The role of innovative capacity

To sustain a process of regional inversion, a region must develop a strong base of innovative capacity.

A region’s innovative capacity is directly related to its technological creativity. Technological creativity is the source of invention, innovation and, eventually, of new technologies. A high level of innovative capacity is vital if a region is to become a significant source of new technologies.

Gone are the days when lower labor costs and a raw material endowment provided the key to long-term development. In today’s world, cost and raw material advantages can disappear quickly, as globalization makes alternatives available. Also, basing a region’s advancement on its lower costs is of very limited benefit, since growth and trade usually raise costs substantially, thereby eliminating those advantages.

In an era when intangibles are the most valuable resource, material resources become less important. The most valuable resources of our time are creativity and knowledge. Nurturing and developing those intangibles are fundamental if a region is to achieve a higher level of innovative capacity.

How does innovative capacity help our understanding of regional inversion?

The concept of innovative capacity can provide important insights on the process of regional inversion. Innovative capacity can be used to understand invention and the potential for innovation. Since a region’s national and international projection may depend much on the link between innovative capacity and the development of new technologies, understanding the dynamics of invention and innovation can provide insights on the prospects for regional inversion.

Second, innovative capacity can serve as a diagnostic tool to gauge changes in a region’s level of invention and innovative potential. As the process of regional inversion advances, it is important to have benchmarks on invention and innovation. Measuring innovative capacity on a continuous basis over time can provide a comparative indicator of how regions, their sectors and industries fare as sources of new technology.

Many economic and social indicators are regularly compiled and published. Employment, interest rates, prices, trade balances and income are a few examples. A regional innovative capacity indicator could be provided regularly as a measure of technological performance and potential, in much the same way as the indicators noted above.

Providing a regional innovative capacity indicator on a regular basis would be a cost-effective way to keep policy-makers and the public informed on a weekly, monthly or quarterly basis. This indicator could also become a valuable resource for research and data analysis. Changes in regional innovative capacity can serve as early indicators of advance or decline in a region’s technological leadership. Awareness of those changes can lead to early action to avoid any negative effects from regional inversion.

At the level of metropolitan areas, innovative capacity can also be used as a diagnostic indicator. It can, for example, be used to compare how technological leadership may be shifting between metropolitan regions. Metropolitan areas may therefore be able to learn early on about any negative changes in their innovative capacity. It may also be possible to identify future leading areas by looking at how metropolitan innovative capacity changes over time.

Third, innovative capacity can provide a multisectoral way to measure invention and innovative potential within and between regions. Innovative capacity is not tied to any specific industry, sector or activity. It can therefore be used to measure regional invention and innovative potential in any sector where they are thought to be important.

Comparative interregional analyses of specific sectors considered crucial for national or regional development can be undertaken with the innovative capacity indicator. This can provide insights on the dynamics of new sectors that depend on state-of-the-art technologies. Analyses of regional innovative capacity for older industries can also yield important insights on their innovative potential, and their prospects for survival. Service activities that generate invention and innovation, or that rely on them, may also benefit from regional and intersectoral comparisons.

Multisectoral analyses with the regional innovative capacity indicator can inform strategy. Strategies of regional and national development typically identify sectors that can provide greater dynamism and create jobs, wealth and improve the standard of living. Analyses of regional and national innovative capacity can provide reliable indications on sectors that might define development strategies.

Fourth, measurements of innovative capacity can provide many insights on the regional dynamics and trajectory of the accumulation of inventions. The accumulation of inventions over time is crucial for a region if the process of regional inversion is to be sustained. Tracking the trajectory of accumulation is important for understanding the cycles of accumulation underlying the process of regional inversion.

Accumulation that leads to a process of regional inversion can show substantial disparities between geographical areas. This can be a function of sharp differences in the regional level of innovative capacity and the factors that support it. Changes in access to education, infrastructure and their quality, for example, have a direct bearing on differences in regional innovative capacity. Measurements of innovative capacity can provide insights on the disparities affecting accumulation, by supplying precise data on these changes at the level of regions, metropolitan areas and sectors.

Fifth, innovative capacity can be used to analyze how invention and innovation occur through regional and interregional networks. Networks are an important source of innovative capacity in regions and metropolitan areas. Networks that support invention and innovation occur at the level of firms, sectors and clusters. Understanding the level of innovative capacity obtained through networks at all of these levels is vital for any analysis of invention and innovation in regions and metropolitan areas.

Measuring the level of innovative capacity that occurs through networks in metropolitan areas can, for example, reveal the importance of clusters in the process of regional inversion. Localized networks can be a significant source of metropolitan and regional innovative capacity, and their contribution to the process of regional inversion should be taken into account. The relationship between networked innovative capacity and the process of regional inversion can provide many indications of how invention and innovation occur, and their contribution to the well being of localities and regions.

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