberg and Verspargen (2009) argue there are probably several thousand academics worldwide working on these issues, whilst the number of publications with the string „innovat*‟ in the title has increased from around four per 10,000 in 1961 to just under sixty per 10,000 in 2006 (Fagerberg and Sapprasert, 2010). This is a far cry from the early twentieth century, when Schumpeter was one of only a handful of scholars who explored innovation. He advanced a theory in which innovations, and the social agents underpinning them, were the drivers of economic development that still defines the field1.

The emergence of systemic approaches to innovation was one of the most influential theoretical advances of the past twenty years or so. Research in this context is driven 1

by the acknowledgement that innovation occurs not within individual firms but a network of actors who are institutionally embedded (Ebquist, 1997), and partly due to the growing realisation of the importance of proximity (both geographic and relational) for the promotion of innovativeness in enterprises (Asheim, 2007). Within this context, the concept of the regional innovation system has emerged as central to the debate (Cooke et al, 1997, Asheim and Isaksen, 1997). As a result, there has been a rapidly growing body of literature exploring regional innovation systems the world over. Research in this context focused squarely on the presence (or not) and mapping out of the regional production subsystem and the knowledge generation subsystem rather than actual interaction between the two.

Moreover, in large parts of the

theoretical literature this concept is used to capture an ideal-type contextual setting for the advancement of innovative activities (Cooke and Morgan, 1998; MacKinnon et al, 2002; Doloreux and Parto, 2005).

However, actors, and particularly entrepreneurs, and their influence in shaping the configuration of innovation systems, and, by implication, the incidence and characteristics of innovation have remained at the margins of this body of literature. This paper sets out to address this gap in the literature, through a shift in emphasis towards the micro-dynamics of innovation systems: advancing the exploration of actual relationships between the regional production subsystem and the knowledge generation subsystem as part of actor-constructed regional innovation systems. The paper ultimately introduces a Schumpeterian corrective to existing theoretical constructs: advancing an entrepreneurial perspective of regional innovation systems. This views outputs (i.e. innovative organisations) as the result of the interaction between evolving places and entrepreneurial journeys.

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The paper is organised as follows. The next Section deals with some key conceptual issues: namely the definition of innovation, theoretical advances on regional innovation systems and the identification of actor-constructed regional innovation systems. The following Section presents the method and the findings of a purposeful review of the literature: identifying and deciphering fifteen studies that (explicitly or – in most cases – implicitly) explore actor constructed regional innovation studies. Then the paper presents a Schumpeterian corrective ro existing theoretical constructs. Lastly the paper offers some conclusions.

Innovation and Regional Innovation Systems

Innovation: a definition Innovation is invariably perceived as one of the means by which firms can enhance their competitiveness and improve their performance (Akçomak and ter Weel, 2009). However, its definition is far from clear. In a rather narrow definition Schmookler (1966) associates innovation with the first enterprise to produce a good or service, or use a new method or input, whilst all subsequent firms that do the same thing are deemed as imitators. However, the boundaries between innovation and imitation are blurred as imitators in their pursuit of the leader may do things differently (in many instances intentionally so as to gain competitive advantage) from the way they were done by the first firm (Hall, 1994). In a much broader definition, which is adopted for the purposes of this paper, Brown-Kamn (1987) identifies innovation with the process of generating ideas that are new to their source and making decisions about these ideas that result in something useful. There are two terms worth pointing out in this

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definition. The first is process – as opposed to „event‟. This means that innovation involves a series of activities (often engaging multiple actors), some of which may be repeated or skipped. Such a conceptualisation of innovation is also influenced by Sayer‟s critical realist perspective (2000) that many causal interdependencies are not necessarily generalisable, enduring and replicable. The next key term in the paper‟s definition of innovation is new. The extent to which an idea is new depends on the view of the person ascribing to it, or it may be widely acknowledged as different. Newness here is perceived as a matter of degree.

The Conceptualisation of Regional Innovation Systems Since the early 1990s, systemic approaches of innovation have dominated the debate on the interface between innovation studies and regional science (Cooke et al, 1997). Innovation systems can function at different scales: regional, national and international ones (Sternberg and Muller, 2005). Within the context of this paper, particular emphasis is placed on innovation systems at the regional scale.

The importance of the region as a setting for innovation systems is on account of three reasons. Firstly, innovative activity is not distributed evenly across space, but is concentrated in certain regions whilst being more or less absent in others (Fritsch and Stephan, 2005). Secondly, the region constitutes an arena of economic interaction, that occurs within a specific institutional, political and social context (Storper, 1997). Lastly, partly due to specificities of context, a set of rules, conventions and norms that influence behavioural roles may occur within a regional setting. As a result, the concept of the regional innovation system has emerged as central to the debate. Cooke at al (1998) define this as a system in which firms and other organisations are

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engaged in interactive learning, and these learning processes take place through an institutional milieu characterized by embeddedness. Therefore, it consists of a production structure (which comprise of techno-economic elements) and an institutional infrastructure (involving politico-institutional components) (Asheim and Isaksen, 1997). Exponents of this concept view it primarily as an analytical construct used in order to understand system dynamics and performance. This suggests that „the system in focus does not have to exist in reality as fully fledged‟ (Bergek et al, 2008, p. 408).

This view of regional innovation systems is manifested in the prevalence of top-down approaches in the operationalisation of the concept. The bulk of this literature draws upon key informant interviews and secondary data with the aim of capturing innovation systems as analytical units rather than as arenas of interaction between actors (MacKinnon et al, 2002; Doloreux and Parto, 2005). Thus, the emphasis is placed on the configuration of the regional production subsystem and the knowledge generation subsystem (as defined by Asheim (2007)) rather than actual interaction between the two. This operationalisation, could offer an accurate description of the regional innovation system under consideration only in a situation where the system was closed: i.e. the regional production subsystem tapped exclusively into the regional knowledge generating subsystem, and the latter was not linked with other (outside the region) production subsystems. However, it is increasingly acknowledged in the literature that accessing knowledge from distant sources is of considerable importance for innovation (Boschma and ter Wal, 2007).

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This conceptualisation and operationalisation of the regional innovation system has led to some confusion regarding the existence (or not) of a normative dimension. In large parts of the theoretical literature this concept is used to capture an ideal-type contextual setting for the advancement of innovative activities. Thus, Cooke and Morgan (1998) argue that a strict reading of the literature shows that only three regions are true regional innovation systems: namely the Silicon Valley, Emilia Romagna and Baden-Wurttemberg. Similarly, Asheim suggests that a regional innovation system „is in place when the following two sub-systems of actors are systematically engaged in interactive learning … first, the regional production structure of knowledge exploitation subsystem, which consists mainly of firms … second, the … knowledge generation subsystem which consists of public and private research laboratories, universities and colleges, technology transfer agencies and vocational training organizations‟ (Asheim, 2007, p. 229). This, in turn, led to the emergence of the concept of „system failure‟ that captures instances when the system fails to develop or does so in a stunted fashion (Carlsson and Jacobson, 1997). This can be understood only in comparison to an ideal-type system (Bergek et al, 2008). However, the use of the concept in empirical studies is not value-laden: capturing a broad range of contexts with profoundly different innovative performance: from Austria (Gerstlberger, 2004) to China (Li, 2009) as well as cross-border regional innovation systems (Moodyson et al, 2008).

Introducing Actor Constructed Regional Innovation Systems In response, this paper introduces a distinction between the regional innovation system (an analytical unit, captured through macro-level methodologies, and possessing a normative dimension) and a different – and complementary – concept:

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the actor-constructed regional innovation system. This divide can not only provide clarity and eliminate confusion, but can also open new and productive lines of scholarly inquiry.

The point of departure for the development of the new concept is the pioneering definition advanced by Lundvall: whereby an innovation system is „constituted by elements and relationships which interact in the production, diffusion and use of new, economically useful, knowledge‟ (Lundvall, 1992, p. 2).

Elements may include

individual actors as well as a host of private and public organisations (which could be grouped into regional production and knowledge generation sub-systems), whilst relationships are defined as „mutually oriented interaction(s) between two reciprocally committed parties‟ (Håkansson and Snehota 1995, 39). Of course relationships do not take place in a vacuum but occur within an established institutional context. Institutions, defined here as the multitude of formal and informal rules that govern the game, are thus, central to the innovation system. The advantage involved in innovation systems is that interaction of these elements produces pervasive and systemic effects that encourage enterprises (operating within the system) to develop forms of capital, and interactions that enhance their innovative capabilities (Doloreux and Parto, 2005).

This conceptualisation differs from that prevailing in the literature in three ways. Firstly, it aims to describe reality rather than provide an abstract analytical unit. Therefore, tracing actual relationships between actors is a key consideration. Secondly, in operationalising this concept a different methodological approach (from that adopted in the regional innovation systems literature) is adopted. This is a

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bottom-up approach that can utilise surveys, case studies and ethnographic research in order to trace existing relationships between actors and map-out the configuration of the system. Interestingly approaches like that are present in the literature (for example Belussi et al, 2010). Lastly, partly as a result of the first point, the approach advanced here does not have a normative dimension. Thus, all regions – irrespective of their innovative performance – have some kind of innovation system.

Empirical Studies of Actor-Constructed Regional Innovation Systems

Method A systematic search of published research in academic journals was undertaken on EBSCO Business Premier, JSTOR, Science Direct, SAGE, PION and Informaworld Databases for the period 2000-2011. This review of the innovation literature followed a combination of Pawson et al.‟s (2005) „realist‟ methodological steps and Gately et al.‟s metasynthesis technique in order to ensure academic rigour. Five different stages of identifying, searching, screening and reconceptualising published material and its policy implications were followed. In particular:

Firstly, the identification of the „regional innovation systems‟ review question as a vortex of actual relationships emerged as of paramount importance; this also assisted the effort to further refine the purpose of the review and more specifically, to clearly articulate its aim of exploring the theoretical underpinning of agency that potentially takes place in „regional innovation systems‟. Given that this „realist‟ review sought to explore and contextualise „regional innovation systems‟ in a variety of settings, the

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second methodological step was to search for empirical evidence that supports, complements, or opposes the dominant conceptualisations of regional innovation systems. A broad search – using the term „regional innovation systems‟ – was initially carried out to look for studies that employed either „case study‟ or „survey‟ methodology in the period 2000-2011. The combined use of „regional innovation systems‟ and „case study‟ terms in a search of the EBSCO, JSTOR (Business and Geography), Science Direct, Informaworld, SAGE, PION and databases led to an identification of 12, 174, 14, 9, 5 and 3 articles respectively. The combined use of „regional innovation systems‟ and „survey‟ terms in a search of the same databases led to an identification of 9, 203, 11, 10, 0 and 0 articles respectively. There was a degree of overlap in the findings of the different searches.

As the third methodological step, the results of these searches were now rescanned and the authors reviewed the table of abstracts that was put together as a summary (a total of 292 articles), appraised the relevance of the gathered empirical material, considered its „fitness for purpose‟ (using a three colour-based classification) and finally decided that the reference to the micro-dynamics of regional innovation systems would be the ultimate inclusion criterion. This further reduced the number of records under investigation down to fifteen studies (Sternberg and Arndt, 2001; Doloreux, 2003; Kaufmann et al., 2003; Izushi, 2005; Tódtling et al., 2006: Benneworth; 2007; von Malborg, 2007; Doloreux and Dionne, 2008; Berggren and Lindholm Dahlstrand, 2009; Chang, 2009; Belussi et al., 2010; Krätke, 2010; Kalantaridis and Bika, 2011; Weigel, 2011; Yam et al., 2011) that were all analysed in depth. Consequently, copies of the full text were obtained, carefully read, discussed and evaluated.

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Fourthly, an attempt to carry out a synthesis of all contradictory empirical evidence and data extraction was made in order to achieve refinement of our ideas The metasynthesis technique was particularly useful here provided that it allowed “new insights and understandings to emerge through a process of a re-conceptualisation of themes” (Gately et al., 2008: 136). To this extent, the new „actor-constructed regional innovation system‟ conceptualisation has emerged as central and the imperativeness of presenting empirical evidence to determine how, under what circumstances and for whom this conceptualisation works was revealed. Finally, some policy implications and other conclusions were drawn.

Key Findings A brief overview of the papers reviewed for the purposes of this paper indicates a growth in the number of studies exploring actor constructed regional innovation systems. Just three papers were published in the four year period 2001-2004, in comparison to five in period 2005-2008, and seven in the two and a half years since then. In terms of the disciplinary setting of the Journals, just over half of the papers were published in Planning and Development Journals (such as Environment and Planning A, European, Planning Studies, Regional Studies to name but a few), whilst three appeared in core Innovation Journals (Research Policy and the International Journal of Innovation Management), and just two appeared in Entrepreneurship Journals (Entrepreneurship & Regional Development). This divide can be explained on the centrality of space in the conceptualisation of regional innovation systems, and reaffirms the growing importance of academics from Planning and Development in the advancement of innovation studies (Fagerberg and Sapprasert, 2010). It is also

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worth noting here the relatively small number of publication in Entrepreneurship Journals.

Methodologically, two thirds of the studies use surveys – ranging from 45 to more than 8,000 responses. The remaining studies construct cases through multiple research methods (including interviews, historical documents and secondary data). This is influenced in large part by the identification of specific methodological approaches as selection criteria.

Research that explores actor constructed regional innovation systems has explored very diverse regional contexts: these range from rural (Cumbria in the case of Kalantaridis and Bika (2011)) and peripheral localities (in the case of Doloreux (2003); Doloreux and Dione (2008)), to an industrial economy undergoing restructuring in a less favoured region of England (Newcastle in Benneworth (2007)) to localities with favourable settings for the formation of actor constructed regional innovation systems (such as Emilia Romagna in the case of Belussi et al (2010) and the Bern region in Weigel (2011) and the high-tech region of Munich in Sternberg and Arndt (2001)). Interestingly, some studies adopt a comparative dimension exploring actor constructed regional innovation systems in favourable as well as unfavourable settings (von Malborg, 2007, Chang, 2009). Lastly, one paper (Kaufmann et al, 2003) sets out to explore the impact of the internet on the configuration of actor-constructed regional innovation systems.

Research into actor-constructed regional innovation systems provides some interesting findings regarding their geographical scope. Indeed, there is only a

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minority of studies that stress the importance of geographical proximity. More specifically, Benneworth (2007) argues that proximity is important in providing an enhanced regional capacity for university interaction and commercialisation, and helps rebuild the regional innovation system. Proximity, rather predictably, is also of importance in the case of regional innovation systems constructed by local authorities (von Malmborg, 2007). Lastly, Chang (2009), in a more nuanced contribution, suggests that more innovative sectors tend to use local knowledge linkages to enhance their innovative potential, whilst less innovative sectors tend to rely on systems of innovation outside their national boundaries.

In contrast, a significant majority of studies support the thesis that innovation systems developed by actors based in a specific region, commonly stretch well beyond the confines of that spatial unit. More specifically, Krätke (2010) shows that regional relationships were reported in 34% of networks in the Hannover-BrunswickGottingen metropolitan region, in comparison to 43% of national relationships, and 23% of international ones. Doloreux (2003), exploring the case of peripheral Beauce, stresses the importance of linkages with the Quebec metropolitan area. In this case local clustering appear to be weak. Kalantaridis and Bika (2011), focusing on rural Cumbria, show that with the exception of labour, entrepreneurs relied heavily on distant sources of other inputs, capital, knowledge and markets. Similarly, Belussi et al (2010), focusing on the resource munificent case of Emilia Romagna, argue that the greatest number of collaborations was with actors based outside the region, linking local firms with national and international networks of knowledge creation and diffusion. Sternberg and Arndt (2001) stress the importance of firm level determinants, over region level determinants, for innovation activity. Interestingly,

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Weigel (2011) argue that whilst the region was important in the emergence of the system, maturity brought a shift (in the geographical spread of relationships and networks) away from the region towards the global sectoral setting. Kaufmann et al (2003) also identify considerable incidence of non-local relationships. But in a suggestive contribution to the debate they argue that this can not be explained on account of the internet. The internet is more effective for improving communication with existing partners rather than finding new ones. This brings to the fore the importance of entrepreneurial individuals and their existing networks of contacts.

Within these regional settings, studies use different types of organisation as the focal actors that shape regional innovation systems. In the majority (ten out of fifteen) of cases firms are identified as the main actors. In other cases this involves a university (Benneworth, 2007) or a university hospital (Weigel, 2011), local authorities (von Malborg, 2007) and technology centres (Izushi, 2005). Interestingly, Krätke (2010) tries to include a broad range of actors (including both firms, universities and other research providers).

Interestingly, a significant minority of studies (five out of fifteen) examine entrepreneurship within the organisational context under consideration, though the manner in which this is done differs significantly. Benneworth (2007) explore the contribution of entrepreneurship towards changing attitudes and institutional culture from being risk averse to engaging in commercialisation activities within the University of Newcastle. A similar approach is adopted in the case of academic spinoffs from Halmstad University in Berggren and Lindholm Dahlstrand, 2009). Both papers authored (solely or with others) by Doloreux include an entrepreneurial

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dimension. In the case of Doloreux (2003) this work refers to collective entrepreneurship, involving cooperation in both productive and commercial phases, which gives rise to economic vitality in a peripheral locality. Doloreux and Dionne (2008) explore how entrepreneurs have been able to develop mechanisms, through local socio-economic networks, to initiate new economic and institutional activities. More directly, Kalantaridis and Bika (2011) explore the influence of entrepreneurial origin on the configuration of actor constructed regional innovation systems. They argue that locally-born and returnee entrepreneurs create firms that innovate within the confines of the regional context, in contrast to in-migrants and immigrants who develop systems that stretch beyond Cumbria.

Entrepreneurship is also present in two more studies, outside the focal organisations of the relevant paper. More specifically, in the Izushi (2005), who explores of technological centres in the development of regional innovation systems, entrepreneurs are identified as users of these services. Also in the case of Weigel (2011) which explores the role of a University in the emergence of medical devices enterprises in the Greater Bern case, entrepreneurs are present as founders of new ventures.

This evidence suggests that the adoption of an actor-constructed perspective to regional innovation systems necessitates the introduction of entrepreneurship as a key dimension. However, doing so is complicated by the emphasis placed on organisations as the main units of analysis capturing agency (the actors) in the entirety of published research. This is a key theme of the next Section of this paper.

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Entrepreneurship and Actor Constructed Regional Innovation Systems The adoption of actor constructed regional innovation systems provides a different picture – including more complex patterns of relationships and networks. More specifically, for some organisations, such as local authorities and universities, with a significant element of civic duty in their mandate, the region appears to be the focal point for innovation. However, for other organisations, such as enterprises, the geography of relationships and networks involved in innovative activities is less important than originally envisaged in the literature. It is worth pointing out here that non-local linkages are not only important in rural and peripheral localities (as one would expect on account of the weak knowledge generating sub-system of such locales) but also metropolitan ones – as shown in the previous Section. Moreover, engagement outside the local boundaries can not be explained on account of new technologies – such as the internet. This simply reinforces existing partnerships, rather than help create new ones (Kaufmann et al, 2003).

As Kalantaridis and Bika (2011) show the origin of distant relationships can often be traced in the family, as well as ethnic and class background, education and work experience of the individuals that make decisions regarding the innovation process. However, research on regional innovation systems remains attached to prevailing structure. In Schumpeter‟s words „[s]o far as the institutional framework is concerned, we are, comparatively speaking, well off. The social, legal, technological, and other conditions in which entrepreneurship has run its course ... have been satisfactorily worked out already‟ (Schumpeter, 1949: 74). What is needed is a better understanding of the entrepreneur and what he or she actually did in specific historical contexts.

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Schumpeter clearly advances the view that more research is needed in order to explore entrepreneurs, and argues that this can be achieved through research into entrepreneurial characteristics and histories: including biographies of businessmen and stories of technological change. However, in doing so, he suggests that these need to be embedded in the context of local and general historical settings.

In response, this paper advances an analytical schema that focuses on the interaction between i) entrepreneurial journeys and ii) evolving places in the innovation process. The former is used to capture the cumulative effect of historical time upon the knowledge, skills, experience, and network of contacts of entrepreneurs. For example, working in one industrial context may provide an individual with knowledge and networks of contacts that may be particularly useful for the individual in question when – in response to changed employment circumstances – this individual finds himself or herself in a different industrial context. Similarly, a migratory move endows an individual with experiences and networks of contact that may be particularly useful upon his or her return in the country of origin. Individual journeys involve multiple changes of the type described above: providing actors with distinct set of knowledge, skills, experience and contacts. As far as the latter concept is concerned, i.e. evolving places, this has been discussed in some detail in the previous Section.

The outcome of the interface between entrepreneurial journeys and the evolving place is the innovative enterprise. Interestingly, Schumpeter writes about it as „the carrying out of new combinations we call enterprise‟ (Schumpeter, 1934: 74). Indeed, he goes on to argue that the most common – though by no means the sole – form of realising a

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new combination „is the foundation of a new enterprise‟ (Schumpeter, 1911: 410). This brings to the fore a third dimension of the analytical schema advanced here: the organisation.

In understanding the importance of the enterprise, it is necessary to explore a relatively overlooked aspect of Schumpeter‟s work, revisited recently by Swedberg (2007), the issue of resistance to change. This has two dimensions: one is sociological in nature whilst the other psychological. The latter: refers to resistance from within: „the whole difference between swimming with the stream and against the stream is to be found here‟ (Schumpeter, 1911: 121). The former, and more important for the purposes of this paper, involves the reaction of other people in the introduction of innovation. Indeed, „[e]ach act of deviant behaviour on the part of a a member of a community meets with disapproval from other members‟ (Schumpeter, 1911: 118). People prefer to do things their own habitual way, rather than have to adjust to innovation. Interestingly, Schumpeter uses an example about entrenched interests against mechanisation and the factory system leading to the death of a Prussian inventor in 1579, and the example of craft guilds to prevent innovation. At its most elementary resistance refers to other entrepreneurs and potential customers as well as prevailing institutions: thus, the importance of the enterprise rests in putting together the resources needed in order to realise innovation. However, resistance to change may also be presented by other individuals working within the organisation. Indeed, there is a voluminous literature exploring resistance to change within organisations (for example ...). As a result, the organisation emerges as an analytical unit that does not merely reflects the whims of the entrepreneur but warrants separate investigation in its own right.

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Concluding Remarks This paper introduces a distinction between the regional innovation system (an analytical unit, captured through macro-level methodologies, and possessing a normative dimension) and a different – and complementary – concept: the „actorconstructed regional innovation system‟ (predominantly descriptive of real linkages between actors, captured through micro-level methods, and without a normative dimension). The latter concept aims to describe reality, trace existing relationships between actors and thus, to include even lagging regions that are not characterized by innovative performance.

The micro-level methodological lens advanced in the paper allows the theoretical reemergence of entrepreneurs within a systemic innovation approach: mixing and matching a production structure with the institutional infrastructure and the knowledge generating subsystem. The entrepreneurs‟ selection histories rather than adaptation processes and most importantly, their moving across scales and lacking of endurance and repeatability in their connections and activities (some of which might occasionally be skipped) underpins the „actor-constructed regional innovation system‟ conceptualisation advocated here as a new way of capturing interaction rather than proximity in innovation studies.

The results of the paper have implications for the direction of future research and policy practice. More specifically, it poses the question of how entrepreneurial attributes and characteristics may influence the incidence of innovation and the actorconstructed regional innovation systems within which this occurs. This is particularly

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important in the context of migrant entrepreneurship. Moreover, it raises the issue of the entrepreneur‟s ability to source and manage external knowledge, providing a „individualised‟ dimension upon the often commended challenge of the absorptive capacity of the firm. Research in this context, offers the scope of altering policy action around innovation: redressing the balance between localism and place-based initiatives (on the one side) and global knowledge networks (on the other).

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His Theory of Economic Development is identified as the fourth most prolific contribution in the field, a list topped by Nelson and Winter‟s Evolutionary Theory of Economic Change, which was influenced heavily by Schumpeter‟s ideas (Fageberg and Sappraset, 2010).

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