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The Emerging Knowledge-Based Economies of theAtlantic Regions: Vision andPolicy DesignDimitrios Konstadakopulos aa European Regional Studies Unit at the Centre forEuropean Studies , University of the West of EnglandPublished online: 31 Mar 2009.

To cite this article: Dimitrios Konstadakopulos (2003) The Emerging Knowledge-BasedEconomies of the Atlantic Regions: Vision and Policy Design, Journal of TransatlanticStudies, 1:S1, 59-86, DOI: 10.1080/14794010909408417

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THE EMERGING KNOWLEDGE-BASED ECONOMIES OF THE ATLANTIC REGIONS: VISION AND POLICY DESIGN

DIMITRIOS KONSTADAKOPULOS’ Eiiropeaii Regional Stirdies Unit at the Centre for Errropean Studies

University of the West of Eiiglnnd

INTRODUCTION

In an increasingly integrating world, knowledge is becoming the driving force for economic growth, societal development, and improvement of the competitiveness of industrial systems and firms. For some time now, the economies of the developed countries have been moving inexorably towards a ‘knowledge-based economy’ - an economic system that is mostly geared to producing, utilising and diffusing knowledge and information rather than simply manufacturing goods and pro- viding services. The emergence of this ‘new economy’ - a synonym’ widely used to emphasise its youth - calls for a change of policy by governments, as well as to the strategies of individual firms. With Total Factor Productivity (TFP) continuing to grow in developed countries through use of information technology, the OECD’s Growth Project report argues that the new economy’s future is assured? To in-depth analysts of the growth of TFP during the last twenty-five years, claims since the demise of the dot.com sector and high-tech companies in mid-2001 have been premature and greatly exaggerated.“Far from losing its appeal, the new econ- omy still ‘retains the power to change the world’:

How well countries respond to the challenge of the knowledge-based economy depends on how well economic actors exploit new scientific and technological knowledge in the form of new product or process innovations, making use of their intangible assets, such as skills and creativity, in a co-operative and collaborative way. We shall argue, therefore, that key elements in promoting a knowledge-based economy are a sequence of linked public policies aimed and designed at: streng- thening a country’s innovation system in the form of investment in research and development (R&D); improving human capital; and facilitating the adoption of a sector-specific industrial policy (including science and technology) and an assertive technology-based export policy. In other words, policy activism should aim at providing the economic and regulatory environment in which firms can increase their innovating process and performance.

Journal of Transatlantic Studies, 1 (1) 2003.59-86 ISSN 1479-4012

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Diiiiitrios Koitstadakopirlos

The emergence of the knowledge-based economy is taking place within the context of increasing integration of international industrial systems - as described by theorists of regionalism, notably Breslin and Higgott, and Clarkson6 - into regional trading blocs such as the European Union (EU) and the North American Free Trade Area (NAFTA). There are considerable differences between these regional groupings, as well as between countries belonging to the same bloc, in the way their economies absorb technological knowledge, stimulate the growth of localised knowledge clusters, and co-operate in R&D at international level.

The first objective of this paper is to examine through a brief literature review the relevance, both in theory and practice, of the knowledge-based economy in two Atlantic areas: Nova Scotia in Canada and in the South West in England in the United Kingdom. Secondly, it will examine how regional decision-makers and corporate managers in these areas are designing and adopting policies that enhance the competitiveness of their regions and companies. Finally, an examination of how the two regions respond to common challenges enables us to discern the major policies adopted and explain how they are implemented. These objectives were realised by undertaking in-depth interviews with decision-makers, acade- mics and top executives at innovative companies in Nova Scotia and the South West of England, in order to identify how they develop strategies for the future and understand how technology can serve those strategies.

A comparative analysis of the two Atlantic regions could contribute to the theoretical debate on the knowledge-based economy, facilitate policy learning for the benefit of less innovative regions or provinces, and identify common features - or specific differences - in the two regions that touch on important issues of regional policies in Canada and Britain.

REGIONAL AGGLOhlERATIONS AS LOCI OF THE KNOWLEDGE-BASED ECONOMY

There have been several theoretical advances of a complementary perspective on national and/or regional development systems, innovation processes and techno- logical knowledge. Evolutionary and industrial economics suggest that countries develop along 'technological trajectories' based on accumulated knowledge, which are shaped by the interplay of markets and non-market organisations and institutions? Similarly, new growth theories advocate that investment in new technologies and human capital are important conditions for increasing returns from knowledge.' The theoretical approaches of Leadbeater and Thurow were undoubtedly the first serious attempts to understand the broad socio-political and economic implications of the knowledge-based economy phenomenon? More specific studies, and accounts of how well firms and governments are recognising and responding to it, have also started to appear." What emerges from these studies is that governments are starting to play a more active role in managing

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The Etnergitig Knowledge-based Ecortoiities of the Atlnriric Regions

knowledge on a wide economic basis by facilitating the flow of technological knowledge. More specifically, they are trying to build a culture of innovation and entrepreneurship, enhance knowledge diffusion, promote networking and cluster- ing, foster commercialisation of research, and facilitate the flow of goods, investment, people, knoviledge and information."

In the growing body of literature on regional development, there are many indications of the move towards a knowledge-based economy and the increasing importance of knowledge-based entities. Firstly, the accelerating pace of scientific and technological change is forcing many firms to innovate rapidly and interact increasingly with public and private knowledge-intensive organisations, such as research institutions and universities. Secondly, although firms compete, they increasingly network and collaborate with other firms at local, national and international level, and this involves transfer and diffusion of technological know- ledge. High technology small and medium-sized enterprises (SMEs) in particular are more likely to cluster together locally and prosper in growth regions. contribu- ting substantially to the promotion of a culture of innovation and the development of collective efficiency.'2

The formation of regional clusters of technologically related activities are impor- tant, not only for the creation of economies of scale but also for the opportunities they provide for innovation and creativity through technology spillovers, exchange of tacit and codified kn0w1edge.I~ and linkage with regional, interregional and trans-national networks." Regional clusters - a popular, albeit 'chaotic', concept of discussion over the last few yearsIs- are often based on local specificities such as geographical location or infrastructure (in the form of a major road network, port or airport), strong knowledge infrastructure (in the form of a university or research institution), or the presence of a major firm supporting a supply chain of smaller firms. Clusters, technology and networks are therefore useful concepts in our understanding of the knowledge-based economy.

The process of transition from a resource-based to a knowledge-based economy also reflects a fundamental change that is taking place, not only in the overall economic, but also the social, activities of advanced economies.I6This process has important policy implications for all members of the European Union and for the North American countries - all of which are members of the OECD - but most importantly for their Atlantic peripheral regions. Many of these maritime regions are disadvantaged when compared with more affluent and centrally located urban areas of their respective continents. For example, they display levels of unemploy- ment that are above the national average; they are faced with a declining fisheries sector; and many of their young and skilled men and women are emigrating.

It was only in the late 1990s that the concept of the knowledge-based economy featured prominently in strategies for the economic development of national and regional governments on both sides of the Atlantic, as well as the rest of the w0r1d.I~ The Canadian province of Nova Scotia is a prominent example already

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Dirttitrios Kortstndnkopiilos

identified as a pioneering region in which firms and government have recognised the challenge of the knowledge-based economy and responded promptly.'' The province has a grand vision of becoming a knowledge-base economy. In this context, through looking at the vision and policy design of Nova Scotia in the next section, it will be possible to compare empirically the relative importance of issue- based explanations of the development of the knowledge-based economy with that of a similar region across the Atlantic, namely the South West of England.

THE DEVELOPMENT OF REGIONAL POLICIES 1N NOVA SCOTIA AND SOUTH WEST OF ENGLAND

Canada is a highly regionalised country with a fairly fragmented economy and large regional disparities. In the 1960s. the market failure argument of neo-classical welfare economics helped to establish the belief that government intervention was needed. Since then, the federal government - initially through its now defunct Department of Regional Economic Expansion (DREE)I9- has spent a consider- able amount of money each year on regional development, in the form of grants and tax subsidies.20 However, regional disparities between Canada's provinces are still considerable, and relatively few significant improvements have been made, especially for the so-called Atlantic Provinces?'

An important distinguishing characteristic of the Canadian regional system is the intra-regional groupings of its regions. Although this paper will focus on the province of Nova Scotia (N.S.), the other three Atlantic provinces - namely Newfoundland (Nfld), Prince Edward Island (P.E.I.) and New Brunswick (N.B.) - are closely associated with it, and strong economic and political links have been developed. In 1954, these four peripheral provinces created the Atlantic Provinces Economic Council (APEC) with the aim of strengthening inter-regional cooper- ation. Although the Council largely succeeded in doing so, such cooperation was rather unfocussed and unstructured. Eventually, in 1971, the regional governments of Nova Scotia. Prince Edward Island and New Brunswick - the smallest pro- vinces in Canada- formed the Council of Maritime Premiers in order to overcome the disadvantage of size and cooperate more closely. The formation of the Council was seen as a significant step because, in the Canadian federation, cooperation between provincial governments had thus far been considered less vital to its functioning than federal-provincial cooperation.22

In 1989, provincial cooperation was further enhanced by the inclusion of Newfoundland and Labrador in the Conference of Atlantic Premiers (CAP). Although both the Council and CAP play an important role in influencing cooper- ation and the adoption of common policies, it is up to the provinces themselves to undertake appropriate action. However, cooperation between the Atlantic and Man- time regions has been limited. The EU's achievements in regional development and spatial planning have thus been turned to as a source of in~piration?~

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The Emerging Knowledge-based Ecorroriiies of the Atlnitic Regions

In the Canadian federal system of governance, close federal-provincial co- ordination is essential, since both levels have considerable powers for regional development. For instance, the ten provinces (and three territories) have exclusive competencies in managing their own natural resources and land use planning, while the federal government is in charge of finance and international trade, and controls transfer payments to the provinces. However, federal-provincial relations and cooperation in regional development have not always been cordial. There were particular problems in the early 198Os, when tension was high over the issue of constitutional reform and the Quebec referendum.“ The position of Quebec in the federation, and the priority given to preserving national unity, has distracted federal and provincial levels of government from concentrating on regional development and solving regional disparities?’ The Atlantic regions are particu- larly concerned about Quebec’s desire for secession, as they would find them- selves geographically isolated from the rest of the new federation of Canada. Paradoxically, the strong regional identity in Quebec has stimulated the growth of other provincial identities?6 including Nova Scotia.

Naturally, as in every other federal or even quasi-federal system in the world, federakentral and regional government compete to gain visibility and credibility for political expediency. As Savoie, a renowned observer of Canadian regional politics, has stated, ‘regional development has often been a pawn in the continuing struggle between ‘nation-building’ and ‘province-building’ . . .’?’ although the cur- rent intergovernmental relationship is best described as ‘collaborative federalism’?8 Such province-building is now evident in Nova Scotia. which has developed the appropriate bureaucracy and an extensive programme for regional development. This does not mean that party politics play a secondary role. Power has alternated between the Liberal and Progressive Conservative parties, which have dominated politics in the province, and being in power has provided them with privileged access to the federal government.

The ‘pork-barrel politics’ of Nova Scotia’s regional government are often blamedZ9for the province’s high levels of unemployment, the collapse of one of its valuable natural resources (fisheries), the burden of servicing its large debts, and the brain-drain of its young and well-educated workforce. Perhaps most notice- able of all has been the persistent intra-provincial income disparities between urban and rural areas - the former reasonably prosperous and the latter with a struggling economy dependent on seasonal crops or tourism.

Nova Scotia has developed a rather complex and possibly unique institutional arrangement. The system of supporting regional development in general, and technological innovation and knowledge transfer and diffusion in particular, consists of four multi-functional layers, with some institutions represented in more than one of them. In the top layer are the federal, provincial and inter- provincial levels of government, which not only play an important role in setting broad policy directions but also coordinate policies and fund R&D, training, and

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Diriiilrios Koristadakopirlos

science and technology infrastructure. The second layer consists of institutions that perform a bridging role and give directions on policies on technological development, promotion of entrepreneurship, and inter-regional collaboration. Institutions such as the Atlantic Caiiada Opporliiriities Agency (ACOA), Enter- prise Cope Breton Corporation (ECBC), Novakitowledge, Ceiitre for Entrepren- eirrship Edircation arid Developnient (CEED), the Canadian Foimdation for Innowtion and the various research councils all act as intermediaries between government and institutions undertaking R&D and other related functions. The third layer consists of institutions involved in R&D, technology transfer, financing and labour training, and the promotion of high technology firms, clusters and incubators. These include the province’s universities and public research insti- tutes, as well as Telecorii Applications Research Alliance (TAM) and Itirrovacorp. The fourth layer consists of companies and public business enterprises, including indigenous and foreign high technology companies.

As we shall see later, in Nova Scotian R&D the federal level - directly, or indirectly through the universities- is by far the dominant source of R&D finance. Nevertheless, the institutional arrangement described above has an important bearing on the economic performance of Nova Scotia and its route toward becoming a knowledge-based economy.

On the other side of the Atlantic, the region of the South West of England offers an equally diverse picture. Unlike the newly devolved Scotland, Wales, Northern Ireland and Greater London, the South West of England does not yet have its own elected parliament or assembly. Instead, the South West of England Regional Development Agency (RDA) is in charge of devising and implementing regional policy. The RDA - a form of ‘shadow’ regional government30- has also under- taken policies to encourage its businesses and institutions to adopt innovation, creativity and new technologies. The Agency acknowledges that the region has a large number of innovative companies and research institutions already well placed to exploit innovation, emerging technologies and knowledge-based industries?’ The most important institutions operating in the region have been the development agencies - which are now part of the South West of England RDA - and the various Leaniing arid Skills Coioicils, Business Links, Clianibers of Coni- inerce and city and county councils.

In the following section, the above-mentioned institutions will be examined in more detail in relation to the type of support they provide, their role in the inte- gration, coordination and improved efficiency of government policies, and most importantly their contribution to the diffusion of technological knowledge and improvement of information flows within the Nova Scotian and South West of England economies.

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The Eirierging Knowledge-based Ecorioiiiies of the Atlariric Regions

AN OVERVIEW OF THE NOVA SCOTIAN AND THE SOUTH WEST OF ENGLAND ECONOMIES.

Nova Scotia comprises just over 3 per cent of Canada’s population. The province has a diverse economy and society concentrated around two major urban centres: the Sydney area of Cape Breton Island in the north and the Halifax Regional Municipality in the southeast. For many years, the province has been experiencing weak economic growth, lagging well behind Canada’s major regions. However, during the late 1980s and early 9Os, the province gradually started to adjust to global competition and rapid technological change, while at the same time em- barking on restructuring its primary sector and downsizing its public sector. It is argued that ‘of all the Atlantic provinces, perhaps Nova Scotia has adopted the most radical program of structural adjustment, resulting in a devastating effect on employment’?* Nevertheless, in the last four or five years the Nova Scotian economy has performed well. For instance, GDP increased by 3.0 per cent in 2000, after a record 5.2 per cent growth in 1999. But in 2001 it shrank to 1.7 per cent, in line with a slowing down of the North American economy as a whole, which was exacerbated by the events of 11 September.”

The consequent increased levels of employment have varied across the province, however, with most of the growth in employment concentrated in the service-based economy of the Halifax region. A slight increase was also observed in the Annapolis Valley, but both the Southern region and Cape Breton Island in the north experienced a decline. Overall, unemployment rates in Nova Scotia in the last decade have been consistently above the national average. In 2001, unemployment in the Halifax region was 7.1 per cent, which is almost the same as the national average (7.2 per cent), but in the rest of mainland Nova Scotia, it ranged from 7.8 to 11.4 per cent, while in Cape Breton Island it was as high as 17 per cent, two and a half times Canada’s average (Figure 1). This picture of varying levels of employment is consistent with the rest ofAtlantic Canada, and the divide between urban and rural areas is repeated across the country.

Despite the growth of the Nova Scotian economy, the province has relied on federal transfer payments from more affluent regions of the country, as is the case in the rest of Atlantic Canada. Nevertheless, in 2001, for the first time in recent years, the province announced its first export surplus, hailed by the Deputy Minister for Economic Development as a landmark in its history.u Much of the significant increase in exports was due to offshore production of natural gas and its high world price. The Sable Offshore Energy Project, one of the largest engin- eering investments in Canada, came close to full production at the end of 2001 and is currently one of the main contributors to GDP growth.

Obviously, the economic outlook for Nova Scotia depends on the economic conditions prevailing in its main trading partners: the other Canadian provinces and the United States. Although Canada is economically dependent upon its neighbour, with exports to the States representing over two thirds of all export

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Fig. 1: Rates of Unemployment (%) in Nova Scotia’s Economic Regions (2001) Soiirce: Statistics Canada

trade, nowadays the Canadian economy and that of its provinces, including Nova Scotia, is becoming more diverse, especially in the knowledge-intensive sectors to be described later. However, the slowdown in the world economy is hampering the evolution of the knowledge-based economy. Furthermore, the uncertainty3’ surrounding Nova Scotia’s preferential treatment under the Canada-United States trade arrangement on softwood lumber is having a negative effect on a depressed but important market for the province.

Compared to other provinces, businesses in Nova Scotia are smaller and less able to afford capital investment in new technologies. Almost 75% of firms in Atlantic Canada have fewer than five employee^'^ and consequently undertake very little R&D. As a result, productivity levels in Nova Scotia tend to be low. However, the total number of businesses continued to grow in the 1990s, and new company start-ups replaced the jobs lost in the defence and fisheries sectors.

Since 1987, ACOA has played an important role in fostering the entrepreneur- ial spirit of the province, particularly through its Entrepreneurship Development Strategy for the Atlantic Region, which was adopted in 1990. Nova Scotia has now built a dense network of small business support organisations. This network includes federal agencies, the provincial department of economic development, university-based counselling centres, chambers of commerce, professional associ- ations, women’s enterprise bureaux and some of the oldest contrrturtity economic developrizerzt (CED) corporations in Canada?’ Government policies have been mostly impartial, supporting a wide range of firms, from those in the traditional resource sectors to those in emerging IT and biotechnology industries. Since the middle of 1990s. and with the appearance of business-led entities such as Nova- knowledge, TAM and binovacorp, more attention has been paid to the growth of knowledge-intensive industries.

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The Emerging Kirorcledge-based Econoiiiies of the Atlantic Regions

Although the South West of England region?’ one of the United Kingdom’s largest, is a peripheral region, as a whole it has been growing faster over the past two decades. than any other in England. The region’s GDP per capita stands at around 91 per cent of the UK l e ~ e I ? ~ I t also performs relatively well in a European context (at 95 per cent of the EU average) but displays high levels of economic activity (61 per cent compared with the EU average of 55 per cent).40 Since the early 1980s, economic growth and job creation has been greater in the south and east of the United Kingdom than in Wales, Scotland, Northern Ireland and the northern English regions. It is now the south that is leading the way towards a knowledge-based economy.

Paralleling this north-south divide within the United Kingdom, there is an extreme economic divergence in the South West of England, with the county of Wiltshire in the east having a GDP of 115 per cent of the European average, while in the extreme southwestern county of Comwall it is only 70 per cent. On the other hand, the region now has little unemployment, with an average rate of just 4.1 per cent, well below the United Kingdom average of 5.4 per cent. Again, Wiltshire is in the healthiest position, with 3.2 per cent, while the Unitary Authority of Plymouth, in the southwest, has the highest rate (5.4 per cent)!’

The region displays high levels of entrepreneurship. It has a relatively large number of indigenous SMEs and one of the highest business start-up rates in BritainP2 with survival rates above the national a~erage.4~ The economy of the South West is based on a diversity of sectors, such as defence, aerospace, financial services, multimedia and electronics, and to a lesser extent on the declining agriculture and fisheries sectors and seasonal tourism. The region has a pristine natural environment, adequate infrastructure, and is a favoured destination of inward investments and relocation place for individuals and companies (mostly from London). The South West of England is starting to dominate the medium and high technology sectors (Figure 2) such as aerospace, defence and precision engineering, especially within the so-called ‘golden triaiigle’ of Bristol, Swindon and Cheltenham. An analysis of research strength and patterns of specialisation, based on bibliometric indicators, has ranked the urban agglomeration of Bristol- jointly with that of Cardiff, in neighbouring South Wales - as an outstanding centre of knowledge in Europe (Table

The region has also benefited from being close to London and Oxford, two important centres of high technology and knowledge. During the 1980s and 199Os, the West of England as a sub-regionP5 saw a significant growth of its indigenous SMEs. Some of these were the direct result of a spin-off from a large local technology-based company. A survey of such SMEs has established that a third of them have patented an innovation and more than one-fifth have produced a breakthrough innovation, appropriating and benefiting from regional collective efficiencyP6 More recent empirical analysis of the sub-region suggests that techno- logy spillovers, information sharing, and exchange of tacit and codified knowledge

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9

8

7

6 r 1 United North North Yorkshire East West h s t of London Soulh Soulh

Kingdom Ens1 W e s l & the hlidlmd hlidlands England East West Humbcr

Fig. 2: Percentage of Total Employee Jobs in High and Medium Technology Sectors in the English Regions (2000) Soirrce: DTI, Regional Competitiveness indicators

Table 1: Research Centres in Europe

Based on scientific papers per 1000 inhabitants, 1993-96

Niirnber of papers

1 Cambridge 81 2 Oxford-Reading 41 3 Geneva-Lausanne 29

5 Bristol-Cardiff 15 6 Zurich 13 7 Stockholm 12 8 Helsinki 12

10 Randstat 10 1 1 Munich 10

4 Basel-Mulhouse-Freiburg 20

9 Copenhagen I I

12 Edinburgh-Glasgow 10

Soiircer Matthiessen and Schwarz, 2000: 54.

are taking ~ 1 a c e . j ~ As a consequence, new patterns of innovative and knowledge- intensive activities have sprung up around the major urban centres of Bristol, Cheltenham and Swindon - the so-called golden friarigle.

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The Emerging Knowledge-based Econoniies of the Atlairtic Regions

REGIONAL POLICIES OF NOVA SCOTIA AND SOUTH \VEST OF ENGLAND: CONFIGURING THE KNOWLEDGE-BASED ECONOMY?

An earlier assessment of the structure of Canadian government with regard to regional development was sceptical about the capability of provincial governments, particularly in slow-growth regions, to initiate creative policy proposals?’ It appears that this is still a valid criticism, as most of Nova Scotia’s policy initiatives in the 1990s and early 21st century have been undertaken by the province’s unique grass-roots oganisations, albeit with the acquiescence and support of provincial and federal levels of government. As in other parts of the world, the regional government of Nova Scotia is gradually transforming itself. It is reducing its size, becoming less of burden on its taxpayers, and concentrating on those areas of responsibility for economic development that have been assigned by Canada’s constitution (although a clear division of competencies between federal and regional levels has never been established).

Nova Scotia’s provincial government, under the premiership of John Hamm, has now started to develop a more clearly defined strategy for the region’s econ- omic growth. The main objective is to bring public sector spending under control and provide fiscal stability. This is well overdue, since, the province has accumu- lated a substantial debt of over $1 1 billion, with a debt-servicing cost of approxi- mately $900 million per year. This is a heavy financial burden for a relatively small region with only 941,000 inhabitants?’However, the Nova Scotia Ministry of Finance forecasts that the deficit of $106 million for 2000-2001 will be gradually eliminated, and small surpluses are expected in 2002-2003, as well as in subsequent years?’

The vast majority of decision-makers, experts and company executives inter- viewed in this study expressed the view that the Nova Scotian economy is leading the way towards the ‘new economy’. This optimism was based on a number of considerations. Firstly, the province is moving towards self-reliance, due to the growing offshore energy sector. Secondly, Nova Scotia is likely to become a knowledge-based economy if growth in the information technology, life science and telecommunications sectors is sustained. It was pointed out that even the region’s firms within the traditional food, fish processing and forestry sectors are becoming innovative. Thirdly, the region has developed an information techno- logy infrastructure and is endowed with many higher education and research and technology institutions?’ However, Nova Scotia is still trailing behind the leading Canadian provinces of Ontario, Quebec, Alberta and British Columbia on R&D expenditure, although it spends more than any other province in Atlantic Canada (Figure 3)?2 As shown in Figure 4, the main source of funding comes from the federal government, through a number of ministries and agencies. R&D in the province’s higher education sector comes primarily from the National Research Council.

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Dirriirrios Korisrndakoprrlos

Fig. 3: Provincial Gross Domestic Expenditure on R&D as a Percentage of Population (1998) Source: Estimate of Canadian GERD. 2001, Statistics Canada

Fig. 4: Sources of Nova Scotia’s Expenditure in R&D in ‘A11 Science’ for 1998 CAN$269m (76)

Sowre: Estimate of Canadian GERD, 2001, Statistics Canada

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The Eirtergiiig Kitowledge-based Economies of the Atlnritic Regions

Nova Scotia’s nine universities undertake a considerable number of R&D pro- jects. The province has a long university tradition, and has the highest percentage of university-educated citizens in Canada. Figure 5 indicates that in 1998-99, the R&D spending of Nova Scotia’s higher education institutions was again well below that of Ontario (Ont), Quebec (Que), Alberta (Alta) and British Columbia (B.C.).53 However, annual investment in Nova Scotia increased by 16 per cent between 1992 and 1998, the largest increase nationwide.”

The provincial government is now attempting to integrate the management of knowledge in Nova Scotia’s economy, and is addressing the problem of under- investment. Strengthening the technology diffusion channels has been a top policy priority, and the provincial government in Nova Scotia has directed its efforts towards fostering computer literacy. More than 6,200 computers connected to the Internet have been installed in schools, as well as over 240 community access ~ i tes .5~ Today, almost every computer in the province is likely to be connected to the Internet, which is widely available to the general public and often free of charge. Through the federal-provincial hfoniiatioii Ecoiioniy Initiative, and other means such as public/private the province has built an infrastructure of IT education. It is claimed that Nova Scotia is now a world leader in information technology training. In addition, the provincial government is becoming a more direct facilitator of knowledge diffusion through its ‘skills strategy’ aimed at encouraging flexible training, and matching training to employers’ needs.

CAN$ million

Fig. 5: Estimate Cost of R&D in the Higher Education Sector, by Province, 1998-99 Sourre: Estimate of R&D Expenditure in HE Sector in 199&99,2001. Statistics Canada

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Bachelor’s and first professional degrees

Community college diplomas

0 1000 2000 3000 4000 5000 6000

Fig. 6: Diploma or Degree Recipients per l00,OOO Population Aged 20-29 (1998) Source: Education in Canada, 2000. Statistics Canada

One of the most significant factors in favour of an emerging knowledge-based economy is the availability in Nova Scotia of a largely well-educated workforce, consisting of scientists, technicians, engineers, managers and other skilled em- ployees. As shown in Figure 6, the province’s educational institutions, as in the South West of England (Figure 7). rank well above the national average with regard to the number of degrees and diplomas granted to young people. However, the continuous out-migration of skilled workers to other parts of Canada and to the United States was deemed by many interviewees to be a severe constraint on the province’s transition to a knowledge-based economy?’

In order to reverse the ‘brain drain’ and accelerate economic development, the provincial government has just embarked on a renewal of its institutions involved in regional development. In April 2001 it created Scoria Biisiness Iiic., a private- sector-led Crown corporation with the purpose of bringing new investment to the province and assisting existing businesses to expand. The new organisation, with an annual budget of $25 million, is expected to take over most of the functions of Nova Scotia’s Department of Economic Development, provide a link between government and the business sector, and materialise the province’s cluster-based policy. The province has designated five clusters of industry with potential for growth: information technology, life science, advanced manufacturing, energy, and learning?’ This cluster policy approach, aimed at fostering an exchange of knowledge and stimulating interaction among actors involved in regional industrial policy, is discussed in more detail in the following section.

In Britain, the competitive advantage of the South West of England in defence, aerospace and electronics has been mainly the result of the post World War I1

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Higher education below degree

Degree or equivalent

0 5 10 15 20 8

Fig. 7: Population of Working Age: by Highest Qualification, Spring 2001

Source: Dept of Education and Skills, from Labour Force Survey (Office for National Statistics)

public procurement policies of the Ministry of Defence, which favoured national defence companies. In addition, the Labour government’s traditional regional policies, based on development controls and capital incentives in the 1960s and 1970s, aided the establishment of a number of high technology companies in the region. In the late 1970s, the Conservative government adopted a laissez-faire approach to the indigenous development of the region, through the creation of new firms. and the promotion of entrepreneurship and competitiveness. Policy measures had been partially successful in the sense that they had created jobs in the unem- ployment black spots of the region, despite inadequate funding?’

Since 1997, the Labour government’s so-called ‘New Regional Policy’ has focussed on supply-side improvements for the enhancement of competitiveness, productivity and entrepreneurship. Such thinking is based on the ‘new growth’ theoretical concept mentioned at the start of the paper - a concept, which is in fact a ‘subtle reworking’ of policies adopted by the Conservative Party in the 1980s. The New Regional Policy favours long-term macroeconomic stability, and growth of certain areas of the national and regional economy.60These areas are linked to the creation of knowledge and enterprise and the promotion of clusters in all regions. Indeed, since coming to office in 1997, the Labour Government has declared its enthusiasm for the so-called ‘knowledge-driven’ economy“ and the development of new or existing high technology However, a number of commentators warn that founding a regional policy exclusively on promotion of the knowledge- based economy and clusters is a risky policy.6’ Nevertheless, the South West of EngIand has gradually developed an important aerospace cluster that includes well- known multinational companies such as BAe, GKN-Westland. Messier-Dowty

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Diiiiitrios Koiistahkopulos

and Rolls Royce, and many of their most important suppliers and subcontractors. Subsequently the defence and aerospace industries gave birth to marine and environmental technologies, as well as to electronics, telecommunication ‘and software industries.

However, the endogenous economic development of the South West of Eng- land was greatly assisted by the establishment in the region, during the late 1970s and SOs, of a number ofAmerican high technology multinational companies (such as Dupont Electronics, Hewlett Packard, Intel, Logica, Lucent Technologies (former AT&T) and Motorola. These were soon followed by high technology multinationals from Japan (e.g. Honda) and Europe (mainly France and Germany). The majority of foreign multinationals built their plants within the M4 comdor (the area around the motorway from London to Bristol and South Wales), thereby giving them easy access to London and Heathrow Airport. As in the rest of the United Kingdom, foreign subsidiaries with plants in the West of England have transferred much of their R&D activity in the region in order to take advantage of the various extern- alities present locally. Among the large OECD economies, the United Kingdom is the only country in which foreign companies’ share in manufacturing R&D is higher than their share in production.m Many of the American, Japanese, German and French multinationals located within the corridors of the M4 and M5 motor- ways carry out research in automobiles, computer and communication services, and R&D consultancy services. Most importantly, they collaborate in R&D with regional universities, research institutions and local firms. The most significant outcome of the high technology clustering of British defence and aerospace com- panies and foreign multinationals along the M4 comdor, and more recently along the M5, is the opportunity it provides for specialisation and inno~ation.6~The West of England sub-region in general has achieved a specialisation in precision engin- eering, aerospace and computer services. Its development has been documented and analysed by a number of authors.M

The province of Nova Scotia - like many other regional governments around the developed and developing world, including the South West of England -has taken a cluster policy approach to economic development in general. and to stimu- lating interaction and knowledge exchange among economic actors in particular. The clustering process of the last decade was initiated by firms and business-led organisations involved in the relevant clusters. Now, in consultation with industry, the federal government, grass-roots associations, educational institutions, research agencies and local communities, the province has set regional priorities and put forward a challenging view of the future.

However, the creation of clusters in Nova Scotia has not always been a market- induced and market-led initiative. In the mid- 19XOs, the federal government adopted a now outdated industrial policy by providing subsidies for the establish- ment in the province of high technology industrial parks (mostly for defence/ aerospace), while reducing support for research in one of its traditional industrial

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sectors, i.e. fisheries!’ Ten years later, the federal and provincial governments shifted their policies to support local development by indirect inducement rather than direct intervention, while at the same time advocating what Bradfield calls an ‘abcd approacli of developiiierit’, favouring aerospace, biotechnology, communi- cations (computer-related activities), and drugs (i.e. pharmaceuticals). The ‘abcd’ sectors, he notes, are dominated by large research-intensive multinational firms, rather than by local innovative ones, which are not given government supp0rt.6~ There are legitimate concerns that the equating of economic development with industrialisation could be inappropriate for Canada and Nova Scotia - whose economies are based on the resource sector - as most of the manufacturing sector is foreign-controlled. This has brought neither economic stability nor political, economic or even cultural independen~e.6~ However, there is some evidence that Nova Scotia, a peripheral region, is starting to specialise in both information- intensive and high technology goods and services, and to gain a comparative advantage by means of ‘judicious subsidisation’ in the form of attracting ‘foot- loose information technology producer services’.7o Moreover, a number of the province’s telecommunications and IT firms are creating their own niche market and gradually becoming - through acquisitions and strategic investment - impor- tant national and international companies in their own right?’

Nevertheless, cluster policies have been important in bringing together the technology and innovation policies of federal and provincial government, as well as its strategic business development, into a common policy framework for the knowledge-based economy in Nova Scotia.

in the South West of England, the RDA was the first agency in England to launch a technology strategy for the promotion of knowledge-based industries (October 1999). The Agency, responsible for a rather large region with a popula- tion of five million (compared with the 1 million of Nova Scotia), and with a modest annual budget of f92 million (2001-02) granted by central government in London, is striving to implement its strategy. Its rather ambitious aim is to promote and provide financial assistance through its Regioiial Developiiieitt Fiiiid to four sectors with the greatest potential for the region’s economy, and to encourage the development of four additional ones. The main sectors are: aerospace, the auto- motive industry, instrumentation production and marine technologies. The sectors to be developed are: multimedia, ICT hardware production, food processing and environmental technologies.

For some time now, the most important regional actors in the South West of England have been instrumental in the creation of sectoral innovation networks for the transfer of technology and knowledge. The region has developed a some- what limited number of these co-operative networks among knowledge-intensive economic actors such as companies and research institution?2 This weak associative order is due perhaps to the region’s equally weak regional identity - the exception being the far south west, i.e. Cornwall.

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Diniitrios Konstadnkopiilos

The South West RDA is supportive of all of these networks, such as the \Vest of Etiglniid’s Aerospace Forzitii, which includes most of the firms involved in the supply chain to the major aerospace companies. As in Nova Scotia. the South West of England RDA also supports a number of business incubator sites in order to facilitate the growth of knowledge-intensive companies and further encourage the creation of high technology clusters. Examples of these incubator sites are the Bristol Creative Teclznology Nehrork, which assists the region’s emerging multi- media sector, and the Gloucestershire Medical School, which promotes the medical instrumentation sector. Support for innovation has materialised with the establishment of university innovation centres that encourage joint research and closer links between the fourteen regional universities and industry. Further initiatives are also being undertaken in order to increase firms’ awareness and understanding of e-commerce and promote a climate of entrepreneurship in the form of making risk capital available to new start-up companies. The adoption of cluster policies and initiatives are seen as important for the development of the knowledge-based regional economy, but it is important to note that it is only during the last few years that significant attention has been paid to these policies in the South West of England.

NOVA SCOTIA’S AND THE SOUTH WEST OF ENGLAND’S KNOWLEDGE INDUSTRIES

What, then, are the promising industries of the emerging knowledge-based economy in Nova Scotia and the South West of England, and how are economic actors facilitating their transitions?

The knowledge-based economy is associated not only with R&D-intensive industries (or ‘low technology’ industries, which use advanced knowledge) but also with more knowledge-intensive - and not necessarily R&D-intensive - indus- tries producing goods and services. For our present analysis, a wide definition of knowledge-based industry is adopted, although a more specific classification system of high, medium and low knowledge industries has been devel0ped.7~ In Nova Scotia, the growth of information technology, telecommunications, film and television, ocean technology, and the life sciences and biotechnology industries are, for the majority of our interviewees, the most visible signs of the emerging knowledge-based economy.

An early analysis by APEC, published in 1999, of the contribution of the knowledge sector to the whole of the Atlantic economy, including that of Nova Scotia, indicated that the output of high knowledge industrics in 1996 was 14 per cent of the total business sector output, and provided 11 per cent of business sector employment. Moreover, on a GDP basis, the high knowledge sectors of the Atlantic regions had been growing at 3.5% per year from 1981 to 1996 - signi- ficantly higher than the medium and low knowledge sectors. It was also forecasted

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The Bnergirrg Kiloidedge-based Ecotzonzies of the Atlantic Regions

that from 1997 to 2007, the annual GDP growth of high-knowledge sectors would continue to increase at a somewhat slower rate of 3.l%?‘-

Noi*aknoidedge, a grass-roots organisation in Nova Scotia, has been monitoring employment trends and producing regular ‘report cards’ on the above-mentioned key knowledge sectors. It, too, has predicted strong growth for the software and computer services, film and television, and life sciences sect0rs.7~

However, institutions in Nova Scotia such as Novaknowledge are not perform- ing in isolation. They interact with other actors in the province (e.g. firms, educa- tional and research institutions, government departments and agencies) and form a regional collective system of networked knowledge institutions that produce and transfer knowledge to all sectors of the Nova Scotian economy. This is particularly so in the information technology and telecommunications sectors, which are developing a common knowledge base in the regional urban agglomeration of Halifax. Between 1992 and 1999, the number of software firms in the province almost doubled. In 1999, there were 236 such firms; the majority of them (146) were located in the Halifax area, while a small number (23) were to be found in Sydney (Cape Breton) and the rest (57) scattered around the rest of the province?6 But unfortunately, as MacDonald observes, ‘several of the high-tech companies, whose arrival was announced with great fanfare, have declared bankruptcy, leaving millions of dollars owing to provincial governments, and their workers in the ranks of the unemployed’?’ Great emphasis has been placed on the develop- ment of the ICT sector in Cape Breton - also known as the Silicon Islorid - where a small cluster of firms has emerged, including several in web design, multimedia and software.

The province’s success is due to a great extent to another unique and active IT association: the afore-mentioned Telecorii Applications Research Alliance (TAM), launched in 1996 in Halifax. It consists of three principal companies (Alinnt/ MT&T - the regional telecommunications company - and two multinationals, Nortel Nettvorks and Cisco Systenis), as well as 58 associates and affiliates. The association makes available a telecommunications R&D facility, offers seed investment funding, and provides business-mentoring services to its members.

The life sciences sector is another rapidly growing knowledge-based industry in Nova Scotia, as in the rest of the Atlantic Canada area. It is an economic sector that builds on the region’s expertise in applied science and medical research, and consists of approximately 100 companies employing two thousand people?8 Nova Scotia has two business incubation centres: the Agrirecli Park in Truro, which provides research assistance and business support to new agri-food companies, and Imomcorp in Halifax, which provides R&D assistance, venture capital, and business support and advice to new biotechnology companies. Imoracorp oper- ates two units: the Bioscierzce Enterprise Centre in Halifax and the Technology Innoration Centre in nearby Dartmouth. The organisation has already assisted in the development of a number of biomedical companies whose products are now

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distributed worldwide. The creation in the spring of 2001 of the Life Sciences Research Ullage in Halifax, which aims to capitalise on the medical research expertise of the province, is considered to be a further step towards a knowledge- based economy.

The development of ocean technology has been mainly the outcome of the province's traditional expertise in fishing, shipbuilding and natural resource management. The sector - not designated as a knowledge-based industry - is a mixture of medium and high technology manufacturing and service industries, which are high value added and labour-intensive, and demand high levels of knowledge and education. The most recent available estimates suggest that the sector consists of approximately 90-100 firms, employing nearly two thousand employees. Many of these firms are also export-oriented." Many decision-makers see the ocean technology sector as a natural opportunity for Nova Scotia to build a knowledge-based economy.

In the South West of England, the golden triangle - also known as the Silicon Gorge - exhibits a knowledge-based economy characterised by the establishment of innovative and knowledge-intensive firms and knowledge institutions. In addition, a new type of firm and a new market culture is emerging in the knowledge- driven sectors of the local economy. Indigenous companies such as Dysori (producer of a revolutionary vacuum cleaner, and the most celebrated innovator in the region), Science Sysieriu, Rotork and the Oscar-winning Andinan Anintations are already on the way to becoming large multinationals. These companies are now firmly embedded in the region. It has also been observed that company executives devote resources to the development and diffusion of knowledge within their organisation and employ a variety of knowledge indicators. These indicators are useful for anticipating and measuring the needs of customers, reviewing the performance of their employees, creating national and international networks and joint ventures, and undertaking pre-competitive research."

CONCLUDING REMARKS

The above analysis suggests that the economic situation in Nova Scotia and the South West of England is substantially similar. Both Atlantic regions are peripheral in relation to the main centres of economic activity in their respective markets of North America and Europe. As Salmon notes, the 'perception of peripherality and psychological distance appears to be cruciaY.8' They are also faced with high intra-regional income disparities, industrial restructuring, a declining fisheries sector, and the seasonality of crops and tourism. Changes in regional policy frame- works have been an integral part of the transformations witnessed in both regions. It has been possible, however, to identify a set of factors that are contributing towards or mitigating against the development of both Atlantic regions and their path towards becoming knowledge-based economies. The most influential of

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Table 2: Configuring the knowledge-based economy

Policy aim hfeatis fintriples within the Regions

To promote the creation of knowledge- intensive clusters

To promote the creation of high technology firms

To reduce asymmetry in information and enhance diffusion of knowledge

To increase institutional links between know- ledge institutions and industry To improve inter- action of regional actors in know-how and innovation

To reduce government interference

To facilitate entrepreneurship and innovation

The adoption of a cluster-based policy

The provision of business incubators with R&D facili- ties, venture capital and mentoring

The provision of Internet access to schools. businesses (ShlEs in parti- cular) and local communities

Joint industry- research centres of excellence

Provision of fora for constructive dialogue

Human capital development

Promotion of public-business partnerships for the promotion and coor- dination of policies

Public investment in seed andlor venture capital

Support in Nova Scotia (‘NS’) - through Nova Scoria Business Inc. - for the digital economy, the energy sector, advanced manufacturing. the learning industry and the life sciences sector Regional Development Rind of the South West of England (‘SIW) Regional Development Agency for the development of aerospace, the automotive industry, instrumentation and marine technologies

N S : Agritech Park in Truro; the Bioscience Enterprise Centre in Halifax; the Tecfinology Innovation Centre in Dartmouth; and Silicon Island in Cape Breton SWE: The Bristol Creative Technology Nehrork

NS: The federal-provincial Iilfonnation Econotny Initiative; the \’inrial Campus of the Nova Scotia Community College; the Nova Scotia TeleHealth Nehvork initiative SVE facilitating adoption of e-commerce by SMB; bandwidth expansion to combat rural isolation

N S : Telecom Applications Reseadi Alliance in Halifax; Life Sciences Reseamh W a g e in Halifax SWE Co-funding university centres of excellence; funding Teaching Company Schemes

NS: Novaknowledge in Halifax SWE West of England’s Aerospace Fonrni

N S : Centre for Entrepreneurship, Education and Dec*elopinent S W E Learning and Skills Coitncils

N S : Nova Scotia Business Inc. SWE The Regional Economic Observatory

N S : Cape Breton Growth Rind SIVE: Particip:ition in EU’s programmes for the promotion of innovation in SMEs

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1.2

1

0.8

0.6

0.4

0.2

0 8 Ont Que B.C. Alta Man N.S. Sask Nfld N.B. P.E.I.

Fig. 8: Distribution of Scientific Publications by Province as a Percentage of Population (000) (1995)

Source: Observatoire des Science et des Technologies (CIRST). Statistics Canada. 1998

these are: a historically strong regional specialisation in resource management and engineering; socio-political embeddedness; effective information and knowledge networks; the existence of knowledge institutions; and a strong local and/or regional identity and culture. External factors such as greater exposure to competition, the effect on Nova Scotia of the vicissitudes of NAFTA, and the South West of Eng- land’s obligations within the European Single Market, are also playing a part in making these regions and their firms more adaptable to change.

However, the context in which regional development policies are set and imple- mented is differs greatly between the two regions. Policy challenges and responses are therefore regionally specific and depend on each region’s technology base, historical experiences and institutional structure. Table 2 provides a wealth of examples of good policy practices adopted by the two regions as a response to the challenge of the emerging knowledge-based economy. In the federal system of Canada, the province of Nova Scotia has extensive competencies, substantial financial resources (and liabilities), and flexibility in accomplishing its policy aims. The South West of England has only recently (through its RDA) been able to formulate a coherent regional development policy. However, it is still too early to gauge the effectiveness of such policies. Nova Scotia clearly faces a greater chal- lenge than the South West of England, since it needs to enhance fiscal discipline and provide new jobs opportunities throughout the province. Figure 8 shows how it leads other Canadian provinces in the production of scientific knowledge.

Despite the commonality of problems on both sides of the Atlantic, the evi- dence from interviews suggests that there has been an almost complete lack of cooperation, let alone coordination or policy learning, between Nova Scotia and the South West of England. It seems that a new transatlantic knowledge-based

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economy is a rather remote possibility. Even where a consciousness of transatlantic neighbourhood and cultural affiliation existed in some policy circles, and was viewed positively, there was little appreciation of the possibilities for transatlantic collaboration at regional levels.

The above comparative analysis of regional policies in Nova Scotia and the South West of England suggests processes of partial and uneven change. However, the processes merit ongoing study, given that the analysis shows that different outcomes are likely in a federated political system, as compared to a unitary one. Looking ahead, it remains to be seen whether Nova Scotia and the South West of England will become fully-fledged knowledge-based economies. Nevertheless, the signs are very promising.

NOTES

’ Acknowledgement: The study was supported by the Faculty Research Program of the Government of Canada through its High Commission in London. This financial support is gratefully acknowledged. An earlier version of this paper was presented at the inaugural Transatlantic Studies Conference, at the University of Dundee, 8-11 July 2002. The paper also greatly benefited from the helpful comments of two anonymous referees. Yet another term in use is ‘information society’. Castells, M. The Information Age: Ecorroniy, Society and Ciiltiire, 3 vols., Cambridge, Massachusetts: Blackwell Publishers, 1996. Vol. I. Chapters 2 and 3). All three terms are used within this papcr. The New ECOIIOIII~: Beyond the Hype, Paris: Organisation for Economic Co-operation and Development, 2001. ‘ Van Reenen, J. ‘The New Economy: Reality and Policy’, Fiscal Stiidies. 22(3), (2001).

’ Williams. K. ‘Business as Usual’, Econonzy and Society, 30(4), (2001). pp. 399-411. pp. 307-36.

Breslin, S. and Higgott, R. ‘Studying Regions: Learning from the Old, Constructing the New’, New Political Economy, 5(3), (2000). pp. 333-352. Clarkson, S. ‘The Multi-level State: Canada in the Semi-periphery of both Continentalism and Globalization’, Review of Intenrational Political Economy, 8(3), (2001) , pp. 501-527. ’ Nelson, R. R. and Winter. S . G. An Evoliitionaty Theory of Economic Change, London: Belknap Press of Harvard University Press, 1982. Dosi, J., Freeman, C.. Nelson, R. R., Silverberg, G. and Soete, L. Technicol Clinnge and Economic Theory, London: Pinter, 1987. ’ Mankiw, G. N., Romer D. and \Veil, D. N. ‘AContribution to the Empirics of Economic Growth’, QiiarterZy Joiinzal of Economics, 100( l), (1992), pp. 225-5 1. Aghion, P. and Howitt, P. Endogenous Growth Theory, Cambridge, Massachusetts: MIT Press, 1998. Bassanini. A.. Scarpetta. S. and Visco, I. ‘Knowledge, Technology and Economic Growth: Recent Evidence from OECD Countries’, OECD, Economics Department Working Paper No. 259, Paris: Organisation for Economic Co-operation and Development, 2000. Leadbeater, C. Living on Tliin Air: The New ECOIZOIII~, London: Penguin, 1999. Thurow, L. C. Bidding 1Vealtli: The New Rides for Individuals, Companies, and Nations in a Knowledge-based Ecottony, New York Harper Collins, 1999.

’O A New Economy? The Changing Role of Innovation and Iifonnation Teclurology in Gnnc*th, Paris: Organisation for Economic Co-operation and Development, 2000. Managing Notionnl Innovation System, Paris: Organisation for Economic Co-operation and Development, 1999. The Knowledge-based Economy, Paris: Organisation for Economic

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Co-operation and Development, 1996. The Iii~pleri~entatioi~ of ari Entrepreneurship Developirient Strategy in Carin&: The Case of Atlantic Region, Paris: Organisation for Economic Co-operation and Development, 1996. Kuklinski. A. and. Orlowski. \V. M. (eds), The Knowledge-Based Economy - The Global Challenges of the 2Ist Centirty, LVarsa\v: State Committee for Scientific Research, 2000. Kuk1inski.A. (ed), 77ie Knowledge- Based Economy - The Eirropeaiz Challenges of the 21st Centzrry, \Varsaw: State Committee for Scientific Research. 2000. RSA, Regioitalisirtg the Kiiowledge Econoiny, Conference Proceedings of the Regional Studies Association Annual Conference, London: Regional Studies Association, November, 2001.

‘I OECD, 1999. pp. 10-11. 12 Capello, R. ‘Spatial Transfer of Knowledge in High Technology Milieux: Learning

Versus Collective Learning Process’, Regional Stirdies, 33(4), (1999), pp. 353-365. Cookc. P., Boekholt. P. and Todtling, Y. Tlie Gownmiice of Innovation in Eiirope: Regional Perspectives on Global Coinpetitiveness. London: Pinter, 2000. Matthiessen, C. \V. and Schwan, A. W. ‘Knowledge Centres of Europe: An Analysis of Research Strength and Patterns of Specialization Based on Bibliometric Indicators’, in A. Kukliriski (ed.) The Knowledge-Based Econorny - The Eztrvpean Clzallenges of the X X I Centiity, \Varsaw: State Committee for Scientific Research, (2000), pp. 47-67. Gertler, M. S., Wolfe, D. A. and Garkut, D. ‘No Place Like Home? The Embeddedness of Innovation in a Regional Economy’, Review of International Political Economy, 7(4). (2000). pp. 688-718. Diez. M. A. ‘The Evaluation of Regional Innovation and Cluster Policies: Towards a Participatory Approach’ Eirropeari Plaririing Stirdies, 9(7), (200 1). pp. 902-23. Nauwelaers, C. and Wntjes, R. ‘Innovating SMEs and Regions: The Need for Policy Intelligence and Interactive Policies’, Teclinology Analysis & Strategic Management, 14(2), (2002). pp. 201-15.

l 3 Howells, J. ‘Tacit Knowledge, Innovation and Economic Geography’, Urban Stirdies,

’‘ Cooke et al., 2000, pp. 95-96. I s See. for instance Steiner, M. (ed) Cliisters arid Regioiial Specialisation, London: Pion

Ltd, pp. 1-17. For a critique of Michael Porter’s influential work on clusters, Martin, R. and Sunley, P. ‘Deconstructing Clusters: Chaotic Concept or Policy Panacea?, Regionalising the Knowledge Econorny, Conference Proceedings of the Regional Studies Association Annual Conference, London: Regional Studies Association, November,

l6 OECD. 1999. Banerjee, P. and Richter, F-J. ‘Social Management: Situating Imagination, Concept, Cooperation and Intangible Assets in the Knowledge Business’, in P. Banerjee and F. J. Richter (eds) Intangibles in Cornpetition and Cooperntion. Basingstoke: Palgrave, 2001, pp. 289-338.

I’ White Paper on Our Conipetirive Firtiire: Building the Knowledge-Driven Economj London: Department of Trade and Industry, December 1998. Canada’s Innovation Strategy 2002 views knowledge as an important national asset (Ittrp:/n~~71.7ciiziiovatioii strateg):gc.ca). Konstadakopulos, D., Christopoulos. D. and Cannon, J. ‘Regional Strategies for the Future: Growing a Knowledge-Based.Economy in the West of England and Singapore- Johor Agglomerations’, in A. Kukliriski and \V. M. Orlowski (eds.) i7ze Knowledge- Based Econoniy - Tlie Global Cliallenge of the XXI Centiity, \Varsaw: State Committee for Scientific Research, 2000, pp. 274-87, p. 274.

I9 The Trudeau government, after its election in 1968, established the Department of Regional Economic Expansion (DREE) with specific responsibilities and ambitious initiatives for regional development. In 1983, the new Department of Regional Industrial Expansion (DRIE) was formed, taking over the industry, small business and tourist components of the Department of Industry, Trade and Commerce. In 1987, the Mulroney

39(5-6), (2002), pp. 871-884.

2001, pp. 8-13.

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government established the Atlantic Canada Opportunities Agency (ACOA) with the aim of assisting entrepreneurs, or would-be entrepreneurs, to establish new businesses in the region. Shortly after, the federal government created the Western Diversification Ofice and replaced DRIE with the new Department of Industry, Science andTechnology (DIST) in charge of promoting high technology sectors in all regions. Hansen, N. M., Higgins, B. H. and Savoie, D. J. Regional Policy in a Changing NbrZd, New York and London: Plenum Press, 1990, pp. 21-43.

‘O The federal government has devised transfer-payment programmes for less developed regions. The most important and best known is the equalisation programme that contributes about a quarter of the provincial revenue of Atlantic regions. Transfers to individuals such as unemployment benefits or family allowances are also significant, amounting to a fifth of earned incomes for individuals living in the less developed regions (Savoie, 1992, pp. 167-168; Bradfield, 2001, pp. 13-14). For an extensive and detailed discussion of Canada’s fiscal federalism, see Lazar, H (ed.) Towards a New hfissioii Stateinerit for Canadian Fiscal Federalisrii, Kingston Ontario: McGill-Queen’s University Press, .2000.

” Afxentiou, C. I? and Serletis, A. ‘Convergence across Canadian Provinces’ in Canadian Joirrizal of Regional Science, XXI: 1 (1998). pp. 11 1-126. MacDonald, M. ‘The Impact of a Restructured Canadian Welfare State on Atlantic Canada’, Social Policy & Adriiiriis- tratiori, 32(4), (1998). pp. 389-400. Coulombe, S. (2000) ‘New Evidence of Conver- gence Across Canadian Provinces: The Role of Urbanization’, Regional Stirdies, 34(8), pp. 7 13-25. Bradfield, M. Regional Econonzics: Analysis and Policies in Canada, Halifax N S : Dalhousie University, 2001. ’* Fanjoy, E. ‘Maritime Cooperation and the Maritime Premiers’ in 1. McAllister (ed) Morking with the Region: University Partnerships: Regional Cooperation; Sustainable Development. Halifax, NS: Dalhousie University, 1997, pp. 71-108, p. 74. At the supranational level, the European Commission has taken a number of initiatives to expedite the shift towards a knowledge-based economy and society (as the Commission now refers to the concept, reflecting its desire to include the social dimension). In 1997, the European Union adopted a communication document entitled Towards a Eirrope of Knowledge, proposed by the Commission for the creation of a European common response to the challenges of the emerging knowledge-based economy. At the Lisbon extraordinary summit in 2000. the discussion document Emplojnzenr. Economic Reforms and Social Cohesion - Towards a Eirrope Based on Innowtion and Knowledge high- lighted the need for Europe to hasten her transition to a knowledge-based economy by investing in people. Many activities for the promotion of the knowledge-based economy and society have been incorporated in the Commission’s draft 6th Framework Programme (2002-06) on the creation of a ‘Eiiropean Reseaxli Area’. McAllister, I. ‘Regional development: How the EC and Canada tackle the issues - with lessons for each’, in Europe, 6(4), (1986), pp. 44-6.

” Savoie, D. J. Regional Ecorroiizic Derdoprrzerit: Canada’s Searchfor Sohrtions, Toronto: University of Toronto Press, 1992, pp. 14-15..

25 Personal comment from an economist who specialises in the province’s economic development. Halifax NS, May 2001.

26 Simeon. R. ‘Recent Trends in Federalism and Intergovernmental Relations in Canada: Lessons for the UK?’, in T. C. Salmon. and M. Keating (eds.) The Dynamics of Decen- tralisation: Canadian Federalisin and British Devolution, Montreal & Kingston: McGill- Queen’s University Press, 2001, pp. 47-62, p. 53.

27 Savoie, pp. 15-17. ’* Ibid., p. 55. 29 Simpson, J., The tnitli aboirtAtlaiztic Carzada’secorioiriy,The Globe and Mail, 2 June 2001.

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The United Kingdom is best described as a unitary state, which since 1998 has gradually devolved power to its constituent nations (Scotland and Wales), provinces (Northern Ireland), and one of its regions (Greater London).

” Regional Strategj for the Soitth Ilkst of Etiglarrd, 2000-2010. (Brochure), Exeter: South West of England Regional Development Agency (SWERDA) 2000. ’’ hfacDonald, 1998, p. 396.

” Department of Finance of Nova Scotia Nora Scotia Birdget for the Fiscal Year 2002-03 by N. J. Leblanc. hlinister of Finance, Halifax NS: Department of Finance, 2002.

3J Presentation by Ron L‘Esperance, Deputy Minister, Nova Scotia Department of Economic Development, at the debate Competing glob all^ at St Mary’s University, Halifax NS, 29 May 2001.

35 The United States announced that it will impose an average 29% tariff on imported softwood lumber from Canada in an attempt to protect its own troubled forestry industry. BBC News, 22 hfarch 2002, http://news.bbc.co.uk.

36 OECD, Entrepreneurship Development Strategy. 1996, p. 16. 37 For a description of two well-known initiatives in community economic development in

eastern Nova Scotia, the Aritigoriish bforenmt of co-operatives and the Cape Breton Fmrily community corporations, see MacAulay. S. ‘The Community Economic Develop- ment Tradition in Eastern Nova Scotia, Canada: Ideological Continuities and Discon- tinuities between the Antigonish Movement and the Family of Community Development Corporation’, Con~~~iiiniiy Developnienr Jormial, 36(2), (2001), pp. 1 1 1-2 1. ’’ The South West of England consists of the counties and unitary authorities of Glou- cestershire, South Gloucestershire, Swindon and Wiltshire, Bristol, Bath & North East Somerset, North Somerset, Somerset, Bournemouth, Dorset and Poole, Devon, Torbay and Plymouth, and Cornwall and the Isles of Scilly.

39 DTI and D E E ‘Soirrli \kst: Opportiiriiiy forAll in a Il’orld of Change’. AWhite Paper on Enterprise, Skills and Innovation, London: Department of Trade and Industry, and Department for Education and Employment, 2001. ‘’ SWERDA, 2000.

“ Regions in Figures: Soittk Ilkst, Summer 2002, Table 4.1. London: Office for National Statistics.

” Sunday limes. Soirtliwest is rhe top spot for entrepreneurs. 7 April 2002. This article, drawing from a study compiled by Barclays Bank, reports that outside London the cities and towns of the South West of England have the highest business start-ups as a percentage of population.

‘3 DTI and DEE, 2001. Matthiessen and Schwarz, 2000. pp. 53-55

” The West of England sub-region is the northeastern part of the region and constitutes approximately one third of the total area. s

46 UWE, Facilirating the Leamirig Behnvioirr of Sriinll Iiiriovatiw Finits, Survey Report, Bristol: University of the West of England. Bristol, 1999.

47 Konstadakopulos, D. ‘The Regions and Their Firms in the Perspective of Global Change’, in H. Biinz, and A. Kuklinski (eds) Globalisatioii: Erperierices mid Prospects, \Varsaw: F. E. Stiftung. 2001, pp. 306-24.

“ Savoie, 1992, pp. 265; MacDonaId, 1998. 49 Statistics Canada ‘Estiriiatiori of Research arid Dereloprrierir fiperidiriuw iri the Higher

.Edircatiori Sector; 1998-9’, Working Paper, Ottawa: Statistics Canada, May, 2001. Department of Finance of Nova Scotia, 2002.

Canadian standards. ” Nova Scotia has nine universities, although only one - Dalhousie University - is large by

52 The remaining Canadian provinces featured in the statistical diagrams are: Saskatchewan

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(Sask) and Manitoba (Man). ’’ Statistics Canada, 2001. Nova Scotia Economic Dcvelopment, 2000.

55 Department of Finance of Nova Scotia BirdgetAddress for the Fiscal Year2001-02 by N. J. Leblanc, Minister of Finance, Halifax NS: Department of Finance, 2001.

56 As, for instance, with two indigenous companies: the provincial telecommunications company MT&T and the Halifax-based distance learning provider Knowledge House Inc.

” In the discussion paper Toward Prosperity it is shown that 57 per cent of the people who left the province between 1991 and 1996 had a university degree, and most belonged to the 25-34 age group, Nova Scotia Economic Development ‘Toward Prosperity: Develop- ing mi Econoiiiic Growth Strategy for Nova Scotia’, A Discussion Paper, Halifax NS: Nova Scotia Economic Development, 2000. p. 17. The determinants of inter-provincial mobility in Canada are discussed by Vachon. M. and Vaillancourt, F ‘Interprovincial Mobility in Canada, 1961-1996: Importance of Destination’, in H. Lazar and T. Mclntosh (eds) How Canadians Comiect, Kingston Ontario: McGill-Queen’s University Press, 1999, pp. 101-22. However, out-migration is not the same as labour mobility. For instance, intra-regional labour mobility among firms, and between firms and research institutions, is an important mechanism for the diffusion of knowledge. The recent changes in the Canadian labour market policies, including efforts by the federal government to remove barriers to labour mobility, are discussed Lazar, H. and Stokyo. P. ‘Canadian Labour Market Policies: The Changing Role of Government and the Extent of Decentralization’, in T.C. Salmon and M. Keating (eds) 77ie Dytainics of Decentralisotion: Cnnndian Federalism arid British Devolrrtion, Montreal & Kingston: McGill-Queen’s University Press, 2001, pp. 137-62. Ministry of Finance Crow Corporation Business Plans for the fiscal year 2002-3, Halifax NS: Province of Nova Scotia, 2002.

59 Taylor, J. and Wren. C. ‘UK Regional Policy: An Evaluation’. Regional Sfirdies, 39(9), (1 997), 835-48.

White Paper on Oirr Competitive Fiitiire: BiiiMing the Knowledge-Driven Econoiny op. cit. footnote 5.

62 Opportrmity for All in a lVorld of Change, White Paper on enterprise, skills and innova- tions, February 2001, London: DTI and DEE.

” RSA. 2001: 26; Martin. and Sunley, 2001, pp. 12-13. 6a The Inteniationalisatiori of lndrrstrial R&D, Paris: Organisation for Economic Co-

operation and Development, 1998. p. 54. Bishop, P. and Wiseman, N. ‘The North-South Divide in the UK Defence Sector’, Regional Studies, 33(9), (1999), pp. 829-841,83 1. Boddy. M., Lovering, J. and Bassett, K. Sirnbelt CiQ? A Study of Economic Change in Britain’s M4 Growth Corridor, Oxford: Clarendon Press, 1986. Konstadakopulos D. ‘A Report on Leaming for Innovation in the South West of England and South Wales: Supporting and Helping Small- and Medium-sized Enterprises to Improve Performance and Competitiveness’, Bristol: University of the West of England, Bristol. UWE, 1999. Konstadakopulos et al, 2001. ’’ Bradfield, 2001, p. 30. Bradfield, 2001. p. 30.

” Ibid. 70 Wernerheim, M. C. and Shape. C. A. ‘The Potential Bias in Producer Services

Employment Estimates: The Case of the Canadian Space Economy’, Urban Studies,

RSA, 2001: 13-14.

38(3), (2001), pp. 563-91.

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71 APEC, IT and the Knowledge Ecoiiottiy in Atlantic Canada, Halifax, NS: Atlantic Provinces Economic Council, 1999. p. 42.

72 Konstadakopulos, D. ‘Milieux innovateurs et apprentissage dans le Sud-Ouest de ]’Angle- terre’, Innovations, CaAiers d’Econoniie de I’lnnovation, 1 I ( I), (2000), pp. 139-154.

73 The provincial government of Nova Scotia refers to knowledge-based industries accord- ing to the Standard Industrial Classification codes. and these industries include life- sciences, e-learning and information technology (Ministry of Finance, 2002). Lee and H a s , c.f. APEC. 1999. pp. 5-6.

74 APEC, 1999. pp. 7-12. 7s Novaknowledge ‘N0i-a Scotia - Knoirledge Economy Report Card 2000’, Halifax NS:

Nova Knowledge, pamphlet 16 pages, 2000. 76 APEC, 1999, pp- 13-14. 77 MacDonald, 1998. pp. 398. 78 A sector survey in 1999 revealed that there were 84 life sciences companies in Nova

Scotia, of which 87 per cent had their head offices in Nova Scotia, while 63 per cent were located in the Halifax Regional Municipality (The Nova Scotia Life Sciences Industry Report, 2000).

79 Mandale, M., Foster, M. E. and Plumstead, J. ‘Estimating the Economic Value of Coastcrl and Ocean Resources: The Case ofNoi*n Scotin’ a report prepared for the Oceans Jnsti- tute of Canada and the Atlantic Coastal Zone Information Steering Committee, Chester NS. February, 1998. p. 23. Konstadakopulos. D., Diez. J. R.. Kocke1,l U. and Mildahn, B. ‘Knowledge Companies in Britain and Germany: A Common Response to the Challenges of the Emerging Knowledge-based Economy?’ a report, London: Anglo-German Foundation for the Study of Industrial Society, 200 1 (on-line wwwv.agf.org.uk/pubs/publications.rtm). *’ Salmon, T. C. ‘The Dynamics of Decentnlisation: Canadian Federalism and British Devolution’, in T. C. Salmon, and M. Keating (eds) The Dynnrnics ofDecetztralirariori: Canadian Federalisin and British Devolution, Montreal & Kingston: McGill-Queen’s University Prcss. 2001, pp. 187-92.

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