Rising innovative city-regions in a transitional economy: A case study of ICT industry in Cluj-Napoca, Romania

Abstract

City-regions have become the focused locations for economic development and policy intervention for innovation activities. As existing literature mostly studied innovative city-regions of the Global North, there is an urgent need to examine the emerging latecomers, particularly those from the transitional economies. In this paper, Cluj-Napoca, Romania has been used a case to study the rising innovative city-regions in the transitional economies, their role in the global innovation networks, and the development of domestic innovation capability. The paper's specific objectives are to evaluate the current status of its regional innovation cluster in the global network, its structural strength and weakness, and the effectiveness of institutional management. A multi-case analysis approach has been used to analyze domestic companies and multinational corporations that are key actors in local innovation system. In addition to the secondary data, 23 interviews were conducted with local business, university researchers, and government officials. The main findings are: first, while Romania as an economy is still categorized as a factor-driven economy, sectors of some city-regions in the country, such as the ICT sector, has started to move towards the innovation-driven economy closely articulated in the global innovation network, especially in Europe's innovation network of software development. Second, while the region can be characterized as to have the relatively strong global pipelines, i.e., linkages with outside players, it has weak local buzz, i.e., local networks. Third, multinational corporations that have generally been attracted to the region due to the overseas-returnee community who are interested in linking Cluj-Napoca to the global innovation network. Local companies have equally benefited from the returning IT talents. One particular challenge is that although start-ups were emerging in Cluj-Napoca, the city-region was not effective at retaining these start-ups by providing opportunities for their further growth. Fourth, like any other city-region, Cluj-Napoca has been under the institutional influence at multiple levels, from the European Union (EU), the national government, the regional government, the county government, to the municipal government. However, close university-industry connection remains a challenge. It is recommended that the city-region should consider a variety of approaches to enhance the local buzz, specifically the social networks and innovation milieu of the city-region. Moreover, it needs to provide more resources for start-ups and do a better job in the retention of the start-ups.