Intraregional economic effects from innovative activities of public research units (PRU): an assessment of institutional determinants (321)

Theme Track: Innovation and New Technologies - Knowledge and Educational Infrastructure

Author:
Rosenfeld, Martin T. W.

In modern knowledge-based societies, it has become a common strategy for policymakers all over the world to use public research units (PRU) as instruments of regional policy. The idea behind this strategy is that a region without PRU (publicly funded universities or specialized research institutes) will in general have less chances for economic development and lower potentials in interregional competition than a region which has established one or more PRU. At first, PRU are important for a region's public image. Secondly, universities are important suppliers for high-qualified human capital within a region. Thirdly - and most important -, PRU have the function to generate new knowledge and innovations. Innovations are the main potential for economic growth. But in this context the question for policymakers is: Who benefits from the innovative activities of the PRU in a certain region R? Are the benefits mainly limited to firms and individuals inside the region R (which is responsible for funding the PRU), or are the spillovers to firms and individuals in other regions more important? - The paper focusses on identifying the institutional conditions which may increase the intraregional economic effects from the innovative activities of PRU within an region. The paper presents theoretically derived results, as the first stage of a research-project on the public research sector in the German Land of Saxonia-Anhalt. The theoretical background is mainly based on New Institutional Economics.

Innovations usually have some of the characteristics of public goods, what means, that everybody may make use of them, irrespective of his location, and without paying for it. If the PRU in a region are mainly producing innovations with the characteristics of public goods, their intraregional economic effects will be lower than if they were mainly producing innovations which may be regarded as private goods. The degree to which an innovation has the characteristics of a public good depends e. g. on what kind of PRU are located within a region.

Rather relevant factors for intraregional economic effects of innovations are information-costs. Private firms have to know about the PRU to make use of their research, and the research-activities of the PRU may benefit from information about the problems of local firms. To establish special agencies within a region which have the task to reduce these information-costs may be one way to increase the intraregional economic effects of PRU. The higher the informations-costs remain, the greater will be the tendency of private firms to import relevant innovations from other regions. Also important for intraregional economic effects of PRU is the 'matching' between the structure of the PRU and the (sectoral) structure of private firms within a region. In addition, the tendency of private firms within a region to make use of innovations from local PRU will increase, if there is a potential of adequate workers in the region which are necessary for implementing the innovations; the size of the firms will also be important.

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