Evaluating the Role of Public Policy in Shaping Innovation Clusters

Abstract

Clusters of innovation (that is, the concentration within a certain geographic region of connected inter-firms, institutions, and resources), are powerful factors of economic growth and development in the knowledge economy. In this paper, we tackle the matter of public policy and its impact on the cultivation, formation, and maintenance of these clusters. In this work, we conduct a cross-country comparative study that examines policy frameworks and innovation ecosystem accelerators like subsidies, tax breaks, infrastructure spending, and protections of intellectual property rights. The research uses a blend of econometric and qualitative methods including case studies for 20 countries over the years 2000 to 2021. The analysis finds that contextually relevant coherent policy frameworks and strategies tend to positively shape the birth and growth patterns of innovation clusters. The most effective were found to be public spending on R&D, education, and collaborative tools. However, the paper also points out gaps in the oversight that results from poorly designed policies and miscoordination. The study proposes several models of best practices and warns of the most common mistakes to be made, which are then used to create guidelines to enhance policy intended for regional development through innovation. The outlined strategies aim to help legislative bodies, development organizations, and industry stakeholders intent on improving regional positioning and the ability to innovate differentiate in their policies.