Complex Adaptive Innovation Systems

Relatedness and Transversality in the Evolving Region

Philip Cooke

• Publisher: Routledge
• Year: 2013
• ISBN:
  9781136457258
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Leading up to the financial crisis of 2008 and onwards, the shortcomings of traditional models of regional economic and environmental development had become increasingly evident. Rooted in the idea that 'policy' is an encumbrance to free markets, the stress on supply-side smoothing measures such as clusters and an over reliance on venture capital, the inadequacy of existing orthodoxies has come to be replaced by the notion of Transversality.

This approach has three strong characteristics that differentiate it from its failing predecessor. First, as the name implies, it seeks to finesse horizontal knowledge interactions as well as vertical ones, thus building 'platforms' of industrial interaction. Secondly, it is not a supply, but a demand side model in which needs-driven innovation rather than pure market competition prevails. Finally, it is ongoing through recessionary times, being more robust than over-specialised approaches to economic growth.

The intellectual origins of Transversality lie in an aspiration to promote eco-innovation, one of the key hopes of assisting Western regional and national economies to re-balance and escape recession. The policy models of key regional exponents of the concept are explored and their goals achievement is assessed. An array of policy instruments and measures is presented for hands-on policy implementation. The book will be of vital interest to academics as teachers and researchers as well as policy advisers and public servants.

1 Introduction

Co-evolution, complexity and emergence in regional innovation systems

The aims of this book

This book introduces a new framework of analysis for economic geography, regional development and, particularly, regional innovation. However, application of this framework applies well outside these fields, in expert hands tutored in evolutionary biology, quantum physics, entropy and the study of corporations as complex organisations, to name but a few. While the application of systems thinking began in the spatial sciences at least as far back as the 1960s (Anderberg, 2004), it has moved into the background in recent decades, except in the field of innovation studies and specifically regional innovation systems analysis (Cooke, 1992; Wiig and Wood, 1995; Braczyk et al., 1998; Fornahl and Brenner, 2003; Asheim and Gertler, 2005; Trippl, 2011). There is now 20 years of solid theoretical and empirical research into regional innovation systems, and the concept is increasingly being applied in the world of policy analysis and practice, as case material in this book testifies. However, until relatively recently, regional innovation systems research and practice could be said to have evolved in a somewhat self-contained manner. Thus the nature of the system dynamics, which might do other than sustain structural and relational networks among actors within and among global regions, was more or less unexplored (Granovetter, 1992). The extent to which the kind of primary data-informed empirics typical of regional systems analysis cast light on broader processes of innovation and institutional change remained similarly unexplored. For, as interest in such analysis was attracted from neighbouring fields, secondary data methodologies were introduced, which often ended up supporting the concept and apparent reality of these systems, using indicators that seldom measured innovation but convenient but desiccated variables like research and development (R&D) expenditure, R&D production functions and patenting activity, having tenuous connections with innovation in itself. Accordingly, one of the key aims of this book is to revitalise the field by theorising innovation rather than research, invention, science or technology, which standard variables measure without throwing much light on innovation processes themselves.

This means that the concept of a regional innovation system, as well as being anatomised in detail at many points in the book for its own interest, acts as a light source for better understanding of innovation more generally. It may be thought surprising that, given the popularity of national, sectoral and technological research traditions of innovation research – many of which refer to different aspects of innovation as in products, processes and organisational change – little is known about the ‘innovative act’ in itself. It has long been considered a strength of regional innovation system research that it relies on primary data collection from surveys and interviews, often with innovators themselves, thus the regional scale is more tractable for detailed unpicking of the sometimes circuitous and unexpected ways it occurs. But in truth, until some of the work reported in succeeding chapters of this book, even regional innovation systems analysts had not come up with much of interest regarding ‘innovation biographies’. These prove to be generally fascinating, some with almost novel-like, complex plots; novel-like because they can only properly be understood after rather than before reading, except by the author, who is non-existent when it comes to innovation (on this, see also Brooks, 2011). So a second aim of the book has been to explore the nature of and rationale for innovation of itself in socio-economic and cultural life.

This feature of innovation proved to be a major, yet to be fully grasped, clue not only to the nature of innovation but of evolutionary development in general and even a perhaps limited rationale for life itself. Such were the thought processes released by a deep exploration of four main grand theories of system change that the best way to introduce them is to replay the intellectual milestones by means of which they contributed to the book reaching completion. So the third aim of this book was to compare and contrast candidate theories of transition and change in complex adaptive systems and among individuals. This would explore the extent to which they facilitated new understandings of development and change, with the main focus being on the region and its socio-economic agents as the principal laboratory setting.

Co-evolution

After a re-reading of Murmann (2003) and other relevant material on co-evolutionary economic development (Nelson, 1994; see also the later Nelson, 2008), this process began with some new research in the eco-innovation field, to try to understand why rising global concern with climate change issues seemed to be producing national and regional policy responses that varied from the concerned and enthusiastic to the apparently unconcerned and apathetic. The idea of co-evolution, or rather absence of it, seemed likely to be germane to such variable outcomes. Some of the eventual comparative findings of this project on eco-innovation paradigm–regime relationships are reported in Chapter 5 (for the full results, see Cooke and Porter, 2011). A brief study tour to North America in 2007, beginning in Texas with a sustainable cities conference at Texas A & M University, enabled me to meet Austin Mayor Will Wynn, who was pursuing a ‘green’ energy, housing and construction strategy. This was both coherent and practical given that city’s recent history as one of the state’s rapidly emerging centres of an urban sprawl process that was already encompassing the once remote Hill Country. I also heard and met Jim Kunstler (2005), author and planning activist, whose take on the long emergency of climate change in the face of ‘peak oil’ and the likelihood of massive mortgage defaults on the aforementioned urban sprawl was presciently summarised as follows:

The decay of mortgage standards was abetted by the rise of the giant ‘government-sponsored entities’ (GSEs), Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Mortgage Corporation) … By the time you read this, it is very likely that the housing bubble will have begun to come to grief … If large numbers of house owners cannot make their mortgage payments, Fannie Mae and Freddie Mac, and by extension the federal government, would be the big losers … The housing subdivisions, as much as the freeways, the malls, the office parks, and the fast-food huts, represent an infrastructure for daily living that will not be reusable, except perhaps as salvage.

(Kunstler, 2005: 232–3)

All these predictions came true, and not only in the US Sunbelt. But to be apprised, in Texas, of the accumulated spatial effects of 150 years of housing and transportation innovation was to see, critically, the evolution of a fully emerged oil-favouring regime and its associated paradigm of carbon-fuelled consumption. So how to begin to grasp how to help change it? I struggled to articulate an appropriate vocabulary to specify the process, not least because the familiar linear ‘long-wave’ model of successive technological paradigms and regimes (Fig. 3.4) itself complicitly framed and implicitly celebrated each successive wave of carbonised radical innovation that had thus far characterised the capitalist era. Thereafter, having moved on to San Francisco, I saw some impressive green buildings and noted signs of a developed ‘green consumption’ culture in the Bay Area, especially in the culinary sphere (Cooke, 2011a), a subject that elicited surprisingly derisive comments relating to the ‘geography of Yorkshire pudding’ at my talk in that year’s San Francisco AAG conference. By the time I reached Vancouver, I was straining at the leash, having seen with my own eyes the depradation of the Boreal Forest wrought by the mountain pine beetle, proliferating now that global warming meant fewer frosts in the Rockies. British Columbia’s Minister of Economic Development, kindly addressing the Canadian Innovation Systems Research Network (ISRN) on the success of the province’s China trade in high-tech goods, got a few unfairly slanted environmental questions instead.

A little later in the same year, doing my adjunct teaching in Aalborg University, Denmark, I again, as in previous years, received illuminating knowledge from the likes of Søren Kerndrup and Arne Remmen about North Jutland’s ‘emergence’ as what I later thought of as a ‘transition region’. This had a well-developed regional eco-innovation paradigm, being home to Vestas, the world’s leading wind-turbine producer, Grundfos, a leading photovoltaics (solar energy) exporter, Velux (insulated windows) and numerous green engineering SMEs. It was embedded in a pervasive ‘green’ socio-cultural and consumption regime supportive of, in particular, local renewable energy networks (Cooke, 2010c). On this occasion, in an eco-innovation seminar Dutchman Bram Timmermans presented on the co-evolutionary transition concept then being practised by the Dutch government and gave me a copy of the key article (Geels, 2006). This is discussed extensively, but not uncritically, in Chapter 5 of this book, since it meets in limited ways the requirement to ‘think outside the box’ of the ‘carbon lock-in’ paradigm, as Unruh (2000) refers to it. It has a multi-level perspective (Fig. 5.2) and a model of how innovations move from managed strategic niches upwards to the overall socio-technical system (STS) of markets, industries, scientific and technological knowledge, culture and policies of consequence to it, and beyond this to eventually become the dominant design in a post-carbon ‘world of production’ (Storper, 1997).

Co-evolutionary transition theory, even with its multi-level perspective (MLP), was intellectually interesting on the one hand but frustrating on the other. The intellectually interesting level concerned the process whereby globally significant innovation rose to the level of the socio-technical system (STS) eventually to become the dominant design (as hydro, solar or wind power are for renewable energy today) and ultimately take over from carbon. In one case this approach showed that innovation in the creative industries sphere had occurred as a result of multi-regime interaction and reconfiguration between the radio broadcasting STS and the music recording STS discussed in Chapters 2 and 3 (Geels, 2007). This foreshadowed theoretical analysis by Martin and Sunley (2010a), who had critiqued classic path dependence theory as static and equilibrium oriented, opening up the prospect of a more dynamic perspective on regional development based on path interdependence. However, their approach lacked a convincing mechanism for bringing such novel states about. Similarly, the frustrating aspect of the earlier STS approach to transition was that it lacked a causal mechanism, change being seen as unproblematically arising from market transactions or something akin to ‘enlightenment’. Reflecting upon this for path interdependence, it seemed primarily because, like much evolutionary economic geography, the nevertheless interesting and creative insight lacked a convincing theory of innovation as distinct from a vague notion of ‘technological change’ as being somehow involved. For STS transition analysis, it may have been the same plus its origins in government where ‘shocks’ and ‘crisis’ are anathema and outside the dominant discourse.

In any case, I felt the pressure of the following observation by Eve Mitleton-Kelly (2006) on the broader project of evolving a richer theory of regional innovation and development:

The distinguishing characteristic of complex co-evolving systems is their ability to create new order. In human systems this may take the form of new ways of working or relating, new ideas for products, procedures, artefacts, or even the creation of a different culture or a new organizational form.

The obvious way forward was to ‘reframe’ the theoretical problem by thinking of path dependence and interdependence in terms of another core concept in evolutionary economic geography (EEG), namely ‘related variety’. This concept had proved remarkably fruitful in analyses conducted mainly by Dutch EEG colleagues (Boschma and Frenken, 2003; Frenken et al., 2007) in showing empirically that regions with industries in neighbouring sectors benefited from a double ‘proximity effect’. The first of these is a relational advantage, which facilitates exploitation of ‘knowledge spillovers’ because of the high lateral absorptive capacity potential of firms towards each other’s external economies of information. The second effect is in terms of the geographical proximity, which facilitates by time-space compression the aforementioned relational advantage. This resonated with research I had earlier been engaged in on sources of value in a knowledge economy. However, in information theory, the pioneering research of Shannon (1993) in a hitherto secret Bell Labs paper on cryptography, had stated that, ‘The “meaning” of a message is generally irrelevant,’ and thereby ‘eradicated’ meaning from the definition of information (Gleick, 2011). This problem of ‘eradication’ was something I found troublesome, since meaning is clearly the fundamental force transforming the use value of information into the exchange value of knowledge. Thus, to take advantage only of proximate knowledge, or more accurately here, information spillovers from a neighbouring firm, still seemed to leave a large gap to be covered by the relational part of the equation. However, there is more to information than mere timetabling. Information involves uncertainty, in the sense that an infinite number of messages is possible and the content of any particular one cannot be forecast. Associated with this is that information, to qualify as such, will contain elements of the unexpected; that is, information contains surprise. Information is also complex or difficult to transmit both technically and cognitively. Finally, information represents entropy in the sense that it degrades and depletes over time, as does everything else in the universe. This is described in the second law of thermodynamics as: the entropy of the universe always increases. Accordingly, even with the semantics removed, there is a considerable value in terms of the potential from paying attention to, of being interested in or reassured by, receiving information and seeking to use it in some way before it degrades, possibly by being apprehended sooner by a competitor.

This idea about the nature of information in innovation makes a significant contribution to the project of the book. It explains how co-evolution of path dependent processes can combine in order to branch into new path creation through facilitating path interdependence. The small but crucial addition that has to be made, from a spatial perspective, is that even though the relevant message may come from a great distance geographically or relationally, it has to be exploited in a particular space or place – the location of the innovation design. Such a location may take the form of a ‘transition region’, which is discussed in Chapters 5 and 6. Many of the innovation biographies discussed in Chapters 4 and 7 display this characteristic of combining or recombining information from widely different sources in a place that is nevertheless non-randomly ‘selected’ and explicable in terms of path dependence and path intersection of STSs. One of the key contributions the perspective makes is to expand the meaning of ‘related variety’ beyond the narrow confines of neighbouring industries such as electrics and electronics, automotive and aerospace engineering, or banking and insurance. This means speaking of ‘relatedness’ more generally, encompassing both routine and possibly surreal knowledge combinations for specific innovation. Information, even devoid of semantically precise meaning, is capable of making a difference (an observation that connects to a similar important debate in evolutionary biology; see Capra, 1997: 297 on the Bateson–Maturano debate over the organically exogenous versus endogenous origins of such difference). This means that the unexpected interest or surprise even information may provoke may help solve a problem related to the tendency to disorder (entropy), faced by the social agent seeking knowledge to innovate. The strong element of surprise involved here means that innovation prediction is impossible except in relatively trivial ways. Accordingly, ‘related variety’ effects may be hypothesised ex ante but they may only satisfactorily be understood ex post. This is called ‘revealed related variety’ and captures the strong element of unexpectedness and unpredictability that seems to be associated with most innovation. The notion that life is fundamentally about the struggle against entropy is central to Schrödinger’s quantum physics and consequent perspective on the rationale for innovative effort and dangers of specialisation in the study of evolutionary processes (Schrödinger, 1967; see Chapters 5 and 9 below). To this, complexity theory adds that, unlike the donkey-like ‘gene carrier’ justification for life advocated by Dawkins (1976), innovative action is the real expression and explanation of the life-force. Moreover, it adds, with the expansion of co-created variety in economic evolution, novelty becomes both more widespread and easier (Kauffman, 2008: 154).

Complexity

There are clear resonances between the co-evolutionary perspective, which also incorporates key concepts like path dependence, related variety and relatedness from EEG, and the key findings of the complexity sciences (see, for an early economic geography approach to complexity, Martin and Sunley, 2010b). One key difference between that treatment of the spatiality of complexity science and the present one, is that this one relies significantly on complexity theory with an evolutionary biology inflection while the other is informed by more of a physico-chemical systems model. Chapters 5 and 7 devote considerable space to explaining why the life-focused evolutionary perspective is superior for the study of human systems, whereas physics-focused complexity theory is better for the study of physical systems. This is important, because as the leading proponent of the perspective adopted in this book, Kauffman (2008) shows, evolutionary biological processes like selection, speciation and mutation are unpredictable. By contrast, planetary and sub-atomic movements are largely predictable, albeit surprisingly often vitiated by data difficulties and even cavalier attitudes by scientists towards data where they do not fit the mathematics (Brooks, 2011). Thus it will be evident that this basic complexity assumption of unpredictability chimes perfectly well with the co-evolutionary discussion above regarding the strong elements of uncertainty, surprise and difficulty or complexity associated with information transmission and reception. These, it will be recalled, constitute intrinsic aspects alongside the semantic element in the unpredictability of knowledge recombination for innovation and that large part of socio-economic, including regional, change entailed by it.

A second area in which there is remarkable agreement between co-evolutionary and complexity theory concerns the element of difference referred to above as being of such importance. This applies even in the analysis of the manner in which ‘mere’ information, let alone meaningful knowledge, contributes to the cognitive combinations and recombinations that denote Schumpeter’s (1975) and the neo-Sch...

Table of contents

• Cover
• Title
• Copyright
• Contents
• Illustrations
• Preface
• 1 Introduction: Co-evolution, complexity and emergence in regional innovation systems
• 2 What went wrong with the vertical process and policy-perspective?
• 3 What is transversality?
• 4 The co-evolutionary origins of transversality
• 5 Transversality and transition in innovation and eco-innovation: Towards complex adaptive systems analysis
• 6 Transition regions and eco-innovation: Studies in complexity
• 7 Resilience, relatedness and complexity geography: Strange attractors in regional innovation
• 8 Complexity, relatedness and transversality: Empirical evidence of regional innovation platform policies
• 9 Complexity, variety and the emergent properties of regional innovation strategy
• Notes
• References
• Index