Challenges for Rural Areas

Developing rural innovation and business systems involves several challenges. Unlike metropolitan areas, firms and other actors operating in sparsely populated areas are for example expected to cope and successfully manage the liability of being distant to larger markets, partners in the same line of industry and specialised knowledge centres, deficiencies in the infrastructure (transport, ICT communications etc), and (often) lack of younger and well-educated staff and entrepreneurial talent. Some researchers here talk about a lack of critical mass, which emanates from physics and natural science and the analogy that “explosions”, change and a dynamic development trajectory requires a certain amount of variables to be in place.

Despite these gloomy characteristics, more peripheral locations however also offer qualities that may serve as a base for developing specific knowledge and competitive advantage. Entrepreneurs may be sparse but they are normally very visible and multi-skilled. Recruiting employees may not be trivial, but is compensated by a significantly lower staff turnover and lower costs for introducing and training people into work assignments. Existing local networks may be thin but are normally solid and built on mutual trust between partners on a long-term basis. The living conditions may involve distance to large shopping malls but offer a quality of life that most metropolitan areas can’t compete with. Distance to customers, partners and specialised knowledge centres may be significant but have often generated specific knowledge and skills in overcoming spatial disadvantages by using modern information and communication technology (ICT). Even “disadvantages” such as a long, dark and cold winter (which we certainly enjoy in Northern Scandinavia) may be used as a base for developing innovations and businesses which more central regions can’t offer – the example of Ice Hotel in Jukkasjärvi (northernmost Sweden) or the advanced car testing that the world’s industry have invested billions in are only two obvious examples.

To me we often seem to forget or underplay “the other (more positive side) of the coin”, namely that a location outside our metropolitan areas also involve potential and factual benefits for developing innovations and businesses. To a significant degree, I as a researcher must admit, the research sector producing sexy research reports on phenomena like Silicon Valley (Bay area USA), Route 128 (Boston area USA), or the needs of “the creative class” expected to form tomorrow’s societies should be blamed. There is however also hope that research and development to a larger degree will address the challenges, strategies and methods relevant for also more sparsely populated regions. The RIBS project connecting development agencies and research expertise in rural areas in Scotland, Ireland, Iceland, Finland and Sweden is only one example.

One example on research that in my mind needs further attention is our mental model for developing entrepreneurial innovation systems. In Sweden innovation system development is handled by the Swedish Governmental Agency for Innovation Systems VINNOVA; an agency that invests significantly in the development of innovation systems on a long-term basis. In order to receive support from this national agency, candidates need to fill a long list of formal requirements and produce a long-term plan that in a comprehensive and convincing way outlines the route for developing world-class innovation systems. These requirements come very close to what Phil Cooke and Loet Leydesdorff in 2004 have labelled as “Institutional Regional Innovation Systems (IRIS)”. They however also identified another variant of regional innovation systems which they named “Entrepreneurial Regional Innovation Systems (ERIS)”, with very different characteristics for developing innovations and businesses. While IRIS-based systems are characterised by long-term planning, collaborations between institutional actors, a mechanistic organisational structure and (normally) engineering based knowledge, ERIS-based collaborative constellations were seen as typical for “the new economy” operated and managed by individuals rather than by institutions, and where demanding pioneering customers rather than technology push factors serve as the main driving force. This also implicates that ERIS-based systems are more action-oriented and based on experimental learning, operate on a step-by-step basis rather than ruled by “a 5/10-year plan” and where collaborative configurations may shift depending on the actual need during different development phases. While management skills and institutional capital are the critical resources in IRIS-based systems, it is access to entrepreneurial skills and different kinds of non-institutional capital (e.g. from business angels) that are critical in ERIS-based systems.[1]

While IRIS-based innovation systems are clearly dominating and heavily supported by governmental funding in Europe, we tend to disregard and under-utilise the development potential inherent in ERIS-based innovation systems. There are good reasons to believe that IRIS-based systems with its specific characteristics fit the development conditions prevailing in metropolitan areas better than they correspond to the development conditions and traditions prevailing in more peripheral regions. Having stated this I have also defined a main challenge for policy-makers in Europe: How long can we disregard from capitalising also on the development potential represented by more entrepreneurial regional innovation systems?

Håkan Ylinenpää

Professor of Entrepreneurship & Innovation

Luleå University of Technology, Sweden


[1] For an elaboration on this theme, see my chapter four in the anthology edited 2008 by Bengt Johannisson and Åsa Lindholm Dahlstrand entitled “Bridging the Functional and Territorial Views on Regional Entrepreneurship and Development”; Swedish Foundation for Small Business Research.