Definitions of a ‘regional innovation system' and ‘regional innovation strategy' are many and varied and often,
the terms ‘innovation strategy', ‘innovation system' and ‘knowledge economy' are used interchangeably.
The following definition, which draws on the international literature, perhaps best describes the essence of a
regional innovation system:
To foster a culture and environment which encourages a region to establish, develop and use its
knowledge, skills and capacity to innovate and prosper.
This is consistent with the concept of a ‘knowledge economy'. According to the Organisation for Economic
Cooperation and Development (OECD), a ‘knowledge economy' is one
"which is directly based on the production, distribution and use of knowledge and information"
This and other definitions of a ‘knowledge economy' share the insight that ‘knowledge' is not a separate sector
of the economy but instead, is embedded in all industries. As Professor Michael Porter, the originator of the
‘economic cluster' term has been quoted as saying, "there are no low tech industries, only low tech firms".
This reiterates the notion that all industry sectors can potentially engage with and become integral to a
Nevertheless, some industries have stronger ‘knowledge' traits than others. The Queensland Government, for
example, defines knowledge-based industries by the Australia and New Zealand Standard Industrial
Classification (ANZSIC) by utilising the OECD's Science, Technology and Industry Scoreboard. In this framework
"knowledge based industries are those that are relatively intensive in their inputs of technology
and human capital. Chief among these industries are aerospace, chemicals/biotechnology, ICT
equipment and services, and consumer electronics. In addition, there are a number of knowledge
intensive sectors in the services/tertiary sector of economies"
(Queensland Government, 2005).
The original knowledge-based industry listing sourced from the Queensland Government has been expanded
by SGS Economics and Planning to incorporate the growing services sector (especially business, health and
education services), key resource and agricultural sub-sectors (such as technical and specialist services to
mining and agriculture), additional ‘advanced manufacturing' sectors like machinery and equipment
manufacturing and the creative industries (like film, entertainment software, music and design). This broadens
the research and technology emphasis of industries that are considered to be ‘knowledge-based'.
The list of knowledge-based industries (by 4-digit ANZSIC classification) is extensive (over 85 individual industry
classifications in all). Therefore, in order to profile a region's knowledge-based industries, SGS grouped the
4-digit ANZSIC classifications into five broad segments based on logical groupings of related industry sectors.
The five knowledge - based industry segments, which can typically be used to profile the knowledge - based
industry propensity of any region, are:
1. Advanced Manufacturing;
2. Scientific & Technical Services to Agriculture and Mining;
3. Advanced Business Services;
4. Advanced Health & Education Services; and
5. Cultural & Recreational Services.
Characteristics of a Regional Innovation System
So what is it that differentiates a regional innovation system / knowledge economy from resource and
production-based economies? And what sorts of attributes should regions be nurturing and promoting in order
to facilitate the growth and development of their innovation systems? Using the definitions referred to above,
it is considered that there are a number of key traits that are indicative of a knowledge economy, as
articulated in Figure 1:
Figure 1. Knowledge Economy Attributes
Identifying and defining regional innovation systems and the types of industries that can play a crucial role in
advancing the innovation system is one matter, but what is equally important, from a policy and planning
perspective, is to understand how the characteristics of a regional innovation system can be nurtured and
For any region to further its innovation framework, a number of challenges need to be met. Broadly speaking,
these challenges include the need to:
* Co-ordinate innovation and knowledge economy growth initiatives - that is, the region's ‘agents of change'
in government and in industry need to agree on and coordinate priorities for the benefit of the region.
* Build momentum across all industries by capitalising on the region's existing competitive industry strengths
* Close the gaps in the innovation framework by providing the necessary infrastructure and support to
effectively facilitate innovation in industry, in government, in institutions and in the wider community.
Figure 2. The Regional Innovation System Challenge
In responding to the challenges for growing the regional innovation system, experience from Australia and
overseas has identified two key elements of success:
* Institutional leadership; and
* Regional industry cluster development.
With respect to institutional leadership, local governments and regional development agencies play a formative
role in establishing ‘collaborative' structures to facilitate innovation and economic development. Given such
arrangements, universities and other research institutions can optimise their contributions to developing a
regional innovation framework by building a critical mass in a limited number of strategic research areas and
across a carefully selected range of teaching disciplines, and ensuring that these activities are well
connected to members of relevant industry value chains. Best practice literature centres on the integral role
of universities in regional leadership and regional engagement, as well as on university contributions to
knowledge generation and research commercialisation processes.
With respect to regional industry cluster development, planning and facilitation must take a flexible approach,
recognising that each region and each industry grouping has different cultures, expectations and potential
leadership structures. This highlights the importance of regional engagement, with industry as the driver of
innovation. It also highlights local government's important role as a lead facilitator and co-ordinator, to
communicate regional principles and priorities to State and Federal governments as well as to prospective
industry and institutional investors from outside the region.
Figure 3. The Facets of Institutional Leadership and Cluster Development Supporting Regional Innovation
In order to successfully engage the State and Federal governments in supporting a region's transition to a
knowledge economy and to attract the desired mix of private sector investment in the region, regional
leaders, including local government, research and learning institutions and peak industry bodies, must
collectively and carefully mobilise to establish and present a shared vision to be an exemplar region of innovation.
Advanced Research Technologies, (2005), The Innovation-Entrepreneurship NEXUS: A National Assessment of
Entrepreneurship and Regional Economic Growth and Development, Powell, OH, April, p.5
Easterly, W. & Levine, E. (2001), What have we learnt from a decade of empirical research on growth? It's
Not Factor Accumulation: Stylized Facts and Growth Models, World Bank Economic Review, Vol. 15, No. 1
OECD (2002), The Knowledge-Based Economy, In Science, Technology, and Industry Outlook, Paris
Porter, M.E. (1996) Competitive Advantage, Agglomeration Economies and Regional Policy, in International
Regional Science, 19 (1 & 2) pp. 85-94
Queensland Government Department of State Development and Innovation (2005), Knowledge-Based Industries,
Internal Working Paper, Brisbane
State Science and Technology Institute, (2006), A Resource Guide for Technology-based Economic Development,
viewed 18th October 2007,
World Bank (1998), World Development Report: Knowledge for Development, Washington DC