Notes on lectures key themes of innovative and sustainable regions
Lecture 1 – 15/11/23
Neoclassical approach
- Free markets – no state interventions needed only to move obstacles for the free market
- Convergence of income inequality
o Capital – decreasing marginal productivity (productivity will diminish as production
increases; in poor countries it is more efficient to increase capital, because the
output is relatively higher than rich countries investing)
o Labor – labor and money flow in the opposite direction
Trickle-down effects (the wealth generated by the rich will eventually benefit
the less rich too)
o Technology – is a public good
- Resilience depends on the ability to bounce-back to pre-shock equilibrium
- Innovation is linear process
o Research -> development -> production -> marketing -> use
- Spatially-blind policies – maximizing agglomeration externalities, which they assume boosts
overall outputs
Institutional approach
- Good or bad institutions
o Reduce transaction costs
o Generate trust
o Enable coordination
- Divergence of income inequality
o Bad institutions are hard to change and takes a lot
o No trickle down effects of benefits
- Social capital – willingness to cooperate
o Trust
o Norms
, o Networks
- Innovation system – every institutions fulfills a certain role and interact
o Incubation spaces for innovation
o Collaborations
o Infrastructures
Evolutionary approach
- History matters
o Path dependence
o Place-based policy – no one-size-fits-all
- Divergence of income inequality
o Accumulated knowledge; knowledge base of a region
o Labor and money flow in the same direction from poor to rich
o Self-reinforcing forces
- Bounded rationality (people can only take in a certain amount of information to make
rational decisions)
- Cumulative causation – increasing returns to scale; agglomeration forces; an growing
business environment can attract other businesses and with than new jobs; multiplier effect
- Innovation
o Leapfrogging
o Related/ unrelated diversification
o Ability to diversify
You need to understand the policy, theories and empirics to understand the innovative and
sustainable regions. Every theory provides a perspective to understand a certain theme; framework
of analysis. Data and methods are being used to test and gain evidence of the themes. This eventually
lead to an appropriate policy implication.
You have different times with
their appearing theories
being implied:
1. Neoclassical theory
as a key theory (since
1970)
2. Institutional theory
(since 1990)
3. Evolutionary theory
(since 2000s)
4. Different theories
(now)
The different theories contradict and complement each other. Theories co-exist at any point in time
and ‘old’ theories may co-exist with new ones.
Dimensions of sustainability (planet, profit, people):
- Environmental sustainability
- Resilience sustainability
- Social sustainability
, - Profit sustainability (economic)
1. Neoclassical approach
How to facilitate trade and mobility, eliminate obstacles to proper market functioning, strengthen the
knowledge economy? It is about economic growth to benefit and knowledge spillovers. In the
interest of policy makers while it promotes economic growth and stimulation of innovation and
investment to create economic opportunities. It predicts convergence of regions and their income
inequality (labor, money, technology)
Innovation is conceptualized by: linear process of Research and Development resulting in innovation
at the market. More the technical innovation.
Sustainability is conceptualized by: profit sustainability according to innovation is the source of
economic growth. The environmental sustainability was absent, all about economic growth and
performance indicators to compare economic regions and employment growth rate.
Key data and methods: were R&D investments, human capital, science base and economic growth
(GPD).
Key policies: are ‘people-based’ and structural cohesion funds. Many actors are involved, but most
are firms who invest in research and development.
The Lisbon Strategy policy was made to invest 3% of GDP in research and development. This is
criticized later, because not every region can obtain 3% investments in GDP and R&D. R&D policy is
about the ‘one-size-fits-all’ approach, and therefore a people-based policy.
2. Institutional approach
Concept of the innovation system, their
institutional compacts are important.
Quality of institutions needs to be taken
into account, collaborations and
infrastructure for innovation and
regional development. Collaborations
Lecture 1 – 15/11/23
Neoclassical approach
- Free markets – no state interventions needed only to move obstacles for the free market
- Convergence of income inequality
o Capital – decreasing marginal productivity (productivity will diminish as production
increases; in poor countries it is more efficient to increase capital, because the
output is relatively higher than rich countries investing)
o Labor – labor and money flow in the opposite direction
Trickle-down effects (the wealth generated by the rich will eventually benefit
the less rich too)
o Technology – is a public good
- Resilience depends on the ability to bounce-back to pre-shock equilibrium
- Innovation is linear process
o Research -> development -> production -> marketing -> use
- Spatially-blind policies – maximizing agglomeration externalities, which they assume boosts
overall outputs
Institutional approach
- Good or bad institutions
o Reduce transaction costs
o Generate trust
o Enable coordination
- Divergence of income inequality
o Bad institutions are hard to change and takes a lot
o No trickle down effects of benefits
- Social capital – willingness to cooperate
o Trust
o Norms
, o Networks
- Innovation system – every institutions fulfills a certain role and interact
o Incubation spaces for innovation
o Collaborations
o Infrastructures
Evolutionary approach
- History matters
o Path dependence
o Place-based policy – no one-size-fits-all
- Divergence of income inequality
o Accumulated knowledge; knowledge base of a region
o Labor and money flow in the same direction from poor to rich
o Self-reinforcing forces
- Bounded rationality (people can only take in a certain amount of information to make
rational decisions)
- Cumulative causation – increasing returns to scale; agglomeration forces; an growing
business environment can attract other businesses and with than new jobs; multiplier effect
- Innovation
o Leapfrogging
o Related/ unrelated diversification
o Ability to diversify
You need to understand the policy, theories and empirics to understand the innovative and
sustainable regions. Every theory provides a perspective to understand a certain theme; framework
of analysis. Data and methods are being used to test and gain evidence of the themes. This eventually
lead to an appropriate policy implication.
You have different times with
their appearing theories
being implied:
1. Neoclassical theory
as a key theory (since
1970)
2. Institutional theory
(since 1990)
3. Evolutionary theory
(since 2000s)
4. Different theories
(now)
The different theories contradict and complement each other. Theories co-exist at any point in time
and ‘old’ theories may co-exist with new ones.
Dimensions of sustainability (planet, profit, people):
- Environmental sustainability
- Resilience sustainability
- Social sustainability
, - Profit sustainability (economic)
1. Neoclassical approach
How to facilitate trade and mobility, eliminate obstacles to proper market functioning, strengthen the
knowledge economy? It is about economic growth to benefit and knowledge spillovers. In the
interest of policy makers while it promotes economic growth and stimulation of innovation and
investment to create economic opportunities. It predicts convergence of regions and their income
inequality (labor, money, technology)
Innovation is conceptualized by: linear process of Research and Development resulting in innovation
at the market. More the technical innovation.
Sustainability is conceptualized by: profit sustainability according to innovation is the source of
economic growth. The environmental sustainability was absent, all about economic growth and
performance indicators to compare economic regions and employment growth rate.
Key data and methods: were R&D investments, human capital, science base and economic growth
(GPD).
Key policies: are ‘people-based’ and structural cohesion funds. Many actors are involved, but most
are firms who invest in research and development.
The Lisbon Strategy policy was made to invest 3% of GDP in research and development. This is
criticized later, because not every region can obtain 3% investments in GDP and R&D. R&D policy is
about the ‘one-size-fits-all’ approach, and therefore a people-based policy.
2. Institutional approach
Concept of the innovation system, their
institutional compacts are important.
Quality of institutions needs to be taken
into account, collaborations and
infrastructure for innovation and
regional development. Collaborations
