Contract No. 2008.CE.16.0.AT.020 concerning the ex post evaluation of cohesion policy programmes 2000‐2006 co‐financed by the European Regional Development Fund (Objectives 1 and 2) Work Package 4 “Structural Change and Globalisation” CASE STUDY BAYERN (DE) Prepared by: Christian Hartmann (Joanneum Research) for: European Commission Directorate General Regional Policy Policy Development Evaluation Unit CSIL, Centre for Industrial Studies, Milan, Italy Joanneum Research, Graz, Austria Technopolis Group, Brussels, Belgium In association with Nordregio, the Nordic Centre for Spatial Development, Stockholm, Sweden KITE, Centre for Knowledge, Innovation, Technology and Enterprise, Newcastle, UK Work Package 4: “Structural Change and Globalisation” Acronyms BERD Business Expenditure on R&D DG REGIO Directorate General for Regional Policy EAGGF European Agricultural Guidance and Guarantee Fund EC European Commission ERDF European Regional Development Fund ESF European Social Fund EU European Union FDI Foreign Direct Investment FIFG Financial Instrument for Fisheries Guidance GERD Gross Domestic Expenditure on R&D GDP Gross Domestic Product GVA Gross Value Added ICT Information and Communication Technology LFS Labour Force Survey NDP National Development Programme NGO Non‐governmental Organisation NTI New Technologies of Information OECD Organisation for Economic Co‐operation and Development PPS Purchasing Power Standard RCA Revealed Comparative Advantage RDP Bayern Regional Development Plan RTDI Research, Technological Development and Innovation R&D Research and Development SME Small and Medium Enterprise SPD Single Programming Document TOR Terms of Reference WP Work Package III Case Study – Bayern (DE) Table of contents Executive summary 1 Introduction 5 1. Structural change and globalisation in perspective 7 1.1 The region at a glance 7 1.2 Searching for the roots of change: socio‐economic history of the region 12 1.3 Regional structural change and globalisation issues in 2000‐2006 14 1.3.1 Dimensions of structural change 14 1.3.2 Understanding the geography of structural change 20 2. Regional policy 2000‐2006: strategy and objectives 21 2.1 Regional policy mix for structural change and globalisation 21 2.2 Overall strategy of the 2000‐2006 Objective 2 programme 24 2.3 Selected fields of intervention and measures 25 2.3.1 Selection logic 25 2.3.2 Detailed description of the selected measures 32 3 Effects of the selected ERDF measures on the process of structural change and adaptation to globalisation 35 3.1 Assessment of the structural and socio‐economic effects 35 3.1.1 Performance of selected measures 36 3.1.2 Contribution of selected measures to structural change and globalisation 40 3.2 Assessment of the effects on institutional capacity and policy learning 47 4. Conclusions: key findings and main message 49 5. Annexes 51 5.1 Additional statistical tables 51 5.2 References 61 5.3 Links 62 5.4 List of persons interviewed 63 IV Work Package 4: “Structural Change and Globalisation” List of tables Table 1.1 – Migration in Objective 2 border region and Objective 2 cities 15 Table 1.2 – Employment by sector (% of employment in the manufacturing industry) in Objective 2 districts and cities in 2006 18 Table 2.1 ‐ ERDF intervention in the regional (national) policy context 23 Table 2.2 ‐ Overview of the Objective 2 programme 24 Table 2.3 ‐ Measures relevant to structural change and globalisation: main features 27 Table 3.1 ‐ Overview of allocations/expenditures as of 31st December 2008 36 Table 3.2 ‐ Measure 2.2 ‐ Comparison of selected planned and realised financial and material indicators 37 Table 3.3 ‐ Measure 2.3 ‐ Comparison of selected planned and realised financial and material indicators 38 Table 3.4 ‐ Measure 3.3 ‐ Comparison of selected planned and realised financial and material indicators 38 Table 5.1 ‐ Taxonomy of Objective 2 eligible areas (NUTS3) 51 Table 5.2 ‐ Regional performance in comparative perspective (NUTS1)‐Basic data 54 Table 5.3 ‐ Socio‐economic change and human capital (NUTS1) 54 Table 5.4 ‐ Employment by sector on NUTS1 level in comparison to Germany and EU15, 2000 and 2006 55 Table 5.5 ‐ Regional specialisation (NUTS1) 56 Table 5.6 ‐ Geography of structural change (NUTS3) 57 Table 5.7 ‐ Geography of structural change (NUTS3) 57 Table 5.8 ‐ Geography of structural change (NUTS3) 59 V Case Study – Bayern (DE) List of figures Figure 1.1 ‐ Bayernʹs location within Germany and Europe 7 Figure 1.2 ‐ Administrative districts of Bayern 7 Figure 1.3 ‐ Objective 2 eligible area in Bayern 2000 ‐ 2006 8 Figure 1.4 – Development of population in the Objective 2 area 15 Figure 3.1 – Projects by branches 39 Figure 3.2 – Development of R&D personnel in the eligible area (1997‐2007) 45 VI Work Package 4: “Structural Change and Globalisation” Bayern case study Executive summary Scope and research methods This report has been prepared in the framework of the ex post evaluation of cohesion policy programmes 2000‐2006 co‐financed by the European Regional Development Fund (Objectives 1 and 2). It is part of the Work Package 4: Structural Change and Globalisation. This case study focuses on analysing the results and outcomes of a set of specific measures of the ERDF 2000‐ 2006 Objective 2 programme implemented in the Bayern region and considered particularly relevant in the context of structural change and adaptation to globalisation: measure 2.2 dealing with the promotion of enhanced competitiveness of SMEs’, projects, the measure 2.3 supporting service centres for SMEs’ and measure 3.3 dealing with the promotion of innovation and R&D at firm’s level’. The study is based on various information sources: an in‐depth analysis of available documents (programming documents, programme complement, annual implementation reports, mid‐term and final evaluations, regional studies); monitoring data of the programme; phone interviews with regional authorities, representatives of the governmental bodies in the region; with final beneficiaries of the specific measures under review, including companies; as well as data from Bayern regional statistical office and Eurostat. Key research question and hypothesis tested in the case study The main research question addressed by this case study is the extent to which regional policy measures, co‐ financed by the ERDF (European Regional Development Fund), supporting structural change and adaptation to globalisation1 have helped to overcome and old and inflexible production system in the eligible areas of Bayern (Germany). In particular, was the ERDF support able to promote the creation of favourable conditions for the formation of new firms, the creation of regional job opportunities with improved skill levels, and to develop interventions that are addressing the stimulation of regional supply chains and to foster technology adoption by regional firms? Given the emphasis of the programming document, the case study focuses on three specific types of measures that have been supported: the offer of service activities for SMEs’, the support of incubators and inter‐firm networks, and the promotion of Innovation and R&D at firm’s level’. The assessment of the effects of the selected ERDF measures aims to highlight the contribution of the Objective 2 programme to structural change in the region, and in doing so tests two of the working hypotheses proposed in the conceptual model developed by the study. Firstly socio‐economic change and human capital is addressed: structural rigidities in the accumulation and change of regional human capital have negative effects on firms’ responses to globalisation challenges and on the adoption of economic innovation. An 1 By measures “supporting structural change and enabling adaptation to globalisation”, the study refers to public intervention to promote the reallocation of resources (labour and capital) towards more efficient ends, either directly (e.g., promoting start ups, or favouring SMEs’ technological intake) and/or indirectly, by minimising possible adverse effects of structural change. 1 Case Study – Bayern (DE) inadequate skill‐base can be due to a lack of flexibility in education, rigid labour institutions, or other socio‐institutional constraints to mobility and to the improvement of human capital. Secondly the production system is under scrutiny: regional production systems are embedded in the regional firm structure and labour markets. The lack of strong local supply‐chain linkages and of intra‐industry collaborative modes between large firms and SMEs may hinder the speed of new technology adoption and the spread of flexible modes of production. Regional context and key findings Bayern as a whole shows a very favourable economic development since 1945, but persistent regional disparities do nevertheless remain. In particular the border region next to the Czech Republic is suffering from its peripheral geographical position, i.e. severe problems with socio‐economic change and the regional endowment with human capital have to be noted for the period from 2000 to 2006. The region is still dominated by regional production systems in the sectors of ceramics, and textiles, concentrated in the districts of Wunsiedel, Hof and the city of Hof. The market dominance of a few large firms has hampered the adaptation of the sectors to international market and technology trends in the period from 2000 to 2006. The roots of these problems can be traced back to the past. The border region next to the Czech Republic (that forms the major part of the Bayern Objective 2 region) became after 1945 a typical rural peripheral region. Because of the Iron Curtain old economic links across the border were cut off after World War II and endogenous potential for renewal remained poor. The regional skill base remained underdeveloped and knowledge infrastructures were established only recently. Policy tried to bring forth adequate responses to these challenges: in particular the measures ‘promotion of enhanced competitiveness of SMEs’, ‘service centres for enterprises’, and ‘promotion of innovation and R&D at firm’s level’ can be seen as addressing the problems of the border region.