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Smart Specialisation Strategies and Regional Productivity

The report assesses the effect of Smart Specialisation Strategies on regional productivity, based on the case of Portugal.
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Smart Specialisation is a place-based approach to innovation policy that underpins a significant amount of EU funding. The origins of the concept lie in the transatlantic productivity gap and a concern that previous investments in Research and Innovation (R&I) had failed to deliver commercial benefits. Following more than five years of implementation, this report contributes to the evaluation of the smart specialisation approach through quantitative analysis. As part of the Stairway to Excellence project, it is one of the first to assess its impact on regional productivity, based on the case of Portugal. This is done using the country’s main instrument to support corporate Research and Development (R&D) that was launched in 2007 and adapted to accommodate smart specialisation in 2014.

An analysis of project characteristics reveals that during the programming period 2014-2020, financial support to corporate R&D investment aligned with S3 priorities has been more concentrated on cooperation between regions and sectors. A higher diversification of R&D and Innovation funds across sectors, regions and beneficiaries, in comparison with 2007-2013, is also observed. As more cooperation and diversification are two important features of smart specialisation, these findings suggest improved investment choices in the programming period 2014-2020. Furthermore, after controlling for the existence of potential geographical spillover effects by applying a spatial econometric analysis, the results display a positive effect on regional productivity from the R&D and Innovation subsidies over the last two programming periods. Furthermore, a higher rate of return of RDI subsidy in the second period is also observed, which suggests that smart specialisation was able to generate an additional effect in comparison with a situation without this place-based policy. Nevertheless, we also found that – in the case of Portugal - smart specialisation has only been able to generate this additional effect in regional productivity when the R&D funding instrument is combined with other types of innovation subsidies. This finding provides additional weight to the argument for broader and more integrated smart specialization policy mixes in the new programming period.