Geographies of the
global economy
Revisiting innovation in the global economy
Lecture 6: April 20th, 2023
Etieno Enang
[email protected]
• Handbook and Canvas
• 6 weeks: online lectures
& seminars
• Asynchronous material
• Group work and Report
• Work effectively together
• Deadline on 12th May
• Be proactive
• No such thing as
a silly question!!
Module Overview
Overview
Overview and Recap of previous lectures
What is innovation?
Why does it matter?
Investing in innovation
Wrapping up
Session 1
• What is competitiveness
-Porters stages of development
– Global competitiveness index
– WST
– Innovation
Empirical sources
EU Regional Co
Session 2
• Industrial emergence- links to innovation, FDI etc
– Self- employment theory
– Agglomeration
– Decline: External and internal reasons
– Renewal: Kondratiev waves, intrapreneurship
– Frankfurt- innovativeness- pros and cons
Session 3
• The role of the state
• Mazzucato
• Innovation
• FDI
• Exports
• QoL- Unrest, poverty, war, racial segregation, vacant land
Session 4
• Theories of economic development
– Rostov’s model
– Recap :WST, Porters diamond, Porters stages of development
– Human resources/capital
– Governance/institutions
– Mumbai- innovativeness, clusters (Bollywood), infrastructure
Session 5
• Institutions: Formal and Informal
• Varieties of capitalism
• National Business Systems
• Cluster membership is linked to variations in income inequality,
innovation performance
• Networks as important for innovation
• Overcoming institutional voids
• Bucharest: ICT graduates, migration issue
• One for each city
So probably one student per city
Be creative – use various sources
Analysis chapters
Policy report
Demand to understand innovation drivers
• One for each city
So probably one student per city
Be creative – use various sources
Analysis chapters
Policy report
Demand to understand innovation drivers
• One for each city
So probably one student per city
Be creative – use various sources
Analysis chapters
Policy report
Demand to understand innovation drivers
• One for each city
So probably one student per city
Be creative – use various sources
Analysis chapters
Policy report
Demand to understand innovation drivers
• One for each city
So probably one student per city
Be creative – use various sources
Analysis chapters
Policy report
Demand to understand innovation drivers
Eurostat
EIS 2022

• “Everyone’s a winner”
High proportion STEM
But… low participation in tertiary/higher education
• Participation in adult learning
Important to improve digital skills

Bucharest
• Davis, K on his website (geovisualist)
Economic development
• World Bank on
their website
Overview
Overview and Recap of previous lectures
What is innovation?
Why does it matter?
Investing in innovation
Wrapping up
What is innovation?
• New or improved products
• …services
• …processes
• …marketing methods
• …organizational methods
What is innovation?
• New or improved products Degree of novelty
• …services
New to firm
• …processes New to market
New to world
• …marketing methods
Radical
• …organizational methods Incremental
Overview
Overview and Recap of previous lectures
What is innovation?
Why does it matter?
Investing in innovation
Wrapping up
Why is innovation important?
• Effects on many different levels

Example: the Solow model (Solow, 1965)
• Overtime there will be diminishing returns of capital
• But if capital ‘improves’ due to technological progress, this could
offset the diminishing returns effect
Why is innovation important?
Why is innovation important?
Why is innovation important?
• Technological progress: Kondratieff waves

Why is innovation important?
• Innovation at the firm level
Why is innovation important?
• Innovation at the firm level
Why is innovation important?
• Innovation at the firm level
Why is innovation important?
• Innovation at the firm level
Differentiate from rivals
Drives economy / industry-level developments just discussed
Important to understand drivers
Why is innovation important?
• Innovation at the firm level
Differentiate from rivals
Drives economy / industry-level developments just discussed
Important to understand drivers
• Multistage process: from innovation activities to innovative
output, and commercialization to profitability, with many
feedback loops
Why is innovation important?
• Innovation at the invention level
Firm-level studies are interesting, but say little about how
innovations themselves alter technological trajectories
Why is innovation important?
• Innovation at the invention level
Innovation = recombination
Why is innovation important?
Why is innovation important?
• Innovation at the invention level
Innovation = recombination
Little recombination = incremental
High recombination = radical
• So, more (extreme) recombination is better? (E.g. impact)
Why is innovation important?
• Innovation at the invention level
Recombination

Novelty
Familiarity
+ =
Why is innovation important?
• Not just about advanced technology
• Innovation in services, public sector, charities, education, sport,
every sector of the economy…
• Innovation is the drive that “there must be a better way…”
Overview
Overview and Recap of previous lectures
What is innovation?
Why does it matter?
Investing in innovation
Wrapping up
Investing in innovation
• So… how to spur innovation to drive competitiveness in the global
economy ?
• And also other important dimensions to driving competitiveness E.g:
GDP
Productivity – related to innovation
Institutions and government
Agglomeration and small firms
Employment
Trade (FDI, imports and exports)
Quality of life
Investing in innovation
• Gardiner M, Martin R, Tyler P, 2004, “Competitiveness,
Productivity and Economic Growth across the European Regions”
Regional Studies 38(9)1037-1059
Investing in innovation
• Gardiner M, Martin R, Tyler P, 2004, “Competitiveness,
Productivity and Economic Growth across the European Regions”
Regional Studies 38(9)1037-1059
Investing in innovation
• Research & development is key
Public (institutes, universities) / private (firms)
• Governments often (try to) spur innovation
Investing in innovation
• What can it do?
Ordering innovation? Directly financing proposals?
Investing in innovation
• What can it do?
• What do you
• think the
• government
• can do to
• spur R&D?
Ordering innovation? Directly financing proposals?
Investing in innovation
• Tax incentives
Reduce costs of R&D
Private actors select R&D projects (risks/markets)
Seems to raise firms’ productivity more than R&D directly
backed with public funds – David et al. (2000)
Investing in innovation
• Direct subsidies
Raises private marginal rate of return
Funding body selects projects
Increased potential for social benefits
• Impacting the
amount of R&D
David et al. (2000),
p. 503
• Marginal rate of return
• Marginal cost of capital
• Profit-maximizing equilibrium R*
Investing in innovation
• Impacting the Funding proposals (subsidies)
amount of R&D
David et al. (2000),
p. 503
• Marginal rate of return
• Marginal cost of capital
• Profit-maximizing equilibrium R*
Investing in innovation
• Impacting the Funding proposals (subsidies)
amount of R&D
David et al. (2000),
p. 503
• Marginal rate of return
Tax credits
• Marginal cost of capital & other cost relief
• Profit-maximizing equilibrium R*
Investing in innovation
Investing in innovation
• Problems with direct subsidies (and to some extent tax incentives)
• Substitution effects
Firms perform public instead of private R&D
Expected rate of return for other private firms is lowered
Higher input prices of R&D for other firms
• David et al. (2000, p. 506): “the policy prescription should be to select
projects for subsidization that the private sector is not likely to
undertake.” However: “matters may be otherwise in actual practice.”
Investing in innovation
• Other ways to spur innovation? (And other matters)
Entrepreneurship and agglomeration (Session 1 and 2)
Research systems (Session 2 and 3)
Human capital (Sessions 4 & 5)
Institutions (Session 3 and 5)
Networks (Session 5)
Overview
Overview and Recap of previous lectures
What is innovation?
Why does it matter?
Investing in innovation
Wrapping up
Flat
Not flat
Flat
Not flat
our
focus
(here)
Begging the question:
• 1. Is there an order to the spikiness?
Global, regional, local: place matters
• 2. Why are there agglomerations?
People & businesses
• 3. What determines their success?
Competitiveness in the global economy
• Place and space matters in influencing competitiveness in the
global economy
• Cities, regions and nation-states are key actors in the global
economy
• Firms and institutions are also key actors
• Economic development is socially and spatially contingent, in
different ways and extents, and place matters
Assignment Q&A
https://pollev.com/etienoenang790