Innovation and Entrepreneurship for Regional Development and Competitiveness

Yenilik ve Girişimcilik Politikaları Birim Başkanı
Head of Innovation and Entrepreneurship Policies Unit

In recent decades, World economy has been home to the changing paradigms and genuine revolution. We have all witnessed production centers moved to comparably less developed locations which later culminates in the shifting economic power and industry profits re-distributed in favor of technology focused areas. Globalization in one hand, knowledge economy has become the main factor for regions and countries to develop further, increase technology development and innovation efforts.

Considering all, regional development takes on a new perspective. According to OECD, the new approach for regional development promises a focus on strengths, rather than weaknesses, of the region mainly creating a positive and accelerated movement towards economic and social welfare. In this brief article, we will start with general definitions, relationship between them, investigate the dynamics and outcomes for economic competitiveness and discuss effective implications for policy makers.

Innovation is the application process of better solutions to existing and predictable problems in economic and societal level. (1) In economic means, ensuring efficient, effective and sustainable ways to manufacture and putting digital economy expansions into practice, innovation drives growth through competitiveness while creating better investment environment and sophisticated job force. Paul Romer, who was awarded the 2018 Nobel Prize for integrating technological innovations into long-run macroeconomic analysis, views the economy as a “huge innovation discovery machine”. His contributions to polemical “Endogenous Economic Theory” simply advocates that the internal factors as knowledge, technology and human capital are the drivers of economic growth. On social wise, innovation serves for social prosperity by diminishing disparities within society such as providing easy access technology for low income communities, convenience products for people with disabilities and most importantly healthcare facilities.

Entrepreneurship is the human quality and characteristic, for reflection of and as an attempt to, embody the innovation process into a product, generally in a newly developed firm. Not only limited to the general idea of startup culture, entrepreneurship can take place within an existing incumbent company or in a social empowerment organization.  

Economic development and social prosperity in the nexus; technology, coming in the form of innovation and entrepreneurship acts as a multi-leg mechanism, one stimulating another. Theoretically, if this mechanism implied systematically in settled industries, the economic development increases competitiveness capacity of the region. In her study, Herman (2018) suggests that the high level of national competitiveness in some EU countries can be mainly explained by a high level of innovation performance, high level of innovative and productive entrepreneurship. If the innovation system is working properly, this virtuous cycle will run and the regional economy will become resilient to economic shocks.

Identifying Innovation Ecosystems for Competitiveness

To answer why not to start the technology-innovation-entrepreneurship mechanism with any industry in any manner, let us simply identify the innovation ecosystem. Companies will thrive for profit maximization and to achieve short term profits they may attempt to lose focus on innovation in the first place. (2) Thus, innovation ecosystems need to be developed or encouraged by policy makers.

Innovation ecosystem is the synergy of resources, capabilities and exists with the collaboration of interconnected actors – as entrepreneurs, firms, universities, investors and other financial funding mechanisms, regulatory organizations – to create ongoing innovation and knowledge development. These actors are independent but integrated in the value chain. (Dosso M., Hervás F and Vezzani A, 2015)

Functional approaches emerging in small Eastern countries can be an example to show what building an innovation ecosystem takes.  Korea has been an example for many countries with its accelerated development from 1990’s. Korean National Innovation System, has been widely known with in-every-aspect interaction perspective for technology and innovation. According to Kim, Bae, and Byun (2020) In Korea, innovation system tend to grow through interactions at three levels: as first firms and knowledge institutions; second, different markets; and third, between market and nonmarket mechanisms. Secondly, referring to Taiwan as a region that ranks 12th where Korea ranks 12th in Global Competition Report; Ta-Kai Yang and Min-Ren Yan (2019) suggest the strategic orientation approaches in Taiwan for the technology-driven competitive industries, which will require a functional and sector-based ecosystem. In the following figure R1 represents the path of technological innovation, where R2 represents new business and market opportunities and R3 represents the feedback path of business development. As can be seen in the following figure, a well-developed innovation system requires functions to feed each other for further developments.

Figure 1: “Strategic Orientation for Technology-driven Business Innovation Ecosystems”. Source: Yang, T.-K.; Yan, M.-R. Exploring the Enablers of Strategic Orientation for Technology-Driven Business Innovation Ecosystems. Sustainability 2019, 11, 5779

Both of these examples show the end-to-end course of action between public and private sector, how they link each other and where an intervention to the system diffuse all over the value chain in a given industry, requiring effort and systematic methods for policy makers.

Considering developmental perspective, these functional concepts are impactful if only the resources are well managed. Therefore, regional policies tend to focus thematic approaches to achieve the best outcome of resources and economies of scale. Policy makers gathering the insights from the industries in a limited territory are able to flourish bottom-to-top strategies. Smart specialization strategies (S3), are effectively operationalized in Europe through regional research and innovation strategies are built on the economic strength, accumulated and collective intelligence, and distinctive assets to identify and enhance competitive advantage of a particular region. (Foray, 2016) S3 methodology starting with a data analysis followed by field validations with a wider range of stakeholders capturing all the innovation ecosystem actors help policy makers foster innovation and adapt powerful innovation ecosystems which directly embosom technology development, entrepreneurial activities and innovation outcomes.

Flourishing Thematic Entrepreneurship for Economic Acceleration

Knowledge emerges as the source of comparative advantage for places. Also, technologies create path dependency where they are used and developed, geographically academic and industrial spill overs ease the innovation process and creates economic shifts. Hence, building thematic entrepreneurship ecosystems will ameliorate professional and academic knowledge development in the particular region. Due to the regional path effects, this accumulation can be expected to rise exponentially.

Entrepreneurs commercialize the spillover of knowledge development as technology through innovative activities, in a newly founded firm where they do not tackle with bureaucracy. According to Audretsch, D. B. (2018) since knowledge spillovers are spatially localized, regional development policies can be evolved, providing different instruments to drive economic growth.

Regional policy makers also have the chance and flexibility to act accordingly to fast changing technologies. Realizing and responding to the entrepreneurs will bring an efficient economic value.

Final Words and Conclusions: İzmir Perspective

While facing sustainability challenges and being a port city, İzmir need enhancement of blue and green growth for innovation and entrepreneurship policies considering regional priorities. In these are, commercialization process is slow and hard to back up. Therefore, Deep-technology commercialization activities are recommended to target over-prototype TRL levels where national innovation system supports are widely available to develop startup products upto that point. Additionally, a startup platform within these themes, “Start in İzmir”, will take place in 2021 to increase awareness and create a community of sustainable startups.

Izmir is a pioneer for developing R&D and innovation strategies, followed by ongoing monitoring annually. Izmir Smart Specialization Strategy is in progress to identify the competitive advantage promising sectors while providing concrete and open data to public.

Innovation and entrepreneurship are the direct channels of ever evolving technology to economy and society. This channeling is important to emphasize for policy makers. Thus, these subjects merit to prioritize politically with evolving the strategies by social and economic conjuncture.


  •  Joseph Alois Schumpeter, also known as the “Father of Innovation” is the pioneer to define innovation and investigate the relationship between entrepreneurship and innovation. We highly recommend to  visit Schumpeter Organization and Creative Distruption. Definitions in this article is accumulation of knowledge and not referenced. Economic perspective to innovation and technology will be discussed in further writings.
  • Abernathy (1978) discusses this concept as “the production dilemma” where automobile industry faces a trade-off between short term profits and innovation. William Abernathy, Philip W. Anderson, Clayton Christensen, Michael L. Tushman, David Teece, James M. Utterback have pioneer studies and are recommended as further readings for market dynamics technology, innovation and market positioning.
  • Audretsch, D. B. (2018). Entrepreneurship, economic growth, and geography. Oxford Review of Economic Policy, 34(4), 637–651. doi:10.1093/oxrep/gry011
  • Dosso M., Hervás F and Vezzani A, (2015). Leading R&D Investors for the Dynamics of Innovation Ecosystems, EU Science HUB
  • Foray, D (2016). On the policy space of smart specialization strategies, European Planning Studies, 24:8, 1428-1437, DOI: 10.1080/09654313.2016.1176126
  • Herman, Emilia. (2018). Innovation and entrepreneurship for competitiveness in the EU: an empirical analysis. Proceedings of the International Conference on Business Excellence. 12. 425-435. 10.2478/picbe-2018-0038.
  • Kim, E.S.; Bae, K.J.; Byun, J., (2020). The History and Evolution: A Big Data Analysis of the National Innovation Systems in South Korea. Sustainability 2020, 12, 1266
  • Marketplace Tech, Why Nobel Prize winner Paul Romer sees the economy as a “huge innovation discovery machine”
  • OECD (2017). Entrepreneurship at a Glance 2017, OECD Publishing, Paris,
  • Uyarra, E., Flanagan, K., Magro, E., Wilson, J. R., & Sotarauta, M. (2017). Understanding regional innovation policy dynamics: Actors, agency and learning. Environment and Planning C: Politics and Space, 35(4), 559–568. doi:10.1177/2399654417705914 
  • World Economic Forum, Global Competitiveness Index, 2019.
  • Yang, T.K., Yan, M.R. (2019). Exploring the Enablers of Strategic Orientation for Technology-Driven Business Innovation Ecosystems. Sustainability 2019, 11, 5779.