Beyond the line of sight: how can we create new industrial development paths in less-favoured regions?

Industrial policy is back in fashion, and even in traditionally hostile polities such as the UK, there's a lively debate about how state action might drive industrial development, especially in peripheral and 'left-behind' places.

Much of the current debate about local and regional industrial policy is focused on building out from existing knowledge and technology strengths through a process of 'related diversification'. But what if a place has relatively few such strengths, or if their prospects are essentially exhausted?

In such a situation, decision-makers could attempt to nurture a completely new industrial development path - but this is assumed to require significant transplantation of knowledge and technology from elsewhere, a challenging and risky prospect which itself demands significant capacity and resources.

But what if this kind of new path creation need not be just technology focused but could also depart from other regional assets and infrastructures, including local problems and challenges? What is the potential for demand-side and market-building policy mechanisms in this kind of new industrial path creation? How can regions mobilise current or latent local needs with the potential to create or shape markets for new technologies??

In a new paper just out in Regional Studies (building on our earlier work with Jon Mikel Zabala-Iturriagagoitia and Edurne Magro on demand-side roles for public actors) Elvira Uyarra and I show how public actors and 'place-based' leaders - as the custodians of place-specific assets and problems - can act as potential 'lead users' for applications of new and emerging technologies and as orchestrators of demand, in order to attract and retain external knowledge and capabilities and to make a new industrial path more feasible.

In order to illustrate our ideas we look at an ambitious policy effort at new path creation in a peripheral region, the Civil UAVs Initiative in Galicia (Spain).

We show how the regional innovation agency identified a potential opportunity to create a new industrial path around UAV (un-crewed aerial vehicle) applications, building on existing local resources, place-specific assets and problems. These included the presence of a disused military airfield with segregated airspace, a variety of topological and climatic conditions, and a series of key policy challenges stemming from the geography and economy of the region, such as forest fires, fisheries control, coastal surveillance and monitoring, agricultural monitoring and pest control and tourism management.

Using a novel combination of 'demand-side' instruments of public procurement and more traditional 'supply-side' subsidies, the regional government has worked to leverage these assets and needs to build UAV infrastructure and stimulate demand for UAV-based services in order to attract a few key large firms, including Babcock and Boeing, and to stimulate the development of a UAV services supply chain within the region.

Galicia is not the only region to have identified UAVs as a promising new technology/sector, but this initiative stands out in terms of the breadth and ambition of the approach. It is too early to say whether a new path has been successfully established, but the initiative illustrates how a broader set of assets might be starting points for regional industrial policy, including natural assets and infrastructures developed for other purposes, as well as problem endowments and place-specific policy challenges. It also reminds us that a wider range of roles of the state can be relevant to industrial policy, including that of potential lead user.

Not all regions are endowed with a wide range of knowledge bases for diversification or the creation of new development paths, but all places have their own problems and challenges - some of which might provide a basis for knowledge and market building processes with the right kind of local leadership and capacity building. This implies that the opportunity space for regional industrial path creation is greater than is often thought.

(PS: In a follow-up article, with Iris Wanzenb?ck of Utrecht University, forthcoming shortly in the same journal, we build on these ideas to offer a framework of possible policy interventions. I'll post a second blogpost about that article when it is available!)

UPDATE: the follow-up article is now published in Regional Studies - here's a second short LinkedIn post introducing it.

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Uyarra E and Flanagan K, 2021, "Going beyond the line of sight: institutional entrepreneurship and system agency in regional path creation", Regional Studies (Forthcoming special issue: Emerging industries: Institutions, legitimacy and system building) https://doi.org/10.1080/00343404.2021.1980522