In Focus: Cluster Development, Competitiveness and Innovation in the Western Balkans

Keywords such as cluster, cluster policy, cluster initiatives, etc. are currently omnipresent in both the scientific and policy discourse. In times when innovation and competitiveness are seen as the main forces to boost our economy, the concept of clusters gained a crucial position in regional and national development strategies.

Emerged in the early 1990s, the most common definition for clusters can be traced back to Michael E. Porter who defined clusters as “geographic concentrations of interconnected companies, specialized suppliers, service providers, firms in related industries and associated institutions in particular fields (for example, universities, standards agencies, and trade associations, etc.) that compete but also cooperate”. Through their geographical proximity, interactions, the presence of a skilled labour force, the exchange of knowledge, technology and business information are facilitated, thereby pooling forces of cluster members and allowing SMEs to benefit who do not have the necessary resources. Therefore, this process enables clusters to be important drivers for competitiveness and innovation.

Modern competition depends on productivity and productivity rests on how companies compete.  Businesses can be productive in any industry—shoes, agriculture, or semiconductors—if they involve sophisticated methods, use advanced technology, and offer unique products and services. All industries can involve advanced technology and can be knowledge intensive.

Clusters are powerful engines of economic development and drivers of innovation in whole European Union and EU's policy tendencies aimed at stimulating the development of competitive agglomeration are determining Member States to steer public measures to support associative forms such as clusters or poles of competitiveness.  National competitiveness can be indeed significantly improved by the development and maintenance of clusters of innovative companies and excellent research institutes and encouraging innovation and productivity within the framework of a cluster directed-economy. In this way, cluster development can be one of the sources of competiveness also for emerging market and developing economies to increase productivity and economic wealth.

At company level, being part of a cluster allows companies to operate more productively in sourcing inputs; accessing information, technology, and needed institutions; coordinating with related companies; and measuring and motivating improvement. Cooperation with research entities moreover impacts cluster development first through education of industrial staff, but also by developing innovation processes through the facilitation of the appearance of innovative ideas and also of knowledge sharing among organizations.  At country level cluster theories and the interventions to develop them can be regarded as fully compatible with the conceptual underpinnings of the S3 approach. Cluster policies present a good potential to become an essential part of S3 for pretty much any region in Europe.  If successfully designed and implemented, smart specialisation strategies help the economies leverage their respective areas of strength and grow into prosperous, knowledge-based economies

Regional business clustering is a mechanism that is not yet fully applied in the Western Balkans. Cluster development requires indeed relevant institutional support and close-fitting collaboration among institutions, entrepreneurs as well as cooperation regional and international levels. Needs range from infrastructures and logistics to support for promotion, education, training as well as research and development (R&D) and competition. Indeed clusters in WBC are not so frequent, generally in need for better organisation, with inadequately trained management while the institutional support is limited. Western Balkan policy makers should focus more and more on the potential of clusters to mobilize local economies and boost growth. When effective, these policies can help develop sectors of the economy in which a region has a significant position. They have the ability to guide the concentration and integration of economic policies on specific areas of the economy. And they can help avoid the difficulties of traditional industrial policies, which often limited competitiveness, and engaged narrow industries rather than broader.

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European Cluster Collaboration Platform: Putting Western Balkan Clusters on the map

The European Cluster Collaboration Platform (ECCP) is a tool set-up by the European Commission which aims at triggering cluster collaboration in Europe and beyond through mapping the clusters, engaging with them, providing background analysis and organising matchmaking events. The ECCP is moreover highly involved in encouraging cluster policies and cluster development in the Western Balkans.

The European Union is committed to the convergence of the Western Balkan to reinforce relations and trade, as part of their process to enter the European Union. In May 2018, a summit gathering the Western Balkans Leaders and the European Leaders to discuss about the future of the cooperation, took place in Sofia, Bulgaria. This summit led to the Sofia Declaration. In this declaration, the Western Balkans representatives re-emphasized their will to become members of the European Union whilst the representatives of the European Union, reaffirmed their support policy towards the admission of the Western Balkans countries as EU members.

The admission of the Western Balkans countries as member states of the European Union is conditioned to various factors. The convergence of the Western Balkans States in terms of socio-economic and political development is at heart of the admission process. This convergence is sought through a set of measures targeting various domains such as preventing organised crime or encouraging neighbourhood stability. Similarly, enabling a pro-business environment through the development of clusters is a piece of the puzzle towards a more even socio-economic development.

In that regards, the ECCP is carrying a set of actions to map the Western Balkan clusters and foster collaboration with European clusters, notably through two matchmaking events.

Following the political engagements taken by the European Union and the Western Balkans leaders, the ECCP organised a matchmaking event September 2017 in Thessaloniki, Greece, with the support of the Centre for Research and Technology – Hellas, the Chorus and Corallia clusters and with the support of the local EEN Hellas and from the Balkan Cluster House network. The event gathered around 50 clusters from 17 countries from the EU and the Balkan Med region and over 133 bilateral meetings were held. The success of the event and satisfaction of the participations is paving the way for enhanced cooperation between the European Union and the Western Balkans.

By organising a cluster matchmaking event in Croatia in November 2018, the European Commission reaches out once more to the Western Balkans, to trigger their admission. This event capitalises on the lessons on the Thessaloniki event and must be seen as an opportunity to reinforce cluster policies and cluster development in the Western Balkans

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Competitiveness and Innovation in the Western Balkans
Interview with Jakob Fexer (Project Manager in the OECD South East Europe (SEE) regional programme)

We spoke with Jakob Fexer (Project Manager in the OECD South East Europe (SEE) regional programme) about the recently released OECD flagship publication Competitiveness in South East Europe: A Policy Outlook 2018. Mr Fexer confirmed us that Smart specialisation has an important role to play in the Western Balkans’ further economic development and added that the process is a demanding one but will itself prove fruitful through the extensive public-private dialogue that it entails.

Although Serbia and Montenegro started their smart specialisation journey a few months earlier and are currently more advanced, all Western Balkan governments seem to have recognised the value of the cmart specialisation exercise and are now starting theirs. Along the way, all six economies will face challenges. Their smart specialisation processes will need to be designed in an inclusive, yet efficient manner, and fully articulated with already existing industrial or innovation policies. In addition, in economies with limited funding available for research and innovation activities, the role of international research and innovation partnerships, but also of technology transfer through foreign direct investment will be key.

Overall research and innovation outcomes remain modest in the Western Balkans. Investment in R&D is very low, particularly in the business sector. Scientific outputs and production of high-technology goods and services lag as a consequence. Foreign direct investment rarely targets knowledge-intensive sectors, due to skills gaps, fragmented labour markets and low levels of integration into global knowledge flows and value chains. The situation is aggravated by endemic brain drain. Having said that, SMEs in the Western Balkans do have a strong propensity to innovate, albeit in non-technological ways. There is a dynamic information and communications technology service sector, and medium-high technology automotive and machine tool industries. Furthermore, some of the governments have adopted increasingly holistic innovation strategy frameworks to effectively coordinate and implement sound innovation policy.

These are positive indications in our opinion and make us optimistic for the future.

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