Path-development trajectories and barriers perceived ...

European Planning Studies

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Path-development trajectories and barriers perceived by stakeholders in two Central European less developed regions: narrow or broad choice? Viktor Květoň & Jiří Blažek To cite this article: Viktor Květoň & Jiří Blažek (2018): Path-development trajectories and barriers perceived by stakeholders in two Central European less developed regions: narrow or broad choice?, European Planning Studies, DOI: 10.1080/09654313.2018.1509061 To link to this article: https://doi.org/10.1080/09654313.2018.1509061

Published online: 14 Aug 2018.

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EUROPEAN PLANNING STUDIES https://doi.org/10.1080/09654313.2018.1509061

Path-development trajectories and barriers perceived by stakeholders in two Central European less developed regions: narrow or broad choice? Viktor Květoň

and Jiří Blažek

Faculty of Science, Department of Social Geography and Regional Development, Charles University, Praha 2, Czechia ABSTRACT

ARTICLE HISTORY

This paper aims at the comprehension of feasible development trajectories conceptualized within the new path-development model in the case of two less developed regions in Central Europe (CE). The main new element of this paper comprises the examination of the perception of key barriers and mechanisms hindering particular evolutionary trajectories by regional stakeholders and their comparison with those conceptualized in the literature. Although conceptual characteristics of prevailing path types in different regional innovation systems do exist, empirical verification from less developed regions such as those in CE is insufficient. On the basis of interviews with regional stakeholders, a typology of barriers for pathways conceptualized to date was elaborated from a CE perspective. Our study showed that the feasibility of a more radical path is hindered by a wide range of barriers operating at different levels. The elaborated typology of barriers for various path-development trajectories outlined the main hindrances constraining key regional actors, linkages and institutions. Given the general weakness of the overall RIS, path-extension and path-modernization trajectories are bound to be the most realistic options for this type of less developed regions. Our study revealed existing regional dynamics as built predominately upon incremental changes within rooted but prospective industrial branches.

Received 14 September 2017 Revised 1 August 2018 Accepted 2 August 2018 KEYWORDS

New path-development model; barriers; CEECs; smart specialization

Introduction One of the key challenges facing economic geographers and economists is to explain various trajectories of regional industrial development in different socio-economic contexts (Binz, Truffer, & Coenen, 2016; Grillitsch & Trippl, 2016; Isaksen, Tödtling, & Trippl, 2016; Martin, 2010; Neffke, Henning, & Boschma, 2011; Storper, 2011). For a deeper understanding and exploration of a dynamic perspective on regional industrial development, a theoretical framework developed within evolutionary economic geography (EEG) and innovation studies can be effectively employed. Namely, this study employs the industrial path-development model elaborated within the EEG stream (Isaksen & Trippl, CONTACT Viktor Květoň [email protected] Faculty of Science, Department of Social Geography and Regional Development, Charles University, Albertov 6, 128 43, Praha 2, Czechia © 2018 Informa UK Limited, trading as Taylor & Francis Group

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V. KVĚTOŇ AND J. BLAŽEK

2016, 2017) and a well-established regional innovation system theory. Current evolutionary economic geography literature suggests that the evolutionary trajectory of the region is shaped by the historically existing industrial and institutional structures in the region in which current activities occur and new development and activities arise (Isaksen & Trippl, 2016; Martin & Sunley, 2006). Recently, path-dependent concepts have been modified and conceptually enriched to encompass also the less developed regions in advanced countries by the application of system-failure approaches (Isaksen & Trippl, 2016). However, these EEG concepts are also criticized by some authors, particularly for downplaying the role of public policy and institutions for new path development, e.g. Hassink, Klaerding, and Marques (2014). Consequently, distinctive potential for deepening the knowledge of evolutionary dynamics of regions could be found within the less developed Central and Eastern European Countries (CEECs), because their economic and institutional structure has been undergoing profound changes at the national and regional levels over recent decades, induced by the reintegration of the former command economies firstly into the global economy and secondly into European structures (Novotný, Blažek, & Květoň, 2016; Ženka, Novotný, Slach, & Květoň, 2015). Surprisingly, the nature of evolutionary trajectories of economies in post-communist countries (as well as of key factors and driving mechanisms) has not yet been sufficiently explained vis-à-vis these newly developed theoretical frameworks. Therefore, there is considerable potential associated with the investigation of existing as well as of possible evolutionary trajectories of regions with less developed research and innovation systems in CEECs. Moreover, a recent paper by Isaksen and Trippl (2017), combining path-development models and knowledge-base concepts in order to explain new industrial paths for two peripheral regions in Norway and in Austria, explicitly highlighted the need to compare the trajectories of peripheral regions in economically advanced countries with new pathways in CEEC regions. The paper investigates the perception of key regional stakeholders regarding possible path development trajectories in two less developed regions in CE and to examine key bottlenecks hindering evolution along particular pathways within the conceptual framework of the path-development model. In other words, the paper seek to comprehend the key barriers, mechanisms and processes of new path development in these two less developed regions in CE, where the regional innovation system (RIS) is often institutionally and organizationally thin, but also fragmented and partly even locked-in (Blažek & Csank, 2016; cfr. Tödtling & Trippl, 2005). Based on interviews with key regional stakeholders in one Polish and one Czech region, the paper compares opinions of key regional actors with propositions stemming from conceptualized path-development trajectories. The paper will answer the following research questions: .

.

What are a feasible evolutionary trajectories perceived by stakeholders in two less developed regions in CE that had to undergo profound changes in economic structure during the transformation period? What are the main hindrances perceived by stakeholders in embarking upon new path development in these less developed regions in CE?

The article is organized as follows. The next part introduces the conceptual framework of the study with a special focus on concepts and empirical findings related to regions with

EUROPEAN PLANNING STUDIES

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less developed innovation systems. Subsequently, the methodological approach is explained, and then the empirical section provides the key findings of two rounds of interviews performed in Lodzkie (Poland) and South Moravia (Czechia), representing regions with less developed innovation systems. Finally, the concluding section summarizes the main findings and outlines avenues for possible future research.

Conceptual departures for new path development For the purpose of this paper, the conceptual points of departure and underpinnings are based on the intersection of regional innovation system (RIS) literature (Asheim & Gertler, 2005; Asheim & Isaksen, 2002; Cooke, 1992; Trippl, Asheim, & Miörner, 2016) and evolutionary economic geography approaches, especially the concept of path dependency (Arthur, 1989; David, 1985). Such a combination facilitates the identification and comprehension of regional industrial changes (Isaksen & Trippl, 2016) as well as a rationale for embarking upon new trajectories (Pike, Dawley, & Tomaney, 2010). Thus, this approach aims to move beyond the traditional static and descriptive perspective often employed within the RIS literature (Uyarra & Flanagan, 2010). The conventional interpretation of the path-dependency concept (Arthur, 1989; David, 1985) is still strong in economic geography, but different approaches to path-dependent development as well as varying definitions and metrics hamper knowledge accumulation (Henning, Stam, & Wenting, 2013). For example, scholarly works differ according to the level of analysis in which the path-dependency concept is used (e.g. firms, clusters of firms, whole industries, regional institutions in the broad sense, commonly applied technologies in the region, etc.). Another crucial point is the very definition of various possible pathways, as different authors denote the same types of paths differently. Moreover, the creation of a new path is not easy to recognize, because the distinction between the new and old trajectories might be rather fuzzy (Henning et al., 2013; Martin, 2010). Unsurprisingly, the above-mentioned conceptual approaches employed for the explanation of new regional pathways face criticism because of several limitations (Dawley, 2014; Hassink et al., 2014). The main limitations relate to downplaying the role of external relationships (Asheim, Bugge, Coenen, & Herstad, 2013) – for example, the position of companies nested in particular regions within the hierarchy of global production networks (GPN) affects the scale and type of their linkages and spillovers – and especially an insufficient comprehension of the role of public policy and of institutions (Hassink et al., 2014). Accordingly, Binz et al. (2016) have recently moved beyond knowledge-based and technological relatedness to develop an analytical framework emphasizing four generic resources in early path creation process (knowledge creation, market formation, technology legitimation, investment mobilization). These authors argued that ‘new industries depend on coevolving territorial and sociotechnical embedded innovation processes and … linkages to other regions in the global innovation system forming around a new technology’ (Binz et al., 2016, p. 194). Consequently, in this paper, we follow an evolutionary interpretation of path dependency that emphasizes regional economic changes, and industry and technology transformations, to try to comprehend key drivers, mechanisms and sources of new regional development paths as proposed by Martin (2010) and Boschma (2015). Our research focuses upon selected regions in CEECs, where the institutional framework and socio-

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economic environment, as well as the capability of public authorities to design and implement various supportive policies, have numerous distinctive features, given their legacy from the period of state-socialism and the subsequent turbulent transformation. The paper draws inspiration from the recent elaboration of the new path industrial development model (e.g. Grillitsch & Trippl, 2016; Isaksen & Trippl, 2016), which surpasses the traditional and restrictive conception of path dependency. It enables an understanding of different sources of new growth (Isaksen & Trippl, 2016), the role of key stakeholders and individual agencies (Miörner & Trippl, 2016; Sydow, Lerch, & Staber, 2010), and conditional factors and mechanisms. Conceptual as well as empirical contributions in recent scholarly works are dominantly focused on the investigation of possibilities for new pathways in less developed regions in advanced European countries. By contrast, case studies and the systematic comprehension of structural economic change and the evolution of economic and innovation systems over time in CEECs are infrequent, but there are several notable exceptions, especially Lengyel and Leydesdorff (2011), Kravtsova and Radosevic (2012), Radosevic and Yoruk (2013), Novotný et al. (2016), and Smith and Swain (2010). Therefore, scrutiny of the relevance of the new path industrial development model characterized by the elaboration of various types of regional pathways, such as path extension, path renewal and new path creation (Isaksen, 2015; Isaksen & Trippl, 2016; Simmie, 2012), seems to be particularly promising in CEECs. In addition, more detailed elaboration of possible pathways has recently been offered by Grillitsch and Trippl (2016) and Isaksen et al. (2016), who newly conceptualized path importation, path modernization and path upgrading. Consequently, we believe that the new path industrial development model represents a suitable framework for research into the evolutionary dynamics of CEECs, given the specifics induced by their state-socialism heritage and subsequent profound socio-economic transformation. However, the potential offered by this model has yet not been utilized. In an effort to systematize existing knowledge related to the new development pathways, the main characteristics of new paths have been elaborated in a tabular form (Table 1). Following the recent works by Grillitsch and Trippl (2016) and Isaksen et al. (2016), the main aim was to capture the key conceptual features of particular path-development trajectories in terms of elementary dichotomies, although, obviously, the full range of options among the extremes encapsulated by these dichotomies is acknowledged. We believe that such an approach reflecting key dichotomies in different pathways represents not only a contribution to the literature, but is also necessary for the empirical part of the paper, in which the typology of barriers for different pathways is developed in an effort to comprehend current as well as likely evolutionary pathways of regions in CEECs. While the literature agrees that future economic performance and evolutionary trajectories are conditioned by the nature of existing innovation systems at the national and regional levels (Cooke & Asheim, 2006), the knowledge of emerging innovation systems is limited in the former command economies. A notable exception is the work of Plawgo, Klimczak, Czyż, Boguszewski, and Kowalczyk (2013) assessing the regional innovation systems in Poland. Some authors, such as Radosevic (2002), were even sceptical about the existence of the RIS in the CEECs because of the lack of interaction among regional actors. However, the ideal functioning of a RIS is rather exceptional even in advanced countries, and Tödtling and Trippl (2005) have applied a system-failure

Table 1. Main characteristics of particular pathways of regional evolution reflecting core dichotomies in conceptualized trajectories. Path extension Reinforcing existing regional industries based on accumulation of know-how and capacities. Lack of changes, threat of negative lock-in.

Specialization /Diversification

Continual adjustments by existing firms, lack of diversification process.

Exogenous / endogenous sources of knowledge

Endogenous effort for recovery and renewal of existing industrial structures prevails, lack of exogenous impulses for new path development.

Path upgrading

Path modernization

Path branching

Path importation

Path creation

Changes of position of regional companies within GPN through process, product, functional or intersectoral upgrading. For CEEC firms, even downgrading processes might be relevant (Blažek 2016). Both specialization and diversification can arise. Repositioning of companies in the market or within GPNs can be linked with (re)specialization upon a particular product with higher value-added. By contrast, diversification processes can result from the streamlining supplybase paradigm when fewer suppliers tend to realize a broader range of activities in GPN. Main impulses for various forms of upgrading often come from the pressure exerted by lead firms of GPNs or from higher-tier customers, which can be located in distant regions.

Regional industrial changes through new technologies, new materials, etc. Continuity of established industries but in new direction.

Setting-up of new firms related to existing regional economic structure or widening spectrum of related products within existing companies.

Radical change of trajectory in regions (inflow of industries not yet embedded in region, inflow of skilled labour, etc.) and related externalities.

Specialization as well as diversification may occur depending upon type of RIS and other socioeconomic factors.

Diversification of economic structure into related industries, regional industries mutate and widen.

Diversification of economic structure through the implantation of new industries, diversification of labour force skills.

Wide-ranging and radical change in regional industries and in the whole regional fabric, complex transformation of RIS (institutional changes, transformation of academia-business linkages, etc.). Diversification processes around assets and competencies embedded in the region. Important role of spin-offs and of long-term labour mobility of highly skilled workers.

Infusion of new technologies and materials results from market pressure or from cooperation with R&D organizations. Exogenous and endogenous sources of knowledge are often combined.

Strong endogenous development impulses given by accumulation of capabilities for branching into related industries.

Dominant role of exogenous impulses (FDI, extra-regional networks, international mobility of highly qualified labour, etc.), but it can be boosted by endogenous linkages and drivers.

Endogenous potential (strong competences, intensive market research, vigorous entrepreneurial discovery process, etc.) is used and combined with exogenous impulses such as those stemming from restructuring of global markets.


Continuity / Change

Source: Own elaboration based on Grillitsch and Trippl (2016) and Isaksen et al. (2016). 5

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approach to identify several types of systemic deficiencies of RISs. Thus, it is evident that various regions face different innovation challenges stemming from both the nature of their RIS and the differing challenges linked to the varying positions of key actors (especially firms) in the globalized economy. Further, as Asheim, Grillitsch, and Trippl (2015) argued, the dynamic perspective of RIS (in contrast to the prevailing static view) is needed for the analysis of structural change, because ‘new path development often results from the combination of related or unrelated industries, knowledge bases, and economic activities, thus from combinations that transcend cluster boundaries’ (Asheim et al., 2015, p. 6). To sum up, both of the main theoretical concepts for this article (RIS and the new path-development model) are well developed, but empirical analyses are limited and difficult to compare and, moreover, cover mostly regions in advanced countries. Therefore, first, the article aims to address this gap and to contribute to our understanding of regional evolution in specific contexts of less developed countries with a heritage of state-socialism and truncation. Second, via new empirical material, this study seeks to enhance the existing literature via the perception of major barriers and mechanisms hindering particular pathways by key regional stakeholders in newly emerging regional innovation systems in two less developed regions in Central Europe.

Methodology Our research effort focused upon a dynamic perspective to understand regional processes within the framework of the regional industrial path-development model (Grillitsch & Trippl, 2016; Isaksen & Trippl, 2016) with the aim of avoiding a static snapshot of RISs. The methodology was developed within the European research project SMARTSPEC and further elaborated with the national research project. The methodology was based on field visits and two rounds of in-depth interviews performed by the authors in 2014 and 2015 and subsequent qualitative content analysis (see Sydow, Windeler, Müller-Seitz, & Lange, 2012). The interviewees were selected to cover key stakeholders of different segments of regional innovation systems (entrepreneurs, cluster managers, representatives of regional self-government, academics, managers of technology transfer centres and innovation centres, regional development agencies, science and technology parks, etc.). Preference was given to stakeholders with a long ‘institutional memory’ to ensure that interviewees had a deep understanding of the evolution of a given region (Table 2). Moreover, regional actors have been able explicitly or implicitly to channel regional development. Most actors were involved, among other things, in the process of preparing and implementing smart specialization strategy.1 Altogether, 31 interviews were performed in Lodzkie (13 interviews in 2014 and 18 in 2015) and 17 interviews in South Moravia (9 in 2014 and 8 in 2015). In addition, in 2015, in South Moravia, a focus group with four key managers from the South Moravian Innovation Centre (a leading intermediary organization in the region and beyond) was conducted during the second round of interviews in 2015 to obtain the opinions of these key ‘movers’ on theoretical concepts of evolutionary pathways in juxtaposition with existing dynamics in the region. The focus group lasted for about 2.5 h. The interviews lasted between 45 and 90 min and included mostly open-ended questions on the following main themes: In which fields it is realistic to attempt a new path development? What are the main hindrances in embarking upon new path development? To what extent have the key stakeholders during the elaboration


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Table 2. Overview of interviewed stakeholder groups. Stakeholder group

Lodzkie region

South Moravia region

Sum

Entrepreneurs Regional authority Universities Intermediaries Sum

6 6 10 9 31

4 4 4 5 17

10 10 14 14 48

of RIS considered the option of promoting a new path development and to what extent has been the effort concentrated upon strengthening of established branches in the region? What is the perceived basis for a new path development? What are the key ingrediences of a policy mix to support new path development and to what extent are these in place in a given region? The interviews were not recorded, as from our experience in CEECs recording often limits the openness of interviewees. Instead, a detailed protocol was elaborated immediately after each interview. To increase the validity of our research, we used methodological triangulation and complemented interviews with annual reports, as well as strategic and other documents of key institutions.

Socio-economic profile of case study regions In our empirical research, we focused on unravelling complexities of emerging regional innovation systems and their evolutionary pathways in Lodzkie and South Moravia regions. Case study regions were chosen as non-metropolitan regions with relatively strong agglomerations that had to undergo profound changes in economic structure during the transformation period (Lodz, due to its traditional orientation upon the textile industry, was sometimes called ‘Manchester in the East’, while the South Moravian capital Brno suffered from severe decline of employment in the machinery industry). Consequently, both regions have been struggling with high rates of unemployment since the collapse of the command economy. By contrast, metropolitan regions of capital cities were not selected for analysis, due to their extraordinary position within the national economies. Lodzkie as well as South Moravia belong to the category of ‘modest innovators’, according to the Regional Innovation Scoreboard (2017). South Moravia underwent dynamic changes during the transformation period. The current socio-economic parameters are presented in Table 3. Currently, manufacturing industry and services with high value-added are the main drivers of the economy of this region, which specializes in engineering, electrical engineering and the electronic industry. The region boasts an exceptionally proactive approach towards designing state-of-the art innovation policy. Due to a systematic effort to improve the conditions for the knowledge-intensive economy, there has been an influx of foreign firms in the sphere of advanced manufacturing as well as in knowledge-intensive business services. Another substantial feature of the regional economy is the relatively large number of companies with own R&D capacities (367 firms). Companies invest in R&D especially in branches such as engineering, electrical equipment, ICT and life sciences (RIS for South Moravian Region 2014–2020). The economic structure of the Lódzkie region is strongly influenced by the specific long-term evolutionary trajectory of its economic base, which was predominantly centred upon the textile industry for about two centuries. Despite profound

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Table 3. Basic socio-economic and R&D&I indicators in the case study regions. Basic socio-economic indicators Population (2014) Unemployment rate in % (2014) EU28 average: 10.2 GDP per capita; purchasing power parity (2014) EU-28 average 100% (27,500) Economic structure – GVA (%) Economic structure – employment Indicators of R&D&I performance (RIS 2017 normalized data*) Population with tertiary education R&D expenditure in the public sector R&D expenditure in the business sector Non-R&D innovation expenditure SMEs innovating in-house Innovative SMEs collaborating with others EPO patent applications SMEs introducing products or process innovations SMEs introducing marketing or organizational innovations Employment in knowledge-intensive activities Sales new to market and new to firm innovations

South Moravia

Lódzkie

1.67 million 8.2 (national rate: 6.1)

2.52 million 8.9 (national rate: 9.2).

73% (21,700) regional average; 85% (23,500) national average Secondary activities 37.2% Services 60.2% Secondary activities 35.8% Services 61.2% South Moravia

63% (17,400) regional average; 68% (18,600) national average Secondary activities 36.0% Services 58.0% Secondary activities 31% Services 55% Lódzkie

0.532 0.707 0.523 0.475 0.447 0.237 0.198 0.449

0.644 0.435 0.152 0.485 0.156 0.068 0.158 0.180

0.275

0.049

0.710

0.409

0.404

0.211

Note: RIS normalized data (the scale of the indicators is 0 to 1, where the best-performing region has 1 and the worst 0). Source: Eurostat, Regional Innovation Scoreboard 2017.

transformational change, the shares of employment in the textile industry, in agriculture and in coal-mining are still above the Polish average. For example, the Lodzkie region creates 65% of Polish hosiery production, 58% of brown coal production and 40% of cotton domestic fabrics (OECD, 2013).

Case study findings Comprehending the path-development model from the stakeholder’s perspective Evolutionary trajectories in CEECs are influenced by a broad mix of economic as well as institutional factors, mechanisms and general preconditions given by their heritage of state-socialism and subsequent truncation (Hayter, 1982; Pavlínek, 2017). The purpose of this section is to scrutinize contemporary regional economic dynamics vis-á-vis particular evolutionary pathways in our case study regions. Special attention is paid to the perception of risks and barriers, which, according to key regional stakeholders, hinder or facilitate evolution in various types of paths. In both case study regions, there was strong consensus among key stakeholders (academics, intermediaries as well as entrepreneurs) about the strategic pathway for the region concerned. In the case of South Moravia, the key strategic opportunity is seen in fostering cooperation among established and relatively highly developed industrial branches in the region in order to develop new products as a result of this cross-fertilization. An example of such collaboration is the cooperation between the IT companies and


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mechatronics firms aiming at the development of special medical appliances, e.g. 3D laboratory, facilitating the manufacture of human body implants. In other words, such an approach is based on supporting innovative products (for example, for the healthcare sector) in sectors of sufficient size, capabilities and tradition in the region. The development of intra-regional cooperation can be illustrated by the significant growth of entrepreneurial expenditures on research and development performed at universities in the South Moravian Region between 2011–2016 (growth from 0.02% to 4.7%). On the other hand, the international R&D cooperation of regional companies and universities stagnates, which undermines the possibilities for more radical pathways. In Lodzki region, there was a broad agreement among various stakeholders that contemporary pathway is based on combination of know-how accumulated in traditional strong sectors with new blood injected in the form of new trends and technologies. This strategy was also perceived as the only feasible trajectory of the future development. In contrast, despite a certain variation in the wording used by particular stakeholders upon this issue, not a single interviewee envisaged new industry being introduced to the region through some form of policy initiative. Instead, respondents from both business and academia often talked about the re-birth of key traditional industries. For example, given the long-lasting dominance of the textile industry in Lodz, new opportunities for textile development were seen in activities such as design competitions and fashion festivals, but also in the development of technical textiles, especially for use in the construction sector, which is also strong in the region. Likewise, significant opportunities were seen in cosmetics, based upon the strong tradition and the existing potential for research in medicine and the pharmaceutical industry. Accordingly, some academic researchers identified considerable potential also in another traditional specialization of the region – in the agro-food sector. Wide spectrum of new opportunities were identified by these academics ranging from the introduction of new and high-quality bio-stimulators and advanced plant-protection substances, which should result in much higher quality in fruits and vegetables, to the development of specialized machinery for picking various sorts of fruits and vegetables. Needless to say, the market for such highly specialized machinery is bound to be rather limited. Therefore, stakeholders in both regions build smart specialization strategies particularly for intra-path changes within rooted but prospective industrial branches. From the perspective of the regional industrial path-development model, such an evolutionary pathway can be best described as a process of path extension combined with path modernization. Nevertheless, path extension seems to dominate clearly over other pathways. Given the overall socio-economic context and tradition in both regions, a strategy based on path extension seems to be the most realistic for the future development in both regions. Moreover, it is possible to assume the simultaneous operation of various trajectories, as documented e.g. Slach, Bosák, Ženka, and Pavlík (2018) at a lower regional level. New path creation in CEECs regions? In contrast, the regions in CEECs have only limited historical experience with radical forms of evolution such as new path creation or path importation. Yet, some interesting (even though unsuccessful) cases of these types of initiative do exist. In particular, the

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South Moravia region learned a harsh lesson when it attempted to develop a new biotechnology industry in this mostly machinery-based region. Inspired by a biotechnology boom that commenced at about the turn of the new millennium, the process of path importation was driven by the local university with support from the South Moravian Innovation Centre, which became the main drivers enhancing the overall innovation system of the region. More specifically, representatives of both institutions tried to develop the biotechnology sector about 10 years ago, and the key mechanism was associated with the competitive rivalry of regional universities. Significant efforts were made to match the other major university with a technical orientation, which had already established its own techno-incubator. However, nowadays, the efforts to spur biotechnology research and the associated industry are broadly considered as unsuccessful by regional stakeholders. In particular, regional stakeholders identified the following main factors for the failure: (i) the limited tradition of biotechnology in the region, (ii) underestimation of the real interest of research teams and companies (biotechnology research in South Moravia is perceived as being below the critical mass needed for real development of this industry; moreover, existing companies are relatively weak in international comparison and frequently do not possess unique know-how), (iii) the high risks associated with the development of the sector, something that representatives of research teams at the university particularly refused to accept, and (iv) low attractiveness of the sector for foreign investors (the region failed to attract any significant foreign ‘players’ in the sector). Therefore, it became apparent that the region had neither sufficient corporate nor sufficient public (university) research to spark the long-term development of the sector. Consequently, support to the development of biotechnology has been terminated as the high costs incurred contrasted sharply with negligible returns with no signal for a change of this trend in the future. On the contrary, entrepreneurs, but also academics, in Lodzkie region have not totally disregarded the option that new branches might be introduced into the region. However, in contrast to South Moravia, stakeholders in Lodzkie miss the real experience with starting path importation or another radical form of regional industrial change during the transformation period. Nevertheless, this form of cautious optimism concerning the scope to introduce new industries to the region is related to the considerable attention that is currently being given in Lodz to the promotion of start-ups across the whole spectrum of industrial branches. The promotion of start-ups in the region has been broadly considered by stakeholders as vigorous, combining numerous forms of support (venture capital funds, business angels, incubators, etc.) and various sources (European, national, regional, and private). Even though most of the start-ups that are successful in Lodzkie region are operating in the ICT sector, especially in the development of new applications for mobile phones, but also in bio-tech on the basis of traditional pharmaceutical and cosmetic industries and research, the option for a promising start-up to emerge in a completely new sector has not been ruled out entirely by our interviewees, but it was considered as unlikely and haphazard. The variety of fields in which new start-ups operate in Lodzki can be illustrated by the following two examples. A start-up company nested in incubator in Lodz area is developing a cyborg with laser-guided navigation (with potential implication in logistics). Another start-up develops a system for monitoring hydration and is driven by Lodz University of Technology.


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In South Moravia, managers in an intermediary body responsible for design and implementation of regional innovation strategy stressed that the more radical form of regional structural change could be introduced into the region as a result of an external impulse in the form of a decision by a strategic investor to locate a new type of production within the region. Both these managers identified avionics as a possible example of new industry. However, other interviewees expressed reservations towards the continuation of overreliance upon foreign investors, as illustrated in this statement by the manager of one of the key intermediary bodies in South Moravia: We are trying to build an alternative economic ecosystem, which is based on entrepreneurs who live here and do not pay dividends abroad. For us, they are like a salt in the region, and when salt is enough, it is better for everyone. (interview, June 2015)

It is an active effort to change path-development in regional economy in CE, where the widespread retreat of companies from final markets to mere components production under the downgrading and truncation survival strategies, along with the predominately low-cost-based development orchestrated by foreign companies, led to their peripheral position within the global economic system. According to Pavlínek (2016), ‘External control and dependence on foreign capital and technology represent the greatest weaknesses of the FDI-driven industrialization’ (p. 587). Generally, there was a broad agreement among interviewed stakeholders in Lodzkie that the future of the region lies in a creative combination of know-how accumulated in traditional sectors injected with ‘new blood’ in the form of new trends, materials and technologies. The contemporary policy-mix for new path development is currently limited to a broad support for start-ups without any intention to target this support upon a specific sector that might be particularly promising given the comparative advantages of the Lodzkie region. Therefore, in this case, a sort of ‘wait and see’ policy is being followed, indicating the limited capability of regional stakeholders to design sound support policy without reference to specific tools that may support evolution along a particular path. Experience accumulated in South Moravia as well as in Lodz region shows that it is important to proceed from rather simple policy tools that correspond to the degree of development of the given RIS and of individual stakeholders. A prime example of a simple tool, which was among the first ones introduced in South Moravia, is the provision of innovation vouchers aimed at stimulating academia–business collaboration. (subsequently, about 1/3 of the projects supported by the Voucher programme continued in R&D co-operation). However, regardless of how useful these vouchers might be at the early stages of the formation of the RIS, when the innovation system reaches an elementary level of connectedness it is necessary to design and employ other tools to secure deeper and more sophisticated cooperation among stakeholders. Consequently, the focus group with managers of the South Moravian Innovation Centre revealed that they are currently considering an option to discontinue the provision of innovation vouchers in the near future, as their main mission has already been accomplished. Another example of a specific tool to promote the potential for new path development is the so-called Centre of Competence (introduced in Czechia in 2012). It represents an instrument that could stimulate the creation and further support of R&D activities that will be innovative and competitive, and which will have market potential. The idea is to

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focus and stimulate intensive and sophisticated cooperation among public and private actors. Three such centres (out of 20 in Czechia) are supported in South Moravia, with the main beneficiary (coordinator) based in the region, and 20 other partners participate in the competence centres, with the main beneficiary based in another region. All three centres try to develop pockets of excellent knowledge in the region in spheres such as electron microscopy and microscopy techniques for nano- and micro-technology. Generally, such exogenously (politically) initiated interventions also have the capacity to start processes for new path development, particularly path extension, modernization or branching (cfr. Isaksen & Trippl, 2016). However, there are also competence centres not supported by the state, but established as a result of a bottom-up initiative. An example is the Competence Center Intemac, which is addressing the needs of the engineering machinery industry that belongs among the key economic domains of the region.

Major barriers and mechanisms preventing embarking upon new path development According to our interviewees responsible for design and implementation of innovation strategy in both regions, the major barrier is the very nature of the ‘political’ process of approval of the development/innovation strategy, which sets the overall framework for new path development. This can be demonstrated with the example of the smart specialization (S3) strategy, which was one of the ex-ante conditionalities for the EU support via Cohesion Policy in the 2014–2020 period. During the preparatory work on the S3 strategy in both regions, there was considerable pressure to objectivize and properly justify the selection of domains of future specialization through ‘hard data’ to avoid rumours about possible political manipulation in favour of some business circles. Obviously, such an approach tends to ‘cement’ existing specializations rather than to search for new ones. Moreover, according to these respondents, embarking upon a new path is also hindered by the fact that, in contrast to established branches in the region, where representatives are able to lobby for their interests during the preparation of relevant strategies and/or programmes, new branches are bound to be underrepresented among the regional stakeholders. Therefore, even from these very basic reasons, it would be practically impossible to propose a new domain of future specialization, as such a selection could not be based on sufficient evidence and, therefore, could not be sufficiently backed politically. In this context, an important question emerged, namely, who should be the main promoter of the new industry and take full responsibility for the associated risks. Consequently, the political representatives of both regions would not commit themselves to such a task and, even if they were brave enough to do so, they had practically no tools for such a promotion. Theoretically, the representatives of excellent academic research teams could potentially make efforts to promote new domains or branches in the region that could be based upon their research results. However, interviewed academics are far removed from this type of thinking, and they lack the necessary market and business knowledge. This observation accords with Patti, Mudambi, Navarra, and Baglieri (2016) who emphasized that the key problem in CEECs is not the knowledge creation but its economic commercialization. The intensity of inter-firm linkages as well as academia-industry links,


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which are widely considered important drivers of competitiveness and constitutive feature of RIS, are limited in these countries (Blažek & Žížalová, 2010; Květoň & Horák, 2018; Marek & Blažek, 2016; Radosevic, 2011). Moreover, the current model of financing academic institutions in both countries relies predominately upon easily counted outputs such as the number of scientific articles, while commercialization efforts are considered as being of only secondary importance at best. Obviously, business leaders – given their position in the market – also tend to support their existing industries rather than highly risky and costly ventures into new domains. This is a vastly different situation compared to advanced regions that often host leading companies in their fields who persistently investigate new business opportunities. Consequently, the business elite in these advanced regions is familiar with the roles of ‘marketmakers’ and ‘trendsetters’. Moreover, these efforts by the business elite are vigorously supported by sophisticated policies designed in close liaison with key regional stakeholders (e.g. Isaksen & Karlsen, 2013; Morgan, 2013), but also by the highly developed institutional set-up of the overall RIS. Therefore, the overall mind-set of key stakeholders (both academics and entrepreneurs) differs fundamentally between advanced and less developed regions. Second, our interviewees generally perceived negatively overall institutional framework, such as cumbersome legislation, while some respondents, esp. those working in various intermediary bodies, also stressed the general weakness of government (at both regional and national levels) in terms of their will, vision, know-how and ability to design supportive policies. The inadequate institutional framework is closely linked with the legacy of state-socialism (Grabher & Stark, 1997). Therefore, the quality of public administration and its overall ‘culture’ is one of the key weaknesses of the former command economies in CEECs (see also the Quality of Governance Index). Additionally, especially in Czechia, self-governing regions are too small and have limited competences (none regarding innovation policy). They are, consequently, largely dependent upon the quality of the public administration at the national level. Until the system of multi-level government works better, the potential for new path development in the regions will remain substantially restricted. Nevertheless, in the example of South Moravia one can see that, despite the inadequate policy and support framework that exists at the national level, significant (positive) results can be achieved at the regional level as a result of bottom-up initiatives by enthusiastic and knowledgeable leaders (Blažek, Žížalová, Rumpel, Skokan, & Chládek, 2013). The time factor is indispensable, as it took about 10 years to accumulate the required trust and know-how for adequate policy design (one manager of South Moravian Innovation Centre denoted his team as ‘policy innovators’). Third, the regions lack relevant corporate partners who would be interested in the radical form of regional structural change. Our interviewees from Lodzkie as well as South Moravia generally shared the view that any strategic shift, such as new path importation (new path creation is broadly considered as inconceivable), decisively depends upon the strategies of the regional firms. The overwhelming majority of firms in both regions are not ready to undertake such a mission. Our interviews revealed that local firms prefer the continuation of existing industrial paths, incremental innovation processes, and partly using new technologies, but not radical changes and reorientation, which is not surprising given their recent truncation and downgrading legacy. On the other hand, one specific case, where it might be possible to consider more radical change (some kind of new

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Table 4. Main barriers for different pathways at different levels.

Firms

Universities and R&D institutions

Intermediate bodies

Intra-regional / Inter-regional linkages

Institutions

Path upgrading

Path branching

Lock-in of firms in unfavourable positions of lower-tier suppliers within GPNs resulting in narrow profit margin preventing accumulation of resources for functional upgrading; widespread branch plant syndrome of these economies. Lack of public R&D institutions that would be willing, and able, to assist firms in resolving problems connected to innovation and upgrading processes needed for repositioning within GPNs.

Weak tradition of spin-off companies, low entrepreneurial vision, low ability to foresee the trends in market evolution.

Low-cost strategies of many FDIs, missing critical mass needed for development of transplanted industries, history of unsuccessful cases (delocalization).

Academics rarely seek a commercialization potential of the research they pursue, moreover in spheres that are currently not strongly represented in the economic fabric of the region.

Limited number of micro-teams at universities achieving results of global importance and closely cooperating with important global firms in relevant branches. Thus, attraction of high value-added foreign investments is unlikely. Limited ability of intermediary bodies to develop and implement strategic vision, which would require long-term and targeted effort to attract desirable type of foreign companies.

Very ‘young’ RISs in CEECs – it takes at least 10 years to build know-how, trust and good reputation of intermediaries needed for effective help to companies in their upgrading efforts. Weak cooperation and learning among companies, low trust and mutual awareness among stakeholders, which implies excessive challenges for individual companies attempting the various types of upgrading.

Strong tendency of intermediaries to deal with existing companies in traditional sectors in the region, while their capacity to spot new opportunities in related sectors is limited or even missing completely. Low trust and prevailing costcompetitiveness, resulting in weak cooperation and learning among companies both intra- and interregionally, which significantly hinders developing new industrial branches.

Missing awareness of regional Path branching requires a certain level of stakeholders about the extent and maturity of the overall RIS; limited type of integration of local firms into capability to design targeted policy the GPN, which inter alia implies noninitiatives for new industrial branches; existing support for repositioning general lack of capabilities to penetrate strategies. or even to shape new markets. . Note: Only barriers that have been broadly perceived by interviewees as important are covered. Source: authors.

Path importation

Weak cooperation and learning among companies, which makes such regions unattractive for knowledge-intensive FDIs.

Low quality of governance and generally weak ‘culture’ of public administration along with overall weakness of endogenous companies deter arrival of more ambitious FDIs.

Path creation Missing firms with global ambition, moreover, new path creation would imply that companies would shift into a new sphere, thus firms could rely on existing traditions only partially in the best case, which would make such attempts inevitably high risk ventures. Like companies, also academics lack such a radical vision. Moreover, lack of resources, lack of state-of-the-art know-how and locked-in knowledge base and under-developed institutions prevent embarking upon new path creation. In public administration, and therefore also in various intermediaries set-up by public bodies prevails strong riskaversion mentality, therefore, attempts to radically alter existing evolutionary trajectory is unlikely. Companies as well as universities are relatively weak in international comparison and have limited possibilities for connectedness (only few companies and some university micro-teams have stable and vigorous cooperation with strong global ‘leaders’). Lack of vision among key stakeholders; approval of the development/ innovation strategy is a highly politicized process; fragmentation of responsibilities over innovation policy; lack of strategic investments.


Agents, linkages, institutions


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path creation), was emphasized during the focus group in South Moravia. According to the participants in this focus group, an entirely new sector might be initiated by a sufficiently strong global ‘player’ from the corporate sector, which would have the required capacities (knowledge, personnel and financial) and would be ready to take the risks associated with the possibility of failure. An example of such a strong player might be major multinational companies based in the region, such as Honeywell (with a strong and established R&D division in South Moravia). The initiative must, however, come from the private sector, which should have sufficient vision and leadership. The common perception among stakeholders is the view that the decisive factor shaping the space for new path development is the demand from companies for such a radical shift, which is however absent. Consequently, neither region satisfies the preconditions for a radical pathway of regional structural change. It should be underlined that in CEECs regions, the risks inherited with such a radical shift in evolutionary strategy are much higher than in advanced regions due to a number of systemic failures as described above, and, therefore, enforcing such a strategy would be misplaced. As a result, despite the major opportunities associated with the potential radical form of path development and possible positive cumulative mechanisms and spillover effects (such as the creation of new and well-paid jobs, increase in the purchasing power of the population, enhanced overall image of the region), no one (in terms of institutions or key personalities) seems ready to bear the risks associated with such a venture in our study regions. Thus, it can be concluded that the more radical forms of path development (such as path creation, path importation, path upgrading or path branching) tend to be suitable strategies only in cases of regions with a sufficient pool of critical assets in a given field (s) and possessing a highly developed institutional, governance and policy framework and well-functioning collaboration among universities, business and government as follows from the Triple Helix concept (Etzkowitz & Leydesdorff, 2000). Another hindrance for more radical forms of path development related with evolution of knowledge bases in CE (Květoň & Kadlec, 2018). As a result, the probability for successful evolution along such radical types of paths in regions in less developed countries tends to be modest and limited to rather exceptional cases. Given the overall socio-economic context and tradition in both regions, strategy based on path extension seems to be quite realistic for the future development in both regions. Therefore, the main barriers for more radical forms of path development, as identified from the perspective of stakeholders from our case-study regions, are outlined in Table 4.

Conclusions This paper aims at the greater comprehension of feasible development trajectories conceptualized within the new path-development model on the case of two less developed regions in Central Europe. Given the distinctive features of development in CEECs after the collapse of state-socialism (see, for example, Pavlínek, 2017; Smith & Swain, 2010) we analyzed the recent path-evolution trajectories and its barriers from the perspective of regional stakeholders. The empirical analysis concentrated on two case studies (the Czech region of South Moravia and the Polish Lodzkie region). Less developed regions in CEECs have not received much attention in the literature, especially regarding their

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evolutionary pathways. Therefore, the paper contributes to the ongoing debate on evolutionary pathways with an examination how regional stakeholders perceive the key barriers and mechanisms hindering particular pathways conceptualized in relevant literature. In particular, a unique opportunity for such a study was born by the EU requirement for regions to prepare and implement a smart specialization strategy, when regions had to reconsider their competitive advantages and try to formulate a strategy that would enable a repositioning of the regions into more favourable niches offering inter alia more and better jobs. Thus, the spectrum of various evolutionary pathways had to be considered by the main regional stakeholders. This particular challenge demanded a thorough examination of existing and foreseeable trajectories of the socio-economic evolution within the given region as well as the role of particular actors. Our study revealed that stakeholders in both regions build smart specialization strategies particularly for intra-path changes within rooted but prospective industrial branches. From the perspective of the regional industrial path-development model, such an evolutionary pathway can be best described as a process of path extension combined with path modernization. Importantly, our research revealed that pre-existing regional industrial structure, while essential in terms of accumulated tradition and capabilities of business leaders, is not the major precondition influencing new pathways in both less developed regions in CE per se, but it forms the fundamental hindrance to embarking upon radical pathways in conjunction with the inadequate institutional framework, the underdevelopment of which is associated with inter alia the heritage of four decades of state-socialism, such as mistrust, passivity and politically enforced collectivism, and which is even multiplied by the lack of visionary leaders in both public and private sectors. Truncation and downgrading characterizing development in CEECs shortly after the collapse of their command economies is a legacy to be taken account for explaining the current possibilities and barriers for new path development. This concurs with argument of Grabher and Stark (1997, p. 542) who analyzed circuit-breakers bringing friction in post-socialist economies and argued that ‘institutional legacies produce the friction that grinds against a smooth transition but preserves diversity for future recombinant strategies’. But even nowadays, evidence suggests that the key actors reconfigured this legacy only partially, and, in particular, the change of institutional environment is sluggish. Our study showed that the feasibility of a more radical path is hindered by a wide range of barriers operating at different levels. The above-elaborated typology of barriers for more radical path-development trajectories outlined the main hindrances constraining key regional actors, linkages and institutions. Consequently, given the general weakness of the overall RIS, path-extension and path-modernization trajectories are bound to be the most realistic options for this type of less developed regions. We argue that attempts at more radical pathways (such as path creation, path importation, path upgrading) seem unjustified and can be assessed as inadequate strategies in the context of the former command economies, entailing vast risks. Importantly, our study revealed that a pre-existing regional economic structure is not the major precondition influencing new pathways in CEECs, but instead the major hindrance comprises the rather underdeveloped institutional framework. The main barriers for more radical forms of path development, as identified from the perspective of stakeholders from our case-study regions, include lack of firms with global


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ambition, missing critical mass needed for development of transplanted industries, lowcost strategies of many FDIs and lock-in of firms in unfavourable positions of lowertier suppliers within GPNs. Like companies, also academics lack such a radical vision and moreover there is limited number of micro-teams at universities achieving results of global importance and closely cooperating with important global firms in relevant branches. Among the long-term hindrances belong low quality of governance, fragmentation of responsibilities over innovation policy and generally weak ‘culture’ of public administration. This leads us to suggest that future research might investigate in detail the role of various stakeholders with varying interests under particular path-development trajectories as well as in the process of the strategic reorientation of relevant policies. Last but not least, it is necessary to empirically verify some of the key elements of evolutionary dynamics, such as the regional-branching processes and the path-modernization or path-upgrading processes within the specific context of CEECs. Furthermore, conceptually, there is an intriguing question for future research. Industrial heterogeneity inside regions in CEECs (in terms of size, industrial branch, ownership, primary market, etc.) as well as fragmentation of emerging RISs are very substantial and impact distinctively upon potential trajectories selected by particular stakeholders. Namely, in CEECs, where regions are typified by underdeveloped or just-emerging RISs, existing conceptualizations of possible evolutionary pathways might be over-generalized. In practice, a wide range of pathways might be followed at the same time by various stakeholders or even by a single actor. Moreover, the multiplicity of trajectories that are followed by particular regional stakeholders represents yet another hindrance in setting up the relevant support policies at both regional and national levels, which contrasts with limited capabilities of relevant public administration bodies in terms of policy design.

Note 1. Smart specialisation strategy can be seen as a suitable tool where representatives of all stakeholder groups in regional ecosystems agree and reflect ambitions, vision and strategy for future regional trajectory.

Acknowledgement Financial support of Grant Agency of The Czech Republic (no: 17-06621S) is greatly acknowledged. This work has been also supported by Charles University Research Centre program UNCE/HUM/ 018.

Disclosure statement No potential conflict of interest was reported by the authors.

Funding Financial support of Grant Agency of The Czech Republic [grant number 17-06621S] is greatly acknowledged. This work has been also supported by Univerzita Karlova v Praze [grant number UNCE/HUM/018].

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ORCID Viktor Květoň

http://orcid.org/0000-0002-8339-0811

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