Institutions and the Geography of Innovation: A Regional Perspective

Abstract: Economic geographers have long been intrigued by the role of institutions in innovation processes. It has been argued that differences in institutions are among the factors explaining the uneven innovative capacity across and within countries. The regional innovation system approach highlights the interrelationships of firms, universities, governmental authorities and other organizations, as well as how those relations are influenced by the institutional setting in a region. There is a general perception in this stream of literature that institutions do matter. They constitute a legal framework for actions, define communication patterns and influence learning possibilities. However, these studies have been criticized for their lack of discussion of the interaction between institutions at different geographical levels, the relation between individuals and institutions and the impact of changes in the institutional framework on innovation activities. This thesis takes the regional innovation system approach as a point of departure and aims to advance knowledge about the role of institutions (i.e. hinderers vs enablers) in innovation processes within regional innovation systems. It especially focuses on the interaction of different types of institutions at different geographical levels, on how institutional influence changes as an innovation process develops, and on the role of regional authorities in changing institutional conditions for the actors. The theoretical framework relates the insights of regional innovation systems studies to theories of new institutionalism in organizational studies, new and old institutional economics and historical institutionalism. Relating regional innovation systems studies to institutional theories enables conceptualization of institutional diversity within the system. The reference is to different types (e.g. regulative, normative, cognitive) and different geographical levels (e.g. regional, national, global) of institutions which form a complex framework for innovation activities. Organizational diversity is considered by using the knowledge base (i.e. analytical, synthetic, symbolic) approach, which can be applied at industry, firm, and activity levels. The empirical focus of this thesis is on Scania, which is a region in Southern Sweden. Previous studies have analyzed various sub-sets of Scania’s innovation system and highlighted on-going innovation activities in the region. The region is also characterized by organizational diversity including various actors when it comes to a critical knowledge base for innovation activities. Therefore, Scania is a suitable case for the analysis. The findings of this thesis reveal that institutional diversity with boundedly rational diverse actors leads to multiple paths of development within a region. Since institutions have different incentives and functions, they can complement, reinforce or contradict each other while influencing innovation processes. Organizational (i.e. critical knowledge base) and individual (i.e. position in the organization, personal qualities) characteristics lead to different responses of actors to institutional incentives. For example, increasing consumer interest in health issues (changing norm) creates an incentive for firms in the food sector to develop healthy products. When the combination of analytic and synthetic knowledge bases is critical to the innovation activities of firms, they respond to this incentive by developing value added products with health benefits, while firms dominated by the synthetic knowledge base from one field of expertise introduce products which are ‘healthy in a natural way’ – i.e. sugar-free (or reduced sugar) alternatives of juice, cereals, or ketchup. Furthermore, some institutions are more relevant at different stages of innovation processes than others. For example, during the initiation and establishment phases of organizational innovation (i.e. novel organizational form of a research unit) the institutions that hinder a change process are most prominent, since all the decisions related to the formalities of the unit then have to be made. The institutions that are related to benefiting from the results of a change process start playing an important role in a later phase. Policy makers should take institutional and organizational diversity into account when designing regional support programs. Knowledge base characteristics can serve as guidelines for the design of the programs at sectoral level and facilitate fine-tuned implementation at firm level. Awareness of institutional diversity enables the identification of supporting and contradicting institutions, and is necessary to achieve the goals of the programs. This thesis consists of four articles that have been published or submitted to peer-review journals, and an introductory part which presents a theoretical overview and discusses the methodological approach and main conclusions.