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TABLE OF CONTENTS

INTRODUCTION ...... 1 1. REGIONAL INNOVATION POLICY IN EUROPE ...... 3 2. EVALUATION METHODOLOGY...... 10 2.1 OBJECTIVES AND SCOPE OF THE EVALUATION ...... 10 2.2 METHODOLOGICAL APPROACH ...... 12 3. BASELINE SITUATION ...... 22 3.1 SOCIO-ECONOMIC SITUATION AND INDICATORS...... 22 3.2 RTDI REGIONAL PROFILES AND INDICATORS...... 30 4. THE IMPORTANCE OF RTDI IN OBJECTIVE 2 PROGRAMMES...... 33 4.1 PROGRAMME DESIGN MECHANISMS AND THE INTEGRATION OF RTDI...... 33 4.2 RTDI AS A PRIORITY THEME ...... 35 4.3 THE SCALE OF FUNDING...... 46 5. PROGRAMME MANAGEMENT...... 57 5.1 REGIONAL INNOVATION PARTNERSHIPS AND OBJECTIVE 2 PROGRAMMES...... 57 5.2 SELECTION CRITERIA AND PROCEDURES...... 65 5.3 EVALUATION AND MONITORING...... 72 6. EFFECTIVENESS OF RTDI ACTIONS ...... 83 6.1 IMPACT SURVEY...... 83 6.2 HOW DOES RTDI AFFECT REGIONAL COMPETITIVENESS? ...... 89 6.3 RTDI AND HUMAN RESOURCES IN OBJECTIVE 2 ZONES...... 94 6.4 SYNERGIES...... 97 7. ENHANCING THE REGIONAL DEVELOPMENT IMPACT OF RTDI ACTIONS UNDER OBJECTIVE 2 - KEY MESSAGES FOR 2000+ ...... 104

LIST OF TABLES

TABLE 1.1: Division of Responsibilities Regional/National Levels ...... 8 TABLE 2.1: The Seven key issues identified by the TOR ...... 10 TABLE 2.2: Five Key Aspects of the Comparative Analysis...... 12 TABLE 2.3: Sources of information...... 14 TABLE 2.4: Categorisation of measures...... 16 TABLE 2.5: List of case study regions and members of evaluation team...... 19 TABLE 3.1: Objective 2 and Total Unemployment Rates per country...... 23 TABLE 3.2: Summary of socio-economic and RTDI situation in Objective 2 zones...... 24 TABLE 3.3: possible RTDI Priority Baseline Indicators...... 28 TABLE 4.1: SPDs with RTDI identified as a priority...... 36 TABLE 4.2: Categorisation of the evolution of RTDI activities...... 40 TABLE 4.3: A Comparative Assessment Of Objective 2 Programme Structures In 1989-1999 Programmes ...... 43 TABLE 4.4: RTDI spending planned in Objective 2 SPDs (1994-1996)...... 48 TABLE 4.5: Trends in RTDI share of SPD budget 1994-96 / 1997-99 ...... 52 TABLE 4.6: Evolution of the share of S,T,I categories in planned RTDI resources ...... 53 TABLE 4.7: Breakdown of planned, committed and actual expenditure by category of RTDI expenditure in a number of case study regions...... 55 TABLE 5.1: Partnerships and programme management - a qualitative assessment ...... 58

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TABLE 5.2: Selection criteria - Austrian Industrial Research Promotion Fund...... 68 TABLE 5.3: Evaluation culture and techniques in case study regions ...... 73 TABLE 5.4 : indicators for evaluating RTDI actions – some examples ...... 80 TABLE 6.1: Structure of survey and respondent firms ...... 83 TABLE 6.2: R&D budget in percent of total turnover...... 85 TABLE 6.3: Actual outcomes as compared to expectations ...... 88 TABLE 6.4: Types of RTDI actions financed through ESF – Auvergne and Nord-Pas de Calais...... 94

LIST OF BOXES

BOX 1: Efficiency and effectiveness - the arguments for Regional Innovation Policy...... 8 BOX 2: Difficulties in Identifying RTDI content ...... 18 BOX 3: Socio-economic and innovation monitoring system...... 26 BOX 4: Towards indicators for the knowledge-based economy ...... 27 BOX 5: Developing a Regional Innovation Profile - the case of RTP Limburg...... 32 BOX 6: The Bremen WAP and Objective 2...... 34 BOX 7: Illustrative structure of typical RTDI priority in Italian SPDs...... 37 BOX 8: RTDI Priority in West Midlands SPDs 1989-99 ...... 37 BOX 9: The budgetary logic in the SPD design process ...... 38 Box 10: Examples of "drivers and barriers" to meeting spending targets ...... 54 BOX 11: MEDILINK Yorkshire & Humberside ...... 61 BOX 12: Development of RTDI Strategies in Dutch Objective 2 regions ...... 62 BOX 13: IRISI in Piemonte – strategic planning and the information society ...... 63 BOX 14: Mechanisms for monitoring RTDI actions – client monitoring...... 75 BOX 15: Good and bad practice in monitoring and evaluation ...... 77 BOX 16: Thematic evaluation of RDTI in Aquitaine ...... 81 BOX 17: CORTECHS – introduction of technicians in SMEs...... 95 BOX 18: New master's programme of the University of Jyväskylä ...... 96 BOX 19: Developing a research environment on pulpwood and Paper in Finland ...... 99 BOX 20: Synergies of Objective 2 RTDI Measures: TELERISE...... 100 BOX 21: Using Innovation As a promotional hook for inward investors...... 101 BOX 22: Five Main Messages for Policy Makers...... 104

LIST OF DIAGRAMS

DIAGRAM 1: Employment Weight of three main industries ‘87-93...... 23 DIAGRAM 2: RTDI planned budget share in 1994-1996 SPD...... 49 DIAGRAM 3: ALLOCATION OF RTDI FINANCIAL RESOURCES ...... 50 DIAGRAM 4: Science (S), Technology (T) and Innovation (I) shares in 1994-96 RTDI budget per country...... 51 DIAGRAM 5: Evolution of RTDI resources in Objective 2 programme...... 53 DIAGRAM 6: Money flow and decision procedures in NRW...... 67

ANNEXES

A. Good Practice Examples B. RTDI statistics for Objective 2 regions

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APPENDICES – COUNTRY REPORTS

· Austria · Belgium / Luxembourg · Denmark · Finland · France · Germany · Italy · Netherlands · Spain · Sweden · United Kingdom

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INTRODUCTION

This Final Synthesis Report presents the culmination of work carried out during the period January 1998 to December 1998 by the Evaluation Consortium1 and its network of country experts under the contract for the Thematic Evaluation of Research Technological Development and Innovation related actions in Objective 2 Programmes. The reports provides:

· a comparative analysis of the trends in priorities and funding across eleven Member States and 86 zones in regions eligible under Objective 2 of the Structural Funds; · an in-depth assessment of key issues through case studies carried out in 15 Objective 2 zones.

A principal output of the evaluation is a series of recommendations on programming methods and content for future RTDI interventions funded by Objective 2 of the Structural Funds . The report takes account of remarks and comments on a draft final report from the Commission services and is structured as follows:

Part I: Background and method

Section 1: discusses changes in the theoretical framework for and priority given to regional innovation policy in Europe.

Section 2: recalls the objectives of the evaluation, the key thematic issues and the methodology adopted by the consortium.

Part II: Comparative analysis

Section 3: sets out the baseline situation in terms of socio-economic and RTDI indicators for the 86 Objective 2 zones.

Section 4: discusses trends in the priority given to RTDI actions and the scale of funding for RTDI across all Objective 2 programmes.

Part III: In-depth analysis - case study regions

Section 5: considers issues related to programme management including partnerships, strategic initiatives, programme design and project selection procedures; evaluation and monitoring.

Section 6: considers the effectiveness of RTDI actions in promoting regional development drawing on an impact survey on SMEs and on examples of how Objective 2 funding for RTDI has improved regional competitiveness. This sections also looks at the impact of ESF measures on human resources for RTDI; and the issue of synergies between RTDI measures and other programmes.

Part IV: Conclusions

Section 7: summarises the main conclusions and suggests a series of recommendations and policy implications for the next period of Objective 2 programming (2000-2006).

1 Consortium key partners: Zenit, ADE & Enterprise plc

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Part I: Background

1. REGIONAL INNOVATION POLICY IN EUROPE

Over the last decade, research and technological development (RTD) have increasingly begun to be considered as instruments serving a wider goal of competitiveness and social well-being, rather than as an aim per se. At the same time, the concept of innovation as a key factor in economic development which requires a policy response which can be separate from and is always wider than RTD policies has gained ground. Given the evolving nature of the policy framework, a definitive and precise definition of these related policy fields is difficult and the evaluation adopted the following definition (Robert Chabbal, Report to the French Secretary of State for Research, 1997):

· research policy aims to create or improve scientific know-how or new technologies by supporting public or private research laboratories whose primary mission is to undertake pre-competitive research; · technology diffusion / development policy which concerns the stimulation or promotion of the diffusion, adoption and commercial exploitation of available technologies within the private sector; · innovation policy which aims to facilitate the success of innovation projects within or between companies: that is the development, production and successful commercialisation of new products, processes or services.

Ten years ago, the design of the major EU policy instruments geared towards the fostering of RTD and regional development in Europe, respectively the RTD Framework programme and the Structural Funds, was such that synergies were difficult to reach between objectives and actions financed under both lines. Broadly speaking, the aim of the former was to achieve excellence in science and technology in Europe, which involved few spatial development considerations, while the latter supported regional catching-up without an explicit recognition of the role of RTD in this process.

At that time, a major argument justifying the inclusion of (a minor amount of) RTD actions in Structural Funds operations was that of the "technology gap" between advanced and less-advanced regions of the EU. In this perspective, actions financed during the 1989-1993 programming period set priorities to increasing the financial, infrastructure and human resources to RTD, through building and equipping research laboratories, raising the number of researchers in regions lagging behind in terms of these resources, and offering sectoral assistance for research in sectors such as telematics.

The STRIDE Community initiative was launched for the 1990-1993 period, with the aim, in Objective 2 areas, to reinforce collaborations between the research community and industry. The distinction between Objective 2 areas and other eligible zones, principally Objective 1 was overtly recognised at this early stage with the former not being given access to funds for strengthening RTDI infrastructure due to the volume and often quality of existing resources. During the same period, the second (1987- 1991) and third (1990-1994) RTD Framework Programmes included measures geared to favour access for persons and organisations from less favoured parts of the EU, to collaborative research projects (such as preferential measures within the human capital and mobility schemes or the VALUE programme), and various schemes to favour the participation of SMEs. As a result, the share of EU funding allocated to this type of region increased.

Up to the mid-1990s, a linear (or supply driven) view of the innovation process prevailed, at least at the operational level, according to which reinforcing the scientific and technological resources of a region

Thematic Evaluation RTDI in Objective 2 – Synthesis Report 3 ADE – ENTERPRISE PLC - ZENIT would automatically generate economic growth. Most efforts were devoted to the upgrading and creation of RTD capacities, and to the fostering of technology transfer centres and mechanisms in order to facilitate the process of industrial absorption of technologies created in the academic or public research laboratory.

The concept of the technology gap has evolved since the early 1990s both in terms of the estimation of the extent of the gap and the importance assigned to the role of the gap as measured by the relatively limited comparative data available which concerns mostly inputs and outputs (e.g. R&D expenditure and patents). As the recent Second European Report on S&T Indicators (1998) notes: But what is the real importance of the technology gap ? Is there a close relationship between economic differences and technology differences ? One could for instance argue that not all regions need to be technology “leaders” in order to be economically profitable. Some might profit from technology adoption, others might focus on innovation in a non-technological sense” (page 346).

This question seems all the more pertinent for the Objective 2 regions where the concept of a technology gap was never statistically valid. More fundamentally, it raises the related issues of the role of RDTI in regional development, and of the role of the regional level in enhancing RDTI capacities. At this point, it is useful to summarise briefly the lessons from recent theoretical advances on concepts such as "regional innovation systems" or "learning regions", which are gradually being assimilated by regional policies throughout Europe.

As evoked above, theoretical thinking has evolved from a linear understanding of the innovation process, where scientific advances stem from the knowledge-producing sector and are progressively transferred to the economic sector, to a more interactive vision, where innovation arises from complex feed-back loops between the market place and the firm, between various units of firms, between the firm and knowledge producers, etc. Policies are evolving too, although at a slower pace: in the linear view, the intervention logic for policy intervention was the "market failure argument", where there is a need to support investment in knowledge, which would otherwise be under-funded by the private sector because of the public good nature of the output and excessive risks associated to these kind of investments. However, when it is accepted that innovation is not necessarily a product from investment in the knowledge producing sector, then the policy emphasis shifts towards the support of "networks" or the correction of "systemic failures".

Indeed, a growing body of research converge in showing that the capacity of firms to organise fruitful linkages with their environment is a key element of their performance. However, "since SMEs have difficulties to attract highly qualified personnel who could handle new technologies, they increasingly need the help of external sources. Paradoxically, however, SMEs need highly qualified personnel to be able to search for external sources and to use the acquired technological information in their firm" (Hassink, 1997). Thus an enhanced propensity to work beyond the formal limits of the firm should be complemented by an upgrading of internal skills and competencies. Lundvall (1988) pointed out the importance of the nature of these external relationships of the firms for their competitiveness: "one important response to intensified competition is increased co-operation between firms aiming at sharing tacit knowledge".

The concept of a "regional innovation system" extends this approach from the production system to the institutional system of a territory. The linkages implied by this approach are at three levels: between firms, between firms and organisations as well as between organisations. Thus, a regional innovation system is constituted by the network of institutions in the public and private sectors whose activities and interaction initiate, import, modify and diffuse new technologies (Freeman 1987). The attention that has been given to the study of regional innovation systems is justified by the belief that such

Thematic Evaluation RTDI in Objective 2 – Synthesis Report 4 ADE – ENTERPRISE PLC - ZENIT interrelationships between agents in a regional economy has an impact on the competitiveness of individual firms and subsequently on the region as a whole. Most work in this framework focuses on “learning firms” within “learning regions”, and aims to identify factors which favour these inter-linkages in the system (family structure and social ties, natural resources, distribution chains, knowledge infrastructure, etc.)

Even if it could be argued that this line of thinking has often taken a too restricted view on the regional system, seeing it as a rather closed system confined to the regional boundaries, and has given rise to a circular reasoning (innovation occurs because there is a favourable milieu, and a favourable milieu is generated by innovation practices), its main contribution has been to highlight the role played by proximity in the fostering of innovative practices in firms. Learning-by-interacting, at the territorial level, is seen as the main process by which a cumulative development process can be nurtured. This is why so much attention is paid to the role of local and regional levels in building the bases for the competitiveness of a region and a nation.

The “regional innovation systems” wave of thinking, has deepened our understanding that the performance of a firm is a function of its environment, and of the firm’s capacity to organise relationships with it. This implies that sound policy approaches should aim both at developing learning capacities of firms and of other agents in the system, namely support organisations but also institutions. The creation of an atmosphere of trust between regional agents has been put forward as an important criteria for enhancing regional competitiveness as a whole, and thus providing better conditions for enhancing innovation within the firm.

In the light of these theoretical developments, concrete strategic exercises at regional level, carried out notably under the RITTS and RTP/RIS programmes of the European Commission, have gathered a lot of evidence about the needs of regional firms in terms of innovation support, the way innovation policies are built and delivered and their weaknesses and strengths.

Studies carried out have consistently shown an inadequacy, to a lesser or greater degree according to regions, between firms’ needs and the way this support is organised. To summarise, the problem is that the policy response has remained based on a "supply-led" and "autarchic" approach – with most efforts going into organising the provision of services which valorise the technological potential of the region (essentially the public and academic research sector or the known research interests of larger firms). In other words, a linear vision of innovation is still very much at the basis of regional innovation policies, focusing on technology transfer mechanism and on a closed view of the firm’s environment, unduly limited to the regional boundaries.

Another finding is regional innovation systems are very often used by a very small subset of enterprises, not necessarily including those who would benefit most from accessing it. The "technology- following SME" market is not as attractive as the large or high-tech firm market, for private consultants as well as for publicly-supported agencies, thus services offered are generally better suited to the needs of the latter firms.

The systemic view of innovation processes implies that each region is unique and that policy design should thus be founded on a sound understanding of the structure of the region (what kinds of firms are there, what co-operation mechanisms are at work, etc.) and should be based on a strategy identifying priorities and using bottom-up processes.

In line with these conceptual evolutions, a shift in emphasis is visible in the policy orientations given by the Commission for the 1994-1996 programming period of the Structural Funds, where, broadly speaking, the idea is to reduce the share of “hard” (infrastructures) RTD measures and enhance “soft”

Thematic Evaluation RTDI in Objective 2 – Synthesis Report 5 ADE – ENTERPRISE PLC - ZENIT measures, targeting the relations within the system. In addition, the Commission has taken action to reinforce the strategic planning capacity of regional partnerships in the field of innovation and the information society through actions financed under Article 10 of the ERDF and the Innovation Programme (an action of the 4th RTD Framework programme).

In the current 4th Framework Programme for Research and Development (1994-1998) there is an explicit objective to contribute to cohesion through dissemination of scientific and technical knowledge, training of researchers and the creation of networking structures. The future 5th Framework programme will be much less science driven than “problem-driven”. Promotion of innovation and the encouragement of SMEs participation will be maintained, and “key actions” will be supported, a number of which are particularly relevant to Objective 2 regions.

The current programming period for the Structural Funds (1997-1999) is marked by an explicit recognition of RTDI as a main element for achieving the general objective of EU cohesion, and industrial restructuring in Objective 2 areas. The note for guidance concerning operations in the declining industrial areas, issued by the Commission in April 19962, states this very clearly. The paramount priority of Structural interventions is “to further strengthen efforts to encourage the emergence of new jobs by improving production structures and raising qualification levels in the workforce”. To achieve this objective, the Commission suggests that interventions are concentrated in three areas:

· competitiveness and development of SMEs; · research & development, innovation and a labour force qualified in future technology; · environment and sustainable development.

The second priority line is justifie d by the idea that “in order to increase competitiveness, greater synergy and effectiveness should be sought from actions for research, development and innovation in the new Objective 2 programmes. In this context the Commission is urging regional partnerships to establish regional innovation and technology strategies which will form the basis of R&D under the new programmes”. More specifically, actions supported should:

· aim to make optimum use of already existing facilities through developing co-operations between R&D resources and businesses; · favour technology transfer in the view of practical application of research results to well-identified users; · stimulate innovation in companies, since innovation is essential for renewing the industrial tissue of Objective 2 areas. Innovation here is seen to go well beyond technological area, as it encompasses a whole set of measures to strengthen to technology absorption capacity of enterprises; · Raise the qualification levels of the workforce, and their awareness of innovation, in order to adapt them better to the requirements of new technologies; · Stimulate networks between enterprises, local actors and knowledge centres.

The fact that Structural Fund interventions must go beyond the simple reinforcement of RTD capacities is explicitly mentioned in this note: “Technical advances (especially in R&D) are not themselves sufficient to ensure successful innovation”. Future orientations for the Structural Funds will need to reinforce this message. Indeed, the recent Commission Communication, published in May 1998, and entitled “Reinforcing Cohesion and Competitiveness through Research, Technology Development

2 European Commission (1996) C (96) 952 final “Note for guidance concerning operations in the declining industrial areas (Objective 2) for the second programming period 1997-1999”.

Thematic Evaluation RTDI in Objective 2 – Synthesis Report 6 ADE – ENTERPRISE PLC - ZENIT and Innovation”3 argues that while R&D and education are the main long term assets that a country needs for its prosperity it is not differences in inputs (R&D expenditure, etc.) which are the pre- eminent problem but rather differences in demand and usage of technologies which are adding a further dimension to uneven growth in the EU. Hence, the key challenge for Europe’s regions is to raise awareness of the necessity to achieve greater integration between RTD programmes and economic policy, and focus on improving learning in firms.

The Communication distinguishes three areas of action for the future: promotion of innovation; stimulation of industrial co-operation and networking; upgrading of human resources. Promoting innovation involves focusing on demand-side initiatives, favouring total quality management, developing new financing mechanisms, promoting better targeting of support structures. Stimulating networking refers to the building of strong liaisons between firms and research centres, developing technology but also involving organisation and marketing, exploitation of clusters, and supporting inter- firm learning. Strengthening human resources can be done through the use of professional mobility schemes, lifelong learning programmes, management support, etc. Whether it is the national or regional that takes strategic decisions on RTDI; provides the public funding and has operational responsibility for the interventions depends very much on the historical trends in policy development and institutions in the Member States.

These orientations mark clearly a definitive shift away from the view that increasing expenditure on the science base and technological development infrastructure will have a causal impact on the economic competitiveness of a region (or nation). Investment permitting greater RTD output is only a necessary and not a sufficient condition for RTDI to be effective promoting regional development. In short, “it is necessary to ensure that RTD and innovation interventions are integrated with the productive fabric of the region. The regional RTD and innovation system - no longer seen as dominated by supply-driven research institutes but expanded to include firms, policy-making institutions and the labour market - should be responsive to the local economic milieu”. An overall objective of the current evaluation is hence to identify to what extent these broad trends in the policy framework and guiding orientations have been met on the operational level by a change in behaviour and the actual content of actions in favour of innovation in regional firms.

A key parameter guiding the capacity of regions to intervene in the field of RTDI is the scope for action provided by the different political and institutional systems in each member state. In other word, the division of responsibility between the three main layers of the subsidiarity chain: regional, Member States and European Union. In each of the Country Reports of this thematic evaluation an introductory section sets out the national context of RTDI policy and the relationships with regional policy.

In the Communication, it is suggested that: the regional level should be responsible for identifying and exploiting local assets, defining and implementing a strategy, and developing partnerships; the national level has to ensure adequate framework conditions (education, regulatory policies, infrastructures, etc.), shape the national R&D system, and co-ordinate Structural Funds programmes; while the Commission, in co-ordination with the Member States, has to set long term goals for RTDI policies and ensure coherence between interventions.

3 European Commission (1998) “Reinforcing Cohesion and Competitiveness through Research, Technology Development and Innovation ”.

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TABLE 1.1: Division of Responsibilities Regional/National Levels

Country Strategic decision making level Control over budget for RTDI National Regional National Regional Austria ÖÖ Ö ÖÖ Ö Belgium ÖÖÖ ÖÖÖ Denmark ÖÖ Ö ÖÖ Ö Germany Ö ÖÖ Ö ÖÖ Finland ÖÖ Ö ÖÖ Ö France Ö ÖÖ ÖÖ Ö Italy Ö ÖÖ ÖÖ Ö Netherlands Ö Ö ÖÖ ÖÖ Spain Ö ÖÖ ÖÖ ÖÖ Sweden ÖÖ Ö ÖÖÖ UK ÖÖ Ö ÖÖÖ Source: Country Reports

A reading (illustrated in the simple tick table above) of the Country Reports for this evaluation allows some clarification as to the extent to which “subsidiarity” is actually being applied with respect to the division of responsibilities suggested in the Communication. In general terms, aside from the highly federalised member States (Belgium, Germany and to some extent Spain), competence for both developing the major lines of policy and for autonomy over R&D and major technological development programmes remains largely in the hands of national governments. That is, even if regional governments and agencies are playing an increasing role in developing strategic policy directions, the final decisions and funding mechanisms in the majority of cases remain at the level of national ministries (e.g. the DTI in the UK, MINER in Spain, MURST in Italy, etc.).

However, the capacity to act at regional level is generally greater for innovation support type measures aimed directly at the business sector. This is the case, for instance, in the Netherlands where the Provincial level has gained increasing scope for action and control over budget for innovation support. This trend has been reinforced by a number of strategic policy documents including an advisory report of the Dutch Advisory Council for science and technology which argued in favour of the regional level has being most effective and efficient in delivering support for fostering innovation in SMEs. Broadly speaking, the case for an leading role for the regional level of government in innovation policy has been acknowledged in the majority of Member States.

BOX 1: Efficiency and effectiveness - the arguments for Regional Innovation Policy

In a 1995 Report to the Ministry for Economic Affairs, the Dtuch Advisory Council for Science and Technology Policy (AWT) set out a series of arguments supporting the transfer of increasing financial resources and freedom of action to the provincial governments in the Netherlands.

The Council regarded the encouragement of innovation in industry as the central objective for technology policy. It made a distinction by type of company: multinational companies, national exporting companies and the SME sector. Large companies and specialised smaller companies often know the route through the knowledge domain. As a rule, the SME requires an intermediary when it starts focusing its search for knowledge. In general, these companies are very much dependent upon parties in their immediate environment. These environmental factors therefore determine for them the conditions and parameters for innovative capacity to a significant degree. The Council's conclusion was therefore that considerations of efficiency demand that policy on fostering innovation for the SME sector should be pursued at a regional level.

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In the Netherlands, policy on encouraging innovation comprised a series of instruments, selected at national level and passed on to the regions in a uniform manner with an allocated sum. However, it is not immediately obvious that all regions require the same instruments, with the associated conditions and budgets. On the contrary, in the light of 'local flavouring', flexibility is required to tie in with specific regional needs in an optimal manner. The Council was therefore of the opinion that considerations of effectiveness make it much more preferable for every region itself to be able to choose which initiatives are needed and therefore able to spend the resources as it sees fit. In this context, the AWT advocated a transfer of resources for the fostering of innovation from national to provincial level. In its eyes, only the total amount should be earmarked for fostering innovation without any further specification for specific instruments.

The Council argued that this proposal would increase efficiency in policy implementation. There is an impressive volume and variety of intermediary organisations at national and regional levels. Many of these organisations are targeted at the SME sector and meet one another in practice as competitors, with the risk of increasing inefficiency. If these organisations have a regional subsidy provider, there would be pressure to rationalise (demarcation of responsibilities, merging, etc.) and thus efficiency gains.

Source: Country Report – The Netherlands

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2. EVALUATION METHODOLOGY

2.1 OBJECTIVES AND SCOPE OF THE EVALUATION

Objective of the evaluation: the purpose of this study is to provide a thorough and systematic analysis of the contribution and impact of the Structural Funds RTD and innovation actions in the Member States and regions from an economic development perspective. The study should also contribute to establishing guidelines for future investments by Structural Funds in this field in the assisted regions, based on the experience of the past and current intervention.

In defining the objectives of the evaluation, the Commission services noted that in developing RTDI policies for Objective areas, “it is imperative to have a detailed understanding of the current regional situation in order to determine what policies might be most appropriate. A region- specific analysis, according to the characteristics of the Objectives, enables current innovation and technology trends to be assessed and gaps to be identified in the policy framework”. This observation was taken as the starting point by the evaluation team in developing the methodology since it both underlines that there may be need to consider more fully the specific economic and innovation profiles of the Objective 2 zones when devising policies; and the need for a thematic evaluation of interventions in favour of RTDI to take due account of the wider system of support agencies and the culture of innovation in the regions concerned. As such, the basic building blocks for the evaluation are the 15 regional case studies through which the evaluation attempted to provide a richer assessment of the different factors which influence the means of delivery and the effectiveness of Objective 2 RTDI measures.

The Terms of Reference for the evaluation set out seven key issues and five key aspects for the comparative analysis which are resumed in the following tables.

TABLE 2.1: The Seven key issues identified by the TOR

Core issues identified by the Commission Ancillary Questions 1. How effective were the Structural Funds in promoting RTDI Pertinence of actions funded; capabilities Coherence with regional strategy 2. To what extent and through which mechanisms have the Private sector participation in RTDI Structural Fund programmes contributed to reinforcing links to local measure design; business and industry? Good practice examples and transferability 3. To what extent have the Structural Funds programmes ERDF/ESF synergies; contributed to overcome skill shortages and improve qualifications Graduate retention / integration; in the field of RTDI? Equal opportunities 4. To what extent has the new RTDI capacity provided with the Impact on business performance and assistance of Structural Funds, enhanced competitiveness and employment economic performance in the areas concerned? Sustainable development Diversification of economy 5. What has been the impact of CSFs and SPDs on national and Change in regional innovation regional RTDI policies and funding, especially on regional systems distribution of RTDI capacity? Network and linkage effects 6. Has there been synergy and co-operation or rather duplication Exchange of good practice; with other relevant Community policies, in particular the RTD Complementarity of actions. framework programmes? 7. What are the main policy issues for the future in regard to the Programme design development needs of the Objective 2 regions Strategy & implementation mechanisms

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Type of measures

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TABLE 2.2: Five Key Aspects of the Comparative Analysis

Theme Focus of analysis RTDI funding Amount and proportion of funds allocated to RTDI The importance assigned to different Breakdown of expenditure on RTDI related actions basis of categorisation of types of projects Quality of RTDI organisation and Evaluation and management structures structures The effectiveness of instruments and Appraisal of key types of mechanisms instruments through case studies The impact on human resources and Analysis of ESF measures in training certain case study regions

In order to make these issues more explicit, the evaluation team developed a full set of research questions which were presented in the inception report. Both the original issues and the research questions are recalled at appropriate occasions during the remainder of this report.

2.2 METHODOLOGICAL APPROACH

In order to carry out the evaluation, the evaluation team proceeded in three main stages in line with the terms of reference of the study:

· definition and submission of a detailed methodological framework and work-programme to the Commission in the form of an Inception Report; · a comparative analysis of trends in funding, objectives and programme design (e.g. single priority against horizontal distribution of RTDI measures across programmes) in all 86 Objective 2 zones carried out on the basis of desk-research; · an in-depth review of RTDI measures, projects, partnership and programme management procedures in 15 case study regions. These case studies were used to both confirm the trends identified in the initial desk research and to analyse key thematic issues based on an extensive series of interviews with the main programme participants and questionnaire surveys. An impact survey on companies as the final beneficiaries of RTDI measures was implemented in certain Member States.

A series of methods and tools were developed in order to gather and analyse the data and qualitative information at each stage of the evaluation:

· a categorisation of RTDI measures with a view to facilitating the analysis of funding trends; · a logical framework type table which allowed the structuring of key information on RTDI measures in each of the SPDs; · a template for the country reports with synthetic financial and analytical tables including regional innovation profiles; · an SME impact survey questionnaire; · good practice templates used to summarise measures and projects providing a novel approach to supporting the innovation activities of regional firms or with an identifiable impact on regional competitiveness. · an interview guide and questionnaire for the case studies.

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Rather than producing stand-alone regional case study reports, the information obtained from the field work in the case study regions enriched the final versions of the Country Reports.

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TABLE 2.3: Sources of information

COUNTRY CSFs/OPs/ CSFs/OPs/RP SPDs SPDs Evaluations Evaluations Evaluations Annual Reg. Other RPDs/SPDs Ds/SPDs 94-96 97-99 89-93 94-96 97-99 Reports RTD Sources 89-91 91-93 Reports (RIS, RTP..) Austria N/E N/E 4/4 4/4 N/E 4/4 4/4 4/4 2/2 4/4 Belg./Lux. N/R N/R 5/5 5/5 4/5 5/5 5/5 N/A N/E Denmark 2/2 2/2 2/2 2/2 2/2 2/2 N/E 2/2 Finland N/E N/E 7/7 5/7 N/E N/E N/E N/E N/A N/A France 1/19 N/A 19/19 19/19 9/19 15/19 19/19 19/19 3 12/21 Germany 6/6 6/6 9/9 9/9 6/6 9/9 9/9 9/9 Italy N/R N/R 11/11 11/11 9/9 5/5 N/E 7 1 3/3 Netherlands N/R N/R 5/5 5/5 3/3 5/5 5/5 N/A 2/2 Spain 4/6 6/6 7/7 7/7 6/6 5/5 6/7 N/A N/E Sweden N/E N/E 5/5 5/5 N/E N/E N/E S S United N/A 1/9 12/12 12/12 6/12 3/12 9/12 5/12 Kingdom N/E Note: For detailed information on available data please see the respective country reports. N/E: document non existent N/R: document not requested N/A: document not available

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Comparative analysis

As a first step, desk research was carried out in each of the eleven4 Member States covered. The documentation used at this stage consisted of the available SPDs and CSFs, the annual reports, ex- ante, interim and ex-post evaluations, etc. Table 2.3 gives a general overview of the data that has been employed for the desk research. In most of the countries, this material was accessible either through the Commission or direct contacts with regional authorities. Data availability varied across the Member States, e.g. for Germany and Spain, previous programming documents and annual reports were fully available. However, some national evaluation teams suffered from a lack of source material, mainly due to difficulties in obtaining requested information through official channels.

The documentation available was used to analyse each Objective 2 region in detail concerning baseline data, the RTDI strategy and measures in the SPDs and the actual and planned expenditures on RTDI measures from 1989 (where applicable) to 1999. A key emphasis was placed on completing the logical-framework and financial tables for the 1994-96 period on the basis of a categorisation of RTDI measures.

Due to the increasingly all encompassing definition of the term innovation, such a categorisation is complex since there is inevitably overlap with traditional policy domains, notably business support. Moreover, each Member State tends, for historical or institutional reasons, to define the scope and remit of RTDI measures/actions in a different manner (e.g. in Germany, investment grants are considered to promote "innovation" in the recipient companies through the acquisition of new equipment, etc.). In the Terms of Reference for the evaluation, the Commission suggested three broad categories of measures: scientific potential; technological potential and support to innovation. In order to establish a more precise definition of the parameters and limits of the analysis, these categories were broken down into a series of "standard RTDI measures" with the aim of:

· allowing an adequate level of demarcation between different policy options, instruments and delivery mechanisms; and · permitting an inter-regional and across country comparison with respect to funding flows.

The categorisation is reprinted in Table 2.4 below with a series of examples, which are not necessarily intended to represent "good practice", drawn from the Country Reports in which further information can be found. In the case of the examples given for “actions”, they are used illustrate the way in which the ERDF/ESF intervened and are not necessarily the unique mission of the centres/programmes mentioned.

It should be noted that the categorisation is an analytical tool not a normative model on whic h RTDI measures should be structured in the context of a programme. By its very nature the classification separates out different types of actions. In implementation, the need to integrate and build measures with significant critical mass means that in practice the sub-measure or project types are often put together.

4 For the purposes of this evaluation the single Objective 2 zone in Luxembourg was included in the Belgian Country Report.

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TABLE 2.4: Categorisation of measures

Types of measures Example from evaluation Enhancement of scientific potential Infrastructure S.1.1. Grant / loan for construction of research facilities · Centre of excellence in electromechanics/ aerospace (Liège - Belgium Equipment S.1.2. Grant / loan for purchase of new equipment · Chemistry Laboratory of Horticulture Engineering (La Rioja - Spain) Actions S.1.3.1 Grant for research projects · Technology Centres (Pais Vasco) S.1.3.2 Grant for collaborative research projects · Technology Centres (Pais Vasco)

Actions S.2.3.1 Grant to cover costs of preparing submission to EU RTD FP · Re-Craft (Yorkshire & Humberside) S.2.3.2 Grant for human capital mobility n.a. S.2.3.3 Grant for funding of researchers n.a.. Enhancement of technological potential Infrastructure T.1.1 Grant for construction of technology resource centres; · Advanced Manufacturing Technology Centre (East London & Lee Valley) T.1.2 Grant for construction of science & technology parks · Creation and development of four technology parks in Piemonte (Italy)

Equipment T.2.1 Grants for equipping technology resource centres · Jyväskyla Centre of Excellence for pulp and paper industry (Central Finland)

Actions T.3.1 Grants/loans to stimulate contract research (technology transfer); · Mechatronica (Twente - Netherlands) T.3.2 Grants for development of technology brokering services; · Technology Centre North-Netherlands (Groningen-Drenthe) T.3.3. Grants / financial engineering schemes for the promotion of spin-offs; · Competence Centre for Energy, Environment and Construction (Vorarlberg - Austria) · Centre de Valorisation des Produits de la Mer (Nord-Pas de Calais - France) T.3.4 Funding for services of technological resources centres · Interface Enterprise-Université (Liège - Belgium) T.3.5 Funding for University interface services · Coteach (East London and Lee Valley - UK) T.3.6. Grants for mobility of researchers to SMEs · n.a. T.3.7 Grants for mobility of business personnel to research facilities · Technofutur (Liège- Belgium) T.3.8. Funding of training in new technologies

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TABLE 2.4 (ctnd): Categorisation of measures

Support to innovation Infrastructure I.1.1 Grants for construction of innovation centres · Lee Valley Business Innovation Centre (East London and Lee Valley)

Equipment I.2.1 Grants for equipment of innovation centres n.a.

Actions I.3.1. Support to stimulation actions (audits, business innovation · CASIMIR (Auvergne - France) counsellors, demonstration projects, networking of operators, etc.) Bremen Innovation Agency (Bremen - Germany) Sheffield Regional Technopole (Yorkshire & Humberside - UK) I.3.2 Inter-firm networking initiatives (clusters, etc.) · NOR-COM (North Jutland - Denmark) Mission-Régionales Textiles Techniques (Nord-Pas de Calais) MEDI-Link (Yorkshire & Humberside) I.3.3 Aid for the recruitment of non-scientific specialised personnel · Innovative Assistant Scheme for in-house ecological supplies (Styria - Austria) I.3.4. Incentives schemes to use specialised consultants; · Fonds Régional d’Aide au Conseil (all regions - France) I.3.5 Promotion of co-operation with non-scientific resource centres · Prodesign (East London and Lee Valley) (technical colleges, design institutes, etc.) 1.3.6 Training schemes for the management of innovation n.a. I.3.7 Subsidies for industrial R&D · Applied Research Grants (Piemonte - Italy); I.3.8 Subsidies for collaborative industrial R&D; · Cluster projects (Zuid-Oost Brabant - Netherlands) I.3.9 Support to financial engineering schemes/funds · Venture capital scheme (Pais Vasco - Spain) I.3.10 Support to strategic planning initiatives for RTDI · Regional Technology Plan (Twente - Netherlands)

Thematic Evaluation RTDI in Objective 2 – Synthesis Report 17 BOX 2: Difficulties in Identifying RTDI content

Measure 1.1 "Support for business initiatives" in the 1994-96 SPD for Alsace gathers under a single measure accounting for 15% of the SPD, actions as different as:

· Aids for capital investment in SMEs (which often have a very limited technology and innovation content) · Aids for intangible investment and access to counselling (same remark as above) · Support for exports actions (not relevant for analysis) · Support for joint business initiatives (which might have an innovation or technology transfer content) · Support for acquisition of technologies by SMEs (relevant to analysis) · Support for innovation projects in firms (relevant to analysis) · Recruitment of technicians in SMEs (probably relevant to analysis).

Source: Country Report France

In retrospect, it is clear that in a number of Member States (France, Finland, the Netherlands), this categorisation was difficult to apply due to two main reasons:

· firstly, in many SPDs, RTDI actions are included in measures of a generic nature supporting, in particular, SME development (see boxed example below); · secondly, even where a specific measure contains only RTDI type actions the content is often defined only at a very aggregate level and during implementation diverse projects may be funded altering considerably the real content and (more critically) the objectives of the measure.

Despite these caveats this tool enabled the evaluation team to analyse the evolution of RTDI content using the broad categories and to examine good practice using an action type framework. This first attempt at a categorisation of RTDI measures in Europe has allowed a significant body of evidence to be constituted concerning planned funding allocations across the 86 Objective 2 zones. This data allowed the testing of a number of postulates such as the existence of a trend over the periods 1989-93, 94-96 and 97-99 from a concentration of resources on the first two categories (science and technology) towards innovation support measures.

The main output of the desk research phase was the production of 11 Country Reports on the basis of a common template. These reports were the basis for both an interim synthesis report submitted in July 1998 and for the comparative analysis section of the final report.

In-depth analysis in 15 case study regions

Following the submission of the interim report, an in-depth analysis were carried out in fifteen case study regions (see table below) as the basis for responding to the issue linked to efficiency in programme management, effectiveness and impact. In each case study region, the analysis was carried out at several levels: firstly at the programme management level with face-to-face interviews with the programme managers focusing on the importance assigned to RTDI and the quality of RTDI organisation and structures. Secondly, at the partnership level with interviews and questionnaires addressed to the most important RTDI project promoters (the organisations responsible for managing specific measures or sub-measures) in order to analyse a series of issues around partnership, programme design, effectiveness of measures, etc..

In addition, final beneficiaries were asked to answer a questionnaire on the RTDI projects funded under Objective 2 that they had carried out. This company survey could be carried out in five case study regions in three Member States United Kingdom, Austria and Germany. The analysis of the case ADE – ENTERPRISE PLC - ZENIT study regions allowed the identification of good (and bad) practice and innovative approaches and served as basis for key sections of the Country Reports.

It is important to underline that over and above the impact survey the evaluation approached the issue of effectiveness and impact essentially through case studies using good practice or exemplar projects funded under Objective 2 to illustrate the types of impact that funding RTDI activities can have on the growth prospects of a regional economy. Although it would have been preferable, and indeed it had been foreseen, to back up these illustrative examples with quantified indicators of impact, the evaluation team was faced with a dual problem:

· investments in certain types of projects (notably larger infrastructure based initiatives, e.g. technology parks in Piemonte, Italy) although begun as early as the 1989-93 period has only become fully operational during the 1997-99 period; and more fundamentally, · project and programme level monitoring and evaluation of RTDI activities is extremely poor (this issue is developed in section with the consequence that little or no data on impact on the final beneficiaries (i.e. regional firms) has been collected by Objective 2 programme managers over the last decade.

Table 2.5 provides a list of the case study regions for each of the 11 Member States concerned by Objective 2 and indicates the company in the core team responsible for overseeing the preparation of the Country Report and the national expert (where different).

TABLE 2.5: list of case study regions and members of evaluation team

Country No. of case Case study regions Country co-ordinator - studies national expert Austria 1 Steiermark ZENIT Joaneum Research Belgium/ 1 Liege ADE Luxembourg Denmark 1 North Jutland Enterprise - Hanne Tanvig Finland 1 Central Finland Enterprise VTT France 2 Nord-Pas de Calais ADE - Auvergne MERIT Germany 2 North Rhine Westphalia ZENIT Bremen Italy 1 Piemonte ADE The Netherlands 1 Twente ADE Capio Consult Spain 2 Pais Vasco Enterprise La Rioja Infyde Sweden 1 Blekinge Enterprise Hanne Tannvig UK 2 Yorkshire and the Humber Enteprise - East London CRESR

In order to avoid duplication and overlap, meetings were held with the evaluators for the Thematic Evaluation of RTDI in Objective 1 zones (consortium led by Circa, Ireland) and with the Ernst & Young team carrying out the SME Thematic Evaluation. Close co-operation was also maintained with the Commission services and notably the desk officer in the evaluation unit of DGXVI, Mr Andrea

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Mairate, who was instrumental in ensuring access to required documentation at EU level and in informing and guiding the work of the evaluation team.

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Part II: Comparative Analysis

Given the remit to review RTDI actions in all 86 Objective 2 zones, the comparative analysis was necessarily based on desk research and essentially focused on three issues:

· the importance assigned to different types of RTDI actions and their diversity and balance across the regions; · coherence of the RTDI measures in the SPDs with the regional innovation profile; · funding patterns and expenditure flows with respect to RTDI measures.

3. BASELINE SITUATION

As noted above, a key premise of the evaluation methodology was that RTDI measures cannot be analysed in an abstract manner without taking into account the regional innovation profile (resources, outputs, networks, etc.), economic performance and coherence with wider regional development policy goals. In order to build up an understanding of the context in which the Objective 2 programmes, in general; and the RTDI measures, in particular had been designed and implemented, each national evaluation team assembled data from the SPDs and other sources on both the socio-economic situation and RTDI profiles of the regions.

3.1 SOCIO-ECONOMIC SITUATION AND INDICATORS

Objective 2 programmes vary in size. Some of the largest programmes are bigger than individual Member States (the West Midlands and Catalunya programmes each cover eligible areas in excess of 3 million people). At the other extreme there are programmes such as Gibraltar with under 100,000 people.. In the future the geography of Objective 2 will become still more diverse as urban, rural and fisheries regions are considered under the same banner. Increasing thought will need to be given to the level at which RTDI related actions fit into this heterogeneous eligibility landscape.

Each of the Country Reports for this evaluation provides a synthesis of the socio-economic indicators for the current Objective 2 regions based notably on the SPDs. It should be stressed from the outset that the information presented in the individual SPDs varies considerably across countries and between zones within countries. In terms of the characteristic indicators of regions facing industrial decline: high relative rates of unemployment and the importance of a limited number of key industrial sectors to the regional economy, the country reports underlined that little has changed over the last decade. Moreover; Objective 2 regions continue in the main to have a population density considerably above the national average this is particularly the case in the UK and Spain, where density in Objective 2 areas is four or five times the national average

Table 3.1 illustrates that the Objective 2 regions continue to have unemployment rates which are above the national average in most of the Member States. For instance, in Germany Objective 2 zones face unemployment rates of between 1 and 3 percentage points above the national average; while unemployment rates in all Austrian Objective 2 areas are higher than the rate for the Länder in which they are located. In the UK the situation also gives cause for concerns since all the Objective 2 zones contain small areas where unemployment rates are three or four times the national average.

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5 TABLE 3.1: Objective 2 and Total Unemployment Rates per country

1992 1994 1997 COUNTRY Obj. 2 Total Obj. 2 Total Obj. 2 Total Austria 6.25* 6.2* 7 6.9 Belgium + 10.4** 7.3** 11.9 9.7 Denmark 14.6 11.4 16.2 12.2 Germany 7.8 6.6*** 10.4 9.2*** 12.6 11 Finland 22.5 20 20.8## 19## Italy 10.77 12 Netherlands 6.6 5.6 8.6 7.6 Spain 19.42# 22.73# 14## 20.3## Sweden 7.1 5.8 11.8 9.8 United Kingdom 11.9** 9** 12.8 9.4 Source: RTDI Evaluation, Final Country Reports

The highest rates observed are in Finland and Spain with between 14% and 20% of the active population out of work; although in the latter case unemployment rates have fallen quite significantly between 1992 and 1997. It is clear then that the socio-economic situation of Objective 2 areas has not changed in drastically in terms of overall unemployment rates during the past ten years.

Key issues with respect to the potential for RTDI funded actions to assist in addressing the problem of unemployment include: the rates of graduate unemployment (indicating both a potential for the insertion of qualified scientific personnel in the work-force; or alternatively the risk of a "brain-drain"), the threat that the introduction of new technologies will drive out lower-skilled workers leading to higher levels of social exclusion if adequate training and re-training courses in new technologies are not delivered; etc.. As a general rule, the analysis of links between new technologies and the labour force in the SPDs did not provide enough data to allow a real appreciation of the importance of such issues.

DIAGRAM 1: Employment Weight of three main industries ‘87-93

60

50

40

1987 30 1989 1991 1993 20

10

0 Belgium France Germany Italy UK

Source: Elize Database 1987-1993

5 Note: Objective 2 rates have been obtained as a simple average of the Obj.2 areas in each country. Thus, they are not weighted and only stand as approximate figures. * 1995 data; ** 1991 data; *** Only includes West Germany; # 1993 data; ## 1996 data

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With regards to the employment weight of the three main industries, Diagram 1 shows no significant change over time in the Objective 2 zones. They still play a major role in the economy of the Objective 2 regions and the main challenge remains the diversification of the economies through the generation of new economic activity and employment opportunities in other sectors. This is clearly an area where Objective 2 funding for RTDI actions is expected to have a significant effect on the economic potential of the regions. The exploitation of knowledge and know-how in the zone with a view to new firm creation is often cited as a key objective in SPDs with certain regions placing an emphasis on specific technologies or themes (environment, biotechnology, etc.). Equally, a number of SPDs underlined the importance of access to scientific infrastructure or expertise for attracting new inward investments to justify Objective funding R&D facilities which are not necessarily "near-market" orientated; or for essentially real estate type science and technology park initiatives.

Of course, even before the introduction in the next programme round of the new classification of Objective 2 zones (industrial decline, urban, fisheries and rural), these average figures hide many divergences in the situation with a number of relatively rural zones (e.g. Lolland in Denmark, a number of the French zones, etc.); coastal zones (such as Boulogne-sur-Mer in Nord-Pas de Calais or Lorient in Bretagne); urban zones such as Bremen, Turin or East London and Lee Valley and so on. Equally, the situation in terms of economic structures and performance is highly varied with certain zones with a richer SME industrial tissue qualifying (e.g. Twente in the Netherlands), while others remain dominated by one or two large companies with relatively recent closures creating important "hotspots" of unemployment (e.g. Liège in Belgium).

This diversity tends to suggest the need for a more sophisticated and flexible approach to developing socio-economic indicators relevant to specific types of Objective 2 Programme across the EU. Indeed, co-operation on a common “indicators strategy” could be very helpful for similar Objective 2 areas in different EU countries. In the following table, a very synthetic and qualitative summary is provided of the information contained in the Country Reports (detailed information can be found in the full regional profiles of all 86 eligible areas).

TABLE 3.2: Summary of socio-economic and RTDI situation in Objective 2 zones

Country Austria Positive : although rising and above the country average, unemployment rates are still relatively low; high skills level; strong past efforts made by regions to develop technology infrastructure and need now for upgrading and fostering co-operation; technological college recently founded and can be used for new R&D activities; successful RIS project in Lower Austria; Negative : Except Styria, lack of business innovation related infrastructure; lack of co-operation between RTDI organisations; qualifications which do not meet firms requirements; lack of preconditions for innovative behaviour. Belgium - Positive : Considerable research potential with the existence of numerous universities, polytechnic Luxembourg institutes and sectoral collective research centres; RITTS/RIS projects being implemented in both Walloon and Flemish regions; Negative : poor state of labour market with very high level of unemployment; high dependence with metal products, machinery, automotive and textile industries; share of R&D expenditure in GDP under the European average, particularly in Wallonia; lack of strategic RTDI frameworks; very segmented innovation and technology frameworks. Denmark Positive : in North Jutland, the degree of business innovation is above the country average and large RTDI investments have been made in Aalborg University and the attached NOVI science park and in many other institutions. Negative : high unemployment rate, declining shipbuilding industry and agriculture and fisheries sectors; small and internationally weak enterprises; migration; lack of highly educated work force, lack of entrepreneurial spirit, lack of R&D-institutions, technologically weak enterprises, R&D expenditure share in Danish GDP smaller than comparable countries.

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Germany Positive : existence of research facilities, polytechnics and universities in a number of zones. Negative : high dependency of regions on old industries in crisis; declining employment and high level of unemployment; except in Berlin, R&D expenditures as % of GDP are below the country average; lack of co-operation and technology transfer from universities to firms ; lack of RTD and innovative activities in industries; lack of RTDI infrastructure in a number of zones; reluctance from industries to use the offered opportunities. Finland Positive : zones logistically important for Finland and strategically placed (harbours, proximity of Russia,...), good network of education institutes; presence of polytechnics colleges and technical colleges; significant public research facilities in Central Finland and in South Karelia; Negative : second highest level of unemployment rate in Europe due to dominance of forest chemical, metal and metal manufacturing industries which have been sharply affected by recession; level of education below the country average; dependence on a few large companies; lack of SMEs and entrepreneurship; high concentration of R&D expenditure in few Finnish regions; low R&D expenditure shares in GDP in Objective 2 regions; low R&D private expenditures. France Positive : presence of research and technology transfer centres in most regions or in close proximity. Negative : high dependence of the zones on declining sectors, economic activity concentrated on low value added products and with strategic function (marketing, R&D, innovation) located outside the zone for large firms; SMEs characterised by subcontracting culture; of entrepreneurial spirit lacking and low rate of firm creation; emigration of skilled population. Italy Positive : increasing funding for RTDI, high quality universities, good transport infrastructures, developed poles where the industrial organisations are efficient; large potential market; 90 % of overall Italian expenditures on R&D takes place in 11 regions which include Objective 2 zones. Negative : decline of traditional heavy industry, increasing age of population and demographic decline; negative environmental situation; lack of an appropriate service sector, high level of structural unemployment; R&D expenditure as proportion of GDP about half the EU average and includes high proportion of government spending; low level of patent activity. Netherlands Positive : Leading multinational companies, universities and network of intermediary organisations in a number of regions with numerous contacts, exchange and collaborations. Negative : unemployment level in Objective 2 regions above the country average; declining share of private expenditures on R&D in GDP since 1987; high dependence to multinational since half of the private sector R&D is carried out by 5 multinational firms. Spain Positive : income and productivity index above the Spanish average; unless if low, R&D indicators in Objective 2 zones are still above the Spanish average; increasing expenditures in high- education and R&D in firms since 1989. Negative : unemployment rate significantly above the European average, poor basic infrastructure endowment (roads, rail,...) and deficiencies in infrastructure and equipment in deprived urban areas; low level of investment for industrial reconversion; important imbalance between the professional qualifications of human resources and firm’s needs; poor development of research and technological centres; Sweden Positive : in an international comparison, large sums on R&D spent in Sweden (in 1995, R&D investment corresponded to 3.6% of GDP which was the largest figure held by any OECD member), business investment in R&D has increased during the last years. Negative : increasingly low population density of Objective 2 areas in Sweden, decline in the traditional industries, increase on unemployment and immigration to other more populated areas, lack of RTDI indicators at Objective 2 level. UK Positive : high percentage of female active in most of the Objective 2 areas, raise in the R&D in manufacturing as a % of Gross Value Added, growth in the percentage of employed in high technology sectors within the period 1993-1995, proactive universities (especially ex- polytechnics), diverse organisational structure Negative : declining and restructuring industries, unemployment rate consistently above national average, important industry restructuring, low share of R&D expenditure in GDP in a number of regions, strong concentration of R&D activities in London and south-east. Source: Country Reports – Thematic Evaluation RTDI

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Issue arising

Three main issues arise concerning the statistical analysis of Objective 2 regions:

· the non-availability of data in some regions. For example, in Denmark the data available for the actual Objective 2 areas is very limited and often the information provided in the SPDs is incomplete and does not even include all available data; · the lack of standardised data when it is available. In Austria, besides the problem of a lack of employment data at sub-regional levels and sectors, the heaviest deficiency is the mismatch of regional coverage of the official data compared to the Objective 2 regions. In Germany, the official regional breakdown of data is based on labour office districts. In some cases, the Objective 2 region comprises several labour office districts or parts of labour office districts, whereas in other cases the Objective 2 region represents only parts of one labour office district; · the indicators used remain extremely traditional, with only limited efforts made to provide data based on methods taking into account economic trends towards the so-called "knowledge economy".

As mentioned before, there is clearly a need for a more concentrated effort to develop Objective 2 level indicators making appropriate use of the ever increasing facilities offered by information technologies and inter-connection of networks. However, it is illusory to expect national statistical offices to push ahead with a desegregation of data purely on the grounds of EU Structural Fund support to defined zones which change on average every six years. A radical and costly solution is for regions to develop their own statistical services which while continuing to collect nationally/European harmonised data are able to generate regionally specific indicators through surveys, etc. This is already becoming the case in certain of the more federalised Member States such as Belgium.

BOX 3: Socio-economic and innovation monitoring system

In Austria, the availability of up-to-date data at Objective 2 level is very limited. This concerns not only the availability of socio-economic data, but even more so RTDI data corresponding to Objective 2. This has repercussions for the regional analysis, the definition of objectives, strategies and measures as well as for the evaluation of Objective 2 programmes.

Programme Managers in Styria have made efforts to develop a new system for monitoring socio-economic trends and innovation behaviour of Styrian firms. The monitoring system will deliver employment data for different sectors at sub-regional level, data about new firm formation, information about trends in qualifications of employees and the unemployed, as well as forecasts for some indicators. An additional model will be developed to monitor the innovation behaviour of firms in at least two yearly cycles. It is based on a survey and results can partly be benchmarked against CIS data. The system will be developed with EU support within the framework of technical assistance. Source: Country Report Austria

In general, however, it is up to the programme management (with the support of external experts funded through the technical assistance budget of the SPDs) to create, update and make data available at the level of Objective 2 regions. In this context good practice examples have been identified in certain Objective 2 zones where an effort has been made to enrich the available baseline data (see box 3). Moreover, in certain Member States, an effort has been made to develop a suitable framework for presenting baseline indicators. One example is the study carried out in the UK by Ekos entitled "Baselines and Quantification Study in the UK Objective 2 Programmes". The study was commissioned by DG XVI of the European Commission to assist the UK Objective 2 Programme Monitoring Committees with their commitment to review baselines and quantification for the 1997-1999

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Single Programming Documents. The guidance produced was specifically developed to take account of the Structural Fund context, both in terms of the types of activities to be monitored and evaluated, and the wide range of partners involved in programmes including programme monitoring committee members, secretariat staff, project promoters, policy makers and evaluators working in the different Objective 2 programmes. Suggested baseline indicators were produced for a number of priority themes including "technology development".

Other studies, even if less strictly related to the Structural Fund context can also be useful in broadening the range of socio-economic indicators drawn up in designing SPDs and subsequently assessing programme impact. A good example is the work of the OECD on indicators for the knowledge-based economy.

BOX 4: Towards indicators for the knowledge-based economy

Both the OECD, EUROSTAT and certain national governments have been pushing forward the debate on developing indicators for the so-called 'knowledge economy' (economies directly based on the production, distribution and use of knowledge and information). A 1996 report of the OECD (The Knowledge based economy) underlined that "our understanding of what is happening in the knowledge based economy is constrained by the extent and quality of the available knowledge related indicators".

The report recommends that the development of indicators of the knowledge based economy must start with improvements to more traditional input indicators of R&D expenditure and research personnel. Better indicators are also needed of knowledge stocks and flows, particularly relating to the diffusion of information technologies, in both manufacturing and service sectors; rates of return to knowledge investments to better gauge the impact of technology on productivity and growth; the functioning of knowledge networks and the development and skilling of human capital.

Potential indicators for Objective 2 programming include: share of high-technology industries in total manufacturing; level of high technology trade; regional knowledge institutes share of patents in technologies relevant to industry; etc. At regional level some indicators may be too costly or time-consuming to collect on a permanent basis but regular surveys preferably in conjunction with business and industrial associations can serve to provide a minimum level of required information to inform policy decisions.

One example of an ad hoc survey which concerned the rate of return of R&D expenditures at the firm level is where executives of major American firms were polled about the proportion of the firm's new products and processes that could not have been developed without (substantial delay) in the absence of academic research. This allows a gauge of the social return on investing in R&D infrastructure. Another option would be to use or mirror European level surveys at regional level such as the Community Innovation Survey.

The key message here is that with relatively limited resources simple but novel new indicators can be developed to track performance of the regional economy through regular survey's (while avoiding survey fatigue) of businesses.

Table 3.3 below sets out a series of possible baseline indicators for drawing up a SWOT analysis of the regional innovation potential. This table should be considered as indicative and will clearly need adaptation to the regional context in each country. However, broadly speaking, the type of indicators suggested can be considered as the minimum required set for assessing the relevance of proposed measures in SPDs.

Thematic Evaluation RTDI in Objective 2 – Synthesis Report 27 TABLE 3.3: POSSIBLE RTDI PRIORITY BASELINE INDICATORS

Baseline indicator Comments / Source Relation to Objective 2 RTDI intervention objectives Industrial structure / business development Number of VAT, etc. registered businesses Standard data generally available at NUTS III Share of population of firms assisted by Objective 2 level Number of firms by sectors, employment size and Standard data generally available at NUTS III Share of firms by sector, etc. assisted turnover band level Number of firms in high technology sectors Availability depends on industrial Share of firms in high technology sector assisted classification system – often not below NUTS II level Number of New Technology Based Firms formed Availability depends on industrial Share of NTBF creation assisted by Objective 2 in past (X) years classification system – often not below NUTS programme II level Rate of high-technology exports Often not available below NUTS II level Number of high-technology exporting firms assisted Sales/turnover/exports generated by new products CIS type surveys – generally not available Benchmark for assessing performance of firms assisted / processes below NUTS II under Objective 2 RTDI schemes

Industrial RTDI activity Business expenditure on R&D (broken down by Eurostat, etc. – generally available at NUTS II Overall trends in BERD as proxy for innovative activity – sector, size of firm, etc.) – availability at lower levels varies between Objective 2 RTDI support as share of total Member States Number of firms with separate R&D department / CIS type surveys – not generally available Percentage of firms active in R&D assisted – stimulation budget / facilities below NUTS II effect of Objective 2 on new RTDI activity Number of patent applications/granted to regional Eurostat / CIS type surveys – generally not Increase in patenting levels attributable to firms / Objective 2 area firms available below NUTS II benefiting from Objective 2 assistance Number of technology-related licences granted to Eurostat / CIS type surveys – generally not Increase in patenting levels attributable to firms regional / Objective 2 area firms available below NUTS II benefiting from Objective 2 assistance Number of new commercially exploitable products/ CIS / national / regional periodic surveys Number of new products/processes produced following processes in year x Objective 2 support Percentage of innovating companies (either CIS / national / regional periodic surveys Increase in number of innovating companies attributable product or process innovators) to Objective 2 programme Number of firms leading/participating in national / Data available from CORDIS, national Number of (first-time) participants firms assisted by international R&D programmes government departments & sources Objective 2 programmes Percentage of companies having co-operation CIS / national / regional periodic surveys Mapping of existing networking relationships – effect of agreement with other enterprises / institutions incentive schemes on RTDI co-operation levels ADE – ENTERPRISE PLC - ZENIT

Human resource indicators Number of new graduates (by level: first degree, Educational statistics, specific surveys Identification of skills mis -match to guide design of post-graduate degree, doctorate) in science and RTDI related training schemes (including Masters) engineering fields / share in total of new graduates Number of RTDI employees (analysed by Labour force, Eurostat/CIS surveys, etc. Increase of new RTDI employees attributable to university training, high-level vocational training and secondary vocational training) / share in total workforce / wage bill Number of employees trained (by size of firm, in Labour force surveys, government Weight of ESF intervention in overall new technology new technology fields) departments, agencies, etc. training

Institutional indicators Synthetic table summarising RTDI grant / loan / National/ regional government Avoidance of multiplication of similar schemes or training schemes, innovation promotion schemes departments/agencies, RIS/RITTS type overlap in target groups analysis Summary of key indicators of performance and Scheme/project level evaluation reports when Assessment of take-up and impact of existing schemes impact of existing RTDI schemes available Distribution of loans/grants disbursed from such National / regional government Scope/effect of Objective 2 on extending reach of schemes by type of firm (large firms /SMEs, ratio departments/agencies, ad hoc studies, etc. standard RTDI incentive schemes of new/recurrent clients by scheme, etc.) Synthetic table of existing industrial RTDI support Government Departments / RIS/RITTS type Avoidance of duplication of effort, multiplication of structures active in Objective 2 (by location, analysis – analysis should not be limited to competing centres, etc. specialisation, mission, target clients, type of organisations located in zone. support provided, etc.)

Thematic Evaluation RTDI in Objective 2 – Synthesis Report 29 3.2 RTDI REGIONAL PROFILES AND INDICATORS

Attempting to present an overview of the RTDI situation across the 86 Objective 2 regions in Europe while of obvious interest goes beyond the remit of this evaluation. Even compiling the most standard and readily available types of RTDI indicators is rendered particularly difficult for Objective 2 zones for two main reasons:

· the lack of availability of data at regional level in certain Member States; and · the sub or sometimes transregional character (in terms of NUTS 2 levels) of the intervention areas of the Objective 2 programmes.

Progress has been made in the last decade by Eurostat, the European Commission (e.g. through the European Innovation Monitoring System funded by DG XIII); and by the OECD (in a number of manuals) to design indicators which assist in measuring the innovative performance of an economy.

However, despite recent efforts by EUROSTAT to compile relevant regional RTDI indicators, relatively acceptable time-series data at NUTS 2 level is available only in Austria, France, Italy and Spain. In Germany and in the UK, which represent two important Objective 2 funds recipients, regional RTDI data is not available below NUTS 1 level. The same situation can be found in Belgium while in the Netherlands, in Sweden and in Finland, data is only available at national level. The second Union wide source of data is the Community Innovation Survey on business innovation activity. To date, no regional level results have been made available and although this is expected in the near future.

With regard to the programming area of the Objective 2 programmes one can make out at least two different approaches:

· the programming area is within a NUTS 2 region, although the actual intervention area covers only sub-regions. This approach can be identified e.g. in Austria, France, Italy and Spain. In these cases the respective RTDI indicators at NUTS 2 level can thus at least be taken, with due care, as a proxy for the real situation in the respective Objective 2 region (for example, in Piemonte, while there are three Objective 2 zones covering only part of the NUTS II level region, the vast majority of academic, public and private research is concentrated in the Province of Torino which is one of the eligible zones); · the second approach might be called the transregional approach which can be found in the UK (e.g. the programming region Greater Manchester, Lancashire, Cheshire which covers parts of three NUTS 2 regions) and also in Germany (e.g. Lower Saxony and North Rhine Westphalia, in the latter case the Objective 2 intervention area covers small parts of four of the five NUTS 2 regions in North Rhine Westpalia). In these cases the NUTS 2 level data can hardly be regarded as a proxy for the actual intervention area.

EUROSTAT data on the few RTDI indicators available at NUTS II level is presented in annex B and some observations can be made on this data although given the broad and long-term nature of the indicators their use for setting targets for Objective 2 programmes is somewhat limited. Certain region have included targets for increases in the overall business expenditure on R&D (BERD) in their SPDs however, the range of factors (notably the general investment climate) which affect this variable are such that assessing the contribution of the relatively marginal financial flow provided by Objective 2 funds is well nigh impossible.

As far as BERD is concerned the figures suggest that the level in the Objective 2 regions is below average with the lowest proportions of BERD as a percentage of GDP (1994) to be found in the Saar region in Germany (0.26%), in Italy in Valle d´Aosta (0.08% ), Veneto (0.27%), Umbria (0.14%) and ADE – ENTERPRISE PLC - ZENIT

Marche (0.12%); and in Spain in Rioja (0.13%), Aragon (0.23%) and the Baleares (0.01%). In the Saar region and in the Valle d´Aosta only 16% and 15% respectively of the national average is reached while the Baleares attain only 2.5% of the Spanish average, but this clearly is a special case. Certain Objective 2 regions are generating higher proportions of business R&D expenditures than the national average, e.g. in Austria, Styria, in France; the Midi Pyrénées and Franche Comté; in Germany, Bavaria and Hesse; in Italy, Piemonte and Lombardia; and in Spain, Madrid and the Pais Vasco. From a dynamic perspective, while in most of the French Objective 2 regions, for example, the BERD/GDP increased between 1989 and 1994; in Austria the situation is the opposite with a reduction in three out of the four Objective 2 regions. In Germany BERD as a share of GDP also diminished both at national level and in all Objective 2 Länder, although this is strongly influenced by the effects of unification.

Government expenditures on R&D (without higher education expenditures) are far below the business expenditures amounting to about a quarter of the value of business expenditures as a percentage of GDP. There is however a wide range of different levels to be identified amongst the Member States and the regions. In Belgium, government expenditures on R&D reached about 6% of the amount of the business sector, while in Spain the figure is only 45%. Moreover, government R&D expenditure in the Objective 2 regions is – apart from some limited exceptions (Midi Pyrénées, Berlin, Liguria and Madrid) – much below the national average. This finding supports the thesis that R&D policy in the Member States follows a horizontal policy approach. The issue of regional cohesion thus appears to be a secondary consideration at best when national governments are allocating their R&D budget.

With regard to the human resources indicator (R&D personnel, head counts, in percent of labour force) the data situation is even worse. In addition to that, in the few cases where data is available, the situations on regional level are rather heterogeneous.

Admittedly, the data presented here provides only a first inside-look into the R&D/innovation state of the play in the regions (given the limitations as discussed above). The actual inherent innovation potential is however not fully reflected in this data set. The Emilia Romagna region is - as the Italian country report shows - a highly innovative region although the level of expenditure on RTD is modest.

Against this background of the non-existence of relevant data at Objective 2 level it becomes clear, why the analysed SPD documents are generally weak in providing relevant data on the RTDI situation. A "strategy" which was applied by many programme writers was to either present some head-count figures (e.g. number of technology centres in the region, number of universities, number of research institutions etc.) or national or NUTS 1 level data which clearly does not reflect the Objective 2 regional situations.

This approach while understandable is far from appropriate. There is an obvious necessity to quantitatively describe the RTDI situation in a given Objective 2 region both at the beginning of the programme period and at a given point of time after the implementation of the programme in order to describe the observed changes (which would be a first step for an impact evaluation, the second would be to define the causality between the programmed actions and the identified changes in time).

It seems unlikely that the provision of RTDI data at sub-regional level will improve particularly since beyond the scope of sub-regional intervention programmes there may be no significant demand for such statistics. Against this background the development and implementation of regional RTDI observatories would be highly desirable. The advantage of such an approach would be, that the lack of official data could be overcome and that the set of indicators could be tailored to the regional demand and to feeding the RTDI policy strategy.

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BOX 5: Developing a Regional Innovation Profile - the case of RTP Limburg

Within the Regional Technology Plan pilot action, co-financed by Article 10 of the ERDF during the period 1995-96, the Dutch Province of Limburg carried out extensive analysis of available data and commissioned a series of studies with a view to establishing a profile of the economy and innovation situation. In particular, the RTP analysis focused on the competitive position of regional businesses from an international perspective and on the technological position of the business community. The latter was characterised using two synthetic indicators:

· R&D intensity: R&D expenditure expressed as a percentage of gross national product; or the number of man-years devoted to R&D as a percentage of the total number of person-years; · Knowledge intensity: is a composite of three indicators the number of companies with a high level of R&D intensity; the average educational level of employees; and the proportion of professions practised by the employees which are scientific in nature.

The RTP report was unable to fully construct these indicators due to the lack of disaggregated data but use was made of two studies made by a Foundation of the University of Amsterdam on the regional dimension of innovation in Dutch industry and services. These studies provided a series of indicators, which however were based on a relatively small sample, allowing comparisons to be drawn between the innovation activity of firms in Limburg and the rest of the Netherlands such as: percentage of industrial firms with an in-house R&D department; collaboration rates on innovation projects, etc..

The RTP allowed the identification of key trends in innovation activity and broken down by sub-sector which provided a clear and detailed analysis of the baseline situation in the Province on which the subsequent action plan and RTP projects could be based. Source: Country Report The Netherlands

Indeed, even within the current period, and given some of the absorption issues raised later in this report, there is a good case for using non-committed funds of the RTDI measures in current SPDs for the development and implementation of such regional RTDI observatories (rather than shifting RTDI resources to say infrastructure measures). It would go far beyond the scope of the current study to present a detailed template of such a regional RTDI observatory and indeed it is unlikely that there is a single approach. Aside from standard mail or phone surveys, one possibility is to use a panel type survey approach:

(1) the observation of RTDI indicators should be based on a fixed panel of intervie wees over time; (2) the panel should include businesses, researchers, academics, members of the RTDI tissue, politicians and the administrative level; (3) the observatory should function within a RIS or other form of regional partnership ensuring consensus around the trends to be tracked; (4) an appropriate frequency for the survey seems to be twice yearly.

Increasing rates of internet connections and the application of network software tools should also make it easier and less time consuming for both intermediaries and business to respond to periodic surveys of their innovation related activities.

The improvement of the data situation on RTDI indicators in the Objective 2 regions is a main requirement for the next round of programmes. In addition, greater use needs to be made of the information already available (studies, evaluations) for the programming and implementation of priority strategies. On the basis of a set of baseline indicators at Objective 2 area level it would be far easier to formulate RTDI priority strategies and to evaluate the results obtained.

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4. THE IMPORTANCE OF RTDI IN OBJECTIVE 2 PROGRAMMES

An Objective 2 for areas that were undergoing industrial restructuring was started in 1989 as a result of the first reform of the Structural Funds. The first programmes following the reform were implemented through Community Support Frameworks (CSFs) involving a two tier programming structure consisting of the CSF and operational programmes. The CSF itself was to be a general document covering a large territory and only dealing with broad definitions of programme priorities. These CSFs were then broken down into smaller operational programmes focusing on a specific part of the region concerned. For example in the North West of England CSF there were four operational programmes for West Cumbria and Furness; Manchester, Salford and Trafford; Merseyside and Mersey Basin.

The first Objective 2 programming period was divided in two parts 1989-90 and 1991-92. These early Objective 2 programmes had a heavy infrastructure bias and ERDF focused mainly on capital projects often to do with transport, utilities, and reclaiming disused industrial sites. There was little integration of ERDF and ESF measures; indeed, in many regions ESF was dealt with in a separate programme across the whole CSF eligible area (examples include UK, Spain, Germany, France).

The introduction of a simplified approach: “the Single Programme Document” (SPDs) in the 1993 reform of the Structural Funds opened up a new programming style. This was particularly appropriate for the Objective 2 programmes which are much smaller in both territory and population than the majority of Objective 1 programmes. The SPDs contained all the programme information (Strategy, priorities, measures, and finance) in one document instead of the two-tier structure of the CSF. This SPD approach was adopted in most of the Objective 2 areas and only Spain held on to the concept of the Community Support Framework with separate operational programmes for each region. Finland adopted a framework that was half way between a true CSF and an SPD. Their single national programme had regional sub programmes similar to the old CSFs but this time contained in a single programming document. This approach fitted the particularly small size of their Objective 2 areas.

In addition, to the changing nature of the programming structures, it should be noted that certain of the eligible areas have changed in number and size in some of the countries with Objective 2 programmes functioning since the earliest stage. As an example, the UK has seen the consolidation in 1994 of the eligible areas in regions such as Yorkshire and Humberside while the Spanish region of Cantabria was an Objective 2 region for the periods 1990-92 and 1992-94, and became eligible for Objective 1 during the 1994-99 period. The learning effects from programme management over time are not to be discounted; however new entrants since 1994 either in terms of zones in existing Member States or the three new Member States (Finland, Sweden and Austria) had at least on paper the possibility to adopt organisational practices more suitable to the changing nature of the RTDI interventions financed under the Structural Funds.

4.1 PROGRAMME DESIGN MECHANISMS AND THE INTEGRATION OF RTDI

Since 1994 when the principle of partnership was reinforced, there has been a gradual increase in the participation of regional stakeholders in the Objective 2 programming structures. The partnership principle is at present applied by all the countries, and at least on paper permits the participation of higher education institutions, universities, technological centres, research agencies and social partners in the programme design. However, in accordance with the principle of subsidiarity, the mechanisms for drawing up Structural Funds programmes differs among the EU member states for a variety of reasons such as:

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· the political structure, distribution of competencies and level of decentralisation of each country; · the level of partnership between the different national and regional authorities; · the role and involvement of social partners and final beneficiaries; · the continuing existence of multi-regional programmes or Community Support Frameworks.

Federal countries such as Germany, Austria and Belgium give regions almost the total responsibility for the programme planning and its implementation. Their constitutional powers and assigned competencies allow them to have the lead in the design of Objective 2 programmes. In Germany, although the social partners are consulted on the Objective 2 assistance strategy, the SPDs tend to mirror the tools of the regional development policy of the Länder authorities, this being particularly the case with the smaller Objective 2 programmes. A good example is the case of Bremen (developed in the box below) where there is a strong relation between the action programme on economic structures (WAP) and the Objective 2 programme. In particular, the WAP guidelines provide the framework for a continuity in Bremen's RTDI policy, although not explicitly codified in an innovation strategy for the region.

BOX 6: The Bremen WAP and Objective 2

Since 1984, WAP is the central programme for Bremen's structural economic policy. It is divided into 6 funds representing a thematic sub-division. WAP aims at the creation of employment, the stabilisation of jobs by modernisation of industry, the solution of structural problems and the strengthening of the region's economic potential. Besides Bremen's own financial resources, other resources like Konver, Resider and Urban contribute to the implementation of structural policy in Bremen. EU funding in the framework of Objective 2 is one of the most important sources and contributes to all the WAP funds; while WAP provides the necessary co- financing for the Objective 2 programme. The integration of Bremen's Objective 2 policy into WAP guarantees the coherence of structural policy in the city state.

The technology fund is the most important for RTDI. Special programmes (e.g. PFAU) have been created to specify and regulate the use of the resources. In the perspective of the final beneficiaries, programmes are perceived as one initiative, not necessarily comprising EU money. Due to this integration, there is a better acceptance of the programme by final beneficiaries.

Additionally to the quantitative increase of WAP resources provided by Objective 2 money, there is also a qualitative revaluation of the WAP funds through the EU funding. To be an EU Objective 2 region gives incentives with regard to financing procedures and programme content. Good projects with a high quality have to be designed and implemented in a short timeframe. This "positive pressure" on programme managers and project promoters, increased by the fact that the programme will be the subject of an external evaluation, contributes positively to the quality and degree of innovation of the projects. Positive experiences in Objective 2 influences the design of the next WAP.

A high integration of regional and Objective 2 policies in a region contributes positively to the impact of structural policy and the acceptance of the programmes by final beneficiaries. This is especially obvious for small urban regions which are independent at the administrative level. There is a mutual influence of regional policies and EU Objective 2 programming. Source: Country Report Germany

In Belgium, the process of programme design comprises both elements of a top down approach whereby the regional administration is responsible for drafting the SPD; and an informal bottom-up process with potential project promoters encouraged to submit project proposals to the regional authorities during the programme design process. This approach lacks transparency and runs the risk of "institutionalising" the role of the existing RTDI intermediaries thereby smothering the emergence of new more innovative projects.

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On the other hand, other less decentralised countries leave governments bodies in charge (UK) or with a strong supervisory role (France) in the process of designing and negotiating the programmes with the Commission. In France, programme design is essentially the preserve of the Regional Councils and the associated representatives of the national government in the region (the DRRT for research and technology; and the DRIRE for industry) in addition to one or two other key agencies such as the national agency for research valorisation (ANVAR). To some extent, intermediaries can be considered to be represented by these different public organisations, this is particularly the case of the DRRT for the academic and public research structures. The process of SPD design is subsequent to the negotiation of a multi-annual framework contract between the regions and central government.

The results, to all intents and purposes, is that Objective 2 Funds are used to top up or supplement regional and national public monies allocated to specific programmes or initiatives. More positively, it would appear that at least in some of the French regions, Structural Funds are able to "correct" the orientation of the RTDI policies due to the clearer emphasis placed on the economic development impact of the measures.

Finally, Spain is a special case where the existence of a multi-regional ESF programme and seven Operational Programmes with an ERDF and an ESF component make crucial but at the same time complicated the co-ordination between the national and regional objectives and strategies.

The current trend in programme design shows a higher integration of Objective 2 policies in the regional institutional context and of RTDI policies in regional development plans. This appears to contribute positively in terms of the coherent design of the structural policy as well as facilitating the acceptance and application process to programmes by final beneficiaries. RTDI intermediaries and project beneficiaries are increasingly indirectly involved in the programme design in most of the countries through either informal consultation processes, formal ad-hoc committees or strategic exercises such as RIS which run in parallel to the Objective 2 programme cycle. The issue of the development of RTDI partnership and their influence on programming procedures and implementation is returned to in section 5.1 below.

4.2 RTDI AS A PRIORITY THEME

The strategic importance given to RTDI in the different programming periods can be partially evaluated through the quantitative identification of this element as a priority in the Single Programming Documents. This presence gives a good (although not sufficient) indication of the existence of an strategic RTDI approach. Table 4.1 suggests that RTDI was of limited importance until 1993. Even if RTDI objectives and actions were identified and allocated within sub-programmes of the Operational Programmes and CSFs for the period 1989-93, there were no RTDI measures grouped in a specific priority in most of the programmes (except for Spain and Italy) until 1993.

The programming period 1994-96 represents a major change in the strategic importance of RTDI. This element appears as a priority in the SPDs of nine countries (all except Denmark and Sweden) and in five countries RTDI priorities exist in a majority of SPDs. For the period 1997-99 the situation is very similar with a slight increase in the number of RTDI priorities within four of the nine countries mentioned for 1994-96 (Belgium & Luxembourg, Finland, France, and the UK). Those countries with no RTDI priorities in 1994-96 have not changed the approach in the period 1997-1999.

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TABLE 4.1: SPDs with RTDI identified as a priority

COUNTRY 1989-1993 % of 1994-96 % of 1997-99 % of total total total Austria No Obj. 2 programmes 2/4 50 2/4 50 Belgium / 1/5 20 1/5 20 3/5 60 Luxembourg Denmark None 0 None 0 None 0 Finland No Obj. 2 programmes 4/7 57 5/5** 100 France * * 10/19 53 11/19 58 Germany None 0 3/9 22 3/9 22 Italy 4/9 44 5/11 46 4/11 36 Netherlands 0/5 0 1/5 20 1/5 20 Spain 7/7 100 7/7 100 7/7 100 Sweden No Obj. 2 programmes None 0 None 0 United Kingdom None 0 10/12 83 11/12 92 * Data not available; ** Data for Southwest Finland and South Carelia is not available for the period 1997-1999

Content of RTDI priorities - from science and technology to innovation

From 1989 until 1993 the majority of RTDI measures focused support on science and technology activities, with innovation being very limited in most of the countries. The initiatives undertaken concerned mainly capital projects for the provision of premises, hard infrastructure and equipment necessary to accommodate R&D activity (science parks, research and technology centres, university research laboratories, etc.). The need to fill a gap in infrastructures provided the rationale for such actions. There were relatively few ‘soft’ or revenue type measures for technology transfer, innovation stimulation or product and process development. In the second part of the programming period the Community Initiative ‘STRIDE’ was introduced. In Objective 2 areas, STRIDE did not fund infrastructure but had a focus on capacity building and technology transfer activities. This approach led to the creation of the first RTDI partnerships in some Member States (for example, France and Italy) and a more integrated approach to mainstream measures.

From 1994 onwards there is an increasing shift in emphasis in favour of innovation which becomes the dominant category of action. During the period 1994-96, the most common categories of intervention were: training in new technologies (detected in 58 regions out of 796); grants to stimulate contract research and technology transfer (40 regions out of 79); and in terms of innovation support measures, support to stimulation actions was detected in 53 SPDs and incentives scheme to use specialised consultants were present in 40 SPDs out of 79. As an illustration of the content of RTDI priorities in 1994-96, the case of Italy is presented in box 7 below.

6 The country-evaluator for the 7 Finnish regions used a slightly different classification. Thus, the related figures could not be integrated here.

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BOX 7: Illustrative structure of typical RTDI priority in Italian SPDs

Measure 1: Creation/funding of Technology Parks / Centres (4 out of 11 regions) Objective: development of technology parks/centres comprising both R&D units of firms, public R&D facilities and incubators as a means of diffusing research and diversifying the industrial structure; Methods: part-financing of real estate and equipment investments.

Measure 2: Research Consortium (8 out 11 regions) Objective: diffusion of R&D results; industry-research interface promotion Methods: creation of research consortium (involving universities, research centres and industrial partners) managing a programme of activities including technological diffusion seminars, pilot technology transfer / industrial application of research projects; regional R&D databases.

Measure 3: Grants for industrial research activities (8 out of 11 regions) Objective: encourage take-up of innovation related services by firms; stimulate industrial research and firm - research centre co-operation with a view to creation of new products or processes Methods: two types of schemes · subsidies for the purchase of services related to innovation and technology transfer; · subsidy for studies/testing (including equipment) for industrial R&D projects.

Measure 4: innovation training (9 out 11 regions) Objectives to: support specific technological and or organisational innovation processes in firms Methods: ESF financial support for: · promotion of training in new technologies (7 out of 11 regions) · training in support of organisational innovation (4 out of 11 regions) · training for researchers/technicians in innovation project management (2 out of 11 regions) · Post-graduate studies (2 out of 11 regions)

Source: Country Report Italy

The current programming period (1997-1999) has seen a reinforcement of this trend with an increasing majority of regions including a distinct RTDI priority in their SPDs. The shift from science and technology to innovation actions is to a great extent driven through the gradual increase in the important given to demand side (proposed by or based on identified needs of firms) as opposed to supply side (proposed by or developed by intermediaries, notably universities and research centres) measures in the SPD (as illustrated from the West Midlands example below). Box 8 presents the case of West Midlands (UK) as a good example of this transition to a vertical approach with a prioritisation of RTDI in the SPDs.

BOX 8: RTDI Priority in West Midlands SPDs 1989-99

The West Midlands area is one of the largest Objective 2 Programmes in the UK, and has been a recipient of Structural funds over the whole ten-year period of 1989-99. Between each of the programming periods, a growing emphasis has been placed on RTDI measures which have become integrated in a single priority.

In the 1989-93 programme, RTDI measures (essentially a property development type science park and an advanced technology centre) were contained in a mixed «R&D/vocational training» priority. For the 1994-96 programme, where an SPD format was adopted, the approach evolved to a priority entitled «Developing research and development in the region and encouraging technological innovation» integrating ESF and ERDF measures and with a focus on support for innovation and making research and high technology from the region’s important academic research base available to firms.

In the 1997-99 programme, the priority is titled «Innovation, technology and R&D» with a strong focus on business needs for innovation.

Source: Country Report United Kingdom

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The situation is similar in countries like Italy, The Netherlands and the UK where there is a clear shift from physical infrastructure to business support and soft measures such as new product and process development, business clusters and grants to single firms to carry out RTDI projects. Over and above certain global trends in policy (see section 1 above), a series of operational level factors would appear to have driven this approach including:

· the development of broader based partnerships following the adoption of the SPD procedure - with respect to the 1989-93 period eligible regions, this seems particularly true in the UK while, in the three new Member States, the most effort in developing new programming methods has been made in Austria; · in certain countries, the role of the Commission services in setting guidelines and negotiating content has been important (for instance in Italy and the UK); · finally, from 1994 onwards, regional technology plan and innovation strategy initiatives funded under either the SPDs (the case in the Netherlands) or the pilot projects of Article 10 of the ERDF have had an instrumental role in developing RTDI priorities and measures based on a sounder analysis of business needs and a greater coherence of action between regional intermediaries (see section 5.1 below)

However, this intention to support demand side orientated measures faces in some cases major obstacles that have led to difficulties in both inserting novel types of innovation support measures in SPDs and in implementing them in practice. A key barrier to the adoption of demand side measures is the emphasis given to the rate of commitment and expenditure of funds by programming management and monitoring committees (i.e. the pressures exerted by national authorities and the Commission should not be forgotten). (see Box 9 ).

BOX 9: The budgetary logic in the SPD design process

The reasons for including various types of RDTI measures in the French SPDs vary according to regions. One general trend influencing the design of SPDs is the "budgetary logic" whereby priorities, measures or sub- measures are generally designed according to whether the budget for a previous similar action was over- or under-consumed. The principle is that every proposal or set of proposals should prove to be "credible", which means that its rate of consumption will be fair in reference to past results.

As put neatly by one interviewee "it is better to spend badly than not to spend". This makes it much more difficult to break with past policy delivery mechanisms. The financial procedures of the Commission reinforce this trend: it is striking to read minutes from SPD Monitoring’ Committees where the majority of discussions are focused on rates of consumption of funds and very seldom on the relevance and efficiency of measures. This is illustrated by the following extract from an annual report of an SPD: "The programme has been executed in a satisfactory way, since 98.82% of European funds have been committed, a fact which demonstrates obviously the scope of needs to be satisfied and the relevance of options decided by the partners".

In the absence of real evaluations, many actors are at the same time judges and beneficiaries of measures and actions financed under the SPDs. This budgetary logic works very much against trial and testing in the area of demand stimulation: it is easier to justify expenses for building and equipment on the supply-side (in the framework of the national decentralisation policy, research establishments are accustomed to preparing medium and long term investment plans), than for softer measures on the demand-side.

In short, a focus the « financial orthodoxy» of a measure and compliance with eligibility rules often substitute for ex-ante impact analysis and evaluation of the pertinence of RTDI actions funded under the SPDs. Source: Country Report France

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It would appear that a "budgetary logic" that gives priority to sub-measures with high rates of consumption works against the adoption of projects in the area of stimulating innovation in SMEs. As was noted in the Dutch report, support for new types of projects such as in the fields of inter-firm networks, joint product development, supply chains, innovation management in firms, etc. were generally introduced in the form of small experimental projects during the 1994-96 period. However, "the investment made in project development by programme management and other regional stakeholders is not directly translated in financial terms as most innovation projects are not very capital intensive".

The bureaucratic and financial factors described above make it difficult to enhance the quantity of innovative measures in Objective 2 SPDs, especially when more traditional measures in the same region are rapidly absorbing the funds. This creates competition at project level and compounds a related issue which is that national co-financing is often easie r to appropriate for infrastructure and equipment projects than human resource intensive measures (e.g. this is the case in the Netherlands). In some respects, there would appear to be a lag between the strategic changes in priorities and the speed with which programming implementation procedures are evolving to the new realities of the forms of intervention required to effectively support business innovation (this issue is returned to in section 6.2 on selection procedures).

The evolution of RTDI in Objective 2 programmes – 1989-99

It is useful in summing up the evolution in the role and importance of RTDI measures in Objective 2 programmes to characterise the trends with respect to a number of main programming issues. This has been done in the table below where three distinct "versions" of programming Structural Fund financed RTDI measures are suggested. A gradual trend in the approach to integrating RTDI in the SPDs can be observed: for the first programming periods until 1994, RTDI projects and measures were dispersed in other priorities; thereafter a RTDI priority approach starts to dominate in most of the Member States and Objective 2 Regions. However, it should be underlined, that there has not been a linear across the board shift from an earlier project based programming model to a more sophisticated strategic priority approach.

Version 1: Technology push – project based approach

The first approach to programming RTDI in the Structural Funds was characterised by relatively low levels of funding for RTDI projects included in a small number of measures that are broad in scope and do not entirely focus on RTDI related activities. In this model, essentially that of the first period using CSFs, RTDI related projects were included in business support or even human resource priorities and were essentially capital orientated including funding for science parks and academic research facilities in addition to training in new technologies. Even although there are difficulties with this approach in identifying a clearly defined intervention logic for RTDI as a means of supporting economic development some regions were able to make considerable progress in bringing together their supply and demand sides, and to integrate infrastructure related RTDI developments within a broader policy framework.

Version 2 - Technology transfer – RTDI measure approach

Considerable increases in the amount of funding for RTDI actions are a characteristic of the second approach though as a general rule the RTDI components of the programme appear to have been designed carried through without a great deal of thought to strategic goals. ESF measures often remain in a separate priority and no distinct RTDI priority is created. In many areas applying this approach RTDI measures are incorporated into other priorities, such as for SME business support (e.g. Western Scotland). Roughly half of the Objective 2 regions adopted this approach in the programmes for 1994-

Thematic Evaluation RTDI in Objective 2 – Synthesis Report 39 ADE – ENTERPRISE PLC - ZENIT

96 and this model continues to be prevalent in the current period. It appears to have been popular in regions with strong regional RTDI support networks and grant schemes such as Nord-Rhein Westfalen in Germany where the Objective 2 programme provides extra money for pre-existing measures.

This programming approach suffered from some of the problems of the first model with often little strategic basis for RTDI interventions nor coherence with other initiatives but some regions were able to make up for this through efficient delivery mechanisms. By the end of the 1994-96 programming period there is evidence that despite the lack of structural elegance the main supply and demand side players were getting together in some regions to consider new approaches.

Version 3 - Demand pull - RTDI priority approach

The RTDI priority structure was heavily influenced by the Commission’s new thinking about Growth Competitiveness and Employment in the Delors' White Paper (1993) which had highlighted the importance of research and technological development and its practical application through innovation. This approach influenced both the Commission services and actors at regional level. They sought to give higher visibility to RTDI actions by designing a vertical priority (i.e. all RTDI measures contained in a single priority rather than scattered across the programme). This approach was implemented in roughly half of the Objective 2 programmes in the 1994-96 period.

These programmes had dedicated and highly visible integrated RTDI priorities containing both ESF and ERDF measures. In some areas the partnership was directly involved in the priority and became its ‘Driver’ through the establishment of a specific working group for RTDI. These groups were able to take a more strategic view during the implementation phase and often became involved in designing project selection criteria and other programming tasks. There were important links through overlapping membership with the Regional Innovation Strategy partnerships that were launched later under Article 10 of the ERDF.

The content also evolved. Measures for RTDI had a reduced emphasis on physical infrastructure. Human resource measures were integrated into the same priorities and although this may have been often window dressing it created a dynamic approach aimed at connecting together economic development and employment projects. Some regions (e.g. Yorkshire and Humberside) went a stage further and separated their supply push and demand-pull measures. Although an integrated RTDI priority has been created there are still measures related to innovation in other priorities - particularly those for SME and business support for instance new measures that began to appear included access to new forms of financial engineering (including venture capital and revolving loan funds).

To conclude, and whilst purely indicative, the table below suggests that the 1994-96 programming period represents an important watershed with most countries adopting the RTDI priority approach.

TABLE 4.2: Categorisation of the evolution of RTDI activities

COUNTRY 1989-93 1994-96 1997-99 Austria * Mix Version 2 / Version 3 Mix Version 2 / Version 3 Belgium / Luxembourg Version 1 Version 2 Mix Version 2 / Version 3 Denmark Version 1 Version 2 Version 2 Finland * Version 3 Version 3 France Version 1 Version 3 Version 3 Germany Version 1 Version 2 Version 2 Italy Version 1 Mix Version 2 / Version 3 Mix Version 2 / Version 3 Netherlands Version 1 Version 2 Version 3 Spain Version 1 Version 2 Version 2 Sweden * Version 2 Version 2

Thematic Evaluation RTDI in Objective 2 – Synthesis Report 40 ADE – ENTERPRISE PLC - ZENIT

United Kingdom Version 1 Version 3 Version 3 Nb: the principle criteria used for establishing this table were the existence of priorities, the types of measures and the number of project sponsors.

Thematic Evaluation RTDI in Objective 2 – Synthesis Report 41 ADE – ENTERPRISE PLC - ZENIT

The RTDI priority approach is not a universal panacea. Lack of demand for measures, over emphasis on technology push linked to a failure to address the needs of SMEs continues to present difficulties in some areas. Despite these criticisms it has tended to be in the RTDI priority programmes that the best linkage between partnership, strategy and programme has emerged, often with help from RIS partnerships.

At the same time, the adoption of the RTDI priority approach requires the existence of a critical mass of financial resources and innovation related organisations in a specific zone to be effective. Hence, in more rural or smaller urban areas, a limited approach based on the integration of one or two specific measures or sub-measures in a local economic development strategy may remain appropriate. The key factor to be taken into consideration when designing the RTDI content of future Objective 2 programmes must be fundamentally the degree to which priorities, measures and projects respond in a structured and coherent manner to identified technological and innovation related factors influencing the competitiveness of firms in the region.

Thematic Evaluation RTDI in Objective 2 – Synthesis Report 42 ADE – ENTERPRISE PLC - ZENIT

TABLE 4.3: A Comparative Assessment Of Objective 2 Programme Structures In 1989-1999 Programmes

DEFINING CHARACTERISTICS

Approach Technology Push – RTDI Projects Technology transfer – Demand-pull – RTDI priority RTDI measure RTDI partnership Weak Emerging Universities and Diverse, more mature still lacking research centres (i.e. Public in private sector participation, sector) priority or partnerships in some areas RTDI Strategy Implicit technology push Weak, some focus on technology Yes, increasing emphasis on generation business innovation RTDI priority No. No. Yes Integration of ESF & ERDF No. ERDF and ESF in different No. ESF & ERDF in separate Yes, but often on paper only programmes within the CSF or priorities otherwise separated RTDI measures Within Business support measures, Distinct RTD measures in Mostly in RTD priority, some mostly one star measures7 Business support priority, mostly measures in business support two star priority (innovation, finance), mostly three star Coverage Most 1989-93 programmes few in Half of 1994-96 programmes Half of 1994-96 programmes 1994-99 Science as a % of RTDI spend Medium Low Low Technology as a % of RTDI Low Medium Low spend Innovation as a % of RTDI spend Low Medium High

7 one star measures are those with minority RTDI content, two star have majority RTDI content, three star are pure RTDI

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Thematic Evaluation RTDI in Objective 2 – Synthesis Report 44 ADE – ENTERPRISE PLC - ZENIT

COMMON CHARACTERISTICS Typical measures Science parks, Research Technology centres, grants for Clusters and inter-firm innovation infrastructure industrial R&D projects, information society, awareness raising and stimulation measures for business Number of project sponsors Few generally public sector Increase between periods but a Increasing number of intermediaries – monopolisation by public / academic business associations, etc. playing sectors greater role. Methods for appraising and Scored through existing Assessment through existing Open calls for proposals. Objective selecting project programme structures regional systems scoring systems using economic and technological criteria related to measures Indicators Generally non-existent Essentially broad indicators of Some integration of data from specific RTDI expenditure business innovation survey but still weak overall. Amount of RTDI expenditure Low <5% Medium (5-10%) some high High (10-20%) as % of total Weaknesses Weak intervention logic for Lack of focus, visibility and strategy Unclear relationship between RTDI, for RTDI in programme. SME/business support measures and Spending based programmes Low private sector participation RTD measures. RTDI actions in composite Lack of flexibility for new actions Some Programme captured by measures and priorities technology/ innovation suppliers. Sometimes insufficient demand, private sector participation Strengths Potential for better integration of Increased coherence, strategic thrust SME and RTD measures and visibility for RTD in programme Efficient RTDI spend

Thematic Evaluation RTDI in Objective 2 – Synthesis Report 45 ADE – ENTERPRISE PLC - ZENIT

4.3 THE SCALE OF FUNDING

A main focus of the remit given to the evaluation team was to analyse the extent of Structural Fund support for RTDI actions across the Objective 2 zones. The national evaluators devoted a considerable amount of time to the financial analysis in order to arrive at the best possible estimate of RTDI content and funding levels. The financial analysis was essentially carried out on the basis of the SPDs for the 1994-96 period and hence corresponds to the planned allocation of funds rather than actual expenditure achieved during the programme. The planned allocation is closely linked to the RTDI strategy followed by the programme and allows comparisons with the 1997-99 SPDs. The difficulties encountered by the evaluators in carrying out the financial analysis due to the generally poor level of detail provided at measure level in the SPDs and annual reports have already been documented in this report.

RTDI funding

Table 4.4 provides an estimate of the aggregate allocation from the SPD budget to RTDI measures in the Objective 2 zones for each country split between the three broad categories of intervention: scientific potential, technological development and innovation support (S,T,I). For most countries, a further breakdown is provided in terms of the funding directed towards infrastructure (building works, etc.), equipment (scientific, technical, machinery, etc.) and "soft" actions. This breakdown is by nature imperfect since a number of measures include several types of intervention in a single financial envelope.

Needless to say, due care is required when interpreting these figures given that the measures identified as being RTDI related do not necessarily dedicate 100% of the financial resources to this theme. Accordingly, a second classification of measures was made according to the extent to which the funding available per measure is devoted to RTDI: *** for measures for which 100% of funds are dedicated to RTDI ("pure" RTDI measures), ** for mixed measures with a majority of financial resources devoted to RTDI; and finally, * for mixed measures which devote a minority of their resources to RTDI.

A number of comments can be made on the basis of table 4.4 and diagram 3. First of all, the financial volume allocated to the different Objective 2 zones varies considerably between Objective 2 programmes with the budget of the Aubange zone (Belgium, 3.15 MECU) being close to 300 time inferior to that of Nord-Pas de Calais (France, 923 MECU) or Piemonte (Italy, 695 MECU). Needless to say such differences in financial means have important repercussions for the choice of strategy and the actions implemented in the framework of the SPDs. For example: a budget as limited as that of Aubange does not permit large infrastructure or equipment related actions nor a diversified approach in terms of actions as the two other regions.

Secondly, For the 1994-96 programming period, Objective 2 regions planned on average to devote around 12% of their financial means to measures which were exclusively funding RTDI related actions (*** measures). This average figure is broadly in line with other calculations notably the estimation of DGXII reported in the Second European Report on Science and Technology Indicators (1997) which attributed to RTDI related activities a share of 14.25% of Objective 2 funding during the period 1994-99 (up from 11.5% in 1989-93) and 18.45 % in 1997-998.

8 It is noteworthy that the report talks about the "Contribution of Structural Funds to R&D" rather than the contribution of R&D to the achievement of the Structural Funds objective of promoting regional development.

Thematic Evaluation RTDI in Objective 2 – Synthesis Report 46 ADE – ENTERPRISE PLC - ZENIT

Thematic Evaluation RTDI in Objective 2 – Synthesis Report 47 ADE – ENTERPRISE PLC - ZENIT

TABLE 4.4: RTDI spending planned in Objective 2 SPDs (1994-1996)

Austria Belgium-Lux Denmark Finland France Germany Italy Netherlands Spain Sweden UK Total

Categories/n°regions 4 5 2 7 19 9 11 5 7 5 12 86

Scientific Potential 1,4 11,9 0,3 10,0 n.a. 0,0 15,4 8,2 62,4 12,5 12,0 134,1 in % of RTDI 2% 12% 6% 22% n.a. 0% 6% 4% 27% 6% 4% 8%

Infrastructure 0,9 0,0 0,0 n.a. n.a. 0,0 8,3 0,0 32,9 12,5 n.a. 54,5

Equipment 0,6 9,9 0,0 n.a. n.a. 0,0 5,9 8,2 29,4 0,0 n.a. 53,9

Actions 0,0 1,9 0,3 n.a. n.a. 0,0 1,3 0,0 0,0 0,0 n.a. 3,5

Technological Potential 18,3 51,2 1,1 10,9 n.a. 98,4 188,2 70,0 92,1 132,2 166,0 828,5 in % of RTDI 28% 51% 22% 24% n.a. 43% 67% 33% 39% 61% 51% 49%

Infrastructure 4,5 2,4 0,0 n.a. n.a. 52,7 53,1 12,8 11,6 17,8 n.a. 154,9

Equipment 3,3 3,1 0,0 n.a. n.a. 11,8 44,6 6,0 1,5 0,0 n.a. 70,3

Actions 10,5 45,5 1,1 n.a. n.a. 33,9 90,5 51,2 79,0 114,4 n.a. 426,2

Innovation Support 44,9 36,6 3,6 24,6 n.a. 129,5 75,8 135,8 44,3 73,1 148,0 716,2 in % of RTDI 70% 37% 72% 54% n.a. 57% 27% 63% 19% 34% 45% 43% Infrastructure 11,3 0,0 0,0 n.a. n.a. 6,4 0,0 0,0 10,8 29,2 n.a. 57,7 Equipment 0,0 2,5 0,0 n.a. n.a. 0,0 0,0 0,0 0,0 0,0 n.a. 2,5 Actions 33,6 34,1 3,6 n.a. n.a. 123,1 75,8 135,8 33,5 43,9 n.a. 483,4 Total measures with RTDI content (***,**,*) 64,6 99,7 5,0 45,6 1881,4 228,0 278,7 213,9 235,1 217,8 326,0 3595,8 in % of SPD (***,**,*) 22% 19% 11% 16% 37% 15% 13% 23% 22% 26% 15% 24% Infrastructure 26% 2% 1% n.a. n.a. 26% 22% 6% 24% 27% n.a. 21% Equipment 6% 16% 0% n.a. n.a. 5% 18% 7% 16% 0% n.a. 10% Actions 68% 82% 99% n.a. n.a. 69% 60% 87% 57% 73% n.a. 70% Only pure RTDI measures (***) in % of SPD 22% 11% 11% 16% 10% 15% 10% 4% n.a. 26% 13% 12% Estimation of RTDI in % of SPD (weighted sum method) 22% 13% 11% 16% 19% 15% 11% 13% n.a. 26% 14% 16%

Total SPD 289,2 517,9 46,7 280,2 5076,6 1566,9 2174,9 923,8 1090,2 826,5 2137,0 14929,9

n.a.: non available or on a different basis. note: Total except 1 Fr. 2 Dan., Fr., Fi., UK. 3 Spain. Weighted sum: [(*** mes.) + 2/3 (** mes.)+ ¼ (* mes.)] / tatal budget.

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It should be underlined, however, that the relative share of funding devoted RTDI measures from the overall SPD budget varies considerably from one country to another. Spain and the three new Member States (Austria, Finland and Sweden) all devoted a share of SPD funds significantly higher than the EU average (from 16% in the case of Finland to 26% in the case of Sweden) while the Netherlands, in particular, would appear to have given a considerably lower priority to RTDI funding.

These extremes illustrate the difficulty faced by the evaluation team in assessing the level of funding allocated to RTDI. On the basis of these figures, the Netherlands, which in many respects has one of the most developed national frameworks for RTDI policy, appears to devote relatively few resources to supporting such activities at regional level. Two explanations can be given:

· in certain Member States, RTDI related actions were largely funded in composite measures which lumped together technology transfer/development and innovation promotion actions with, most notably, rather more generic business support activities (the case in the Netherlands, France, etc.);. · the scope for infrastructure and equipment type investments varies between Member State, depending on the strategies adopted and the baseline level of RTDI infrastructure. There seems to be some correlation in the table between countries which invested more heavily in capital projects (notably in terms of enhancement of scientific potential) and higher average weights of pure RTDI measures (notably, Austria, Spain and Sweden) in the SPD budget.

The first explanation leads to a difficulty in isolating RTDI funding and hence introduces an element of under-estimation with respect to the funding devoted to RTDI if the total for *** measures is considered. Diagram 2 illustrates the scale of this issue.

DIAGRAM 2: RTDI planned budget share in 1994-1996 SPD

EU

UK

Sweden

Spain

Netherlands

n.d. Italy *** ** Germany *

France

Finland

Danmark

Belgium-lux

Austria

0% 5% 10% 15% 20% 25% 30% 35% 40%

RTDI share in SPD Budget

Sources: SPDs. Own Calculation.

Thematic Evaluation RTDI in Objective 2 – Synthesis Report 49 ADE – ENTERPRISE PLC - ZENIT

Whilst in the majority of Member States concerned (Austria, Denmark, Finland, Germany, Italy, Sweden and the UK) the calculation of the amounts devoted to RTDI do not change significantly if funding devoted to two and one star measures is added in; in contrast, in Belgium, France and the Netherlands the relative weight of RTDI funding in the SPD budgets jumps considerably (respectively from 11% to 19%, 10% to 37% and 4% to 3%). Since France accounts for a relatively important share of Objective 2 expenditure, this has the result of doubling the overall share of funding devoted to RTDI to 24% across the 11 Member States. This upper end of the range is clearly not realistic either since few informed commentators would accept the argument that a quarter of Objective 2 funding is devoted to RTDI.

Given the above comments, it is extremely difficult to provide a clear-cut quantitative answer to the question of the share of RTDI within SPDs as well as to attempt to draw inter-country or inter-regional comparisons in terms of the share of RTDI in SPD budgets. This would require an in-depth analysis at the level of the projects approved in each of the 86 zones. Such an analysis is clearly beyond the remit of the current evaluation. The figures presented in this section can however be taken as a close proxy for reality and a weighted average of the amounts allocated to each of the categories produces a figure of 16-17% of Objective 2 funds devoted to RTDI during the 1994-96 programming period9.

DIAGRAM 3: ALLOCATION OF RTDI FINANCIAL RESOURCES 900,0

800,0

700,0

600,0 55 %

500,0 Action Equipment MECU Infrastructure 400,0 91 %

300,0

13 % 200,0 3 %

100,0 54 % 31 % 0%

42 % 9 % 0,0 Sciences Technology Innovation

9 This estimation is based on a weighted sum of coefficients given to the three types of measures : 1 for "pure" RTDI measures; [0.66; 0.75] for mixed measures with a majority of resources dedicated to RTDI; and [0.25; 0.33] for one star measures. The set of solutions is [16.3; 17.3].

Thematic Evaluation RTDI in Objective 2 – Synthesis Report 50 ADE – ENTERPRISE PLC - ZENIT

Sources: SPDs. Own Calculation.

During the 1994-96 period, the vast majority of the RTDI budget is divided among technology development measures (49 %) and innovation support measures (42%). Although soft actions dominate both categories, the distribution between infrastructure, equipment and actions differs significantly accounting for only 9% of the budget allocated to innovation measures compared to 45 % of the budget for technology measures. Only 8 % of the total RTDI budget was allocated to measures aiming to increase scientific potential with only Spain and Finland displaying any notable deviation from the average by devoting more than 20 % of their RTDI budget to this type of measure. As a general rule, this funding was allocated to infrastructure and equipment which absorb nearly all financial means (97%) dedicated to scientific potential.

However, once again, important disparities also exist between countries and regions in terms of the importance placed on the three main forms of intervention. While Austria, Denmark and The Netherlands devote more than 60 % of their RTDI budget to innovation related measures, Belgium, Italy and Spain planned to spend less than 30% in this field.

DIAGRAM 4: Science (S), Technology (T) and Innovation (I) shares in 1994-96 RTDI budget per country

Total UK Sweden

Spain Netherlands Italy Scientific Potential Technological Potential Germany Country Innovation Support France Finland Denmark Belgium-Lux Austria

0% 20% 40% 60% 80% 100% S,T,I Shares

Trends in Objective 2 funding in RTDI measures

A second issue analysed by the evaluation was whether there have been changes in the importance of RTDI related funding between the two most recent programme periods (1994-96 and 1997-99). As was noted in the previous section, there has been little change in the number of RTDI priorities included in each SPD and it might have been expected therefore that funding patterns would not have changed significantly.

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TABLE 4.5: Trends in RTDI share of SPD budget 1994-96 / 1997-99

RTDI Budget RTDI share in SPD Budget (in MECU) 94-96 97-99 change 94-96 97-99 change Belgium-Lux 99.7 141.5 ÚÚ 19 % 14 % Ø Denmark 5.0 5.1 Ù 11 % 9 % Ø France 797.4 696 Ø 16.% 10% ØØ Germany 228.0 397.0 ÚÚ 15 % 21 % ÚÚ Italy 305.1 457.6 ÚÚ 14 % 17 % Ú Netherlands 214.0 464 ÚÚ 23 % 33 % ÚÚ Spain n.a. n.a. Ú n.a. n.a. - UK 326 410 ÚÚ 15 % 15 % Ù NB: Ú=increasing, Ø= decreasing, Ù= stable. Ú,Ø=change comprise between 5 and 25%, ÚÚ;ØØ=change higher than 25 %. Austria, Finland and Sweden are new member state, and thus comparison is not possible.

As can be observed from table 4.5, RTDI funding has increased between 1994-96 and 1997-99 in most of the regions. However, this increase in the absolute value of RTDI budget is only relative since the overall SPD budgets has increased in a number of regions more than proportionally to RTDI budget. As a result, there has been a relative decline in the importance of RTDI in financial terms between 1994-96 and 1997-99 in half of the Member States (out of eight for which a relevant comparison can be made). In addition, a number of country reports underline a decline in the share of 'pure' RTDI measures in the regions (notably in France and Italy) which is also likely to have had an impact of the overall budget targeted at RTDI. Moreover, while table 4.5 shows an increase of the relative share of the RTDI budget of some 7 percentage points for Germany, during the 1994-96 period only 66% of the indicative RTDI budget was consumed and there seems to be a strong possibility that commitments will fall short of the target in the current period. Accordingly, if this scenario is confirmed, Germany would follow the same trend.

This decline in the importance of RTDI in the SPDs funding runs contrary to the strategic orientations being given by both European, national and regional authorities. One explanation of this paradox is related to the absorption capacity of the Objective 2 zones. In the 1989-93 and 1994-96 periods, important amounts of funding were devoted to infrastructure and equipment for research, technology or training centres and sciences or technology parks. However, these traditional interventions have already reached a certain degree of saturation and thus, those infrastructure and equipment RTDI measures are loosing their relative marginal importance. Furthermore, as noted already, this type of measures is generally more costly than demand side stimulation measures, notably because the rate of take up of certain forms of intervention (e.g. grant aid schemes in Belgium) continue to be rather low in traditional industrialised areas with a limited number of innovative SMEs. In short, for the future programming period, regional authorities who take no action to stimulate the emergence of mature (in terms of the project preparation) and feasible new forms of intervention responding to a real demand from the intended beneficiaries will be faced with significant problems in committing and disbursing the RTDI budget within SPDs.

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TABLE 4.6: Evolution of the share of S,T,I categories in planned RTDI resources

(in % of RTDI resources) 1994-96 1997-99 Change Country S T I S T I S T I Belgium-Luxembourg 12 51 37 17 42 41 Ú Ø Ú Denmark 6 22 72 0 20 80 Ø Ø Ú France ------Germany 0 43 57 0 32 68 Ù Ø Ú Italy 6 67 27 2 74 24 Ø Ú Ù Netherlands 4 33 63 0 29 71 Ø Ø Ú Spain 6 63 31 8 40 52 Ú Ø Ú UK 4 51 45 3 49 48 Ø Ù Ú Total for these countries 4 52 44 3 45 52 Ø Ø Ú N.B. Ú=increasing, Ø= decreasing, Ù= stable. The figures can slightly differ from table 4.4. in order to take the same basis for the two periods. For Spain, this table presents only figures for Pais Vasco and La Rioja regions. Austria, Finland and Sweden became Member States in 1995, and are not included.

Finally, according the three categories (scientific potential, technological potential and innovation support) one can see from table 4.6 and diagram 6 that the major trends is a decreasing share of RTDI resources allocated to scientific and technological potential in favour of innovation related projects. In fact, the share of innovation related measures in the planned RTDI has increased in almost all countries while for a large majority of countries, the share of sciences or technology related measures in RTDI the budget dedicated is at best stable or shrinks between the two periods.

DIAGRAM 5: Evolution of RTDI resources in Objective 2 programme

60%

52% 52% 50% 45% 44%

40%

94 30% 97

20%

10% 4% 3%

0% Sciences Technology Innovation

In depth analysis of planned, committed and disbursed RTDI budget in case study regions

The final table in this section presents a breakdown of planned, committed and actual expenditures of RTDI measures (for the 1994/96 period) in a number of case study regions. It can be observed that the commitment rate (financial commitment/SPD planned allocation) is significantly lower than 100%. The field work revealed that administrative or legal difficulties were encountered and that a number of

Thematic Evaluation RTDI in Objective 2 – Synthesis Report 53 ADE – ENTERPRISE PLC - ZENIT measures face either a lack of demand from beneficiaries and a limited response in terms of proje cts proposed. This is confirmed by numerous reallocations in these regions. In the case study regions, the actual public expenditures are generally between 75% and 90% of the financial commitment at six months from the end of the programme. The level of private funding in the overall RTDI budget significantly differs from one region to another with private contributions in Styria corresponding to more than the half of public funding and hardly any private contribution in Bremen.

It is difficult to summarise, however, a number of examples illustrate the types of issues arising:

· In the Meuse-Vesdre zone (Belgium), no private sector funding was provided in infrastructure and equipment related measures leading to the potential risk of over-estimation the demand from local business to use the equipment while projects are exclusively publicly funded. For this type of intervention it would be preferable to require a private contribution, even if marginal, in order to stimulate a greater prior analysis of cost-benefit ratio and an increased assessment of the needs of local businesses; · In both the French case study regions (Auvergne and Nord-Pas de Calais) a good or over consumption of 'supply enhancement measures' was achieved while poor consumption rates are observed for 'demand stimulation measures'. The explanation is similar to the difficulties encountered in Twente in ensuring private funding reach foreseen levels. Programme managers suggested that businesses are not yet prepared to contribute to project costs resulting in difficulties for project managers to meet the number of targeted companies.

Box 10: Examples of "drivers and barriers" to meeting spending targets

The measures which have been carried out in Germany and Austria have reached the targets previously defined. In both countries the Objective 2 programmes are very deeply embedded into the regional structural policy and thus into regional funding schemes. That suggests that a close integration of RTDI measures into the regional RTDI policy is a driving factor for the success of RTDI measures in Objective 2 regions.

It could be observed in some regions, e.g. in Styria in Austria, that targets for some RTDI measures were set too low. This could also be considered as a "driver" for the performance of an RTDI measure, because targets can easily be reached and even exceeded. However, the country evaluators recommended that more realistic targets should be set which could be facilitated by a benchmarking process between regions with a comparable profile.

In the implementation phase, drivers for the success of RTDI projects are to be seen in a competent and active support of the defined measures, e.g. by project promoters or agencies which are really committed to the performance of the funding programmes, training measures etc. As the example of the case study region Liège shows, this can be very much facilitated by a working network of key RTDI actors in a region.

Barriers could be identified on several levels. First of all, some measures have not been implemented at all, e.g. in the German case because of a lack of demand or of co-financing resources for a specific measure. The example of the Bremen Innovation Fund which was not implemented under Objective 2 but outside this programme shows a third type of barrier which consisted in this case in the variety of EU regulations concerning revolving funds. Another example from Liège of a difficulty in the interpretation of eligibility and state aid rules which jeopardised the balance of RTDI measures between technology transfer capacity enhancement (infrastructure and equipment) and SME grant aid schemes including various measures designed to stimulate innovation .

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TABLE 4.7: Breakdown of planned, committed and actual expenditure by category of RTDI expenditure in a number of case study regions

SPD allocation Financial Commitment (12/96) Actual expenditure

Case study regions type Public EU Private Public Commitment Private Public Spending Private Expen.

(MECU) % share MECU (MECU) rate (%) share MECU (MECU) rate (%) share MECU date

Styria (Austria) RTDI 35,6 30% 47% 32,0 22,4 63% 50% 22,6 17,4 78% 52% 18,5 June 98

T 7,9 35% 37% 4,6 5,1 64% 27% 1,8 4,5 89% 25% 1,5 I 27,7 29% 50% 27,5 27,6 100% 39% 17,3 20,7 75% 45% 16,8

Liège (Belgium) RTDI 36,7 48% 1% 0,5 34,0 93% 11% 4,4 25,2 74% 17% 5,0 June 98

S 19,5 50% 0% 0,0 12,3 63% 0% 0,0 3,9 32% 0% 0,0

T 17,2 46% 3% 0,5 21,6 126% 17% 4,4 21,3 98% 19% 5,0

NPC (France) RTDI 234,4 46% 20% 57,4 173,6 74% - n.a. n.a. - - n.a. -

NRW (Germany) RTDI 128,7 50% 13% 19,4 91,6 71% 32% 43,0 80,2 88% - n.a. Sept. 98

T 82,7 50% 0% 0,0 43,2 52% 26% 15,2 37,4 87% - n.a. I 46,0 50% 30% 19,4 48,4 105% 36% 27,8 42,7 88% - n.a.

Bremen (Germany) RTDI 11,6 50% 0% 0,0 6,4 55% 0% 0,0 5,3 84% 0% 0,0 Sept. 98

T 9,6 50% 0% 0,0 6,4 66% 0% 0,0 5,3 84% 0% 0,0

I 2,0 50% 0% 0,0 0,0 0% - 0,0 0,0 - - 0,0

Piemonte (Italy) RTDI 81,4 50% 9% 8,0 85,6 105% 15% 15,4 72,6 85% 9% 7,5 Déc. 97

T 59,5 49% 4% 2,5 59,5 100% 13% 8,8 53,9 91% 5% 2,8

I 21,9 56% 20% 5,5 26,1 119% 20% 6,5 18,7 71% 20% 4,7 Twente (The Netherlands) RTDI 25,8 56% 35% 13,7 27,2 105% 15% 4,7 19,7 73% 21% 5,3 Oct. 98

T 1,4 50% 50% 1,4 4,4 313% 14% 0,7 3,2 74% 24% 1,0

I 24,4 57% 34% 12,3 22,8 94% 15% 4,0 16,5 72% 21% 4,3

Styria (Austria) RTDI 35,6 30% 47% 32,0 22,4 63% 50% 22,6 17,4 78% 52% 18,5 June 98

Infr. 7,0 - 25% 2,3 2,0 28% 26% 0,7 1,4 70% 51% 1,4

Equip. 1,1 - 24% 0,3 0,3 25% 26% 0,1 0,2 85% 27% 0,1

Action 26,6 - 53% 29,4 20,2 76% 52% 21,9 16,0 79% 51% 16,9

Liège (Belgium) RTDI 36,7 48% 1% 0,5 34,0 93% 11% 4,4 25,0 74% 17% 5,0 June 98 Infr. 10,5 - 0% 0,0 6,1 58% 0% 0,0 1,9 31% 44% 1,4

Equip. 12,4 - 0% 0,0 12,6 102% 3% 0,4 5,9 47% 6% 0,4

Action 13,8 - 4% 0,5 15,3 110% 21% 4,0 17,3 113% 21% 4,7

NRW (Germany) RTDI 128,7 50% 13% 19,4 91,6 71% 32% 43,0 80,2 88% - n.a. Sept. 98

Infr. 82,7 - 0% 0,0 43,2 52% 26% 15,2 37,4 87% - n.a.

Action 46,0 - 30% 19,4 48,4 105% 36% 27,8 42,7 88% - n.a.

Bremen (Germany) RTDI 11,6 50% 0% 0,0 6,4 55% 0% 0,0 5,3 84% 0% 0,0 Sept. 98 Infr. 4,6 - 0% 0,0 3,3 71% 0% 0,0 2,6 79% - 0,0

Action 7,0 - 0% 0,0 3,1 44% - 0,0 2,7 - - 0,0

Piemonte (Italy) RTDI 81,4 50% 9% 8,0 85,6 105% 15% 15,4 72,6 85% 9% 7,5 Déc. 98

Infr. 5,8 - 30% 2,5 5,8 100% 30% 2,5 3,4 58% 45% 2,8

Action 75,6 - 7% 5,5 79,8 106% 14% 12,9 69,2 87% 6% 4,7 Twente (Netherlands) Action 25,8 56% 35% 13,7 27,2 105% 15% 4,7 19,7 73% 21% 5,3 Oct. 98

Thematic Evaluation RTDI in Objective 2 – Synthesis Report 55

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Part III: In-depth Analysis - Case Study Regions

5. PROGRAMME MANAGEMENT

Research questions:

· what types of structures are most effective for programme delivery · who participated in drawing up the SPD ? Who leads the process ? · How have the partnerships been structured - what RTDI experience is present on the key committees ? · How does the private sector participate in the partnership structures ? · Have Article 10 ERDF / Innovation Programme Actions (RTP, RIS, RITTS, IRISI, etc.) had any structuring effects on the type, balance or programme design mechanisms of RTDI actions ?

Given the issues raised, this section of the report draws mainly on the field work carried out in case study regions. In order to investigate the thematic issues raised in the terms of reference, the evaluation team sought to question Commission desk officers, programme managers, key members of Objective 2 Monitoring Committees, the principal project promoters, etc.. In certain respects, there is no reason why programme management related issues should be significantly different in the field of RTDI than in say the environmental or economic development fields. As such some of the findings of the evaluation team suggest lessons that can be useful for improving programming procedures across the board.

5.1 REGIONAL INNOVATION PARTNERSHIPS AND OBJECTIVE 2 PROGRAMMES

The concept of partnership was reinforced in the framework regulations for the Structural Funds for the 1994-99 period and many concrete steps have been taken to improve the level of participation of regional stakeholders in the programming cycle over the last five years. In this section, two main issues will be addressed:

· type and sophistication of the partnership arrangements and their development during the period 1989-99; · the importance of the role of partnerships in the Objective 2 programming cycle;

The first issue is partly descriptive (e.g. what forms of partnership exist; are they informal or formal arrangements, etc.) but it also focuses on the actions undertaken to improve the understanding of the innovation needs of business; and the extent to which certain partnership forms are more effective in terms of increasing the quality and quantity of RTDI activity than others.

The second issue pertains to the way in which partnerships have interacted with the Objective 2 programming cycle - clearly where the partnership is part of the official programming structures (e.g. a sub-committee of the Monitoring Committee) this occurs "naturally"; where the partnerships are developed in parallel the issue of how to "mainstream" the strategic approach and specific actions promoted by the partnership within the Objective 2 programme arises.

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Table 5.1 provides a synthetic summary of the level of partnership development and the way in which these partnerships interact with the Objective 2 programming cycle. The first three columns indicate the framework within which the partnerships are developing - either through stand alone initiatives such as «Twente 2000», RITTS or RIS in Bremen and Yorkshire and Humberside; and/or through the Objective 2 programme itself either formally (such as the RTP project in Twente, see section 4.2 above) or informally through programme related partnerships in North Jutland, Liège, and East London.

TABLE 5.1: Partnerships and programme management - a qualitative assessment

Innovation Partnership Interaction with programming structures Case study Independent of Within Obj. Non- Traditional Variant Innovative regions Obj.2 2. structures structured Steiermark 4 4 Liege 4 4 North Jutland 4 4 Central Finland 4 4 Nord-Pas de 4 4 Calais Auvergne 4 4 North Rhine 4 4 Westphalia Bremen 4 4 Piemonte 4 4 Twente 4 4 4 Pais Vasco 4 4 La Rioja 4 4 Blekinge 4 4 Yorkshire and 4 4 4 the Humber East London 4 4 Source: Country Reports

In the second three columns, the way in which the partnership interacts with the Objective 2 programme is identified: traditional referring to cases where the programme monitoring committee either takes little account of partnership dynamics or remains a forum from which RTDI partners are largely excluded; variants being cases where the programme monitoring committee includes specific RTDI partners or creates sub-committees as a link to the strategic partnership; and innovative referring to examples where a RIS or RITTS exercise has effectively been given the leadership of the programme design and prioritisation for RTDI measures and priorities.

RTDI partnerships within programme management structures

North Jutland in Denmark provides a good example of the way in which through relatively traditional Objective 2 committee structures, an effort has been made to include a greater number of the main parties interested in RTDI, including business, in the programming procedures. During the 1989-93 period, the partnership was restricted to the core programme management committee with representatives of the national and local and the social partners. Since 1994, a number of advisory

Thematic Evaluation RTDI in Objective 2 – Synthesis Report 58 ADE – ENTERPRISE PLC - ZENIT committees have been established and the number of RTDI stakeholders involved enlarged from those consulted informally in the previous period. In addition, business involvement has increased through the selection of a number of private business people (as opposed to the traditional involvement of representatives of employers associations, etc.). However, in this region, there is no specific RTDI advisory committee with RTDI stakeholders sitting on committees dealing with industry, education, etc.

In the two UK case study regions, whilst the final approval decision to fund individual projects in both areas was taken by the programme-wide PMC, these decisions were based on recommendations, advice and activities of an RTDI Priority Thematic Working Group. These groups were formed by approximately 10 representatives of the main RTDI partners: the Government Office in the Region, training and enterprise councils, the Universities; business intermediary organisations, Further Education Colleges; regional technology, environmental networks and agencies, etc.. In both areas the thematic groups not only played a key role in delivering the 1994-96 Programme but also provided a critical and informed contribution to the design and generation of projects for the 1997-99 Programme, although both areas were to introduce ‘Action Planning’ as in the rest of the UK for this period.

The advantages of establishing and using a ‘thematic group’ within the RTDI priority are that this: · brings a clear focus to the activities, with the opportunity of making that focus very market and commercial oriented; · can ensure development of projects offering high quality and innovation in an area of complexity; · provides an opportunity to use ‘expert’ advice and high levels of understanding about specific technological/market opportunities; · allows the pursuit of region-wide and strategic measures, achieving spatially specific impacts from measures which are often non-spatially oriented.

The disadvantages of this approach can be that it leads to or reinforces a ‘cartel’ of partners, who already have largest vested interests; it can lead to fragmentation of the overall SPD, in particular divorcing RTDI measures from wider competitiveness measures such as business support and training. Neither the advantages nor disadvantages inevitably flow from the implementation of this model, and much will depend on attitudes, motivations, experience etc of the partners.

In Piemonte, the Partnership Survey carried out indicates that the core group of actors Region, Technology Park directors, FinPiemonte (the regional development agency), and to a lesser extent the partners of a research-industry consortium COREP (including the Polytechnic of Turin and Chambers of Commerce) form very much a privileged club which has been strengthened by the Objective 2 programme. However, despite the importance of the RTDI measures in the SPD, there is no RTDI sub-committee and programme design has tended to be promoted by this same group of actors over the last decade. The lack of the constitution of a broad-based partnership able to identify novel orientations for RTDI measures poses a threat to the future development of the regional innovation policy framework in this region.

Regional RTDI partnerships and interactions with Objective 2 programmes

In Austria, the existing administrative structure for regional policy is not ideally suited to accommodate the requirement of EU support with co-ordination and links between regional development partnerships often informal within the framework of the traditional consensus-based decision-making structures. One effect of EU Structural Funds, which is widely recognised in Austria, has been the integration of all relevant actor in the planning process and improved co-ordination and co-operation between a variety of institutional levels. In the case study region, Styria, the focus of

Thematic Evaluation RTDI in Objective 2 – Synthesis Report 59 ADE – ENTERPRISE PLC - ZENIT regional innovation policy is the co-ordination of existing elements and two new partnerships have emerged:

· Wirtschaftspark Obersteiermark» - a network of actors established jointly by a regional and a federal institution bringing together technology centres, transfer organisations, training centres, etc. in the Objective 2 zone; and · Technology Partners Styria - a partnership of 14 institutions covering the entire Länder.

Both networks are not involved in the management of specific measures of the Objective 2 programme, but they act as a catalyst for discussions of RTDI measures at both Länder and more specifically at sub-regional level (Objective 2 zone).

In other zones, RTDI partnerships are much more informal and in several zones studied appear to depend on a major knowledge centre to drive the dynamic of co-operation. This is the case in Liège and La Rioja, for instance, where the local universities have taken a leading role in organising "one- stop" shop type interface structures. In these regions, the partnership structures are informal and at least in Liège there is an impression of a core group of RTDI operators which works in isolation from economic development stakeholders with an obvious loss of synergy.

In Central Finland, where tensions over different options and aspirations arose between the two key groups of local and national level authorities and agencies, the University of Jyväsklä has also played an important role in the design and implementation of RTDI under the Structural Funds working "as an idea generator for local authorities". However positive the role of the Universities in these regions, there is a clear hint that these large academic institutes are adopting the leadership role by default to the lack of a broader based and dynamic RTDI partnership, particularly involving business.

An example of the "variant" approach is provided by the Basque Country where the approach to science, technology and innovation policy is highly structured and possibly is one of the most sophisticated in Europe, reflecting in part the broad range of powers which this autonomous region- state enjoys. A Basque Technology Council (CVT) was created in 1993 bringing together the key government departments, development agencies, innovation and technology centres, universities and representatives of the industrial ‘clusters’. The CVT is intended to serve as the element of the system which integrates public and private objectives with a view to co-ordinating and encouraging the Basque R&D system. This approach of a highly institutionalised partnership also runs the risk of stifling the emergence of new actors or priority themes although the Article 10 ERDF RIS project, for which the CVT serves as the steering committee, is in part intended to promote the emergence of new clusters in previously low priority sectors; and stimulate a switch of emphasis from science and technology to innovation support.

Although Objective 2 and other EU funding regimes have not been the sole precondition for partnership building in Yorkshire & Humberside, they have been a powerful incentive for closer collaboration. For instance, the nine regional Universities have taken steps to increase their capacity to contribute to regional development - a main instrument has been the creation of a Universities association in the form of a limited company (YHUA Ltd.). Perhaps more important within this region is the creation of business sector groups the first of which is MEDILINK (see box below). This is perhaps one of the most encouraging initiatives identified particularly as these business groups work to develop a strategy for their sector valid across the region and not just in the limited ERDF zones

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BOX 11: MEDILINK Yorkshire & Humberside

MEDILINK is a unique professional association which brings together the region’s medical technology companies, hospitals, universities and business support agencies to generate new opportunities and advance the interests of the region’s medical technology sector. Strategic Working Groups drive forward the development of key support services whilst Local Steering Groups and Specialist Interest Groups ensure that local and niche needs are met.

MEDILINK’s mission is to stimulate growth in the medical technology sector within Yorkshire & the Humber by forging effective and sustainable links between customers, innovators and suppliers, for the mutual benefit of members. It seeks amongst others:- · to raise the profile of the region’s healthcare sector to promote the region’s products and services; · to increase overseas trade through partnership with healthcare and general overseas promotion initiatives; · to support the development of new and improved medical products for exploitation within the region; · to increase awareness of, and attract funding from, regional, national and international funding mechanisms to support medically related projects; · to encourage and facilitate information flow between members and the medical sector nationally and globally; · to work closely with training providers to develop programmes which will ensure that the region’s medical equipment sector remains competitive; · to champion regional and sub-regional healthcare initiatives; · to enhance technology transfer between universities, hospitals and medical technology companies; · to stimulate and support R&D which is customer/patient focused and which takes full consideration of emerging technologies and advances in healthcare systems.

To its membership, MEDILINK provides information, a telephone help-line, networking, seminars, workshops and conferences, product development support, grant support, exhibitions, export advice and trade missions.

The use of intermediaries in the delivery of support to SMEs in the Objective 2 programme is a common feature in the UK. Too often such approaches can be ‘supplier led’, but Medilink illustrates how business interests can be organised to enhance partnership involvement and the delivery of business relevant services. ). The MEDILINK model has served as the basis on which the Article 10 ERDF RIS project has developed similar "sector innovation boards" as the core of the strategy Source: Country Report United Kingdom

Over all the Yorkshire & Humberside model provides many pointers towards how sustainable business driven partnerships can be developed. The conclusion of the partnership survey for this region were that "the Objective 2 SPDs had forced partnership arrangements despite money being the catalyst, and in Yorkshire & Humberside there were consistently positive views about the RIS and its role in starting to break down parochialism and the supply-side orientation of existing partnership".

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The role and impact of strategic planning exercises on Objective 2 programmes

As outlined in the introduction, a series of measures have been taken (Regional Innovation Strategies, etc.) to stimulate the process of strategy design and associated pilot actions in the field of RTDI. Broadly speaking, the rationale behind these strategy development exercises is that:

· networking is central to the innovation process through allowing firms to make use of external knowledge, develop partnerships permitting access to complementary assets and manage producer/user relationships in specific techniques or technology; such formal or informal networks can be developed most effectively at the regional level since despite "globalisation", proximity counts in the "social process" of innovation; · that the regional level is the most effective and efficient level for delivering support to SMEs in their innovation activities (an issue already discussed in section 1 above).

It would appear that during the current programming period (1997-99), the influence of pilot projects co-financed under Article 10 of the ERDF has increased. Some countries and regions are already using the partnership led strategic orientations provided by IRISI, RIS, RTP or RISI initiatives as one of the main drivers of their new programming strategy. For instance in the Netherlands, many of the activities under Business Support priorities were targeted on supporting business innovation in the last programming period (1997-1999) as a result of the Regional Technology Plans carried out in the Objective 2 zones.

BOX 12: Development of RTDI Strategies in Dutch Objective 2 regions

The Objective 2 regions in The Netherlands only began to develop more detailed innovation strategies and plans from 1995 onwards. Limburg, one of the pilot Article 10 ERDF RTP regions, developed the most extensive RTP with pre-studies, pilot projects and broad consultations. Twente also conducted a quite comprehensive bottom-up RTP process. The RTPs in Groningen-Drenthe and especially Zuidoost-Brabant had more the character of a research study, whereas Arnhem-Nijmegen devised an alternative in the form of a continuous series of workshops on topical themes.

However, only the RTP of Zuid-Limburg, and to some extent Twente, entails a more strategic approach concerning choices for sectors, target groups, knowledge infrastructure and awareness raising activities. Limburg is undertaking efforts to structure its activities and projects for better co-ordination and synergy between the activities. Related to this, monitoring and feedback systems are being developed further for measuring effects and drawing lessons to be included in new projects and for adapting strategies. The RTP in Twente stimulated the province of Overijssel to start a RITTS project. Twente is also active in other initiatives for policy learning. For example, a series of workshops is organised to share experiences about collaboration for product development.

The RTPs have contributed to a process of consensus building particularly in Limburg and Twente that conducted the most in-depth process. The investments of these two regions in policy and strategy development have resulted in a number of follow-up activities that reinforce implementation approaches and instruments. As an example, the RTP in Limburg resulted in the elaboration of 51 specific projects with an overall financial volume of 75 million guilders: 10.7 million guilders of which was contributed by the Province, plus 19.5 million guilders by the ERDF and 2.1 million guilders from the ESF through the Objective 2 programme for Zuid-Limburg (1997-99).

The Province of Limburg’s RTP team organised regular briefings with the ERDF programme management concerning the Objective 2 programme in South Limburg. As a result, the RTP provided a framework for implementing the company-specific measures developed within the programme. Source: Country Report The Netherlands

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In Piemonte, the IRISI (Inter-Regional Information Society Initiative) exercise (Box 13) has given the Information Society a major influence on the regional development plan and strongly influenced the objectives and content of measures of the current Objective 2 programme. While there were some criticisms of the closed nature of the partnership arrangement, the project did achieve a significant result in terms of the inclusion of IS measures in the 1997-99 SPD – the unique example of such a focus in Italy.

BOX 13: IRISI in Piemonte – strategic planning and the information society

The Article 10 ERDF co-financed IRISI project in Piemonte although awarded to the Regional Government was effectively managed and run by an existing consortium between the Turin Polytechnic, public and private agencies and industrial companies (COREP). The Steering Group was dominated by the Polytechnic, the CSI (Consorzio per i Sistemi Informativi - regional and local administrations), CSELT, Telecom Italia, Turin University and the Federation of Industrial Unions. The strategy was developed through the activities of working groups in four fields: network infrastructure, policy and regulation; awareness building, training and education; SMEs; and social aspects. The final strategy set out three main goals:

· creating the basic infrastructure that will enable all regional information society applications and services; · foster and support the development of key initial applications and services that will drive the endorsement of the information society by business and citizens; · aggressively drive the awareness of the information society, the region and its services internally and abroad.

According to the evaluation of IRISI, out of 34 proposed projects, 17 projects were completed by 1997 and eight were on-going. Although Piemonte started from a position of relative strength, at least in the Italian context, in terms of telecommunications infrastructure, business and research capacity, it is clear that IRISI served to focus attention and to provide a coherent framework for measures designed at stimulating take-up of new information and internet technologies by regional firms.

The initiative has lived on in the form of two specific measures in the 1997-99 SPD mobilising funds totalling some 15% of the total RTDI related budget of over 200 MECU for the period. The first measure concerns the creation of a consortium to extend and continue the co-ordinating role which the IRISI partnership played through the creation of thematic working groups and practical demonstration and promotion actions of new IS applications. The second measure concerns a grant scheme for the introduction of new telematic applications in firms with an emphasis on the service (design, consultancy, etc.) as opposed to equipment components of such projects. Source: Country Report Italy

The example of Bremen is relevant for future Objective 2 programming in Urban zones where a relatively sophisticated RTDI policy has been developed. Obviously the Bremen case as a city enjoying the full powers of a German Länder is relatively unique but the main lesson to be drawn is that with proper direction and impetus given by the competent authorities (in the case of Bremen the Sentator of Industry), there is considerable scope for developing an innovation policy which draws full advantage of the rich tissue of connections between different academic, research and industrial firms which can be fostered in dense urban zones. The main issue in Bremen was not the lack infrastructure but the isolation in which the different organisation worked. Under the direction of the Länder authorities, a RITTS project (co-financed by DGXIII of the Commission) allowed the reformulation of policy following the end of a first Bremen Innovation Programme in 1995. This resulted in a series of action being financed under the Objective 2 programme in 1997-99.

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There are also expectations in a number of the case study regions where a RIS is currently underway that the results of the strategy in terms of objectives and actions will serve as the basis for future programming rounds. For instance, the Austrian Country Report underlines that the Article 10 initiatives (RISI in Styria and RIS in Lower Austria) have succeeded in developing a broader partnership than those of the Objective 2 programmes. These initiatives will strongly influence new programmes thanks to the links between the steering group and the Objective 2 programmes committees with main policy makers and support agencies represented in both.

A clear impact of the RIS exercises is also present in the case in Yorkshire and Humberside, Pais Vasco, and Auvergne. In the latter region, where the regional policy and previous Objective 2 rounds have supported an 'endowment' strategy in terms of R&D infrastructure, the expected output of the RIS is "a set of recommendations to improve the relationships between firms and research laboratories" Indeed, the 1997-99 SPD gave preference in selecting organisations for the "targeted research centres" measure to those identified through the RIS as being the most able to implement the recommendations.

Conclusions

The evaluation has allowed the identification of a number of interesting examples of how the development of RTDI partnerships has been developed within or in parallel to the Objective 2 programmes. A key factor influencing the performance of RTDI priorities is an appropriate partnership mechanism facilitating the creation of a strategic framework for RTDI actions at regional level.

There is a clear trend towards an increased inclusion of both business and the "knowledge" sector in programme management structures and towards a structuring of regional innovation partnerships largely aided by the RIS/RITTS initiatives co-financed by the Commission. The synergies between the initiatives of these partnerships and the Objective 2 programme design and implementation are clear in a number of areas notably in terms of giving a greater emphasis to measures which focus on responding to business innovation needs.

Less positive trends are also apparent with a number of zones unable to create a structured partnership with a broad enough base to stimulate the identification and development of new forms of intervention.

Two main features of the RTDI partnerships studied merit being highlighted:

· firstly, in many cases, the partnership does not exist simply at the level of the Objective 2 zone. Indeed, except where the zone is either large enough to include all the major urban centres (where RTDI infrastructure is generally located) this would be contrary to logic. The nature of innovation related activities is such that it is no longer know-how but also know-who that drives and facilitates knowledge transfer. For strategic partnerships to develop appropriate policy responses demands that such strategies be developed on the basis of coherent and effective knowledge and/or business partnerships whose rationale rarely respects the zoning logic of the Structural Funds. At the same time, this does not deny that the sub-region or zone may have specific technology and knowle dge related needs; · secondly, the Yorkshire and Humberside model illustrates that placing business in the driving seat can have appreciable benefits in terms of stimulating new forms of intervention with a higher degree of immediate economic impact. At the same time, the example of the RTP initiatives carried out in all five Dutch Objective 2 zones underlined that the mechanisms used to involve business need to vary according to the tradition of business dynamism and networking in each region. Hence, in some regions, Twente and Yorkshire & Humberside for instance, the programme management can adopt

Thematic Evaluation RTDI in Objective 2 – Synthesis Report 64 ADE – ENTERPRISE PLC - ZENIT

a relatively hands-off approach simply ensuring the coherence of the business initiatives and offering appropriate support at precise moments in strategy or project development; while in others significant efforts need to be made in a pro-active way to encourage business to express its needs.

Just as important as partnership based strategic exercises are mechanisms allowing prior preparation and design of RTDI measures. As one person interviewed noted: "the programming cycle for Objective 2 is such that we don’t have the time to develop projects and implement them - what is required is a project development fund to allow projects to be mature for launching at the start of the programme".

As a result, the most effective approach would appear to be the development of a RTDI strategy on a level high enough to ensure a critical mass of resources (the NUTS II level generally adopted by the Article 10 ERDF RIS initiative) and avoid competing sub-regional initiatives. In regions with a number of Objective 2 zones, programme managers and local partnerships can then concentrate on project development related to specific local issues and complementary or in synergy with region wide initiatives.

5.2 SELECTION CRITERIA AND PROCEDURES

The methods used to select projects are highly variable between the Member States as a result of the application of the subsidiarity principle and the different institutional geomorphology of the Objective 2 regions.

Selection criteria were not well defined in the Programming documents whether under the CSF model or the SPDs. This is partly a result of Member States wishing to keep as much flexibility for the implementation process as possible and partly because of the difficulty of defining measures and the more detailed aspects of selection in a period of negotiation that was already overloaded. Some programmes did, however sketch out indicative criteria (Styria in Austria, Twente in Holland) and in others there was an attempt to determine eligibility criteria (Yorkshire and Humber). However, these tend to be of a fairly general nature.

In the previous period a small number of avant-garde Objective 2 regions had experimented with scored criteria based selection systems. Strathclyde, North East England and some of the Dutch regions had instituted such systems. Often the same criteria were used across the whole programme with little or no differentiation by measure. Few if any regions had tried scoring systems for ESF project selection. Where existing aid schemes were being co-financed it was also common for scoring systems to be employed (NRW, Germany).

The selection systems in use in the 1994-96 period can be categorised in three main types: scheme based and open call bidding and politically determined. These are discussed below.

The first group, termed ‘scheme-based’, uses national or regional selection systems that are already in existence to select the projects or more frequently companies to be beneficiaries of aid schemes. In these programmes (Finland, most of Germany, Spain, Austria) the Structural Funds are providing more resources for existing regional programmes for RTDI. Relatively few new projects emerge and indeed there is little space in which this could happen. On the other hand these programmes are highly efficient in terms of expenditure. There are few delays in implementation once the programme is approved and absorption tends to be high. Efficiency counterbalances their lack of innovation. These programmes are also characterised by the relatively high proportion of RTDI spend that goes to enterprises directly through aid schemes. The approach is common for dealing with aid schemes rather

Thematic Evaluation RTDI in Objective 2 – Synthesis Report 65 ADE – ENTERPRISE PLC - ZENIT than projects, although as the Austria n example illustrates the same approach can be used for selecting projects as for selecting companies.

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DIAGRAM 6: Money flow and decision procedures in NRW

EU

NRW NRW Federal resources NRW resources resources RTDI TPW Regional support programme

Investmentbank Funding units NRW at Ministry

Housebank B Housebank A o o o Projects

o o o Projects Projects Projects

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North Rhine Westphalia provides an impressive distribution system for Structural Funds down to the end user (see diagram below). The technology programme for business (TPW) works to finance the RTDI infrastructure and for software measures. The Ministry of Economic affairs employs the regional economic development agency to market its wares. These are then accessed through the ‘Housebank system’ with a branch in every locality. It is probably the most accessible system for accessing Structural Funds in Europe. The selection is based on various criteria such as level of innovation, technological risk, market prospects and financing. It is a system of continuous application with no bidding rounds.

One of the downsides of the Housebank approach is that, despite its accessibility to the user and its efficiency in disbursement, few recipients realise that they are receiving European Objective 2 monies and there is no profile for the programme in the region. The European ECU’s disappears into a rather perfectly organised delivery system. In this system the final accountability and decision making rests with the ministry, although all of the processing is done by the implementing agency. The system is not good at generating synergies at the level of the firm. A firm receiving an ERDF grant would only coincidentally receive support under the ESF - which in any case tends to go to government schemes for the unemployed.

These selection systems tend to rely on individual agencies running specific measures with a specific allocation of resource. Both Finland and Austria use this approach in a very similar way. In the Finnish programme, TEKES is the agency running the measures for technology grants to SMEs.

In Styria (Austria) two sets of selection criteria are applied. First the project must satisfy the selection criteria defined in the SPD (eight criteria) and then the selection criteria of the aid scheme itself – four technology related criteria for projects and three for companies and five economic criteria for companies and one for projects. This was the only example noted where ‘scheme based’ selection systems used a two tier approach and one of the few where selection criteria were specified in the SPD.

TABLE 5.2: Selection criteria - Austrian Industrial Research Promotion Fund

Technological-related criteria Economic-related criteria Project Novelty Marketing experience R&D Risk Marketing perspectives Functionality Implementation of results Ecological relevance Macroeconomics Social aspects Company Technological up-grading Performance of the company R&D dynamics Feasibility Source: Austrian Industrial Research Promotion Fund

In Spain the measures for new equipment for the Universities are managed by CICYT. Both end users and intermediaries are thus pre-defined in the National/Regional model. This approach to delivery seems to be most common in regions which have not yet adopted an RTDI priority approach (see section 4.2 above).

The second type of project selection tends to happen in regions that have less established regional/national RTDI Frameworks and where the European Objective 2 programme exists more as an entity in its own right. Here it is common to find annualised open calls for projects with a bidding cycle where bids are made to a programme secretariat acting on behalf of the Monitoring Committee. This pattern is found in programmes in the UK, Denmark and Sweden.

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In the Netherlands a similar approach is made but using continuous calls. It focuses more on projects than on aid schemes. A proactive approach is used by project sponsors (the suppliers) who initiate a project. The project ideas are mostly based on perceived needs of companies. The project is then discussed with the Objective 2 programme management (often itself a development agency running the programme through a technical assistance contract). In the early stages of programmes when there is a lot of money few projects are rejected, but competition becomes more fierce as money runs out.

In the programmes using ‘open call selection systems’ there is a greater plurality of agencies bidding into the measure (which is essentially open except for certain rules governing private sector participation) and a greater range of project types than with the scheme based systems. This leads to increased levels of project innovation (specifically encouraged in the case of Denmark). The down side is that much slower absorption seems to take place, especially in the first 18 months of the programmes.

The most elaborated systems for the open call approach have a two stage process with eligibility checks in the first stage and then a scored selection system based on transparently assessed criteria. In many of the UK programmes in 1994-96 this included both programme wide criteria (value for money, indicators etc) and specific criteria designed for individual measures. Scores were split between the measure criteria and the rest. At times these elaborate scoring systems have an element of window dressing and the transparency of scoring systems has been weak. To counterbalance this tendency the Scottish system of using independent experts in the field to validate the scoring is a best practice model worth following.

These open call programmes appear to have been more influenced by the RIS approach than the others. This may be simply because the programmes are not so pre-determined and there is more room for manoeuvre. It is also associated with the ability of these programmes – particularly those that have an RTDI priority, to bring together a group of partners who then influence project selection from a strategic perspective. Several regions have succeeded in establishing groups of partners associated with the RTDI priority. In some places they have developed refined selection criteria and helped to map gaps and overlaps that the selection system can then attempt to address. This participatory approach has proved effective at improving the quality of choice of projects under programme measures.

There is a third group of regions and Member States in which no transparent system for selection is found at all. In these regions (such as Liege) project selection is a political process and at the mercy of pork barrel politics. Large projects in many regions are a special case of this effect. Often large projects defy all project selection criteria, as illustrated by the proposal for the inward investment of a research centre project called ‘Soleil’ in the current Nord pas de Calais programme Projects like this tend to be steam-rollered through the scoring system with the selection process being used for post-hoc rationalisation.

In such programmes, there is an urgent need to inject some transparency into the selection process for projects and SMEs for aid schemes. One way of achieving this would be to adopt the scoring matrix approach used in many of the UK and Dutch programmes and to bring in external experts in the field to evaluate the projects. The final selection could then be devolved to a sub-committee of the Programme Monitoring Committee.

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Issues in project selection

The key issue in project selection systems is whether they succeed at reasonable expense in choosing the best projects to implement the strategies that have been developed. There is some evidence from the country reports that lack of demand within RTDI measures has limited the role of selection criteria. In the bid and challenge ‘open call’ systems there is an obvious risk that projects coming forward are what suppliers wish to supply rather than what the region needs. In the scheme based aid scheme model there is a risk that no strategy is being implemented at all except by default. For the future when the Commission will take a significant step back in both the design and implementation stage there must be real concern that the systems in the Member States for selecting projects are simply not up to the job of delivering regional innovation strategies. It certainly appears that the ‘open call’ systems have the edge when it comes to policy innovation and mainstreaming the experience of the Regional Innovation Strategies. Yorkshire and Humber provides an example of good practice in this area.

The country reports identified a number of other concerns:

1. Independence/conflict of interest

In many project selection systems there is a real case of what the British call ‘heads in the trough’ behaviour. The agencies that win project funding and also bring co-financing to the programme (so called ‘matched funding’) are the same people that have the practical responsibility for choosing or rejecting the projects recommended by the secretariat on the basis of the scoring system. The French have institutionalised this approach by creating a specific sub committee that selects the projects and comprises only the funding partners. However, there is a risk in these systems that projects are subjected to insufficient independent appraisal.

2. Competence of selectors

There is a real issue in all systems of the competence of selectors to judge the projects they are looking at. Apart from the obvious difficulties in judging whether the project application form does justice (or too much justice) to the project there is a further problem of understanding of the processes at work in a technical area such as RTDI by selectors who may be generic officials or consultants. In Piemonte, despite an open call, published in the regional official journal with nine criteria the staff readily admitted that they really could not judge. Instead officials take comfort from the fact that the enterprise must contribute 50% as a guarantee of the commitment of the company and the expected results. In these instances experience suggests that scoring grids are the best support, perhaps combined with independent expert assessors.

3. Time taken to select projects

Most project sponsors in most regions appeared to have had their projects processed in between three and six months. This was regarded as acceptable. There were considerable delays at the start of the 1994-99 programmes most of which were not signed until December 1994 as a result of the late determination of eligible areas and the time needed to negotiate the programme. There were therefore many projects in the pipeline that had to wait longer than this. Three to six months for project proposals seems to be an acceptable time-scale. It is clearly too long for business applicants and the best programmes (NRW) in terms of efficiency of spend were also quick to determine grants.

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4. Eligibility criteria: Location of projects

For small zones there is a specific problem of the location of RTDI investments. This can also be a problem with larger zones but it is less serious. Normally ERDF investments must be within the eligible area and this is often specified in programme documents as a requirement for ERDF support. Clearly it protects the area against raiders, but there are times when it makes no sense to invest in the zone, because it is more cost effective to invest in a University or research facility outside provided that the benefits can be made to carry. The reverse is true, often funding bodies site an investment in the zone but it brings no local benefit. A more flexible geographical logic may be needed in interpreting selection criteria based on the spatial distribution of economic benefits.

5. Competition in bidding

Most regions had some method for encouraging competition between projects or companies. In the real world of programme expenditure genuine competition only occurs when there is greater demand than supply for project funding and tends to work against the imperative to spend. Quality and spend thus become binary opposites. RTDI measures were often well supported in the 1994-96 programmes in relation to the capacity to absorb and inevitably this may have led to a reduction in the quality of projects that were selected. Both project selection typologies include ways of selecting the better projects but only when there is an overbid.

The U.K. programmes were unique in instituting an interesting although controversial innovation called Regional Challenge - a programme wide competition for a top slice of about 5% of programme funding open to all types of projects. Before the competition took place it was expected that infrastructure projects would win, but Regional Challenge led to some interesting region wide RTDI projects in both the UK case study regions and countered the tendency towards cartelisation of the programme between spatially defined sub regions. The experiment was dropped in the 1997-99 programmes that moved instead toward a more explicitly spatial action-planning model and the weakening of programme wide selection criteria by measure.

6. Specificity of criteria

There is a weakness in many of the programmes that were studied in case study regions of broad criteria that were insufficiently tailored to the needs of the specific measures. This problem runs alongside the weakness of the output and impact indicators for particular project types. More work needs to be done in this area both to create new ways of appraising projects ex ante and ex post and to identify existing best practice.

To conclude, it is not possible given the range of institutional landscapes within the European Union to make any definitive remarks about selection systems. Different approaches are used in different Member States and even by different regions in the same countries. Selection is intimately linked to other systems of project delivery. The scheme based approach is more efficient at disbursement but appears to curtail policy innovation and integration. There are also concerns about the visibility of European support in some of these regions. The open call method appears to be more supple and evolutionary and easier to link to a ‘driver’ or priority partnership. At the same time it is associated with some serious delays especially at the start of programmes that then feed into rates of spend.

Regardless of the type of approach to sele ction, the best results appear to come from programmes that have attempted to objectify selection through quantified scoring approaches. Although still in their infancy, and fraught with difficulties, these approaches seem to be the best way that programme managers can select projects or businesses to benefit from programmes.

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5.3 EVALUATION AND MONITORING

Research questions:

· what are the means (data collection processes, indicators, analytical tools, etc.) available for monitoring RTDI measures ? · How robust are the management systems? How does the reporting operate (e.g. focus on financial and eligibility indicators); · did the evaluations of the previous period cover RTDI (e.g. analysis of pertinence, effectiveness, of measures, etc.); was specific action taken to measure impact on business ? · how are trends in the performance of the RTDI system charted ? · how are the results of these monitoring and evaluation efforts integrated into the elaboration of subsequent policies ?

The Terms of Reference of the Evaluation required that the issue of the quality of RTDI management structures and evaluation procedures be addressed. In order to ensure an effective programme and project cycle, well structured and methodologically sound monitoring and evaluation techniques are required. Evaluation can be defined as "a process which seeks to determine as systematically and objectively as possible the relevance, efficiency, and effect of an activity in terms of its objectives". In turn, monitoring is of key importance to improving programme performance, and successful evaluation hinges upon successful monitoring. Monitoring is a continual process which should examine the delivery of programme outputs to intended beneficiaries. It should permit rapid correction of deviation from operational objectives and modifications where necessary to the programme structure. In short, developing adequate monitoring and evaluation procedures which are disconnected from the policy building process, will ultimately miss the point of improving the efficiency of public action in favour of RTDI, as in other fields.

Findings of the thematic evaluation

Across the fifteen case study regions and 11 Member States, the situation in terms of monitoring and evaluation can be, at best, summed up as unsatisfactory. The case studies in particular noted that:

· there is a generalised lack of what can be termed an "evaluation culture" with regions failing to integrate evaluation and monitoring within the programme management cycle; · monitoring activities concentrate on providing the minimum financial and output indicators required by national and EU authorities; · RTDI measures in SPDs are, with few exceptions, evaluated within programme wide evaluations; · very limited impact assessments are made with funding for measures being continued from one programming period to another in spite of lack of verifiable results; and even in spite of recommendations to change orientations in certain cases.

The situation in the case study regions is summarised in table 5.3 below.

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TABLE 5.3: Evaluation culture and techniques in case study regions

Case Study Evaluation culture Monitoring and impact assessment of RTDI Region measures Steiermark · history of low profile of evaluation at · evaluation of specific national RTDI national level; programmes (co-financed by ERDF); · entry into EU has provided impetus to · focus on financial indicators with need development of evaluation techniques for general improvement in output and impact indicators Liege · some efforts made to strengthen · Classical approach to monitoring based monitoring techniques and indicators for on generic financial and output 1997-99 SPD; indicators; · few tools or indicators leading to weak · Positive experience of project diagnosis of RTDI situation in terms of monitoring committees; business needs. · No impact analysis of RTDI measures North Jutland · methods vary between funds with greater · Basic monitoring framework with need effort for ERDF; to develop more precise and specific · Response to "obligations" from RTDI indicators Commission. Central Finland · Application of formal requirements of · Lack of precise impact indicators Commission; · Overlap between national and EU evaluations Nord-Pas de · developing but incoherence between · Sophisticated database developed but Calais national and regional efforts and lack of difficulties in obliging projects to resources; provide data; · significant efforts made by regional service · Evaluation of impact of certain RTDI responsible but poor linkages to policy measures but conclusion ignored in 97- making. 99 SPD Auvergne · weak evaluation culture with limited ex-ante · Focus on financial absorption and analysis of pertinence of RTDI projects to compulsory data; economic tissue · Evaluation of Cortechs (human resource scheme). North Rhine · Resources devoted to evaluation with · Standard indicators but attempt to Westphalia improvement over time in methodology. develop new indicators across types of measures (including RTDI) has begun. Bremen · Positive attitude at programme · Evaluation procedures anchored in management level; RTDI projects developed in framework · Focus on ex-post evaluations of RITTS; · Need to develop systematic set of indicators for RTDI. Piemonte · weak culture of evaluation at national level; · Standard assessment of financial emphasis on monitoring at regional level eligibility and financial indicators; · Structural Funds have provided impetus to · Indicators essentially of generic output developing techniques. type; · no specific evaluation of impact of RTDI measures despite importance in SPD budget Twente · evaluation system developed in response · computerised information system to requirements of Commission; developed for SPDs - · need to take next step to internal learning · monitoring system geared towards systems and long-term effects analysis reporting and accountability lack of evaluation procedures at project level. Pais Vasco · assessment of global impact of policies · inadequate impact analysis of OPs; rather than of precise measures; · employment impact indicators · effort to quantify target RTDI indicators in developed for some measures framework of regional technology plan.

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La Rioja · culture of evaluation is scare · monitoring and follow-up of actions extremely limited to "number counting" Blekinge · Generalised weak system of evaluation · No guidelines developed. Yorkshire and · inadequate monitoring and evaluation · good practice example of rigorous the Humber mechanisms; application of monitoring; · "ethos of evaluation" absent · two programme wide assessments but no specific RTDI measure focus. East London · inadequate monitoring and evaluation · number counting indicators ("SMEs mechanisms assisted") with move to more precise impact indicators ("jobs created") in 97- 99. Source: Country Reports

In many respects, these deficiencies reflect historically weak cultures of evaluation at national level, this is the case in Austria and Italy, for example. In France, evaluation of public policies has only been institutionalised since 1990 and despite efforts to develop tools, resources at both national and regional level remain limited.

At least in terms of RTDI measures, although there is no reason to suspect that the situation is better in other fields, the result is that the public authorities (in particular, the Commission services) have no effective means of assessing, either during or after programme implementation, the basic criteria for public policy interventions:

· relevance (do the projects and measures relate to the initial analysis of problems); · efficiency (how economically has the intervention been converted into outputs and results ?); · effectiveness (how far have the different instruments contributed to achieving the policy objectives); · impact (at the level of the projects, the measures and the programme).

It is thus not surprising that, in most case study regions, the main indicator of success used for the RTDI measures is the rate of utilisation of the financial means available which at best provides a partial response to the efficiency question in terms of programme and project management processes. The side effect of a dependence on this indicator is to favour projects which consume money rather than projects which meet programme goals. In the rest of this section, a series of issues raised in the Country Reports are summarised.

Issues in monitoring and evaluation

1. Ex-ante analysis and programme and measure design

As has been noted elsewhere in this report, the quality of the prior appraisal and the baseline information contained in the SPDs varies from region to region with in general, a sound analysis of the RTDI situation lacking. Results from previous RTDI measures financed under the Structural Funds are sometimes referred to but usually in financial or output terms. There is rarely an explicit link between the objectives of the SPD and the previous period's experience and performance. In many regions, the baseline analysis did not change markedly between the 1994-96 and 1997-99 periods.

These deficiencies in the strategic approach underpinning the SPDs has a knock-on effect on the way in which the objectives of the RTDI priority, measures and projects are defined. In many measures, there is an incoherence between the stated objective and the type of actions financed (e.g. the objective ‘improving business access to regional technology resources’ associated with an

Thematic Evaluation RTDI in Objective 2 – Synthesis Report 74 ADE – ENTERPRISE PLC - ZENIT intervention in favour of ‘building of laboratories or purchase of equipment’). The result is that it is often only through the output indicators that an understanding of the reality behind the measures can be gained. In short, the vagueness of the definition of RTDI measure objectives does not provide the solid foundation required for the subsequent monitoring and evaluation process.

2. Monitoring systems

As a general rule, the monitoring systems and annual reports of the Objective 2 programmes are oriented towards the collection of financial and operational information which, for instance in the UK, serves mainly to establish auditing trails. No structured approach to the monitoring of whether the RTDI actions implemented are meeting their targets. In many, if not all, cases, the monitoring systems are limited to building the compulsory data required by the Commission (financial execution at measure level). In France, the country expert noted that "it was often difficult for an external observer to understand the relationships between the various programming documents and the financial tables produced in the regions, and the case was not infrequent that seemingly identical reports contained completely different data for reasons that remained obscure"'.

BOX 14: Mechanisms for monitoring RTDI actions – client monitoring

TeCH was created by the Training and Enterprise Councils (TECs), Business Links and local authorities in Bradford, Kirklees and Wakefield who pooled their resources to help local businesses in a project supported by EU funds. TeCH helps companies to look closely at their business and identify areas that might be improved through the introduction of Information and Communication Technologies. TeCH advisers understand the needs of growing businesses and work with businesses in Objective 2 eligible areas which employ under 250 people and have been trading for a minimum of 6 months. TeCH advisers work with the business for free, but further cash is available for up to half of the cost of business analysis, capital purchases and staff training, The average cash contribution per company is £3,000.

Mission Statement:- to facilitate economic growth in the local objective two areas by enabling companies to improve their competitiveness through the introduction of appropriate technologies. Intended impact:- to create new employment opportunities by:- · Increasing efficiency and reducing costs · Releasing time of key workers for productive investment · Providing accurate management information, particularly on costs, capacity and capability · Improving competitiveness · Providing access to new markets and customers and servicing those markets/ customers more effectively.

Target (October 1998) = 822 companies to be directly assisted. This included clients contracted plus clients advised without receiving grant support.

Achieved (September 1998) = 679 companies have a live contract with TeCH having been offered a grant, a further 520 companies have been assisted without a grant, a total of 1199 companies.

Key message: Despite having a clear mission statement and objectives, this project acknowledged the difficulties associated with attempts to measure the outcomes of their activities given that these occur within the SME base of the area. As a result, TeCH developed a ‘client database’ and a ‘support methodology’ for dealing with its clients who are ‘contracted’ to formally assess their business performance, take appropriate actions and provide feedback to TeCH at the end of the period of assistance. This has led to a joint identification of measurable outcomes related to the performance of the SME. Source: UK Country Report

In Liège (Belgium), project promoters were highly positive about the use of project level support committees (composed of the organisation managing the project, the regional administration and the cabinet of the regional minister) which allow a continual feedback on project implementation and an

Thematic Evaluation RTDI in Objective 2 – Synthesis Report 75 ADE – ENTERPRISE PLC - ZENIT early identification of barriers and problems. Programme managers also draw benefit in terms of being able to take timely action to adjust or modify specific measures.

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In Nord-Pas de Calais, a well-developed monitoring system is put in place and forms a basis for sound evaluations , as described in the box below. However, the most important question is, as noted above, how this system flows into the design procedures of the next programming document and this relationship appears to be anything but solid.

BOX 15: Good and bad practice in monitoring and evaluation

Both European and national requirements in terms of monitoring and evaluation of the contents of SPDs are rather limited, and essentially geared towards financial control in view of ensuring timely payment procedures. In Nord-Pas de Calais, an effort has been made to develop a monitoring and evaluation system which allows for the analysis of outputs, effectiveness and impact of SPDs.

Within the French regions, a service of the Prefect of the Region (the Sécretariat Générale aux Affaires Régionales -SGAR) is responsible for drafting the SPDs and overseeing the implementation in co-ordination with the national ministries (notably the DATAR) and the Regional Council and Departmental authorities. In Nord-Pas de Calais, an Evaluation Unit has been created within the SGAR, with qualified staff in charge of conducting analyses of economic development questions and analyses of public policies. This evaluation unit developed a detailed grid of indicators (“Tableau de Bord”) for all measures and sub-measures financed by the SPD which it has developed as a database. All agencies and services in charge of the implementation of the measures are requested to fill in a standardised information sheet for every project, containing all relevant data including output and impact indicators. The system is accessible on-line for the services concerned and is much more developed than the national software, the latter being focused on only financial management indicators. In parallel, the evaluation unit carries out econometric analyses of public policies, such as assessments of grant aid schemes to enterprises, and studies of the economic situation, e.g. of the degree of technological development of enterprises.

Recently a new software has been announced at national level for the management of European Funds (SUSI), and this was taken as an occasion for many measures managers to stop encoding data under the regional system. Therefore the flow of information developed previously has stopped and it has become impossible to produce for the 1997-99 period the same “Tableau de Bord” as the one available for the 94-96 SPD… The Prefect, head of the SGAR has few powers on the services” to force them to deliver the required data for a proper monitoring and evaluation of the actions financed under the ERDF, beyond national requirements. As a result, the development of a sound data base on actions financed under the ERDF is put in danger in Nord-Pas de Calais, although this is the necessary base for good evaluation work.

Key message: The capacity to manage sound evaluations, based on good quality monitoring data, is a necessary function to be developed within a regional administration. To be effective, it needs, first, to rely an a good database on the actions financed, including financial, physical output and impact indicators, and second, to be connected with the policy building process. The system developed in Nord-Pas de Calais would seem to be rather standard practice in terms of monitoring, however it is probably a “best practice” in the French context. Source: Country Report France

3. Indicators and evaluations

The establishment of clear, unambiguous and relevant indicators10 should be the cornerstone of evaluation and monitoring process of publicly supported programmes. In this respect, it is astonishing

10 For sake of clarity, the terminology for specific types of indicators adopted by the MEANS programme and the EKOS study are used here : financial inputs are the financial contributions to an activity and comprise Structural Fund, other public sector and private sector support; activity / output indicators concern the direct result of the project, i.e. what Structural Funds are actually purchasing (e.g. SMEs assisted; equipment installed, people trained); outcome/result indicators are the gross economic effects of the activity supported (e.g. new sales for SMEs, business investment in research & development); impacts are the final consequence of the support expressed as net effects, and are deduced from the specified outcomes

Thematic Evaluation RTDI in Objective 2 – Synthesis Report 77 ADE – ENTERPRISE PLC - ZENIT that many RTDI measures financed under Objective 2 have been planned without concrete indicators in terms of outputs, results and impacts which are prerequisites to assessing whether a measure is meeting its objectives. In certain of the case study regions, programme managers were reported as being reluctant to define very precisely even output indicators as they preferred a broad definition leaving more flexibility in the types of actions implemented.

In the main, the indicators identified in SPDs and synthesised in the country reports were related to outputs, certain types of results and occasionally impacts 11. An additional problem was the difficulty in matching on many occasions the given output with the RTDI content of the measure. This applies to mixed measures (such as business development measures) where RDTI actions only constitutes a part of the whole measure. Indicators used to measure the performance of specific types of measures varied significantly with both quantifiable results indicators (e.g. number of net jobs created) mixed with non-verifiable global objectives (e.g. increase the competitiveness of SMEs) as was the case in Italy; while the SPDs generally use the number of participants to measure the output of a measure in the field of training with rarely any attempt to measures the structuring effects of the this training on company performance.

Often the relevance of indicators can be questioned for instance: is it more appropriate to measure the achievements of a project funding a technology centre by taking the number of square meters built or rented to new start up firms as an indicator? Moreover, in comparison to the indicated measure outputs in the programme documents, the real outputs reflect sometimes a rather unspecific result of a measure. Outputs and results reported do not always properly reflect the real technological or innovative character of the projects financed under the SPDs. The Dutch example shows even that output indicators are not always considered with due seriousness: one project in Zuid-Limburg aims at stimulating contacts between firms on innovation projects. The output analysis shows that the budget has been fully used for the different activities promoting contacts between firms but it also mentions that zero firms participated in the project.

It is frequent that a confusion exists between output, result and impact indicators. In many cases, impact indicators are simply missing. In others, they are very vague and difficult to measure (“increased competitiveness of SMEs”) and in most cases they do not capture the innovation dimension but reflect rather a job creation objective. In the case study regions, for example, there is very little data available regarding the effects of contracts signed between research laboratories and regional SMEs, although this is often a clear objective in the SPD. In addition to the number of contracts, to be meaningful, these indicators should also capture information about the size and content of these contracts, the renewal of the client base of the laboratories, the characteristics of the firms concerned before and after the intervention, etc. In most cases this information is not available with the implication that there is no means to check the effectiveness of measures geared towards the development of relationships between the knowledge base and industry in the regions.

In Liège, one example of an indicator used with respect to ERDF grants is that of an “utilisation log (carnet de vie)” accompanying each new piece of equipment purchased. The centre receiving the

11 The aggregation of data on indicators across the Member States, but also within single countries (e.g. the UK) proved to be very difficulte due to the heterogeneous nature of measures and indicators. Data is mostly available on project rather than measure level. Another problem arises from the different programming periods. Given that the focus for this evaluation is 1994-1996, the programmes for the Member States which joined the EU relatively recently (Sweden, Finland, Austria) have programming periods which differ from those of the other Member States, starting e.g. for Austria at the beginning of 1995. This made it difficult to compare and aggregate data. Nevertheless all study teams compiled relevant output data which are included in the respective country reports. In most cases, quantitative and/or qualitative output information could be found but hardly any reliable data on the results of RTDI measures.

Thematic Evaluation RTDI in Objective 2 – Synthesis Report 78 ADE – ENTERPRISE PLC - ZENIT equipment is obliged to fill in the log each time the equipment is used specifying notably the type of service provided, the beneficiary firm, the length of time utilised and the tariff applied. The information contained in these logbooks are a potential source of more pertinent indicators (e.g.: utilisation rate of the equipment, share of total use attributable to firms from the zone, surveys of firms benefiting from the equipment, etc.) but remain under-exploited by the regional authorities.

In summary, the situation with monitoring indicators proposed in the SPDs is, as suggested by one of the interviewees, that “they measure a programme and not a policy”. They are oriented towards the necessities of financial procedures, not to the effectiveness of a policy.

The table below gives an indication of the types of indicators which could be used to monitor specific types of RTDI measures. Given the limited number and low quality of the indicators used in the SPDs, the table includes a mix of indicators used during the period 1994-96 by Objective 2 regions and indicators suggested by the evaluation team on the basis of its experience and other studies (notably the Ekos "Baseline and Quantification" report for UK Objective 2 regions).

In terms of evaluation methods and techniques, the situation varies across regions, but in the majority of cases, ex post evaluations do not include impact evaluations but, rather an administrative analysis of the outputs produced by the programmes. The general tone is descriptive, focused on the question of budgetary consumption, and few strategic recommendations are delivered. The accent is more on the verification of outputs achieved, compared to outputs expected when properly specified, and more rarely on pertinence, efficiency, effectiveness or impacts of the actions supported.

Hence, the extent to which an effort is made to track the effects on business of RTDI projects and measures is largely insufficient. In most cases, there is no ex-ante analysis of business demand for the services or scheme being proposed which makes it difficult to set targets in terms of the results and impacts expected on firms. In addition, in the 15 case study regions, only a very few examples of a detailed ex-post evaluation (encompassing the issue of impact ) could be identified (e.g. an evaluation of the CORTECHS graduate placement scheme in Auvergne).

This is not always due to a lack of willingness since in certain cases the lead time for certain initiatives to become fully operational has been between six to ten years. This is the case for example of the Technology Parks developed in Piemonte – design and feasibility work on the first park Tecnoparco de Lago Maggiore began in the early 1990s with the Park facilities and testing and certification laboratory only becoming fully operational from 1997 onwards. However, despite claims to the contrary, the excuse of the "long-term impact" of RTDI measures for not carrying out adequate assessments of impact is very rarely justified and in any event raises the issue of whether it is pertinent for the Structural Funds to be funding such measures.

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TABLE 5.4 : INDICATORS FOR EVALUATING RTDI ACTIONS – SOME EXAMPLES

Scientific potential Technological development Innovation promotion Output indicators · R&D centres / university · number of contract research · innovation centres constructed laboratories constructed / projects with SMEs; / equipped equipped (m²); · number of inter-firm · number of SMEs financially · number of new post-graduate collaborative research projects assisted for innovation courses developed with supported (SME-SME and projects; industry; SME- large firms); · number of technology / · number of graduate placements · number of feasibility studies on innovation audits in firms; in firms (masters or doctoral introduction of new · numb er of participants in level) – share of female technologies; innovation management graduates. · number of SMEs supported training schemes; with patent / licensing · number of marketing studies applications related to new product · number of technicians placed launched; in firms; · pre-investment studies for · number of NTBFs, Spin-offs R&D projects; supported. · number of new financial schemes (venture capital, business angels) supported Result indicators · number of new collaborative · increase in business · number of firms adopting new research projects (national and expenditure on R&D in firms innovation management international); assisted; techniques; · rate of utilisation of scientific · rate of increase of new · new products launched on equipment by regional firms; products/processes market; · rate of retention of graduates developed; · increase in firms using after end of subsidy. · new technology based firms / innovation infrastructure spin-offs established (share of resources following female entrepreneurs); advice/auditing actions; · rate of retention of technicians · funds disbursed by new after end of subsidy; innovation financing schemes/ · number of new NTBFs, Spin- offs created.

Impact indicators · number of patent's exploited · increased sales and turnover · increase in proportion of industrially in region; due to new products; in regional firms using innovation · increase in proportion of targeted sectors, from support services (rate of first- workforce qualified above NTBFs/spin-offs; time clients); graduate level; · increase in gross business · increase in regional financial · increase in regional investment in R&D; means available for innovation; participation rates / share of · increased proportion of · increase in rates of quality/ funds of major national and EU manufacturing employment in technical certification , RTD programmes high technology sectors; labelling, of regional firms, · increase in level of high- products, processes, etc. technology exports Source: Country Reports, Benchmarks and Quantification Study (Ekos, 1998), evaluators own suggestions.

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As regards evaluation methodologies, a main conceptual problem concerns the difficulty to analyse impacts for RTDI measures with a long term effect, such as investments in the R&D base in a region, especially when the justifications are of an “image and attractivity” type. The Commission, in the guidelines for Objective 2 programming, insists very much on the short term impacts of the measures on job creation, which might not always be very pertinent for RTDI stimulation measures.

Another problem relates to the capacity of the evaluators selected by the regional authorities who are in the main generalists with little experience of studying RTDI actions. This appears to be an issue in France and Italy, for example.

Box 16: Thematic evaluation of RDTI in Aquitaine

Aquitaine is the only French region that has carried out a thematic evaluation of its Objective 2 programme in the field of research, innovation and technology transfer. This is undoubtedly linked with the fact that this region has a remarkably highest proportion of RDTI actions in its SPD of all French zones. The regional government entrusted the evaluation to a specialist consulting company with the remit to study the "technological and socio-economic spill-over of the support to research, innovation and technology transfer in the Objective 2 zones". The evaluation method was based on a systemic vision of the innovation processes in the region and distinguished between three questions:

· The short term question aims to evaluate how far the regional RDTI policy has been modified by the Objective 2 programme, and if it has resulted in change of emphasis (rather than a mere quantitative extension of existing policy); · the medium term question relates to the changes that can be observed in "behavioural parameters" that can be associated with an improved functioning of the regional innovation system: change in attitude from public researchers with regard to co-operation with SMEs; reinforcement of the knowledge providers and interface structures' actions towards SMEs; increased openness from SMEs towards their environment; · the long term question is the one of the impact of these changes on value added, turnover, exports and job creation in the business sector.

The core of the evaluation consists in a descriptive analysis of all measures containing an RDTI component (here the evaluators were faced with the difficulty to distinguish between RDTI and non-RDTI actions), accompanied by a critical analysis of their contribution to the overall goal of raising absorption of RDT resources by companies, in view of enhancing their innovation abilities. This task is made possible by the existence of a clear policy statement for an integrated RDTI policy, which the evaluators attribute to a large extent to the previous realisation of a RITTS exercise in the region. The main thrust of the analysis is qualitative and the substance comes from interviews with members of the system (knowledge providers, intermediaries and firms). The approach followed seeks to highlight "innovative" practices, i.e. measures or actions which have been supported by the SPD and would not have been present in the absence of this programme, showing thus a degree of "qualitative additionality" of EU money.

The evaluation does not include analyses of the efficiency of each measure or action, in terms of results achieved. The little quantitative data available (such as, for example, the rate of penetration of support structures in the productive tissue) are estimations from the regional actors involved in the actions measured. However, the report suggests a number of useful indicators which could be developed and then tested to undertake such an efficiency analysis: · the rate of penetration of the various support services within three types of companies: research-intensive companies, "open" companies, "traditional" companies; · for service providers and intermediaries, the number, financial scope, and nature (length: number of days) of services sold; the ratio between these data and the rest of activities of the providers; · an on-going analysis of the structural changes in firms: creation of internal R&D units, hiring of engineers or researchers, participation to co-operative research projects, number of patents or licenses, etc. · an on-going analysis of the evolution of immaterial expenditures in companies: R&D expenses, technological watch and information systems, support services acquired (advice, studies, training,…) Source: Country Report France

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A first step towards adequate evaluations of regional RTDI actions is the adoption of a sound conceptual framework, as was the case in the Aquitaine example where the RDTI actions in the SPDs are analysed with respect to their relevance with a global, knowledge-based, regional development policy. In this respect, it goes much further than the usual "programme assessments" which focus on absorption rates, measure by measure. The next step towards a real "policy evaluation" is to develop objective indicators for the performance of the elements of the innovation system as well as for analysing the interactions between them.

Conclusions

The assessment of monitoring and evaluation procedures underlines the generally poor situation at all stages of the evaluation process of RTDI measures (ex-ante, on-going, ex-post, etc.). The result is that there are few means for national or European authorities to understand the pertinence of certain measures in the context of other policie s and for regional authorities to properly monitor and evaluate their policies. The justifications for the measures included in the SPDs often adopt arguments drawn from new regional and innovation policy orientations at EU or national levels but there is often no real possibility to check at the ex-ante stage if this is just window-dressing and whether these actions are really implemented in a manner which respects the original objectives.

This situation calls for urgent action to be taken at all levels (Commission, national and regional authorities) to develop much more precise and measurable output, result and impact indicators for specific types of measures and sub-measures, build adequate monitoring procedures on this basis, and foster evaluation work of high quality standard and independence.

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6. EFFECTIVENESS OF RTDI ACTIONS

Given the lack of existing evaluations of the results RTDI measures, two approaches were adopted by the evaluation team to the issue of impact both in line with the remit given to the team by the Terms of Reference of the Commission. The first was a questionnaire survey on the impact of RTDI projects on participating firms (with a special focus on SMEs) in selected Member States, the results of which are covered in section 6.1; and the second was the identification of specific cases of measures or projects with an identifiable impact on business performance and/or regional competitiveness presented in section 6.2.

6.1 IMPACT SURVEY

The aim of the survey was to assess the effects of participation of businesses in RTDI projects co- financed by the European Union under Objective 2, based on a sample of firms in selected case study regions. The survey used a standard questionnaire format designed by the project consortium.

The overall framework of the impact survey

The decision on which Member States to be integrated in that survey was for the most part driven by the issue of data availability and access to the firms. That was the reason why the survey presented here is restricted to four Member States (Austria, Denmark, Germany and the UK). In the other Member States either the data situation was too poor to implement the survey (case of France) or the local experts found it too early to assess the impact since most of the projects were still on-going by the time the current study was carried out (typically the case for the Scandinavian countries Finland and Sweden). In Italy the RTDI measures identified as being appropriate for the impact survey could not be used for implementing the survey since in one case the firms were the subject of a questionnaire survey being carried out by the beneficiary and in another case the programme managers indicated the firms were already over-surveyed by academics so that a high level of resistance of the beneficiaries to answer the questionnaire was expected in both cases.

The impact surveys carried out in Austria, Denmark, Germany and in the UK covered some 210 firms in six regions. In total, eleven funding schemes are integrated in the survey. In Austria and Denmark only one support scheme was evaluated, whereas in Germany three and in the UK six schemes were covered.

The response rate of the survey varies in the four countries ranging from only 26% in Germany to 100% in Denmark.

TABLE 6.1: Structure of survey and respondent firms

Number of Response Number of employees firms contacted rate < 10 10 - 49 50-99 > 100 average n° of employees in % of responses Austria ** 43 51 % 14 % 33 % 10 % 43 % 200 Denmark 19 100 % n.a. n.a. n.a. n.a. n.a. Germany 49 26 % 38 % 24 % 0 % 38 % *300 UK 100 60 % 63 % 27 % 7 % 3 % 17 *One firm which implemented two project (thus being represented twice in the survey) employs 3,200 employees; without counting that firm, average number of employees reduced to 40 people. ** 3 responding firms did not provide information with regard to that question

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Source: ADE, Enterprise plc and ZENIT impact survey; for further details please see relevant country reports (chapter 4.2)

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As far as the rather disappointing response rate in the German impact survey is concerned, the consultants identified in the framework of a telephone follow-up four main reasons for the reluctance of the beneficiaries to respond to the questionnaire:

· in some cases the beneficiaries seemed to be over-surveyed; · in other cases the interviewees were not aware of the EU contribution to their project and thus they did not see an "ethical" obligation to respond to an EU related survey; · the contacted firms regarded the questions stated in the questionnaire as highly sensitive for their strategic development; the contact persons stressed data protection issues as an excuse for not replying to the questionnaire; · the other reason is to some extent a self-criticism; in several cases the contacted persons estimated the questionnaire as not appropriate and too complex.

In Austria and in the UK the consultants assessed the response rate as encouraging and sufficient although for example in the UK six beneficiaries directly refused to answer the questionnaire.

Structure of respondents The survey covers a wide range of enterprises with regard to number of employees. In the UK the responding firms employ on average 17 people whereas in Austria and in Germany this indicator reaches 200 and 300 people respectively. As table 6.2 shows, the majority of the responding firms devote less than 5% of their total turnover to RTDI related activities. In Austria and in the UK 18% or 16% respectively of the responding firms stated that they invest more than 10% of their turnover in RTDI actions. Product innovation and design is by far the most important type of RTDI activity of the responding firms. In the UK survey almost two-thirds of all firms spent their RTDI budget in this activity field. Market research and patents are both of minor importance in Austria, Germany and in the UK.

It would appear evident that the firms investing in RTDI activities focus their engagement on new product developments and product designs. In other words, the great majority of the firms carry out R&D in order to find, to develop or to improve products for the future market. It is thus first and foremost for market reasons that the firms are implementing R&D projects. That result clearly contrasts with the finding that market research and patents only play minor roles in the R&D activities of the firms. It is clear though, that market research and patent protection activities generally demand less money than new product developments which results in smaller shares of the RTDI budget. The result of the UK survey, where 75% of the respondents do not spend RTDI budget in this field, however drastically shows, that there is a clear lack of awareness regarding marketing issues to be observed.

TABLE 6.2: R&D budget in percent of total turnover

R&D budget in percent of turnover 0 % 1-5 % 6 - 10 % > 10 % 0in % of responses Austria 5 % 64 % 14 % 18 % Germany * 15 % 54 % 0 % 8 % UK ** 8 % 50 % 26 % 16 % * 3 responding firms did not provide information with regard to this question ** 10 responding firms did not provide information with regard to this question Source: ADE, Enterprise plc and ZENIT impact survey; for further details please see relevant country reports (chapter 4.2)

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Application procedures

Generally speaking, the responding firms did not rely on external support in accessing the support provided with the Objective 2 scheme. In the UK that is due to the indirect nature of the project support. It is not the firm but an intermediary organisation which submits the project application under the UK Objective 2 programme. In Austria and in Germany the application procedure is totally different. In these two Member States the final beneficiary usually has to apply for the funding/grant. Objective 2 measures are however integrated in regional or national RTDI aid schemes. The beneficiary thus does not have to formally apply for EU support. The firm rather goes to an established (and normally well known) programme either at national or at regional level. With regard to the necessity of external support, the two different approaches which are being reflected in the impact survey do not make any difference. That is a rather surprising result as one could have expected less need for external support in the Austrian/German approach. In all, the result shows that in both systems the delivery structures are well known and that no additional administrative barriers have been created for the final beneficiaries.

The awareness of Structural Funds grants on the other hand is fairly low in all three Member States where the full survey could be implemented. In the UK over two-thirds of respondents were not aware of the existence of ERDF or ESF support. Similar figures were revealed in Germany (58%) and in Austria (60%). It would appear that the low visibility of EU money at the level of the final beneficiaries can be traced back either to the approach which channels Structural Funds money through pre-existing schemes (case of Austria and Germany) or to the fact that the respondent firms are indirect (final) beneficiaries, obtaining advice, assistance and/or support from a broader project (UK case).

The clear strategy of the programme management behind the two different approaches identified in the impact survey is to reach a larger number of SMEs than it would otherwise be the case and to provide the support on an efficient and effective basis. As far as evaluators are concerned, this objective was reached. On the other hand, the data on the visibility of the EU-money at project level reveals, that this strategy is not without risk. High participation and efficient administration - so the result of the survey - coincides with low levels of awareness with regard to the EU support. In order to reach both, high participation (and thus high absorption) and a sufficient awareness about the EU-support the Commission should demand from the programme managers concrete PR measures which are likely to increase the awareness of EU support in the R&D community in the respective regions.

The R&D projects financed under Objective 2

The key factors for the participation in the Objective 2 co-financed RTD projects in the three Member States concerned are presented in the boxes below:

Factors motivating participation in an Objective 2 RTDI project UK Access to new markets Increasing skill levels Improving innovation management skills Replace products

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Germany Access to new markets Replace products Reducing environmental damage Improving product quality

Austria Access to new markets Replace products Improving product quality Increasing resource efficiency

Across the three Member States access to new markets and the replacement of products were the main driving forces for firms becoming involved with Objective 2 co-financed RTDI projects. This finding coincides with the general reasons why firms carry out R&D activities, namely product innovation and design. This suggests that Objective 2 co-financed RTDI support schemes do not generate "artificial" projects in the sense that there is no real need for them, and that they were only implemented because they are publicly financed. The measures seem to support the type of actions, the firms usually focus their RTDI activities on. On the other hand, the risk which coincides with this approach is a large dead-weight share, meaning that the projects would have been implemented even without the public support. Some empirical evidence for this hypothesis could be found in the Austrian survey where 60% of the responding firms would have carried out the RTDI project without public money.

Differences with regard to the motivation factors can be seen in the human resources field. In Austria and in Germany human related motivation factors are more or less not existent. In the UK two of the four key motivating factors are related to human resources. "Increasing skill levels" assessed some 40% of all respondents in the UK as an important or very important factor. "Improving innovation management skills" found a good fifth of all respondents as being an important or very important argument for becoming involved in an Objective 2 co-financed RTDI project.

Results and impact

The expected impact of the R&D projects are clearly a reflection of the key motivation factors as presented above. The access to new markets is thus in all three Member States the most important expected target from the firms' perspective. In Austria and in Germany an increase in sales revenue comes second whereas in the UK the second focus is mainly on improving productivity, to which increased skill levels are seen to contribute. In the UK in Austria and in Germany the creation or the protection of employment also seem to be important expected impact (see boxes below).

Expected impact of RTDI involvement

UK Penetration of a new market segment Increase in productivity Increase in sales revenues from new products

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Germany Penetration of a new market segment Increase in sales revenues from new products Employment

Austria Penetration of a new market segment Increase in sales revenues from new products Employment

In the table below the actual outcome of the projects is compared to the expected result. A first striking result is that in nine out of the twelve boxes of the matrix presented below the actual gains did not reach in what was initially expected at the level of the firms. Only in the field of "increase in productivity" in the UK and in the Austrian survey the firms stated that the actual outcome exceeded the initial expectations. Increase in productivity does however not belong to the key motivation factors for R&D involvement. In the Danish survey four out of the 19 projects stated, that all objectives have been reached. All 19 projects see a general positive result of the RTDI project on their enterprise/organisation.

With regard to market penetration - a strategically important issue for the firms as discussed above - only in the UK did the results reach the level which was initially expected. In Germany not even two thirds of the anticipated results were actually achieved. In view of that result it may be that the expectations of the SMEs with regard to this respect were a over optimistic or were generated at a point in the business cycle unfavourable to their exploitation. However, another interpretation would be that new product developments is not sufficiently accompanied by market research and marketing activities. This bears the risk that product developments are being publicly supported although the real market demand has not been surveyed beforehand.

TABLE 6.3: Actual outcomes as compared to expectations

United Germany Austria Kingdom increase in productivity •• ¯ • increase in sales revenues from new products ¯ ¯¯ ¯ penetration of a new market segment ¬® ¯¯ ¯ Employment ¯¯ ¯ ¯ Source: ADE, Enterprise plc and ZENIT impact survey; for further details please see relevant country reports (chapter 4.2)

Another striking finding is, that in no case the targeted employment goal was reached. However, it should be recalled that the firms are undertaking R&D with a primary objective of product innovation and the access to new market segments and not to increase productivity. From a theoretic perspective there is hence a clear stimulation of employment to be expected from these RTDI approaches. However, the firms are highly resistant in spending R&D budgets in market research and in patents. That clearly is a contradiction and seems to be the main shortcoming in the RTDI strategies of the firms. Publicly financed regional development programmes like the future Objective 2 schemes should thus concentrate on this deficit. Increase of the awareness concerning marketing issues in the firms which do R&D and thereby stimulating the demand for combined R&D and marketing actions could thus be guidelines to improve the employment effects of RTDI measures. For example, a market feasibility study could be foreseen before committing the grant for R&D.

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6.2 HOW DOES RTDI AFFECT REGIONAL COMPETITIVENESS?

In the scope of this evaluation, the extent to which the Structural Funds have contributed to the promotion of RTDI capabilities, to the establishment of technology transfer mechanisms and to the improvement of regional competitiveness in Objective 2 regions has been examined in depth in 15 case study regions. The field work carried out in these regions has allowed the evaluation team to select and identify a series of initiatives and projects which merit being highlighted as examples of good, if not best, practice.

Each of the good practice examples is summarised in a synthetic template structure in annex A detailing the context of the initiative, a description of the project, key message of the experience gained, and the scope for transferability. The good practice examples are divided into the following four broad groups:

(A) Knowledge-providers - industry linkages A-1: Improving the effectiveness of technology transfer (Bremen, Germany) A-2: Technology Centre North Netherlands (Groningen-Drenthe, Netherlands) A-3: Tech Centres in the Basque Country (Basque Country, Spain) A-4: CASIMIR – Technology Pole (Auvergne, France) A-5: Technological nodal FAZAT (Upper Austria, Austria) A-6: TeleRegion (East London & Lee Valley, UK)

(B) Stimulation of business innovation B-1: NorCOM - A cluster of industries (North Jutland, Denmark) B-2: Combination of RTDI infrastructure and individual support of firms (Nordrhein-Westfalen, Germany) B-3: New financial instruments for innovation- revolving loan fund (Piemonte, Italy) B-4: Product innovation (Twente, Netherlands) B-5: RTDI measures and regional competitiveness: The PFAU programme (Bremen, Germany)

(C) Human resource and training initiatives for RTDI; C-1: Technifutur (Liège, Belgium) C-2: CorTech, (France) C-3: Teaching Company Scheme (East London & Lee Valley, UK)

(D) RTDI in rural and urban environments D-1: Urban regeneration and the environment – Environment Park Torino (Torino, Italy) D-2: CEVPM – Centre for fish products development (Nord-Pas de Calais, France)

The examples presented show how the Structural Funds have been used to exert a positive influence on the regional key factors for the success of RTDI measures and their effect on regional performance.

The first group (A) illustrates that knowledge transfer from scientific partners to industrial companies can be improved by different types of measures which facilitate contacts between regional actors ranging from communication infrastructure measures to brokerage services. Increased exchanges lead to a better exploitation of the existing knowledge by SMEs and improve the network of contacts and the transmission between supply and demand side. The examples show that the demand side has

Thematic Evaluation RTDI in Objective 2 – Synthesis Report 89 ADE – ENTERPRISE PLC - ZENIT to be assisted in the identification of its RTDI needs. Technology centres or agencies can act as brokers and facilitate the development of synergies through parallel activities in several fields:

· Bremen has created a technology transfer agency with two main tasks: at regional level, it co- ordinates the network of existing technology transfer units based at university or polytechnics institutes in order to increase communication and know-how transfer between the regional RTDI actors. At institutional level, it acts as interface between the administration and companies and provides information and support for the acquisition and management of projects in the form of a one-stop-shop. This clear organisational structure helps to avoid overlaps and duplication of work and thus increase the regional RTDI performance. · In order to make the existing knowledge in the region accessible to SMEs, a technology centre has been created in the North of the Netherlands. It acts as a broker between SMEs and high level RTDI institutes. With the help of the institute, SMEs formulate their R&D needs and find the right partner to carry out their projects. They are also supported in the management of the projects. The success of this measure has largely exceeded the expectations. · As the example of the Tech centres in the Basque Country shows, the integration of RTDI measures co-financed by Objective 2 money into the wider Science and Technology Plan elaborated by the Basque Government fosters regional development (a positive impact on GNP and high-tech employment in the region). The eight Tech centres act in close co-operation with their industrial environment in order to promote use and development of technology in the region. The integration of the private sector, grouped in industrial clusters, is one of the key success factors of the measure. · a clear shift towards a demand side approach in technological development be observed in Auvergne. CASIMIR, the regional technology pole, was originally founded by public authorities as an interface between research and industry. At present, its activities aim at the stimulation of demand from enterprises with a strong focus on innovation. Enterprises are supported in the identification and formulation of their needs, the development of concrete projects and the establishment of partnerships. · The Austrian example illustrates how innovation stimulation can be initiated at regional level. The research and training centre for work and technology FAZAT has used Objective 2 support to expand its activitie s in research, training, regional development and telematics. Additionally, it acts as business incubator. Besides the development of technology transfer projects between actors in the different fields, the expansion made it possible to raise the impact of the centre from a local to a regional level and to become a recognised partner at national level. · The high importance attributed to the development of a communication infrastructure as a precondition for the use by SMEs was the origin of the TeleRegion Ltd. funded by ERDF Objective 2 money in East London & Lee Valley. A broad partnership consisting of local authorities, research and training centres built up a high bandwith broadband network in order to provide the basic technological infrastructure for further use for regional enterprises, especially SMEs. With tailor-made offers these companies are attracted to make use of the enhanced technological capacities of the region.

The second group of examples (B) illustrates how business innovation can be supported by Structural Funds measures. The cases presented under section B clearly reveal the advantage of interactive approaches in order to support innovation.

· The good practice example identified in North Jutland in Denmark is a cluster approach in the field of mobile communication. Private firms, a university and a science park co-operate in this sectoral RTDI initiative called NorCOM. Parallel basic research, knowledge transfer and user-oriented R&D are the success factors of NorCOM. This shortens considerably the distance from basic

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research to marketable products. The cluster approach makes the participating SMEs more visible, which is especially important in areas with a dominance of large enterprises; · in the second case in, the well developed technology infrastructure in North Rhine Westphalia (in this case a technology centre for young businesses) was linked with a company grant scheme and a range of innovation stimulation measures. It suggests that the intelligent combination of infrastructure and demand stimulation actions can lead to improved results in the field of business innovation; · Financing issues are often not considered at the beginning of innovation processes. Without access to financial resources, however, innovative ideas burn out before being implemented. That is the reason why financing schemes are so decisive in the framework of innovation stimulation. The revolving loan fund developed in Piemonte illustrates, that even in the absence of a commercial banking culture hundreds of innovation projects could be pushed to get started; · The Twente (NL) example stresses the networking issue of innovation stimulation. The organisation and management of co-operation networks are a key factor for success in promoting innovation in regional SMEs. Detailed monitoring and the fostering of a learning approach led to small firm networks developing into complex and comprehensive networks in which also research institutes and other intermediaries are participating.

With regard to good practice in the field of human resources and training initiatives for RTDI (C) the identified examples prove that it is in particular the partnership either of training institutions or in the framework of the measures/programmes which lead to successful training measures. The Technifutur case in Liège for example was created by a broad range of partners like trade unions, employers associations, university and private companies. This co-operative approach could create a critical mass of resources and competencies necessary to create and run a high level training centre. Much more concerned with the transfer of know how from universities to industry are the examples from France (Cortechs) and the UK (teaching company schemes). Both programmes aim to transfer know how via the "brains" of university graduates. Although following completely different approaches, both cases have one point in common: the focus on the human resources as the predominant catalyst for technology transfer and innovation.

With regard to the future design of Objective 2 in the new programming period of the Structural Funds, some good examples with relation to RTDI in an urban or rural context could be identified in section (D). Intelligent solutions of the regeneration of urban problem zones foster the regional development and increase the capacities of the actors involved, with positive influences on their regional competitiveness. A strong partnership is needed to implement these measures. In rural areas, a sectorial approach supports the companies in the region, successful activities also allow for further activities outside the region:

· The regeneration of areas formerly used for heavy industrial in combination with the creation of a new technology centre specialised on environmental technology is the heart of the Environment Park established in Torino. The acute need for industrial regeneration with environmentally friendly concepts has generated a measure which at the same time fosters research and development activities in the environmental sector and restructures a part of the city into an attractive site. The companies located in the incubation centre participated actively in the regeneration of the area. A key success factor of this measure is the strong local and regional partnership. · The example from Nord-Pas de Calais shows how technological support for the fishing sector in a coastal area can be successfully organised. A fish products technology centre, CEVPM draws on public and private resources and supports companies of the fishing sector in research, process and product development issues. The approach is oriented towards the clients' needs and in particular production of trial production runs and provides a wide range of quality control and technical

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services. Important links have been established with the fishing industry and the training system and the centre is now developing an incubator for new technology companies in the sector.

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Summary

A number of lessons can be drawn from these cases:

· the need for intra-regional co-operation of the relevant R&D actors; a cluster approach seems to be of advantage; · an intelligent combination of RTDI infrastructure and direct aids for firms can lead to interesting synergy effects – the creation of one-stop shops or networks of regional innovation counsellors can lead to appreciable increases in effectiveness of support to firms; · in times of tight public budgets, financial engineering techniques (venture capital, business angels, revolving loan schemes) are of particular attraction for policy makers. Moreover, even in the absence of a commercial banking culture favourable to "innovative" projects, mixed private-public financing schemes can achieve significant leverage in terms of funding raised. At the same time, through the provision of financial resources in the frame of a loan scheme, the integration of new technologies in firms can be induced.

With regard to regional impact, the identified good practice examples lead to the following findings:

· The impact of a research centre on the host region is the greater, the stronger the ties of the centre with industry and in the RTDI tissue. As simple and as self-evident as this phrase sounds, such practices are difficult to define and adopt. One approach seems to be to integrate research and vocational training in one single centre which both increases the quality of the technology and research services and the training provision; and appears to be effective in promoting structural change. The role of business in defining the orientations and missions of such centres can be crucial in ensuring the pertinence of the services offered; · environmental protection and regional economic development are no longer considered as opposites but rather as two sides of the same coin. In particular in urban areas the mobilisation of environmental technologies needs to be assured. As the example of Environment Park Turin suggests supporting the application of "green" technologies can stimulate small firm growth and the emergence of a new business cluster and can foster urban regeneration; · direct firm aids in the field of RTDI - if properly designed and managed - strengthen the innovation capacity of firms and stimulate new product or process developments leading to new employment possibilities. However, in many regions, there is a multiplication of schemes which favour larger or already innovative firms. Focusing more on the competitiveness of existing firms (technology followers) could ensure that a greater number of jobs are safeguarded at all levels of skills in the work-force. In certain regions, small and flexible grant schemes aimed at inciting firms to test collaboration possibilities with other firms or technology centres seem to offer the potential for increasing the number of innovative firms. Twinning R&D rela ted grants with more general business development support, notably pre-R&D investment feasibility and marketing studies also seems an approach to be promoted.

The different cases presented here reveal, that there is no single approach to define and to programme RTDI measures within Objective 2 SPD. It should be underlined in closing, that the identification and presentation of good practices at programme or measure level cannot substitute for full and detailed impact and benchmarking of results to assess effectiveness. The lack of such data at regional level, as described in section 5.3, made it impossible for this multi-country thematic evaluation to offer an estimation of net impacts or Euro per job, product developed, etc. as would have been preferable .

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6.3 RTDI AND HUMAN RESOURCES IN OBJECTIVE 2 ZONES

Research questions:

Two key issues were set out by the terms of reference with respect to the theme of human resources for RTDI:

· to what extent have the Structural Funds contributed to overcome skills shortages and improve qualifications in the field of RTDI ? · the impact on human resources and training for RTDI ?

A third issue and related issue overlaps with the theme of the next section namely synergies between the ERDF and ESF RTDI related actions. It is dealt with at the end of this section

It proved extremely difficult for the evaluation team to provide responses to these inter-linked questions due in large part to the almost complete absence of evaluations or assessments of ESF measures in the Objective 2 zones; allied to the complexity of the issue itself and the limited resources available to the evaluation team. The analysis was thus restricted to the 15 case study zones. In certain regions, the evaluation team was unable to draw any signific ant conclusions either due to lack of ESF RTDI measures or their late introduction: this is the case in Nord-Rhein Westphalia where ESF measures in favour of RTDI did not start before 1997; although under the RESIDER Community initiative a scheme was developed in support of training in business re-organisation which contained certain aspects related to RTDI and based on the networking of SMEs.

In term of the types of actions introduced, in a number of countries the ESF schemes are relatively standard training in-company courses in new technologies and innovation. The scope of these actions tends to be enormous with for instance 27000 trainees over the programme period in Piemonte and over 20000 in Pais Vasco (including 1663 grants for researchers; and 18329 trainees in firms or research centres. This would seem to inhibit evaluation of effectiveness or impact with for instance the Region of Piemonte only now considering the first evaluation of the impact on the trainees careers although the first such scheme was launched in 1989. Moreover, the lack of clear instructions from the Commission or Member States on the definition of innovation often means that it often becomes a catch all term and training, as in Italy, concerns mainly ISO9000 quality control, etc..

TABLE 6.4: Types of RTDI actions financed through ESF – Auvergne and Nord-Pas de Calais

Type of action Auvergne NPDC Research grants for engineers in large public research institutions x x Hosting of researchers in research and technology transfer centres Research grants of “excellence” level x x Technological thesis for researchers and PhD Research and technological innovation grants, carried out in enterprises or x laboratories in the EU Hiring and training of technicians in enterprises CORTECHS x Training of technology development advisers x Organisation of technological and strategic watch groups for enterprises, x Training of enterprises managers in the field of innovation management Technological training of enterprises personnel in resource centres x Source: Country Report France

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The table above summarises the ways in which the ESF intervenes in the two French case study regions which illustrates how approaches can differ even between regions in the same country with Auvergne focusing mostly on the development of human resources in the research sector while in Nord-Pas de Calais there a greater focus on training and animation actions towards the private sector.

BOX 17: CORTECHS – introduction of technicians in SMEs

One interesting scheme worth reporting upon in the field of human resources upgrading for RTDI, is the French national scheme CORTECHS which is co-financed by the Structural Funds in most Objective 2 programmes. CORTECHS contracts associate an SME, a young technician (max 30 years, level of education bac+3) and a competence centre around an innovative project. The scheme, under the responsibility of the ANVAR (national agency for research valorisation), provides for a subsidy (70 MFF) to a company that hires a researcher for a period of one year, in order to conduct a technological development project in the enterprise, with the support of a competence centre that ensures the scientific and technical support to the project. The competence centre may be a technical lyceum, an engineering school, a research laboratory or a technology transfer centre. It receives a subsidy of 14 MFF. The technician receives a training during the period of the grant.

This procedure is promising since it targets two key aspects of the innovation process in SMEs, where main barriers are often found to lie in innovation enquiries: the availability of adequate resources internally and the capacity of engage with external relations to improve the knowledge level of the firm.

An evaluation of the CORTECHS in Auvergne has been conducted and its findings include that: the rate of satisfaction of enterprises with the scheme is high; and that many technicians engaged under the CORTECHS procedure stay in the enterprise at the end of the period. This last point has been quantified in Nord-Pas de Calais, where the rate of technicians staying in enterprises after the subsidy period is as high as 75%. It seems thus that the CORTECHS scheme might have a lasting and structuring effect on the human potential of the firm, but the scheme does not focus on innovation, rather on technological capacities of the firm. At national level, an evaluation of CORTECHS has been conducted with a main question around the job creation impact of the scheme. The results showed that one CORTECHS supported is responsible for the creation of 4 direct or indirect jobs.

The types of issues arising concerning pertinence of the RTDI human resource related measures can be illustrated by the case of the two UK case study regions:

· the universities and colleges played a central and important role in programme partnerships, design and implementation. The Y&H programme involved 9 universities and 8 colleges, the EL&LV 3 universities and 7 colleges, but competencies and involvement in RTDI measures varied considerably between individual institutions; · ERDF was used to equip centres to provide new and additional training facilities, and was often used to up-grade provision to incorporate the latest technologies. Several of these initiatives were supply led, and not based on a full market analysis; · Innovative delivery in training was being explored, such as open learning provision and use of telematics, but examples were often small and experimental; · Measures were addressing some specific applications of technology, for example with support for film, media, and telematics measures, but there was little evidence in either case study area of a new advanced economy being coherently encouraged; · Graduate placements in to businesses were being pursued, often modelled on the national TCS scheme, but these did not cover all of the areas and individual programmes remained small; · most of the training provided generic skills, more likely to enhance general employability of the beneficiary rather than to stimulate new RTDI based economic growth; · support was often for courses and facilities which were previously under-resourced (the colleges) or requiring rapid expansion (the universities);

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· provision was largely supply led, with business measures forming only half of the projects and sector specific training a third. Training in to businesses or for SMEs was more prevalent in Y&H; · provision was spatially differentiated, with few programmes operating region wide. Whilst this has strengths in terms of stimulating diversity and local flexibility, it was also a weakness in that provision was patchy and there was little promotion or exchange of best practice.

BOX 18: New master's programme of the University of Jyväskylä

The University of Jyväskylä created a working group, which included representatives from the Regional Council, with the aim to establish synergies between teaching at the university and specific prioritised fields of industrial activity as a part of the Centre of Excellence-programme. This was realised by establishing a multidisciplinary master’s programme in the fields of environmental technology, pulp & paper, chemistry, and IT, blended with business management. The needs of industry were taken closely into account, and companies were encouraged to employ students in R&D and other projects temporarily or full-time.

The programme was supported through funding from Objective 2, the Ministry of Education, the private sector and regional organisations. Altogether some 40 % of the total costs of ECU 16 million was funded out of the ESF, making the realisation of this programme highly dependent of EU funding. Evidently this programme received strong support from the ministerial level. The working group could also harness the head start that they had due to favourable timing with respect to Finland's full membership to the EU in 1995. The master's programme covers the period 1.8. 1997-31.12. 1999 and has so far enrolled some 600 students. Source: Country Report - Finland

Within the framework of the company impact survey carried out in several of the case study regions, some indication of the types of effects that can occur from RTDI human resource measures can be given. In Austria, the impact survey revealed that factors related to R&D staff (such as introduction of new skilled labour or increasing the skill level of existing employees) are not important motivating factors for project applications. Nevertheless, 46% of the firms identified an improvement in internal know-how for innovation management as a lasting effect of the RTDI project. This can be regarded, at least partly, as an increase in the skill level of the R&D staff; while 23% of the respondents have employed additional specialised R&D staff with an unlimited contract. In addition, an estimated 280 jobs in the field of RTDI have been supported temporarily by Objective 2. This would indicate that Objective 2 support made a considerable contribution to create or to safeguard highly-qualified jobs in the Objective 2 region although the possibility of windfall gains cannot be ignored.

ERDF / ESF synergies

In the UK, the main elements of ESF grants were allocated within national programmes designed an administered by national government departments. As a result, the allocation and implementation of these funds at a regional level was generally undertaken separately from the ERDF measures, although attempts were made to achieve greater integration in the 1997-99 period. Evidence from the survey and interviews with project leaders suggests that synergies between ERDF and ESF had occurred at project level. The most common approach was for the sponsoring organisation (say a university or college) to successfully bid for funds from both the ERDF and ESF programmes, as they were encouraged to do so within Yorkshire & Humberside by the GOR. Therefore, a major sponsor such as Sheffield Hallam University would secure funds for projects which shared the same RTDI objectives, for example use of ERDF to provide equipment for a technology centre and ESF to provide SME and student training in a sector, such as TV and film production. Alternatively, integration of ESF and ERDF actions occurred at the point of delivering support to an individual client SME. Many projects used client referrals or acted as conduits to other funding, thus the business was encouraged to take advantage of, say, an ERDF grant assisted service but then to also utilise ESF funded training, for

Thematic Evaluation RTDI in Objective 2 – Synthesis Report 96 ADE – ENTERPRISE PLC - ZENIT example in the introduction of some new technology. This more ‘holistic’ view of support or funding was, in the view of project leaders, likely to lead to clear additional synergy impacts through improved performance within the SME and a more sustainable and appropriate supply of RTDI related services.

In Germany, the situation in terms of synergies appears to be rather zone dependent - in NRW, although there is a formal «mixing» of funds between the two main ministries concerned (the Ministry of Economic Affairs, Technology and Transport responsible for ERDF interventions receives a certain share of the ESF budget from the Ministry of Labour and vice versa) - the subsequent programmed interventions are carried out independently and without interactions with the Objective 2 programme management. In Bremen, the situation is more positive with the development since 1992 of a "coherence fund" in the Objective 2 programme combining certain actions of both funds. A certain number of the projects financed have been RTDI related;

This is a common theme in most reports, namely that ERDF/ESF synergies with respect to RTDI are rarely if ever formulated at the strategic level, in the SPDs, or even at measure level. In most regions, the creation of effective complementarities between the funds is dependent on the knowledge and skills of the various project managers in combining ERDF funds for equipment with ESF funds for training.

Conclusion

The relation between ESF measures and RTDI is generally not made explicit in the SPD and project outputs are formulated in terms of numbers of participants and total hours rather than indicators related to theme of the training. It is clear that projects are not developed according to a thematic or sectoral policy or strategy, but emerge from a certain need of companies to upgrade staff or fulfil vacancies. The main aim is to improve or maintain employment and not so much to support innovation by means of training. From the point of view of RTDI objectives, it would be advisable to increase the emphasis on training (and hence ESF actions) in regional RTDI strategies (RIS, etc.) and to guide project development from this perspective.

6.4 SYNERGIES

A key thematic issue set out by the Terms of Reference of the Evaluation was that "taking into account the growing importance of RTD investment, including human resources, has there been synergy and co-operation or rather duplication with other relevant Community policies, in particular the RTD Framework Programme". Given the complexity and qualitative nature of the issue, the approach adopted was to analyse synergies at the level of the case study regions by referring to two specific questions:

· internal synergies (i.e. limited to the actions within the programme) and external synergies with other Community policies in particular the Community Initiatives and national programmes; · synergies with the RTD Framework Programme.

Synergy effects of Objective 2 programmes

As with issue of ERDF/ESF synergies, the prior identification of synergies either internal between priorities or external with the Community Initiatives is rather rare at programme level. For example, in the Spanish case, the interviews highlighted a desire of the different project leaders for a more transparent and structured identification of "who does what" between regional, national and EU levels and how support under one level can be used to "step up" (for instance towards participation in the

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RTD Framework Programme). Once again, it was largely left to the project promoters to identify additional and complementary resources to the support provided under Objective 2.

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A good example of achieving complementarity in terms of the stage of the project cycle is provided by the creation of centre of excellence in Central Finland, where funds for feasibility and preliminary studies came from a national Centre of Excellence Programme with the ERDF intervening to support the development stage (see box below).

BOX 19: Developing a research environment on pulpwood and Paper in Finland

As part of preparatory work undertaken for the establishment of the Jyväskylä Centre of Excellence, the Regional Council, VTT Energy, the science park, experts from industry and other regional authorities initiated an preliminary study for the construction of a research environment catering to the needs of the regional pulp & paper industry. An explicit aim was to harness synergies between the Centre of Excellence programme and the Objective 2 RTDI measures. VTT Energy undertook the role of the project leader.

Collaboration resulted in a concrete project, which was integrated with the activities of the Centre of Excellence during the period 1995-96. Later it was extended to also cover the period 1997-99. In accordance with Finnish practice, the project proposal was submitted to the Regional Monitoring Committee. When the committee had defined the project proposal to be compatible with the Objective 2 measures, the district office of Tekes endorsed the proposal and earmarked ERDF funds for the project. The total investments constituted some ECU 2,5 million of which almost ECU 1 million was funded from the ERDF and the rest came from regional organisations and industry. In this example the EU funding was regarded as the decisive factor which committed the regional organisations and industry, and thus contributed directly to the realisation of the project.

The infrastructure project resulted in the development of equipment which is suitable for research related to wood production and handling issues, and for studying various fibre suspension phenomena which have broader relevance for the pulp and paper industry’s energy technology. EU funding was harnessed for the required investment in personnel and hardware, while national funds were used for preparatory work. The research equipment is used in contract research involving industry, as well as in-house research at VTT Energy. Hence, the project has contributed in concrete terms to the realisation of complementarities and synergies between the Centre of Excellence-programme and Objective 2 RTDI measures.

In the Basque Country, an example is the Technology Park of Zamudio, the construction and equipment of which has been supported under Objective 2, while project related activities have been financed through the participation of the park in both the SME Community initiative and the ATYCA (Technology, Safety, and Industrial Quality Support) initiative of the Ministry of Industry.

The measures financed within SME Community Initiative and ATYCA programme have been directed to promoting concrete collaboration among firms, the Technology centres in their respective areas, and to promote the creation of common services of support to SMEs. The results have been assessed positively in terms of promoting collaboration between firms and technology centres and in particular allowed Zamudio Technology Park, to enlarge its operational environment, overcoming the local dimension.

In the UK in contrast, the least common synergies appeared to be between the Objective 2 RTDI measures and national programmes. Little mention was made of other UK funding, except again some recent opportunistic successes in bidding for national funding of ‘Centres of Excellence’ by the universities and colleges and some funding from the UK Information Society Initiative. Reference in East London & the Lee Valley was often made to national selective assistance (SRB) funding but otherwise there seemed little synergy at programme or project level. This was particularly surprising given the stated intent within SPDs to see national schemes such as SMART, SPUR and TCS expand levels of provision in the regions through ERDF funding. The apparent lack of this activity may be the result of issues concerning eligibility rules for ‘matched funding’, the use of funds within national rather than regional organisations, and a failure to achieve targets for these schemes within the regions.

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BOX 20: Synergies of Objective 2 RTDI Measures: TELERISE

Telerise is a telematics project based at the University of Sheffield and offers SMEs:

· a drop-in centre to sample the new technologies and seek impartial advice; · on-site practical demonstrations of new technology relevant to the SME; · a cash contribution to help the SME buy hardware and software; · training and easy to understand information; · advice on the best way to get connected · on-going, jargon-free technical support.

It focuses on providing an independent and impartial service to businesses in the health technology, environmental industries and print-related sectors. It is an information broker which helps SMEs to get information, to get information to customers in new markets and independent advice on appropriate technology.

Telerise is about the exploitation of on-line technology for business solutions, but a main aim of its first phases has also been to transfer technology and knowledge from the research base to business for competitive advantage, This knowledge brokerage role has led to and involved collaborative working and the involvement of other partners and the private sector in a number of other RTDI projects:-

REGIS - funded by national research council (EPSRC) and DTI LINK Initiative on High Performance Interfaces and Protocols involving Fretwell Downing Ltd, cable companies, Nexor Ltd and University of Sheffield. REGIS investigates the technical problems inherent in providing regional business communities with low cost high speed access to local and international information services

GAIA - funded by EU ACTS 2 Programme with Fretwell Downing Ltd, University of Sheffield and 10 other European partners. This programme aims to develop a sector-and-supplier-independent architecture capable of supporting multilateral information trading. This will facilitate discovery of information, goods or services, location of suppliers, negotiation of service levels of quality, delivery and price, digital delivery, payment and royalty management.

PVC - also funded by the national ESPRC/DTI LINK Initiative on High Performance Interfaces and Protocols, and aims to develop and trial an ATM (Asynchronous Transfer Mode) testbed for a novel encoding scheme, in software only, for use in the delivery of digital video services to homes and businesses in real time, such as high quality video-conferencing.

This SME-oriented service within a University has been able to develop synergies through integrating activities vertically (between levels of funding sources) and horizontally (between partners), mainly as a result of developing a clear client base and sector focussed approach within a commercial culture. The technologies arise from specific needs and market opportunities. Source: UK Country Report

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BOX 21: Using Innovation As a promotional hook for inward investors

ITP (Investments in Turin and Piemonte) is an agency created by the main public institutions and associations of private companies to attract foreign investors to Piemonte. Support provided under the 97-99 SPD (Measure 5.4 “Territorial Marketing” project approved in April 998) with the objective to attract and assist foreign investors to the Objective 2 areas and to provide them with a series of incentives in terms of investment services. Main activities include: press campaigns in Italian and foreign newspapers and magazines; internal marketing dedicated to the foreign investors already present in Piemonte and in Italy; the establishment of a trade marketing network (associating four major consultancy firms) to scout for potential investors from the US, certain EU countries and Japan through their international networks.

The fourth part of the territorial marketing project is dedicated to the promotion of the four Technology Parks whose development has been financed under the Objective 2 Programme since 1989. This last activity is carried out in collaboration with Tecnorete (a network including the four technology parks and the ACIEP association for the co-ordination of economic and manufacturing installations). Since January 1998, 14 companies have been assisted to locate in the region with most recently an Austrian company in software development creating 25-30 posts in the Objective 2 zone near the Bioindustry Park (but not in the actual park since the research phase of the software was complete). In the Environment Park in Turin, ITP has assisted in the location of a firm leading to 10-15 new jobs and an investment of 1000 MLIT. ITP is currently in discussions with a potential investor in Tecnoparco (Verbania) to carry out R&D activities with an investment of around 300 MLIT and creation of ten employees. In order to promote foreign investment, ITP has also financed missions to trade fairs for the Bioindustry and Environment Parks.

The support of ITP to the Technology Parks allows both professional assistance in promotional activities and the development of a one-stop shop for high-tech inward investors. Activities of ITP in terms of high-tech inward investors extend beyond the Technology Park, for instance, it has already assisted with the location of a Motorola R&D centre in the Polytechnic of Turin with a possibility of future investment by the same company in software development. ITP has also co-ordinated the development of a Territorial Pact for the Canavese area (part of the Objective 2 zone which provides a framework for an integrated funding package in favour of two key priorities: Communications and Innovation.

Source: Italian Country Report

Synergies with the EU RTD programmes

The recent Second European Report on Science and Technology Indicators poses the question as to whether the European Union’s RTD Framework Programme fosters cohesion. It finds that “a small number of really high tech regions dominate Europe’s technological landscape…in general, 35 of the 147 regions included in the analysis receive more (i.e. regional share of annual budget of the Framework Programme) than their respective shares of EU GDP”.

Another aspect of interest for cohesion policy is the extent to which the Framework Programme is an effective incentive to changing institutional patterns of investment and activity in the RTDI field. In other words, principally, what influence does the Framework Programme have on business, particularly SMEs, participation rates in RTDI projects. Figures presented in the above mentioned Report indicate that between the Third and Fourth Framework Programme the participation rates of companies (calculated as the budget received with respect to the general budget) fell in non-objective 1 regions (i.e. including Objective 2 regions) from 16% to 15% for SMEs and from 37% to 28% for large firms (the educational sector being the main beneficiary of this decline).

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The Terms of Reference of the Evaluation set out an explicit request for a review of complementarity and synergy between Structural Fund interventions and relevant sectors of the Framework Programme, in particular information and communication technologies; industrial technologies, life sciences, including biotechnology and agriculture. Unfortunately, despite a written request by the consortium to DGXII of the European Commission no data (despite its obvious availability given the results presented in cartographic form in the Second European Report on Science and Technology Indicators) has been provided on either the budgets received by Objective 2 regions or the participation rates. As such, the evaluation team are obliged to rely on secondary and necessarily incomplete sources. In this Synthesis report a number of issues are raised by referring to available data for a number of regions.

The evaluation teams found little evidence of significant synergies between the Objective 2 programmes and the EU's RTD Framework Programme. In some respects, this can be attributed to the marginal nature of the funding provided through the RTD Framework Programme in the countries concerned by Objective 2. A good example is Germany where available figures suggest that the funding provided by RTD Framework Programme to R&D organisations in the German Objective 2 areas is relatively derisory compared to national efforts (both public and private) in this field. The major share of RTDI budget in Germany is accounted for by industry. The federal government is the second largest financier and the Länder are coming third. In 1990 public civil R&D appropriations and private R&D expenditures reached some 34 billion ECU, with a private share of some 68%. In 1995 the total R&D budget reached 43 bn ECU, with a private share of 65%12.

The average amount of public appropriations on civilian R&D between 1989 and 1995 was about 13 billion ECU which represents a per capita amount of some 162 ECU. With regard to Objective 2 RTDI public contributions, the German country report of the current evaluation project has shown, that between 1989 and 1999 849 MECU were either committed or planned in the field of RTDI, thus giving a calculated average of 77 MECU p.a. representing about 11 ECU per capita of the population in the eligible zones. In other words, if the relatively heroic assumption is made that national expenditure are equally distributed, the Objective 2 programmes (total public money) would add in the regions suffering from industrial decline about 7% to the average amount available at national level.

Measured on this scale, the contributions coming from the European R&D framework programmes are even more marginal than those of the Objective 2 Programmes. According to the statistics of the Federal Government, the RTD Framework Programme's contribution to the total RTDI budget in Germany was about 0.4 % between 1989 and 1991. Relative to expenditure of the Federal Government alone, RTD Framework Programme resources received by German actors reached an approximate share of 1.8%.13 A considerable share of this amount was absorbed by universities and large companies. Against this background, it is not surprising that neither the programme managers of the Objective 2 programmes nor the RTDI policy makers at Länder level are greatly concerned with the RTD Framework Programme when framing the strategic objectives of regional development programmes.

Another means of considering the potential scope of synergies would have been to identify the number and type of participants (universities, SMEs, etc.) in specific programme of the RTD Framework Programme and to study their relevance with respect to the objectives and measures of the Objective 2 policy.

12 Figures taken from EUROSTAT (1997), Research and development, annual statistics; please see also Country report Germany. 13 Figures cited from KRULL, W. and MEYER-KRAHMER, F. (1997), Science, technology and innovation in Germany - changes and challenges in the 1990s, in KRULL, W. and MEYER-KRAHMER, F. Ed. (1997a), Science and technology in Germany, Cartermill publishing 1997.

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In the case study region NRW the Länder government co-finances a Euro Info Centre and an Innovation Relay Centre at Länder level. Both centres are hosted by the same institution. One task of the centres is to support the participation of SMEs in the specific programmes of the framework programme. However, a particular focus of the centres on the Objective 2 area is not observable.

With regard to two important specific programmes, BRITE/EURAM and ESPRIT, the CORDIS database contains 227 projects with partners from NRW (15 leaders and 212 partners). Some 50% of the NRW participants are from industry. About 10% are research organisations. The country evaluators have regionally broken down the participants on the basis of the addresses (city name). Admittedly, this is a rather broad categorisation, but given the limitations for a regional assessment of CORDIS, this was at least one manageable approach. As a result, the evaluation team found, that in total some 37 project participants come from a city in the NRW Objective 2 area, thus representing about 16% of all NRW participants, whereas some 20% of all NRW citizens live in an Objective 2 region. The proportion of participants from the Objective 2 area in NRW in the two programmes BRITE/EURAM and ESPRIT is thus a good 20% below the share of the Länder's population.

To summarise, not only does the RTD framework programme plays a marginal role in the German R&D scene as far as financial resources are concerned. In addition comes the NRW case study which revealed, that participants of the specific programmes of the R&D framework programme coming from the Objective 2 area are under-represented by 20% as compared to inhabitant proportion. Should there be any regional effect of the R&D framework programme - this would appear to increase rather than close the technology gap between the regions in Germany.

These types of broad findings are largely confirmed by a study carried out, also using the CORDIS database, on the participation of Italian organisations to the third and fourth Framework Programmes.14. In this study, participation is assessed in terms of number of lead contractors and partners from Italy, including by region, in Framework Programme projects. The regional distribution of Italian principal contractors is heavily biased towards only 6 regions of the north-centre of Italy - all of which are Objective 2 regions : Emilia Romagna, Lazio, Liguria, Lombardia, Piemonte and Toscana with some 1509 participants out of 1929 (or 78% of the total). Indeed, 48.9% of all principal contractors come from only two regions: Lazio and Lombardia. Perhaps unsurprisingly, the main factors influencing this distribution seem to be the technological intensity, the level of public research and the industrial development of the region.

In the specific case the BRITE-EURAM (industrial/materials technologies), the study found that the role of the Italian Universities in this programmes is rather modest (higher education institutes tend to enter these projects often as sub-contractors) with the role of non-University organisations increasing from the second to the third RTD Framework Programme. Italian participation in BRITE-EURAM is monopolised by a small number of institutions with some 23% of the institutions being responsible for over half the participation in projects – a trend reinforced between BRITE-EURAM I and II. These results tend to indicate the existence of cumulative phenomena in the participation in European R&D programmes which again is not particularly favourable to cohesion objectives given the existing disparities in participation rates between the core metropolitan poles of research (London, Paris, Milan, etc.) and the eligible zones for ERDF interventions.

14 Source: Aldo Geuna e Myriam Mariani; La Partecipazione italiana ai Programmi Quadro delle Commissione delle Comunità Europee. Paper presented at the International Convention on “Ripensare l’innovazione tecnologica: nuovi paradigmi, nuove politiche. Sponsored by the Fondazione Giovanni Agnelli. Torino, 8 October 1998

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Part IV: Conclusions

7. ENHANCING THE REGIONAL DEVELOPMENT IMPACT OF RTDI ACTIONS UNDER OBJECTIVE 2 - KEY MESSAGES FOR 2000+

The Terms of Reference set out two main policy questions15 to which it expected the evaluation team to provide elements of a response: should there be more RTDI activities funded under the Structural Funds; and how should RTDI actions be focused ? These two questions are essentially framed with a view to assisting in the allocation of future budgetary resources available to Objective 2 programmes. The contention of the evaluation team is that in the end a precise answer to both questions cannot be given without taking into account the quality of the management processes of the programmes and in particular, the extent to which RTDI actions are driven by a strategic vision of how they respond to business needs to adapt to technological and organisational trends.

The over-arching conclusions that can be drawn from this thematic evaluation are that: many of the accepted trends in theory and policy of RTDI at regional level identified in section 1 are still not being applied in practice; while, the tools and procedures for designing, implementing and evaluating RTDI actions remain largely inadequate and out-dated in the majority of regions.

This final section seeks to draw together the main findings of the thematic evaluation16 so as to focus on a selected number of key messages for the next programming period (2000-2006). This approach is intended to allow policy makers and practitioners, at all levels of the subsidiarity chain, to identify the appropriate action they can take:

· to reinforce the positive effects of the previous funding rounds in terms of the definition of the overall and operational objectives of RTDI priorities, partnership arrangements, and focus and content of measures, etc.; or · to correct and improve management procedures of Objective 2 programmes in particular in terms of stimulating project development, selection procedures and criteria and monitoring and evaluation techniques..

In the rest of this section five main messages are spelt out by recalling in a synthetic manner the main findings relevant to the message from the evaluation; and by proposing a set of targeted recommendations for action to be taken.

BOX 22: Five Main Messages for Policy Makers

· RTDI actions financed under Objective 2 must aim to increase the systematic practice of business innovation. · Reinforced partnerships and a strategic RTDI plan should be a pre -condition for increased funding · Increased integration between RTDI and SME priorities should be favoured in future SPDs

15 The issue of whether more should be done to achieve better synergy between the Structural Funds and the RTD Framework programme was also highlighted. Due account was taken of the Commission Communication on “RTD, Innovation and Cohesion” when framing these recommendations. 16 In addition, section 5 of each of the 11 Country Reports provides a set of specific proposals and recommendations in line with the specific national institutional and economic context.

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· Priority should be given to measures with business as the direct beneficiary · At all stages in the programming cycle, capacity to chart the outputs and effects of RTDI actions must be strengthened

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RTDI actions financed under Objective 2 must aim to increase the systematic practice of business innovation.

Key findings:

It may appear obvious to state that the Structural Funds should aim to increase the competitive position of business in the zones concerned through enhancing the rate of product, process and organisational innovation. If the global objective of RTDI measures within SPDs is effectively to influence the levels of business competitiveness through stimulating rates of innovation, then the definition of these measures needs to be based on a detailed and in-depth understanding of the pattern of innovation and the factors facilitating or impinging on the success of RTDI projects in regional firms. However, almost across the board, the national evaluators reported that the SPDs were poor in terms of both the baseline data and strategic objectives of RTDI actions.

Despite the efforts made both at national and EU level to provide a stronger methodological framework for carrying out SWOTs of regional RTDI capacity few Objective 2 programmes are founded on a clear and well-presented explanation of the factors influencing the innovation activity of regional firms. The issue of the availability of baseline indicators both in terms of RTDI and “knowledge” type socio-economic indicators remains a high priority. While there has been some improvement of data availability at NUTS II level, there is very little harmonised data at the scale of most Objective 2 zones. Data such as business expenditure on research and development or human resources for research and development are the proxies most commonly used for measuring the impact of RTDI policies on regional development. The use of these broad indicators of change in RTDI investments for this purpose is inappropriate, not only because in general this data exists at no lower than NUTS II level, but also because these variables are influenced by a broad range of additional factors and hence say little about how the programme has effectively contributed to medium-term trends.

The Country Reports illustrated the weakness of RTDI strategies particularly in the 1989-93 and 1994-96 programmes. Although over half of these programmes had an RTDI priority very few were based on an explicit and well-though out regional innovation strategy. One explanation for this lack of strategy is the widespread use of national or regional RTDI aid schemes as a main conduit for support under the programmes. There is evidence that the situation was beginning to be addressed in the most recent programmes, often as a result of Regional Technology Plans (RTPs) and Regional Innovation Strategies supported either by Objective 2 funds (the case of the Netherlands) or by Article 10 of the ERDF.

Recommendations :

1. Structural Fund partnerships should give appropriate consideration to allocating financial resources still available under the 1997-99 SPDs to fund studies to establish clear and well- defined baseline indicators and analyse the strengths and weaknesses of the RTDI system. A more ambitious version of this recommendation is to encourage the establishment of “regional innovation observatories”, ideally within regional administrations or agencies, with a view to ensuring a systematic and coherent production and use of indicators and data. In many regions, the SPDs have failed to exploit even the available data and it is important that a full audit of existing studies and reports should be carried out as a first step in such a process of upgrading RTDI indicators.

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Action to be taken by: Regional Authorities.

2. An on-going effort is required to make operational much of the recent methodological work on regional R&D and innovation statistics carried out by EUROSTAT, the OECD and the Commission. This requires action at both national and European level, in a first instance, to ensure that a broader based set of regional level indicators becomes available during the next programming period. Such activities could include: · training and technical assistance to regions on the definition and production of a minimum set of baseline indicators; financial support under the future Article 4 for the development of regional innovation observatories and for the networking of such observatories to favour the transfer of tools and methods between regions should be considered; · The Commission should set out a minimum set of comparable RTDI indicators to be provided by all future SPDs drawing on available studies and the suggestions made in this report. Ideally, a specific study should be commissioned; · Member States should consider the potential and provide where necessary the resources allowing a greater disaggregation of existing statistics on R&D and of innovation support. Action to be taken by: European Commission and Member States

3. There is need to strengthen the quality and neutrality of ex-ante appraisals of RTDI measures. The Commission is likely to launch a thematic prior appraisal of RTDI measures in the next round of programmes. This should not absolve the partnerships in those Objective 2 regions which devote a significant part of resources to RTDI measures or which have a distinct RTDI priority from entrusting to independent experts: · the formulation of an opinion on the suitability and pertinence of the baseline data and analysis for regional RTDI capacity and where necessary complete the set of indicators; · the examination of the quality of the strategic objectives and the coherence between the objectives and the RTDI measures; a particular emphasis should be given to examining the efficiency, effectiveness and results of measures financed during the previous programming periods which are to receive additional funding; · an assessment the extent to which specific measures are based on readily identifiable needs of regional enterprises. Action to be taken by: European Commission, regional authorities.

4. Closer co-ordination is needed between the interventions of the EU’s RTD Framework Programme, national R&D programmes and the Structural Fund. This should include adaptations to the Cordis central database of projects that provides geographical information on funded projects at NUTS II level so as to release a greater level of detail on the projects funded (notably financial contributions under specific programmes and the number and size of firms involved). Without denying the need for minimum confidentiality requirements, this report recommends that DGXII and the Member States increases the level of transparency surrounding the RTD Framework Programme. There must be greater acceptance on the part of those managing and receiving RTD funds that regional authorities require a basic level of access to such data if the full impact on business innovation performance and cohesion is to be judged. In the absence of such information, there is little justification in economic development terms for complementary funding of R&D infrastructure actions (as opposed to business related technology transfer and innovation actions) under the Structural Funds.

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Action to be taken by: European Commission and Member States

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Reinforced partnerships and a strategic RTDI plan should be a pre-condition for increased funding

Key findings:

As noted above, the evaluators were asked explicitly to offer an answer as to whether future Objective 2 programmes should allocate increased resources to RTDI actions. Given the multi-country nature of this evaluation, it is not unexpected that there is no bla ck and white answer to this question.

A considerable effort was made by the evaluation team to provide a precise baseline figure for current funding levels of RTDI. On average 12% of Objective 2 funding in the period 1994-96 was allocated to measures exclusively including RTDI activities, with this overall figure hiding divergences between countries and between regions within countries. This figures is broadly in line with other estimates such as those of DGXII of the Commission. However, the lack of clarity in terms of objectives or content of specific measures often made it difficult if not impossible to sift out RTDI actions from more general business support. As a result, this figure under-estimates the real funding levels for RTDI which can be estimated to be closer to 16% on average across the 11 Member States concerned by Objective 2.

At the same time, the in-depth analysis carried out in a number of case study regions illustrated a significant problem for regions to absorb the current levels of funding for RTDI. The underlying reasons appears to be two-fold:

· the existing relatively high capacity in terms of RTDI infrastructures in Objective 2 regions allied to considerable spend on building and equipment during the 1989-93 and to a lesser extent 1994-96 period, has led to a “drying-up” of projects able to consume funds within the relatively short-programming period; · in a majority of regions, new forms of intervention based on business needs for innovation support have either not emerged due to a neglect of the partnerships to take appropriate action to stimulate project development; or where such projects have been selected, business interest in the actions proposed via intermediaries often fails to meet expectations.

In many respects, these problems reflect a project driven approach evident in the majority of SPDs with very few regions managing to base RTDI actions on coherent and well defined measures integrated in a strategic approach to promoting innovation.

More positively, the regional case studies identified a growing trend towards RTDI partnerships that are bringing together the main players (both users and providers of knowledge and innovation support) in the regions. In the best cases these partnerships are ‘driving’ the agenda. Often the industry side remains under-represented, but despite this criticism these partnerships are helping to focus the RTDI effort in the region. There would appear to be a link between process and effect - the more dynamic partnerships are generating the best and most innovative approaches.

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Recommendations :

1. Regional authorities responsible for future Objective 2 zones should establish an RTDI strategic partnership to assist in the design and oversee the implementation of RTDI actions. There is no set formula for such partnerships which can range from a sub- committee of the Structural Fund Monitoring Committee to an autonomous partnership. However, these partnerships should: · be broad based including representatives of stakeholders from government, business and knowledge providers; · in order to avoid the partnership becoming an “intermediaries cartel”, engage the private sector by all means necessary by trying to find partnerships champions from business willing to drive the process in their respective fields of activity; · recognise that RTDI requires new forms of co-operation and mechanisms for delivery (e.g. clusters) and be pro-active in identifying future links between projects and partners; · submit themselves to external assessment and take advantage of both regional and external expertise wherever appropriate. Action to be taken by: Regional Authorities.

2. Future Objective 2 Programmes will increasingly encompass areas which lack critical mass in terms of RTDI (rural, certain urban zones, etc.) both in terms of institutions central to the innovation process and of the industrial trade and product development patterns.. There is thus a significant risk that a supply led process of capacity enhancement will occur exacerbating a problem of ‘leakage’ already evident when relatively small industrial decline zones are endowed with specialised technology centres. With a view to increasing both efficiency and effectiveness of Structural Fund interventions:

· All future RTDI infrastructure related projects should be required to conduct a full review of existing capacity in the field of intervention proposed within the Member State or in neighbouring regions of other Member States where appropriate. Wherever such capacity exists, alternative solutions such as schemes providing vouchers to firms for the purchase of services or regional “gatekeepers” who would facilitate access of firms to resources outside the zone should be examined within the feasibility study for the project; · Objective 2 RTDI partnerships should be encouraged to ensure that actions proposed under Objective 2 programmes are complementary to national/regional strategies and intervention schemes. In particular: where zones are small or lack significant RTDI resources, attention should be paid to stimulating projects which are founded on the specific problems of the zone but which are coherent with the wider territorial innovation system in which firms operate. Where national innovation support schemes are co- financed by Objective 2 programmes, an emphasis should be given to adapting the scheme to the potential of the firms in the zone rather than simply topping-up resources available. Action to be taken by: Member States and Regional Authorities.

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3. At European level, financial resources available for the future innovative actions, under the new Article 4 of the ERDF (former Article 10), should be allocated in priority to developing strategies and methods for promoting innovation in small and medium firms17. The lead time for project development in the field of RTDI is such that without a mechanism for stimulating and supporting the emergence of new players and forms of support, programmes face considerable difficulty in ensuring Community value added. (i.e. funding activities that are novel or innovative to the region). In particular, experience suggests that business driven projects where their is assurance of a response to a real demand require considerably more preparation time. While the inclusion of projects developed under RIS should not be automatic, a system of regular calls within the Objective 2 programmes allowing the take-up of projects developed within RIS style projects as they come “on stream” could be made mandatory in the future. Alternatively, mainstreaming of successful pilot or demonstration actions could be explicitly foreseen at the stage of the mid-term review

Action to be taken by: European Commission

Increased synergies between RTDI and SME measures should be favoured in future SPDs

Key findings:

The evaluation has underlined that the structure of programmes can encourage or inhibit integration and focus of RTDI measures. In particular, during the ten years since 1989, there has been a gradual but significant shift from an approach where RTDI was included in programmes in a restricted manner as a complement to business support or training measures towards an integrated approach with a distinct RTDI priority often combining ERDF and ESF measures.

By and large, except for small programmes where a single priority is not warranted due to the limited funding available, the ‘RTDI priority structure ’ offers considerable advantages in terms of facilitating increased coherence between supply and demand side measures and by raising the awareness of technology and innovation as a key driver of economic change in the zone. At the same time, there is evidence from a number of the case study regions, that the separation of more general business support measures and RTDI measures in two distinct priorities reinforces an institutional barrier already present in many Member States. Namely, there is a continuing presumption that RTDI equals science and research and hence is the sole competence of regional or national science and technology ministries. This runs counter to the trend visible in terms of objectives of RTDI measures towards actions based on a broader vision of innovation as a business process.

Despite considerable effort to ensure ERDF/ESF synergies, ESF support for innovation and technology remains too often disconnected from both ERDF measures in favour of RTDI and a more focused territorial logic of innovation. That is there remains a significant emphasis on ESF co-financing of broad-brush national schemes in a number of Member States with little practical adaptation to the characteristics of Objective 2 zones. Encouraging exceptions were

17 This recommendation is in line with the European Parliament’s Opinion on the Commission’s Communication on RTDI and Cohesion.

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identified (e.g. Bremen, Liège) to the overall disappointing level of synergies between ERDF and ESF measures which indicate potential solutions for future programmes. In this area, more could be done within RIS type actions to encourage new thinking on how training and human resource development can actively stimulate a more innovative culture.

Recommendations :

1. Regions should consider the pertinence of adopting an "Innovation and Competitiveness" priority in order to ensure greater coherence and synergy between business development and RTDI actions. At the minimum, better links between RTDI measures and SME support measures need to be identified at the programme design stage and wherever possible ‘twinning' of measures should be encouraged, for instance financial assistance for marketing studies in advance of grants to companies for research on product development. Action to be taken by: Regional authorities

2. The potential for adopting complementary ERDF/ESF measures for RTDI should be explored at all levels of the subsidiarity chain. Measures should be paired or twinned within the programmes or special funding arrangements (such as the Bremen example mentioned in this report) should be encouraged. In particular: · the Commission (DGV in co-ordination with DGXII, DGXIII and DGXVI) should provide a clearer definition to regions on the types of ESF actions which can be effectively considered as supporting RTDI in order to avoid such resources being allocated to more generic training and quality standardisation actions. Technical assistance and diffusion of good practice on implementation mechanisms and project types from current Objective 2 programmes and Community Initiatives (notably ADAPT) should be provided with a view to encouraging a diversification in the types of actions being funded; · RIS type exercises should be encouraged to introduce a specific innovation training and human resource needs analysis as a key component of strategy and pilot project development. Action to be taken by: Regional authorities, Member States, European Commission

3. With a view to facilitating both implementation and monitoring and evaluation, bulky or heterogeneous measures should be avoided wherever possible. Where in order to facilitate synergies a series of actions are included in one measure, the Commission should insist on a clear and explicit breakdown (of funding, objectives, outputs and expected results) by sub- measures. In particular, consideration should be given to separating measures for the supply of RTDI services by intermediaries from those that stimulate private sector RTDI activity (grants, investment support) and inter-firm clustering and supply chain projects, etc. when such projects are business led. Action to be taken by: European Commission

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Priority should be given to measures with business as the direct beneficiary

Key findings:

The RTDI related content of Objective 2 programmes has changed significantly between 1989 and 1999. There was an evolution in the balance of RTDI activity from a technology development focus (not necessarily directly linked to industrial needs) in the early programmes to a greater emphasis on technology transfer and innovation in industry in later programmes. A similar trend was observed in terms of the type of intervention with a shift from RTDI infrastructure (science and technology parks, equipping of research orientated laboratories, etc.) which were more pronounced in the early programmes with revenue, human resource and direct support to business innovation actions gaining in importance over the decade.

However, in many regions, programme management and project selection procedures continue to inhibit the full potential of this change in objectives and forms of action :

· where Structural Fund support is provided as a topping-up of existing regional or national grant or loan aid schemes, there is a double problem with respect to Community value added. Firstly, in many cases the final beneficiary is not aware of Community support; and secondly, and more fundamentally, the schemes financed are rarely tailored to respond to specific regional issues in terms of support to business innovation. The result is that the opportunity to use Structural Fund money as a means of testing new or innovative delivery mechanisms or to target new “clients” is effectively lost. In this respect, the long term effects of the Structural Fund interventions on upgrading regional RTDI policy and capacity are reduced; · a second issue is that in many programmes project selection is done in a manner where often only lip-service is paid to the measure objectives when selecting project for funding. This is due in part to a relatively limited level of competition for availa ble resources; and in part because project selection is strongly influenced by the a budgetary absorption logic which favours existing intermediaries.

The issue of content and balance between supply and demand type measures is a question for each region to decide in partnership with the national authorities and the Commission. As has already been underlined, each region has specific needs which require a thorough analysis of business needs in the zone and a well-defined ‘driver’ strategy before the pertinence of a specific mix of measures can be judged. However, the evaluation has identified examples of types of measures which appear to be more effective in stimulating business innovation.

Recommendations :

1. A more concerted effort is required to balance supply and demand measures not only in terms of the programme’s objectives and focus but also during the practical implementation of measures. In particular: · project development must become more driven by companies and less by key intermediaries, even if the latter remain strongly involved in delivery. This requires a more active role of programme secretariats and partnership structures. Experience suggests that in those regions which are not characterised by a tradition of a co-operative SME culture, a highly pro-active approach is required to ensure business participation in project development;

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· timing and procedures for project selection need to be modulated with respect to the type of activity in order to avoid non-disbursed funds being allocated to supply- side measures as a fall-back solution. More specifically, measures aimed at inter- firm co-operation, in-firm innovation management support, etc. require more frequent open call procedures and a staggering of commitments throughout the future seven-year programmes. · special delivery mechanisms to make actions more accessible to SMEs by reducing bureaucracy and processing time should be developed for grant aid schemes: · the focus of selection criteria needs to switch from “eligibility” with respect to programme procedures to compatibility and pertinence with respect to measure objectives. A greater use of external expertise for project selection should be made a requirement. Action to be taken by: Regional authorities

2. As noted above an ‘ideal’ RTDI priority is difficult to define since each region has specific needs in terms of business innovation. However, it should include a balanced mix of capital and revenue measures along the following lines: · direct business funding schemes - a panoply of types of financial support (particularly grant based) exists - however, in many regions evidence suggests that these schemes touch essentially larger SMEs or even large firms already active in research or product development. There is evidence of a need for smaller more flexible pre-RTDI investment subsidies aimed at improving internal innovation management and marketing studies; · in certain Objective 2 zones, mixed public -private loans or equity schemes have proved successful in attracting smaller firms and should be extended despite difficulties at the level of financial control; · where measures are essentially of a capital nature, a pre-condition for funding should be complementary revenue type actions (a good example is the integration of industrial research know-how with vocational training activities) - new technology/innovation structures must have a “self-financing” target (for example, 50% of revenue from private sector) with a cut-off date for public funding if this target is not met; · initial experience with inter-firm co-operation and clustering projects has not always been conclusive with business interest in such projects often failing to meet expectations. However good examples do exist of sectoral and supply-chain clustering initiatives and future programmes should certainly make space for this type of project in order to balance intermediary driven supply side projects.

A golden rule is to avoid the ‘hijacking’ of RTDI priorities by seemingly attractive, high profile large or scientific infrastructure type projects that do not connect to the industrial fabric and cannot demonstrate multiplier effects on economic development within a ten-year time-scale.

There is a clear and pressing need for increased support by the Commission for the diffusion of good practice at Community level, and indeed within Member States. Such exchange of experience should focus as much on process and procedures as on content of project.

Action to be taken by: Regional authorities and European Commission

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At all stages in the programming cycle, capacity to chart the outputs and effects of RTDI actions must be strengthened

Key findings:

The national evaluation teams found low standard of record keeping in nearly all Member States especially regarding outputs and results of funded projects. There were patchy attempts to automate data capture of physical outputs. Financial monitoring was better organised but even here it was often difficult to obtain even simple data on the absorption rates of specific measures. This is a basic programming need and it is difficult to see how the programme secretariats can hit their expenditure targets without this information.

Considerable support under technical assistance is needed at the inception of new programmes to create the monitoring framework.

Programme level evaluation was also patchy despite the efforts of the Commission to spread best practice through the MEANS programme. Very few individual projects seem to carry out systematic and truly independent evaluations although this problem is not exclusive to RTDI measures within Objective 2 programmes. However, there is a significant additional issue related to both project and programme evaluations for RTDI where inappropriate output and result indicators continue to be used, in particular, a focus on ‘number counting’ as opposed to understanding how projects have changed the innovation process in firms and induced "network" effects in the wider regional innovation system. Much more attention is needed to assess the benefits at the level of the final beneficiary, companies, in order to (1) induce policy learning, (2) to constantly improve operational objectives; and (3) to adapt funding to focus on the most effective projects, project leaders and delivery methods.

Recommendations :

1. The frequency and quality of measure or project level (depending on the type of action) monitoring must be improved in order to allow more flexibility in programme implementation by:

· allowing scaling up of successful projects (particularly inter-firm and business co- operation projects); · prevent the continuous funding of non-performing actions (or the corollary which is actions that are unable to prove impact on business performance).

Where necessary, the proportion of overall programme budgets allocated to technical assistance and evaluation should be increased. However, an appropriate application of self- monitoring techniques for project leaders and on-line record and data collection systems should allow a more efficient on-going assessment of project achievements and financial performance.

Action to be taken by: Regional Authorities and Member States

2. The Commission should fund a programme of assistance on evaluation and monitoring of RTDI activities with a view to offering regions involved in Objective 2 a “help-desk” function and in order to facilitate exchange of experience on evaluation procedures. Given

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the remarks on the continuing absence of a generalised evaluation culture, this could be as part of a follow-up to the previous MEANS initiative. Member States also have a significant role to play in this field by adopting more rigorous and thorough evaluation procedures for national programmes. As part of this process, the Commission services should require from Objective 2 programme managers that:

· forecast results of projects should be systematically compared with other similar projects from a previous or parallel programming period; indeed projects, should be encouraged to benchmark themselves against European best practice; · at the mid-term review stage, attention should be paid to ensuring that independent expertise is available to carry out specific thematic review work particularly for those programmes which spend more than, say, 10% of funds on RTDI activities or have a specific RTDI priority.

Action to be taken by: European Commission and Member States

3. A more professional approach to meeting the requirements of the Structural Fund regulations with respect to publicity requirements for ERDF/ESF part-funding of projects is required. Awareness on the part of the final beneficiary of the source of funding is not only a legal obligation but is a basic pre-condition for the effective monitoring and evaluation of these actions since firms are all the more unwilling to disclose information required on project performance. In this respect, project beneficiaries should be obliged to provide programme managers and/or evaluation and monitoring teams with a minimum pre-defined set of indicators.

Action to be taken by: Regional Authorities and Member States

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