Innovation without regional development? The complex interplay of innovation, institutions and development

This paper argues that the development of regional innovation concepts drawing primarily on the experiences of advanced regions, has meant that the dominant narratives about regional development are not adequate to explain the experiences of less developed regions (LDRs). Drawing on the extensive experience of the authors doing research in LDRs, the paper develops three main arguments: first, the emphasis put on networks and systems means that not enough attention is paid to the internal capabilities of organisations, including those of firms, Universities and the public sector. These capabilities shape the strategies of these organisations regarding innovation and collaboration, and therefore influence the nature and content of innovation systems. Second, the paper argues that too much attention has been paid to the importance of informal institutions, rather than analysing the dynamic interaction between formal and informal institutions. The latter approach allows us to avoid culturally deterministic interpretations of under-development and to think about ways in which formal policies could help to improve innovation environments. Third, the paper argues that innovation at the firm level does not always lead to improvement in productivity and economic growth at the aggregate scale. This is partly due to the effects of the dynamics discussed in the two previous points, but is also because advanced regions benefit from a socio-economic ecosystem which supports the translation of new ideas into economic activity. This means that though innovation is fundamental for long-term economic growth, it is not sufficient without mechanisms that ensure its dissemination through the entirety of the economic system.