Public policies for local networks of innovators

Abstract

A rich and heterogeneous literature has recently clarified the nature of agglomerations of small and medium-sized companies (industrial districts, flexible manufacturing networks) interacting in a territory and acting in the open market as efficient competitors against other forms of production organization, such as the traditional vertically integrated firm. Their ability to adjust to uncertain external conditions depends on fthe common culture and diffuse knowledge of the area, which is a sunk cost for those companies. In a policy perspective, the main question concerns the possibility of intervening in a specific context to stimulate the creation and growth of an agglomeration of companies i.e., to establish a “clan” of agents having a common interest in innovation. Technological knowledge will have to be provided as “club good” for the network. There are three elements to be considered in designing such a policy: (1) entry into (admission) and exit from (exclusion) the network; (2) promotion of a positive selection process of innovators within the network; (3) increasing the common knowledge and the specific learning characterizing the network. The aim of public interventions undertaken in the various regions of Europe, but also in several experiments in the US, can be seen as the constitution of “collective agents” or service centers, sponsored by the local public authorities and enterpreneurial associations, to manage collectively the cost of coordination of the entrepreneurial activities necessary for the formation and development of a local network of innovators. The new industrial policy approach of the European Community is explicitly oriented to supporting the local aggregation of new businesses, through the promotion of integrated plans of local intervention.