EUROPEAN COMMISSION Brussels, 18.7.2017 SWD(2017) 264 final COMMISSION STAFF WORKING DOCUMENT Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Strengthening Innovation in Europe's Regions: Towards resilient, inclusive and sustainable growth at territorial level

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Commission staff working document Table of Contents 1 Introduction 2 Smart Specialisation – regional partnerships for innovation, growth and jobs 2.1 The need for smart specialisation 2.1.1 Boosting investment in research and innovation 2.1.2 The diversity of performance of regional innovation systems across Europe 2.1.3 The position of the European institutions 2.1.4 Public consultation on smart specialisation 2.2 The RIS3 approach 2.2.1 The history of smart specialisation 2.2.2 A place-based policy approach 2.2.3 Addressing weaknesses in the delivery of regional innovation policy 2.3 Putting in place the right conditions for effective investments 2.3.1 RIS3 as an ex-ante conditionality 2.3.2 Incentives for reform through ex-ante conditionalities 2.3.3 RIS3 conditionality has helped address institutional weaknesses in innovation systems. 2.3.4 Changes induced by the RIS3 ex-ante conditionality

2.4 Early implementation and expected results 2.4.1 Expected results 2.4.2 Investment share in Research and Innovation (R&I) 2.4.3 Thematic priorities of regions – Eye@RIS3 2.4.4 Selection of operations and expenditure declared in ESI Funds 2.4.5 Evidence on implementation through analysis of calls for projects 2.4.6 The establishment of the S3Platform 2.4.7 Influence on national and regional systems 2.4.8 Overall assessment of achievements 3 Key challenges and next steps: boosting innovation-led growth 3.1 Further reform of research and innovation systems 3.1.1 The contribution of research and innovation to EU economy and productivity growth 3.1.2 The need for reform 3.1.3 Higher education and VET in smart specialisation 3.2 Increasing cooperation in innovation investment across regions 3.2.1 Rationale for transnational, interregional, cross-border cooperation 3.2.2 Addressing fragmentation and creating innovation investments in value chains 3.2.3 RIS3 in European Territorial Cooperation 3.2.4 Macro-regional strategies 3.2.5 European-level support for smart specialisation investment across borders

3.2.6 Thematic Smart Specialisation Platforms 3.2.7 RIS3 and the link to Digital Innovation Hubs and other innovation infrastructures 3.2.8 Maturity of mechanisms to support investment in innovation across borders: 3.3 Leveraging research and innovation in less developed and industrial transition regions 3.3.1 Tailoring through RIS3 leads to address specific bottlenecks in less developed regions 3.3.2 Mutual learning on design and implementation 3.4 Harnessing synergies and complementarities between EU policies and instruments 3.4.1 Mechanisms for synergies 3.4.2 Progress on synergies 3.4.3 Initiatives to promote synergies



1Introduction Europe is experiencing a momentous period of change. Globalisation, automation, decarbonisation, emerging and digital technologies: all have an impact on jobs, industrial sectors, business models, the economy and the society as a whole. It is indispensable to help Europeans adapt to these profound changes and to help the EU economy to become more resilient. In its Reflection Paper on Harnessing Globalisation, the Commission highlighted the opportunities and challenges that Europe's citizens and regions are facing. This means anticipating and managing the modernisation of existing economic and societal structures bearing in mind that today, more than ever local issues have gone global and global issues have become local. To this end, Europe needs a long-term strategy, involving action at all levels, which triggers a fundamental shift in technology, economics and finance. The future challenge for EU regions is to be able to compete at the global level with other most advanced and emerging economic powers as they are more than ever part of a globalised world. Therefore, they need to find ways to become more resilient and competitive by taking concrete actions at EU, national and local levels while ensuring that the benefits of globalisation are shared. Many European regions are well positioned to take advantage of the opportunities offered by globalisation. However, the Commission's reflection paper on globalisation stressed that the competitiveness and innovation divide between some advanced EU regions and less strong regions is widening. Vulnerable regions can still be found across Europe in Southern or Central and Eastern Europe. Identify the potential of these regions and focusing on reinforcing their local strengths, narrowing development gaps, and boosting competitiveness can help strengthen resilience to globalisation. Special attention should also be paid to the resilience of rural areas, which are at risk of being left behind by globalisation and demographic change. Innovation clusters that link up companies, universities, start-ups, investors and local governments must be further developed and linked up across Europe. The EU and their regions should invest more in the emerging industries and workers of the future, focusing on new and advanced manufacturing technologies and related industrial services to drive innovation. EU regions should position themselves in global value chains and help their businesses move up along the value-chain and further exploit their comparative advantages. In order to do so, regions should further strengthen links between stakeholders and infrastructures across different European countries to exploit synergies. Interregional cooperation can play an essential role in this direction. Sharing costs between companies within value chains and sectors in an open innovation community would allow the development of new processes and provide the means to succeed in a comprehensive way. This would permit many industries, and in particular their SMEs, to develop processes that they would not be able to develop on their own because of a lack of resources. In order to boost Europe’s competitiveness, it will also be necessary to find additional private investment across all sectors, provide better access to finance (especially for SMEs and start-ups that develop most of the innovations) and increase access to foreign markets towards boosting EU exports. Openness to foreign investment is also key for the EU and a major source of growth – as is to provide investment-friendly regulatory and business framework conditions as well as develop critical infrastructure (including for digitalisation, energy and transport). Globalisation is a shared task between the EU and its Member States and regions. The table below – from the European Commission’s reflection paper on harnessing globalisation – shows how each level can contribute to make this process successful.

Graph 1: Contribution of each level of governance to harnessing globalisation In conclusion, it is difficult to predict what globalisation will look like in ten years' time as technologies and their uses are changing rapidly. However, by strengthening cooperation between different levels of government, Europe can help its regions to move up global value chains, stimulate the private sector and target investment on key priorities and challenges, while preventing brain drain and rural flight. This requires a concerted effort at EU, national and regional level to broaden the base for innovation, better target private and public resources and increase synergies. This entails not only better links within the Single Market and the European Research Area but also new opportunities for businesses to build on regional strengths to develop and grow within global value chains and markets and in this way to seize the opportunities created by globalisation. In 2010 the Commission called on national and regional governments to develop smart specialisation strategies (RIS3) for research and innovation (R&I) to encourage all European regions to discover their competitive advantage. This new "smart specialisation" approach became the basis for research and innovation investment under the European Regional Development Fund (ERDF) for the programming period 2014-2020. The Council of the EU and the European Parliament have highlighted the need to further build on this approach. The purpose of this staff working document is to provide a first overview of the evidence and draw lessons on R&I strategies for Smart Specialisation (RIS3) and their contribution to more efficient and effective national and R&I systems that support competitiveness and cohesion as well as broader research and industrial policy objectives, in the context of globalisation. The document presents the smart specialisation approach and how it evolved from a theoretical concept to tool for the implementation of national and regional innovation policy in all European Union regions irrespective of their economic development level, innovation performance, governance structure, research capabilities or business environment. It also examines how the prerequisites (ex-ante conditionalities) necessary for smart specialisation have been applied. The staff working document assesses the current state of play as regards the design and implementation of smart specialisation strategies in the EU. It also shows how the smart specialisation approach is being applied in other parts of the world such as Australia and Latin America. Finally, it examines the contribution of smart specialisation to the reform of European R&I systems and how, by adopting a tailored approach it has helped to build capacity in Europe's regions and facilitate investment across regions. It provides a state of play on the complementarities and synergies between EU instruments. 2Smart Specialisation – regional partnerships for innovation, growth and jobs 2.1The need for smart specialisation Innovation is recognised as one of the main economic drivers for boosting jobs, growth and investment in the White Paper on the Future of Europe and is essential for achieving the political priorities of the Juncker Commission. Innovation is a precondition for "sustainable and job-creating growth". It leads to higher productivity and competitiveness while offering social and environmental benefits. 2.1.1Boosting investment in research and innovation Despite the fact that the target for Member States to invest 3% of their GDP on R&I is one of the priorities of Europe 2020 strategy , the aggregate share of R&I investments within the EU is still lower than in countries such the USA, Japan and South Korea. Within the EU, gross domestic expenditure on R&D as a percentage of GDP varies considerably from country to country with Sweden, Austria and Denmark spending a high percentage of their GDP on R&D and Eastern and Southern European countries lagging behind with lower expenditure. Graph 2: Gross domestic expenditure on R&D as % of GDP Source: Eurostat 2017 South Korea and Japan have an increasing performance lead over the EU. In particular their relative strength is in business R&D expenditures, innovation collaboration and procurement. The top R&D spending enterprises invest twice as much on R&D as top EU enterprises. Australia, Canada and the United States have a decreasing performance lead over the EU. However, Brazil, China, India, Russia and South Africa are catching up. In particular China increased its R&D expenditure and the number of Trademark and Design applications.

Graph 3: Global performance (bars show countries' performance in 2016 relative to that of the EU in 2010) While the EU hosts a high number of high level PhDs, their research is weakly connected to the market. Their employment is almost equally shared between the public and private sector, whereas in competitor-countries the percentage of researchers employed within the private sector is higher. Graph 4: Researchers share in the business and public sectors in third countries compared to the EU. Source: Science, Research and Innovation Performance of the EU 2016 2.1.2The diversity of performance of regional innovation systems across Europe Well performing innovation systems are found in Member States and regions which are better developed and are more competitive. There is a close correlation between R&D performance ("Regional Innovation Scoreboard") and economic performance ("EU Regional Competitiveness Index"). Without research and regional policies working closely together to encourage knowledge absorption, lagging regions and countries may never be able to converge to the technology frontier. Graph 5: EU regions performance in terms of innovation and competitiveness Source: EU Regional Competitiveness Index, 2016 and Regional Innovation Scoreboard Report, 2017 More than half of the total potential for productivity growth in developed countries comes from "catching up" innovation. Given the different level of economic development in which EU innovation actors operate, European policies need to take account of the differing situations in Member States and regions and, in particular, should target the needs of both developed and less developed economies. Cohesion Policy therefore takes account of the specific needs of less developed Member States and the need to support broad based innovation. This is in line with the recommendations of the 2017 Annual Growth Survey, which highlights the need to improve the interaction between research and business and to encourage reforms of weak research and innovation systems in Member States. As conditions differ from region to region, innovation needs to be embedded in local business knowledge that is often concentrated in clusters of related industries, but linked to high quality research across Europe to enable the swift diffusion and application of the knowledge created. By bringing together a broad range of businesses, researchers and public actors as part of a prioritisation and experimentation process and connecting them with new research ideas, smart specialisation can build on Europe's diversity of regional and local strengths. The process of designing and implementing smart specialisation strategies ensures that public resources are targeted at areas which are likely to bring the best returns in terms of raising the level of innovation in all parts of Europe. This is achieved by addressing weaknesses in innovation systems and reinforcing the institutional capacity to bring research to market and trigger an uptake of innovation, notably in less-developed Member States.

2.1.3The position of the European institutions The European Parliament expressed its support for smart specialisation in its resolution of 8 September 2016, and proposed to the European Commission and to Member States to implement further actions in order to make smart specialisation become more effective. It also noted in its Resolution of 6 July 2016 that synergies for innovation between Structural Funds and Horizon 2020 and other policies and instruments must be further enhanced in order to maximise the impact of investments. It further called for continued efforts to boost inter-regional collaboration and recalled the importance of innovation systems, institutions and the linkages to local and regional clusters in its report of 27 April 2016 on Cohesion Policy and smart specialisation strategies. The Council, in its conclusions of 24 June 2016, called for "a more R&I friendly, smart and simple Cohesion Policy and the European Structural and Investment Funds more generally", and recognised that "smart specialisation strategies could be powerful instruments for contributing to tackling societal challenges, and boosting innovation, investment and competitiveness, based on socio-economic and territorial specificities". It called on the European Commission "to give continued support to Member States and regions when developing and implementing smart specialisation strategies". The Council Conclusions of 4 December 2014 on the industrial competitiveness agenda had also already recommended smart specialisation as an approach to prioritising investments and reiterated the importance of clusters and partnerships and the Presidency report of 16 November 2015 on mainstreaming competitiveness also acknowledged the contribution of clustering and smart specialisation strategies. In addition, the European Commission has launched many initiatives at EU level which identify smart specialisation as relevant for structural reforms and for various policies such as energy, digital, industrial policies and for the circular economy. 2.1.4Results of the public consultation on smart specialisation The importance of smart specialisation strategies is also highlighted by the replies of 237 respondents to the public consultation launched by the Commission in December 2016. 73 % of the respondents think it is ‘most and very important to implement European strategic priorities in focus areas in regions’, 70 % think it is ‘most and very important to have a bottom-up agenda for European growth & jobs’, 68 % think it is ‘most and very important that all types of regions can participate (advanced, research intensive regions and lagging regions)’ as well as alignment between complementary efforts in different countries and regions (64%). The three most important objectives of RIS3 according to the respondents are: ·creating jobs and growth through place-based R&I investments (84%), ·enabling businesses and researchers to develop investment projects together (72%) ·the economic transformation of the region (e.g. towards new sectors) (68%). The vast majority (94 %) of respondents to the public consultation think that it is important ‘to a great extent’ (74 %) or ‘to some extent’ (20 %) to put in place RIS3 strategies with priorities about which businesses, academia and public stakeholders have been consulted before funding is allocated. Supporters and implementers of innovation alike observed a significant increase in the participation of clusters or business associations (75% and 66% respectively) and higher education institutions (68% and 76%) in the innovation ecosystem In terms of the first early impact of smart specialisation strategies on the research and innovation infrastructure or support services, the greatest improvements in the support offered was observed for networking and cooperation (62% for finding partners within the country and 54% for partners abroad), for industrial research activities (55%) and experimental development/prototyping (49%) and for better access to researchers (53%) and R&I infrastructures and R& I service providers (55%). Important improvements have also been observed for technology transfer (47%) and digitization of enterprises and processes (42%) whereas no overall improvements were observed for the regulatory framework. 2.2The RIS3 approach 2.2.1The history of smart specialisation Smart specialisation (RIS3) is an innovation policy approach that aims to boost national and regional innovation, contributing to growth and prosperity by helping and enabling Member States and regions to focus on their strengths. RIS3 brings together the research community, business, higher education, public authorities and civil society. These partners identify strengths in their region, and prioritise support based on where local potential and market opportunities lie (the "Entrepreneurial Discovery Process" - EDP). To help with this process, RIS3 seeks to improve governance at regional and national level, concentrate resources, build critical mass, and accelerate the uptake of new ideas. The smart specialisation strategy concept was developed by the European Commission's high-level expert group "Knowledge for Growth" in 2005-2009, closely related to the concept of clusters, and was originally designed to tackle two main issues: ·The fragmentation of public research systems unable to compete independently on a global scale; ·The duplication of research work which leads to a scattering of resources across the European Research Area. During the reform of cohesion policy for the period 2014-2020, the concept was extended in order to encourage regional economic transformation. It was also incorporated into EU regional policy as a key principle of investment in R&I.

In its 2010 Communication "Regional Policy Contributing to Smart Growth in Europe 2020", the Commission called on national and regional governments to develop smart specialisation strategies (RIS3). Following its inclusion in the regulatory framework for Cohesion Policy 2014-2020 through the introduction of specific ex-ante conditionality, this new approach became the basis for research and innovation investment under the European Regional Development Fund. Smart Specialisation strategies are defined in point (3) of Article 2 of the Regulation (EU) No 1303/2013 of the European Parliament and of the Council: "Smart Specialisation Strategy (S3)" means the national or regional innovation strategies which set priorities in order to build competitive advantage by developing and matching research and innovation own strengths to business needs in order to address emerging opportunities and market developments in a coherent manner, while avoiding duplication and fragmentation of efforts; a smart specialisation strategy may take the form of, or be included in, a national or regional research and innovation (R&I) strategic policy framework." 2.2.2A place-based policy approach Innovation still depends very much on location. Smart specialisation has been implemented in high-performing, middle income, and less-developed Member States or regions., Conceived within the reformed EU Cohesion Policy, smart specialisation is a place-based policy promoting investment in innovative activities in selected areas to achieve a smart, inclusive and sustainable growth in line with the EU's Europe 2020 growth strategy. Using local knowledge and learning reflects the overall justification for using a local and regional place-based development policy approach to cohesion policy, rather than employing a space-neutral or purely sectorial approach. The smart specialisation approach therefore identifies strategic areas for intervention, based both on the analysis of the strengths and potential of the regional economies and on a process of entrepreneurial discovery with wide stakeholder involvement. It embraces a broad view of innovation that goes beyond research-oriented and technology-based activities, and requires a sound intervention strategy supported by effective monitoring mechanisms. Lessons learned from targeted RIS3 support in EU Member States and their regions In Poland, for instance, the Slaskie Region initiated its first innovation strategy for 2003-2013 on which it could rely, whereas Wielkopolskie, which never had strong specialisation, needed to start the entrepreneurial discovery process leading to the regional smart specialisation strategy, through comprehensive research and analysis of the existing conditions. Latvia where smart specialisation was a new concept started with a comprehensive research on the sectors of the economy, related research capacity, business composition and advantages of the Member State. In close cooperation among the public sector, academia and business priority areas were chosen and further developed though a continuous entrepreneurial discovery process combined with structural reforms of the research institutions and higher education institutions as well as by reviewing the tax regime for innovative companies. In Denmark and Sweden, with highly developed innovation and business structures, the process approach was to detect systematically the inter-linkages and opportunities of the existing regional and national innovation and development strategies rather than to identify e.g. specific sectors as object for public intervention to promote smart specialisation. Finland, as a leader in innovation, continues the smart specialisation approach in open, inclusive and participative method building on the existing advantages. An excellent example is Oulu Innovation Alliance that was created when the city faced a serious structural change caused by big ICT companies moving out of the city and thousands of jobs were lost. The aim of the alliance was to develop a Northern innovation ecosystem through cooperation between public sector, research and educational sector and companies that integrates top expertise and resources from selected fields. This approach helped Oulu to create 2000 new jobs, establish 300 new start-ups in the knowledge-intensive growth sectors, and develop new ICT sub-sectors that made the ICT sector in the region more flexible, agile and resilient to possible structural changes. Each region, no matter the type or level of its socio-economic endowment, can in this way find its own way to sustainable and inclusive growth taking into consideration EU strategic goals. For example, a carbon intensive region could focus on transforming experience and technology in traditional activities into greener economic activities that require similar competences and which are set to grow in the future in the context of EU policy priorities. 2.2.3Addressing weaknesses in the delivery of regional innovation policy If properly designed through an interactive bottom-up process involving most of the innovation actors on a territory, smart specialisation can help address weaknesses in the delivery of innovation policy in Europe. These include the following: Weaknesses in the delivery of regional innovation policy: ·Lack of prioritisation and poor resource allocation - The Entrepreneurial Discovery Process (EDP) is perhaps the most distinctive feature of the smart specialisation approach. Such a mechanism makes it possible: (i) to identify precisely (at the level of a single activity or system of activities) the market failures affecting the local economy and (ii) direct policy intervention exclusively towards those targets . This is opposed to the previous situation (pre-RIS3), where it was not possible for public authorities to identify specific market failures and needs of the local economic system – meaning that the only option was to use horizontal measures (acting across activities, but with no differentiation between them. ·Weak microeconomic governance in the EU Member States and regions – evidence based policy and investment decision making which is informed by tacit knowledge of innovation actors is often not available in the public domain. ·Barriers to the uptake of new ideas – inflexible governance mechanisms hamper the process of bringing new products and services into market. ·Mismatch of EU research strengths and business needs – the failure to exploit the wealth of knowledge existing in the EU to increase the competitiveness of EU businesses and accelerate the uptake of solutions to tackle societal challenges. ·Lack of strategic alignment of investment pipelines in industry and research, in both the private and public sector. This leads to scattered, fragmented and duplicated investments.

·Lack of information flows across business sectors, scientific disciplines and EU territories – increasing the degree of information asymmetry. ·Lack of interregional cooperation between innovation actors across EU – failing to exploit the EU single market's potential to improve collaboration between innovation actors in related activities. ·Weaknesses in EU value chains – opportunities for demonstration projects and for scaling up of initiatives are missed due to lack of economies of scale and scope. ·Low leverage effect of EU funding – a failure to attract private investors to realistic and bankable innovation initiatives. By addressing these issues in the delivery of support for innovation under the European Structural and Investment Funds (ESIF), smart specialisation can contribute to boosting overall growth and jobs, and help respond to globalisation. At a more specific regional level, smart specialisation can – by improving the prospects of specific regions and Member States for growth and economic transformation – also reduce disparities between the levels of development in the various regions and help the less-developed or lagging regions to progress. It will also contribute to building specialisation in the Single Market as a whole, broadening innovation and contributing to industrial competitiveness goals. This applies to both well-established sectors such as agri-food, tourism, textile and those at the global technology frontiers in energy, environment, nano-tech, and health. Public administrations can use their purchasing power to play an important complementary role by encouraging transformative technological change and the uptake of innovation through their purchasing power. Such activities offer regions the opportunity to diversify and develop new industrial activities by capitalising on emerging and key enabling technologies (KETs), digital transformation, service innovation, resource-efficient solutions and other breakthrough innovations that cover all and new forms such as open and user-led, public sector, frugal and social innovation. In addition, the bio-economy and the transition to a circular economy offer great potential for growth. 2.3Putting in place the right conditions for effective investments 2.3.1RIS3 as an ex-ante conditionality A key element of the RIS3 approach in during the 2014-2020 programming period was the requirement to define a national or regional RIS3 strategy for R&I before being allocated ERDF funding. This ex-ante conditionality was added to the regulatory framework to ensure that the effectiveness of EU investments within the regions was not undermined by the absence of evidence-based innovation priorities and the lack of appropriate institutional framework for R&I. Two thematic ex-ante conditionalities (ExAC) were introduced in the area of research and innovation: R&I: requiring a national or regional smart specialisation strategy that (ExAC 1.1) ·is based on a SWOT or similar analysis to concentrate resources on a limited set of research and innovation priorities (ExAC 1.1.1); ·outlines measures to stimulate private research, technology and development (RTD) investment (ExAC 1.1.2); ·contains a monitoring and review system (ExAC 1.1.3); ·ensures that a Member State has adopted a framework outlining available budgetary resources for research and innovation (ExAC 1.1.4); R&I infrastructure: requiring a multi-annual plan for budgeting and prioritisation of investments (ExAC 1.2) The RIS3 ex-ante conditionality applied to most national or regional operational programmes (169 out of 205) and in all 28 Partnership Agreements. It was the most frequently applied ex-ante conditionality at regional level. At the time the programmes were adopted, only 20% of the programmes were considered as fulfilling ex-ante conditionality. 20 member states were required to develop action plans to fulfil this conditionality. The following causes have been identified by the European Commission as responsible for a difficult fulfilment of ex-ante conditionality in the area of RIS3: ·A lack of political commitment to long-term strategies, and difficulties devising a bottom-up process of smart specialisation as a way to prioritise investments;

·The split of responsibilities between different vertical (national, regional, municipal) and horizontal (between ministers and departments) levels, resulting in the fragmentation of powers and failed coordination; ·A lack of effective, competent and adequately skilled staff in administration exacerbated by frequent legislative and institutional changes; ·Weak collaboration between the public and private sector and thus little commercialisation of public research; ·An absence of continuity in the entrepreneurial discovery process and a lack of key milestones, roadmaps, monitoring mechanism; ·Tenuous links between financed projects and RIS3 priority areas. It is likely that all programmes will have fulfilled their ex-ante conditionalities by the reporting deadline of June 2017. The introduction of the RIS3 ex-ante conditionality has therefore demonstrated the significant potential for the improvement of the governance of national and regional innovation systems in many Member States. 2.3.2Incentives for reform through ex-ante conditionalities Ex-ante conditionalities (ExAC) have been important in terms of triggering reforms. They accounted for about 85% of the reform-triggering ExAC in in Member States that have joined the EU since 2004. Graph 6- Overview of reform triggering Thematic Ex-ante conditionalities 1.1 1.2 2.1 2.2 3.1 4.1 4.2 4.3 5.1 6.1 6.2 7.1 7.2 7.3 7.4 8.1 8.2 8.3 8.4 8.5 8.6 9.1 9.2 9.3 10.1 10.2 10.3 10.4 11.1 Total AT 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 BE 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 BG X X X 0 0 0 0 0 0 0 0 X 0 0 0 0 0 0 0 0 0 0 X X 0 X 0 X X 9 CY X X X X X 0 0 0 X X X 0 0 0 0 0 0 0 0 0 X X 0 0 0 0 X X 0 12 CZ X 0 X X X 0 0 0 X X X X X X 0 X X X 0 0 0 0 X X 0 X X X X 19 DE 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 DK 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 EE 0 0 0 0 0 X 0 0 X 0 0 0 0 0 0 0 0 0 0 0 0 X 0 X 0 0 0 0 0 4 EL X X X X 0 X 0 0 0 X X X X 0 0 X X X 0 X 0 X X X X X 0 X X 20 ES 0 0 0 0 0 0 0 0 X 0 X 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 FI 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 FR 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 HR X 0 X X X 0 0 0 X X X X X X 0 X 0 X 0 0 X X 0 X 0 X X X X 19 HU X X X X 0 X 0 0 0 X 0 X X 0 0 X 0 0 0 0 0 X X X X X X 0 X 16 IE 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 IT X X X 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 X 0 0 0 0 0 0 0 4 LT X 0 0 X 0 X 0 0 0 0 0 0 0 0 X 0 0 0 0 0 0 X X X X X X X 0 11 LU 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 LV X 0 0 0 0 0 0 0 X X X X X X 0 0 0 0 0 0 0 X 0 X X 0 0 0 X 11 MT 0 0 0 0 0 0 0 0 0 0 0 X 0 X 0 0 0 0 0 0 0 0 0 X 0 0 X 0 0 4 NL 0 0 0 0 0 X 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 PL X X X 0 0 0 0 0 0 X X 0 0 0 X 0 X 0 X X 0 X X X 0 0 0 0 0 12 PT 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 X 1 RO X 0 X X X 0 0 0 X X X X X X X X 0 X X X 0 X X X X X X X X 23 SE 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 SK X X 0 0 0 0 0 0 0 0 0 0 0 0 0 X 0 x 0 0 0 X X 0 X X X X X 11 SI X 0 X X 0 X 0 X 0 X 0 X X X 0 0 0 0 X 0 0 0 0 0 0 0 0 0 X 11 UK 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Total 13 7 10 8 4 6 0 1 7 9 8 9 7 6 3 6 3 5 3 3 2 11 8 11 6 8 8 8 10 190 Key to table: 0 No reform triggering effect found X Reform triggering effect found Source: Study "Support of ESI Funds to the implementation of the Country Specific Recommendations and to structural reforms in Member States" ExAC 1.1 (research and innovation) was characterised by a strong reform impact and high coherence with the European Semester (CSR/structural challenges). Evidence shows that the RIS3 ex-ante conditionality triggered reforms in all 13 Member States which joined the EU in 2004 or later and two belonging to the EU15 – IT and GR. All these Member States had Member State specific recommendations in the European Semester process in the Member State Reports in the field of research and innovation in 2012-2015. In the majority of the Member States, the recommendations on research and innovation persisted for the whole period. The occurrence of reform-triggering ExACs was substantially higher in the major (per capita) beneficiary Member States of the ESI Funds, which are also countries whose level of economic development is below 75% of the EU average. In many cases, this conditionality helped to break down silos in multi-agent and multi-level governance and led to new dynamics in setting priorities and targets and creating the relevant policy instruments to achieve them. This mechanism, where public administrations listen directly to actors as part of a structured dialogue gives direct and unbiased feedback on existing or potential bottlenecks in national/regional R&I systems and skills and education needs. 2.3.3RIS3 conditionality has helped address institutional weaknesses in innovation systems. The effectiveness of the EU investments under cohesion policy depends on the institutional capacities in the Member States through which these investments are channelled to the final beneficiaries.The organisation of the public sector and the institutional relationship and cultural norms governing the relationship between innovation actors is essential for economic performance. Characteristics such as trust, information sharing, common goal setting and mechanisms such as partnerships, clusters, stakeholder involvement and transparency and anti-corruption initiatives provide the basis for sustained economic cooperation. In this respect, the RIS3 ex-ante conditionality has helped in many regions to set an agenda for modern research and innovation institutions that can prioritise investments in research and innovation, in particular through its impact of the ex-ante conditionality is on the governance and on the behaviour of the stakeholders in the innovation systems while setting-up the RIS3. The 6th Cohesion Report (European Commission 2014a) summarises several channels through which poor governance limits the impact of cohesion policy on economic growth. In the first place, it can reduce expenditure if programmes fail to invest all the funding available. Secondly, it can lead to a less coherent or appropriate strategy for a country or region. Thirdly, it may lead to lower quality projects being selected for funding or to the best projects not applying for support at all. Fourthly, it may result in a lower leverage effect because the private sector is less willing to co-finance investment. In 2013 Rodriguez Pose and Garcilazo (2013) used econometric tools to examine the impact of both the quality of government (measured by the European Quality of Government index) and EU Cohesion Policy expenditures on regional growth in the European Union in the period between 1996 and 2007. They found that above a certain level of Cohesion Policy transfers, the quality of local government becomes a vital factor in determining the extent to which EU funds affect economic growth: the higher the quality of government, the greater the impact. In the regions with poor quality of government, greater level of cohesion expenditure can only lead to a marginal improvement of economic growth, unless the quality of government is significantly improved.

There is evidence that the capacity of a regional government in promoting public policies and minimising corruption is relevant for the effectiveness of strategies aimed at improving innovation. Regions with poor institutions can achieve significant gains in terms of innovative performance as a result of relatively small improvements in the quality of their governance systems. Good institutions, therefore, seem to be a significant pre-condition for the development of the innovative potential of regions and for making innovation strategies such as RIS3 work, especially in the periphery of Europe. 2.3.4 Changes induced by the RIS3 ex-ante conditionality The ex-ante conditionality aims at improving performance of the innovation systems concerned through a partnership process requires behavioural changes of all partners and stakeholders involved. According to early evidence based on survey data, the ex-ante conditionality on smart specialisation triggered the introduction of significant adaptations in the stakeholder involvement process (more than 60% of respondents). Changes in the behaviour of administrations were achieved without imposing a unique model to be followed by all regions and Member States with substantial scope left for adaptation to local specificities. This resulted in clear differences in the way smart specialisation elements are articulated and implemented on the ground, revealing differences in the starting point of regions and Member States facing a new approach to innovation. The majority of regions acknowledge that RIS3 has had a positive impact on their innovation policy governance, with better planning and impact orientation and more inter-departmental cooperation (e.g. among the research, education and industry ministries). As a result of the action plans a number of Member States needed to make changes to fulfil the preconditions (for example, the need to involve national and regional bodies). There was a clear difference between Member States with an already established structured strategy and Member States with a weaker strategic framework. Many Member States or regions with a strong tradition in innovation adapted existing strategies. In contrast, EU13 Member States developed their regional (e.g. Poland) and national strategies according to the guidelines of the European Commission. This suggests that the introduction of the RIS3 ex-ante conditionality has significant potential for the improvement of the governance of national and regional innovation systems in many Member States. 2.4Early implementation and expected results 2.4.1Expected results During the negotiations on their programmes, EU Member States and regions have developed over 120 RIS3 strategies establishing priorities for research and innovation investments in the programming period 2014-20. Throughout this period an amount of more than EUR 40 billion (and more than EUR 65 billion including national co-financing) will be allocated to regions through the European Regional Development Fund (ERDF). Overall, support to research, innovation and entrepreneurship is expected to help 15 000 enterprises to introduce new products to market, to support 140 000 start-ups and to create 350 000 new jobs by the end of the programme period . In addition, around EUR 2.5 billion is focussed on clusters and business networks and EUR 1.8 billion have been programmed under the European Social Fund (ESF) for strengthening human capital in research, technological development and innovation. Foreseen outputs for ERDF investment in Research and Innovation Number of new researchers in supported entities: 29,372 full time equivalents Number of researchers working in improved research infrastructure facilities: 71,960 full time equivalents Number of enterprises cooperating with research institutions: 71,252 enterprises Private investment matching public support in innovation or R&D projects: 9,985,491,257 EUR. Number of enterprises supported to introduce new to the market products: 15,385 enterprises Number of enterprises supported to introduce new to the firm products: 26,938 enterprises Number of enterprises participating in cross-border, transnational or interregional research projects: 5,177 enterprises Number of research institutions participating in cross-border, transnational or interregional research projects: 1,117 research institutions

The long-term impact of implementation of smart specialisation strategies in terms of increased innovation, job creation and improved productivity will require a number of years and will be examined as part of the ongoing and ex-post evaluation of Cohesion Policy programmes. 2.4.2Investment share in Research and Innovation (R&I) The largest investments in research and innovation (R&I) in absolute terms are planned in Eastern and Southern Europe (ERDF, ESF), notably under the thematic objective (TO1) research and innovation. On average, 10.6% of ESIF are committed to R&I. As a share of total investments, planned investments in R&I are higher in Northern Europe. Under TO1 the five largest planned investment categories are research and innovation processes in SMEs (including voucher schemes, process, design, service and social innovation) EUR 6.7 billion; Research and innovation infrastructure (public) EUR 6 billion; Technology transfer and university-enterprise cooperation primarily benefiting SMEs EUR 4.4 billion; Research and innovation activities in public research centres and centres of competence including networking EUR 4.2 billion and Research and innovation processes in large enterprises EUR 2.5 billion. The Member States with the largest planned investments in absolute terms are Poland EUR 7.5 billion, followed by Spain 4.7 billion, Germany 3.8 billion, Italy 3.5 billion, Czech Republic 2.4 billion and Portugal 2.3 billion. The Member States with highest share of investment planned for TO1 are the Netherlands, with 32.1%, followed by Denmark (23.2%), Luxembourg (20.8%), Germany (20.6%) and Austria (19.8%). Graph 7: Planned investments under TO1 Source: ESIF-viewer, visualising data for ERDF, ESF, CF and YEI, http://RIS3platform.jrc.ec.europa.eu/esif-viewer 2.4.3Thematic priorities of regions – Eye@RIS3 In RIS3 strategy documents, most regions and Member States have identified different combinations of broadly defined priorities. The RIS3 definition process identified a range of thematic priority areas for investments – e.g. health, climate, energy and industrial modernisation driven by key enabling technologies, transport, mobility, creative economy, bio-economyand much more. The identified areas have been found at the intersection of economic sectors, expected to develop faster, thanks to their novelty, diversity and innovation, as well as new marketing and organizational solutions. This could nonetheless also involve revamping traditional sectors by mixing them with new economic areas or focusing on their particular elements from a new viewpoint based on a specific advantage. Examples of RIS3 priority-setting processes In Poland, the RIS3 finding process resulted in 20 national and 81 regional smart specializations, encompassing both traditional sectors (such as tourism, furniture or agriculture) and more innovative technologies and industrial processes (such as multifunctional materials, including nanoprocesses and nanoproducts). In Denmark, some sectors appeared in several regions' identified areas of strength and opportunities (health e.g.), whereas other sectors appeared more region specific (e.g. blue economy). This identification process has enabled the Danish regions to adopt a more systematic approach to the entrepreneurial discovery process. In the UK the smart specialization strategies depend on the unique circumstances of the different “Member States” (England, Scotland, Northern Ireland and Wales). Innovation policies are developed at national level in partnership with businesses and research institutions across the Member State, whereas other elements of smart specialisation can only best be delivered at the local level, such as strengthening of local innovation ‘ecosystem(s)’ and building local capabilities, supporting local supply chains to invest and collaborate, catalysing and leveraging the differing opportunities of social innovation; and branding and positioning places as credible centres of smart specialisation. Ireland's smart specialisation strategy provides indicative multi-annual plans for budgeting and prioritisation of investments linked to R&D, identifying 14 strategic areas where public investment in research should be concentrated. These strategic areas encompass the priorities both at national level and at regional level. A “mapping” exercise of the existing strengths evidenced regional specializations such as Medical Technology concentration in the West of Ireland, or Marine Renewable Energy in the West and North West. Estonia has chosen surface coating technologies and nanotechnologies in new materials as one of the domains of the smart specialisation. For instance, a company, Skeleton Technologies, used an ERDF grant to develop a high-performing and competitive ultra-capacitor technology . Combined with support under Horizon2020 and later financing by the European Investment Bank, the company became Europe's leading producer of ultra-capacitors. Graph 8: Ten most common categories of priorities Source: Eye@RIS3 database, http://RIS3platform.jrc.ec.europa.eu/map

The Eye@RIS3 tool of the Smart Specialisation Platform provides detailed maps of regions according to thematic priorities, as illustrated below for energy. Graph 9: Example Eye@RIS3 map of regions with energy related priority areas Source: Eye@RIS3 database, http://RIS3platform.jrc.ec.europa.eu/map 2.4.4Selection of operations and expenditure declared in ESI Funds The European Regional Development Fund is the most important source of support for smart specialisation strategies in most regions. By January 2017, the progress of implementation on the ground was picking up speed. The end-January indicator of project selection has reached 26% on average for all the European Regional Development Fund (ERDF) projects. When examining the thematic objectives (TO) that correspond to the eligible costs of projects selected, supports for smart specialisation (TO1 – EUR 16 billion) and for SMEs (TO3 – almost EUR 20 billion) are the most advanced fields approaching 40% of ERDF allocation. Under TO1 – strengthening research and innovation: about one fifth of the EUR 16 billion eligible costs fall under the category of research and innovation processes in SMEs (cat.064). Together with technology transfer (cat. 062), activities in public research centres (cat.060), public infrastructure (cat.058), and processes in large enterprises (cat.002) about 75% of the overall eligible costs are covered. The eligible costs in selected projects are relatively evenly distributed across these four categories (in a range of EUR 1.9 billion to EUR 2.6 billion). Under TO3 – enhancing support for SMEs: generic productive investment in SMEs (cat. 001) makes up almost half of the EUR 20 billion eligible cost in selected projects. Adding SME business development support (cat.064) and advanced support services to SMEs (cat.066) results in coverage of 80% of the expenditure of selected projects. 2.4.5Evidence on implementation through analysis of calls for projects An ongoing study by European Commission (JRC) analysing the calls for projects launched under the ERDF Thematic Objective 1 “Strengthening research, technological development and innovation” in 2014-2016 in five Member States (Poland, Italy, Portugal, Hungary, Lithuania and Slovenia) reveals that the smart specialisation (RIS3) approach is being translated into practice and is playing a pivotal role in the implementation of ERDF innovation-linked measures within national and regional Operational Programmes. In most of the examined calls, RIS3 alignment is a binding eligibility condition for R&I funding. ERDF Operational Programs – Thematic Objective 1 (Research and Innovation): Number of RIS3-related calls (31 December 2016) Member State Published calls (end-2016) RIS3-related calls (eligibility condition) Number Number % of total calls Italy 66 61 92 Poland 109 105 96 Portugal 54 54 100 Hungary 11 7 64 Lithuania 10 10 100 Slovenia 7 7 100 TOTAL 257 244 95 Source: Adaptation from Gianelle, C., F. Guzzo, and K. Mieszkowski (2017), Smart Specialisation at work: Analysis of the calls launched under ERDF Operational Programmes, JRC Technical Report, forthcoming. Nearly all ERDF resources made available through the calls support project proposals falling exclusively within RIS3 priority areas. ERDF - Thematic Objective 1 (Research and Innovation): Funding allocated through RIS3-related calls (31 December 2016)

Member State ERDF resources Overall ERDF funding for TO1 in each MS (2014-2020) RIS3 related calls: % of TO1 resources Total published calls (EUR) RIS3-related calls (EUR) % of RIS3 related calls Italy 767,830,874 741,203,316 96.5 3,512,735,843 21.1 Poland 3,860,052,103 3,846,348,571 99.6 8,351,428,665 46.1 Portugal 1,253,320,000 1,253,320,000 100 2,328,812,052 53.8 Hungary 1,194,255,484 1,073,610,323 89.9 2,148,860,450 50.0 Lithuania 244,536,487 244,536,487 100 678,878,835 36.0 Slovenia 75,232,627 75,232,627 100 461,739,158 16.3 TOTAL 7,395,227,575 7,234,251,324 97.8 17,482,455,003 41.4 Source: Gianelle, C., F. Guzzo, and K. Mieszkowski (2017), Smart Specialisation at work: Analysis of the calls launched under ERDF Operational Programmes, JRC Technical Report, forthcoming. The study also shows the existence of "spill-overs" of smart specialisation into other policy areas, in particular SMEs competitiveness, access and use of ICT, shift towards a low-carbon economy, and education and training. There exist calls embracing different policy instruments which support integrated project proposals falling within RIS3 priorities areas. The study shows that the most common category of beneficiaries is consortia of enterprises and research organisations. Together with three other categories - single (large, small and medium sized) enterprises - consortia of enterprises, and consortia of SMEs, they are generally the beneficiaries of calls aiming to support R&I projects. 2.4.6The establishment of the S3Platform One of the main achievements of the smart specialisation approach has been the establishment of a community of practice for design and implementation of smart specialisation strategies. To assist Member States and regions in the process of developing, implementing and reviewing their smart specialisation strategies, the Commission set up the Smart Specialisation Platform (S3 Platform) in 2011. Its objective has been to provide information, methodologies, expertise and advice to national and regional authorities as well as to promote mutual learning and trans-national cooperation. It has around 200 members in total including 18 EU Member States and two non-EU countries, as well 170 EU and nine non-EU regions. The S3 platform has developed a number of tools to encourage and support stakeholder interaction in RIS3, such as online matchmaking tools, peer review exchanges and learning workshops, giving interested parties a solid basis on which to interact with each other. It is clear, however, that an insufficient level of development of innovation environment is hampering the participation of some Member States and regions, especially from the EU-13, and limiting cooperation with more developed regions from the “old” Member States. Smart specialisation cooperation actively involves a wide variety of stakeholders — national and regional authorities, universities, research institutions, business and civil society — and therefore brings significant opportunities to exploit synergies, facilitate the transfer of knowledge and capabilities and develop new ideas. A transnational perspective enables Member States and regions to evaluate their competitive position with regard to others, obtain the necessary research capacity or overcome a lack of critical mass. Graph 10: Registered Member States and regions in the RIS3 Platform Source: RIS3 Platform, available at http://RIS3platform.jrc.ec.europa.eu/RIS3-platform-registered-regions 2.4.7Influence on national and regional systems There is a range of evidence which shows how smart specialisation strategies have influenced national and regional innovation systems. 2.4.7.1Governance and institutional changes New practices in public administrations have emerged at national, regional and local level with regard to innovation policy-making. The RIS3 approach has brought about significant structural and institutional changes in regional governance, triggering or strengthening inter alia, interdepartmental cooperation, participative and inclusive governance, more transparent and efficient monitoring mechanism. Examples of how RIS3 has triggered structural change in some EU Member States: In the Czech Republic, the national authorities have given regions the opportunity to determine their own priorities by exploring their R&I strengths and weaknesses, growth potential and engaging with regional stakeholders. This should lead to the better allocation of financial resources. Although regions still do not hold formal legal responsibilities in R&I, they have designed their RIS3 strategies and manage them under the ESIF-funded Smart Accelerator project, depending on the readiness of regions. In Slovenia Strategic Research and Innovation Partnerships (SRIPs), established during the RIS3 design phase, play a key role in transforming the governance structure. SRIPs are clusters that bring together companies, knowledge institutions, civil society organisations and notably, different government services. RIS3 initiated an unprecedented pooling of public and especially private research, technology, development and innovation capabilities in key priority areas. This is accompanied by comprehensive and well-coordinated government support addressing all relevant competitiveness dimensions and simultaneously emphasising forward-looking and disruptive types of innovation through the integration of science, engineering, design and art. In Sicily (Italy), innovators have pointed out that most ideas have often failed to get off the ground because they did not pass funding eligibility thresholds. The regional authorities recognised the need for a different governance model. A new cross-departmental structure now coordinates the analysis, planning, guidance, and monitoring of RIS3. This is complemented by permanent thematic groupings that include international partners. In Lapland, systemic RIS3 thinking has emerged (rather than a new governance structure): RIS3 implementation is followed up horizontally throughout all the layers of the planning and decision-making process in regional development. In East Macedonia and Thrace (Greece), the entrepreneurial discovery process (EDP) required not only the introduction of participatory dialogue into research, technology, development and innovation policymaking, but also renewed efforts to build trust in the public sector. This transfer of ‘entrepreneurial· knowledge’ into policy intervention required that stakeholders who took part in the EDP were kept informed about policy outcome through: •EDP focus groups: a set of four sector-based events, aimed at generating innovative ideas through interaction between business, the public sector and research organisations within the RIS 3 priorities; •Project Development Labs (PDL): a set of two events aimed at processing EDP ideas and moving them towards implementation, identifying funding opportunities and action plans for policy. During the second PDL in particular, policymakers presented to ‘Triple Helix’ actors the draft calls for proposals, which had been developed during the EDP focus groups. Stakeholders were able to comment on those and develop their own ideas further with the support of experts in R&D funds. With the RIS3 experience, policymakers in this region were given responsibilities for R&I policies. These new powers pushed the managing authority of the ERDF operational programme to develop, together with the Joint Research Centre (JRC), skills in participatory leadership to pursue EDP in different sectors. Through the EDP focus groups, the region set out in detail its priority areas and, building on this, analysed the administrative and legal aspects necessary to write effective calls for proposals. This involved interactions with the national government, the European Commission and experts in the field. Furthermore, throughout this process, stakeholders themselves noted that a better awareness of relevant actors (through updated databases and appropriate avenues for interaction) was necessary for conducting a proper EDP. In the public consultation 92% of respondents replied that they think they should be more involved in the design and/or implementation of S3 challenging existing innovation governance structures. The respondents have been asked also which other organisation should be in their opinion more/better involved in the design or implementation of R&I support in their country / region. Most respondents see a need to involve enterprises (55% for medium-sized enterprises, 46%, for large and 43% for small and micro-enterprises) more in the implementation or research and innovation support. More involvement of SME intermediaries such as cluster organisations and Higher Education Institutions (43% each) is also seen as important. A recent survey shows that the EU’s new cohesion policy has led many regions and Member States to change their behaviour with regard to collaboration on R&I policy. The main barriers to collaboration seem to be inter-related and include lack of resources, insufficient political commitment, insufficient engagement of regional stakeholders and unclear objectives. One interpretation is that it is challenging to communicate clearly to stakeholders and politicians the outcomes of interventions, with the result that stakeholders are unwilling commit or mobilise resources. Innovation policy interventions quite often support activities that provide indirect and dynamic benefits that are not easily measured, divisible or attributable to individual actors or activities.

2.4.7.2The Entrepreneurial Discovery Process The Entrepreneurial Discovery Process (EDP) is an inclusive and interactive bottom-up process in which stakeholders from different environments — governance, firms, higher education institutions and civil society — gather on a regular basis to explore and select the domains of R&I in which regions are likely to excel, given their existing capabilities and productive assets. The EDP pursues the integration of entrepreneurial knowledge, fragmented and distributed over many sites and organisations, through the building of connections and partnerships. Stakeholder interaction has proved conducive to opening up new market and technological opportunities, as well as informing governments’ policy and decision-making processes. The EDP approach facilitates the setting-up of public-private partnership and larger-scale projects. Thus, the smart specialisation concept has become an influential instrument for place-based innovation-driven growth. Examples of the Entrepreneurial Discovery Process in some EU Member States: A novel approach was introduced in Calabria (Italy) to encourage stakeholder engagement in the design and implementation phase of RIS3. Along with the establishment of thematic workshops, various tools (online consultations, technology foresights and global value chains analysis, etc.) were implemented to promote information gathering and public debate. Eight thematic platforms are about to be launched to maintain the momentum generated by the RIS3. They should promote industry-science cooperation, explore market opportunities, help select and monitor innovation areas, support regional firms’ outward orientation and global engagement and shape decision-making processes in general. A newly established RIS3 steering committee is responsible for taking decisions on the strategy’s revision and the exploration of new innovation areas. To ensure main stakeholders’ involvement, this committee is composed of representatives from the quadruple helix. The emergence of a bottom-up approach to policymaking has led to a dramatic change in the approach to innovation in the Pomorskie Region (Poland). Various tools such as co-working platforms and forums have been developed to engage stakeholders in a continuous and long-term exchange. The entire ecosystem is mobilised and academic establishments have started setting up partnerships with businesses. Almost all regional policymakers who recently took part in a survey judged the entrepreneurial discovery process to have been effective in identifying investment priorities for regional development. There is a high level of satisfaction with the EDP and its ability to engage stakeholders, increase trust among stakeholders and towards the public sector and to inform policymaking. The way in which the outcomes of the EDP have been embedded in the policy process varies between regions, with some considering it as mandatory and some seeing it as optional. 2.4.7.3Monitoring Through smart specialisation, European regions and Member States have designed a set of result-oriented policy actions, whose capacity to meet the strategic objectives need to be monitored closely. A substantial effort has been made to extend monitoring activities in order to integrate a range of strategic functions with the goal of better informing the decision-making process and keeping stakeholders engaged. 2.4.7.4Economic transformation, new technological and market opportunities The RIS3 logic has facilitated a reflection on the economic transformation of a wide range of regions. It promotes locally driven knowledge-based growth while breaking down silos between research and economic development. In addition, a continuous entrepreneurial discovery process fosters cross-sectoral working practices and the emergence of clusters as a practical instrument for encouraging stakeholder commitment and collaboration. A shift towards a demand-oriented R&I policy approach is taking place, thus furthering private co-financing leverage. Examples of transformation processes in some EU Member States: RIS3 in Saxony (Germany) has triggered thinking about a much broader definition of innovation that goes beyond R&D, to encompass new emerging issues such as business models, design, market research, and social innovation. RIS3 has acted as catalyst for stakeholders' interaction to determine these new elements. Among the seven specialisation areas selected by the Languedoc-Roussillon (France) region, the one dedicated to water technologies provides an example of the impact of the structuring effect of RIS3 on the regional ecosystem in a specific field. Regional stakeholders with the support of the competiveness cluster and the regional innovation agency aim to form a complementary chain in Water technologies and then reach a necessary critical mass. The role of the RIS3 framework was crucial in contributing to the faster development of six groups of integrated solutions in water technologies to better access to international markets. In Emilia Romagna (Italy), RIS3 gave a new impetus to a more demand-oriented reshaping of regional research and innovation policies. The smart specialisation exercise is helping to address more effectively companies’ need for innovation through targeted support on research projects whose results can be used to create new products and processes that generate market value and enhance regional firms’ competitiveness. In Catalonia (Spain), a clear shift from infrastructure/equipment towards innovation led projects can be seen. RIS3CAT communities are more company focused. Innovation Public Procurement schemes foster collaborations between public administrations, R&I agents and, in the case of public procurement, with companies. New instruments, such as CatLabs promote the participation of civil society in innovation. In Podkarpackie (Poland), the development of an aviation and aeronautics cluster is helping the regional economy diversify from agri-food into high-tech industries and creates links with world class aviation businesses and research activities 2.4.7.5Behavioural changes in universities and research centres Smart specialisation gives a leading role to universities as actors in their local innovation ecosystems, connecting global and local knowledge domains, and arguably gives them far more prominence than it has been the case under previous structural funding programmes. Universities have started to play an increasingly important role in the design and implementation of regional RIS3, and a much broader role than merely generators of technological research and other ‘upstream’ activities. There remains though scope to better translate the presence of excellent universities and research centres into benefits for local businesses and the local economy.



Examples of fostering behavioural changes in research institutions in some EU Member States: In Catalonia (Spain), the University of Girona set up the so called “Campus Sectorials” to foster actors’ entrepreneurial readiness. These are independent entities aimed at increasing the social and economic impact of the university by acting as bridges between the academy, the local productive sector, the institutions and society. The “Campus Sectorials” act as business-led knowledge brokers between researchers and the local private sector, launching an initial embodiment of EDP and preparing participation in it. Indeed, they have been critically engaged throughout the whole cycle. Smart specialisation has helped develop a more focused and strategic relationship between Värmland's regional authority (Sweden) and Karlstadt University. A renewed cooperation agreement has been put in place for opening up the agenda of public research institutions. It aims to develop excellence in teaching and research based on interaction with local private and public sector institutions, while increasing the international profile of the university and the region. Tangible results have already been achieved: in the first phase of Horizon 2020, Karlstadt University registered an impressive success rate of 32%, with most of the funded projects related to an RIS3 priority, a result the university explains partly by cooperation with regional institutions that give real life opportunities for scientific enquiry. Improving education in training is a more long term but just as important objective. The knowledge generated from the RIS3 areas is fed into degree curricula as well as its professional training courses. This is done through guest lectures, student placements, joint thesis supervision, as well as programme management, since each subject area is managed by council that includes an external representative. From the region's side, it hopes that the Smart Specialisation Academy can increase the long-term attractiveness of Värmland, both for university students and innovative companies that seek highly skilled employees and cutting-edge knowledge. The public consultation responses confirm that over the past 3 years thanks to the S3 the interactions between the different stakeholders in the innovation eco-systems (including universities and research centers) has improved significantly. In more detail, the implementers of innovation noted a significant increase in cooperation with Higher Education Institutions (HEI) (76%), followed by more cooperation with clusters or business associations (66%) and consultancy firms (64%). 2.4.7.6Cooperation Outward-looking specialisation (RIS3) emphasises the identification of niches, clusters of related industries, cross-sectoral innovation, value chain linkages and the solving of societal challenges to find a region’s potential advantages in international markets, and to identify partners to help deliver new solutions and solve common challenges. This is the case not only for industry and academia, but also for regional policymakers who need to engage in interregional collaboration processes. Building interregional strategic cooperation The joint strategic process between Galicia (Spain) and Norte (Portugal) began in 2014 with the creation of the cross-border Work Group (Technical Secretariat) made up of representatives from the Galician Innovation Agency and the Northern Portuguese Regional Coordination and Development Commission. They set up the governance for the development of a joint strategy and carried out an analysis which identified the main areas for collaboration between the two entities. At the end of this strategic exercise, a shared vision for the future was reached that includes the alignment of R&I goals and the proposal of joint priorities, actions for support, as well as an evaluation system with indicators to follow up implementation.

According to the public consultation results, 59 % of respondents have been directly involved or observed concrete, strategic interregional cooperation between their region and other regions that have similar or related S3 priorities. Moreover, a large majority (86 %) of the respondents confirmed that developing interregional cooperation in the framework of smart specialisation is important. 2.4.7.7International recognition of Smart Specialisation Smart specialisation is also now attracting the attention of countries outside Europe. Smart specialisation has therefore been recognised by international organisations such as OECD, the World Bank and the United Nations Economic Committee. At the European level, the Proposal for a New European Consensus on Development (Our World, our Dignity, our Future) and the External Investment Plan (EIP), the Digital for Development (D4D) initiative, together with the support of further public sector's investments in R&I capacity in developing countries to unlock private sector investments will help to drive economic and social development internationally. The regulation outlining pre-accession funding identifies smart specialisation as a thematic priority for helping enlargement Member States. In a recent Joint Staff working document for the Eastern Partnership, the European Commission and the representatives of the six partner member states agreed to having at least one partner government commit to starting a full-fledged RIS3 process in 2017 and formally adopting a new innovation strategy by 2020. In the Western Balkans, Asia and Latin America, many countries have expressed their interest in learning from and exchanging knowledge with European counterparts that are successfully implementing smart specialisation strategies., Examples of smart specialisation strategies put in place outside the EU: Australia, Smart Specialisation Strategy for the Hunter Region: aims at boosting regional competitiveness and prioritising the region's unique strengths, namely in food and agri-business, mining activities, medical technologies, oil, gas and energy resources, defence, advanced manufacturing, and creative industries. The strategy is the first of its kind in the country and has already identified the necessary actions to deliver innovation-driven growth. Brazil, Project Regional Innovation System in Pernambuco: EU-Brazil pilot project to design a RIS3 for the State of Pernambuco in economic sectors relating to clothing. The project aims to build endogenous capacity to develop local talents in the production of clothing. Chile, Strategic Decentralisation of Innovation in Chile: decentralisation pilot plans are being implemented in the regions of Biobio, Antofagasta and Los Rios with the objective of creating incentives for business innovation. A total of 25 strategic specialisation programs have been implemented in 7 strategic sectors (mining, healthy food, sustainable tourism, sustainable construction, health technologies, fishing, and aquaculture and creative economy). Peru, Regional Agenda for Sustained Growth, Strategy of Smart Specialisation and Innovation in the Region of Piura: aims at designing the specialisation agenda of Piura for the next 5 years in light of innovation policies done at the EU. The project is an initiative by the University of Piura and includes activities such as territorial diagnostic, strengths analysis, action plan and engagement of quadruple helix actors. Exchanges with Latin America are an example of the positive results generated by the sharing of EU regional innovation programmes, mostly in the thematic areas of agri-food and energy. Argentina, Brazil, Chile, Colombia, Mexico, and Peru have established bilateral agreements with the EU to elaborate, implement, and manage urban and regional policies for innovation, which are mostly under implementation phases at the moment. This experience will be capitalised on under the European Union’s new International Urban Cooperation programme, 2016-2019, which, in the Latin American sphere, will mobilise policymakers and other regional actors to promote innovation, working closely with EU regional counterparts in a multi-stakeholder context where the business sector is expected to play a major part, thus generating new opportunities on both sides. An example of international cooperation on smart specialisation: EU-Latin America cooperation The experience of EU regions in promoting regional innovation through Smart Specialisation Strategies (S3) is widely considered as an inspirational model for many countries and regions in Latin America. Many of the latter are seeking to diversify away from a longstanding dependence on primary products in order to create economies with greater focus on activities with more added value. Accordingly, countries such as Argentina, Brazil, Chile, Colombia, Mexico and Peru are seeking to create economies less dependent on exporting natural resources in favour of a knowledge-based development model where innovation is the key driver of structural change. Given the European experience in this field, cooperation with European Union institutions and the regions is a priority for many Latin American countries. A new framework for this cooperation was created in 2015 in the EU-La Comunidad de Estados Latinoamericanos y Caribeños (CELAC) Summit which called on both sides "to strengthen the capacity of the regional and urban authorities to promote economic development and innovation and social inclusion and cohesion" . The European Commission has played a key role in promoting this cooperation through the Directorate-General for Regional and Urban Policy and the Joint Research Centre (notably its S3 Platform). This ongoing work has led to the exchange of experiences and mutual learning between Latin American countries (notably, Brazil, Chile and Peru) and European regional authorities and specialised agencies. Themes for exchange have included the conception, implementation and management of regional innovation strategies, including cluster development and the promotion of innovation SMEs, and involving cross-border and global value chains. 2.4.8Overall assessment of achievements Smart specialisation has contributed to the quality of investment in innovation and entrepreneurship under cohesion policy. In terms of key Commission priorities such as creating jobs, growth and investments, smart specialisation has been central in: ·Mobilising investments of EUR 65,8 billion, where EUR 43,7 billion is from the EU budget and the rest are national contributions; ·Supporting investments where the needs have been developed through a bottom-up process of priority selection; ·Creating an investment friendly environment through an intensive dialogue of innovation stakeholders in the local context; ·Addressing priorities of the Digital Single Market, Energy Union, the Circular Economy and the single market through technological and non-technological investments in innovation.

One of the main achievements of RIS3 approach has been the establishment of a community of practice for the design and implementation of smart specialisation strategies. This has been made possible on the basis of the RIS3 'ex ante conditionality'. The public survey results indicate that for 59% of the respondents the S3 process had an important impact on the quality and range of R&I support to their work over the last three years. The respondents from North-Western EU countries perceived a bigger impact (65%) than those from Mediterranean countries (56%). The majority of respondents from Central and Eastern European countries noted an impact of S3 in the past three years (but it needs to be noted that 21 of the 25 respondents come from Poland, i.e. this trend might not be generalised yet). The effort to concentrate resources on limited number of priorities has changed the perception and the mind-set of key innovation actors, including businesses and researchers, encouraging them to focus on their capacities and develop a tailored policy mix that is relevant for specific priorities rather than repeating support for generic capabilities and research infrastructure. It has involved more decentralisation in R&I policymaking and greater use of the public-private partnership approach. Regional innovation actors have become better connected since national and regional authorities were required to involve businesses, researchers and civil society to identify the unique competitive advantages of a region – as also shown by the results of the public consultation (see Section 2.1.4). Innovation actors from different fields were often not connected at cross-sections of technological, sectoral, or geographical strengths. In addition, regions have become more outward-looking in their approach to research, innovation and enterprise. They are now more able to cooperate with others since their complementary strengths are now clear. This cooperation is making it easier to build critical mass and to make their RIS3 investments more cost-effective. This has encouraged a wider EU-level perspective to be considered. Regarding impact, there are now also more robust performance frameworks in place, with methodologies developed to capture the results and impacts of innovation-led development. New approaches to improve the implementation of RIS3 concepts include constant feedback loops of diagnostic monitoring (problem solving) and systematic learning-by-doing at project and policy level. 2.4.8.1Weaknesses and areas for improvement More efforts are still needed as regards the choice of priorities and keeping a structured interaction between researchers, businesses and civil society going. The choice and design of policy tools for implementation of the RIS3 - and the monitoring systems - still need attention in many regions to make them fit for delivering on the RIS3 priorities and objectives. There are also challenges in less-developed regions to build institutional and legal environment conducive to innovation and join international networks and value chains. The need to reinforce trans-border cooperation is one of the clearest challenges of all RIS3 work. Effective engagement of regions in interregional collaboration remains limited. In addition, global challenges and new political priorities such as COP21, SDGs, the circular economy or bioeconomy create opportunities for new research, but also social and business model innovation and new value chains. These can build on local natural capital, such as unexploited biomass resources, using side-streams or wastes in the agri-food sector for bio-based products or producing textiles from wood cellulose. These opportunities have been identified and recognised by many EU regions. It is important to further broaden the scope of actors and topics involved in the interactions at the local level. These are still too focused on purely research and technology oriented debates and led by universities and research organisations rather than local business firms. Civil society organisations are underrepresented. If intermediaries such as clusters are absent, discussions should be encouraged directly between research actors and firms. There is a risk that, when the process is anchored at the political level or covers a large territory, it will tend towards political negotiation rather than towards open-ended processes of joint discovery. The process which led to fulfil the conditionality made it evident that some preconditions are necessary to put smart specialisation in place: ·Leadership is necessary to embed design and implementation of smart specialisation in the overall policy making of the region. This requires a strong commitment to mobilise innovation actors around common vision of regional economic development. The vision making and facilitation of interactions should not finish once the strategy has been adopted. Interactions with a large variety of actors should be a process that continues throughout implementation and leads to concrete action i.e. investments or an adjusted policy mix. ·An enabling public administration at all government levels is crucial in order to harvest the knowledge and information generated through the process of interactions between innovation actors. The public sector needs to have the soft skills of collaboration, leadership, team working as well as the ability to translate received feedback into an effective policy mix that takes into account the local institutional, legal and political context. ·Real and continuous interactive process (so called Entrepreneurial Discovery) between businesses, universities, research centres, wider groups representing civil society that allows market forces and the private sector to discover and produce information about new activities. ·Modern role of government changing towards providing the right conditions to empower key actors to contribute to the strategic development of the region. Policy and investment decisions should therefore evolve through interactions with and between entrepreneurs (e.g. business people, researchers and social activists) and local citizens. In particular, the government needs to be much more engaged in helping design and develop the collaborative (investment) projects that represent the realisation of the entrepreneurial discovery process. ·Openness to the external world is essential in the global economy. Innovation networks call for a regional and innovation policy that goes beyond regional and national borders and which is not reluctant to be benchmarked and cooperate with others. ·Transparent monitoring mechanisms - besides the legal obligations - should be understood as a management tool for the strategy. Good monitoring system helps public authorities to properly implement and react promptly to inappropriate deviations. However, in order to maximise the role of smart specialisation to contribute to Europe's innovation potential in the context of globalisation, it is necessary to examine the broader policy framework in which it operates. This issue is addressed in the next section. 3Key challenges and next steps: boosting innovation-led growth In order to promote growth at regional level, target new sources of investment in innovative sectors and increase the competitiveness of European regions at a global level, the following four challenges need to be addressed:

·Further reform of the regional and innovation systems; ·Increase cooperation in innovation investment across regions; ·Leveraging research and innovation in less developed and industrial transition regions; ·Harnessing synergies and complementarities between EU policies and instruments. 3.1Further reform of research and innovation systems 3.1.1The contribution of research and innovation to EU economy and productivity growth The importance of productivity as a key driver of sustained economic growth and consolidation of the recovery in Europe has been identified by several studies, such as 'The Future of Productivity’by the OECD. Labour productivity in the EU is around 15 percent lower than in the United States and this gap has increased in recent years. Graph 11: The real labour productivity gap (GDP per hour worked) between EU Member States and the United States, 2014 This labour productivity gap stems in particular from under-performing labour-intensive services which highlights the important of both advanced technologies and service innovation. While many factors drive multifactor productivity, for most advanced economies innovation and innovation-related investments in R&D, ICT and skills development are crucial. These processes are affected by different factors that can range from the functioning of the institutional set-up, the abundance and quality of the infrastructure network or the functioning of the markets that allow for an efficient allocation of resources to more productive activities. 3.1.2The need for reform Structural reforms and better regulatory and institutional frameworks are essential to improve competitiveness and the sustainability of growth through increased productivity in all Member States. While it is always difficult to properly measure complex phenomena such as innovation, the relationship between private R&D investment, as a crude proxy of innovation capacity, and multifactor productivity growth shows a positive relationship. Graph 12: Business R&D intensity, 1995 versus average annual growth in multifactor productivity, 1995-2007 RIS3 aims at a better and smarter targeting of public investment in R&I through a focus on regional strengths and opportunities. An innovation strategy should focus on the barriers to innovation (regulation) and the needed support systems (investment in R&D, support for technology transfer and STEM education) that can spur more innovation in all three major sectors of an economy (for profit, non-profit and government). Efficient implementation of these strategies, however, requires well-functioning regional and national R&I systems. In this respect, the European Semester process clearly shows that further progress needs to be made. While the situation differs from one Member State to another, three cross-cutting issues require particular attention: the quality of public research, public private cooperation and the business environment for R&I. RIS3 is an integral element of the Commission's analysis of R&I policies in the context of the European Semester and as a consequence is reflected in the European Semester Member State Reports and in some of the Country Specific Recommendations. The overwhelming majority of public research in Europe is financed and governed through 27 national systems (and regional ones below) which vary considerably in scale and overall quality. According to the ERA Expert Group there are systemic characteristics and consequences arising from the multi-centred and multi-level governance of research and innovation, such as: ·Barriers to researcher mobility inhibiting career opportunities; ·Difficulty in establishing cross-border academic-industrial partnerships; ·Duplication of funding between national/regional programmes dispersing resources, ·Lack of European perspective and transnational coherence in reforms undertaken at national level;

·Diminished attractiveness as a location for business R&D investment. This leads to inadequate selection mechanisms and incentives to improve efficiency, effectiveness and learning capability. Such system-failures are at the level of governance of research, implying a lack of coordination and/or cooperation among innovation support institutions. The Horizon 2020 Policy Support Facility (PSF) further supports Member States in the design, implementation and evaluation of structural R&I policy reforms. Issues linked to the implementation of RIS3 have been explicitly addressed in the context of several PSF projects such as the Peer Reviews of Hungary and Bulgaria and they will be further examined by the PSF Mutual Learning Exercise (MLE) on "National practices in Widening Participation and Strengthening Synergies" which will be launched in autumn 2017. The MLE will include exchanges of national practice at the operational level in relation to how to best support national participation in EU Framework programmes and use ESIF and exploit synergies at the national level to build up a knowledge economy. The Regional Innovation Monitor project, launched in 2010, monitors Research & Innovation policy in EU regions with special focus on industrial aspects. An online repository was regularly updated to provide an easy access and comparative overview of relevant regional support measures and strategies, policy documents and organisations. Standardised baseline regional profiles give user a quick overview of the socio-economic situation, research and innovation performance, innovation governance, policy trends and advanced manufacturing-related activities. The tools of the European Observatory for Clusters and Industrial Change – which is continuing the work of the previous European Cluster Observatory – can further help regions and Member States in setting evidence-based priorities. For instance, the Observatory provides an overview of regional strength for specialisation areas by providing a sectoral and cross-sectoral cluster mapping through its cluster mapping tool and European Cluster Panorama, which reveal concentrations of economic activities for 51 traditional sectoral cluster categories and for 10 emerging industries that represent cross-sectoral cluster categories. The Observatory's Regional Ecosystem Scoreboard captures the quality of conditions in the regional ecosystem that can foster or hinder innovation and entrepreneurship through 60 indicators and composite indicators in six dimensions (namely entrepreneurial conditions, knowledge basis and skills, collaboration and internationalisation, access to finance, demand conditions and quality of governance). Its policy action dashboard identifies specific areas that might be most promising to address by policy action as a result of a regional bottleneck analysis. The six model demonstrator regions (namely Centre region in Portugal, Nord-Pas-de-Calais in France, Hamburg in Germany, Stockholm Digital Health Cluster in Sweden, West Region in Romania) that received advisory support services from the Observatory can also serve as showcases of modern cluster policy to inspire the RIS3 process of others. 3.1.3Higher education and VET in smart specialisation Support to reforms can be increased through more emphasis on skills and education in RIS3 processes. This is the second most important element among respondents highlighted by stakeholders in the consultation. Education is a high priority, in particular for less developed regions. However, a recent Fraunhofer survey underlines that universities are perceived as focusing on their traditional remit of knowledge and talent providers as well as research organisers. Their role as entrepreneurial drivers of collaboration or platforms connecting the region to external knowledge sources is rather limited or, at least, rare except in the Nordic Member States and to a lesser extent, parts of the UK and Eastern Europe. Furthermore, the survey shows that universities' role as entrepreneurial drivers of collaborations is stronger where institutional settings are inclusive. The more the processes of consultation are anchored in the political hierarchy, the larger the average size of the territory they cover, the more dominant role they hold. It appears that the potential role of universities to build innovation capabilities in Southern, Central and South-Eastern Member States is weaker. Graph 13: Perceived role of universities in EDP: Source: Fraunhofer Survey, DG REGIO. Traditionally innovation has been seen as a result of R&D activities carried out by highly qualified staff and thus a domain of higher education rather than vocational education and training (VET). However, there are at least three reasons why high quality VET is relevant to supporting innovation: ·Technological and process innovations can be absorbed by businesses provided that employees at all levels of the production chain have the required skills; ·Given that the majority of European companies (including small enterprises) are involved in global value chains, constant innovation and efficiency are a must to ensure competitiveness in a global context. That has implications for skills and work organisation practices; and ·Innovation cannot be limited to high tech industries – it also takes place in low-tech industries which account for a large share of employment in Europe. Investment in training is also an investment in innovation, since many technical changes results from incremental innovations made by skilled workers and engineers on the factory floor. However, the potential of VET to support or even drive competitiveness, innovation and growth policies has largely been neglected in education and training policies in many countries, in particular when compared with the role attributed to the higher education sector. Countries like Austria, Denmark, Germany and the Netherlands exemplify the importance of combined strategies where VET and higher education are seen as complementary and where one cannot be developed without the support of the other. Policy makers need to integrate the VET offer into comprehensive skills and knowledge-based economic development strategies, particularly at regional and local level. This is related mainly to strategies to attract investments, to clusters, innovation, smart specialisation strategies and sustainable growth strategies. As defined in the ex-ante conditionality 10.4 on vocational education and training, countries should implement measures to foster excellence in VET which include, among others: ·Incorporating VET in economic strategies which connect skills supply and demand, based on systematic skills monitoring and anticipation;

·Building up VET providers' institutional autonomy and capacity to develop a strategic approach linked to local and regional economy and react to skills challenges; ·Promoting innovative forms of cooperation between VET providers and companies, authorities, technology centres and educational institutions, ranging from local partnerships to international networks; and ·Developing VET qualifications at higher than upper secondary level to respond to skills shortages. Transversal competences like creativity, sense of initiative and entrepreneurship are vital for innovation to reach the market. Entrepreneurship skills and attitudes should therefore be fostered in students and researchers to develop their proactivity, flexibility, autonomy, the capacity to manage projects and achieve results. Furthermore, entrepreneurship programmes provide an excellent opportunity to connect the education systems to the local economy and gives incentives for students to remain in a region. Structural Funds (in particular the ESF and the ERDF) have an important role to play in supporting concrete projects aiming to enhance the entrepreneurial mind-sets, skills and attitudes. European initiatives such as the "Blueprint for Sectoral Cooperation on Skills" and the Digital Skills and Jobs Coalition included in the New Skills Agenda for Europe, help in responding to the lack of synergies between quadruple helix actors and in developing concrete actions to satisfy short and medium-term skills needs to support innovation strategy within Member States. Furthermore, smart specialisation cannot be isolated from social innovation. Promoting social innovation within European societies and, more specifically, in social policies, entails, the combination of skills, business cultures and public services to offer innovative responses (instead of focussing only on business products). 3.2Increasing cooperation in innovation investment across regions 3.2.1Rationale for transnational, interregional, cross-border cooperation Regions play an important role in creating the conditions to attract private sector investment in innovation and for businesses to seize opportunities in new, often global value chains. Interregional and macro-regional cooperation can help to exploit complementarities to build EU-wide value-chains and encourage the alignment of investment between the private and public sector. There is a large untapped potential for more joint interregional actions with the corresponding national and regional policies as also illustrated by the Vanguard Initiative and the strong support expressed in the recent public consultation. For instance, the BLUEMED initiative intends to promote joint actions of relevant research and innovation priorities within the maritime sector in