The effectiveness of a NSI or RIS will, however, depend not only on the capability of
its component institutions but also on the extent to which these institutions are
connected through formal or informal networks6. The institutional context for
innovation in any locality will also have both national and regional elements.
Beyond the national or regionally specific characteristics of the NSI/RIS, the level of
innovative activity will also be influenced by what Hassink (1993) calls the ‘ongoing
shift from Fordist mass production to post-Fordist flexible specialisation’ (p. 1009) or
what Best (1991) less prosaically describes as the shift towards the ‘New
Competition’. Both emphasise profound changes in firms’ competitive environment,
dominated by the internationalisation of production activity, rapid technological
change, and shifts in consumer demands. For the individual firm these changes
emphasise the importance of innovation and flexibility as the basis for creating and
sustaining competitive advantage. For regions, changes in the competitive
environment also pose new challenges epitomised by the emergence of new high
growth regions focussing on high-tech development and/or tertiary activity, while
regions whose economies are based on more traditional, structurally-weak sectors
continue to decline7.
Hassink (1993) also suggests, however, that these ongoing changes in production
organisation bring with them the potential for the type of local agglomeration
economies epitomised by the literatures on clusters and industrial districts8. This
potential - it can be argued - creates a new policy opportunity for regions to generate
new business and growth trajectories. By enhancing the learning process in, and
between, companies and other institutions, regional governments or development
authorities can enhance the innovative capability of the region, generating variety or,
in more concrete terms, a broad range of innovative behaviours and innovations
(Metcalfe, 1997). Morgan (1997), for example, arguing from a Welsh perspective,
6 The UK NSI, for example, has been criticised for having strong knowledge generating institutions but
weak mediating and co-ordinating institutions and connectivity (Walker, 1993).
7 Hassink (1993) contrasts, in particular, developments in the Ruhr and Baden-Wurttemberg regions of
Germany, while others have documented the high-tech developments of Silicon Valley (Saxenian,
1996), Cambridge (e.g. Druilhe and Garnsey, 2000), Israel and the Republic of Ireland (Roper and
Frenkel, 2000).
8 Others suggest that globalising pressures are more important as multinational companies internalise
transaction costs and develop competitive advantages based on proprietary technologies (see, for
example, the discussion in Dunning, 1993, pp. 597-617).