Innovation, regional development and relations between high- and low-tech industries

Abstract

The current European policy agenda strongly accentuates the importance of research and development (R&D) as a driver of economic growth. The basic assumption is that high European wage levels make it unlikely that less research-intensive parts of the economy can withstand competition from low-wage countries with increasingly skilled labour forces. Thus, the inferior growth of the European Union (EU) in the 1990s compared with the USA has been explained by the latter’s higher rate of R&D investments. The paper challenges this rather simplistic view of innovation and examines the regional consequences of such policies. EU growth has caught up with that of the USA during recent years and low-tech industries continue to have considerable economic importance in Europe in terms of jobs and value added, especially outside the main growth regions, but also in the major urban regions. Empirical evidence from Denmark and the UK provided in the paper suggests that low- and high-tech industries are closely interconnected because low-tech firms play important roles both as partners in the innovation processes of high-tech firms and as buyers of high-tech products. Therefore, EU industrial policy is not appropriate because it overlooks the continuing significance of low-tech industries. Furthermore, the rather uniform focus on R&D is associated with a strong emphasis on large city-regions where research-intensive industries are concentrated and, thus, increasing regional inequality in Europe is being produced.