Exploiting Knowledge: The Importance of Regional Allegiance and Territorial Loyalty in Implementing a Regional Small Business Innovation System

Abstract

In his recent discussion of regional innovation systems (RIS), Philip Cooke outlines the two starkly different interpretations of regional innovation systems. (Regional Innovation Systems, Asymmetric Knowledge and the Legacies of Learning, Draft 2007). He notes in his review, "Clearly, there are two kinds of regional innovation occurring in these examples. The first is geographically proximate, the second is functionally proximate."

On one side of the philosophical divide about interpreting the exploitation of knowledge are economists and politicians who embrace the benefits of an integrated world economy that features an alliance between multinational corporations (MNC) and metro regional governments. In this functional interpretation of regional innovation, the potential new knowledge in a metro regional economy can be organized to feed directly into the multinational corporate global value chains.

Cooke contrasted this "globally competitive" functional perspective, with the second perspective that he called the "market geographical perspective." In this second conception of regional innovation, small firms "co-locate" in a metro region and benefit from "knowledge spill-overs" obtained from inter-industry regional value chain transactions."

This article explores the two interpretations of the regional innovation systems in terms of how they contribute to regional job creation and regional wealth. The article provides advice to regional economic development agencies on the strategy for implementing a regional small business innovation system.

Protecting the regional knowledge from exploitation by the MNCs would require a deliberate strategy for the regional small business innovation system. It would mean that local business and political leaders would adopt the philosophical values of regional allegiance and territorial loyalty to their regional citizens.

Keywords: regional innovation systems, knowledge creation, small business development

JEL Classification: L16, M13, O16, O31, O32, O33, O34, O38, R12, R15, R58