News archive - Smart specialisation: How should Western Balkan countries "specialise"?

For many years, researchers have debated what kind of regional economic structure is more beneficial for growth. On the one side, some have argued that specialisation in selected industries is preferable. On the other side, there were those who claimed that a diverse economic structure was more conducive for growth. While the first position suggests targeted policies such as traditional clustering in a few well delineated industries or even traditional industrial policies ("picking winners"), the second position would suggest horizontal policies such as promoting entrepreneurship across the board and in all disciplines. Unfortunately, there is no clear conclusion to draw from this debate because there is supportive empirical evidence for both positions.

The good news is that both positions do not exclude each other. The fundamental question is not whether to pursue a specialisation strategy or a horizontal strategy, but how to combine both. This is precisely what smart specialisation attempts to do, in line with a newer concept of evolutionary economic geoprahy called related variety. In essence, related variety says that growth in regional economies tends to unfold from existing fields of specialisation into diverse but related fields.

In terms of policy, related variety suggests promoting specialisations not in narrowly defined industries but rather promoting specialisation in economic activities or capabilities that are cross-sectoral and that span various industries. This is exactly what smart specialisation does. If, for example, during the entrepreneurial discovery process that eventually leads to the formulation of a national or regional smart specialisation strategy, stakeholders identify existing capabilities (for example, qualified workers or specialised research infrastructures) in a certain knowledge domain, it makes sense to promote this knowledge domain under the framework of the smart specialisation strategy and to look for ways to apply these capabilities in new and diverse economic activities. In this regard, horizontal policy tools such as entrepreneurship support come into play, highlighting the combination of specialisation and diversity. For instance, a business-planning competition targeted to the specialised capabilities identified but covering diverse economic sectors or industries (such as agriculture, manufacturing, tourism, and others) could be part of a smart specialisation action plan.

Considering both specialisation and diversity and developing their smart specialisation strategies in a cross-sectoral perspective by focusing on activities and capabilities instead of economic sectors or industries is an important lesson for Western Balkan countries currently in the process of elaborating their smart specialisation strategies. To take a general example, Western Balkan countries have considerable potential in food industries. The ubiquitous presence of local cheese in the Western Balkan implies a wealth of capabilities in cheese making and related dairy production all across the Western Balkans. Cheese (as other food products) is a product very suitable for promoting cross-sectoral growth and to apply the perspective of related variety. In the first place, cheese is a product emanating from agricultural production but at the same time, there is a cheese manufacturing industry that can potentially evolve into an exporting industry. Further, cheese is a product highly suitable for creating synergies with tourism, particularly in premium segments such as culinary tourism. This small example shows how existing capabilities in producing one product can span various industries in all three macro sectors of the economy (agriculture, manufacturing, and services). Wine is another example relevant for the Western Balkans.

To seize these opportunities when developing smart specialisation strategies, Western Balkan countries could define agriculture and food production as one of several broad fields of specialisation, identify the underlying capabilities and skills present, and promote related variety along these capabilities through tools such as business-planning competitions for innovative business models related to themes such as cheese or wine. Doing so is likely to lead to diverse outcomes and thus to create diverse new economic activities in various industries. At the same time, employing smart specialisation in such a cross-sectoral way provides an opportunity to benefit from the creativity that does exist among young people all across the Western Balkans. While the results of such an approach will take years to crystallize, they could make a positive impact on Western Balkan economies for a long time by creating new economic pathways that could eventually evolve into pockets of competitiveness and excellence.

Geographical focus
  • Western Balkans
Scientifc field / Thematic focus
  • Cross-thematic/Interdisciplinary

Entry created by Maximilian Benner on March 29, 2018
Modified on April 13, 2018