Regional Innovation system and Region in Sweden

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1 Regional Innovation system and Region in Sweden Yo Tsuchida Abstract This paper argues, through the case of packaging and printing industry in Värmland, Regional Innovation system (RIS) and the part of regional government to make RIS function. Basic reason of the fact Värmland, while locates in periphery, has accumulation of packaging and printing industry, the industry value added and market oriented, is that the industry there realizes innovation responding to rapid change of raw material and needs of market through intimate exchange of information with user in distant area made possible by development of information technology. Uniqueness of the industry is that, while each company has its own connection with national and global wide actors through each type of network, on the whole RIS functions with mutual trust among companies and social and cultural environment in Värmland for background. To make RIS function Region Värmland (RV) plays important part through encouraging network organization among companies and bridging cooperation between Karlstad University and the industry and so on. The reason made it possible is that RV plays its part as pivot of network formation through coordinating both horizontally interests and policies among communes and social and economic organizations, and vertically between policies by central government agencies including policy for infrastructure and education and policy in Värmland. Case of Värmland as such seems suggestive to think about RIS and the part of region government on the points as follows. First it indicates the possibility of that the type of innovation which responds to the need of user through synthesizing and applying existing technology become base of competitiveness and that, as a result of development of information technology, industry locates peripheral area realizes such kind of innovation. Second it shows importance of RIS with university/research institution and network of companies for its core and connection with national and global actors. Third it shows that it’s possible for regional government, in the situation local industry strengthens direct connection with global economic actors following to economic globalization, to pursue its part to make RIS function through, given diversity of areas within the region, region wide coordination. [Content] Introduction Regional government and Innovation in Global age

Transcript of Regional Innovation system and Region in Sweden

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Regional Innovation system and Region in Sweden

Yo Tsuchida

Abstract

This paper argues, through the case of packaging and printing industry in Värmland, Regional

Innovation system (RIS) and the part of regional government to make RIS function. Basic

reason of the fact Värmland, while locates in periphery, has accumulation of packaging and

printing industry, the industry value added and market oriented, is that the industry there

realizes innovation responding to rapid change of raw material and needs of market through

intimate exchange of information with user in distant area made possible by development of

information technology. Uniqueness of the industry is that, while each company has its own

connection with national and global wide actors through each type of network, on the whole

RIS functions with mutual trust among companies and social and cultural environment in

Värmland for background.

To make RIS function Region Värmland (RV) plays important part through encouraging

network organization among companies and bridging cooperation between Karlstad University

and the industry and so on. The reason made it possible is that RV plays its part as pivot of

network formation through coordinating both horizontally interests and policies among

communes and social and economic organizations, and vertically between policies by central

government agencies including policy for infrastructure and education and policy in Värmland.

Case of Värmland as such seems suggestive to think about RIS and the part of region

government on the points as follows.

First it indicates the possibility of that the type of innovation which responds to the need of

user through synthesizing and applying existing technology become base of competitiveness

and that, as a result of development of information technology, industry locates peripheral area

realizes such kind of innovation.

Second it shows importance of RIS with university/research institution and network of

companies for its core and connection with national and global actors.

Third it shows that it’s possible for regional government, in the situation local industry

strengthens direct connection with global economic actors following to economic globalization,

to pursue its part to make RIS function through, given diversity of areas within the region,

region wide coordination.

[Content]

Introduction Regional government and Innovation in Global age

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Section1. Regional Innovation System and regional government

Section2. Development of policy relates to Innovation and region

Section3. RIS and RUP in Värmland

Section4. Regional innovation system and region government

Introduction Regional government and Innovation in Global age

In Sweden today region has become one of focus points to strengthen economic

competitiveness and it’s been under examination nationwide formalization of regional

government and redistribution of authority of central government. Starting point to consider the

part played by regional government and local economic policy to be pursued is the fact that

economic globalization has brought about the situation each local area faces directly or

integrated into global wide economic activity. Each company constitutes part of global wide

business relation and network on one hand, and strengthening competitiveness through utilizing

network and research institution etc. in the area locates on the other hand. In such situation it’s

become necessary for local policy to prepare and consolidate local economic base to keep its

position in global economy.

This paper argues the role of regional government in Sweden focusing on its relation with the

system to promote innovation of regional industry (hereafter RIS: Regional Innovation System)

aiming to make it clear the part of regional government under economic globalization from

functional side. Structure of each section is as follows. Section one examines arguments on RIS

keeping in mind relation with the part of regional government. Section two outlines state of

change of policy in Sweden under economic globalization paying attention to innovation policy

and region. Section three argues, focused on Värmland, restructuring of regional economy under

economic globalization, function of RIS and the part of Region Värmland. Section four

summarizes the part of RIS and regional government.

Section2. Regional Innovation System and regional government

It’s been stressed in EU countries including Sweden to promote innovation of economic

activity on the whole premising “Transition toward knowledge economy” as focus point to

strengthen competitiveness. What’s influenced on such policy from theoretic side (Landabasoet

al., 1999) is the argument puts importance on the part of national system which promotes

innovation (hereafter ‘innovation system’). That innovation system has been stressed as policy

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by government dates back to 19th century in Germany when F. List has argued intending to raise

the quality of economic activity on the whole to catch up industry in UK. Theoretic argument on

innovation system today has been proposed confronting to the policy which intends to realize

competitiveness through lowering wage level (Lundvall, 2007).

Starting point of the argument, stresses the part of government to strengthen competitiveness

in knowledge economy, is to put importance on learning as a process to acquire knowledge

presuming that in contemporary economy, under rapid progress of technique, what’s most

important resource is knowledge (Lundvall, 2010a). What’s important, relating to regional

government, on the argument of innovation system, and regional innovation system as a part of

it, is as follows.

First it understands innovation not only as development of cutting edge new product but as

improvement of economic activity on the whole. Innovation can be classified as a direct result

of cutting edge research and also as a result of synthesis and application of existing knowledge

and technique. The system which supports innovation includes not only research institutions

with special competence but also educational institution including one for reeducation of

workers to raise competence to adapt new technology and social infrastructure including one to

support labor market policy etc. Moreover deemed important equally is to acquire

knowledge/information through network on the ground that, under the situation each company

specializes in each special area, information exchange through networking among companies

and users becomes indispensable to realize innovation avoiding risk follows inevitably to new

development (Lundvall, 2010b). Arguments of innovation system as such have sifted focus

point of innovation from R&D to learning process and of industrial policy from science and

technology policy to innovation policy (Lundvall, 2007., Som, 2012).

Second is the point of argument to understand that region becomes one of focus points of

economic activity as important side-effect of economic globalization (Isaksen, 2001). What’s

necessary to pay attention is that economic globalization effects through various routes to

dynamics of regional economy. Economic globalization and rapid progress of information

technology, while damage existing suppliers, provide new market to companies in dynamic

region through accelerating worldwide procurement based on low cost and comparative

advantage and also through dismantling fixed business relation. The situation in which emerges

as a result, for example, small company in peripheral area acquires market abroad and becomes

base of production of specialized parts in national and global wide value chain. In such trend

regional atmosphere which nurture innovative company becomes focus point and innovative

cluster formed there raises its position as connecting point in globalized production network.

Third is arguments which put importance on RIS. Characteristics of the arguments is to put

importance on institution and policy, based on region including institutions for research and

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development and vocational training, in other word on intervention by policy to accelerate

cooperation and promote capacity to innovate as well as acquisition of knowledge through

learning and competence development (Asheim, 2011). What’s important for company and

local industry to be innovative and competitive is ability of people, organizations, network and

local society to learn which makes it possible to adapt to introduction of new technique and

rapid change of needs of market. Those will realize competitiveness by absorbing high

technology and information through worldwide network made possible by development of

information technology. In such meaning “cooperation” has strategic part in knowledge

economy. What’s become necessary is competence development of employees, information

exchange and acquisition of knowledge through network among companies as well as

cooperation between industry and institution for research and development and these will

become effective by existence of social capital, stable manager-employee relation and

cooperation between government and private sector (Asheim, 2011).

Fourth is the argument on structure of RIS as the point indispensable to establish RIS through

policy of government. There is argument which considers structure of innovation system paying

attention both to core part of the system as research institution, institution for competence

development and network of companies, and to kind of environment of the system as institution

for education, labor market policy, financial market and welfare (Lundvall, 2007). And also

there is argument pays attention to function, to accelerate innovation, and to autonomous

sub-systems, which generate such function, as accumulation of companies, institutions for

research and education, intermediary institutions to coordinate both of them and infrastructure

surrounding the area (Koschatzky, 2012).

It can be said, through these arguments, that characteristic of RIS, when paid attention to

functional side, resides on functional synthesis of various factors, as research and education

institution and network of companies, to acquire knowledge and information and to utilize it

taking advantage of unique condition of each region. Keeping mind arguments above, we pay

attention to arguments on RIS following.

First is the argument that the core of economic competitiveness is competence development of

economic actors including working people, and also the fact that the argument has developed as

kind of counterproposal to the pressure to cut wage aiming to be competitive.

Second is its emphasis on institution and policy of government including establishment of

institutions for research and education in which cooperation between government and private

sector is deemed indispensable.

Third is that it puts importance on social and cultural conditions and social capital inherent in

each region as background factor for learning and development of competence as well as on to

combine regional technique with knowledge and information acquired through specialized

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institution and global network.

The argument of RIS, while criticized in part, as being analytic point rather than theoretic

method to plan because of its vagueness of definition, influenced on EU policy. Purpose of this

paper is to argue, assuming RIS as methodological point of view, the policy to accelerate

innovation of regional industry and the role of regional government rather than to pursue

detailed study on RIS. It’s necessary to keep in mind followings to consider RIS in connection

with the role of local government including regional one.

First is that the role of local government is not only support local industry. What’s necessary

for local government to pursue is to position innovation policy as a part of comprehensive

strategy for development of the area. At the same time, in the situation acquisition of knowledge

and competence development become keyword for innovation, policy and projects relate to

cultural environment and social relation, formed historic in the local society, are also important

for innovation policy.

Second is mutual relation between regional government and tiers of governments including

national one. What necessary for regional government based on regional area with various types

of industries is, in the situation regional economy connects directly with EU and global wide

economic activity, to make RIS function both vertical coordination among multi-level

governments from central government to commune and through horizontal coordination among

communes each with unique industry and advantage.

In the following this paper examines the role of regional government on formation and

function of RIS keeping in mind the process of reformation of Swedish policy followed to

globalization and EU-nisation of Swedish economy.

Section2. Development of policy relates to Innovation and region

1. Swedish policy and innovation

This paper understands the situation in which region has gained attention in Sweden as a part

of the process of reorganization of national economic system led by central government

following to economic globalization. What’s suggestive here is the argument on national

economic system to understand it “as intermediate system” which mediates regional economy

with global one under de-unification of national economy following to globalization (Samuta,

2013). This paper understands national economic system as national economic and industrial

structure framed by institutional and political factor of the nation.

In Sweden after Second World War taken central place of welfare state strategy has been the

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policy to secure employment through strengthening competitiveness of growing industry and

keeping market abroad, and so called positive labor market policy, which has made it possible

for employees in industrial section losing competitiveness to have job in growing section

through reeducation, has deemed important. In other word innovation and competence building

of labors had been put on basic point in welfare state policy at the time. In the system, known

also as cooperative system on central level among government, labor and capital, regional

government with general authority had been in real meaning not existence and the authority on

policy on industry and infrastructure had concentrated on central government.

This system has been forced to reexamine under economic globalization, outflow of capital

and affiliation in EU. Background factor of change is globalization of regional economy in

parallel with dis-functioning of policy of government to control economy through financial and

exchange policy. In the situation, regional industry is exposed to imported goods from low wage

countries and strengthens its character as a part of EU wide economic area, and the reform

intends to strengthen competitiveness of region through innovation is ongoing (Tsuchida, 2011).

In this situation it can be said that national economic system of welfare state type in Sweden is

now strengthening its character as “intermediate system” under the situation regional economy

is strengthening its connectivity with global economy.

Innovation strategy in Sweden can be understood with the strategy of EU, originated with Aho

report (European Communities, 2006) and resulted to EU2020, for background. Characteristic

of EU innovation strategy is it aims to execute policies EU wide as to utilize result of cutting

edge research in important industrial sector including bio and to raise mobility of capital and

labor responding to rapidly changing economy as well as to extend investment for R&D to keep

competitiveness in knowledge economy. Characteristic of innovation strategy in Sweden is it

understands that various factors as social capital and education etc. as well as competence

development and information exchange will play important part to promote innovation

assuming innovation as making a new departure in every section of economic activity

(Näringsdepartmentet, 2012). So far been executed in Sweden policies to promote innovation

including increase of investment for R&D, strengthening of cooperation between industry and

research institute, competence development of labor to make it possible to rightly respond to

ever changing technology, development of entrepreneurship through each level of school and

establishment of agency of government (VINOVA) with its mission to promote innovation

which has also executed support for cluster formation (Eklund, 2007). Concerning the policies

as such we can point characteristics bellow. First, under the presumption of moving out of

company and deindustrialization of Swedish economy, stressed cooperation between university

and industry to raise competitiveness through promoting innovation. Second in those policies

the system for vocational education and competence development has been built-in as

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indispensable factor for industrial policy rather than as a part of social security policy. Third is

that region has become focus point of competition strategy. We will see below outline of change

of some areas of policy.

1) University policy

One of uniqueness’s of R&D policy in Sweden is that almost of it is done by university. To

strengthen cooperation between industry and research centered by university, in addition to the

policy to establish university in each area enacted since 1970th, formalized cooperation between

university and regional industry and society in general. Characteristics of the cooperation are as

follows.

First is that it’s been stressed responsibility of university to cooperate with regional industry

and society, and cooperation with local society has even been institutionalized by amendment of

law 1997 1) as the third mission after education and research.

Second is support system for commercialization of result of research and for entrepreneur.

Holding companies have been established in main universities which executed financing for

researchers to start up, and universities have made preparation to respond to commissioned

research from company.

Third is management of university. It’s been institutionalized that board of university consists

of representative of local government, local industry and student, and the board will manage

university in cooperation with rector appointed by minister of education after recommendation

of the board.

2) Vocational education

In Sweden it’s been deemed important, in parallel with to raise the ratio of students to go on to

high education, to respond to the problems including mismatching of employment as lack of

competent worker under high rate of unemployment caused by moving out of companies, and

it’s been estimated to face serious shortage of worker in near future after retirement of after war

generation. With these factors for background executed policy bellow.

First is competence development of labor and nurturing of skilled labor. Yrkeshögskolan has

been institutionalized (2008) through merging education for competence development formerly

executed by company with one executed as a part of education in university, and the institution

to certificate competence of labor officially to raise competence and also mobility of labor is

now in preparation as a part of EU wide policy.

Second is to put importance on vocational education in school. Along with that nurturing of

entrepreneurship has been made as one of educational targets, reformation of gymnasium to

establish vocational education course and kind of institutionalization of Teknikcollege, which

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certificates graduate student of vocational course in addition to formal education of gymnasium,

have been executed.

Third is project for cooperation between industry and education policy in region. The project

Competence Platform by regional government, aims to promote cooperation responding to

regional condition, has been institutionalized to coordinate on one hand demand of company for

workforce and content of skill, and on the other hand the plan of educational institutions

responsible to the demand of labor and student to the content of education.

3) Policy in regional area

Coordination among policies with region as unit has been executed as bellow.

First is to improve transportation infrastructure with region as unit. Swedish transportation

infrastructure plan (2010-2021) 2) has made as its main purpose, presuming region centered by

big city as a base of European wide economic activity, to realize effective transportation system

within region and to strengthen connection of region with main cities in Europe. In parallel, for

region and cooperative organ it’s been given the authority to plan transportation infrastructure in

the region which will be executed by central government. The authority plays important part for

region to raise centripetal power among communes in the region.

Second is commencement of examination to reorganize agencies of central government with

region as unit. It’s been problematized that there are more than 300 agencies each with own

local geographic area. In the proposal of consultative committee 3) it’s been recommended to

make seven regions on the whole Sweden, to reorganize area of local unit of each agency based

on the regional area, to make region as nationwide institution and to give authority to the region

to coordinate among policies of central government agencies.

4) Region and regional government

While local government in Sweden consists of commune as primary government and landsting

as regional government, landsting is equal footing with commune on law and in reality

specialized only on medical care and transportation, and the authority to coordinate policies of

central agencies has been executed by governor put each län as jurisdiction of central

government on regional area. However the authority of governor has not been strong enough to

bind policies of central agencies. As a result of that, it’s been deemed necessary to solve

problem associated with the lack of middle level government, and to make mechanism to

coordinate among policies of agencies, with basic strategy made on regional level, executed

reformation as below.

First region and “cooperative organ”, kind of alliance among communes and landsting, have

been institutionalized and it’s become possible for each area to choose one of them. For region

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and cooperative organ devolved authority, other than one inherited to region from landsting, to

plan transportation infrastructure and make RUP (Regional Utvekling Proglam) 4) and some

other one. Because region and cooperative organ have almost same authority we call both of

them as region and regional government.

Second it’s been made as the important part of region that it makes RUP in cooperation with

communes, business society and organizations related including civil society. For RUP as basic

strategy of the region, assumed to coordinate and synthesis policies of central government

agencies and it’s been made as important part of region to coordinate among policies of

communes and central agencies through drafting RUP.

2. Trend of Swedish policy and Regional innovation system

This paper understand trend of policy above as process of change from welfare-state type

national economic system. Basic background factors are as follows. First, under the advance of

globalization and influence of EU on Swedish economy, each area has strengthened direct

economic connection with EU cities. Second following to dysfunction of economic policy of

central government, for example exchange policy, focus point of competition policy has shifted

to region. Third Swedish governance system has intensified its character, following to affiliation

to EU, as one by multi-level governments from EU and central government to commune

(Tsuchida, 2011). On the other side in the real world it’s become clear problems following.

First that the strategy to focus on region has, after gaining power of alliance government

(2006) led by moderate party negative to establish region, become somewhat vague as strategic

direction. As for example it’s been stressed in university policy to specialize for each university

in the field of study skilful and neglected in reality the policy to cooperate with regional

industry. As a result while local university, having funded by local government and local

industry, deepens cooperation with them, many of famous universities advance specialized

research having funded through cooperation with big company and have no interest to cooperate

with local one 5) .

Second content of RUP, should be basic strategy for regional government to coordinate

policies of sectors, in reality not necessarily has substance possible to say as comprehensive

strategy. According to evaluation of RUPs by Tillväxtverket, government agency, most of RUPs

are either only making abstract target or focusing only on supporting some important industrial

sector and difficult to say as comprehensive development strategy economically as well as

socially (Tillväxtverket, 2011) in part reflecting difficulty to synthesize confronting interests

among communes within the region 6).

Third that it’s difficult for central agencies to plan and propose comprehensive development

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plan focused on region. There is no system among central agencies to coordinate among policies

focused on region, for ex. it’s been said in ministry of industry that it’s difficult to coordinate

with ministry responsible to university to give shape to regional system for cooperation between

university and local industry 7). Difficulty to coordinate among central agencies also shown as

for example in the report summarized the discussion on how to support Competence Platform

project by regional government above mentioned. What’s been said in report, as difficulty for

central agencies, relate to the project, to cooperate to support, is that in the situation, in which

for example certification and funding on Yrkeshögskolan is made by agency responsible based

on estimation of employment of each region, and management of gymnasium, on which

Skolverket is responsible, is under responsibility of commune, there is quite rare the space for

central agencies to execute policy based on uniqueness of each region 8). The difficulty in part

reflects that projects of central agencies are executed based on objectified standard based on

statistical data and with transparency. In Swedish system responsibility to coordinate policies of

central agencies so far has been authority of governor appointed by central government. Under

the situation, in which considered to devolve the authority to coordinate among policies of

central agencies to region, position of region has become important.

It can be said political system in Sweden is under the change with region as unit and it’s

necessary, to make direction clear, to examine bellow. First, under the growing situation local

industry is put under control of global company, to make it clear possibility and strategy for

each region, including one in peripheral area, to keep its own position and advantage utilizing

its unique condition. Second is to make clear strategic direction to establish RIS (Regional

Innovation System) including the part of university and research institution, network of

companies and institution for vocational education etc. Third is to make clear the part of

regional government as coordinator to establish RIS and to make it function as a part of

comprehensive strategy to develop the region. We will examine these based on the case in

Värmland.

Section3. RIS and RUP in Värmland

This section examines, to argue the role of regional government and RIS in concrete, the case

of packing and printing industry in Värmland (16 communes, population 270,000) including

economic and social characteristics formed in the area historically. The reason we examine on

the industry in Värmland is as follows.

First is economic and technological uniqueness of packing and printing industry. It’s necessary

for packaging, as contact point between consumer and product, power to appeal through design

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and artistic character and moreover it’s also necessary to consider cost of materials and effect on

logistics (Coles, 2011). On this point it can be said packaging and printing industry is a typical

industry in which innovation becomes key point of competitiveness on the ground that it

requires to collect information, regarding to various and rapid changing science and technology

including new raw materials and needs of user, and also to develop competence of worker.

Second that Värmland, placed peripheral area distant from big city area, has national base of

packing and printing industry. The important reason is that utilization of information and

communication technology has made it possible information exchange with user in the distance

making the industry a kind of model of local industry in information age.

Third that in Värmland, with population less than 300 thousands, cooperative organ (hereafter

RV: Region Värmland) has been established and played important part to establish RIS, and that

the policy to become region with present geographic area is recognized in common in political

world in Värmland. Basic reason 9) is that it’s advantageous to be independent authoritative

body to execute policy suitable to unique condition of the area, this makes Värmland good

example to consider the part of regional government to be played based on condition/advantage

of its area.

In this section below we will consider industrial structure of Värmland and function of RIS

there through examining cooperation among network of packing and printing industry,

university and RV and also the case of cluster of graphic printing industry, and based on these

make it clear characteristics of packing and printing industry in Värmland,function and

structure of RIS there and the role of RV.

1. History and economic and social structure of Värmland

Värmland locates central/southern part of Sweden and adjacent to border with Norway and has

people commuting to Oslo and also investment by Norwegian capital. Other than Karlstad as

central city with population 100 thousands 15 communes there are small in population and some

of which have damaged by removal of big manufacturer. On the other hand there is also area,

reflecting history there with prosperous iron industry, which has headquarter and production

section of iron and machine company with subsidiary worldwide symbolizing that local industry

there has direct connection with national and global economy and that Värmland is the area with

both diversity and commonality. Table 1 shows trend of management and number of employees

in main industrial sector in Värmland. The table shows growth of tourism and corporate service

industry and big growth of per employee added value in paper and pulp industry which includs

paper packaging industry as well as big effect of world financial crisis 2008. On the whole this

shows trend of transformation from production of raw material to production inclined to added

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value as well as to service economy.

Uniqueness of Värmland Seen from the process of economic development is as follows.

First is its location with natural resource and benefit of transportation. In Värmland, locates on

north bank of Lake Värnen main axis of transportation, mining and forest industry have

developed since medieval age. The feature is that, while located interior of the country, taking

advantage of terrain blessed with waterways export to outside the country including United

Kingdom has been striving. At the same time that dispersed ironworks have located, with

background such as that ironwork requires more fuel, resulted in various industries such as

development of the pulp, machinery and lumbering industry in the form distributed all over the

region (Kåpe, 2006).

Secondly industrial structure there has converted, inter alia from 1970th from the pulp and iron

Table 1 State of main industrial sector in Värmland (1000sek、people)

2001 2004 2007 2008 2009 2010

*Iron &

machine

Value-added 3940742 4025882 6391670 6303666 2160618 3964963

turnover 16559511 16407882 26832999 29293372 19415025 17803681

employee 8055 8390 9624 10099 8740 6359

**Paper

& pulp

Value-added 3070130 2622317 2665227 2707402 2953542 3419346

turnover 9871048 11121764 11016649 13064413 12922493 13262867

employee 3344 3735 3339 3209 3036 2919

Corporate

service

Value-added 839363 1406632 2178610 2027838 1893324 1676813

turnover 2284519 3019844 4171681 4490025 4241457 3443032

employee 2279 3459 4203 4631 4129 3540

Tourism Value-added 354449 465862 676567 779795 736302 649106

turnover 1156211 1476009 2122885 2402699 2380862 1980434

employee 1263 1491 1904 2205 2160 1742

***IT &

Telecom

Value-added 1130147 1489199 1814306 1828691 1279341 1612097

turnover 3606531 4290415 5948897 6786487 6509651 3860724

employee 2765 2629 2818 3036 2943 2040

* Decrease in 2009 caused mainly by management crisis of subsidiary of Volvo automobile.

** Includes paper-packaging industry

*** Includes production of electronic apparatus and data processing

Source: Region Värmland ”Studie av näringslivets tillväxt och konkurrenskraft i Värmland

- enligt Simplermetoden”, 2011, by author

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and steel industries, characterized by mass production and use of resources, to final

market-oriented or high value-added industries including paper, packaging, machinery and IT.

Further, inter alia during the 1990s increased entrepreneurship through spinoff of technicians in

parallel with that large companies such as steel and paper industry have entered under the

umbrella of the foreign one. Eventually business relationship in Värmland, once regarded as

model of company town(Bruksorter)based on heavy industry, has become one which includes

networked business relations (Sandström, 2010).

Thirdly, in parallel with restructuring as such, enterprise network or so called cluster (hereafter

“cluster”)formation has been carried out, in responding to appeal by Karlstad University

(hereafter KU) and RV etc. through cooperation among research institutions and tiers of

government. In the process that big companies, which have become global business, still

utilized Värmland ccontinuously as base for product development and played for cluster

formation can be said as one of characteristics of Värmland (Sandström, 2010).

Fourth is that the conversion of the regional industrial structure has advanced in parallel with

the institutionalization of vocational education on national level. On this point it can be said that,

in the estimation of retirement of workers after world war second generation, projects intend to

keep skilled labor and to raise competence of labor have become important challenge for cluster.

On the whole industry in Värmland including packaging industry is now changing its structure

to a base of product development and production connected directly with market.

2. Cluster formation in Värmland

Here we will examine RIS of printing and packaging industry in Värmland. The industry has

been formed with background factors including, joint project by KU with the industry including

product development and technical support, cluster formation proposed by commune and RV,

establishment of institution for vocational education and also the fact that big companies in

paper and pulp industry have intended to diversify product, promoted startup of employees and

given technical support to small company. We will examine below the function of cluster, KU

and RV institutions which play central part for innovation of printing and packaging industry.

1) TPP: The Paper Province 10)

The Paper Province (TPP: 80 companies about 8600 employees) is network organization of

paper and pulp industry in Värmland and surrounding areas. TPP, originally co-established by

big companies for in-house education and extended to include small companies, has been

established in 2000 as an organization for vocational education and recruitment of employees

co-founded by Värmland län, communes and companies. Business and features of TPP are as

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follows.

First is implementation of vocational education and management of test facility. TPP executes,

through company owned 100% by TPP, test and research and various types of vocational

education utilizing test facility taken over in 2004 from Metso Corporation, leading company of

paper industry, with one sek following to moving out of production base of the company to

Finland. In reality it can be said that for Metso TPP is a kind of branch to coordinate and

cooperate with related companies in Värmland. The test facility plays important part in

executing joint development of packaging and packaging materials with corporate customers

(e.g. beverage manufacturers) on which KU and big business research laboratories also involved.

Moreover becoming out-of-date of the machine it’s now under consideration among companies

after proposition by TPP to lent laboratories of companies each other on hour base to raise

overall environment there for research and to make it possible, to appeal Värmland to attract

investment as a place advantageous for product development on which companies are on the

whole positive.

Second is implementation of projects subsidized by EU, governmental agencies and local

governments. This contains following projects.

* KOM-INN : Project for employee recruitment and vocational education founded by

VINNOVA, RV and KU and participated also by cluster of other industry in Värmland.

* The Energy Square: Joint project, by RV, Värmland län, KU and Chinese Research Institute

of Pulp and Paper, conducts cooperative project such as the development of energy-efficient

paper products participated also by related companies. Main subject of the project, once focused

on pulp and paper industry, is directing now to one, with forest as starting point, focused on

product development related from bio to utilization of pulp, logistic, nanotechnology and

energy.

* Tillväxtkontoret (Development Office): Project, operates under support by RV, KU and four

communes, intends to realize innovation through connecting product development by small and

medium sized enterprises with research institutes.

TPP is involved multi-facedly in product development executed by institutes of KU as network

of paper and pulp industry and plays a major part to strengthen connection among pulp and

paper industry, university and research institutes and government and communes. On the

relation between small and big companies, it’s been said, information exchange and cooperation

are deepening through for example big company dispatch technocratic instructor to small one

and big one have idea of small one.

2) TPA (The Packaging Arena) 11)

TPA (The Packaging Arena) is a network organization of packaging-related companies, such

15

as machinery and paper, and related companies such as food industry which utilizes packaging.

With consumer-oriented feature of packaging industry for background joint projects for product

development, by various types of industries centered on the needs of end-user, have been

enacted. Characteristics of TPA are as follows.

First is the course to inauguration. Basic background of inauguration of TPA is that, following

to inauguration of TPP and establishment of the institute for development of packaging by RV

and KU, it has become common understanding, among parties relate to paper industry, that

industry in Värmland has advantage on packaging technology and design. This understanding

had also been affected by the sense of necessity to differentiate from paper related industry in

Finland which holds the premier of global value chains related to forestry industry. TPA has

inaugurated in the year 2004 with financial aid of TPP, Värmland län, RV, KU, government

agency and some others. What’s been made common strategy, among parties involved in the

inauguration of TPA, is a cluster model which corresponds to user demand through partnership

between parties in Värmland including on one hand industries locate on each level of packaging

related industries from paper mills to design and printing business, and on the other hand

research institutes in KU specialized in each area of service, marketing and data processing

respectively.

Second is business concept. TPA, participated by 56 companies including consumer goods

manufacturers and manufacturer of packaging machinery from European wide areas, plays its

part as meeting place for packaging related industries in Värmland and related industries

including users in European wide area. TPA performs various types of projects including

mutual exchange of information among packaging related industries, through for example

seminar participated by people relate to packaging industry Scandinavian wide, and joint

product development of vessel of beverage and cosmetics with new raw material and design etc.

by companies related including user company. Member companies gain information and

business partner for product development through TPA as for example TPA has connection in

Japan with Toyo Seikan Co., Ltd and Dai Nippon Printing Co., Ltd and has held packaging

related seminar in Tokyo made it possible for TPA to give advice to company intends to have

business in Japan.

Third is business concept of TPA. Business model of TPA is named Value Star (Christensen,

2005) contrasting with global value chain model showing purpose of TPA to implement joint

development and commercialization by related companies surrounding demand of users as food

and beverage producers from paper manufacturing technology, design and printing to even

logistic companies as seen in figure 1. Outer ling of figure 1 can also be thought as a kind of

value chain and the reason TPA can position itself as hinge of the ling is, it’s been said, its

ability to coordinate. The advantage of TPA is the possibility to cooperate with paper industry,

16

KU and also graphic industry on which we will see later, and TPA keeps its position as

connecting point of information exchange through its ability to coordinate backed by network as

such. This point reflects that for packaging industry, which necessitates perpetual product

development, collection of information from wide range of business world and research

institutions related plays important part.

Fourth is the mutual relation between TPA and big paper company. Because for the big

companies, moved out their headquarters abroad, TPA is kind of information source to think

about management strategy to diversify its range of products, they usually keep close contact

with TPA ever since its inauguration. TPA on the other hand raises its importance as connecting

point for information exchange indispensable for innovation through connection with wide

range of packaging related companies.

On finance of TPA subsidy, from Central Government agencies, local governments and EU to

promote cluster formation, accounts 80% of its income and public aid as such has become

background factor of support services by TPA to SMEs. In this regard TPA is also typical

example of regional industrial policy of government focused on cluster formation.

3) Karlstad University (KU)

KU can be said as the university established with regional development strategy of central

government, with university for its clue, for background. Predecessor of KU is nursing school

established in 19th century and, after the establishment as a branch of the University of

Gothenburg, departed 1970th as a college and since then through making cooperation with local

Needs of User

Logistic

Design

Paper production

technology

Graphic technology

Industrial IT

Market research

Figure1 Value Star (Christensen2005)

17

governments and industry in Värmland to be full-fledged university launched again 2000 as

university. KU occupies an important position in many industrial clusters in Värmland and, as

one of reasons, KU as a university open to world, it’s been said, has connections with the

world's experts (Region Värmland, 2006). KU, with approximately 10,000 students, has

advanced joint ventures with industry and provincial governments as follows.

First is establishment and management of research institutions and support system for various

entrepreneurs. Basic idea inter alia is to connect the meeting place of ideas, from businesses and

public agencies as well as the university, with basic enterprise support system such as incubator

and further to support growth as the company (Region Värmland, 2006). For this purpose been

established in KU, in cooperation with local governments and industry, research institutions

with cross-sector research areas and conscious on cooperation with business activities, for

example Region Development Research Center and Center for Service Sector Research and so

on. Also established various types of institutions including one which engages mainly in design

technology development and one engages in exchange of information with related industry and

education project established as a joint venture with Swedish Industrial Design Foundation.

Second is execution of research/development project and establishment of organization

necessary based on agreement between RV and KU. KU and RV have made joint statement

2010 on promotion of joint research from 2010 to 2014 12). This statement, made in

co-operation with industrial clusters including TPP, has revealed its aim to strengthen research

on core area including efficient use of energy and manufacturing and packaging technology, to

execute more than 20 joint projects, to make number of enterprises participate in joint project

more than 50 and also additional adoption of 10 full-time professors and 15 researchers to

realize these purposes. Moreover on financial support, presuming subsidy 10 milion sek per

year from other organizations including EU, RV will subsidize the same amount. To oversee the

progress of these projects also decided to establish joint group for direction.

Thirdly KU performs, through partnership with TPP and so on, projects including technical

assistance to individual enterprises and joint research and development and plays its part as a

cornerstone of innovation system in Värmland. In which the company (Karlstads universitets

uppdrags AB) owned 100% by KU plans and executes various types of educational courses,

through cooperation with either individual company or chamber of commerce and industry,

including course for training of assistant of dentist, development of tissue paper from raw

material to improvement of quality of paper and education for teachers nationwide after contract

with Skolverket, with turnover on the whole amounts to 38milion sek 2012. Because those

courses, as courses executed by university, are subject of certification of skill and competence

by formal institution, individual participants of courses also have advantage13).

18

4444) RV (Region Värmland)

Main part of RV is to intermediate policies among communes and between Värmland and

central agencies including below;

First is authority to plan infrastructure within Värmland. RV has been devolved from central

government authorities including to make transportation infrastructure plan and RUP (Regional

Development Program). In which, for transportation infrastructure plan in Värmland allocated

1,4bsek in Swedish transportation infrastructure plan (2010~2021).

Second is to organize network in each industrial sector and to coordinate between industry and

educational institution including university. In Värmland today there are, other than TPP and

cluster of paper and packaging industry, IT concerned clusters (Compare, 100 companies) and

cluster of iron and steel and machinery industry (Stål och Verkstad, 80 companies) and it’s been

deemed basic policy to strengthen collaboration among university, government and these

clusters as well as to expand industry-specific networking in industry such as tourism. RV has

its seat in the board of KU and has some influence. For Technique College, run by gymnasium,

more than 100 collaborating companies support through providing facilities for practical

training and RV plays its part as coordinator among them.

Third is the part to coordinate among EU subsidized projects, central agencies and private

sector with RUP for base. RUP, drawn up by RV, has its meaning as strategic program drawn

jointly by communes, government agencies, business world and wide range of organizations

including organization of citizens in Värmland. Värmland RUP (Region Värmland 2008) drawn

2008 as a program from 2009 to 2013 enumerates as major goal "education and faculty

development", "life-cultural environment", " improvement of interregional and international

access in Värmland" and "creative environment to development". It’s been said these condition

each other and support development of Värmland.

Industrial structure in Värmland is going ahead from pulp and paper to be diversified one.

Point of the strategy is to share wide range of information through network formation among

companies, cooperation between KU and companies and competence development of workers.

3. Regional industrial system and companies in Sunne

1) Flexografi industry in Sunne

Packaging graphics-printing (Flexografi) industrial cluster in Värmland has its heart in Sunne

locates northern-central area of Värmland. Flexografi is high technology in package printing

industry and Sunne is one of bases of Flexografi industry side by side with one in Skåne.

Feature of the cluster is that institution for vocational training (Broby Grafisca Utbildning,

19

hereafter “Broby School”: with yrkeshögskolan 175 students) has been the linchpin of cluster

formation. Broby School runs yrkeshögskolan with high-tech facility of Flexografi and so on in

a body with Sweflex national organization of Flexografi industry with 120 companies and

organizations.

Working population of Flexografi in Sunne has increased in parallel with extension of business

of Broby School from 200 in 1993 when Broby School started to 700 in 2012 14). The

background of Broby School is as follows. In Sunne, since the end of 1920th, located packaging

printing companies and, through the spin-off of the workers, gradually increased the number of

companies. Faced with nationwide economic crisis and structural change of printing industry

and technology of printing in early 1990th it’s started vocational education, after the appeal of

Arbetsförmedlingen in Värmland, in gymnasium of the commune of Sunne to secure

employment of workers of printing company bankrupted. Also parallel to this, been established

the team to inquire establishment of regular course of graphic techniques by the commune,

printing industries and KU which resulted in establishment of the course 1992 by the commune

of Sunne (Rydin, 2007). The decision by the commune had also been affected by the fact Tetra

Pak, leading packaging industry, had decided to set up its own printing plant in Sunne.

Thereafter the project has expanded through collaboration with KU and printing industry as

follows.

Frist is cooperation with company in Sunne. Companies of Flexografi in Sunne produces plate

for printing and send to printing company out of Sunne to print. It’s important for company in

Sunne, engages in production of plate, to check plate before send it to printing company and

Broby School lends out latest printing facility as well as photograph studio for companies.

Broby School plays its part as a base of competence development of workers and product

development through various types of out-sourced training, renting of facility and development

of new product by member company of Sweflex etc. That trainees engage in development of

new product is advantageous also for company to have reliable work force. Broby School and

Sweflex engage jointly marketing and for ex. having order from apple-growing district in Japan

to develop package for apple.

Second is vocational education. Broby Scholl runs, having permission as yrkeshögskolan,

packaging and graphics-printing related courses. The course aims to master series of process

from planning of design to final product, and in the course test machines have important part to

check idea and real image of product. One of key features of the vocational education here is

close partnerships with local companies especially through that teachers of Broby School

exchange their post in the company every several years to make sure state of production site is

reflected in the course of education. The school also provides to trainee opportunity to have

practice in European companies including Germany and United Kingdom and implements joint

20

product development and exchange of teachers with schools in France and Italy.

Third Broby School plays its part as the secretariat of SweFlex. SweFlex, established side by

side with Broby School, mainly engage in information exchange between company and research

institution. SFIAB, company owned by the commune of Sunne 60% and SweFlex 40 %

respectively, has been established and principal of Broby School becomes president of it.

SFIAB plays its part as an agent to prepare facility of Broby School having EU grant and

donation from national fond, and in the process, to have subsidy from public institution,

cooperation with RV is deemed important.

2) State of packaging companies in Sunne 15)

Flexopartner AB (Plate production company, nine employees)

“On the process of our work at first we have order through contract between user like food

company and design company or directly based on the plan on packaging design made between

user company and us. We make sample, determine content of product with user and send plate

to print company which deliver final product to user. While in the process it’s necessary to

coordinate with print company, it’s easy by internet and no problem for us to be in Sunne rather

advantageous to keep skilled workforce through and utilise test machine, to check sample, of

Broby School.”

Tetra Pack Sunne factory (Package production, 300 employees)

“Tetra Pack has two factories in Värmland specialized for paper as raw material and for

package respectively. This factory engage in production of package and distribute to whole

European area by track. Because we locate adjacent to raw material it’s possible to lower

transportation cost after processing. We engage from printing to final product and whole

operation is automation controlled by computer. We make effort to be efficient through activity

of QC circle and have many after graduates and trainees of Broby School.”

Prime Blade AB (Production of parts of Flexografi, 19 employees)

“This company has been established 2010 by four specialists each of technology and

management. One of founders in charge of technique has had experience, after spin-off from

iron and machine maker in Värmland, as entrepreneur from production of non-broken knife to

metallic parts of tissue paper which utilized for this company. Our company is specialised for

production and distribution of Doctor-blade, parts of Flexografi to control amount of injection

of ink by pressing plate and paper, and with acquiring patent sales volume is rising rapidly.

Advantage of our product is that, while hitherto used one coated on surface of metal, without

coating by applying nano-technique which made it possible to drift paper smoothly. To raise our

21

technique we engage joint research with SKF and Chalmers University in which especially with

SKF we share purpose of development on making surface of metal slippery. We have sales

agent in nine countries on which, utilising connection of one of founders who had been manager

of company Miller Graphics in Sunne, got some of subsidiaries abroad of the company to be

agent. While distant from big city Sunne has no problem for us as production site even for

export to world countries.”

Miller Graphics Scandinavia (Production of plate, 20 employees)

“Miller group has five groups of company including marine transportation and our company is

one of companies of printing group. Group of printing company is now expanding business in

areas including countries in Europe and Morocco through acquisition of company on the spot.

To raise technique of whole group we have technique team on group level and person in charge

in each company. On the process of our work, at first we have order through design company or

directly from user company and we produce sample and model of product and send to print

company. We also sometimes make use of test facility in Broby School to test trial piece.”

3) Characteristics of Flexografi industry in Sunne

Suune has, as area accumulated by small scale companies engage in Flexografi and centered

by Broby School, characteristics below.

First main business of company is product development responding to various needs relate to

package printing of mainly food related companies. In which that in packaging industry

development of printing technique and design is needed without interruption has become

background for application type innovation to have important part.

Second is that accumulation of industry in Sunne locates distant from big market. Technical

background made it possible is that cooperation with client in great distance has become easy by

development of IT technology and technical characteristic of Flexografi.

Third that Broby School plays its part, under daily contact with company related, as base for

the industry. The School provides test machine indispensable for new product as well as secures

work force through training excellent operator. Moreover the School has, along with connection

with KU, close connection with institutions and organizations in Värmland including that

person in charge of development of the School is former director general of TPA.

4. Characteristic of Värmland model and structure of Regional Innovation System

Characteristics of packaging and printing industry in Värmland are as follows. First many of

big companies, while moved out headquarter abroad, implement in Värmland product

22

development responding to need of user in cooperation with company there. Second each

company, while extends own network in national and world scale, utilizes accumulation of

companies and infrastructure including university for product development through application

of existing technique and production. Third packaging and printing industry in Värmland on the

whole has become base of applied product development responding to the need of final user

including food industry. As institution and factor made possible these we can point below;

First is the system which supports mainly small and medium size companies. Institutions as

TPP and Broby School play their part including support for product and technological

development, recruit of worker and test of product etc.

Second is existence of network organization like TPA. Characteristics of networks are that

they not only coordinate information exchange and joint development among various companies

in Värmland but also provide opportunity for information exchange and joint development with

users through European and world scale network.

Third is the system which supports vocational education and competence development.

Education and training by 18 yrkeshögskolan and 12 teknikcollege in Värmland, as well as

educational institutions including KU and gymnasiums, play important part to promote

TPA

KUKUKUKU

TPPTPPTPPTPP

Broby Graphic

R&D network

Applied research,

Technology support,

Technology education

Paper production/packaging

network

Vocational education,

Co-development, test

Graphics printing network

Vocational education,

Skill training

Applied development

Figure 2 Regional networks in Värmland

National network

Packaging related network

World academic network

23

innovation.

Fourth is network for applied research and development with KU as center. KU plays its part

as cornerstone of application/improvement type innovation in Värmland and supports research

and product development in cooperation with cluster as TPP and yrkeshögskolan.

The system to support innovation in packaging and printing industry in Värmland functions

through reciprocal action among applied research with university as center, vocational education

and network connecting company and user, and Värmland is now in the process to have its

position as base for innovation of the industry. Structure of network relates to packaging and

printing industry can summarize as Figure 2. Characteristic of it is that each network and

company, while having connection with national and world actors, make regional innovation

system function with mutual trust among companies and distinctive historic and social feature

of the area for background. In which RV has important part, to make regional innovation system

function, including to lead cluster formation and to coordinate between KU and clusters.

Section4. Regional innovation system and region government

In Sweden today, which realized economic development through restructuring of industry and

competence development of workers, innovation in all areas of economic activity is put on

central place of the competition strategy under progress of economic globalization and IT. On

the other side regional industrial structure has deepened its character as accumulation of

companies each of which acts its business through connection with national and global

economic actor under the progress of globalization and incorporation into EU economic sphere

of regional economy. This change has made it necessary, for regional economy to be stable, to

establish the system possible to utilize both indigenous advantage of the region and new

technique and information. In such situation it’s become necessary for regional government to

play its part as pivot to connect on one hand indigenous condition of local industry and

economy, and on the other hand nationwide policy for infrastructure and education etc. and to

make it clear mutual relation between central agency and regional government.

The case in Värmland, while specific one and difficult to generalize, gives suggestion below

on the subject 16).

First is that packaging and printing industry in Värmland is going ahead, despite its location, to

be area accumulated by companies with worldwide business activity. Background factor of it is

that companies there execute innovation responding to ever changing market need through daily

information exchange with user and business connections distant from them made possible by

development of information technology. In that sense the industry shows that such type of

24

innovation, as to respond to the need of market through application and synthesizing of existing

technology, could be source of competitiveness and the possibility for industry in peripheral

area to have advantage.

Second it shows importance of RIS under accelerating globalization of regional economy. In

Värmland institutions including KU and organizations public and private play key part for

packaging and printing industry there to execute innovation, and each company extends its

business nationally and worldwide through taking advantage of the result of innovation.

Third that RIS in Värmland has peculiarity as a system which has unified, with innovation as

focus point, functions of university, network organizations and so on each has its own strategy.

That whole system, RV coordinates, shows the part to be played by regional government as

coordinating institution to make RIS function based on concrete vision.

Based on above the part of regional government as keystone to make RIS function can be

summarized below;

First is to make RIS function through coordination presuming diversity of areas within the

region. It’s suggestive that within Värmland multi-polarization is in progress, as seen in Sunne

where industry in small area has gained its own status and strategy, and that RV plays its part as

regional coordination system presuming diversity of areas within Värmland.

Second the role to prepare RIS and make it function as a part of overall vision and policy

aiming comprehensive development of the region.

Third is its part as main connecting point within governance system by multi-level

governments. Regional government plays its part as connecting point both of horizontal network

among communes and between commune and social economic organizations, and of vertical

network between on one hand policies including education and infrastructure by agencies of

central government, and on the other hand economic and political actors in the region.

Note

1) Regeringens proposition 1996/97: 141, Högskolans ledning, lärare och organisation.

2) Prop. 2008/09:35 Framtidens resor och transporter

3) SOU 2012:81 Statens regionala förvaltning–förslag till en angelägen reform

Slutbetänkande av Utredningen om den statliga regionala förvaltningen、Stockholm 2012

4) Förordningen (SFS 2007:713) om regionalt tillväxtarbete (11§)

5) My interview with Joakim Palestro (Universitetskanslersämbetet) 21st Aug 2013

6) My interview with Frida Andersson (Tillväxtverket) 21st Mar 2013

7) My interview with Sverker Lindblad (Närings department) 31st Aug 2011

8) Myndigheten för yrkeshögskolan 2012 Dnr: YH 2010/348 Myndighetssamverkan inom

kompetensförsörjningsområdet 2012-04-23

25

9) My interview with Catarina Segersten Larsson RV executive committee 11th Mar 2013

10) This part owes on my interview with Maria Hollander (VD, TPP) 13th Mar 2013 and other

materials of TPP

11) This part owes on my interview with Sandra Eriksson (VD, TPA) 16th Aug 2013 and other

materials of TPA other than specific note

12) Region Värmland, 2010, “Avsiktsförklaring om forskningssamarbete mellan Region

Värmland och Karlstad universitet åren 2010-2014”

13) My interview with Martin Sundqvist (VD, Karlstads universitets uppdrags AB) 11th Mar

2013 and other materials of the company

14) On Broby School owes on my interview with Per Branzén(Development manager, Broby

School) and Göran Dahl (Chairman, Swedish Flexography Association) 11th and 12th Mar

2013 and other materials of the school other than specific note

15) On companies below owes my interview in 12th Mar 2013

16) However that local industry engages in global business activity is not rare case restricted

only in Värmland, see (Tsuchida 2011)

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