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‘Theories and Policies of Innovation: A Critical Review’

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Geography Compass 5/11 (2011): 838–850, 10.1111/j.1749-8198.2011.00457.x

‘Theories and Policies of Innovation: A Critical Review’

Pedro Marques*
Centre for Urban and Regional Development Studies, Newcastle University

Abstract
For more than two decades economic geographers and others have been examining the reasons
why some places are more innovative than others. Policy makers have also been actively involved,
as they try to develop their countries and regions through innovation and knowledge. In this
paper I will address three criticisms that have been made to this literature and suggest avenues of
research that could help address them. These criticisms are: the neglect of power asymmetries at
the international and intra-regional levels between economic and other relevant agents, and their
impact on the evolution of regional economies; the excessive focus on the region and the neglect
of the multi-scalar nature of innovation; the emphasis on networks and systems which masks het-
erogeneity and fragmentation at the local level. Finally I will also discuss some of the more recent
guidelines for place-based policy making in this field. Overall my objective is to contribute to the
literature on territorial innovation systems by suggesting how these concepts can be improved.

Introduction
After more than two decades of theoretical and empirical development, research on terri-
torial innovation systems has contributed to a better understanding of the reasons why
innovative capacity varies across space (Polenske 2007). It has done so through an empha-
sis on the systemic and socio-cultural dynamics that are particular to certain places, by
exploring dimensions such as networking, learning, and the feedback loops between dif-
ferent organisations and individuals in an innovation system (Boschma 2005; Cooke et al.
2004). Its results allowed economic geographers to highlight the importance of proximity
in the generation of knowledge externalities and in stimulating cooperation and trust
among a range of actors, including both private and public organisations. They have also
allowed researchers to challenge arguments about the ‘death of geography’ (Morgan
2004) or the ‘flatness of the world’ (Christopherson et al. 2008), by emphasizing that eco-
nomic performance and the institutions that regulate economic activity have different spa-
tial manifestations.
The insights generated by geographers have also informed new approaches to policy
making. In particular, they have contributed to a new generation of tailored policies,
based on unlocking under-utilized local or regional resources through a place based
approach (Barca 2009; OECD 2010). The latter are usually described as an alternative to
top down, or one-size-fits-all policies, that treat every place as equal by trying to replicate
the experiences of a small number of successful regions (Tödtling and Trippl 2005).
Despite its relative success (and probably because of it) in the academic and policy
world, this literature has been the target of several criticisms. I will focus here on three of
those criticisms. The first is that it has appropriated early institutional theories in a partial
and fragmented way, by avoiding issues such as power and politics and their impact on
the distribution and allocation of resources (MacLeod 2001). Secondly, studies on the

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 Theories and policies of innovation 839

economic geography of innovation have been accused of focusing excessively on adminis-

trative regions, even though the latter rarely refer to a cohesive and contained economic
unit (Moulaert and Sekia 2003). Finally this body of work has been accused of placing
too much emphasis on the systemic properties of local economies (such as the role of
networks and inter-firm relationships) while ignoring the importance of economic and
political agency (Markusen 2003). But before addressing these criticisms I will start by
providing a brief description of the main components in a territorial innovation system
(TIS).

Territorial Innovation Systems

The name territorial innovation system (TIS) was coined by Moulaert and Sekia (2003)
to encapsulate a variety of concepts such as the learning region or regional innovation
systems. Different concepts tend to focus on different dimensions of innovation as a result
of their distinct intellectual roots (See Moulaert and Sekia 2003 for a diagram on the evo-
lution of each concept). However they share a similar concern with the causes and pro-
cesses that lead to different regional or local innovation performances.
According to TIS approaches innovation is a non-linear, systemic activity with a spatial
dimension. It is non-linear because it does not follow a linear path between research,
invention and innovation. Instead it is the result of systemic feedbacks and interactions
between research, production and consumption (see Figure 1). In this literature it is also
argued that some regions have the best institutional structures to foster and support inno-
vation (Cooke et al. 2004; Storper et al. 2007; Tödtling and Trippl 2005). Institutions
may be formal, such as the organizational structure of firms and public bodies, laws gov-
erning competition or labour markets, or the existence of Universities that reach out to
local business; or informal, such as a culture that promotes risk-taking, networks where
information can flow and trust relations among economic agents that reduces uncertainty.
Overall these concepts tend to be framed by evolutionary and institutionalist approaches
that emphasize the importance of path-dependency and uncertainty, routines at the firm

Fig. 1. Visual depiction of linear and systemic models of innovation.

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840 Theories and policies of innovation

level, and institutional diversity as a source of advantage at the local or regional levels
(Saxenian 1994).
As an example, the literature on regional innovation systems (RIS) tends to emphasize
the importance of institutional structures and the interactions between them. According
to Autio (1998) a RIS is composed of two main sub-systems: 1) the knowledge applica-
tion and exploitation system, that comprises the industrial clusters of a region, including
the companies, their suppliers and their clients, their competitors and the different organi-
sations that aggregate partners in cooperation activities; 2) the knowledge generation and
diffusion system, that includes the different institutions engaged in the production and
diffusion of knowledge and skills (Autio 1998). Tödtling and Trippl (2005) added to this
scheme the policy sub-system to emphasize the importance of sub-national political struc-
tures. The interactions within and between the different sub-systems are mediated by the
regional socioeconomic and cultural setting. Additionally the RIS is expected to maintain
links with other actors, namely national and international organisations, political entities
or other RIS (Tödtling and Trippl 2005). Research using this framework has tried to
explain innovation dynamics in regions by examining the relationship between the differ-
ent sub-systems (Cooke et al. 2004).
The learning region (LR) concept shares certain similarities with the RIS. The main
contribution of the former is its emphasis on the cognitive processes supporting innova-
tion (learning) especially the role of tacit knowledge and ‘untraded interdependencies’
(Storper 1997), as opposed to focusing on groups of actors and their interactions. These
processes are hampered or enabled by localized social structures such as networks that
facilitate the exchange of knowledge and ideas. The localized dimension is particularly
important for the dissemination of tacit knowledge that cannot easily be codified and
appropriated by agents located elsewhere. It is argued that these factors help regions gain
a competitive advantage towards their competitors, because the underlying causes of their
competencies are unique and cannot be copied (Saxenian 1994). From a prescriptive
point of view, the LR has tended to analyze which social ensembles, at different levels of
analysis (geographic and organizational), facilitate or deter learning and innovation (Ger-
tler and Wolfe 2002).
As mentioned in the previous section these concepts have been criticized on several
levels, of which I highlighted three. In the next section I will explore the first: the role
of power in determining the distribution and allocation of resources across space and its
impact on innovation capacity.

New Avenues of Research: Power and Politics

Institutional economics, from which TIS concepts derive some of their insights, was orig-
inally concerned with the political aspects underpinning the creation and management of
markets. However as MacLeod (2001) and Cumbers et al. (2003) argued the original
focus on the close alliance between politics and the economy has been somewhat lost in
the TIS literature, due to its narrow focus on processes of learning and synergetic local
relationships. As argued by Cumbers et al. (2003) current economic geographical con-
cepts are ‘‘somewhat at odds with an older institutionalist tradition which viewed the
economy as an instituted process imbued with power, knowledge and values’’ (Cumbers
et al. 2003, pp. 326). This is extremely relevant, particularly when discussing the rescaling
of power towards both the sub-national and trans-national levels and the increased levels
of competition and international economic integration. As transnational corporations
(TNC) become key global players, and regions are encouraged to compete for scarce

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 Theories and policies of innovation 841

resources, it is important to recognize the capacity that some organisations or individuals

have in influencing the distribution and allocation of resources across countries and
regions, and their impact on innovation capacity.
While I want to emphasize the importance of power, I would also like to introduce a
note of caution against traditional interpretations of this concept, as something that is
concentrated at the top of a hierarchical structure, and that can be exercised unilaterally.
As argued by Allen (2003) and Sayer (2004) power is a contingent social phenomenon
(These authors are not in complete agreement about the definition of power, but they
share broadly similar views). It is dependent on the capacity that those exercising it may
have for mobilizing a set of appropriate resources, but also on the reactions of those feel-
ing its effects, and that are not likely to react passively. As a result it cannot be character-
ized as a single force travelling seamlessly across space and time to deliver predicted
outcomes. Power also assumes different modalities, such as leadership, charisma, domina-
tion or coercion and it can be exercised both in horizontal relationships (networks) and
hierarchical ones (within an organization or a rigidly structured value-chain). The core
concern of research on power and regional innovation should therefore be the study of
the relational and contingent elements that characterize power in particular instances.
These elements may remain stable during certain periods, but over time they are likely to
change.
In recent years a growing body of research has demonstrated that such concerns should
come to the fore in order to explain why and how regions develop. A relevant example
was provided by Christopherson and Clark (2007a,b) using case studies from the US.
These authors showed that power is a relevant concept both at the international and the
sub-national levels. According to their research transnational corporations (TNC) operate
on an international scale to monitor and take advantage of regional capacities, in a way
that is not necessarily beneficial to the actors already present in that region. From the per-
spective of the TNC local or regional economies are strategic assets that can be used
depending on the corporation’s needs. This contrasts with the situation of both small and
medium sized enterprises (SMEs) and labour which tend to be less mobile and therefore
more dependent on the conditions that they meet in a particular context.
At the sub-national level TNCs can shape the activities of research and training institu-
tions towards their own interests. This can happen both through imposing constraints on
the functioning of labour markets or through shifting the risk and investment required
for research and development (R&D) to publicly funded institutions (Christopherson and
Clark 2007a,b). Their power to influence both the fate of regions on an international
scale, and the internal dynamics of those places where they locate, is therefore central in
explaining the evolution of regional economies and local innovation capacity. Neverthe-
less power dynamics are not exclusive to TNC ⁄ SME relationships. For instance Lazerson
and Lorenzoni (1999) reviewed 10 years of research on Italian industrial districts to argue
that some firms have had a major impact in the development trajectories of different sec-
tors in this country. This finding suggests that even within a group of firms with similar
characteristics there are variations (in size, knowledge absorption capacity or business
strategy, for instance) that can lead to the emergence of power asymmetries.
Innovation capacity at the local or regional level is therefore constrained by power
asymmetries that manifest themselves at different scales and through the interactions of a
range of organisations. But on the other hand, innovation can be part of the response to
those same power asymmetries. In the interaction between the local and the global, the
former can strengthen its position by creating the conditions that allow its firms to
become more competitive and less ‘disposable’ (Coe et al. 2004). Innovation can also

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842 Theories and policies of innovation

allow firms to be more proactive in the search for new markets and clients (Vale and Cal-
deira 2007). For firms dependent on a value chain, innovation can include the creation
of own brands or finding solutions to reach final clients without the mediation of an
intermediate organisation (Tokatli 2007). These examples point to the relational and con-
tingent nature of power, by suggesting that there is a constant struggle between the struc-
tures created or used to exercise power, and the efforts of those at the receiving end to
accommodate or replace them. They also indicate that innovation strategies respond to a
myriad of stimuli that emerge from different spatial scales, such as the local, the regional,
the national and the international. This is what I will explore in greater detail in the fol-
lowing section.

The Multi-Scalar Nature of Innovation

Earlier studies within this field were often criticized for isolating the region and treating it as
a contained entity (Hadjimichalis 2006; Moulaert and Sekia 2003). In recent years several
avenues of research (in particular the global production networks (GPN) framework) have
tried to address this problem by stressing the key role that external links may have in creat-
ing or maintaining competitiveness within a localized innovation system. The objective in
this paper will be to discuss previous attempts to conceptualise innovation as a multi-scalar
activity and to suggest further avenues of research that can improve our understanding of
this process. Bunnell and Coe (2001) for example, were among an early group of academics
who understood the importance of this approach, when they stated
that scale is a fluid and multidimensional concept, delineating the complex interactions between
physical space, institutional and regulatory jurisdictions, and the shifting levels at which the
actors in innovation systems organize themselves. (Bunnell and Coe 2001; pp. 570)
Links with external private or public agents are now seen as crucial in providing access to
essential knowledge that is not generated locally and may also be an essential force in pre-
venting lock-in and ‘institutional sclerosis’(Bathelt et al. 2004; Vale and Caldeira 2007).
In general a multi-scalar understanding of innovation is in line with the research objectives
outlined by Coe et al. (2004, 2008) for their work on GPN. Their objective is to capture ‘‘the
dynamic ‘strategic coupling’ of global production networks and regional assets, an interface
mediated by a range of institutional activities across different geographical and organisational
scales’’ (Coe et al. 2004; pp. 469). The concept of network is taken as the central element in
explaining both the structural and the relational processes through which goods and services
are produced, distributed and consumed. The use of the network concept is also a way of
emphasizing that international economic structures involve linkages between different organ-
isations and not just firms. The authors point to three interrelated conditions necessary for
regional development to occur (Coe et al. 2004):

1. the capacity to generate economies of scale and economies of scope

2. the capacity to bring about the benefits inherent to localization economies that will
benefit a global production network;
3. the capacity to ‘hold down’ these networks by finding the optimal institutional envi-
ronment.

These conditions will help regions to align their capacities with the strategic interests of
‘focal firms’ (such as TNCs) and allow their firms to prosper as a result of three processes:

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 Theories and policies of innovation 843

value creation, value enhancement and value capture (Coe et al. 2004). Value creation
refers to the capacity of regional institutions (firms and non-firms) to create the condi-
tions for attracting or developing value-added activities. Value enhancement refers both
to the upgrading of endogenous regional organisations and to the creation of conditions
that facilitate the enhancement of value by focal firms. Value capture is related with the
capacity to reap a substantial part of the value-added created by the GPN. As the authors
acknowledge the latter is deeply influence by issues of power and control, since the firms
that rest at the top of the production network have in theory predominance over its sup-
pliers. However Coe et al. (2004) argue that regional assets can be mobilized to make its
organisations less substitutable, a process that can lead to an increased bargaining power.
It is through these relational dynamics that this framework seeks to understand the cou-
pling of the global and the local, and in particular to find ways in which the local or
regional can benefit from international economic structures.
The GPN literature is also concerned with integrating non-economic elements into its
analytical apparatus. For that reason it emphasizes the role of labour markets, and in par-
ticular it contrasts the mobility of focal firms with the limited mobility of workers (Coe
et al. 2004, 2008). It also addresses the importance of governmental organisations, partic-
ularly the nation state but also other levels of decision making, and integrates them in a
multi-scalar model where these institutions are themselves part of the production net-
work. Finally in more recent years the proponents of the GPN approach (Coe et al.
2008) have argued for an opening up of new avenues of research including: an investiga-
tion of intra-firm dynamics, alongside the inter-firm linkages that tend to be the object
of these studies; a focus on the relation between the networks and the material space in
which production happens, in particular its environmental impacts; and also for the incor-
poration of civil society organisations, such as NGOs that can have an important role in
shaping institutional environments.
The GPN framework offers a very interesting way of thinking about the multi-scalar
nature of innovation. In particular, it draws our attention to the fact that localized pro-
cesses are often strongly influenced by institutions that tend to be regulated at the
national or international levels (e.g. labour markets or fiscal and monetary policy). An
excessive focus at the local or regional level may lead the researcher or policy maker to
ignore key processes that are actively constraining the actions of firms. It is for instance
impossible to understand the relative decline of Italian industrial districts without incorpo-
rating into the analysis the rise of China and other emerging economies. Considering the
current economic crisis, it would be wrong to explain the fate of a localized economic
sector without taking into account macroeconomic factors such as the huge costs
involved in the financial bailouts, the rise in oil prices, or the austerity measures that
many Western countries have adopted to cut back public spending. All these factors have
a direct impact on the decisions of individual firms regarding their innovation strategies
and have an aggregate effect on the performance of industrial agglomerations.
In order to capture the importance of multiple scales of activity it is also necessary to
engage with research on global spaces of knowledge and the dynamics of different types
of proximity (Boschma 2005; Faulconbridge 2006; Grabher and Ibert 2006). For exam-
ple, Faulconbridge (2006) used the case study of the advertising industry to explain how
TNCs can create and manage global spaces of learning and knowledge sharing that allow
individuals to share experiences and ideas as part of the creative process. This example
does not deny the importance of localized knowledge, and in fact it is stressed that
knowledge sharing often happens at an abstract and general level due to the difficulties in
sharing embedded experiences. It does however demonstrate that long-distance links can

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844 Theories and policies of innovation

be crucial in stimulating creativity and in helping advertisers overcome their embedded-

ness in a particular cultural environment. Grabher and Ibert (2006) on the other hand,
distinguished between different identities (project identity, entrepreneurial identity and
firm identity) and forms of attachment (communality, sociality and connectivity) to
examine distinct forms of proximity and their inherent conflicts, but also the role of
actors in managing and maintaining these networks. Both accounts show how knowledge
sharing is often a fragmented and even contested territory, that can benefit from physical
proximity but that can also be built though other types of organisational and personal
relationships that span a range of scales. Finally on a more conceptual level Boschma
(2005) discussed how different types of proximity (cognitive, organizational, social, insti-
tutional and geographical) have diverse spatial manifestations. All these examples demon-
strate that despite their importance (which I do not want to deny here) localized
processes represent but one dimension of innovation. Together with the literature on
GPN they also indicate that further development is needed in understanding the impor-
tance of agency and its impact on innovation systems. This is the topic of the following
section.

Systems and Agency

The third critique to be dealt with in this paper is the role that has been ascribed to
socio-economic structures at the local level within the TIS literature. By socio-economic
structures I mean networks, trust, social capital or more broadly the ‘untraded interdepen-
dencies’ that are believed to be a source of competitive advantage at the sub-national
scale (Saxenian 1994; Storper 1997). My argument is that there is a tendency to ascribe
to these structures the power to cause innovation when in fact they should be understood
as a strategic resource that firms can use within a geo-historical context. Additionally the
essentially benign representations of these structures in the literature have led to a misrep-
resentation of the region as the place where people with divergent interests converge to
find common solutions to their problems. I will counteract this perspective by arguing
that regions have a tendency to be heterogeneous entities, economically and politically.
Nevertheless the use of these concepts has undeniably been a positive development in
innovation studies, because it has allowed researchers to have a more complex perspective
on how firms and other organisations interact at the local, national and international lev-
els, and how this can be a key element for success. They have provided the basis for a
better understanding of innovation when compared with the earlier linear framework, or
even with the national innovation systems literature that failed to explain the persistence
of regional inequalities. For these reasons this critique does not deny their importance,
but merely asserts that they are used strategically by organisations and individuals for spe-
cific ends.
I will take this argument forward by introducing the strategic-relational (SR) approach
developed by Jessop (2001), and showing how it can help illuminate this point. It was
originally developed as a way to address the debate on agency and structure, taking into
account geo-historical contingency. Instead of conceiving agency and structure as two
interdependent yet separate entities the author argues that each must always be explained
in relation to the other. This means that ‘‘structures are thereby treated analytically as
strategic in their form, content, and operation; and actions are thereby treated analytically
as structured, more or less context sensitive and structuring’’ (Jessop 2001, pp. 1223). In
other words structures are understood as providing a set of privileged strategic possibili-
ties, constraining individuals towards a particular set of attitudes and actions. On the other

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 Theories and policies of innovation 845

hand agency is understood as a set of reflexive strategies that are devised within a particu-
lar structure to allow the achievement of particular aims.
Within this framework networks, global pipelines (Bathelt et al. 2004), communities of
practice (Faulconbridge 2007) and other social phenomena are instruments used by cer-
tain firms or professional communities as part of the innovation process, to enhance their
competitive advantage. The choice between these different instruments will depend on a
series of factors, ranging from their geographical location that determines whether they
can access valuable knowledge in their region, or whether they have to link with key
sources outside of it (Lorentzen 2006; Vale and Caldeira 2007); the type of product that
they supply, that may favour large vertically integrated firms with more organizational
rigidity and therefore less capacity to engage in flexible networking (Boyer and Freyssenet
2002); within communities of practice, the professional ethos of a particular profession
appears to be an important determination of willingness to engage with them (Faulcon-
bridge 2007). On a more general level the SR approach means that individuals and
organisations involved in innovation react to the institutional structures surrounding
them, and with their actions shape it. This is a different hypothesis than assuming a priori
that a certain type of social capital pre-exists and is independent of the decisions made by
individuals or organisations.
A similar objective was recently outlined by Coe and Hess (2010) in their efforts to
bring together the frameworks of ‘new regionalism’ and GPN. By putting an emphasis
on the contested and political nature of regional development, they argue that the
‘dynamic strategic coupling’ of the global and local is inevitably relational, temporary and
multi-scalar. The presence of a TNC in a region for example does not immediately result
in development at the local level. Additionally the successful positioning of a co-located
sector within a GPN may generate or exacerbate intra-regional disparities and ⁄ or dys-
functions. Therefore these authors argue that it is necessary to pay attention to the way
in which firms and non-firm organisations actively position themselves within global net-
works and the strategies that they devise to cope with competition and market fluidity.
The use of the network metaphor should not prevent researchers from understanding the
role of key organisations within the process of regional development, nor the fact that an
existing successful network still needs the active effort of those involved to continue gen-
erating positive results.
Overall a framework that places more emphasis on the agency of firms and organisa-
tions is necessarily more cautious about defining the local innovation system as a cohe-
sive, stable unit. TIS can indeed be fragmented entities, with a range of overlapping or
independent networks that will not necessarily converge in their interests. This fragmen-
tation is not necessarily disruptive, since it may contribute to the ‘institutional thickness’
of places (Amin and Thrift 1995). In fact research has shown that a successful economic
agglomeration may persist despite this fragmentation (Henry and Pinch 2001; Staber
2007). In other cases however it may have a negative effect, as shown by Safford (2004)
in his study of two post industrial towns in the USA. Fragmentation within an innovation
system is also likely to exacerbate power asymmetries within the system and generate dis-
trust. This may happen between firms but also between these and other actors such as
trade unions, research centres, or public agencies.
To summarize I have argued in this paper that research on local innovation has to pay
more attention to power and to the role that key organisations can have on the evolution
of regional economies and their innovative capacity. I have also argued that innovation is
a multi-scalar activity, because firms and individuals respond to a range of stimuli emerg-
ing at different geographical scales. And finally I have argued that at the local level

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846 Theories and policies of innovation

processes such as networking and the development of trust have to be understood as a

strategic resource that is used and maintained by firms and other organisations to achieve
certain aims. I will now turn briefly to recent debates in the policy arena before drawing
together some concluding remarks.

Innovation Policy
Literature on regional policy has evolved over the last decades, as research and policy
experiments have shown the limitations of earlier approaches. Early linear approaches
have been dismissed due to their lack of attention to the systemic properties of innova-
tion (Tödtling and Trippl 2005). Since the 1990s experiments based on the notions of
learning regions, and regional innovation systems have allowed for further improvements.
For instance Cooke (2007) argued that the option of stimulating regional learning is inad-
equate, due to the difficulty in translating regional experiences to different contexts.
Investments in physical infrastructure, such as technological parks, an option that was very
common in the 1990s and early 2000s have also shown limited potential. As a conse-
quence policy prescriptions have in recent years been converging towards two key ideas:
that policies should be tailored to the needs and specificities of each place; and that they
need to adopt an integrated perspective, that takes into account the various dimensions of
innovation, but also the more general processes of entrepreneurship and good governance
(Barca 2009; OECD, 2010).
The first idea has been encapsulated by the call for a repeal of one-size-fits-all
approaches. Tödtling and Trippl (2005) used the three ideal types of the ‘peripheral
regions’, ‘old industrial regions’, and ‘fragmented metropolitan regions’ to argue that each
is faced with a particular set of challenges. The first type is characterized by the ‘thinness’
of the institutional environment, and therefore by the lack of sufficient complementarities
to generate synergies and competitive advantages. The second type tends to be plagued
by situations of lock-in, where institutions are mostly geared towards managing the
decline of industrial sectors, thereby preventing a process of economic regeneration. The
last type is characterized by the existence of a fragmented institutional background that
renders cooperation and the setting of common goals more difficult.
The notion of integrated approaches has also gained traction in different policy con-
texts, such as the recent report for the reform of regional policy in the EU (Barca 2009)
or the commentary by Crescenzi and Rodrı́guez-Pose (2011) on the reconciliation of
top ⁄ down and bottom ⁄ up development polcies. On the particular topic of innovation
policies, the OECD (2010) has published several reports where it argues that these should
be structured around five principles: 1) the need to empower people to innovate, through
an investment in a broad range of skills, both for managers, workers and consumers.
These skills should be geared towards promoting flexibility and entrepreneurialism. 2)
The need to unleash innovation, by guaranteeing the existence of an environment that
supports competition and innovation. This is to be done both by improving the financial
mechanisms that finance innovation, but also by promoting and open and competitive
business environment. 3) Investment in the creation and application of knowledge,
through more and better public investment in R&D, the creation of an infrastructure that
facilitates knowledge exchange while protecting intellectual property rights, and public
sector innovation. 4) Use of innovation to address global and social challenges, by
improving the international transfer of ideas, creating a stable political environment that
facilitates the emergence of flexible solutions to address global imbalances, and by creating
the conditions for more innovation in low-income countries. 5) An investment in better

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governance and measure of innovation policies. This can be achieved by ensuring coher-
ence of innovation policies and a commitment by top political actors, in coordination
with local and regional entities.
The advantage of the OECD principles is that they are less prescriptive than early TIS
inspired policies. Whereas initially the objective appeared to be the replication of success-
ful regions in different contexts, the attention has shifted to a combination of infrastruc-
tural factors (entrepreneurship, good governance) with targeted investments (capacity to
generate and absorb knowledge). To a certain extent these recommendations have already
started addressing some of the criticisms described previously in this paper: there is an
understanding that administrative regions may not correspond to functional regions and
there is a call for the integration of the local, regional, national and international levels of
policy-making. The missing element in these principles is an active policy that aims to
redress imbalances in the world economy cause by heightened competition and the pres-
sures put on suppliers by transnational corporations. This is however something that falls
outside the remit of innovation policy. The principles outlined by the OECD (2010) are
also likely to encounter rigid bureaucratic practices that resist transversality between gov-
ernment ‘silos’ and integration of different levels of policy making. Therefore it remains
to be seen how they will translate into practice; in particular in those places with less
developed institutional capacities and that are likely to be the ones that most need inno-
vation and rapid economic development.
The OECD guidelines are also fairly orthodox particularly in comparison to the
approach of authors such as Blake and Hanson (2005), Moulaert et al. (2005) and Moula-
ert and Nussbaumer (2005). The latter group argue that the literature on innovation
should move beyond a narrow focus on economic growth and technological develop-
ment and understand how innovation can be used to address social issues such as gender
inequality, poverty or social exclusion. Blake and Hanson (2005) criticize the export-ori-
ented innovation model and state that more attention has to be paid to innovations that
primarily serve the local community, that contribute to greater well-being and that
involve a range of actors (small and micro businesses or non-profit organisations). In prac-
tical terms, they suggest that instead of channelling public resources towards a small num-
ber of key organisations that fit the prevalent model, more resources should be offered to
non-profit organisations, locally oriented firms and even the government. Moulaert and
Nussbaumer (2005) build on the notion of community as the place where market rela-
tions are embedded and whose survival depends on a wider range of factors than those
provided by technocratic development models, to assert the importance of social innova-
tion. To operationalise this concept the authors distinguish between public, private and
collective capital and argue that they respond to different rationales. In particular the lat-
ter is oriented towards revealing and satisfying the needs of local communities instead of
towards profit maximization. It is therefore at this level that social innovation is most use-
ful. Moulaert and Nussbaumer also argue that if TIS models incorporated this notion than
they would see culture and society not as an instrument for achieving growth, but as
goods in themselves that deserve the attention of policy makers and the commitment of
public resources.

Conclusions
In this paper I have described briefly the main elements in theories of local and regional
innovation. I have then analysed three criticisms that have been levelled against this field
and discussed how some of these issues have been dealt with or could be dealt with by

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848 Theories and policies of innovation

combining it with other concepts and theoretical frameworks. I argued that TIS
approaches need to incorporate more strongly the notion of power asymmetries at the
international and intra-regional scales; I argued also that innovation is a multi-scalar phe-
nomenon, because firms and other organisations respond to stimuli emerging from local,
national and international processes, and that research on global production networks
could help integrate this notion into research on localized innovation; finally I argued
that local structures such as networks and trust are used strategically by organisations in a
TIS to achieve certain objectives, which is likely to generate fragmentation and hetero-
geneity at the local level. In the end I briefly discussed five principles for policy making
on innovation devised by the OECD that represent a step forward but still fall short of
addressing all the points enumerated in this paper.
As developed countries continue struggling with low growth rates and brace them-
selves for the reappearance of long-term structural unemployment, this topic is only likely
to increase in importance. It is therefore crucial that researchers can provide comprehen-
sive answers that are valuable to people and places at all stages of economic development,
while integrating this with a vision of the whole. This is what I believe could be
achieved by pursuing the three research agendas outlined in previous sections.

Acknowledgement
Research for this paper was supported by the fellowship SFRH/BD/27431/2006 from
the Fundação para a Ciência e a Tecnologia (Portugal). This fellowship programme is
funded by the Programa Operacional Potencial Humano and the European Social Fund.
I would like to thank James Faulconbridge and two anonymous reviewers for their
comments on an earlier version of this paper.

Short Biography
Pedro Marques has worked on several applied topics within the broad field of economic
geography, including innovation and power, public policy, the impact of transport invest-
ments in regional and local development and the structural territorial inequalities in the
UK. He has taught for several years in the Geography BA at Newcastle University and
more recently for the MA in Local and Regional Development ministered in the Centre
for Urban and Regional Development Studies. He has published several book reviews
and currently has under review two papers in the Professional Geographer, as a result of his
participation in the Summer Institute in Economic Geography (Vancouver 2010). He
holds a BA in Sociology from the Atlantic University – ISCTE in Lisbon, and both and
MA and a PhD from Newcastle University.

Note
* Corresponding address: Pedro Marques, 4th Floor Claremont Bridge, Newcastle upon Tyne, NE1 2AY, United
Kingdom. E-mail: p.m.marques@newcastle.ac.uk.

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