Geoforrrm. Vol. 23. No. 3, pp.

365382,
Pnnrrd in Great Bntain

1992
0

lxJ1~718S/Y2 $5 00+0.00
192 Pergamon Press Lrd

Regional Innovation Systems:

Competitive Regulation in the New
Europe

PHILIP

COOKE,*

Cardiff,

U.K.

Abstract: This paper is concerned

with the concept of regulation.
Formerly,
economic regulation was seen as a necessary corrective to capitalisms cyclical and
spatially variable tendencies,
enabling a competitive
system of economic activity to
remain in place without collapsing under the strains of its own internal centrifugal
forces. Increasingly,
the role of iegulation
has been reinterpreted,
being viewed
either as a major source of unnecessary
restraint upon enterprise or as a necessary
element in enabling firms to compete more effectively. This paper examines the role
regulation can play as a form of proactive support for industry. It does so in three key
sections. The first focusses upon three different approaches
to regional innovation,
drawing on material evidence from Japan, Germany
and France. The second
focusses upon regional innovation
within the United Kingdom,
with particular
reference to Wales. The third reports upon developments
which have attempted
to
move the microregulatory
structure of Wales towards European best practice within
the sphere of regional innovation through a process of learning through interaction
with more dynamic, institutionally
networked
regions in Europe. The main conclusions of the paper are that such interactive learning can produce evidence of very
rapid institutional
reactions,
although there is a time lag before the economic
performance
and dynamism of business is harmonized
across regions. Nevertheless,
the case of regulatory
intervention
in the development
of a network innovation
syslem in Wales testifies to the importance of a regulatory perspective which is equal
to tackling the liberating, as well as the controlling, dimensions of regulatory activity.

Introduction
of regulation
is largely a theory of control.
It suggests a solution
to the problem:
how can a
competitive
system of economic
activity remain in
place over long periods without collapsing under the
strain of its own internal,
centrifugal
forces? The
answer provided
is that the state and civil society
impose a regime of moderation
upon those fissiparous tendencies
(ACLIETTA,
1979). However, in a
period such as that experienced
by the Western
economies over the past decade, characterized
by oilThe theory

* Department
of City and Regional Planning, University of
Wales College of Cardiff, P.O. Box 906, Cardiff CF13YN,
Wales, U.K.

365

shocks, deindustrialization,
global competition,
the
formation of gigantic trading blocs, and challenges to
their dominant
mode of economic organization,
the
concept of regulation per se has come into question.
From a situation
where regulation
was seen as a
necessary
corrective
to capitalisms
cyclical and
spatially variable tendencies,
it has either been seen
as a major source of unnecessary
restraint
upon
enterprise
(e.g. in the U.K. and U.S.A.),
or as a
necessary
element
in enabling firms to compete more
effectively
(e.g. in Japan and most Western European countries).
It is in this second sense-regulation
as a form of proactive support for industry-that
this
paper is couched. There are two reasons for this.
Firstly, those countries
that have conceived
regu-

366
lation

Geoforum/Volume
in its proactive

sense

have undeniably

been

logical infrastructures.

23 Number

3/l 992

It is this, the strong innovation

more economically
successful than those which have
perceived regulation
in its first, and negative, sense.
Secondly,
even in the U.K. and U.S.A.
there is
beginning to be a recognition
that the second sense of

base, to which the analysis in this paper will be

devoted.
It is one of the key forms that modern,
proactive, regulation at the sub-central
level takes.

regulation
is more appropriate
to dealing with the
competitive
challenges of the late twentieth century.
This is better developed in the U.S.A. than the U.K.

The remainder

Recent evidence (see HATCH,

1989) suggests that a
Western European
model of regulatory
support for
industry is gaining adherents rapidly.
Of particular

interest

to regionalists

is the fact that the

focus for this renewed interest in proactive regulation

is subcentral.
That is, it has become apparent that the
preferred spatial level for regulatory intervention
is
that of the region rather than the central state. Tellingly, that preference
does not preclude the salience
of a suitably facilitative
supranational
state apparatus, archetypically
that of the European
Commission and its related democratic
institutions,
though,
in the U.S. case, the Federal Government
plays a
comparable
role.
In this respect, the state once again plays something
like the part assigned to it by ALTVATER
(1978) as
an ideal collective capitalist,
except that it is not
ideal, either in the sense of knowing the best possible way forward or in its capacity to essentialize
the
best interests
of its competing
business
subjects.
Nevertheless,
and keeping in mind a certain margin
of error on both counts, it seems that sufficiently
convincing cases have emerged to make the model of
the dynamic,
regulated,
regional economy
one to
which there is a widespread aspiration.
The regions which now play this role include Smaaland in Sweden,
Jutland
in Denmark,
EmiliaRomagna
in Italy
and Badcn-Wurttemberg
in
Germany. They have in common the following. They
have never been deeply touched by the ancien rPgime
of Fordism (GRAMSCI,
1971). They possess dense
clusters of small firms or a mix of large and small firms
which, crucially,
are closely integrated
through
networks. They have, in general, a higher density of
skilled (including
multiskilled)
workers than elsewhere. They are innovative,
and their innovativeness
is crucially dependent
upon judicious and advanced
provision
by both public and private agencies of
highly-developed
research and scientific and techno-

of this paper

contains

three key sec-

tions. The first focusses upon three different

approaches to regional innovation:
the grassroots, the
network and the dirigiste forms. Each is conceptualized from material cases drawn from Japan, Germany and France. The second section of this paper
turns the focus towards the U.K.-a
country which
(as the section testifies) has a poor record in innovation both before and during the past decade and has
a particularly
weak regional system of innovation.
In
this section, the focus will sharpen by reference to a
part of the U.K., Wales, where there is evidence to
suggest that a base exists for European-style
innovation growth, because of its microregulatory
structure. Though weak, this structure has enormous potential for rapid readjustment
towards
European
norms. The last section of this paper reports upon
what this microregulatory
structure has been doing to
pursue European best practice. This task is difficult to
achieve, but without it, the people it represents
are
likely to be condemned
to a slow-track European
economic future by comparison
with the fast-track
profiles being pursued by the proactively
regulated
regions of the northern and central European
Community member-states
(as analysed by LEBORGNE
and LIPIETZ,
1990). Conclusions
are drawn which
point to the difficulty of applying lessons learned from
close interaction
with successful growth regions in
Europe. At no point is it remotely suggested that such
experiences
can be reproduced.
However, the negative notion that everywhere
is unique and thus must
work out its own salvation solipsistically
is resolutely
eschewed. The message of this paper is that proactive
regulation
works. that useful lessons can be learned
from successful growth regions, and that the U.K. has
unnecessarily
handicapped
itself by a naive government belief in the hidden hand of the market. If the
U.K. is to innovate, it must first innovate its rcgulatory structures.

Regional Technology

Policies: Three Models

Many countries have a longer tradition of implementing regional technology policies than the U.K. Even

Geoforum/Volume

23 Number

so, there has been

technology
transfer

a sharp acceleration
in regional
(RTT) during the past decade.

Moreover,
took root
elapsed

3/l 992

in those countries
where new thinking
in the early 198Os, sufficient
time has

for monitoring

and review

underway.
In the present century,
a considerable
length of experience
include

367

Japan,

The objective

Germany

to be currently

the countries
in operating

with
RTI

and France.

of establishing

agencies

to support

RTT in Germany

can be divided

simply between those originating in and funded from

the Federal Government
and those which are the
responsibility
of the Liinder. Support to fund technology transfer comes through indirect measures with
an emphasis
focus during

on collaborative
research. A change in
the 1980s involved boosting support for

SMEs. Examples of collaborative

research funded in
this way are the programmes
for production
enginto diffuse tech-

nological know-how
to the furthest possible extent
and with a view, in particular,
to reaching small and
medium
enterprises
established
in Japan.

Measures

(SMEs)
is probably
longest
The Kohsetsushi centres date

from the 1920s when they were established

as industrial experimentation
centres
to aid economic
modernization.
There are now 169 of these centres
conducting
research. providing analysis, testing and
inspection
services. technological
guidance and advice, providing employee training, making available
equipment
and laboratories,
and conducting
cooperative research projects with SMEs. Kohsetsushi
centres can be found in every Japanese prefecture.
They are administered
either by prefectural
or
municipal
governments.
Funding
comes from the
Ministry of International
Trade and Industry (MITI),
the Japan Small Business Corporation
and a few
industry
associations
(20%), but the largest proportion of funding (80%) comes from prefectural
or
local government.
In 1988 the total budget for the
system was $496.4 million, of which personnel costs
accounted for 60%. Total staff numbers were 6900, of
which 5300 were engineers and researchers.
Average
centre staffing was 40 people, half employed less than
30 while 14 employed 100 or more. In 1988 the centres
provided technological
guidance in 472,000 cases, of
which 24,700 involved sending experts to firms. There
is little direct guidance of the centres from above but
there is considerable
indirect guidance via MIT1 research laboratories,
MITT funding and government
guidance of an informal kind. The centres do not
undertake fundamental
research, but rather deal with
the problems of SMEs in light of their understanding
of state-of-the-art
knowledge
generated
in research
laboratories
in Japan or elsewhere. SMEs appreciate
the free or nominal charges for services. However,
some centres show signs of age in both equipment and
staff and resources are sometimes spread too thinly
(e.g. many research projects are run not by teams but
by single researchers)
(SHAPIRA,
1991).

eering, information
technology,
materials research,
biotechnology
and physics/chemistry.
Collaborative
funding rose in each field except biotechnology
between 1985 and 1988 and ranges from 100% in production

engineering

to 45% in biotechnology.

Where SME support is strong, the proportion

of
collaborative
funding rises accordingly.
Measures in
1990 to promote research and development
(R&D) in
SMEs involved funding for: improving the range of
technology
development
in industry
(DM
1994
million); strengthening
collaboration
with the science
base (DM 744 million);
and establishing
SMEoriented
technology
supply (DM 37 million).
The
mechanisms
by which these allocations
take place
are: private industry; universities;
research institutes
and societies;
and industrial
research associations.
Industry spends DM 41.3 billion, research institutes,
societies and associations
spend DM 7.2 billion and
higher education
DM 8.3 billion per year (1987 figures).
At the Land level the proportion
of total German
science spending has remained constant at just over
30% in the period 1979-1989;
in real terms this
represents
an increase
of 11% over the period.
Universities
account for the greatest share of this
(90%). Lander have their own specific measures
regarding expenditure
on technology
transfer. As a
case in point, Baden-Wiirttemberg
has three special
technology-related
programmes
to assist SMEs to
establish R&D laboratories,
install new technologies
and to establish new, technologically-intensive
startups. In addition the Landgovernment
provides direct
and indirect subsidies to the Steinbeis Foundation,
a
privately-run
network
of I30 technology-transfer
centres based in higher education institutions
(HEIs)
and capable of supplying problem-solving
know-how
on technological
matters to SMEs (for further information see COOKE
and MORGAN
1990, 1991~;
also MEYER-KRAHMER,
1990).

368

Geoforum/Volume

France is a case of much more centrally guided RIT

than either Japan or Germany.
From the 195Os, often
under political pressure from less favoured regions,
the French government
has pursued a limited policy
of decentralization
of government
research laboratories from Paris. The atomic research centre CEA
was moved to Grenoble
in Rhone-Alpes
as early as
1956. In 1961 part of CNET (telecommunications),

23 Number

30992

Vetrotex-Saint
Gobain, employing
at least 5000 researchers
in 1987. The CRITT
system is wellrepresented
in the region. There are three general
CRITT centres and seven specialized CRITI or local
transfer centres with two more projected.
a further
seven
local technological
networks

exist in the region.

Finally,

In addition
counselling
Rhone-Alpes

SOCOTEL
(telecommunications)
and
CEMS
(meteorology)
were decentralized
to Brittany,
as
were three oceanography
centres, a military research

has six technopoles,

though there is some local scepticism about the success of these (COLLETIS,
1991).
Funding for these RTTs comes from a number of
sources, mainly the French government
agencies such

centre
tions).

as the Ministries of Education,

Science and Industry,
ANVAR (where work with SMEs occurs), EEC (e.g.

and CCETI
(television
and telecommunicaToulouse received similar decentralizations
in

aerospace,

and other research

laboratories

have been

similarly transplanted.
Later, service provision to the
regions was improved
by the decentralization
of
ANVAR,
the French agency for the exploitation
of
research,
and CNRS the national
science research
council. In the 1980s CRITT, the regional centres for
innovation
and technology transfer, were set up to act
as a bridge between national R&D laboratories
and
local industry,
particularly
SMEs. Another
key element of French RTT is the establishment
of rechnopoles linking public and private R&D, vocational
training and advanced technology firms. Expenditure
on these so far amounts to at least FF2 billion. There
are approximately
16 such centres in existence and
the eight most developed
had 400 establishments
employing 10,000 people by 1986 (ROTHWELL
and
DODGSON,
1991).
If we look at the functioning
of French RTT at the
regional level, there is no better region to observe
than the RTI rich region of Rhone-Alpes
(which,
like Baden-Wurttemberg,
is one of the Four Motors
for Europe
with which Wales has close links).
Rhone-Alpes
has 10% of the French industrial
and
research base, but receives 18% of the regionalized
(excluding
Paris) civil R&D budget.
Rhone-Alpes
has the following
national
R&D centres:
CNRS
(National
Centre
for Scientific
Research),
INRA
(agronomy),
INSERM
(medical),
CENG (nuclear,
linked with CEA) and CERN (nuclear,
local facilities). There are nine universities
and polytechnic
institutes
supported
by 21 technical
high schools
employing
5000 academic
researchers.
In total,
public research in Rhone-Alpes
is represented
by 240
laboratories
employing 20,000 people. There are also
important
private research centres of companies like
Merlin-Gerin,
and
Rhone-Poulenc.
Pechiney,

SPRINT)

and private

firms.

The

regional

govern-

ment of Rhone-Alpes
only has a small part to play in
funding this activity. It devoted FF70 million to research and FF30 million to innovation
in 1989. The
regional arm of ANVAR spent FF170 million in the
same year. The budget for education
of the RhoneAlpes government
was FF1398 million or 49.6% of
the total; a portion of this supports research in technical high schools (COLLETIS,
1991; NEUMANN,
1991).

Three models of regional technology transfer

On the basis of the preceding
discussion
of actual
systems of RTT in advanced economies,
it is possible
to draw up schemes for three different
models of
technology transfer control and service delivery. The
three models can be differentiated
along five dimensions. These are: primary source of initiative; primary
source of funding; predominant
competences;
degree
of coordination;
degree
of specialization.
These
dimensions
cover the main management
and organizational issues of power, resources, expertise, control and focus. These can be hypothesized
to vary in
relation
to each other according
to the historical
origin and present structure
of the power and resource flows typical of the three different
RTT
models. The models in question are described below.
Model 1: the grassroots approach.
In this model, the
perceived need for technology
transfer originates at
the local level and begins in a geographically
and
historically
uneven
way. A local university
may
recognize itself or be recognized as having a particular competence
in a specialized field which is of value
to a local industry.
A particular
municipality
may

Geoforum/Volume

23 Number

369

30992

decide that firms in its locality require technology

transfer. A private company might recognize a mar-

ments, firms and intermediary

organizations
such as
Chambers of Commerce, business associations and so

ket niche for selling its technology transfer expertise.

Funding for such local arrangements
will be supplied
locally through market transactions
or local subsidies
of a directly or indirectly
public origin. The main

on. Finally, the network model will facilitate specialization of activities,

since the level of information
flowing through the system regarding the particular

competences
applications,

of the
analysis,

ties of direct

relevance

centre will tend towards the

testing and near-market
activito local firms. Coordination

between the scattered centres could not be expected

to be high, at least in the formative
stages of the
development
of such arrangements.
Finally, it would
be likely that centres would have relatively

diversified

customers,
defined primarily
by the nature of the
local economy.
The exception
to this might be a
specialist university research centre engaged in technology transfer. But even there, such a centre might
find itself being drawn into servicing a broader range
of firms at a lower level of technological
sophistication than its expertise might warrant. The Japanese
Kohsetsushi
system leans towards this grassroots
model even though it is, by now, subject to administrative guidance and some funding from MIT1 which
considerably
mitigates the uncoordinated
tendencies
implicit in the model.
Model 2: the network
approach.
The network
approach to RIT will consist of some elements of the
grassroots model, but the system will be more subject
to initiative taking, policy-formation
and to funding
originating
at the regional or nation-state
level of
government.
Networking requires at least a minimum
of strategic guidance,
animation
and direction from
above if it is to work efficiently.
However,
such
guidance needs to be handled with a light touch and
with sufficient sensitivity not to transgress the technological purview of the actors in the system. One key
way of giving broad direction to a variety of different
types of technology transfer centre is by linking funding for centres to a strategic research and technology
development
policy. Equally, though, there will be
scope in a network model for funding to be responsive
to initiatives from below. The competences
present in
a networked
RTT system may vary from the capacity
to undertake
basic research to the ability to offer
near-market,
relatively low-level information
and advice to firms. Networking
implies some degree of
coordination
by definition.
RTI centres at lower
levels of competence
learn of what is available from
those higher up the chain, as well as from govern-

expertise
provided

of centres will be high. Overlaps in services

will be minimized,
though not necessarily

removed,
principle,

and the efficiency of the system should, in

be quite high. In spite of this, in a devel-

oped network
whole
cations,
example,

model

to meet
analysis
SMEs)

the capacity

a wide

range

of the system

of day-to-day

and testing demands

should also be high.

as a
appli-

(from, for
This model

approximates
to the German approach to RTT, particularly
as represented
in its successful
BadenWurttemberg
version.
Model 3: the dirigiste approach.
The dirigiste
model is essentially
the opposite of the grassroots
approach
and operates to implant an RTT system
where there is little initiative from below, or where
the initiative from below is weak or considered inadequate. Hence, the primary source of the RTT initiative will reside at central state, or possibly regional
government
level.
Because
advanced
industrial
economies have government
research laboratories
it
is natural that an RTT system should be built around
their decentralization,
because government
is both
controller
and principal
funder
of such centres.
Whether or not the main emphasis in RIT development rests on decentralization
of R&D laboratories
or on the design of a new system, the resources in a
dirigiste system will be overwhelmingly
public, at
least in the first instance, and largely governmental
in
origin. There is a high probability that, because of the
fundamental
nature of much governmental
research
laboratory activity, the competences
of the personnel
transferred
in a decentralized
system or employed in
a newly-established
system will tend towards basic
rather than applied, and large-firm facing rather than
SMEs. Due to the high degree of central administration and funding involved,
the level of coordination between centres in a regionalized
system may
be expected to be high. However, where local technology transfer centres coexist, there is no necessary
or obvious basis for linkage, indeed the opposite may
be the case. Equally the requirements
of local firms
may not be addressed in such a system. Finally, the
dirigiste nature of this model suggests the likelihood
of strong specialization
of centres with the aspiration

Geoforum/Volume

370
that these
innovation
France
and,

should stimulate
downstream
into the local economy.

is the clear exemplar

while

dynamism
elsewhere.

it has contributed

chains

of

of the dirigiste

model

substantially

to the

of RhGne-Alpes,
it has been less successful
Moreover it has not obviated the need for

new intermediary

RTT centres

to interact

with firms

in the region.
This introductory

section

has sought

to achieve

two

of RTT

from elements

abstracted

countries,
mostly with a
than the U.K., have capi-

talized

field. Why should

in the innovation

this be?

The information
to be discussed in this paper points
strongly to one key reason. The U, K. lacks the inno-

vative support-system of intermediate organizations

that has become common in the stronger competitor
countries. This is, of course, not the only reason for

agement
theless,

pointless
better

the finanand man-

training all make their contribution.

Neverin an industrial
life or death struggle it is
to blame

the corpse

to design a life-support

for the murder.

Far

system.

from the

three empirical cases. This is meant as an illustrative

rather than wholly representative
method of differentiating types of RTT system. However, on the face of
it the three models seem reasonable,
simple to follow
and relevant to the real world. They can be drawn
upon to highlight key aspects of the new cases to be
more fully described
below. Moreover,
they may
prove valuable in showing how RTT systems change
over time, perhaps moving from an approximation
of
one model to that of another.
To complete
this
section of this paper, the models are summarized
in
Table 1.

The U.K. Innovation

3/1992

Meanwhile
competitor
poorer invention
record

innovative
strength or weakness: culture,
cial system, university-industry
relations

things: firstly, to give an account of key aspects of

RTT activity in three advanced economies-Japan,
Germany and France-and,
secondly, to derive three
models

23 Number

Gap

It is clear that innovation

has moved up the political
and economic agenda in a big way during the past two
or three years. Innovation
is the stage in the product
development
process following invention.
Once an
original idea has been patented (invention)
it is available for commercialization
(innovation).
Too often in
recent industrial
history, there has been a failure to
follow through from the U.K.s world-class invention
effort into the equally
testing innovation
phase.

The European
Commission
has been influential
in
encouraging
innovation
through its Framework
and
Structural programmes.
Statistics from the Commissions own Statistical
Office indicate
that regional
income is strongly associated
with expenditure
on
R&D (see Maps 1 and 2). E.C. initiatives
such as
ESPRIT,
BRITEIEURAM,
RACE, BRIDGE
and
so on support innovation
through encouraging
the
formation
of collaborative
R&D networks.
Many
other
progr~~mmes
such as SPRINT,
STRIDE,
STAR (and its follow-up T616matique).
LEADER,
INTERREG,
and RECITE
have an explicitly regional focus in their encouragement
of the formation
and exploitation
of innovation
networks.
Added to
these must be those programmes
to support innovative training
opportunities
such as ERASMUS,
COMETT,
EUROFORM,
NOW and HORIZON,
some aspects of which also have a regional dimension.
It is probably not exaggerating
to say that what some
authors called the new competition
(HATCH.
1989;
BEST, 1990) involves specifically regional efforts to
assist the innovation
potential of their populations,

Table 1. Three models of regional

technology

transfer

Model
Characteristics

Grassroots

Network

Dirigiste

Initiation
Funding
Research-competence
Coordination
Specialization

Local
Diffused
Applications
Low

Multi-level
Guided
Mixed
Potentially

Central
Determined
Basic
High

Weak

Flexible

high

Strong

GeoforumWolume

23 Number

3/1992

371

EUR 12 = 1M.O
s = 78.8

Map 1.

Business

expenditure
on research
Source: HIGGINS

Map 2. Regional

and development
rt ul. (1987).

GDP per inhabitant,

1988.

Geoforum/Volume
whether

of people

23 Number

373

3/1992
on partnerships

or of firms and public institutions.

So far, the U.K. government

has given little specifically regional impetus to their newly-discovered
enthusiasm for innovation
policies. Peter Lilley, Secretary of State for Trade and Industry
noted in his
speech to an invited audience
at the University
of
Warwick:
On 30 April I spoke in Birmingham

about the overall

role of DTI. In that speech I identified the stimulation of
innovation as a key priority
. [Companies] ability to
innovate and willingness to give priority to investing in
new products and processes are both crucial [emphasis
added] (LILLEY, 1991).
Various
DTI (Department
of Trade and Industry)
stimuli such as L,INK (collaborative
research;
28
programmes;
125 projects;
300 participants;
DTI
commitment
f170 million), SPUR (new products and
processes; grants less than f150,OOO; firms less than
500 employees)
and SMART
(new technologies;
firms less than 50 employees,
now less than 180
employees;
1400 applications)
have been launched
and new initiatives such as technical audits and industrial
units
(both
HEI-focussed)
have
been
announced.
However, on the regional front only the
regional technology
centres (of which there are 12),
in existence since 1987, get a mention.
These have
scarcely covered themselves
in glory. On a meagre
budget of &2.5 million from the DTI and DES, the
best that can be said is that they have levied f2.5-3.5
million extra expenditure
from industry.
At best,
their budgets have been a little over f150,OOO per year
up to 1990. Their general lack of performance,
with a
few exceptions,
is hardly surprising.

Three indicators of the way in which U.K. industry

falling behind its competitors
are identified below:

is

(i) The House of Lords Select Committee

report
Innovation
in Mantqacturing Industry (HOUSE
OF
LORDS,
1991) showed that the U.K. was the only
industrial
country
in which gross expenditure
on
R&D declined as a percentage of GDP between 1981
and 1988.
(ii) Research done in the Science Policy Research
Unit at Sussex University showed that the U.K. share
of European patents in the U.S.A. has been declining
since the 1960s (h4cKINSEY
& CO. LTD, 1991).
(iii) Relationships
between industry and HEIs are
poor in the U.K. Business only spends flO0 million

with academia

sector R&D),
facturing

One-third

firms spend

(McKINSEY

(i.e. 0.02%

of the U.K.s
nothing

& CO. LTD,

of private

top 200 manu-

on R&D

with HEIs

1991).

The seriousness with which these issues are now being

treated testifies to a recognition
in the U.K. that
Manufacturing
Matters.
This means that the old
idea that we could pay our way via a post-industrial
future based on financial services has failed, not least
in the light of the acid-test of relative contribution
to
the U.K. balance of payments.
The Citys annual
contribution
ally outstrips

to Britains trade balance only marginthat of a single, large firm such as British

Aerospace.

Exploring
Regional
Case of Wales

Innovation

Potential:

the

Wales has a stronger manufacturing

economy than
the average for the U.K. While, clearly, the bulk of
employment
and output is, as everywhere
else in the
U.K., services-based,
the proportion
of manufacturing activity is above-average.
This is a strength which can be built upon,
consolidate
the picture shown in Table 2.

to further

In addition,
Wales has a sizeable
(and growing)
engineering
industry which employed 72,000 people
in 1985, but which had increased to 87,000 by 1990.
Within those totals, the proportion
employed in the
higher qualified categories
of managers,
scientists,
technologists
and engineers rose from 11.9% in 1985
to 14.0% in 1990. Nevertheless,
the proportion
of
operator-grade
workers also rose marginally
from
53% to 55% during the same period. So, although
Welsh
engineering
employment
became
more
demanding
of skilled people at the top of the occupational range, the demand for less skilled personnel
Table 2. Manufacturing

indicators,

Manufacturing

Wales (%)

Share in GDP (1991)

Output (1985 = 100)
Productivity
(U.K. = 100)
Share of employment
* Source:

Central

Statistical

28
127
102
19
Office.

1991
U.K.
23
113
100
17

374

Geoforum/Volume

remained
buoyant in the 1985-1990 period
eering Industry Training Board statistics).

(Engin-

A sizeable number of students in Wales are training

as engineers.
The University
of Wales had 569 new
entrants to engineering
courses in 1986-1987 though
this had dropped to 477 by 1988-1989. A further 636
were registered on Open University courses and 3531
were enrolled
on polytechnic
and HEI courses in
1989. This means approximately
1700 students enter
engineering
higher education in Wales each year. Of
course, by no means do all of these then enter
engineering
jobs in Wales, but they form a substantial
pool from which Welsh manufacturing
seeking more highly qualified engineers

Despite this, the Employment

Department
Survey of
Skill Needs in Britain (1990) showed that a higher
proportion
of firms reported recruitment
difficulties
in engineering
than in any other main category. While
recruitment
difficulties were higher for the U.K. as a
whole (60% of firms) than for Wales (45X), engineering was giving the highest recruitment
difficulty
in both places. It is not clear precisely what kind or
skill-level of engineer was in short supply from these
figures, but there is an obvious problem which the
existing system of demand and supply is not satisfying. One fear, already noted, has been that engineers
were not going into engineering,
choosing accountancy and related financial jobs instead. The tigures,

Place of
Graduates

training
University
Wales
U.K.
- Source:

U.K.
employment

3/1992

however, while giving a little support to this view,

cannot explain the overall mismatch. It may be that
employers
are seeking types of engineers
that the
education
institutions
are not yet supplying in sufficient numbers.
In South Wales, inward investing
companies
have noted specific shortages
in established professional
spheres such as chemical, electrical, electronics
and products engineers.
Apart from
electronics,
it is the case that the University of Wales
has a smaller proportion in these fields than is the case
with U.K. universities.
There is also a demand for
quality assurance, robotics, information
systems and
materials engineers that is clearly not being satisfied
at present.
In addition,
gaps exist for electronics

employers
can draw.

Despite the fears that insufficient engineers actually

go into engineering
careers,
if we look only at
university-trained
engineers
we see, as Table 3
shows, that a higher proportion
of University
of
Wales trained engineers
(80%) go into engineering
jobs in industry than is the case for the U.K. as a
whole (76%). The apparently
large losses of graduates can be explained by the relatively large numbers
returning
overseas, going into research and further
training and, to a lesser extent, gaining employment
in public service.

Table 3. Destination

23 Number

technicians,
SPC
statisticians,
toolmakers
and
engineering
shop floor workers (WDA E.C. Skills
Shortages Report).
This suggests that Welsh HEIs
may not have reacted quickly enough to the rapidly
changing,
increasingly
innovative
skills demands
being made of the Welsh workforce.

Innovation

support programmes

This suggestion
is not counteracted
by information
from different sources. As noted earlier, there are
various European Community
and U.K. government
(DTI) initiatives in support of innovation
in industry.
As Table 4 shows, Wales languishes near the bottom
of the take-up league on European
programmes
in
the area of new technologies.
For understandable
reasons (having to do with the extremely
rapid restructuring
of the Welsh economy away from heavy
industry
and towards more electronics-based
production), the focus has been placed on accessing the
Structural
Funds (ERDF and ESF being the most
important)
rather than the Framework
Funds (such
as ESPRlT,

RACE,

BRITE

etc.).

While the statistics in Table 4 should be treated

some caution, because London and the South

of university graduate engineers,

U.K. industry

with
East

1988-1989

U.K. engineering
jobs

U.K.
finance jobs

Other jobs

14 (5%)
67.3 (12%)

273
3806

of
494
9662
Universities

Statistical

2SY
5472
Record

221
4586

207 (80%)
4183 (7w%)

~eoforum/Volume

23 Number

375

311992
Table 4. E.C. Framework Fund take-up, 1991*

ESPRIT
(%)

Region
London
East Anglia
South East
West Midlands
East Midlands
Yorkshire/Humberside
North West
North East
Scotland
WALES
Northern Ireland

BRITE/
EURAM
(%)

38
14
12
4
4
4
8
5
10
1
0

29
4
8
15
9
7
12
6
6
4
0

RACE
(%)

BRIDGE
(%)

40
29
4
6
6
1
6
0.5
5
2
0.5

35
17
8
8
7
4
8
4
7
1
1

* Source: Cabinet Office.

may well be overrepresented

since that is where most
U.K. firms have their headquarters
and their R&D
laboratories,
nevertheless
Wales, on these statistics,
looks to be receiving (and possibly applying for) less
than its share of E.C. Framework
Funding.
On a
more positive note, recent E.C. data shows that
Welsh SMEs received
7% of the U.K. share of
Framework
Funds between
1987 and 1991. This
placed Welsh SMEs in the top five of this particular
regional
table (COMMISSION
OF THE EUROPEAN COMMUNI~,
1991).

hard to access increased amounts. This is because the

reform of the Structural
Funds favours Southern
Europe, especially Greece, Spain and Portugal, and,
if Eastern European countries are admitted, ways will
have to be found to favour them too at some point in
the possibly not-too-distant
future, as has already
happened with East Germany.
Innovation
funding
is also available
from DTI
schemes managed
in Wates by the Welsh Office.
Three of these, LINK, SMART
and SPUR,
are
aimed at improving the innovative
capacity of SMEs.
Although firms in Wales have done reasonably
well
with the LINK programme,
there has been more
success with SMART
and considerable
interest
shown in SPUR. Between 1987 and 1991, 76 Welsh
companies have accessed over &3 million, 9% of the

As Table 5 shows, while Wales does far better in

accessing E.C. Structural
Funds-where
one would
not expect the richer U.K. regions to be performing
well because they do not suffer problems of structural
economic
adjustment-in
future, Wales will find it

Table 5. E.C. Structural Fund take-up,

Region

1987 (ESF, 1989)*

ERDF (%)

EAGGF (%)

ESF (%)

North
YorkshireiHumberside
East Midlands
East Anglia
South East
South West
West Midlands
North West
WALES
Scotland
Northern Ireland

14.1
6.9
0.6
0.0
0.0
6.3
14.9
8.3
12.5
26.0
8.9

2.5
3.4
14.2
14.9
10.1
1.7
1.2
4.0
1.1
20.0
26.7

9.9
9.3
2.7
0.2
8.3
1.1
9.7
15.0
8.6
14.0
20.9

U.K.-wide allocation

f443.S million

f15.3 million

E211.1 million
2433.6 million

U.K. total

Sources: Department

of Employment,

and CSO.

376

Geoforum/Volume

23 Number

311992

U.K. total, from SMART, the merit award for innovation scheme. For the newer SPUR (Support for
Projects Under Research) over 70 Welsh firms have

does have certain prefigurative

network model features. As will be seen, this is relatively unsurprising
given the closeness
of Welsh links with Baden-

registered as candidates
for support. Between them
SMART and SPUR offer a total of &2 million per year

Wtirttemberg,
one of the most highly sophisticated
of
European network systems of innovation
(COOKE
and MORGAN,
1990a, b, 1991a; HATCH,
1989;

to further

innovation

in Wales. However,

against this

the 3i Venture Capital organization

recently noted
that between 1985 and 1990 they had only assisted 39
Welsh companies (3% of the total U.K.) with finance
valued at 1% of the f6.2 billion invested. These are
substantially
paringreceipts
(4.6%)

less than one could expect from comwith either Walesshare

of U.K. GDP

or population

(5%).

So, to conclude this section, it may be seen that Wales

is generally
underperforming
in the innovation
stakes. As industry has become more innovative,
it is
possible that industrys skill-shortages
stem, in part,
from the absence of appropriately
qualified engineers, technicians and so on. Welsh firms do not access
as much European
innovation
finance as they could,
though there are signs that take-up of Welsh Office
managed programmes
is better. Finally, on limited
evidence, take-up of venture capital is relatively low.
The relative success of the SMART scheme points to
stronger marketing by its regional initiators as one of
the reasons for better take-up. It is in this context that
proactive
regulatory
activity effort by the Welsh
Office as purse-holders
has been of signi~cance.
It is
recognized
that Welsh firms benefit from the availability of help in accessing funding for innovation.
partner-search,
guidance
in formInformation,
filling, expertise in accessing appropriate personnel in
funding bodies, are amongst the obvious kinds of
assistance that prove invaluable.
In this respect the
regional apparatus has become more European in its
regulatory posture, having discovered that European
regions have experience
of a variety of innovation
strategies. policies and mechanisms.
European
integration and business inn~~~rati(~n are learning
processes. In the next section an outline will be provided
of some of the key initiatives being taken to raise the
innovation
potential of firms in Wales. Many of these
display the proactive regulatory system of the Welsh
Office and Welsh Development
Agency. being mobilized around European initiatives or established upon
European
partnership
arrangements.
While this
activity is not obviously dirigiste in its posture, nor
does it quite seek to bring together a pre-existing
grassroots
innovation
support or RTT system, it

SABEL

et al., 1989a; HERRIGEL,

Wales: Regional Innovation

Interacting

1989).

through

Learning by

Wales has a sizeable proportion of SMEs in a range of

traditional sectors such as engineering,
clothing, food
production
and metal manufacture.
It also has a
large, often indigenous,
steel industry
and a now
virtually non-existent
coal industry. It is around the
foreign-owned
part of the economy that some of the
more interesting
attempts to develop a networking
strategy are beginning to emerge.
One of the recent turning points in the development
of this thinking has been the bilateral economic partnership
formalized
in I990 between
Wales and
Baden-Wtirttemberg.
The latter, the initiator of the
Four Motors for Europe partnership
with three
other dynamic growth regions-Lombardy,
RhoneAlpes and Catalonia-became
particularly interested
in Wales f~~llowing the decision by Robert Bosch to
establish a large auto-components
plant near Cardiff.
Subsequent
to the signing of the partnership
deal,
further partnerships
have been formalized with two
of the other motor regions and Catalonia is likely to
be signed up shortly. Such regional partnerships
are
important
to the new thinking
in DG XVI of the
European
Commission.
The rationale
is that such
links may act as a limited corrective
to the clearly
ccntripetal
economic forces being unleashed
by the
Single Market legislation.
Both the Welsh Office and the Welsh Development
Agency have been remarkably
active in trying to
develop these links. More importantly,
the form
taken by them is predominantly
the encouragement
of inter-firm partnerships.
By early 1991, 13 Welsh
firms had been matched up with equivalent
BadenWiirttembcrg
firms, mainly operating
in advanced
metals, automotive
and electronics
industries.
In
mid-year similar arrangements
were made between
Welsh and RhAne-Alpes
telecommunications
com-

Geoforum/VoIume
panies.

23 Number

In each case the partnerships

nology exchange and development,

ment and product marketing.
Simultaneously,
form networks
indigenous

377

311992
involve

product

tech-

develop-

a significant effort has been made to

of supplier firms from amongst the

SME

population

that

can

meet

the

requirements
of larger indigenous and foreign-owned
customers.
The first of these initiatives
has been

Wales does not bring a more dynamic

partnership,

but it does bring

economy

a highly

to the

dynamic

re-

gional development
system of institutions
and policies. Already well-versed in the arts of intra-regional
institutional
networking
between the Welsh Office,
Welsh Development
Agency, Training
and Enterprise Councils, Wales Trade Union Congress, local
governments,

Chambers

of Commerce,

HEIs,

and

on

both large and small firms, Wales brings a strong

regional coalition to the negotiating table. In the past,

information
technoIogy products. Others are likely to
follow in the food, clothing, biomedical
and aero-

this coalition has been directed at attracting inward

investment
from Japan, North America and Europe

space industries.
These initiatives
the establishment
of an industry
after, the animation
of training

in general. This effort has been highly successful,

Figure 1 shows.

centred

on automotive

components,

the second

involve primarily
forum and, thereand skills-related

as

committees
involving local authority education authorities, further and higher education
institutes,
the
Training and Enterprise
Councils and local economic
development
experts, facilitated by the WDA. This is
little short of an attempt to try to implant a networking culture into a region whose old networks were
Iargely destroyed by the restructuring
of the 1980s.

Now, attention is quickly turning to policies aimed at

improving indigenous
businesses,
most of which are
SMEs. How is this to be achieved?
As examples,
three policies are worthy of attention.
They are: the
Eurolink
programme,
the Innovation
programme
and the Sector Initiative programme.

The involvement
of industry,
Training
and Enterprise Councils educators and local economic development staff with those of the WDA shows a recognition that, as with the rest of the U.K., there are
serious skills-deficiencies,
a consequence
of the older
industrial tradition,
that require special effort if new
demands by firms are to be met. Thus far, the regional
and local training systems have shown that they are
capable of rapidly meeting the high speci~cati~~n of a
German inward investor such as Robert Bosch. However, it remains to be seen just how many indigenous
SMEs will be able to match the expressed requirements of overseas firms such as Bosch, Sony and Ford
for more locai suppliers.
The quality, performance
and cost criteria now being demanded
create a very
large gap between what local SMEs have been used to
and what they must aspire to. if they are to become
fully networked locally.

The Eurolink progrrrmme

The inclusion of Wales as a cl[~sely-integr~lted

fifth
member of the original Four Motors for Europe
partnership
has had a very noticeable
effect on both
policy and institutional
innovation.
To quote a representative
of Baden-Wurttembergs
Ministry
of
Economics and Steinbeis Foundation:
the arrival of
Wales has added
a turbo-charger
to the Four
Motors. What does this mean? As we have seen.

Beginning with the signing of Wales first European

cooperation
agreement
with Baden-W~rttemberg
in
March 1990, the Welsh Development
Agency has
established
its Eurolink
programme.
Equivalent
agreements
have been signed with the regional governments
of Catalonia
and Lombardy.
A companybased agreement has also been arranged with RhoneAlpes. Recently the five partners have signed a joint
agreement
with Ontario
in Canada.
These agreements cover trade and industry, science, technology,
R&D, environmental,
education and cultural fields.
400 -

300 -

is85

1986

1387

1988

1989

19% 991 Q2

Figure 1. Inward investment,

Wales, Source:
Actually f800 million

WDA.

378

Geoforum/Volume

Wales opened its first office in Brussels in January

1992, in a joint venture with the local authorities
and
the Training and Enterprise
Councils. In 1990, Wales
hosted the E.C.
brought together

Europartenariat
Exposition
which
hundreds
of European
SMEs for

trading,

marketing

tangible

signs of the seriousness

and joint ventures.

Welsh governmental
organizations
towards European
integration.
The Eurolink
programme
businesses
the opportunity,
powerful

Four Motors

These

are all

of the intentions
and

of

agencies

is aimed at giving Welsh

through links with the

regions,

of creating

commer-

cial and industrial strength in the competitive

Single
European
Market.
Eurolink
supports this by using
the regional
network
in a highly targeted,
clientorientated
search for business partners.
The Welsh
Development
Agency has an office in Stuttgart to
enable the firms it acts for to have a permanent
base,
from which businesses
from Wales and BadenWtirttemberg
can develop joint activities.
This is
done by introducing
firms to organizations,
other
firms, technologies,
products
and processes
from
Wales or Baden-Wurttemberg.
They key partner
organizations
in Stuttgart
are the Steinbeis
Foundation and the Stiftung Aussenwirtschaft
(the Land
overseas trade foundation),
the first focussing upon
technology
transfer, the second upon economic and
commercial
development.
Table 6. Offers of business

Welsh firm
Osprey

Since

1
1

Ferranti

Welsh Development

a further

24 similar

from

Catalonia,

Rhone-

In the case of Rhone-Alpes,

the Eurolink
partnerships were targeted at the telecommunications
sector
at the request of the Rhone-Alpes
regional government. Twelve telecommunications
components
firms
from Wales were introduced
to six from RhoneAlpes. Discussions
are still proceeding,
and four
Welsh telecommunications
components
firms are in
serious discussion about the possibility of joint ventures.
It is, of course, far too early to judge the success of
these partnerships,
as many of them are very new and
most of the firms introduced to each other have either
decided not to proceed with joint ventures or are still
in discussions with their prospective partners. Never-

AESF
IIT
Control Techniques
Penny & Giles
* Source:

were made,

proposals
involving
firms
Alpes and Lombardy.

Wallace Evans
Pilkington

offers

Wiirttemberg.
Finally,
a further 30 Eurolink
proposals are planned for early 1992. Among the 30 are

these

offers have been arranged.

In addition,
some 20
Welsh firms have agreed to become involved in the
Four Motors Aerospace project being led by Baden-

collaborations

CBL
EPI

30992

By September
1991, 21 offers of partnership
with
Baden-Wiirttemberg
firms had been made to Welsh
firms. Of these, 13 have been taken up, as Table 6
shows.

Number of
partnership
offers

Metals

23 Number

Agency.

taken by Eurolink

firms

Partners in
Baden-Wiirttemberg
Mahle
Langlet
Kolbenschmidt
Kerafol
Fraunhofer
Gesellschaft
Bosch
AEG
Seutter & Ziilow
Bayer
BASF
Ikoss
Comsoft
Innit
Sydat
Plasma Ionic
Bosch (ESPRIT)
German sister company
Schmidt Feintechnik

Geoforum/Volume

23 Number

379

30992

theless, a great deal of knowledge has been generated

between
the development
agencies of the partner
For example,
the process of identifying
regions.
partners has been refined and the level of information

Alpes has five national

research laboratories,
nine
universities
and polytechnic
institutes,
240 public

about
appropriate
improved. However,
out the Four Motors

Basque Country has raised its R&D/GDP

spending
from 0.06% to 1.4% in ten years, largely by support-

would

have been

partner
candidates
is much
the key conclusion is that, withagreements,
none of these firms

assisted

to develop

tive position in the European

market
indeed, in such a focussed manner.

research
laboratories,
10 CRITT
and local
nology transfer centres,
and six technopoles.

their competi-

ing nine regional

and local technological
centres
which have assisted SMEs to become technical inno-

so quickly

vators.

or,

However,

strong regions.

As a result of being in close contact with European

regional partners, government
agencies have become
aware of the importance
of having a strong innovation base to improve the competitiveness
of companies. Baden-Wurttemberg
and Rhone-Alpes
are
two of the strongest innovation
regions in Europe,
with a high proportion
of R&D spending as a percentage of GDP. It is widely assumed that there is a
positive correlation
between expenditure
on research
and industrial
competitiveness,
and that business
performance
will become more, not less, dependent
upon innovation
capability.

Now

In Table 7 an indication is given of some national and

regional relativities
in gross R&D expenditure
as a
proportion
of GDP. The strong regions have a high
density of governrnent
and industry
funded R&D
institutions
and programmes.
In Baden-Wurttemberg, there are 14 Max-Planck
Institutes,
14 Fraunhofer Institutes,
nine universities
and 130 technology
transfer centres of the Steinbeis Foundation.
Rhoneas % of GDP

Gross expenditure
on R&D,
(%I

Welsh firm
U.K.
France
Germany
Italy
Japan
U.S.A.

2.2
2.3
2.9
1.4
2.9
2.8

Baden-Wiirttemberg
Rh6ne-Alpes
Basque Country
Wales

3.6
2.4
1.4
1.1

Sources:

OECD

and various.

like Wales

with its six university

colleges and 13 or so higher and further education

institutes but few large public research laboratories,
it
lacks the density of support institutions
typical of the

The Innovation programme

Table 7. Gross R&D expenditure

techThe

1988

that

Welsh

development

organizations

have

been reminded of this below-average

R&D and innovation history, they have begun to respond
in a
concerted way:
(i) An audit of industrial R&D has been commissioned to identify precise areas of strength and weakness. It has been established
that the industry R&D
employment
base in 1988/1989 was-according
to
official government
statistics-3100
people, and that
firms spent over f133 million on R&D. However,
little is known of the nature and specific expertise of
these R&D activities. Nevertheless,
such a picture
will soon emerge.
(ii) There is concern about what are perceived to
be low take-up rates by Welsh SMEs of European
Community
Framework
Funding.
In 1990, the percentage distribution
of U.K. Framework
II Funds
was as shown in Table 5. To improve this, the WDA
has established
the Euromanagement
initiative
(funded by DG 23). This involves SME audits to find
out why they do not become sufficiently involved in
collaborative
programmes
and to encourage them to
do so. In the E.C., 700 SMEs are being examined by
Euromanagement
projects, of which 15 are in Wales.
To the core group of 15 firms, a further 15 have been
added, making a small, but representative,
sample of
dynamic potential
E.C.-fund
users. The findings
suggest low proactivity due to SMEs being customerdriven, with business managers insufficiently
cluedin to European
Research and Technology
Development initiatives.
(iii) The next step is to develop awareness mechanisms to assist SME take-up of R&D programmes.
One example of this concerns Electronic Data Interchange (EDI). In the summer of 1991, an audit of 970

380

Geoforum/Volume

Welsh firms was undertaken

to identify the number
ED1 users; thereafter
the aim was to stimulate
further
number
i.e.

of
its

use and identify strategies for enlarging the

of users. In the sample, 24% were ED1 users,

under

250,

and

further

research

suggests

the

figure may be under 100. As a result, an application

has been made to the E.C. TEDIS programme for the
creation
different

of an ED1 Awareness
Centre in Wales. In a
field, an administration
in northeast Wales

is seeking
funding
for a TtlCmatique
Awareness
Centre to raise consciousness
of business
opportunities in telecommunications.
(iv)

Finally,

agreement

Imperial
College,
Park,
part-funded

has been

reached

with

London
to establish
a Science
by the Welsh
Development

The Garment

Industry

23 Number

3/1992

initiative

A good
thinking

example
of the application
of European
in innovation
is the WDAs
Garment

Industry

initiative.

European

Influenced

conception

to some extent

of regional

technology

by the
and

business
services centres,
the WDA proposes
to
establish, in early 1992, a Garment Design Centre in
the heart of the South Wales garment industry. There
are, in Wales, some 240 garment firms, mostly SMEs
with the largest company
employing
around
500
workers. Over 180 of these firms are independent
Welsh companies.

The industry

as a whole employs

11,563 workers. It should be noted that this is simply

the garment
industry;
it does not include fabric,

Agency which, it is expected, will become a focus for

both
overseas
and
indigenous
innovators,
researchers,
innovative
businesses
and business
advisers.

knitwear or textile manufacturers.

shows the distribution
of Welsh
firms. As can be seen, they tend to
clusters, though not necessarily
districts.

The Sector Initiative programme

The Garment Design Centre will provide the following computer-based

services to local firms; conceptdrawing.
block-pattern-making,
graded
patternmaking,
and marking.
It will not be a computercutting or initial design service (such as CITER offers
in Emilia-Romagna;
see COOKE
and MORGAN,
1991b). Applications
of CAD-CAM
in garmentproduction
(unlike textiles) are still to be developed
to the level of sophistication
required. Initial market
research shows that immediate
receptivity is already
expressed by 10% of firms, of whom a majority would
use the service if it was presently in existence. The
aim is to diffuse knowledge of the advantages
of the
system to other firms in the supply-chain
or outside it.
The overall cost will be some f400,OOO per year with
the cost of the service being charged at below market
rates. The centre will employ 11 or 12 people with

One aspect of regional development

policy that has
been
strengthened
recently
is the sector-based
approach
to industrial
support. The WDA, in particular, is now seriously committed to identifying
key
sectors in the Welsh economy, strengthening
these by
improving
opportunities
for indigenous
firms and
bringing in foreign firms where there are gaps in the
overall sectoral profile. Finally, where this is appropriate, the aim is to stimulate
the development
of
supply-chains
(see SABEL et al., 1989b) between
customers and sub-contractors
by helping to upgrade
local firms and encourage them to be more European
in their outlook (here Eurolink
has a part to play).
The sector initiatives are listed in Table 8, according
to their priority ranking.

Table 8. Sector initiatives in Wales

Category

Sector

Information technology
Financial services

1
3
3
3
3
3

R&D
Garments
Furniture
Craft
Packaging
Chemicals

a Source:

WDA.

Category

Sector

Automotive

2
2

Acrospacc
Medical/health

4
4
3

Environment
Energy
Media

The map (Map 3)

garment
industry
be concentrated
in
as true industrial

Geoforum/Volume

23 Number

381

30992
the fields of R&D, vocational
mation

and

technology

training,

transfer.

The

business
problem

inforfor

Europe is how best to generalize such experiences

to
weaker firms and weaker regions without weakening
the European
challenge to Japanese and, to a lesser
extent,

U.S. competitive

Examples

have

been

excellence.

provided

of successful

Euro-

pean partnership
regions involved, for example in the
Four Motors experience.
The cases of Japanese and
other regional innovation
support or proactive microregulatory
systems were also shown. Furthermore,
the case of Wales as an institutionally
dynamic
partner seeking to improve its economic strength by
learning through interacting
with the Four Motors
was also examined.
The positive conclusion
is that
such interactive
learning
can produce evidence
of
very rapid institurional
reactions.
Perhaps the less
positive conclusion
is that the time-lag in bringing
economic performance
of businesses up towards an
equivalent level of dynamism is substantially
greater.

Map 3. Location

[3

GARMENT ESTABLISHMENT

Ia

DlSTRlCTCONClL

cl

La

COUNTY CclNClL

BONDARY
BOUNDARY

of garment industry
Wales.

DESlGN CENTRE

establishments

in

expertise in the garment industry. It is hoped that this

will be the forerunner
of further industry technology
centres in other sectors.

Conclusions

Major changes are taking place in the scale and

intensity of international
competition.
European
integration
is creating
new market-pressures,
while
globalization
of production
forces European
firms to
match Japanese performance.
Neither of these tasks
can be accomplished
without European
firms and
regions engaging
in learning through networking
(COOKE
and
MORGAN,
1990a).
But such
networking
is already a feature of Japanese business
economics.
There is really no choice but to adapt
European
business culture to meet the new imperatives of competition.
Leading corporations
and SMEs
in strong regions already interact favourably.
Moreover, they further interact with support agencies in

Despite this, important

lessons have already been
learned. For example, the key elements of the successfully regulated, networked region include: a thick
layering of public and private industrial support institutions, high grade labour market intelligence
and
associated
vocational
training,
rapid diffusion
of
technology
transfer,
a high degree of inter-firm
networking
and, above all, receptive firms welldisposed towards innovation.
Regions such as BadenWiirttemberg,
Emilia-Romagna
and RhGne-Alpes,
possessing such characteristics,
can be shown to exist
in Europe.
Such regions are influential,
acting as
exemplars
to less favoured regions. The more dynamic, institutionally
networked
(albeit improving)
regions, are able to adapt key aspects of innovation
strategy to their own traditions
and requirements.
The case of regulatory
intervention
in the development of a network innovation
system in Wales testifies to the importance
of a regulatory
perspective
which is theoretically
equal to tackling the liberating,
as well as the controlling,
dimensions
of regulatory
activity. Such are the imperatives
of European
integration and global competition
for regional administrations at the end of the twentieth century. In acting
as described in this paper they are demonstrating,
not
the impossibility
of reproducing
other models of
development,
but learning to develop their own.

352
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