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TÍTULO: The Competitive Evolution of Regions: Towards Smart Specialisation Strategies AUTOR 1: Jaime del Castillo Hermosa Email: [email protected] AUTOR 2: Jonatan Paton Email: [email protected] AUTOR 3: Belen Barroeta Email: [email protected] DEPARTAMENTO: Economía Aplicada V UNIVERSIDAD: Universidad del País Vasco UPV/EHU ÁREA TEMÁTICA: Crecimiento, convergencia regional y políticas de cohesión RESUMEN: Recently at European level the concept of smart specialisation has gained increasing importance. The porpoise of this paper is to analyze the situation of smart specialization at European level highlighting the opportunities but also the threats when considering transfer the concept and the methodologies to each regional context. The authors have developed a specific methodological approach to RIS3 definition, implementation and evaluation that give regions common elements but also specificities allowing them the search for their own regional competitive advantage. The work carried out has been structured into two stages: (1) specialization patter identification and (2) related variety exploitation. The first stage introduces the question of specialization pattern and how it evolves through time using complex coefficients and technological interrelationships to map regional specialization patterns in the long term. In the second stage, a guideline on how to exploit the regional related variety under the specialization patterns identified is proposed. Here, interclusters collaboration arises as one of the most valuable mechanisms and one specific model already tested is included. Finally, all these methodological propositions are tested in the specific case of the Basque Country, a region that is already developing a RIS3 framework. PALABRAS CLAVE: smart specialisation, innovation strategies, Cohesion Policy 0. Introduction. 1

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TÍTULO: The Competitive Evolution of Regions: Towards Smart Specialisation Strategies

AUTOR 1: Jaime del Castillo HermosaEmail: [email protected]

AUTOR 2: Jonatan PatonEmail: [email protected]

AUTOR 3: Belen BarroetaEmail: [email protected]

DEPARTAMENTO: Economía Aplicada V

UNIVERSIDAD: Universidad del País Vasco UPV/EHU

ÁREA TEMÁTICA: Crecimiento, convergencia regional y políticas de cohesión

RESUMEN:

Recently at European level the concept of smart specialisation has gained increasing importance. The

porpoise of this paper is to analyze the situation of smart specialization at European level highlighting the

opportunities but also the threats when considering transfer the concept and the methodologies to each

regional context. The authors have developed a specific methodological approach to RIS3 definition,

implementation and evaluation that give regions common elements but also specificities allowing them

the search for their own regional competitive advantage. The work carried out has been structured into

two stages: (1) specialization patter identification and (2) related variety exploitation. The first stage

introduces the question of specialization pattern and how it evolves through time using complex

coefficients and technological interrelationships to map regional specialization patterns in the long term.

In the second stage, a guideline on how to exploit the regional related variety under the specialization

patterns identified is proposed. Here, interclusters collaboration arises as one of the most valuable

mechanisms and one specific model already tested is included. Finally, all these methodological

propositions are tested in the specific case of the Basque Country, a region that is already developing a

RIS3 framework.

PALABRAS CLAVE: smart specialisation, innovation strategies, Cohesion Policy

0. Introduction.

1

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Nowadays, most academics, politicians and businessmen agree that entrepreneurial

processes driven by innovation are the key not only to business success but also to

regional prosperity (Pontikakis et al. 2006, Foray et al. 2009 and McCan and Ortega-

Argilés 2011). However, to ensure the anchorage of prosperity to the regional context

innovation driven entrepreneurship must be understood and developed as a place-based

concept (Barca et al. 2011). This requirement brings into question the mechanisms and

processes necessary to develop the correct place based policies.

The Basque Country is one of the best regional cases to analyse all these issues

specifically how economies evolve and grow, reinventing themselves towards

entrepreneurial discovery processes. Although it can be though that current

entrepreneurial processes in the Basque Country are spontaneous phenomena driven by

natural interclustering effects, there were some macro and micro conditions that

favoured them. Thus, during a period of nearly three decades, the Basque region has

developed specific public-private initiatives as well as a complete policy framework that

has contributed to the emergence of a number of flagship projects resulting from these

entrepreneurial processes.

The paper proposes a quantitative methodology to link the regional economic

specialisation patterns to entrepreneurial discovery processes phenomena and observe

their roots from an economic structure point of view. In addition to that, the paper

proposes also a qualitative methodology complementary to the previous one focused on

those elements that contributed to develop the favourable context’s conditionalities,

especially regarding the role of regional public policy. The paper specifically focused

on one of those entrepreneurial discovery processes -the electric vehicle case-, a new

eco-industry emerging from a quadruple helix collaborative project and from a

technology hybridization process between automotive and energy sectors.

1. Objectives

The main objective of the paper is to analyse the entrepreneurial discovery process

introduced in the smart specialisation literature (Foray et al. 2009 and McCann and

Ortega-Argilés 2011) for the specific case of the Basque Country. A mixed conceptual-

empirical approach allows concluding lessons that could favour the replication of the

Basque case in other regions. The specific objectives of this work are the following:

• Definition of a mixed quantitative-qualitative methodology to identify the regional

related variety possibility frontier and the entrepreneurial discovery processes linked

to its exploitation.

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• Identification and analysis of the relationships between economic specialisation,

related variety and entrepreneurship regarding smart specialisation and RIS3.

• Application of this methodology to the case of the Basque Country in order to

characterize and describe an example of an entrepreneurial discovery process as

included in the smart specialisation concept.

• Elaboration of a set of conclusions and lessons from the case study in order to

favour the transfer of this experience and the improvement of regional public

policies focused on innovation and entrepreneurship for the coming RIS3.

2. Methods

2.1 Identification of the specialisation pattern and the related variety exploitation

possibilities: the quantitative approach

The methodology developed in this section has its roots in the work of Del Castillo and

Paton (2010b) that it is in turn based on a classical approach for cluster mapping (Porter

2003, Brenner 2005 and Duranton and Overman 2005). As a starting point we consider

chapter to establish a set of variables (5 in total) to be included in the analysis of

economic specialisation mapping:

1) The economic specialization

Economic specialization is one of the most visible characteristics of any given cluster

and has to do with the progressive division of labour according to products and

processes becoming more complex and requiring further deepening of the value chain.

In this sense, we define the specialization of a location as a greater relative value for a

particular variable with respect to the same measure in a superior geographical scope. In

the work of Porter (2003) this has been called the location quotient. Mathematically the

expression of the location quotient for a sector "xij" would be:

Analytical expression 1

where "xij” is the number of firms for the sector “i” and the region “j”, “n” is the total

number of sectors within the economic classification and “z” the total number of regions.

The result of applying this specialisation coefficient (CE) is a percentage that can range

within the following values:

3

CE(������) ������σ ����������=1σ ����������=1σ σ ����������=1����=1100

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• “CE” (Xij) ≤1.10 - The sector “xij” has no specialization.

• “CE” (Xij)>1.10 - The sector “xij” has a certain degree of specialization.

The economic activity classification of the Spanish Institute of Statistics (CNAE)

provides information on employment stratum. This information can be further broken

down, taking into account the weight of employment in the identification1. Thus,

together with the criterion of specialization of more than 10% of the average, taking into

account the different levels of employment (without employees, with employees and

with +10 employees) we can further detail the economic specialisation pattern

considering the most remarkable regional clusters.

2) The geographic concentration

Along with economic specialization, the geographic concentration of economic activity

was the most visible element in cluster definition. Although nowadays the relative

importance of geographic proximity has been reduced due to globalization and

transportation and communication cost (Cairncross 2001), distance generates

considerably effects regarding knowledge spillovers, cost efficiencies and cluster

synergies. We propose a measure of geographic concentration based on the GINI index:

Analytical expression 2

Where “Xc” is the percentage of enterprises located in a zip code “c”, and “Yc” is the

percentage of area accumulated for that zip code “c”.

This spatial heterogeneity index ranges from 0 and 1 where 0 represent and equality

distribution of enterprise across territory and 1 represent a total inequality distribution

(total concentration in a given location).

3) The interrelationships between agents

The increasing importance of innovation as a source of economic specialisation has led

to a further analysis of networking performance as a key explanatory element of the

superior performance of economic agglomerations.

The regional input-output framework is the instrument that provides most information

on the relationships between economic sectors. The measurement of technical

coefficients (commercial relationships) gives the degree of dependence between one

sector and the rest of the regional economy. Thus, those sectors that exceed a certain

1 By measuring the degree of concentration based only on the number of incorporated companies, rounded results can be obtained when considering the group of companies without employees.

4

IG = อ1 − (����+1 − ����)(����+1 + ����)��=��−1��=1 อ

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value regarding others become part of either suppliers (if the sector is the client) or

customers (if the sector is the provider). In this sense, the input-output analysis will

allow us to identify through these coefficients both suppliers of the core activities of the

cluster as well as the customers of these sectors. The technical coefficients of each pair

of sectors “i” and “j” are calculated by the following expression:

Analytical expression 3

Where “aij” is the technical coefficient for the sector “j”, “xij” the inputs in sector “j” for the sector “I” and

“Xj” the total production in sector “j”. The value of “aij” is always in the range [0.1] and___

From the expression 3 (obtaining the coefficients for the entire matrix), it can be

identified the value chain for a given fixed value “a”. Mathematically the value chain

can be defined as:

Analytical expression 4

From the above expression, the fixed value “aFj” is defined by us as:

Analytical expression 5

In other words, all those sectors that provide intermediate inputs with a higher degree

than the average for that sector (fixed value) may be considered as part of its value

chain. In any case, even setting a filter through the specification of the fixed value “aFj”,

not all sectors within the defined value chain will have the same weight, or in other

words, the same relationship intensity. Therefore, we need to specify different degrees

of relationships within each chain, apart from the selected sectors with a value aij>AFj,

the cut-off points for the 3 categories will be:

Analytical expression 6a

Analytical expression 6b

Analytical expression 6c

Where Ring1 is the cut-off point for a low intensity level, Ring2 for an average level, and Ring3

for a high level (considering the whole sector “j”). T1j and T2j are Ring1 j and Ring2j respectively.

4) The economic impact

5

������ = ����������

����������=1 < 1

∀ ��, ��⊂ ���� ���� ������ > ������

aFj = Σannn

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Sector with an economic specialisation nature are in most cases strategic industries for

the economy of a region and their economic relevance comes from both its direct impact

on the main macroeconomic variables (GDP, production, employment, etc.) and the

knock-on effects effect on the rest of the economy. In this sense, the overall impact is

the result of the sum of the direct impact within the cluster itself and the effects on the

rest of the economy.

The methodology proposed (Castillo et al. 2008) firstly calculates the direct economic

impact of the sector, i.e. the economic weight in terms of the variables of employment,

GDP or total production. Secondly, the calculation of the total impact on the economy is

obtained by the multipliers of GDP and employment. The basic tool of this

methodology is the input-output table. The inversion of the matrix gives us the GDP and

employment multipliers:

• The multiplier of added value measures the increases of GDP in the economy due to

the increase in a unit of the final demand in each industry (turnover in our case),

given by the following expression:

GDP Multiplier =GDPi*(I-A)-1 = GDPi*BR Analytical expression 8

Where GDPi is the vector of coefficients of GDP at a basic price per unit of production, “I” is the identity

matrix, “A” is the internal coefficient matrix and therefore “BR” is the interior inverse matrix.

• The multiplier of employment measures the increases of employment required due

to the increases in a unit of the final demand in each industry, given the following

expression:

Employment Multiplier= Ej*BR Analytical expression 9

Where Ej is the employee ratio per unit of production and BR, again, the

interior inverse coefficient matrix.

Applying this multiplier directly on production figures (turnover) and using

corresponding coefficients of income and employment (expressions 8 and 9), we obtain

the induced impacts on income (GDP in our case) and employment, respectively.

5) The technological structure

To calculate the potential technology relationships within a regional economic structure

we use a method based on the input-output framework. From the I-O inverse matrix,

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Jaffe (1986) uses the following expression to measure the cosenic distance between a

pair of sectors “i” and “j”:

Analytical expression 10

Where “wij” is the new coefficient from the I-O inverse matrix which ranges from 0 (total

technological inequality) to 1 (total technological equality), and “a ik”and “ajk” are the I-O

inverse matrix coefficients calculated from the expression 3.

Following Frenken et al. (2007) and Los (2000), “wij” coefficient can be considered a

good proxy for technological proximity. Using MDS technique (Mutidimensional

Scaling) we can represent the technological distances between sectors for a given

regional economy and obtain the evolution between two different periods. The

comparison between sectoral performances leads us to identify the related variety

possibility frontier (see note 7).

2.2 Identification and analysis of the entrepreneurial discovery process case: the

qualitative approach

The quantitative methodology proposed previously will allow to identify the related

variety possibility frontier for a given economic specialisation pattern at regional level.

Then, the next step must be focused on identifying those areas (economic sector and

clusters) within that frontier that could host entrepreneurial discovery processes from

radical innovations. Here we propose a qualitative methodology for the entrepreneurial

processes analysis following GREMI2 approach. This methodology mainly focuses on:

• Participatory strategic processes (participatory governance).

• Challenge/opportunities identification (window of opportunity).

• Potentialities within the processes from a regional perspective.

• Business model behind the entrepreneurial discovery process and innovations

• Quadruple helix analysis and roles identification.

3. FINDINGS

3.1. A great socioeconomic transformation in terms of regional development

According to the figures of INE and EUSTAT, today the Basque Country is one of the

wealthiest regions in Spain, with a GDP per capita 36% higher than European Union 27,

2 GREMI – Groupe de Recherche Européen sur les Milieux Innovateurs. See Del Castillo et al. (2012)

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������ = σ ����������������=1ට൫σ ������2 σ ������2����=1����=1 ൯

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and 32% higher than Spain's average in 2010. Nevertheless, this outstanding situation

has not been an unchanged pattern for the whole 20th century. Industrial activities

(related mainly to metal manufacturing) dominated the regional economic structure

during the past century, providing the Basque Country with one of the highest economic

growth rates in Spain until the second half of the 70s (Del Castillo 1987). At the end of

the 70s, the Basque industry became obsolete, and a change in the international

competitive model lead to a deep economic crisis during the late 70s and the 80s.

Unemployment rates rose dramatically to nearly 20%, with many businesses closing,

and the social landscape worsened accordingly (Azua 2006). Besides, the resource

intensive industry dramatically degraded the environment in the most populated areas of

the region, limiting its capacity to launch other economic activities.

In this context, the incoming regional government3 defined and implemented a complete

industrial and technological policy in order to modernize and transform the obsolete

Basque economy into intensive innovation (Del Castillo and Paton 2010a). In parallel,

the Basque Government also managed to introduce some initiatives to improve the

environmental situation of the region (Arto 2010). One remarkable aspect is that to a

certain extent, the industrial and technological efforts were combined with the

environmental ones, considering that the success in one of them necessarily implied the

success in the others4 (Ashford 2010).

Figure 1 Basque economic structure evolution since 1980

Source: Authors from EUSTAT 2010

3 After the decentralisation occurred in Spain during the early 80’s, the Basque Government acquire many competencies in fields such as fiscal policy and economic promotion. Its ability to define its own industrial and technological policy can be considered as one of the main causes of a better recovery after the middle 70’s crisis.4 One clear example is the creation of the technology parks as spaces for hosting high-tech activities with an environment friendly approach (Del Castillo and Diez 2006)

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Nowadays, after 30 years of this kind of efforts, the Basque Country has become an

advanced economy, with a world-class competitive industry in certain activities and a

service sector that represents 70% of regional GDP mainly focused on the knowledge

economy (EUSTAT 2010). On the other side, the environment has improved

significantly and, as some theories state (Florida 2002 and 2005) it may have favored

the allocation of talent and knowledge intensive activities. Anyhow it seems that the

overall situation comparing to that of the 80s could be assessed as positive.

This transformation was based on an innovation intensive pattern (Jaureguizar 1996)

that contributed to a better performance in comparison to national average. One

remarkable aspect behind this process is that the transformation was not only a result of

the progressive modernization of the Basque industry per se, but it was also related to

the adaptation of industrial heritage and regional assets to the new competitive trends

where other aspects such as social issues and environmental conditions were also

critical.

Figure 2 Basque economic growth, R&D effort since 1980 and main socioeconomic indicators

BC SP DE FR IT UK SEGDP p.cap. (PPC–UE27:100) (2009) 136 104 116 107 102 116 120

Lab Prod (PPC–UE 27:100) (2009) 130.3 110.0 104.6 124.5 108.5 109.2 108.8

R&D investment (%GDP) (2008) 1.85 1.35 2.63 2.02 1.18 1.88 3.75

Degrees in S&T (per 1,000) (2007) 27.2 11.2 11.4 20.7 12.1 17.5 13.6

Employment rate (%) (2009) 65.2 59.8 70.9 64.2 57.5 69.9 72.2

% pop sec edu (%) (2008) 78.0 60.0 74.1 83.4 76.5 78.2 87.9

Welfare exp. per cap (€) (2007) 5,156 3,925 7,408 8,007 5,812 7,291 9,744

Internet at home (%) (2009) 60 54 79 63 53 77 86

Greenhouse emissions -2010 114.0 115.0 79.0 100.0 93.5 87.5 104.0

Energy intensity -2007 146.3 184.2 151.5 165.4 142.8 115.5 156.5

Source: Data from Eustat 2010

Public policy played an important role since it not only defined the measures needed,

but also ensured different frameworks for the different fields. Thus, Basque

Government tried to accompany industrial and technology measures with other support

frameworks focused on broad context conditionalities not necessarily linked to

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economic promotion, but at the same time critical to trigger and multiply their effects

(e.g. social or environmental conditions policies) (Basque Government 2010).

As the figures show apparently, the increasing efforts for modernizing the obsolete

Basque economy reached good results in quite a short time (Olazarán and Lavía 2000

and EUSTAT 2010). In 1981 the R&D expenditure in terms of regional GDP only

accounted for less than 0.1%, which is quite below the national average of 0.42%. But

astonishingly, only six years later the Basque R&D overcame the national average and it

nowadays stands as one of the highest, with 1.96% of total regional GDP (compared to

1.35% of the Spanish average). The anchoring process can be clearly observed through

nearly 30 years, comparing the evolution in innovation effort and main socioeconomic

indicators of the Basque country and of its counterparts at national and European level.

3.2. A great transformation in terms of regional economic structure

From a traditional point of view, economic specialisation patterns are processes from

which some activities get more sophisticated than others, and configure at the so called

natural clusters regional level (Porter 1990 and 1998, and Ketels 2006). In our opinion,

these patterns are thought to host the sources of related variety exploitation

opportunities and the potential entrepreneurial discovery processes.

Following these premises and the methodology proposed in analytical expressions 1 to

9, specialization patterns have been calculated for the Basque Country. The analysis

considers the level of specialisation of various sectors in terms of the Spanish average,

their level of imbrication (in terms of number of sectors in its value chain), their spatial

concentration and their impact in terms of employment and GDP.

Table 1 Specialisation patterns in the Basque Economy: main economic clustersNumber of sectors

CNAE 2009 (Two digits)

Specialisation coeffcient (1) R

ing1

Rin

g2

Rin

g 3

TOTA

L Spatial Heterogeneity

Index

Spatial Heterogeneity Index (%) (2)

% direct regional

empl.

% direct regional

GDP

Total empl.

(3)% GDP total (4)

Paper industry 134.53 9 4 2 15 0.75 98.96 0.55 0.67 1.02 1.23Energy 216.59 10 2 2 14 0.99 130.29 0.10 0.94 0.11 0.98Metal manu. 186.43 11 1 1 13 0.70 91,66 9.14 9.32 18.02 18.38Mach. & electric mat. 246.46 9 1 3 13 0.76 100.02 4.30 4.62 7.5 8.12Automotive 128.71 13 0 1 14 0.78 102.78 1.35 1.62 2.91 4.46Manu. of other vehic. 226.95 10 1 1 12 - - 0.85 0.70 1.73 1.42Environment 111.39 15 3 2 20 0.73 96.64 0.09 0.12 0.15 0.19Trans. & log. 146.90 10 1 1 10 0.96 125.84 0.07 0.15 0.10 0.22Specialized services 184.45 12 0 1 13 0.84 110.11 9.82 7.57 17.78 12.68Welfare services 187.23 14 1 1 16 0.78 102.58 1.23 0.62 2.03 1.039Creative & cultural act. 111.08 10 1 1 12 0.74 97.55 1.62 1.27 2.81 2.21

TOTAL CLUSTERS (% REGIONAL) 29.12 27.6

Source: authors from Del Castillo and Paton (2010b). Data from INE and EUSTAT. Input-Output tables 2005(1) CE>110% average of the 3 criteria(2) % of regional average(3) (direct + induced) regional(4) (direct + induced) regional

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According to the results obtained, the region shows a strong industrial profile (activities

linked to metal manufacturing) and some advanced services (specialised services to

industries, creative and cultural industries). A total of 11 specialization fields have been

identified ranging from quite big and heterogeneous sectors (metal manufacturing and

specialised services account for nearly 10% of direct employment and GDP) and very

narrow and sophisticated ones (energy, machinery-electric material and manufacturing

of vehicles).

Since the beginning of the reindustrialisation period by mid 80s, the competitive

transformation of the Basque Country has focused on a clear phenomenon by which

industry reinvented itself into a completely modernised and highly technology intensive

one. That has supposed a strong specialisation, where sectors become increasingly

different from each other. Services have registered a similar pattern, many of them

becoming highly knowledge intensive activities. But in parallel, within related

economic groups, new business models have arisen as a result of technological

hybridization (related variety exploitation).

The question now is whether this new business models emergence is something

systematic (structural) or just an isolated phenomenon due to random phenomena

(cojunctural), and not a result of anchoring process of them. In this paper we propose a

method (expression 10) to search for sectoral convergence at macro level using a cluster

dynamic analysis approach, and systematize the process of identification potential

niches of related variety exploitation possibilities through entrepreneurial processes.

Although Porter (1990) explained how countries move from the “factor driven stage” to

the “wealth-driven stage” through innovation, his cluster analysis has mainly focused on

studying their structure and performance from a static perspective. Thus, we have added

a dynamic dimension to the traditional cluster analysis, trying to identify the general

evolution pattern within the Basque natural clusters (figures 3 and 4).

Thus, the figures below show four different areas depending on the technological nature

of the sectoral concentration in it5. The two main areas 2 and 3 are related to services

and industry activities respectively. Area 4 (bottom-right) focuses on primary inputs

activities and area 1 (top-left) does not represent a specific economic activity (but a

transition stage).

5 Notice that this distribution is particular to the Basque Country economic structure reflected in its I-O tables. If the same exercise is applied in other region, the distribution may differ.

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Figure 3 Basque specialisation technology patterns in 1995

Source: Authors. Data from EUSTAT: Input-Output tables 1995

Figure 4 Basque specialisation technology patterns in 2005

Source: Authors. Data from EUSTAT: Input-Output tables 1995

As we can see in figures 3 and 4, although Basque economic structure has experienced

minor changes since 1995, if we quantify the precise movement of each sector, we can

perceive a certain evolution pattern. In other words, if a given position in the chart

defines a specific relative technology situation for a cluster (the nature of the productive

process itself) a change in its relative position necessarily implies an indirect change in

its technology nature. The table below shows the coordinates of each cluster in 1995

and 2005, the change experienced across areas and quantifies the total movement

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METAL MANUFACTURING

ENERGY

PAPER INDUSTRY

MACHINERY MANUFACTURING

AUTOMOTIVE INDUSTRY

OTHER VEHICLES MANUFACTURING

ENVIRONMENTAL ACTIVITIES

TRANSPORT &LOGISTICS

BUSINESS SERVICES

WEELBEING SERVICES

CULTURE AND CREATIVE SERVICES

AREA 3

AREA 1

AREA 4

AREA 2

METAL MANUFACTURING

ENERGY

PAPER INDUSTRY

MACHINERY MANUFACTURING

AUTOMOTIVE INDUSTRY

OTHER VEHICLES MANUFACTURING

ENVIRONMENTAL ACTIVITIES

TRANSPORT &LOGISTICS

BUSINESS SERVICES

WEELBEING SERVICES

CULTURE AND CREATIVE SERVICES

AREA 3

AREA 1

AREA 4

AREA 2

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intensity using a the Change Index -CI6. Some clusters (paper industry, welfare services

and creative and cultural activities) are not experiencing a significant change in its

technological position. Al off them continue in 2005 in the same area than in 1995 and

the CI is lower than 0.48.

Table 2 Basque technological specialisation patterns evolution between 95-05

Sector/cluster 1995 2005 Change Index (CI)Coor. DimA Coor. DimB AREA Coor. DimA Coor. DimB AREA

Paper industry 0.68 -0.01 4 0.60 -0.07 4 0,14Energy 0.37 1.02 2 0.71 -0.53 4 1,89Metal manufacturing -2.37 -0.87 3 -2.89 -0.52 3 0,87Machinery and electric material -0.84 -0.35 3 -1.03 -0.16 3 0,38Automotive -1.12 -0.33 3 -1.69 -0.28 3 0,62Manufacture of other vehicles -0.99 -0.35 3 -1.30 -0.22 3 0,44Environmental act. -0.32 0.06 1 -0.57 -0.16 3 0,47Transport & logistics -0.23 0.16 1 0.15 0.04 2 0,5Specialized services 0.24 0.05 2 0.20 0.19 2 0,18Welfare services 0.43 0.03 2 0.55 0.39 2 0,48Creative and cultural activities 0.19 0.38 2 0.41 0.46 2 0,3

Source: Authors.

On the contrary, the energy cluster is changing significantly from the second area to the

fourth. According to our hypothesis, the cluster may be evolving to a different business

model. As it enters area 2 we can identify this change as a search for new inputs (i.e.

new energy sources and its combination with other activities).

Other remarkable movements are those identified in industry and services activities

because of their share and impact in the regional economy. In industry metal

manufacturing and automotive sector are moving towards a more pronounced

specialization (inside area 3). Machinery manufacturing and electric materials, and

manufactures of other vehicles (such as ships and aerospace) are moving very slowly

but towards area 1, that is, a prior stage to a pronounce “tertiaritation” towards area 2.

They are combining industrial production with a “customer oriented service”. In

addition to this, in services, knowledge intensive and business services begin to focus

their activity to industry sector. It seems that these businesses begin to specialize in

providing “solutions” to the vast business fabric existing in the Basque Country.

Finally, the environmental activities (mainly represented by recycling and water

management activities) are also moving towards an industry oriented service, especially

to those sector focused on metal manufacturing where the waste and the dangers of

pollution are higher.

6 The Change Index is a measurement of the differences of relative positions experienced by sector/cluster due to its technological nature change. For a complete description see Del Castillo & Paton (2011)

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Therefore, according to these results the link between the competitive transformation

towards a sustainable innovation and the smart specialisation elements seems to be

positively correlated. Here a sound specialisation process is being taking into account

while an exploitation of the related variety is pursued it is recently observed. In order to

identify the related variety possibility frontier, distances between different pairs of

clustered sectors can be observed aggregating the value of the coordinates in table 27

into a double entry (symmetric) matrix:

Table 3 Basque technological specialisation patterns evolution between 95-05

1 2 3 4 5 6 7 8 9 10 111) Paper industry 02) Energy 0,77 03) Metal manufacturing -0,03 1,02 04) Machinery and electric mat. 0,14 0,47 -0,17 05) Automotive -0,38 0,19 0,35 -0,48 06) Manufacture of other vehicles -0,04 0,41 0,01 -0,18 -0,3 07) Environmental act. -0,19 0 0,3 0,47 -0,05 0,29 08) Trans. & logistics 0,52 0,33 -0,43 -0,26 -0,78 -0,44 -0,73 09) Specialized services -0,16 -0,13 -0,27 -0,1 -0,62 -0,28 -0,55 0,38 010) Welfare services -0,22 -0,03 -0,65 -0,48 -1 -0,66 -0,89 0,04 -0,34 011) Creative and cultural act. 0,16 -0,47 -0,47 -0,3 -0,82 -0,48 -0,77 -0,04 -0,1 0,38 0

Source: Authors

Note: figures in bold (+) shows a reduction of the overall technological distance between sectors

The related variety possibility frontier is composed for all those pairs of sectors whose

technological distances have been reduced. Table 4 presents a list of those sectors for

the period 1995 and 2005. Although many related variety opportunities may be

considered, here we are going to focus on the electric car case. This entrepreneurial

discovery process can be indirectly observed in table 8 in the intersection between the

energy sector (column 2) and machinery and electric material, automotive, manufacture

of other vehicles and transport and logistics (rows 4, 5, 6 and 8).

3.3. The great transformation and the role of regional policy

Although current related variety exploitation possibilities and the related entrepreneurial

discovery processes in the Basque Country are the result of a complex combination of

public policies, private commitments and context conditionalities regarding socio-

economic and environmental dimensions, in this paper we will be analysing the roots of

these processes from a policy perspective.

First of all, the Spanish regional decentralization, that came into force in 1979, allowed

the new Basque Government to put huge efforts into boosting and supporting the 7 For aggregation of coordinates A and B in 1995 and 2005 the following expression has been used:

Aij=[(CoorDimAi95–CoorDimAj95)2+(CoorDimBi95–CoorDimBj95)2]-[(CoorDimAi05–CoorDimAj05)2+(CoorDimBi05–CoorDimBj05)2]

Where Aij is the internal coefficient for the related variety possibility frontier in matrix (table4)

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revitalization of the regional economy (Del Castillo 1987) and to accompany them with

other areas such as social and environmental ones (Barrero 2010 and Arto 2010).

According to Del Castillo (1987), from a industrial decline situation, three different

models can be differentiated regarding a typical industrial policy: a reindustrialization

policy stage, a modernization stage and an innovation driven stage. After these three

phases, more sophisticated policy measures are to be defined mainly deepening into the

specialization patterns chosen during those first stages (Del Castillo and Paton 2010).

Figure 5 1980-2010: towards entrepreneurial discovery processes anchored to territory

Source: Del Castillo et al. (2012) “The Great Basque Transformation towards sustainable innovations”

In the case of the Basque Country, the current entrepreneurial discovery processes and

the related variety exploitation possibilities are rooted in the industrial sectors supported

during the reindustrialization in the 80s (1st stage), the specialization pattern promoted

in the 90s through clusters (2nd stage) and the new technology domains were encouraged

during the 2000s (3rd stage).

As it can be seen on the figure 5, there are some “linear” consequences arising from the

80s, where the choices made in the past determined the related variety possibility

frontier afterwards. The table also shows a number of “fostering conditions” linked to

each stage and the way by which they have determined the current Basque innovation

model and the related variety possibility frontier for entrepreneurial discovery process8.

8 A brief description of each stage and the relation to current Basque entrepreneurial discovery processes are provided following the periods described by some authors (Del Castillo and Paton 2010 and Jaureguizar 1996)

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1981-1990: main elements of the reindustrialization

In the early 80´s, the Basque Country had a business fabric focused on mature and

obsolete industrial activities that failed to be competitive in the increasing globalization

context, widespread business “individualism” and unemployment rates above 20%

(Azua 2006). Regarding science and technology context the Basque Country registered

very low levels of R&D and a general unawareness on the concept of private R&D

(Navarro 1993). Besides, the science and technology system was virtually non-existent,

with a very young university unable to play a predominant role and no relevant public

research bodies. To make matters worse, the bad environmental situation conditions (air

pollution, resource and energy intensive productive patterns, etc.) limited the capacity of

the region to host new high-tech activities or simply attracting talent.

But the increased “autonomy” within the Spanish decentralization scheme to define and

implement not only specific economic and industrial policies but also broad policy

support in social and environmental fields, allowed the new Basque Government to lead

the Basque modernization through a sound policy support and the resources to make it

possible. Thus, the Basque Government fostered the creation and consolidation of a

strong base for the Basque innovation system (Technology Centres), the instruments

needed to support business modernization (SPRI a) and combined the modernization

focus with a progressive environment friendly approaches (e.g. technology parks).

1990-2000: The Basque competitiveness approach

In the 90´s, as localization theories became an area of interest during the 90s, especially

those related to “innovative milieus” and “clusters” (Becattini 1990 and Porter 1990),

the Basque Government, along with the main businesses and innovation agents built a

new strategy focused on economic specialization and collaborative approaches: the

Basque cluster policy (Monitor Company 1991). Since the 90s, 11 cluster initiatives

have been launched in the most strategic and competitive sectors as a common space for

debate and discussion regarding competitive challenges and innovation tied to territory

(Aranguren et al. 2009). Nowadays, eight additional emerging clusters have been

included within the cluster policy support in order to include additional economic

activities.

Table 5 Cluster initiatives launched since 1990

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SECTOR CLUSTER YEAR SECTOR CLUSTER YEARMachine tools AFM 1992 Energy Cluster de la Energía 1996Appliances ACEDE 1992 Aeronautics HEGAN 1997Automotive ACICAE 1993 Marine sector Foro Marítimo Vasco 1997Environment ACLIMA 1995 Paper (wood) Paper Cluster 1998Bilbao Port Unipor Bilbao 1995 Audiovisual EIKEN 2004Telecommunications GAIA 1996

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Source: Aranguren et al (2009) “Asociaciones cluster de la CAPV: desempeños y retos”

From this moment on, the industrial policy (as well as the technological one) changed

from a “top-down” approach to a “bottom-up” perspective (Moso and Olazarán 2001).

The cluster associations launched intended to serve as mechanisms to identify and

communicate the challenges and necessities of regional businesses, mainly regarding

the knowledge and technology capacities of RTD developers (mainly technology

centres) (Aranguren and Navarro 2003). Moreover, SPRI's programs were designed as

collaborative projects to support collaboration between RTD developers and businesses

from these cluster associations.

It was in this period when the roots of the anchoring capacities of Basque innovations

appeared. On one hand, the cluster approach allowed for the Basque Government to

recognize the needs of the businesses, identifying both technological and competitive

trends to be prioritized (e.g. through cluster observatories). On the other hand, they also

played an important role as intermediate agents to “territorialize” the results and support

of R&D carried out by RTD developers. Finally, clusters set the start of intercluster

collaboration, from which some of the current entrepreneurial discovery processes

emerged (e.g. between energy and automotive sector).

2000-2010: The Basque knowledge economy

The importance gained by technology development and innovation during the 80´s and

90´s reached its peak during the last decade (Del Castillo and Paton 2010). During the

00´s, the Basque innovation system became even stronger with the creation of new

agents (CICs - Centres of Cooperative Research, BERCs - Research Centres of

Excellence, Innobasque, Ikerbasque, etc.).

In addition to the initiatives carried out by EVE and IHOBE until this period, the

inclusion of the social and environmental aspects within the regional competitive and

innovation strategic vision contributed significantly to present them as elements of

equal importance to economic promotion regarding regional competitiveness (Basque

Government 2006).

Parallel to all these initiatives, the Basque Government also promoted a sectoral

economic diversification with the aim of developing new emerging markets. The result

was the definition of Biobask 2010 Strategy (for the biotech sector), Nanobasque 2015

Strategy (nanotechnology) and Tourgune (tourism sector) and their respective agencies.

2010-…: Towards a smart competitiveness

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Recently, the Basque Government, along with the main agents of regional

socioeconomic fabric, has elaborated the new Competitiveness Plan 2010-2013. This

new Plan has been built-up as a smart specialization strategy to promote regional

prioritization of sectors and technologies to achieve entrepreneurial discovery processes.

Thus, the Plan clearly supports flagship projects resulting from entrepreneurial

discovery processes and related variety exploitation. One clear example is the

importance gained by the energy sector and its potential for other economic activities

through energy efficiency solutions (automotive, ICT, construction, manufacturing etc.).

4. Implications: The Basque electric car as an entrepreneurial discovery process

The electric vehicle case emerges undoubtedly from the Basque Great Transformation

economic, social and environmental heritage. At policy level, the experience gained

since the 80s allowed Basque Government to establish a strategic definition process that

identified the potentiality behind sustainable innovations in general, and the electric

vehicle in particular, as a means to face some traditional weakness of the Basque

economy such as the low capacity to generate radical innovation. Moreover, this process

enables the consensus and the commitment through a quadruple helix approach.

From a broader competitiveness approach, the Competitiveness Plan 2010-2014

identified the economic opportunity behind the environmental challenges through a

regional participatory process and also established energy as one of the main “key

enabling technologies” (KET) for the regional competitive advantage at international

level (Basque Government 2010). In parallel, but inside the framework of the

Competitiveness Plan , the Basque Energy Strategy 3E2020 was identified and set as a

priority, therefore facing the traditional weaknesses of energy dependency due to the

lack of fossil energy resources and the high energy intensive productive pattern of the

industry (nearly 1/3 of the regional economy) (Basque Government 2011).

The choice for a sustainable green business model was not made arbitrarily. Both

strategies identified a regional strength in the Basque innovation system (RVCTI) where

some technology centres, the newly created CICs and research groups from regional

universities maintain a frontline position in technologies related to energy efficiency

and storage. Regarding businesses, there was a critical mass behind the advance of the

engineering sector (GAMESA, SENER etc.) and the energy companies (IBERDROLA).

This critical mass, both in economic and technological terms, has been favored by 30

years of industrial and technology policies. But beyond that, one of the main success

factors of the process, the partnership created to commercialize the new opportunity,

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could have not been possible without the policy support to networks and collaboration

since the 90s. The partnership, based on a quadruple helix (Basque Government through

DG Industry and EVE and SPRI), private sector (main automotive enterprises from the

Automotive Cluster and the Energy Cluster), RTD developers (technology centres such

as Tecnalia and IK4, universities and CIC Nanogune and Energigune) and some end-

users (e.g. transport and logistics, retailers or municipalities) make the complex

combination of technology (technological hybridization) between automotive solutions

and energy efficiency possible, as well as the definition of an integrated business model.

Figure 5 1980-2010: towards entrepreneurial discovery processes anchored to territory

Source: Del Castillo et al. (2012) “The Great Basque Transformation towards sustainable innovations”

The electric vehicle is the experience of an entrepreneurial discovery process rising

from the identification of strategic opportunities within energy constraints (nearly 78%

of the total energy consumed in Basque Country comes from industry and logistics

sectors, a region with no fossil energy resources) and climate change threats. Thus,

sustainability becomes not only business opportunities but also environmental

improvements. That has led to the configuration of a public-private partnership to

develop the initiative of the electric vehicle; a sustainable innovation from the

technological hybridization between automotive and energy sectors.

In 2010, the Basque Government, Automotive Cluster (ACICAE), AIC Automotive

Intelligent Centre and Mercedes-Benz signed an agreement to develop and

commercialize a new electric vehicle model. In October of that year the Basque

Government and REPSOL (Spanish oil company) created IBIL to develop the electric

vehicle model (charging point management mainly, car-sharing, etc.) within the Basque

Country territory. Its competitive advantage lies on its specific distribution model.

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IBIL market share lies upon those users whose travelling frequency is very high but do

not travel long distances since the electric vehicle has autonomy for no more than 150-

170 km. This vehicle has significant advantages over the traditional one for urban

commuting as well as for medium (or big) fleets of certain retailers (e.g. EROSKI),

public entities (e.g. Osakidetza – health Basque service-, municipalities etc.). The

conceptualization of the management model is a central pillar for the success of this

business (market segmentation, charging points distribution, agreement with energy

distributors, with technology providers and vehicle producers, etc.).

As it may be seen, the management model for electric vehicle comprises a complex

quadruple helix where the core was initially configured by Mercedes-Benz (the OEM

manufacturer), REPSOL (the energy distributor through charging points), the Basque

Government (through EVE agency) and the public-private initiative IBIL responsible

for the development and commercialization of this business model. In this quadruple

helix RTD developers (CICs, technology centres, universities, frontline R&D and

engineering firms, etc.) play a significant role as supporters of the whole concept

(energy efficiency applied to automotive solutions).

Users are also integrated in the partnership through distribution channels (REPSOL),

transport and logistics activities and the trade sector (EROSKI). Public procurement has

been (and will be) one of the main fostering elements, due to the important tractor effect

through public fleets (municipalities´ projects such as HIRIKO, Osakidetza, etc.).

Finally, Public Authorities have played a central role in encouraging and facilitating the

elements needed to launch the initiative (IBIL) and will play a bigger role when

adapting the current regulatory framework and the public procurement mentioned.

The electric vehicle business model lies upon 4 main key axis for its consolidation as a

real choice against non-renewable energy vehicles. The first of all, a strong automotive

sector linked to energy efficiency solutions. Secondly, a progressive increase in the

demand for this kind of vehicles from both public-private fleets and individual

consumers. Thirdly, the investment required for an optimal distribution infrastructure

(charging point) along the Basque (and national) geography. Finally, the

definition/adaptation of the current regulatory framework to favor the emergence of the

commercialization model of the electric vehicle, even with positive discrimination

measures due to its impact on the environment.

Regarding the first axis, the Basque Country hosts an OEM producer (Mercedes-Benz

in Vitoria) and a very important critical mass of TIER 2 and 3 producers. In addition to

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them, the region also hosts a number of important electric components manufactures

and energy companies that also participated in the process. The Basque Government

supported the emergence of the initiative both through specific programs and

collaborative dynamization.

Regarding the second axis, at a start the electric vehicle went into public fleets, where

municipalities and other public entities (e.g. Cruces Hospital) played an important role.

Secondly it started to be used by a private fleet being manly big market retailers (e.g.

EROSKI, Orona etc.) and car leasing and sharing (IBILEK).

The third axis was developed under the agreement between the Basque Government and

REPSOL to identify the international trends in electric vehicle charging possibilities and

a viability study with the aim of implementing it at regional level. The objective here is

to foster the creation of multiple charging points for these new vehicles. The

collaboration between these two entities and the Energy Cluster as well as the ICT

Cluster favored the technological base of this collaboration.

Finally, in the fourth axis, the electric vehicle model was fostered thanks to a change in

the general legal framework for the electric sector with the introduction of the new legal

form “electric operator” that regulates the charging manager entity. In fact, IBIL was

created in 2010 for this new legal form as a public-private partnership between EVE and

REPSOL. In addition to that, since the main regulatory framework lies under national

authorities, the Basque Government is working with IDEA (Spanish Institute for

Energy) and the Spanish Ministry of Industry (MINETUR) to develop and adapt the

current legal framework to the necessities of this new business model.

In any case, public authorities have been one of the most important agents in the

quadruple helix of the electric vehicle flagship project. From the business model

designed for the exploitation of the electric vehicle, the Basque Government established

a strategic approach to consolidate it focused on 4 axes:

• Automotive sector support, mainly through specific R&D programs that foster

collaboration along the value chain of energy efficiency applied to automotive

(business-to-business and business-RTD developers).

• Promotion of a progressive increase in its use, where public procurement (such as

that of municipalities) and public support programs to boost electric vehicles

acquisition and adaptation (such as those from EVE).

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• Definition of a coherent and favorable regulatory framework, to reduce uncertainty

in a market where the legal framework is crucial to make the business model

flourish (certification, competition regulation, etc.).

• Ensuring an energy distribution channel through infrastructures, because the

business model of the electric vehicle is linked to the availability of a charging point

and the fixed investment required is considerably high.

6. CONCLUSIONS

The Basque Country case is a clear example of how a quite long process known as the

Great Basque Competitive Transformation has moved the traditional and obsolete

Basque industry of the beginning of the 80s into a thriving one resulting in frontline

entrepreneurial discovery processes from regional related variety such as the electric

vehicle. In this process a remark must to be made considering the role performed by the

Basque Government, whose strategies and policy measures have guided the process for

more than 20 years, and finally promoted the flagship project providing the support and

the intermediation needed to formalize the partnership around the electric vehicle

business model.

But the electric vehicle is only the peak of a bigger phenomenon known as the “Great

Basque Transformation”, a complex process combining a series of economic, social and

environmental dimensions from an historical perspective. The main idea here is that, to

understand how entrepreneurial discovery processes emerge, consolidate and provide an

anchoring effect on economic growth and prosperity to the territory, an interrelated

analysis between socioeconomic and environmental conditionalities in the territory is

needed and, last but not least, the heritage that determines them all. In this context the

way in which regional related variety performs is crucial.

In this paper an historical analysis has been made focusing on those policies (industrial,

technology and environmental) that generate favorable conditions for the emergence of

current Basque sustainable innovations. In the case of the electric vehicle, the four axis

within its business model would not have been possible without the previous advance

(in some cases processes that have been carried out for more than 20 years) in the

private business critical mass (automotive and energy sectors technologically advanced

and able to incorporate frontline), in the strengthening of the regional innovation system

(around energy efficiency key enabling technologies), in a regional governance model

focused on collaboration, and in a change on regional culture towards innovation,

knowledge intensive and environment friendly priorities.

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The next table summarizes the elements under the success of sustainable innovations

emergence and anchoring in the Basque Country focusing in the electric vehicle case.

The summary shows the key elements to consider regarding the quadruple helix

approach in the Basque Country, the contribution of each agent typology to the electric

vehicle flagship project and the causes from the Basque heritage that make it possible

nowadays.

Figure 6. The quadruple helix and the enablers from the Basque transformation heritage

Source: Del Castillo et al. (2012) “The Great Basque Transformation towards sustainable innovations”

Nevertheless we cannot forget that, apart from the achievements during these 30 years

and the apparent success of sustainable innovations in the Basque Country through a

remarkable policy commitment and support, the Basque model has also generated a

number of weaknesses that may threat its sustainability in the long term.

First of all, although the modernization promoted during the 80s and 90s through a

sound industrial and technology policy reached good results and was one of the enablers

of current entrepreneurial discovery processes (e.g. electric vehicle), this has also

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PRIVATE INITIATIVE

1

R&D SUPPLIERS

2

PUBLIC ADMINISTRATION

3

REGIONAL CONTEXT

4

ROLE IN THE ELECTRIC VEHICLE

ENABLERS FROM THE BASQUE TRANSFORMATION (1980-2010)

Leading role as applicants of the technology anddevelopers of the new business model aroundthe producers and distribuitors of the electricvehicle

Main companies from the automotive sector(automotive components producers) and energycluster (electric components producers andenergy distribuitors)

Supporting role as main technology owners anddevlopers. They have played a more importantrole during the first stages when thetechnologicaleffortwas bigger.

CICs and technology centres have played animportant role carrying out the initial effort inR&D and transferring technology to businesses.Universities alsohave been involved.

Basque Government support the initiativethroughEVEagency

Basque Government supported the initiativeincluding it as a flagship pilar in the EnergyStrategy (3E2020), Competitiveness Plan andthrough a number of policy instruments(funding, collaboration, etc.)

The problems regarding oil prizes, energyconstrainst and climate change makes theelectric vehicle an affordable option in form ofthe traditionaloptions.

Anyhow, the change towards an environmentalfriendly culture made possible a positiveresponse of society toelectricvehicle.

The current role played by private sector in electric vehicle wouldhave not been possible if during the 80s and 90s the modernistaion ofthe basque industrywouldhadnot happened.

The different measures of the reindustrialisation and technologypolicies make possible that today manufacturing goods sector hadbecome oneof the most competitive inthe Basque Country.

This position as leading tech firms make possible the technologicalevolution towards anenergyefficiency pattern.

Today, Basque Country has a strong innovation system with leadingtechnology centres. This is a consecuence of the support offered bythe government through S&T policy during the 90s and 2000s (e.g.technology centres)

Besides, most of the RTD developers with a bigger role in the electricvehicle are a result of the S&T policy pursued by the governmentduring the2000s suchas the CICs.

The Basque Government has achived a remarkeble experience inR&D+I policy since the 80s. This comprises not only defining the righactions but also establishing the channels to identify the needs andtrends fromthe business fabric.

Since the 80s, the government has progressively introduced changesin the priorities as long as they were needed: reindustrialization in the80s, technological modernisation in the 90s, open innovation in the2000s and sustainable innovationnowadays.

Basque Country as a society has change a lot since the 80s from anresorce intensive industrial society to a knowledge intensive one. Thebusiness model culture has change to one focused on added valueand technology leadership where sustainability is a pilar ofcompetitiveness.

Besides, the priorities have changed progressively towards social aenvironmental objectives (where the sensibilization of regionalgovernment playedasignificantrole)

Public Administration played a central role favoring the context conditionalities for the emergence of sustainable innovations such asthat of the electric vehicle: identifying and covering business needs, ensuring a strong RTD supply, defining a good regulatoryframework, promoting collaboration for critical mass, sensibilizating about environmental issues etc.

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generated, to a certain extent, a probable excessive specialization in very small number

of market niches and a limited related variety (see table 3). Besides, many of these

niches are not emerging industry sectors but rather traditional ones where the

competitive forces are very powerful and only a few (automotive and energy in our

case) have managed to reinvent themselves through technological hybridization and

innovation.

Second, the innovation pattern of Basque industries is characterized by a DUI (doing-

using-interactive) approach, which is very useful for incremental innovation but not for

radical innovations. Basque country still fails on moving towards a real science based

innovation able to develop real innovations. Experiences such as that of the electric

vehicle, where RTD developers supported and served as the basis for the innovation

process, have not extended to a majority of the economic structure.

Third, the vast science and technology system generated under the support of the

Basque Government has led to an oversized system, with clear duplicities that later

corrections carried out by the supporting framework were not able to solve. It has not

been able to reach all the business fabric, especially the smaller companies (that

represent more than 95% of total enterprises). Again, apart from some successful cases,

basic science is underdeveloped and does not collaborate with the private sectors.

Fourth, even nowadays some key priorities have been chosen (in line with a smart

specialization approach) such as nano technologies, biotechnologies, renewable energy,

ecoindustries, creative industries, tourism etc., but only a small number of them really

seem to flourish (e.g. electric vehicle and other initiatives in renewable energies).

Therefore, since the figures are quite good nowadays and the related variety possibility

frontier seems to give certain opportunities at medium term, the future is far for being

ensured. The Basque model proved to be good for transforming the economy initially,

but is still unclear that sustainability got ensured apart from some success experiences

like the electric vehicle.

To face this situation, a new strategic process has been launched since 2010 with the

new Competitiveness Plan 2010-2014 and Science, Technology and Innovation Plan

2015. The new notion of “smart specialization” is deeply rooted in both of them with

the aim to finally achieve not only competitiveness but sustainability in the long term.

The success factors that are supposed to enable the emergence of sustainable innovation

such as that of the electric vehicle in the Basque Country can be a recipe for success in

the upcoming smart specialisation approaches. In other words, a renewed strategy built

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of a conjunction of elements where policies in each field have managed to conform a

coherent framework to improve the triple helix of prosperity.

Regarding the future, we can speak about a new path of “sustainable” prosperity

focused on achieving a twofold objective: (1) economic sustainability ensuring a

coherent social and environmental context able to foster competitiveness through

knowledge (long run economic growth through sustainable foundations), and (2)

enough economic “health” to advance in the main social and environmental indicators.

Those general objectives clearly define the idea behind the electric vehicle initiative and

the strategy around it.

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