Master’s Thesis Master’s Degree Programme in European Studies Human Geography
Understanding of innovations, territorial innovation systems and spatial scaling in regional policies of Northern Ostrobothnia.
Oxana Kozar 2015
Supervisors: Tommi Inkinen Markku Löytönen
UNIVERSITY OF HELSINKI FACULTY OF SCIENCE DEPARTMENT OF GEOSCIENCES AND GEOGRAPHY GEOGRAPHY PL 64 (Gustaf Hällströmin katu 2) 00014 Helsingin yliopisto Index
Introduction ...... 1 Theoretical concepts ...... 4 Innovation ...... 4 Regional dimension in innovation ...... 7 Territorial innovations models ...... 9 Innovation and periphery ...... 17 History of economic and innovation development in Northern Ostrobothnia ...... 19 History of innovative development in Finland ...... 20 History of economic development in Oulu ...... 22 Educational institutions ...... 23 Role of big enterprises in Oulu ...... 25 VTT in Oulu ...... 26 Technology parks and public-private cooperation ...... 27 Center of Expertise Programme and Multipolis network ...... 28 Social and economic development in Northern Ostrobothnia ...... 29 Methods...... 37 The understanding of innovation activities in regional strategic programmes of Northern Ostrobothnia ...... 41 The industries associated with innovative activities ...... 42 The concepts of regional innovation systems, clusters and innovative milieu in regional strategic programmes of Northern Ostrobothnia ...... 44 Spatial scaling of innovation systems ...... 48 Conclusions ...... 52 References ...... 54
Introduction
Innovations and innovative development have become of the most popular concepts in economic development during last few decades. However, the understanding of these concepts may differ. Too narrow definition can lead to the development strategies that don’t utilize all possible resources and mechanisms for economic growth and prosperity, too broad definition erodes the theoretical concepts, makes them less practically applicable and promotes their transition into buzzwords.
An interesting example of using innovations and knowledge as tools for economic development is the rise of the city of Oulu as a technological and economic center. A city which economy in 1960s was based on resources-intensive industries has become one of the main economical, technological and social centers in the country and acquired importance on international level. Oulu phenomenon has become an iconic success story from Finnish knowledge-based development. Nevertheless, the region of Northern Ostrobothnia where the city of Oulu is situated has not become one of the leading regions of Finland. For example, in 2012 it occupied 11th position among 19 Finnish regions by GDP per capita. Low population density, provincial position it terms of geographic distances and innovation resources are still affecting the level of development of Northern Ostrobothnia.
The geographical scaling of the research and delimiting the borders of the region were problematic. While addressing the issues of technological or knowledge-based development in Oulu, many researchers use different geographic scales as if they were interchangeable without taking into considerations the differences in their structure and the interrelationships they are in with each other. Northern Ostrobothnia is often used as a synonym to Oulu region. This confusion is supported by the official website of Council of Northern Ostrobothnia, which is titled “Pohjois-Pohjanmaan liitto” in Finnish with the English translation “Council of Oulu region” below. As a result, the development of other municipalities, such as Raahe or Oulu is not taken into account. In addition to this
1 ambiguity, some researchers claim to focus on bigger region of Northern Finland, however, leaving the region of Northern Ostrobothnia in the shade of Oulu or Lapland development.
In this paper the research will go beyond Oulu and will be concentrated on the region of Northern Ostrobothnia with its other municipalities. However, since all the scales are connected and can influence one another, the local, higher regional and national level will be also considered.
The research will refer to public sector policies that are formulated on regional level and are supposed to provide common vision and common planning for future regional development. It will be analysed how innovations and innovative developments are understood and planned on this level. The policy documents chosen for the research are regional strategic programmes of Northern Ostrobothnia for four programming periods: 2004-2006, 2007-2010, 2011-2013 and 2014-2017. The method used for the research is qualitative content analysis which allows to systematize the content of the texts and interpret the ways the concepts of innovations and territorial innovation systems are utilized. In addition, I will also have a look on how geographical scaling of innovative activities is defined in the policies.
Therefore, four research questions of the thesis were formulated:
How is innovation understood in the regional policies of Northern Ostrobothnia? Has the understanding changed during the last decade?
What sectors is the concept of innovation and innovative development connected to in the policies of the region?
What concepts connected to innovative development (innovative milieu, regional innovation systems, cluster) are dominating in the policies and how these concepts are correlating with each other? Has the way of utilizing these concepts changed? 2
How has innovative development been scaled in regional development documents of Northern Ostrobothnia?
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Theoretical concepts
Innovation
To begin with, it is important to define the basic term “innovation”. Innovation implies newness, which is reflected in the most of the definitions given to the term. At the same time it is important to distinguish between invention and innovation. Nowadays invention is rather seen as “the first occurrence of an idea for a new product or process, while innovation is the first attempt to carry it out into practice”. (The Oxford Handbook of Innovation, 2006)
Cooke (2001) defines innovation as referring to “the process of commercialising new knowledge, possibly though not necessarily emanating from universities, with respect to product, process or organisational innovation”. Schumpeter, one of the first researchers studying and conceptualizing innovation, in his early works considered innovation as performed by heroic entrepreneur, a pioneer, who “draws other producers in his branch after him”, whose task is in “breaking up old, and creating new” (Schumpeter, 1996). Later Schumpeter switched to understanding innovation as being created by collective effort and acknowledged the need for systematic innovation (Cook; Oxford Handbook). Therefore, while defining innovation it is useful to pay attention to the process of the knowledge transfer as well as users, producers and other intermediaries.
Based on the context, the understanding of innovation can differ. Some sources, for example, Oslo Manual, address only technological innovation and define two types of innovation - product and process innovation. Product innovation is creating new product and introducing it to the market, process innovation is developing new production or delivery methods, which can mean improving equipment, working methods, human resources (Oslo Manual). However, on the company level creating new product involves not only technological solutions, but a range of entrepreneurial decisions and activities. 4
Hence, Schumpeter, having wider understanding of innovative activity, defined a list of activities that can be considered as innovation. Based on his classification, with the addition on one more type (“new services”) Johannessen et al. (2001) define six following types of innovative activities:
1) developing new products;
2) developing new services;
3) developing new methods of production;
4) opening new markets;
5) finding new sources of supply;
6) creating new ways of organizing.
The advantage of narrow approach to innovation is the ability to have easier and better defined criteria for innovation and indices for evaluation of innovation process, however, wider approach is necessary for deeper understanding of these processes and needs of innovation systems. It emphasizes that successful innovation involves not only scientific ideas and research, but also marketing, planning, managing human resources and productional processes. That is why I prefer to underline wider definition of innovation.
The understanding of innovation can also depend on the industry. Often innovation is regarded in context of “high-technology” industries so it is necessary to take a look at the classification of industries. The classification was developed by OECD in 1980s, it divided industries into “high-tech”, “medium-tech” and “low-tech” based on their expenditure on R&D in proportion to the output (Johannessen et al., 2001, Hirsch-Kreinsen et al, 2003). The classification was based on the statistical data from 12 OECD countries and was revised several times on the basis of the recent data. As a result, the most current classification consists of four groups: high-technology industries (industries with R&D intensity higher than 4%), medium-high technology industries (with R&D intensity between 4% and 1%), medium-low technology industries (between 1% and 0.5%) and low- technology industries (below 0.5%). Table 1 illustrates the classification, the industries 5 included in each group and R&D intensity for each industry calculated as a percentage of direct R&D expenditures in gross output converted using GDP PPPs. the countries used for the calculations are United States, Canada, Japan, Denmark, Finland, France, Germany, Ireland, Italy, Spain, Sweden, United Kingdom.
Table 1: Classification of manufacturing industries based on technology intensity
1991 1999
High-technology industries Aircraft and spacecraft 13.9 10.3 Pharmaceuticals 9.4 10.5 Office, accounting and computing machinery 10.9 7.2 Radio, TV and communications equipment 7.9 7.4 Medical, precision and optical instruments 6.6 9.7
Medium-high-technology industries Electrical machinery and apparatus, n.e.c. 4.2 3.6 Motor vehicles, trailers and semi-trailers 3.7 3.5 Chemicals excluding pharmaceuticals 3.4 2.9 Railroad equipment and transport equipment , n.e.c. 2.9 3.1 Machinery and equipment, n.e.c. 1.9 2.2
Medium-low-technology industries Building and repairing of ships and boats 0.9 1.0 Rubber and plastics products 1.0 1.0 Coke, refined petroleum products and nuclear fuel 1.2 0.4 Other non-metallic mineral products 1.0 0.8 Basic metals and fabricated metal products 0.7 0.6
Low-technology industries Manufacturing, n.e.c.; Recycling 0.5 0.5 Wood, pulp, paper, paper products, printing and publishing 0.3 0.4 Food products, beverages, and tobacco 0.3 0.3 Textiles, textile products, leather and footwear 0.2 0.3
Source: OECD Directorate for Science, Technology and Industry. ISIC rev. 3 technology intensitty definition, 2011
In research, business and political analysis high-technology and medium-high technology industries are usually aggregated into a group of high-tech (HT) industries and medium- low technology and low-technology industries are aggregated into a group of low and medium-tech (LMT) industries (Hirsch-Kreinsen, 2003; Santamaria et al, 2009).
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However, this classification has limitations and can be called rather approximate. High- tech industries are seen as the industries with higher expenditure on R&D, which is often considered as the main driving force of innovation, however wider understanding of the concept of innovations leads to the idea that some innovative activities are not necessarily based on formal R&D and can occur also in the companies that are not referred to high- tech industries. (Santamaria et al, 2009; Korres, 2012)
There are numerous facts showing that innovation can be associated with the industries that are not included in the high-tech ones. Though LMT industries are often mature, their product or process innovation activities can be stimulated by the changes in the market caused by the emerging new technologies. In addition to this, new technologies often don’t replace, but complement old ones, which can be incorporated into production (Tunzelmann, Acha, 2006). New technologies of production can be used in the production process leading to decreased costs or improved quality. Implementing new technologies can be necessary for adapting to new economic and market conditions and solving new problems. Tunzelmann and Acha (2006) illustrate it with the example of growing R&D in oil drilling in the North Sea needed for working in changing conditions. Moreover, knowledge spillovers from one industry to another are possible, which dissolves the boundaries between them. LMT can, in fact, be active users of innovations created by HT industries. (Santamaría et al, 2009)
Innovation is needed to adapt to changes in demand and developing new products for new markets. New standards, for example higher environmental safety are also triggers of innovation. This shows the necessity to have more open approach to innovation and pay attention to all the industries that can take advantage of it.
Regional dimension in innovation
The role of region and processes happening on the regional scale has been emphasized in past decades. It happened partly because of the rise of new regionalism in 1980s, which 7 pointed out that functional systems have gone beyond the borders of nation states, and, as a result, regions have become actors in global markets (Keating, 2008).
Researchers point out that localized knowledge is becoming the most important success factors. For example, Carlsson and Stankiewicz claim that "high technological density and diversity are properties of regions rather than countries. They are the results of local agglomeration of industrial, technological and scientific activities" (Carlsson & Stankiewicz, 1991 in Asheim, Isaksen, 1997). In addition, Cooke (1998) states that localized knowledge pools are necessary for knowledge transfer, which is a precondition for innovative activities. Tödtling and Trippl (2005) highlight that innovation studies are more often addressing to regional level paying attention to regional specialization, underlying the role of spillovers and tacit knowledge which is spread on regional level.
Increasing competitiveness of regions on global markets and such trends as so-called ‘Europe of Regions’ result in delegating decision-making to regional level, which, according case studies conducted by Cooke (1998), can be more effective since local governments can design tailor-made strategies suitable for the local industries.
There can be different definitions of the term ‘region’. Cooke (1998b) regards region as “defined in terms of shared normative interests (culture areas), economic specificity (mono-industrial economies) and administrative homogeneity (governance areas)” with “non-specific size, identifiable homogeneity” in geographical, political, cultural and industrial terms, able to be distinguished from other areas in terms of the previous criteria.
Later, he mentions the hierarchical level of regions by defining their place “as an important level of industry governance between the national and the local” (Cooke, 2001).
Soursa (2009) discusses the scale of regions, their connection to other territorial systems and gives a different characteristic of regions: according to her, regions can include smaller entities, be dynamic, their development can be considered as development in the region as well as development with the relation to other regions; regions are also important for local economy, regions are not below national level on the hierarchy, they are rather in a different hierarchical division. Analysing the way the concept of region is used in innovation studies,
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Suorsa classifies the scale of regions into national, sub-national, cross-border, or transnational (Suorsa, 2014).
She also takes classification of functional regions from economic geography, but modifies it in the way it is understood in innovation research resulting with the following types: NUTS regions, clusters, networks, and municipalities.
The difficulties with region delimitation is one of the problems of regional research. In her analysis of scientific articles published in 2004-2010 that use RIS approach Suorsa (2014) finds out that the exact borders of the studied regions are unclear in some research. Besides, in economic research administrative regions or statistical units are often used as a source of data, while the actual object of research is cluster or a network, i.e. functional regions (Suorsa, 2014). This inconsistency may be caused by the available sources of data and the ways of collecting it, as well as the fact that the borders of administrative regions are more clear and visible, hence, easier to define.
Another problem, which has been noticed is the oversimplification of the definition of region and studying not a region, but processes that happen there, so the region is simply seen as a stage for development. In these cases the development in a region is confused with the development of a region, while the social relations are not taken into account. Cooke (1998) emphasizes that the term “region” means “process or a nexus of processes rather than a thing” in the innovation context, while Terlouw (2000) concludes that in modern research there is a tendency for studying not region, but regional factors affecting development, which leaves the region itself outside.
Territorial innovations models
The acknowledgement of systematic nature of innovations as well as the idea of localized knowledge has lead innovations research to developing various territorial models of innovations. The models considered in this research would be regional innovation systems, innovative milieu and clusters. All of them are used in the innovation policies in Northern
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Ostrobothnia. These models can have different definitions, but it is important to understand the conceptual differences between them.
The background for regional innovation systems approach can be found in different theories, which in some way have contributed to the understanding of RIS nature. Such theories as evolutionary economics, institutional economics, network theory, new regional economics, economics of learning, economics of innovation can be included in this list (Doloreux, 2002) . Regional innovation system approach originates in the idea that some characteristics of a region, such as the history of this region, its institutional structure, existing policies, influence the innovation process because they are located there and have power to play a role in the processes happening in the region.
Doloreux (2002) indicates the connection between the terms national innovation system and regional innovation system. He claims that the difference between NIS and RIS is in general quite uncertain and that often the distinction is not made. There are authors who perceive these two concepts as totally different, while others see them as connected in some way. It is often claimed that NIS is the original concept of a spatial innovation system.
There are authors who understand RIS as a subsystem of NIS (Doloreux, 2002). However, if region is defined as functioning in different hierarchical division from national level, RIS is can not be interpreted as a part of NIS, but rather a different system, connected with NIS through some elements, such as national innovation policies and the national actors of the innovation system (Suorsa, 2014).
One of the reasons to talk about the existence of innovation systems is interactive nature of innovation. Doloreux (2002) points out that “innovation cannot be produced in isolation by relying exclusively on internal resources within the firm”. He emphasizes the role of the environment, which can be embodied in different ways - a network of some actors engaged in innovation process or a more general framework. So cooperation, networking, exchange of knowledge, flow of investment create an effective atmosphere for innovation processes.
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Cooke (2001) was studying cases from Japan and France and pointed out that establishing technoparks as a central measure in innovation policy was not as efficient as it was expected. He concluded that, though co-location of high-tech companies creates agglomeration effect, it lacks synergy needed for achieving higher result. This led to highlighting the role of social capital, trust and cooperation which facilitate interactions and networking. Cooke explained that, while technopole is hierarchically planned, and creates an agglomeration of companies, innovative cluster is “more organically evolved, networking is promoted and linkage stimulated.” (Cooke, 2001)
Another factor affecting innovation is state governance. There is a debate about the role of state in innovation process. From the point of view of neoclassical economics the state can be an innovator (through state owned corporations) or a planner. However, it is questionable whether the state possesses the knowledge of the markets (Cooke, 2001). Besides, it is often highlighted that innovation requires tacit knowledge, which can be described as “disembodied know-how that is acquired via the informal take-up of learned behaviour and procedures”, “scientific intuition”, “craft knowledge within scientific disciplines” (Howells, 2002). Codifying or centralizing tacit knowledge for state planning of innovation can be problematic. (Cooke, 2001). According to associational theory the role of state is not in direct participation in innovative activities, but rather in facilitating discussion, where firms participate as independent actors and in creating capacity for collective action (Cooke, 2001).
Cooke et al. (1998 in Doloreux, 2002) give the following definition of RIS - it is a system “in which firms and other organizations are systematically engaged in interactive learning through an institutional milieu characterized by embeddedness”.
However, while elaborating on a definition of regional innovation system, it is necessary to bear in mind that there can be broad and narrow interpretations of innovation systems. In narrow sense system of innovation includes such actors as research institutions, R&D departments, universities. Innovation system in broad sense includes also all different actors that can influence exploring and learning - production, marketing, finance systems
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(Lundvall, 2010). Doloreux (2002) specifies the elements of RIS. According to him, the main elements are firms, institutions, knowledge infrastructures, and innovative policy.
Lundvall (2010), while referring to the NIS, applies broader interpretation of innovation system and lists the internal organization of firms, the inter-firm relationship, the role of the public sector, the institutional setup of the financial sector, R&D intensity and R&D organizations as the core elements which play a substantial part in process of innovation. Cooke (1998) adds user-producer relationship to the elements of RIS explaining that the existence of advanced user creates the supply.
The concept of cluster was originally introduced and researched by Porter and Krugman. Porter (2000) explains cluster as a “geographically proximate group of interconnected companies associated institutions in a particular field, linked by commonalities and complementarities”. Cluster consist of industrial companies with their contractors, competitors, collaborators and customers. Porter also underlines that a cluster has synergetic effects and creates competitive advantage outside a firm or industry. Both cooperation and competition are the forms of interaction present in a cluster. After the emergence of regional innovation system concept there has been different explanations of the interrelations between the two models. One of them considers cluster as a previous development stage, which can be transformed into RIS with the establishment of institutions and development of cooperation (Asheim, Isaksen, 2002). Another point of view sees cluster as an element of regional innovation system (Asheim & Isaksen, 1997, Cooke, 1998 in Doloreux & Parto, 2005).
The model of RIS developed by Tödtling & Trippl (2005) based on the model of Autio (1998) shows the elements that constitute the system and the linkages between them. This model presents RIS as consisting of industrial cluster, knowledge production and diffusion subsystem and policies. So regional innovation system in this case is seen as a broader concept than cluster, while cluster is a component, where knowledge is applied and utilized. Knowledge production and diffusion system includes public research organizations, educational organizations, technology mediating organizations and workforce mediating organizations. Industrial cluster and knowledge production and
12 diffusion subsystem are connected by the flows of knowledge, resource and human capital. The functioning of cluster and knowledge production subsystem are affected by the policy.
The model also describes the external factors that can affect the system: other RIS, NIS organizations and policies, international organizations and programmes. The extent of NIS influence depends on the region, the level of its economical independence and decision- making power. Bathelt et al. (2004) also emphasized the role of international interaction and knowledge flows (“global pipelines”) for RIS. He claims that local buzz and global pipelines are supporting each other and networking with the actors outside region brings more information about the markets and positively affects internal dynamics.
Fig. 1 Structure of regional innovation system. Source: Todling, Trippl (2005)
Innovative milieu (innovative environment) is concept that was developed by the GREMI (Groupe de recherche europeen sur les milieux innovateurs) (Moulaert, Sekia, 2003). It is based on the idea that firms function in three spaces, that are the production, the market 13 and the support space; with support space helping the firm to face the uncertainties. Support space is formed by relations of three types: privileged relations connected with the organisation of production factors; strategic relations between firm, partners, suppliers and clients; strategic relations with other actors from the same environment (Moulaert, Sekia, 2003). The concept of innovative milieu is based on the idea that the environment is crucial for generating innovations in the companies (Doloreux, 2002). The difference between RIS and innovative milieu models is explained as lying in the understanding of the core of innovation dynamics - in the RIS model the interactive and cumulative nature of innovations, collective learning organized in a network are emphasized (Moulaert, Sekia, 2003).
One of the problematic issues connected to the topic is whether every region has RIS. One opinion is that RIS concept is applicable only for regions with developed industrial cluster and present knowledge creating institutions. For example, Asheim & Isaksen (2002) believe that RIS approach can be used to the limited range of regions and is not suitable for peripheral regions since in the periphery there is often not enough companies to form a cluster and not enough institutions. Alternatively, Doloreux & Parto (2005) consider RIS of some kind can be found in every region. Another approach uses the term “unsuccessful RIS” (Cooke, 2007 in Suorsa, 2009) with asymmetrically developed components and processes, which, therefore, don’t function properly, allows to speak about RIS in wider range of cases. Besides, using RIS concept for studying peripheral regions gives the opportunity to assess the system innovation potential and suggest policy measures for improving innovation performance of the region. Thus, Cooke (2001) discusses the factors creating strong or weak regional innovation system potential. These conclusions are built upon the case of Baden Wurttemberg. Cooke classifies the factors into four levels: infrastructural, organisation in firms, organisation in policies, institutional. On infrastructural level autonomous taxation, localized private finance, embedded universities and labs and strategic infrastructure competence are creating strong RIS potential, while decentralized taxation, national private finance, disembedded universities and few infrastructure competences mean weak potential. On the organizational level of firms workplace cooperation, externalisation and innovation create better potential than
14 workplace antagonism, internalisation and adaptation. The policies contributing to RIS potential are inclusive, involve consultation and monitoring, while unsuccessful policies are exclusive, concentrate on authorisation and reacting. The institutional factor is increasing RIS potential if it is associative, brings consensus and disposition for learning. If the institutions are disconnected, work in dissensus and are introspective rather than learning, they weaken the potential for innovation system.
In Cooke (1998) another interesting factor that can affect regional industrial and innovative performance is mentioned - the author claims that too tight productional links in the cluster make the agglomeration less flexible for market changes and more vulnerable in case of crisis. He concludes that production systems with more loose links can be a more effective alternative for local industrial development. In addition, the question, whether more specialized or diversified agglomerations have higher potential for innovation, is still debatable (Tödtling, Trippl, 2005).
Another topic for debate is the role of institutions and policies in innovation processes. There are researchers who consider national (Lundvall, 2010) or regional (Cooke & Leydesdorff, 2006) policies as one of the most significant component of innovation system facilitating interactions, knowledge and financial flows. Mehmood & Moulaert (2010) claim that the researchers using RIS approach often overemphasize the importance of public sector and institutions in innovation and development, as well as highlight institutional development and economic competitiveness, while not paying enough attention to multifunctionality of economy and other, non-economic, spheres - natural environment, social-cultural, political spheres. Yeung (2005) also states that RIS studies tend to underline the role of policy measures in the development of a region, while, in his opinion, geographers should regard the power relations and social practices between actors, as well as relation between systems.
Scaling of innovation activities
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The model of regional innovation system presented above underlines that RIS does not exist in vacuum and is connected with other actors, is influenced by external factors and is involved in broader processes. However, innovation activities are often considered only on one geographical level, which doesn’t allow to take into consideration all the links and factors. Therefore, the question of scaling of innovation activities is topical. It is easier to systematize the interactions by geographical scale.
One of the approaches to conceptualisation of scaling of innovative activities is presented in Figure 2. Figure 2 illustrates the interactions on different levels in knowledge creating process. As we see. global context is affecting the formulation of national policies and the trends in education, as well as it has influence on the strategies of universities and research institutions, while the activities of the private sector firms happen on regional scale. The funding can be provided by sources on regional, national or international level.
Figure 2. Characterisation of a national innovation system. Source: Ahlqvist, Inkinen, 2007
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In addition to Figure 2, for the purpose of this research I would like to add local scale, which will be differentiated from bigger regional scale and refer to the sub-regional level. The reason for doing so is the plan to investigate how regional policies are addressing uneven development in the region and interactions between its core and periphery. It is also important to consider the interactions between regional and local level. Cities can be the nods of knowledge flows and business activities, so it is interesting how their role is interpreted on regional level - are they seen as an element incorporated into regional innovation system or as locomotives of development stimulation diffusion of innovations and economic development in the other parts of the region.
It also important to bear in mind that there are horizontal and vertical links and interactions on different scales, in context of this research horizontal links on local and regional scale will be considered, i.e. the interactions between different sub-regions, cities and interactions between northern Ostrobothnia and other regions of Finland, to see if the policies emphasize competition or cooperation.
Innovation and periphery
There are different approaches to the concept of peripherality. The definition of peripherality can depend on the factors that are chosen for the research or on the level of territorial unit studied. The conventional understanding of peripherality is connected with distant geographical position and, therefore, low accessibility to the main economic centers, which leads to the increase in transport costs and travel time (Copus, 2001). The second group of characteristics of peripherality, which stems from distant location, include social factors, such as smaller or declining population and lower population density, lack of industrial agglomeration, high service costs, deficit in infrastructure and lack of capital. The low influence on national policies is also seen as an attribute of peripheral disadvantage.
As far as innovation activities are concerned, peripherality is first of all associated with the lack of knowledge resources. It is caused by uneven distribution of knowledge capital,
17 which tends to accumulate in the centers. Benneworth & Charles (2005) explain that because of the lack of knowledge capital peripheral regions lack the returns to scale, which means that knowledge capital brings less profit than in core-region and, consequently, the opportunities to create a competitive advantage in knowledge-based industries are lower. Besides, they point out that knowledge accumulation happens in virtuous circle, which means that existing knowledge creates new knowledge and so on, which helps the core- region to develop its advantage.
Lack of access to technology and the lack of networks, low educational level and low- skilled human resources also associated with peripheral position. Rosenfeld (2002) adds to this lack of access to capital, since capital tends to concentrate in the centers rather than in periphery, where it is difficult to monitor them; weak technology institutional structures, that are helping to create links in regional innovation systems. International networks and benchmarking have a positive effect on RIS development, while regional insularity and lock-in can also create and aggravate peripherality.
However, Copus (2001) discusses that the range of socioeconomic and technological changes have challenged the core-periphery balance. Improved transport infrastructure allows to decrease transport costs and increases accessibility, though, it can also have a negative effect for the region and stimulate the outflow of population. The economical changes with tertiary sector and light manufacturing getting increasing share in economy reduces the transportation costs. In addition, the development of E-commerce and information society technologies improve information flows to remote regions. As a result, the concept of core-periphery becomes less dependent on geographical location and the concept of aspatial peripherality emerges. In the context of aspatial peripherality Copus (2001) defines the following list of factors. Quality of local IT infrastructure, which facilitates information flows; human capital, including capacity to use IST; quality of local business networks, which is important for the efficient cooperation and knowledge flows necessary for innovative development; local embeddedness and civic society, which basically means social capital - the connection of companies with society, local traditions and business culture; local institutional structures or networks; quality of links to European/global markets and information networks. 18
History of economic and innovation development in Northern Ostrobothnia
The history of economic development in Northern Ostrobothnia provides the necessary context for the analysis of the regional development policies. It introduces and explains the main economic, social and development processes and describes the current situation in the region.
While talking about the history of innovative development in the region of Northern Ostrobothnia it is useful to have a look at processes that were happening on different levels and well as in different spheres since region is never isolated from the outside world and can be influenced by national and global trends. In order to get better understanding of the factors and processes that have affected the present social and economic situation in the region it was decided to, first of all have a look at the success story of Oulu innovation development, which was the main reason that made the research of this region interesting and peculiar. It was decided to have an overview of the main actors and processes that played part in creation of Oulu high-technology clusters starting from 1960s, when according to the most researchers, the cornerstones were laid.
In addition to this, it is impossible to look at the local and regional development without the understanding of broader national context and the national policies that were influenced by the global trends. Therefore, there will be a separate chapter for national regional and technology policies.
It was impossible to ignore the context and the links with the region of Northern Finland, which, besides Northern Ostrobothnia, includes Central Ostrobothnia, Lapland and Kainuu. It can also be useful to consider this region of higher level since it is also a recipient of regional policies. Besides, there are important horizontal interactions on local level that can go beyond the borders of Northern Ostrobothnia, but are usually happening within the regional boundaries of Northern Finland. 19
In the case of Northern Ostrobothnia it is also necessary to pay attention to factors and processes happening on municipal level besides Oulu because the development in the region has been uneven with Oulu being the main center of economic and innovative activities and concentration of knowledge, labour and financial resources.
History of innovative development in Finland
Finnish science and technology policy was developed in 1960s and 1970s and it was aiming to tackle the problem of low R&D in private firms and encourage its growth. The approach chosen in the policies highlighted technical education and technical research as well as support for companies working in the field of new technologies. This direction was supported and developed in further policies in 1980s expressing the idea of the important role of technology in the economic development of the country. (Oinas, 2005)
As far as regional development is concerned, the separate regional policy was formulated in 1970s. The key idea of the policy was encourage the development in the peripheral lagging behind regions of Northern and Eastern Finland and decrease regional disparities. 1960s and the beginning of 1970s was a time when the migration level of economically active population became especially high, this period is even called the time of “Great Migration” (Tervo, 2005) Southern Finland became the main center of economic growth and the destination for the migrants from less developed regions, population was moving from countryside to the cities, the emigration from Finland to Sweden became particularly active and from 1961 to 1970 reached 143 thousand people. (Tervo, 2005) One of the tools to balance out the uneven development were the subsidies that Southern Finland payed to the peripheries through the Fund for Under-developed Regions. (Häyrinen-Alestalo et. al, 2006)
In 1980s the shift to the ideology of neoliberalism has changed governmental approach to the policies emphasizing the strive for higher competitiveness and market governance.
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1990s was a period of economic crisis and recession for the whole Finland. During this period the role of high-technology industries significantly increased for the whole country, the share of the products of high-tech industries grew from 12.4 % in 1994 to 20.4 % in 1999. (Tervo, 2005) Therefore, the most economic activities were concentrated in the areas with developed high-technology industries, mainly in the cities of Helsinki, Oulu, Tampere, Turku and Jyväskylä. The policies formulated in 1990s underline investing in new technologies, increasing role of privatization and private companies, necessity to develop systems for promoting and supporting innovative activities. The programmes created to facilitate systematic innovation were developed. They were the Center of Expertise Programme and the regional Employment and Economic Development Centers (TE-centers) Programme.
Joining EU has affected Finnish regional development since it was included in EU regional policies and was subject to financing from EU Structural Funds. There has been a range of effects EU regional policy on national regional policy: the indicators used by EU to access the level of regional development were used in Finnish policies, the new delimitation of regions and subregions, shift to programme-based projects. (Häyrinen-Alestalo et. al, 2006) Some researchers claim that usage of Structural Funds by Finland was seen as the way to partially replace some of the national expenses on regional development. (Tervo, 2005)
It has been noticed by the researches that, while the regional scale has acquired a stronger position in the economy and innovative development during the last decades, regional and innovation policies have come closer together. It has been argued whether the attempts to integrate regional and technological policies are successful since there are a lot of tensions between them, such as the lack of clarity about the geographical scope and the mechanisms of funding. In addition to this, there is a conflict of interests driven from different goals of regional and technological development - the innovation policies strive to achieve high development levels that would be significant on internationally and increase competitiveness of the regions on global scale, while regional policy pays attention to more even technological development, positive effects on the peripheral areas. (Häyrinen-
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Alestalo et. al, 2006) In 2003 the assessment of the results of Centers of Expertise Programme has concluded that in some areas the know-how development was substantial only on Finnish level, while on global scale these results were not outstanding.(Ministry of the Interior, 2003 in Häyrinen-Alestalo et. al, 2006)
History of economic development in Oulu
The Oulu development played a dominant role in the economic history of Northern Ostrobothnia. The history of economic development of Oulu is a history of successful transition from a lagging behind province into Oulu is an example of a city that was able to revitalize its economic and social life and become one of the industrial and research centers with developed cluster of new technology-based firms.
Since 18th century Oulu has been an important center of trade and industry as well as administrative center at first in the whole region of Northern Finland, then for Ostrobothnia since 1938, when Lapland became a separate administrative unit (Rossi et al, 1999). In the end of 19th century, with the decline of wooden shipbuilding in Europe, the local shipbuilding industry and trade shrank. The economy of Oulu region was then based on agriculture and pulp and paper industry, the region was in economic periphery. By 1950s the outward migration from the region caused by regional disparities and higher attractiveness of Southern Finland made national as well as local authorities concerned about introducing changes that will be able to keep the population in Oulu. It was important to create additional jobs, raise educational standards, level of medical services and the overall quality of life. One of the first steps was made by introducing the Higher Education Committee which in 1956 recommended to establish a university in Oulu to provide education for Northern Finland. (Donnelly & Hyry, 2004)
In research (Hyry 2004; Männistö & Tervo 2000) the history of technological development in Oulu is considered to start in 1960s. Männistö & Tervo (2000) made the periodization of Oulu development by decades. Using their periodization with some adjustments we can define the following stages in the history of technological development in Oulu region: 22
● 1960s was mainly the time of education and training, ● 1970s is the decade of establishing electronics in Northern Finland, ● 1980s is creation of the concept of Oulu as technological city, ● in 1990s new challenges were faced and adjustments made, ● in 2000s further development and further bigger challenges. The table created by Hyry (2004) illustrates the timeline of the economic development since 1970 till 2000s on different scales.
There has been numerous factors that played their role in the Oulu success story. Since there were different actors, tools and links between them, it will be easier to consider all the processes by the main spheres: education and research, business, public sector. However, it is necessary to mention that this division is rather approximate, since there has been a lot of work done in cooperation between universities, public and private sphere.
Educational institutions One of the main factors promoting and facilitating knowledge-based development in Northern Finland and one of the first steps towards future changes was establishment of University of Oulu in 1958. Newly established university included Faculty of Technology, which was necessary for preparing specialists for industry and increase the local know- how. The university’s subdivision, which played especially important role in further technological development in the region, was the Department of Electrical Engineering (Donnelly & Hyry, 2004). The department has made a gradual shift from preparing engineers for electric power plants to electronics, since it seemed to be potentially more expanding sphere requiring specialists while the labour market had already enough electric power engineers.
The decision to concentrate on more potentially perspective sphere of electronics was a matter of personal choice. The researchers (Hyry; Männistö & Tervo) point out the role of individuals in the processes and decisions that affected the future specialization of the region. in the context of establishment of electronics engineers training the names of professors Oksman and Otala, who were relying on electronic technologies, are mentioned.
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Besides the Faculty of Technology, Faculty of Medicine has contributed to the future of the city when it generated research in related spheres.
Oulu University introduced bachelor’s degrees in telecommunications and electronics in 1970s to cement its place innovation development in electronics industries, other educational institutions in the region followed its example: a new university institute with same courses was established in Raahe and Kajaani.
In 1990s the economic crisis, which has affected the development in the whole country and in the region as well, had its influence on the University of Oulu. The new aim formulated for the university was to develop international cooperation and strive for a stronger position on international level. However, it was also important to continue fulfilling its functions in the promotion of development in the region of Northern Ostrobothnia and the whole Northern Finland. The question the university had to answer was what its role in the region was and what approach to the work it should choose. (Lajunen et. al, 1999) As a result university has chosen the main prioritized areas that were multidisciplinary, involved participation of different faculties and included different sciences and spheres. The areas were information technology, biotechnology as well as northern studies.
In order to promote research in the field of information technology University of Oulu came up with the initiative to create a research center for information technologies. The center was called Infotech and it was involving research groups selected by external experts. infotech was not a brand new division, it was rather seen as a new additional way to activate research in the selected most promising areas. (Hyry, 2004) The research was conducted for the needs of commercial sector. The main areas of specialization of this center were communications, measurement technologies, information processing, software. (Lajunen et. al, 1999)
The research in the sphere of northern studies was promoted with the establishment of Thule Institute, which started the programmes researching global changes in Northern regions, economy and technology in Northern regions, man and culture in the North and space research in Polar regions.
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It was not only technical education and research that were emphasized by the local educational and research institutions. Marketing and commercialization of innovations play a great role for commercial success, so during 1990s first MBA programme appeared in the region. It was executive MBA programme offered by the university and Revontuliryhmä ry, the programme was a good instrument for increasing competence in management for business people with education in technology.
Role of big enterprises in Oulu
It is possible that external actors can influence the innovation system in the region. Hyry (2004) suggests that Kajaani Electronics has laid a foundation for Oulu technological development since Kajaani Oy was the first company in the region of Northern Finland that made a decision to invest in the research and development in electronic sphere. In 1970s Kajaani Oy was a company working in pulp and paper industry, however it was not willing to depend on natural resources and wanted to achieve higher growth pace to provide more stable positions on the market. Therefore, ait established Kajaani Electronics, which was a new branch of the company working in electronics sphere. The low transportation costs in electronic industry and abundance of high-skilled labour resources provided by University of Oulu made this sphere attractive for the firm, so Kajaani Electronics started working on electronic instruments for pulp and paper production. In 1980s Kajaani Oy because of the problems in pulp and paper sectors shifted the attention to the core industry and later Kajaani Electronics was divided into two smaller companies and then sold. However, Hyry (2004) suggests that it was an important stage for technological development since a big company kajaani Oy invested in development of electronics, i.e. it worked as a technological incubator of some sort, providing financing for the technological research which was later used by other companies that were working in Kajaani and Oulu.
Another big international company that has positively influenced innovation development in Oulu and Northern Finland was Nokia. At first in 1970s Nokia opened a production of radio equipment for military forces which was based on the patent from the U.S in Oulu. Later, Nokia started production of radiotelephones for civil sphere. The reasons for Nokia 25 coming to the region were high competition for labour resources in Southern Finland and lower expenses on labour force in Oulu as well as tax preferences in Northern Finland that were introduced in order to attract business to northern periphery. (Mannisto, Tervo, 2000) Development of telecommunication technologies and establishment of new standards for mobile networks has led to the changes in the production and opening of new production units outside of Oulu in Oulu region and employing more people outside the city.
However, for about a decade the company has not been closely cooperating with the city or the University of Oulu. In 1980s, the time of further advancement of telecommunication industry and growth of Nokia production, the company has purchased a number of small local firms operating in telecommunication sphere. In 1985 Nokia expanded research and development to its units based in Oulu, which was a very important step for the future development of the region. The R&D was concentrated on technologies in fixed telecommunications network as well as in software for mobile phones, to which in 1986 was added R&D in circuit design and later hardware design until 2000, when the decision was made to concentrate only research and development connected to mobile networks and outsource R&D for fixed telecommunication networks. (Hyry, 2004)
In further decades Nokia was expanding and growing rapidly. It started additional production units in Raahe, which in 2002 employed about 50 people, while it provided about 4 500 jobs in Oulu region. (Hyry, 2004)
VTT in Oulu VTT is a Technical Research Center of Finland, a national research organization providing partly state-financed research for different industries that serve the needs of commercial firms, public sector and different institutions. The state funding for the research is directed through the Finnish National Fund for Research and Development (SITRA) and The Finnish National Technology Agency (TEKES). VTT is playing a significant role in technological development in Finland - in 2012 it was involved in 36% of Finnish innovations (Loikkanen, T. et. al, 2013)
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In 1974 electronic laboratory in Technical Research Centre of Finland was established in Oulu. Nevertheless, at first the customers of the laboratory were situated in Southern Finland since there was no electronics industry in Northern Finland yet. The role of the laboratory was to advance electronic research in the region, to connect university and commercial sector as well as to provide workplaces for engineers graduating from the university and keep the intellectual resources in the region. Later laboratories also helped to create spin-off companies (Donnely, Hyry, 2004).
Technology parks and public-private cooperation In 1980 a working group created for developing a strategy for electronics business suggested establishing a technology park in the city. The area for the technology park was chosen in the vicinity of university, it was a district called Linnanmaa. The technopark was established in 1982 and was called Oulun Teknologiakylä Oy.
The city of Oulu, the University of Oulu, the Regional Development Fund (KERA) as well as 18 privately owned companies were involved in the project at first. (Hyry, 2004) The private firms that became the partners of technology park project were the companies operating in different industries. Here is the list of them:
● construction firms (Insinöörityö Oy, OMP- Yhtymä Oy, Oulun Rakennus Oy), ● energy producing firms (Turveruukki Oy, Pohjolan Voima Oy, Oulujoki Osakeyhtiö), ● local teleoperators and the local newspaper (Oulun Puhelin Osakeyhtiö, Kaleva Kirjapaino Osakeyhtiö), ● basic industries (Kajaani Oy, Rautaruukki Oy, Kaapeliteollisuus Oy). Smaller companies also included Automaatiotekniikka Oy, Temelex Oy, Tornion Elpolar Oy, KOPO- Konepohja Oy, Farmos Yhtymä Oy, Regional Development Fund and MKT- Tehtaat. It is interesting that the main part of stakeholders in the project were local or originated from the region of Northern Finland. (Hyry, 2004)
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In 1993 Oulu City Council approved “The Business Development Strategy of the Oulu Region”. According to new strategy, the development of new progressive knowledge- intensive industries and the development of more traditional industries were separated. The development of high-tech industries was the competence of the local Technology Park Company, while the measures for traditional industries were designed by City Council (Donnelly, Hyry, 2004). Technological development became the key goal of Oulu region aiming to connect different development measures. The funding was provided by national government and private companies participating in the project.
The projects designed for facilitating research and development in new high-tech industries were sectoral forums Pro Electronica, Center for Wireless Communication, Center for Wellness Technology (for biotechnologies) as well as Mobile Forum (for communications technology).
Center of Expertise Programme and Multipolis network The new Centers of Expertise Programme (OSKE) was designed on national level. It aimed at enhancing regional competition in educational and research level, business activity and international cooperation for acquiring the status of Centers of Expertise (Wallin, Laxell, 2013). The programme was emphasizing the importance of local planning and measures necessary for innovation development.
The Center of Expertise Programme is considered to be a programme bringing closer regional and technological policies. It was influenced by the concept of regional innovation system and involves promoting local networks. The programme’s main goal was to increase cooperation in existing technological agglomerations in chosen fields. The main focus of the programme was put on local activities and initiatives, while the state formulated criteria for the regions. The three criteria were quality, impact and organizational criterium. The technological center applying for the programme was supposed to meet the standards of quality of the research and business activities, make impact on regional development and have a functioning system with enough critical mass of business, funding opportunities and interaction between actors. The participants of the 28 programme get state funding for the purposes of enhancing coordination and networking between different elements, including companies and projects that can receive funding from normal financial instruments: EU Structural Funds, Tekes, Employment and Economic Development centers, as well as private sources. (Häyrinen-Alestalo et. al, 2006)
In 2000 a programme for creating a network of innovative nods in Northern Finland was launched as a project supported by Centers of Expertise Programme. The network was called Multipolis and its main aim was to activate innovation activities outside Oulu, which was the core of technological development in the region, and promote technological development in the periphery of Northern Finland. Multipolis consisted of 15 technoparks, while in 14 centers (besides Oulu) 137 high-technology firms and 116 low and medium- technology firms were allocated (Jauhiainen, 2005). Multipolis network was formed as a result of collaboration between different actors - its board included the representatives of city of Oulu, Regional council of Northern Ostrobothnia, Technopolis and Oulu Innovation Ltd. The industries that were united into the Multipolis network were mainly electronics, environmental technologies, media and content production, software, biotechnologies and metallurgy.
The biggest share of the funding to Multipolis is provided by EU Structural Funds, Finnish regional policy funding instruments, regional authorities and local authorities. (Jauhiainen, Suorsa, 2008)
Social and economic development in Northern Ostrobothnia
In order to speak about social and economical development in the region, I would like to explain its subregional division first, since this scale would be used for illustrating the
29 features of the development in the different parts of the region. Figure 3 is illustrating it.
Figure 3. Sub-regional division of Northern Ostrobothnia. Source: Pohjois-Pohjanmaan maakuntasuunnitelma 2030, maakuntaohjelma 2011-2014. Edited by the author
In order to promote more even development in the region and encourage more active local development the municipalities in the region were aggregated into four sub-regions. These subregions are comparable by the size and the regional strategic programmes for Northern Ostrobothnia refer to these subregions as the lower scalar level. Since Oulu is the main economic center in northern Ostrobothnia, the form of cooperation on lower level is called 1+3 - Oulu plus three other subregions. Therefore, it is more convenient to use them as statistical units for addressing to subregional disparities.
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In terms of migration, as we can see on Figure 4 the changes in net migration in the region were mainly dependent on the net migration in Oulu and Oulu South. During the last three decades there have been fluctuations in net migration in the region and this two subregions. There has been drastic fall in late 1990s connected with the economic crisis.
Figure 4. Net migration in Northern Ostrobothnia. Source: StatFin.
Unemployment rate has traditionally been high in Northern Ostrobothnia as well as in whole Northern Finland. It is mainly caused by the high unemployment rate among young people (Hyry, 2004).
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Figure 5. Unemployment rate in Northern Ostrobothnia. Source: StatFin.
It is peculiar that unemployment rate is approximately the same in Oulu and Oulunkaari and is higher in the subregions of Oulu South and Koillismaa. Mid-1990s is the time when unemployment peaked, which explains high emigration level from the region in late 1990s.
As far as the economy of Northern Finland is concerned, Table 2 shows the employment in North Ostrobothnia by economic sector in 2013. we see that manufacturing, retail and construction dominate in the region.
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Table 2. The number of personnel per economic sector in Northern Ostrobothnia in 2013. Source: StatFin
Economic sector Number of people employed
Manufacturing 21417
Wholesale and retail trade, repairment of 14039 vehicles
Construction 11564
Transportation and storage 7465
Professional, scientific and research activities 6643
Administrative and support services 6366
Agriculture, forestry, fishing 5686
Human health and social work activities 5210
Information and communication 3838
Mining 1034
Water supply, sewage 809
Electricity, gas, air conditioning supply 647
Arts, entertainment, recreation 633
In the Table 3 the number of personnel by industry (including only biggest industries) is represented. As the table shows, in 2013 the most influential industries on the regional scale were high-tech manufacture of computer and electronic products, software, as well as low- and medium-tech metallurgy and wood production.
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Table 3. Number of personnel in Northern Ostrobothnia in 2013 by industry. Source: StatFin.
Industry Number of people employed
Manufacture of computer, electronic and optical products 4849
Manufacture of basic metals 2940
Manufacture of fabricated metal products, except machinery 2691 and equipment
Computer programming, consultancy and related activities 2527
Manufacture of wood and of products of wood and cork, 2422 except furniture; manufacture of articles of straw and plaiting materials
Publishing activities 762
Manufacture of machinery and equipment n.e.c. 743
Scientific research and development 704
Manufacture of paper and paper products 685
Manufacture of electrical equipment 566
Manufacture of chemicals and chemical products 565
Telecommunications 337
Printing and reproduction of recorded media 252
Manufacture of motor vehicles, trailers and semi-trailers 180
Motion picture, video and television programme production, 70 sound recording and music publishing activities
In order to illustrate the distribution of business activity, I have made Table 4. The table shows the number of establishments by sub-regions as well as total number of personnel in them, turnover and turnover per person. This table shows that Oulu subregion is still
34 keeping the leading role in business activities, it has significantly higher number of establishments than in lagging behind Oulunkaari (almost 6 times more) and Koillismaa (almost 12 times more), however, the fact that the difference in turnover per person is not that high, hints that in Oulu subregion there is a significantly higher number of small establishments with smaller turnover.
Table 4. The distribution of establishments by sub-regions of Northern Ostrobothnia in 2013. Source: StatFin.
Subregion Number of Total number Turnover Turnover/pers establishments of personnel EUR 1,000 on EUR 1,000
Oulu 12 203.0 56 937.0 12 876 425.0 226.2
Oulu South 9 859.0 26 259.0 4 616 906.0 175.8
Oulunkaari 2 333.0 7 011.0 1 360 604.0 194.1
Koillismaa 1 336.0 4 497.0 844 315.0 187.8
In order to summarize the content of the chapter and get more clear picture of development in the region, I created a table based on Hyry (2004) which describes the main process and factors that were influencing the development in the region since 1960s until 2000s.
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Table 5. Main processes in regional development in 1960s-2000s on different levels. Source: Hyry (2004), modified by author
Factors and 1960s 1970s 1980s 1990s 2000s processes
National level Emphasis on Separate Regional Economical “Post growth mineral regional policy development recession situation”, resources formulated policy Industrial migration exploitation strengthened restructuring inside the Technological Joining EU country, policy concentration established Shift to neoliberalism
Northern Strong out- Out-migration, Industrial Crisis, high Networking, Finland migration industrial restructuring, unemployment Multipolis restructuring strengthening
Education University of VTT Internationaliz new research and research Oulu established in ation and units and established, Oulu maintaining its networks University role on turning regional level towards electronics engineering,
Business Prevalence of Traditional Nokia begins ICT cluster Structural traditional industries to grow in dominates changes industries funding R&D, electronics, Nokia comes Nokia buys to region firms, technopolis established
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Methods
The method of the research is qualitative content analysis. Qualitative content analysis is a method which allows to “systematically describe the meaning of the material” (Schreier, 2012). It is “a research technique for making replicable and valid inferences from texts (or other meaningful matter) to the contexts of their use” (Krippendorff, 2004). This methods allows to work with long texts and analyse how different concepts are understood and used, which is necessary for answering the research questions of this thesis.
It was decided to choose planning documents issued by the regional council of Northern Ostrobothnia. In Finland the regional councils issue two main documents - regional plan (maakuntasuunnitelma) and regional strategic programme (maakuntaohjelma). The regional plan presents long-term development objectives and visions, while regional strategic programme is medium-term formulating targets, measures and financial plan according to main objectives stated in the regional plan. An implementation plan (toteuttamissuunnitelma) for the regional strategic programme is prepared every year to show the projects designed for executing strategic programme. (Makkonen, Inkinen, 2014)
For the research I decided to use regional strategic programmes since they present more concrete goals and measures for the regional development while mentioning wider framework. The chosen programmes covered four most recent programming periods: 2004-2006, 2007-2010, 2011-2014 and 2014-2017.
The first step for the application of the method was to define all the relevant parts of the documents. Since regional strategic programmes include diverse information concerning all spheres of regional development, it was important to choose only the text connected with the researched topic. After the first reading of the material all the paragraphs concerning innovations, know-how and innovative development were selected, later only those connected with the research questions were highlighted. For the first research 37 question the paragraphs mentioning the different types of innovations or innovations in particular context pointing at its type were underlined. The paragraphs for the second research question were mentioning or discussing any forms of innovations in concrete industries. In order to answer the research question number three I picked phrases either using concepts of regional innovation systems (“innovaatiojarjestelma”), clusters (“klusteri”) or innovative milieu (“innovaatioymparisto”, “innovatiivinen toimintaymparisto”). In addition to this, the first reading of the text showed that there were paragraphs not mentioning the words listed above, but nevertheless discussing the elements constituting regional innovation system (educational and research institutions, public policies, firms) and/or linkages between them, which was acknowledged as tackling the topic of models of organised innovations and, therefore, relevant for the research. And, lastly, the phrases involving the question of scaling of innovative activities were marked. These were the sentences mentioning the scale of the region where the innovative activities are happening, as well as the paragraphs that examine the interconnectedness of different levels and of the territorial units on the same level.
In QCA the text is analysed through the coding frame, which creates the structure for interpreting and classifying the data drawn from the text. A coding frame consists of the system of codes designed for each research question.
It was decided to use a combined approach to designing the coding frame for the content analysis. According to Krippendorff (2004), the method of qualitative content analysis can use the constructs originating in existing theories, previous research or the knowledge of the experts, while Schreier (2012) gives preference to material-driven analytical categories, that allow to give more elaborate coverage to the studied texts and assure that all the details are taken into consideration not depending on the expectations or preconceptions of the researcher. Therefore, the coding frame was based on the the theories considered in the theoretical background chapter and the research by Makkonen and Inkinen (2014). Subsequently the coding frame was tested through a pilot study on 50% of the material to make sure that codes are easy to follow, interpret uniformly and cover all the text relevant
38 for the research questions. The pilot study showed that it was necessary to make changes in the coding frame since the existing scheme did not cover all the aspects of the researched questions. For example, the concept of innovative milieu wasn’t considered in the original research method because it seemed an outdated term not used in the current innovations research. However, it turned out to be actively used in the material so it was decided to include it in the research and coding frame. It was also noticed that having a code “other” was crucial to take into consideration all the details regarding the research questions that were not falling into the existing scheme. After the pilot study some codes received more elaborate unambiguous definitions. Thereafter, all the material was coded with the edited coding frame so that the coding frame remained intact during the whole process assuring consistency.
Coding frame
1. The understanding of innovation activities in the documents 1.1. New product (introducing new products as well as significantly improving existing ones) 1.2. New service 1.3. New technology (new technology or new production method affecting the production processes rather than final product) 1.4. New markets (finding markets for the products and services, as well as improving marketing process and developing brands) 1.5. New sources of supply 1.6. New ways of organizing (organizational changes that help companies to be more efficient, profitable, improve their performance) 1.7. Other 2. Industry connected with innovations 2.1. High-tech industries (computer, telecom, pharmaceuticals) 2.2. Medium- and low- tech industries (machinery, transport, chemical industry, construction, wood industry) 2.3. Other 39
3. The territorial innovation models 3.1. RIS 3.2. Cluster 3.3. Innovative milieu 3.4. Other 4. The spatial scaling of innovative activities 4.1. Global scale 4.2. National scale 4.3. Local scale
The possible limitations of qualitative content analysis lie in problems with reliability due to the bias of the researcher. In qualitative content analysis it is important to provide consistency of understanding the same passage, going beyond individual understanding and interpretation. Individual understanding is expressed in the coding frame designed for the study. In order to achieve higher objectivity and make sure that the same passages are coded in the same way the text was coded for the second time with the interval of one month. The second coding was also used to make sure all the codes within the same research question are mutually exclusive.
Another potential setback of the research method is caused by the fact that it involves interpretations of the text written in the Finnish language, which is the second foreign language for the researcher. However, the level of my proficiency in the language combined with the awareness of the topic seem enough for understanding the material and conducting this research. The phrases that could cause ambiguity were checked by native speakers.
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The understanding of innovation activities in regional strategic programmes of Northern Ostrobothnia
The research showed that in the regional strategic programmes of Northern Ostrobothnia the concept of innovation is used in different meanings and contexts since all the types of innovation activities were found in studied the documents. However, after closer investigation it becomes evident that some types of innovations are mentioned rather briefly.
Innovation activities connected with new products are mostly mentioned as a need for encouraging product development activities. However, there are also suggestions to create new products on the intersection of the supported spheres and technologies (in environmental technologies, biotechnologies and software).
The new services are mentioned mostly together with new products in the phrases marking the development goals but not specifying them. Otherwise, it has been mentioned to discuss the new role of information and communication technologies - in the programme it is suggested that they can develop new services for the customers as well as for the other industries and spheres, such as public sphere, wellness cluster and the others.
New production methods are mentioned in the text of the documents multiple times. However, most of the mentions are new technologies without particular context or concrete explanation.
The most mentioned innovation activity is creating new marketing strategies and solutions and entering new markets. In 2006 this aspect gets a lot of attention and it is pointed out that there is lack of this type of innovation activities in Northern Ostrobothnia, which is acknowledged as one of the main weaknesses of the region. There is an attempt to find the reasons for this situation: the lack of relevant knowledge in SMEs, the lack of investment within the country.
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Searching for new areas for application of mobile technologies is pointed out as a future opportunity. However, the main question discussed in all of the documents is connected with entering or developing products on international markets. The number of phrases mentioning entering international markets has dramatically increased in 2006 (14 against 3 in 2003). In the regional strategic programme for 2014-2017 the role of public sector in the marketing of the new products is mentioned - procurement activities are listed as measures helping new products of SMEs to enter the markets.
In regional strategic programmes there are also ideas for the potential new customers of new technologies. For example, it is pointed out that tourism, games, multimedia messaging can become more active consumers for software and media applications.
Searching for new sources of supply is the innovation activity that is almost not mentioned in the strategic programmes. The only idea connected with it is the suggestion to use new energy sources.
It is substantial to distinguish between newness, changes that are copied and the newness which is original and unique (Johannessen, 2001).
Innovation activities are a way to improve economic performance of the separate industries and the region in general, and the narrow understanding of the concept doesn’t cover all the relevant processes and factors that create newness and affect the output. However, the risk of applying broader understanding is in making the whole concept too unclear.
The industries associated with innovative activities
In regional strategic programmes Innovative activities are mentioned in different contexts. It is claimed that research and product development in all the industries are the main driving force for regional development and especially spatially balanced development. The research showed that innovative activities are associated not only with ICT (telecommunications and software industries), which are often considered in the research 42 about innovative development of Northern Ostrobothnia. The high-tech industries listed in the documents are ICT, nanotechnological industry, optical measuring technique, printed electronics, biotechnology, wellbeing industry, Arctic research.
Innovations are also mentioned in the context of LMT industries in all of the four regional strategic programmes. The LMT industries that, according to the regional strategic programmes, are benefiting from innovations are construction, metal industry, wood industry, energy industry, mining, food industry.
There were mentions of innovations in industries, that are usually not associated with innovations. For example, tourist industry, for which the goal is achieving steady balanced development. Natural resources exploitation sphere was also regarded in the regional strategic programmes. It consists of fishing industry, aquaculture, fur farming that are traditionally important for some municipalities in the region and were seen as needing innovations for improving competitiveness.
There are five growth industries prioritized for Oulu innovation development that are mentioned in the regional strategic programme for 2004-2006. They are information technology, environmental technology, biotechnology, wellbeing technology, content and media industry. In regional development programme for 2007-2010 the approach to the main industries changed, three industries were characterized as strong traditional industries. They were forest industry, metallurgy and ICT-cluster. The list of growth industries consisted of content production for mobile applications, culture services and technology; wellbeing industry, bio- and environmental technologies, nanotechnologies. Wellbeing industry is an industry uniting pharmaceuticals, bio- and environmental technologies.
Innovations, including organizational innovations, in public sector are also mentioned since public sector can both produce knowledge and regulate innovative development in the region.
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Besides innovations in different industries, innovations in social and cultural spheres were mentioned in all of the regional strategic plans as well. According to the regional strategic programmes, developed innovative environment stimulates not only product innovation, but also social and cultural innovations.
Innovations were talked about in the context of living environment. It was claimed that high quality living environment can be built using innovations as an instrument. As examples of such innovations, second homes, telecommuting, changes in organization of housing for youth and elderly people, living close to nature.
In general, the number of mentions of innovation activities in the context of high-tech industries is comparable to that of low- and medium-tech industries, which allows to conclude that the understanding of innovation activities applied in the regional strategic programmes of Northern Ostrobothnia since 2004 till 2017 is rather broad. The industries that are often considered as having not knowledge-intensive are seen as able to benefit from innovations. The most attention in terms of innovative activities and development is given to the industries, that are called “strong traditional industries” - information and communications technology, forest industry and metallurgy, and high-tech growth industries - media and wellbeing technologies. In case of traditional low-tech industries, the innovative activities are mainly discussed in the context of Centers of Expertise Programme.
The concepts of regional innovation systems, clusters and innovative milieu in regional strategic programmes of Northern Ostrobothnia
As far as the territorial innovation models are concerned, there are several used in the regional strategic programmes of Northern Ostrobothnia since 2004 to 2017. The number of mentions of each concept per each document are presented in Table 6.
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Table 6. The frequency of mentioning of different territorial innovation models in the regional strategic programmes of Northern Ostrobothnia.
Concepts Programming period Innovative milieu Cluster RIS
2004-2006 2 14 2
2007-2010 6 11 2
2011-2013 9 10 8
2014-2017 3 6 0
As we can see from the table, the model of territorial innovation which is used most frequently in the documents is cluster. The concepts of innovative milieu and regional innovation system, the ones that pay more attention to intermediaries, such as educational and research institutions, public policies, has become more popular by 2011-2013 programming period. However, in the regional strategic programme for 2014-2017 the frequency of mentioning all territorial innovation models decreased, while regional innovation system has not been mentioned at all.
In order to systematize how these theoretical concepts were utilized in the documents I have used the approach suggested by Makkonen and Inkinen (2014), adapted it by uniting some of the categories and coded all the quotations concerning clusters, regional innovation systems and innovative milieux according to the features of the models that have been considered in the quotations. The features are the ways the territorial innovation models are defined; components constituting territorial innovation models and processes happening between them; the tools and goals associated with them in the policies; and limitations of the concepts and their applications discussed in the documents. The term “cluster” was actively used in the documents, but not in all the cases any features of the cluster were utilized. Therefore, category “other” was added. The results are illustrated by Table 7. 45
Table 7. The mentions of features of territorial innovation models in regional strategic programmes of Northern Ostrobothnia
2004-2006 2007-2010 2011-2014 2014-2017
Innovative definition 0 0 1 0 milieu components & 0 2 4 2 processes
tools and goals 2 4 4 1
limitations 0 0 0 0
Cluster definition 1 1 0 0
components & 2 3 1 5 processes
tools and goals 7 3 5 1
limitations 1 0 0 0
other 3 4 4 0
RIS definition 0 0 2 0
components & 2 1 0 0 processes
tools and goals 0 1 6 0
limitations 0 0 0 0
There is a definition given in the regional development strategy for 2004-2006 and 2007- 2010. According to it, cluster is a complex consisting of different branches. It functions through effective allocation of economical resources, sharing of knowledge and ability to cooperate. It includes companies of different size, educational and research institutions and networks created by public sector. The purposes of clusters in different industries are 46 occasionally mentioned in the documents. They are seen as a tool for creating critical mass and commercialization of know-how. Clusters are considered as boosting research and helping to create a pool of know-how in the industry.
The quotations that qualified into “other” category show that cluster has been used as a buzzword. It has also been applied to name the industries that do not really form a territorial innovation system, such as natural resources exploitation sphere. In the regional strategic programme for 2014-2017 territorial innovation models are used much less and the concept of cluster was mentioned mainly in the context of ICT industry.
Regional innovation system concept is mentioned in the regional development strategy for 2004-2006 and 2007-2010 (2 mentions in each), it received significantly more attention in the programme for 2011-2014 (mentioned 8 times) and was not mentioned in the programme for 2014-2017. It is clear that the model of regional innovation system was not fully adopted in regional strategic programmes. There has been minor attempts to define the components of the regional innovation system. In the strategic plan for 2011-2014, which is utilizing all the territorial innovation models most actively, there were paragraphs giving definitions to RIS. According to the document, innovation system is a “well working network of innovative milieux with defined areas of specialization”. So it is implied that regional innovation system is a next step in the development of innovative milieux, which is set as the goal for the regional innovative development. The components and links between them are, however, not discussed.
The paragraphs in the strategic programme for 2011-2014 containing definition of regional innovation system are showing the interpretation of interrelation between regional innovation system and innovative milieu. Though, all of the three concept were mentioned in the strategic programmes, the researched documents did not contain any discussion on the interconnections between clusters and regional innovation systems or clusters and innovation milieux.
As Table 3 shows, there has not been much critique of these concepts or discussion about their limitations. The only mention was considered the concept of cluster, it was made in 47 the strategic programme for 2004-2006 - it was pointed out that assessing cluster development can be problematic because a cluster consist of various branches and involves different spheres so it is sometimes challenging to delimitate the borders of the cluster.
Besides using the concepts of cluster, innovative milieu and regional innovation system, there has been numerous mentions of the networks in different spheres that help to concentrate know-how and generate innovations without details about the structure and mechanisms of functioning of these networks.
Spatial scaling of innovation systems
There are mentions of different spatial scales associated with innovation activities in the regarded documents. The most frequently used is international scale. The most phrases mentioning international scale are discussing the necessity for regional companies to enter international market, which is seen as the main opportunity for growth since local and national markets are too small. In the regional strategic programme for 2007-2010 there is an idea of possible inter-firm cooperation which can assist entering international markets - in this situation a bigger or newer company can take a role of a leader and sell products and services produced by other companies of the network.
Promotion of allocating foreign companies in the region is also prioritized. Attracting research and development units of international companies to the region is also mentioned as a tool for future development.
International cooperation and the influence of international markets are payed attention to. It is stated that the need to increase competitiveness on international market is making the companies to increase their specialization and be more willing to establish long-term cooperation, including cooperation in financial sphere. International knowledge flows helping to develop new products and find new application spheres for existing technologies are also emphasized.
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Utilizing international funding sources is another important aspect discussed in regional strategic programmes. It is pointed out that national funding opportunities are limited and not enough for regional innovation system, therefore it is necessary for the companies to search for the funds outside of Finland. The international funding sources listed in the regional strategic programme for 2004-2006 include EU funds, for example, the 6th and 7th EU Framework Programme for Research and Technological Development (FP6 and FP7). It is also suggested to develop new financing models, for example buffer funding, that can help to improve the effectiveness of funding received through EU programmes.
Cooperation within Barents region developed by Barents-strategy is seen as a tool for entering the market in the region. Other potential markets listed in the strategic programme for 2011-2014 are Russia with Sochi Olympics, China and India.
The weaknesses of regional innovation system on international scale are payed attention to in the regional strategic programme for 2007-2010. The mentioned weaknesses are a small number of international companies and a shortage of international experts. The challenges caused by international competition are also noticed.
Horizontal interactions with other Finnish regions are also mentioned in the strategic programmes. The competition with other regions of Finland are mentioned almost as often as cooperation and Northern Ostrobothnia is seen as a locomotive for development in other regions.
Such relations as cooperation with Lapland or Karelia are listed as prioritized, though the main effect discussed in the documents is concerning more even development on national level. In the regional strategic programme for 2011-2017 there is a discussion about the common vision for innovative development and innovation system in the whole Northern Finland.
The vertical links with national scale are mainly consisting of funding received through different national innovation programme. The most important ones are Expertise Center Programme and Cohesion and Competition Programme (Koko). 49
As far as the links with local scale are concerned, in the researched documents it is, of course, pointed out that Oulu is an undebatable center of Northern Ostrobothnia, as well as Northern Finland with concentration of main business activity, knowledge and labour resources.
The horizontal links with Oulu on national and international level are also considered in the regional strategic programmes for Northern Ostrobothnia. Oulu is called a nationally and internationally important high-technology center whose position on international level should be strengthened. On national level the partner relations with other big cities, such as capital region, Turku and Tampere, that are also national knowledge and innovation centers, are considered.
There is also horizontal cooperation in the form of development zones, such as Oulu- Kajaani, Oulu-Kokkola, Bothnian arc, which are seen as the tools of facilitation knowledge transfer. However, the mechanism of their work is not specified in the regarded documents.
However, the view on Oulu innovation system in relation to regional innovation system of Northern Ostrobothnia is not clearly defined. Oulu educational and research systems are seen as core for regional innovation system of Northern Ostrobothnia. Other municipalities are dependent on Oulu educational and research institutions.
The strong sides of other municipalities are also payed attention to. Raahe has a big international company Rautaruuki as locomotive and is involved in Center of Expertise in metal industry together with Oulu South, as well as Steelpois and Softpolis. The profile of Northeast Finland, according to the documents, includes forest industry and innovations. However, peripherality of these regions in terms of innovations is not really discussed. There was one mention of establishing a goal to build RIS in Oulu South, but the limitations, possible elements, mechanisms and tools were not mentioned.
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To summarize the chapter I would like to outline the main findings of the research on a temporal scale. The definition of innovative activities has been broad in all of the documents, however in the regional strategic plan for 2007-2010 there has been a shift towards emphasizing the role of marketing and sales. In terms of industries, both high-tech and low-tech have been regarded as the sectors benefiting from innovative activities and structures. However, the approach to their innovative development has been mainly through the Centers of Expertise Programme. In the regional strategic plan for 2014-2017 the approach discussing potential innovative activities in concrete industries has been used.
There has been a shift in the way territorial innovation models are used in the policies. In general, during the latest programming period, there has been more cautious attitude to using the terms. The concept of cluster has seen competition from the concept of innovative milieux, while the latter has been used to introduce the regional innovation systems, which has not yet been actively used.
The role of international scale for regional development, mainly international markets and financing was much more actively pointed out in the programme for 2007-2010. The role of other scales was mainly perceived in the same way during the whole period from 2004 to 2017.
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Conclusions
Technological development in Northern Ostrobothnia has been affected by a range of various factors. As probably all successful stories, the success of Oulu economic development was a consequence of different factors and actions whose contribution was summarised. There has been processes and influences from all geographical scales: local, regional, national and global.
Regarded regional strategic programmes of Northern Ostrobothnia seem to acknowledge the role of all geographical scales in innovative activities, but still their interpretation of those roles is rather limited - on the local scale the dominant position and the most of the attention is given to Oulu, while innovation in other sub-regions and municipalities has been tackled mainly by national policies (Centers of Expertise Programme in particular).
Though Finnish technological policy as well as Oulu development strategies have mostly emphasized high-technology industries as the most promising and competitive industries, in the regional strategic programmes for Northern Ostrobothnia the attention has been equally payed to traditional low- and medium-tech industries as the sectors that provide employment and stable production and are playing an important role for the region. Innovation activities in such industries can have a whole range of positive effects, including increased competitiveness of their product, utilization of new resources, decreasing expenses. However, in the policy documents there is mainly a declaration of need for supporting innovativeness in LMT industries, while the mechanisms of such support or positive effects of innovations are neglected.
As far as territorial innovation models are concerned, there were three different models used in the regional strategic plans for Northern Ostrobothnia: innovative milieu, cluster and regional innovation system. In the time period from 2003 to 2013 there has been a change in the conceptual preferences: the interest to the term “cluster” which was used extensively and often inaccurately has slightly decreased and in the strategic programme for 2014-2017 it was mainly referred to information and communications technology 52 sector, while there has been more references to innovative milieux and slightly more interest in its components and structure. The concept of regional innovation system is still practically not adapted by the regional policies in Northern Ostrobothnia, insofar it was seen as the next stage of innovative milieu and is considered as a vague goal for the future development rather than an existing structure.
The definition of innovation adopted by the regional strategic programmes of Northern Ostrobothnia is broad, however the term itself is often used only for marking future priorities and goals without explaining them, therefore it is possible to make a conclusion that it is often used as a buzzword. Nevertheless, one aspect of innovative activities is quite elaborated on - it is finding and entering new markets and developing the ways to sell the product. The importance of this type of innovative activity has been emphasized since 2006 and became one of the most discussed issues.
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