Exploring Innovation Activities of Firms from Peripheral Regions in Estonia and Germany A Relational Perspective Von der Fakultät für Physik und Geowissenschaften der Universität Leipzig genehmigte D I S S E R T A T I O N zur Erlangung des akademischen Grades doctor philosophiae Dr. phil. vorgelegt von M.A., Martin Graffenberger geboren am 20. Dezember 1983 in Euskirchen Gutachter: Prof. Dr. Sebastian Lentz, Universität Leipzig und Leibniz-Institut für Länderkunde Prof. Dr. Sebastian Henn, Friedrich-Schiller-Universität Jena Tag der Verleihung: 16. Dezember 2019 Bibliographische Beschreibung: Graffenberger, Martin Exploring Innovation Activities of Firms from Peripheral Regions in Estonia and Germany. A Relational Perspective Universität Leipzig, Dissertation 229 Seiten, 296 Literaturangaben, 25 Abbildungen, 23 Tabellen, 4 Anlagen Referat Die vorliegende Dissertation exploriert Innovationsaktivitäten von Unternehmen des produzierenden Gewerbes in zwei unterschiedlich strukturierten peripheren Regionen: in Südestland und dem Erzgebirgskreis. Die Arbeit erweitert bestehende Forschung, da periphere Regionen und low-tech Industriezweige sich nur vereinzelt in wirtschaftsgeographischen Forschungsagenden finden. Ausgehend von einer relationalen Perspektive fokussiert die Forschungsarbeit auf Akteursbeziehungen und insbesondere darauf, wie diese Beziehungen Wirtschaftsprozesse wie Wissensgenerierung und Innovation bedingen. Als analytische Perspektiven innerhalb dieses relationalen Rahmens werden Netzwerke und unterschiedliche Dimension von Nähe und Distanz herangezogen (geographische, soziale, kognitive, institutionelle und organisationale). Die Dissertation erarbeitet kontextualisierte Erkenntnisse zu räumlichen und relationalen Elementen von Innovationsaktivitäten in peripheren Regionen. Methodisch orientiert sich die Arbeit am Ansatz der Innovationsbiographien. Dazu werden konkrete Innovationsprojekte und ihre Netzwerke aus räumlicher und zeitlicher Perspektive rekonstruiert. Entsprechend wird im empirischen Teil der Arbeit ein evolutionäres, interaktives und wissensbasiertes Innovationsverständnis aufgegriffen. Die Arbeit stellt heraus, dass Unternehmen in beiden Untersuchungsregionen aktiv Innovationsprozesse vorantreiben bzw. an diesen teilhaben. Periphere Lage und sozioökonomische Herausforderungen prägen die Innovationspraktiken der Unternehmen entlang unterschiedlicher Dimensionen. Insbesondere lassen sich zielgerichtete Netzwerkaktivitäten, ein hoher Mobilitätgrad sowie die strategische Ausrechterhaltung bzw. der Ausbau einer umfassenden Technologie- und Fertigungstiefe identifizieren. Diese Praktiken fungieren als Mechanismen zur Überwindung potenzieller Strukturnachteile peripherer Regionen. Basierend auf diesen Erkenntnissen illustriert die Dissertation Ansätze zur Erweiterung wirtschaftsgeographischer Innovationstheorie und diskutiert Maßnahmen zur Förderung der Innovationstätigkeit von Unternehmen in peripheren Regionen. Abstract This dissertation explores innovation activities of LMT manufacturing firms located in two differently structured peripheral regions: South Estonia and the Erzgebirgskreis. Thus, the dissertation expands existing scholarship in economic geography by investigating innovation in localities and sectors that are not part of broader research agendas. Operating from a relational perspective, this research emphasises the diverse actor relations and how these relations shape economic processes of knowledge creation and innovation. Within this relational framework, networks and multi-layered dimension of proximity and distance (geographical, social, cognitive, institutional and organisational) are mobilised as central analytical perspectives. Thereby, the dissertation provides contextually grounded insights on the spatial and relational elements that drive innovation activities in peripheral regions. Methodologically, this research is guided by the innovation biographies approach. Specific innovation projects and their networks are traced throughout space and time. Thereby, the evolutionary, interactive and knowledge grounded understanding of innovation is empirically addressed. This research finds that firms in both study regions actively pursue and participate in innovation activities. Operating at distance shapes the practices of firms in a number of decisive ways: purposive networking activities, high levels of actor mobility and maintenance of comprehensive internal capacities are identified in particular. These practices operate as mechanisms to overcome potential shortcomings of peripheral regions. Based on its findings, the dissertation outlines avenues to expand dominant approaches towards innovation theory in economic geography and provides avenues for policy measures that aim at fostering firm innovation in peripheral regions. I As part of the RegPol2 project, this study was made possible by generous financial support from the EU 7th Framework Programme, People Programme (Marie Curie Actions) (Grant Agreement no.: 607022) II Summary Economic peripheralisation processes and persisting regional disparities can for instance be attributed to a lack of firm innovation (e.g. Friedmann, 1973; Kühn, 2015). Consequently, successful innovation activities can be considered a central mechanism to counteract peripheralisation dynamics and to support regional economic development. The phenomenon of innovation holds a central position within economic geography. It is widely acknowledged that the capacity of firms to innovate depends on the specifications of regional environments (Isaksen and Karlsen, 2016). This assumption facilitated the emergence of a persistent urban bias (Shearmur, 2017) and induced a specific core-region thinking into the discourse on innovation and space (Isaksen and Sæther, 2015). City regions are widely considered quintessential innovation hotspots (Shearmur, 2012; Florida et al., 2017) as structural features such as size, actor and resource density, proximity etc. provide fruitful conditions. Conversely, peripheral regions are portrayed as rather non-innovative settings because agglomeration advantages are largely absent. This theoretically grounded urban bias facilitated a focus of empirical investigations on innovation in urban areas and high-tech sectors. Conversely, scholarship on innovation outside of designated hotspots and high tech industries is still scarce, although dynamically expanding (Eder, 2018). Despite the broadly theorised perspective of peripheral regions being rather unconducive settings for innovation, this emerging scholarship illustrates that also these regions do generate innovation. However, these innovation processes might be different to the patterns and models observed in metropolitan regions. Such indications operate as a starting point for this dissertation, which explores innovation activities in localities (peripheral regions) and sectors (low and medium-low tech manufacturing) that are not part of broader research agendas. Despite growing scholarship, a need to better understand how firms from peripheral regions innovate successfully continues to exist (Shearmur, 2017). Thus, this dissertation expands existing scholarship in economic geography and its innovation geography subfield. In particular, the present study contributes to a better understanding on the spatial and relational contexts of innovation activities that occur in peripheral regions. The spatial focus of this study is on South Estonia and the Erzgebirgskreis (Saxony). Within this study, both regions are considered peripheral as they are exposed to socio-spatial challenges such as relative economic stagnation, ongoing population decline and a geographically remote location. Based on these motivations this dissertation investigates the following overarching research question: Which key mechanisms facilitate the emergence and drive the dynamics of firm innovation in peripheral regions? Innovation is broadly used as a generic term for progress and has become a fuzzy phrase of academic, policy and wider societal debates (Grupp and Fornahl, 2010). Innovation in this dissertation is defined as the processes whereby firms transform ideas into new or improved products or processes (Baregheh et al., 2009). This inclusive understanding emphasises the evolutionary, interactive and knowledge grounded nature of innovation. To understand the diverse contexts of innovation and to overcome prevailing core- region thinking, this dissertation operates from a relational perspective. Social relations between economic agents and how these relations shape knowledge creation and innovation are openly explored by adopting a geographical lens (Bathelt and Glückler, 2003; Yeung, 2005), focussing on actors and practices. Networks constitute a central concept within the relational framework. Networks are depicted as central modes to organise complexity and interaction (Rammert, 1997). Adopting a network perspective allows to understand how actors interact with their environments and, ultimately, how actors build their environments needed for innovation. Network ties are driven by configurations of proximity and distance. The easing function of geographical proximity has traditionally been emphasised, even though it has been argued that geographical proximity alone does not facilitate interactive learning and innovation (Boschma, 2005). As firms from peripheral regions are not able to extensively draw upon the benefits of geographical proximity, this research adopts multi-dimensional, relational conceptions