Addressing the regional dimension of open strategic autonomy and European green industrial policy : new perspectives and pathways for impact.
Date: 2024-03-11
Institutions: Joint Research Centre
Subjects: EU industrial policy, EU strategy, European security, digital transformation, economic transition, energy grid, energy transition, green economy, industrial development, open innovation, raw material, renewable energy, report, social change, strategic autonomy, supply chain, sustainable product

ISSN 1831-9424 

Addressing the regional dimension of open 
strategic autonomy and European green 
industrial policy 

New perspectives and pathways for impact 

Trippl, M., Soete, L., Kivimaa, P., Schwaag Serger, S., 
Koundouri, P., Pontikakis, D. 

2024 

 EUR 31868 EN 

 
 
  
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How to cite this report: European Commission, Joint Research Centre, Trippl, M., Soete, Kivimaa, P., L., Schwaag Serger, S., Koundouri, P. and 
Pontikakis, D., Addressing the regional dimension of open strategic autonomy and European green industrial policy, Publications Office of the 
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Contents  

Contents ........................................................................................................................................................................................................................................................................ i 

Abstract ....................................................................................................................................................................................................................................................................... 1 

Acknowledgements .......................................................................................................................................................................................................................................... 2 

1 

Introduction..................................................................................................................................................................................................................................................... 3 

2  A changing global context and the advent of open strategic autonomy and technological sovereignty ............ 5 

3  Priority areas for OSA industrial policy ................................................................................................................................................................................ 9 

3.1  The military sector ..................................................................................................................................................................................................................... 9 

3.2  Energy transition ....................................................................................................................................................................................................................... 10 

3.3  The manufacture of microchips ................................................................................................................................................................................. 13 

3.4  Critical raw materials ........................................................................................................................................................................................................... 15 

4 

Implications for regional development ............................................................................................................................................................................. 18 

4.1  Academic insights from economic geography and (regional) innovation studies ...................................................... 18 

4.2  Potential regional development impacts of new industrial policy areas ............................................................................ 21 

4.3  The semiconductor industry ........................................................................................................................................................................................... 22 

5  Conclusions .................................................................................................................................................................................................................................................. 29 

References ............................................................................................................................................................................................................................................................. 31 

i 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Abstract  

We  explore  the  regional  implications  of  the  policy  concepts  of  open  strategic  autonomy  and  technology 
sovereignty, examining how those policies may impact and interact with industrial development and the socio-
economic  and  -ecological  transformation  of  regions.  We  highlight  that  the  effects  of  policies  on  promoting 
strategic  autonomy  and  technology  sovereignty  can  vary  significantly  across  regions.  We  demonstrate  that 
the  effectiveness  of  such  policies  can  depend  with  regional  development  and  cohesion  strategies  under 
certain  circumstances.  To  exemplify  these  arguments,  we  analyse  several  cases,  including  the  territorial 
aspects of military security, energy transitions, microchip production, and critical raw materials. Achieving OSA 
related goals without compromising environmental and social sustainability requires a fundamental rethink of 
supply  chains,  material  sourcing  and  use,  radically  different  energy  systems,  and  a  new  industrial  policy 
centred on renewable energy sources and sustainable material use. 

1 

 
Acknowledgements  

We are grateful to Johan Stierna, Francesco Molica, Michal Miedzinski, and the members of the PRI Scientific 
Committee for comments on a previous version of the paper. The usual disclaimer applies.   

Authors 

M. Trippl, L. Soete, P.Kivimaa, S. Schwaag Serger, P. Koundouri, D. Pontikakis 

2 

 
1 

Introduction  

In  this  contribution,  the  Scientific  Committee  delves  into  recent  developments  in  European  policy  making 
pertaining to strategic autonomy which  has emerged as a direct reaction to escalating geopolitical tensions 
and  uncertainties,  and  the  rediscovery  of  industrial  policy  as  a  means  to  attain  greater  technological 
sovereignty.  Strategic  autonomy  means  the  European  Union’s  (EU’s)  capacity  to  act  independently  of  other 
countries  in  strategically  vital  areas,  including,  for  example,  the  economy,  defence  and  energy.  Technology 
sovereignty,  a  related  concept,  has  been  defined  as  sovereignty  of  government  action:  “the  attempt  to 
safeguard public agency in the domain of technology and innovation, i.e. the ability to act independently in the 
face of institutional and economic boundary conditions and, in some cases, third parties' adversarial actions” 
(Edler  et  al.,  2023:  p.2).  The  potential  impacts  of  these  policies  on  regional  development  have  yet  to  be 
explored  but  it  is  clear  these  policy  developments  are  important  with  respect  to  the  EU’s  and  its  member 
states’ industrial and innovation policies and the advancement of sustainability transitions in regions. 

At first sight most of the ideas reflected in e.g. the four pillars of the EU’s Green Industrial Plan1, such as the 
Net-Zero  Industry  Act2,  the  Critical  Raw  Materials  Act3  or  the  reform  of  the  electricity  market  design4,  all 
aimed  at  reaping  more  benefits  from  the  large  single  market.  However,  their  implications  for  regional 
development  and  for  place-based  transformative  innovation  are  likely  to  be  significant.  This  is  because 
regions  possess  different  innovation  and industrial  capabilities,  natural  resources and  contextual  conditions, 
which affect their possibilities to benefit from these policy changes. 

The  EU  has  a  long  tradition  in  industrial  policy.  In  many  ways,  the  new  belief  in  Europe  in  “technological 
sovereignty”  is  reminiscent  of  some  of  the  old  ideas  from  the  1980s  and  1990s  of  creating  European 
industrial champions through the Research Framework Programmes.  Only few of those attempts succeeded, 
most failed particularly in some of the most technologically advanced areas such as digital technologies. One 
can, in other words, only hope that the new calls for strategic autonomy and technological sovereignty learn 
from past experiences. These calls are also made in a rapidly changing world, where China’s role is growing in 
importance  in  the  global  economy  (as  well  as  in  some  regional  economies  in  the  EU  as  an  investor),  and 
where both geopolitical and regional instabilities and tensions have increased. These efforts are also placed in 
a world where the impacts of climate change and biodiversity loss are more visible and increasingly extreme. 

the 

EU’s 

affecting 

(geo)economic 

In  section  2,  we  discuss  in  general  terms  what  the  new  concepts  of  open  strategic  autonomy  and 
technological  sovereignty  imply  for  the  new  forms  of  European  (green)  industrial  policy.  Viewed  through 
pragmatic policy lenses, the  notion of “open strategic autonomy” (OSA) provides a framework for assessing 
risks 
identifying 
and 
sectors/products/technologies which could be considered critical to Europe’s long-term security. Some of these 
sectors/products/technologies are discussed in more detail in section 3. We start with the defence sector: an 
area which traditionally has been kept outside of the European integration project, the latter being considered 
in first instance a peace initiative. The second sector we discuss is the energy sector: a sector which is today 
at the centre of an accelerated transformation process following the painful realisation of Europe’s fossil fuel 
dependency  on  Russian  oil  and  gas  in  the  wake  of  the  country’s  war  on  Ukraine.  The  third  case  is 
characteristic  of  traditional  industrial  policy:  the  manufacture  in  Europe  of  microchips  considered  today  a 
strategic  commodity  in  most  of  Europe’s  industry  and  in  which  Europe  lacks  domestic  production  and 

security. 

includes 

societal 

It 

1  See  https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal/green-deal-industrial-

plan_en 

2 https://single-market-economy.ec.europa.eu/publications/net-zero-industry-act_en  
3https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal/green-deal-industrial-

plan/european-critical-raw-materials-act_en 

4 https://energy.ec.europa.eu/topics/markets-and-consumers/market-legislation/electricity-market-design_en  

3 

 
 
 
 
                                                        
 
technological  capabilities.  Finally,  there  is  the  case  of  access  to  “critical  raw  materials”  many  of  which  are 
today  of  strategic  importance  for  both  the  renewable  energy  transition  as  well  as  for  the  manufacture  of 
chips and batteries and where Europe appears now to be heavily dependent on China. 

The sectors/areas discussed in section 3 are not exhaustive but rather illustrative of the  different nature of 
possible dependencies which the new industrial policies of strategic autonomy and technological sovereignty 
seek to address. In section 4, we explore the potential regional development impacts of the industrial policy 
areas  outlined  in  section  3.  As  already  noted  above,  these  impacts  have  hardly  been  addressed  in  policy 
debates  concerning  OSA  and  technological  sovereignty,  including  the  Green  Industrial  Plan.  Essential 
questions,  such  as  how  these  regional  impacts  can  inform or  guide  the  design  and  implementation  of  OSA 
industrial  policies,  and  how  place-based  innovation  and  development  policies  can  contribute  to  European 
technological  sovereignty,  remain  unanswered  but  must  be  properly  understood.  OSA  policies  create 
opportunities for regional industrial development in some places while others might benefit less. We will pay 
close  attention  to  the  question  of  which  conditions  need  to  be  (put  in)  place  for  regions  to  develop  new 
industrial  paths  or  transform  established  ones  in  strategic  sectors.  It  is  important  to  consider  that  these 
strategic  sectors  have  varying  location  requirements,  which  necessitates  a  nuanced  discussion.  Finally,  we 
assert  that  the  drive  towards  OSA  may  result  in  regional  industrial  development  with  unintended  negative 
economic,  social,  and  environmental  consequences  within  the  region  and  beyond,  highlighting  the  potential 
existence  of  trade-offs.  The  challenges  and  risks  involved  in  facilitating  industrial  development  in  strategic 
sectors must be taken into account at the regional, national, and EU policy levels. Finally, section 5 concludes. 

4 

 
 
 
2  A changing global context and the advent of open strategic autonomy 

and technological sovereignty  

The past years have seen  significant changes in the global context. Global  shifts in technological  capacities 
(above all China’s growing science power), increasing geopolitical tensions and uncertainties, growing effects 
of climate change, and a new competition between different political and value systems (Edler et al., 2023; 
OECD, 2023a) have been raising concerns. As Edler et al. (2023, p. 1) note: “The globalist assumptions of the 
post-Cold War era that reliable mutually beneficial agreements could be reached with all nations, regardless 
of ideology, have been shattered. A previously less visible, mostly political, risk dimension has been brought to 
the fore by recent geopolitical and geo-economic developments”.  

Against this background, notions such as (open) strategic autonomy (OSA) and technological sovereignty have 
gained prominence in policy debates in Europe (and elsewhere). They reflect a growing concern about Europe's 
multifaceted  dependencies  (and  thus  vulnerabilities).  As  Soete  and  Burgelman  (2023)  note,  these 
dependencies  cover  a  wide  range,  from  Europe's  reliance  on  the  United  States  for  military  and  digital 
technologies to  its  dependence  on  Russian  fossil  fuels for energy.  The  latter caused  serious problems  after 
Russia’s invasion of Ukraine in 2022, but new solutions have been found (such as the expansion of renewable 
energy, energy efficiency investments and liquefied natural gas terminals) which require some time to have a 
full  effect  (Kuzemko  et  al.,  2022).  Moreover,  Europe's  economic  and  industrial  dependency  on  China,  as 
highlighted  by  the  case  of  solar  panels  but  is  even  more  predominant  in  relation  to  several  rare  earth 
materials, has gained increased attention. The COVID-19 crisis, along with the resulting disruptions in supply 
chains,  have  further  highlighted  some  of  these  dependencies,  especially  in  sectors  considered  strategically 
vital (Molthof et al., 2021; Crespi et al., 2021). Compared to 2020-2021, for example, Europe’s dependencies 
on China, and the critical material supply chains it controls, are now much more openly discussed; yet, there 
are  substantial  regional  differences  in  terms  of  how  well  these  dependencies  are  recognised  (Kivimaa  and 
Sivonen, 2023). These developments have further fuelled debates on technological sovereignty and strategic 
autonomy.  

There  are  various  apprehensions,  including  the  resurgence  of  more  interventionist  and  protectionist  policies 
(Molthof et al., 2021) accompanied by increasing isolationism. There are fears that such policies could disrupt 
free  trade  flows  and  undermine  global  production  interdependencies  that  have  benefited  Europe  and  other 
parts  of  the  world.  Additionally,  there  are  worries  about  potential  declines  in  science,  technology,  and 
innovation  collaborations,  a  reduction  in  the  global  mobility  of  talent,  and  the  escalation  of  subsidy  races 
(OECD,  2023a,  see  also  Box  1).  For  example,  pertaining  to  the  latter,  the  impacts  on  regional  innovation 
systems, need to be assessed. Above all of this looms the concern that tackling the sustainability crisis could 
suffer because this requires open science, open innovation and global cooperation (OECD, 2023a; Soete and 
Burgelman, 2023). 

The  notions  of  strategic  autonomy  and  technological  sovereignty  remain  fuzzy  concepts.  They  appeared  in 
2013 in the context of defence and security policies and are now spilling over to other policy areas, including 
trade,  industrial  and  innovation  policy  (Molthof  et  al.,  2021;  OECD,  2023a).  There  is  no  commonly  agreed 
understanding of those terms5. Clear conceptualisations are missing (Crespi et al. 2021). 

Edler  et  al.  (2023,  p.  1)  point  out  that  technology  sovereignty  should  be  understood  "as  sovereignty  of 
governmental action, rather than (territorial) sovereignty over something”. Consequently, the authors define it 
as “the ability of a state or a federation of states to provide the technologies it deems critical for its welfare, 
competitiveness, and ability to act, and to be able to develop these or source them from other economic areas 

5 In this regard, Crespi et al. (2021, p. 349) note that “recently, the notion of technological sovereignty has been put in the 
context  of  a  series  of  related  concepts,  such  as  strategic  autonomy/sovereignty,  economic  sovereignty,  innovation 
sovereignty, regulatory sovereignty and digital sovereignty. These terms are often used interchangeably (Kelly et al., 
2020), a factor that contributes to confusion in the debate, avoiding a clear definition of the perimeter of objectives 
to be achieved and therefore the identification of appropriate policy strategies”. 

5 

 
 
 
 
 
                                                        
 
without one-sided structural dependency” (Edler et al., 2023, p. 2; see also Crespi et al., 2021). It is added that 
technology sovereignty should not be seen “as an end in itself” or a standalone goal, but as a tool to attain 
the primary objectives of innovation policy, that is, fostering competitiveness and establishing capacities for 
transformative policies (Edler et al., 2023). Crespi et al. (2021, p. 348) “argue that technological sovereignty 
can  represent  an  emerging  framework  in  which  the  renewed  interest  in  European  industrial  policy  can  be 
incorporated […] the choice of objectives (missions), strategies and instruments of industrial policy should take 
the actual context, constraints and ambitions (in terms of a European technological sovereignty) into account”. 
These interpretations of the concept and its connections to industrial policy raise questions about its practical 
implications,  its  impact  on  regional  development,  and  its  interaction  with  place-based  transformative 
innovation and industrial policies like the Partnerships for Regional Innovation (PRI) framework. 

Policy  interventions  to  enhance  technological  sovereignty  and  strategic  autonomy  typically  consist  of  (a 
combination  of)  protection,  promotion  and  projection  measures  (OECD,  2023a).  Box  1  summarises  their 
potential effects.  

Box 1: Policy interventions for open strategic autonomy and technological sovereignty 

Protection  measures:  The  OECD  (2023a)  highlights  that  protective  measures,  including  export  controls, 
foreign  direct  investment  (FDI)  screening,  negative  lists,  and  research  security  measures,  are  expected  to 
trigger  a  decoupling  from  technology  (and  potentially  science)  ecosystems  in  China.  This  could  lead  to  a 
decline  in  science  and  technology  connections.  Additionally,  trade  and  investment  restrictions  will  adversely 
affect technology-intensive companies. Lastly, both the public science sector and the corporate sector could 
confront skill shortages if the movement of international talent becomes restricted. 

Promotion measures: Such measures include industrial policies aimed at bolstering industrial capacity and 
reducing reliance on foreign  suppliers. They  could  benefit science and innovation activities. These measures 
have  the  potential  to  augment  the  availability  of  resources  and  funding  for  research  and  innovation.  It  is 
emphasised that a comprehensive perspective encompassing the entire innovation chain is crucial, along with 
a prioritisation of activities oriented towards sustainability transitions. Investing in domestic skill development 
is seen to hold significance, particularly if international mobility declines as a result of OSA policies. Recent EU 
and  US  industrial  policies  highlight  fostering  international  ties  with  like-minded  nations,  which  could  spark 
new  collaboration  opportunities.  Promotion  measures,  however,  can  also  have  negative  effects.  One  such 
concern is the risk of a subsidy race, potentially overshadowing cooperative technological advancements. The 
danger is that domestic STI ecosystems might suffer irreversible damage if high-tech firms relocate due to 
generous subsidies elsewhere. 

Projection measures: Measures such as STI alliances and technical standards are said to have the potential 
to  promote  a  diversification  of  international  STI  relations.  These  measures  are  frequently  integrated  into 
broader  recoupling  strategies  that  prioritise  aspects  like  supply  chains,  collaborative  STI  efforts,  and  the 
enhancement  of  STI  capabilities.  These  projection  measures  are  also  viewed  as  a  means  to  facilitate  the 
worldwide spread of sustainability values and to stimulate investments in research and the development of 
innovative capabilities in middle- and low-income economies. 

Source: OECD (2023a) 

While the potential impacts of OSA agendas are discussed in more detail in section 4, it can already be noted 
at  this  point  that  there  are  likely  to  be  uneven  regional  effects  resulting  from  the  policy  interventions 
described in Box 1. In fact, while the measures have first and foremost a national or, as in the case of the EU, 
supranational  purpose  such  as  “de-risking”  particular  strategic  external  dependencies,  the  impacts  of  OSA 
interventions  will  often  be  most  acutely  experienced  at  the  regional  level,  with  outcomes  likely  to  vary 
spatially,  affecting  some  regions  more  strongly  than  others.  Overall,  the  regional  effects  of  policy 
interventions seeking to promote technological sovereignty and strategic autonomy have received very little 

6 

 
 
 
 
 
 
 
attention  so  far.  Furthermore,  we  see  potential  links  between  such  policy  interventions  and  cohesion  policy 
(see section 4), which also hitherto remain unexplored. 

Protection measures: Regions heavily dependent on international technology flows and trade, especially those 
with strong ties to the technology ecosystems of countries targeted by protective measures, could experience 
significant  disruptions.  Urban  areas,  science  hubs,  and  regions  with  a  high  concentration  of  technology-
intensive  industries  might  be  more  affected  due  to  their  reliance  on  global  technological  networks  and  the 
inflow of foreign talent. The consequences may be graver for territories that are particularly exposed to the 
outcomes of the failure to take collective global action,  notably the impacts of accelerating climate change 
such as desertification, rising sea levels, habitat loss and associated losses in resource endowments.  

Some  of  the  less  developed  regions  of  Europe  may  benefit  from  the  substitution  of  European  imports  in 
critical value chains with domestic supplies. However, with the possible exception of a few cases (e.g. recycling 
of critical raw materials), these benefits will crucially hinge on pre-existing conditions (e.g. availability of raw 
materials, suitability for renewable energy investments, and a sizeable stock of related physical and human 
capital investments) that are not equally distributed across Europe. The re-shoring of manufacturing and of 
scientific  and  technological  collaborations  may  also  benefit  some  less  developed  regions.  Shorter  distances 
between  the  places  of  production  and  consumption  provide  new  opportunities  to  also  use  demand-side 
policies  to  spur  and  steer  industrial  development  in  less  developed  territories.  These  opportunities  will, 
however, not be realised automatically. Strategic policy interventions will be required to ensure that the time-
bound opportunities systematically favour less developed regions. 

Promotion  measures:  Some  regions,  particularly  industrial  heartlands  and  other  places  with  a  strong 
manufacturing  base,  could  benefit  from  promotion  measures  aimed  at  bolstering  industrial  capacity  and 
reducing  reliance  on  foreign  suppliers.  These  measures  could  lead  to  a  revitalisation  of  mature  industries, 
generating  job  opportunities  and  boosting  economic  development  within  these  regions.  Furthermore,  less-
developed regions, those in focus of the Just Transition Mechanism, might benefit from promotion measures 
through  opportunities  to  diversify  into  new  industrial  activities.  Support  for  sustainability  transitions  in 
particular  stands  to  multiply  the  opportunities  for  the  economic  diversification  of  less-developed  regions, 
which beyond their agri-food and tourism sectors, tend to lack other areas of obvious strengths to diversify 
from and are particularly susceptible to the tendency to pursue whatever sector happens to be fashionable. 
The  two-decade-long  timeframe  of  the  European  Green  Deal  enables  more  ambitious  diversification 
strategies, by providing some reassurance that both policy support and household and business investments 
will  be  heading  in  the  same  broad  direction.  Subsidy  races  could  also  affect  regions  negatively, compelling 
them to compete with other regions for public subsidies and private funding. 

Projection  measures:  Finally,  regions  with  established  research  and  innovation  capabilities  might  be  better 
positioned  to  benefit  from  projection  measures,  as  these  could  facilitate  collaborations  with  international 
partners. Science hubs and urban areas with strong  universities may diversify their STI relations and attract 
global partnerships and investments, spurring research and development efforts. Less favoured regions might 
also  benefit  if  projection  measures  lead  to  a  greater  dispersion  of  innovative  capabilities  or  if  projection 
measures  lead  to  cross-border  partnerships  that  strengthen  their  innovation  capabilities  and  economic 
diversification opportunities.  

Overall,  the  implications  for  regions  can  be  expected  to  vary  depending  on  their  economic  structure, 
technological  capabilities,  skill  base, institutional  capacities,  and  historically  grown  international  connections 
and embeddedness in global innovation and production networks (Isaksen and Trippl, 2016; Binz and Truffer, 
2017).  While  some  measures  might  create  opportunities  for  economic  development  and  innovation,  others 
could  introduce  challenges  related  to  technology  access,  talent  mobility,  and  competition  for  resources.  In 
certain  regions,  the  pursuit  of  strategic  autonomy  may  also  hinder  the  advancement  of  sustainability 
transitions. This is particularly seen with respect to the energy transition, and the stalling of phase-out plans 
of  fossil  fuels  from  2022  onwards.  The  extent  of  these  implications  will  also  largely  depend  on  how 
effectively regions adapt to the changing context and navigate the evolving supranational and national policy 
environments.  However,  it  is  clear  that  many  policy  interventions  to  enhance  technological  sovereignty  and 
strategic  autonomy  such  as  de-risking,  increasing  resilience  or  “economic  security”  follow  national  and 

7 

 
 
 
 
 
supranational  goals.  Adapting  such  policies  to  regional  settings  could  significantly  enhance  their  overall 
impact and effectiveness. We come back to this in section 4. 

8 

 
3  Priority areas for OSA industrial policy 

Without  attempting  to  be  exhaustive, we  address in  this  section  four  areas/sectors  which  have  been  at  the 
centre of the OSA debate: (1) the defence/military sector; (2) the energy transition part of the European Green 
Deal;  (3)  microchips  manufacture  with  the  recent  implementation  of  the  Chips  Act;  and,  (4)  critical  raw 
materials, exemplifying efforts to “de-risk” future economic dependencies. 

3.1  The military sector  

One  important  starting  point  for  pushing  both  research  and  industrial  policy  in  the  direction  of  strategic 
autonomy  and  technological  sovereignty  is  to  strengthen  military  capabilities.  Such  objectives  have  been 
largely absent in the European integration project as it took form and became institutionalised following the 
Second World War.  European  integration  became  first  and  foremost  a  peace  project  even  though  it  saw  its 
birth in the midst of the cold war. Hence the peaceful exploitation of nuclear power, as with the setting up of 
Euratom,  a  forerunner  of  the  European  Community  of  Coal  and  Steel,  which  became  fully  part  of  the 
European project. The same goes for the development of civil aviation with the development of the Concorde 
and the creation of Airbus. Dual-use military applications of civilian technologies remained, however, explicitly 
outside  of  the  European  scope  of  action;  they  were  even  explicitly  eliminated  from  any  of  the  research 
support programmes of the EC when they were first developed in the 1980s and subsequently renewed and 
enlarged to the current Horizon Europe EUR 80 billion R&D  support programme. The Treaty on the European 
Union actually restricted the use of the EU budget for defence (European Court of Auditors, 2023). EU action 
in the field of defence is limited to the common security and defence policy as an external crisis management 
tool  and  not  intended  to  be  a  collective  European  defence  policy,  encompassing  for  example  a  common 
definition  of  the  threats.  This  constraint  complicates  the  EU  long-term  planning  for  EU  spending  in  the 
defence area. Thus, in the case of Horizon Europe, legislation explicitly prohibits the use of research money for 
military applications (see e.g. European Commission, 2021). 

Similarly, at the industrial level, the individual Member States’ defence industries did not benefit from any of 
the Single Market reforms introduced in 1992. Military production and procurement remained entirely subject 
to national decision making. Those European Member States, which had been part of the NATO alliance, did 
coordinate their procurement policies but more with the US than with European partners. This became even 
more pronounced following the end of the cold war with  many of the new Member States looking for their 
military  security  to  NATO  and  to  the  US  rather  than  to  European  partners.  As a  result,  the  industrial  sector 
with  possibly  the  greatest  "single  market“  opportunities,  never  developed  in  Europe:  the  advantages  of 
European  scale  were  not  realised6.  European  defence  markets  did  not  contribute  to  the  overall 
competitiveness  of  Europe's  defence  and  security  industries.  By  contrast  most  dual-use,  technological 
breakthroughs of existing, often highly specialised defence firms in individual Member States, particularly the 
small ones, were transferred to, and became exploited in the  US. Only large Member  States (the UK  before 
Brexit,  Germany  and  France)  succeeded  in  developing  a  dynamic  defence  sector/industry.  In  short,  there  is 
little doubt that the fragmented European defence market has not contributed to the overall competitiveness 
of  Europe's  defence  and  security  industries,  on  the  contrary.  And  while  the  recent  EUR  7.9  billion  European 
Defence  Fund  (EDF)  set  up  in  2021  can  be  considered  as  a  significant  milestone  for  collaborative  military 
R&D programmes across Members States, the EU still lacks a longer-term strategy for the EDF7. 

6  As  highlighted  in  the  official  Consilium  document: “To  ensure  the  long-term competitiveness  of the  European  defence 
industry and  secure  the  modern  capabilities  needed,  it  is essential  to  retain  defence  Research &  Technology  (R&T) 
expertise,  especially  in  critical  defence  technologies.  The  European  Council  invites  the  Member  States  to  increase 
investment in cooperative research programmes, in particular collaborative investments, and to maximise synergies 
between  national  and  EU  research.  Civilian  and  defence  research  reinforce  each  other,  including  in  key  enabling 
technologies  and  on  energy  efficiency  technology.”  https://data.consilium.europa.eu/doc/document/ST-217-2013-
INIT/en/pdf 

7  As  the  European  Court  of  Auditors  (2023,  p.5)  notices  ”the  Commission  has  not  yet  sufficiently  addressed  strategic 
issues in order for projects under the EDF to have their intended impact. PADR defence research projects do not, from 

9 

 
 
 
                                                        
 
A political side effect of the Russian invasion of Ukraine is undoubtedly the realisation in both European and 
national  Member  States  policy  circles  that  Europe’s  integration  project,  which  was  based  primarily  on  “soft 
power”, is not fully sustainable in the current multipolar world of geopolitical tensions. The aim though is not 
so  much  achieving  military  technological  sovereignty,  with  many  EU  Member  States  being  now  also  full 
members of NATO, but rather to exploit in a more proactive way the technological and industrial advantages 
of dual-use opportunities associated with military and relevant civilian research carried out in Europe8. 

Military  research,  just  like  space  research,  because  it  has  been  shielded  from  immediate  commercial 
application pressures, often  offers opportunities for more radical disruptive innovations as illustrated in the 
case  of  the  US  DARPA  (Defense  Advanced  Research  Projects  Agency).  Cutting  off  or  preventing  military-
civilian  fusion  as  is the  case  today  in  European  research  programmes,  or  was  until  recently  the  case  in  US 
space  programmes,  appears  today  to  have  been  a  too  restrictive  approach  to  industrial-led  research  and 
innovation-led  procurement.  As  Schwaag  Serger  et  al.  (2023)  note:  “DARPA  has  allowed  the  US  to  drive 
disruptive  innovation  and  technology  development  that  meet  both  national  defense  needs  and  benefit  US 
economic  growth (through commercial applications). China has pursued civil-military fusion for many years. 
For historical reasons, Europe has sought to keep civilian and military research and innovation systems apart. 
Yet as illustrated in many new areas, such as space, public-private cooperation has accelerated technological 
advances9. In a time of increasing  geopolitical tensions where our  freedom and democracy are increasingly 
threatened, innovation, security and sustainability need to cross-fertilize and reinforce each other. This need is 
now  also  captured  in  NATO’s  new  strategic  concept  that  combines  the  three  areas  in  its  recent  strategy 
”Technology innovation for a greener defence” (European Leadership Network, 2022). Europe can and should 
assume  a  leading  position  in  linking  defense,  innovation  and  sustainability  –  triple  use  –  for  the  benefit  of 
national security and competitiveness.” (Schwaag Serger, S. et al., 2023). 

There are also major regional implications of the recognition that the defence sector plays a significant role in 
Europe’s efforts to bolster strategic autonomy and technological sovereignty. The  geographical concentration 
within  the  EU  of  particular  defence  production  sectors  and  more  broadly  military  facilities  grew  out  of  a 
historical process of the allocation by individual Member States of defence budgets to places often in border 
regions  and  in  the  periphery  of  the  country.  They  were  formally  part  of  individual  European  countries’ 
industrialisation  process  in  the  19th  and  20th  centuries  and  following  the  Second  World  War,  a  cold  war 
period with the establishment of NATO, and subsequently a disarmament period with the enlargement of the 
EU to the Eastern European countries and the realisation of a so-called peace dividend.  

We discuss in section 4, how such earlier defence-oriented industrial policies could be considered as national 
“cohesion”  policy tools  avant la lettre. It opens today the way for a new  role of European cohesion policies: 
contributing now directly to Europe’s security.  

3.2  Energy transition 

The European energy transition is not a single transition.  Several transitions are taking place in EU  Member 
States, in different forms and speeds. What connects these transitions is a predominant pursuit of non-fossil 
fuels  expansion  and  increased  electrification  based  on  the  European  Green  Deal  and  the  EU  Energy  Union 

the  outset,  include  a  plan  specifying  how  research  results  will  be  dealt  with  at  later stages,  in  terms  of  additional 
research, development, manufacturing, procurement, and other aspects.”  

8 In defence research, the figures are actually striking: in 2019 the US spent some $69 billion on defence R&D, compared 
to $4.1 billion for the whole of the EU; $3.7 billion for Korea, $2 billion for the UK and $1.4 billion for Turkey. Within 
the EU, Germany spent $2 billion, France $1.1 followed by Poland with $0.27 billion. 

9 This holds not just for the US but also for e.g. the so-called Quadrilateral Security Dialogue of Australia, India, Japan and 
(see  https://isic-

into  a  platform  for  mutual  security 

is  now  developing 

the  US.  The 
japan.org/event/commanding-heights/ ).   

latter  ”Quad” 

10 

 
 
 
 
 
 
                                                                                                                                                                             
 
principles.  As  noted  by  Mata  Peréz  et  al.  (2019),  the  countries  and  regions  differ  regarding  the  speed  of 
hydrocarbon phase-out and its employment and economic impacts. In addition, there is diversity in terms of 
approaches  taken  towards  nuclear  power  –  and  prior  to  2022,  in  stances  regarding  the  Nord  Stream  gas 
pipelines flowing from Russia to Germany. 

Particularly  with  respect  to  the  European  Green  Deal,  one  of  the  flagships  of  the  present  European 
Commission, the new industrial policy inspired by strategic autonomy now serves a very different purpose and 
aim. It is no longer about strengthening Europe’s industrial competitiveness or enabling  particular European 
industries to further expand. It is now about “competitive sustainability”. Over the last 75 years or so, Europe 
became  internationally  specialised,  particularly  in  energy-intensive  industrial  production  processes,  ranging 
from  the  production  of  iron  and  steel  to  the  manufacture  of  combustion  engine-driven  motor  cars  and 
machine equipment.  

The enlargement of the EU in the 1990s further “widened” these European industrial value chains across the 
EU towards both the Southern and Eastern parts of Europe. They were also broadened to include other sectors 
of  the  economy  including  the  agro-industrial,  chemicals,  aerospace,  mechanical  and  electrical  engineering 
sectors. As a result, today Europe probably faces more than other countries in the world, a radical structural 
transformation  of  most  of  those  energy  intensive-industrial  sectors  towards  green  energy-based  sectors 
(OECD, 2023b). As argued by Soete and Stierna (2023), this involves not just the systemic transformation of 
industrial  production  and  supply  chains  with  heavy  investments  in  new,  green  energy  production  sites  and 
new,  renewable  energy  grids  but  also  a  possible  relocation  of  industries  near  more  easily  accessible 
renewable green energy sources – or green hydrogen facilities increasingly planned. At the same time, the (re-
)use  of  existing  materials  might  also  lead  to  more  revolutionary  rather  than  incremental  applications  of 
circular economy principles. These, in turn, could result in radical shifts towards reliance on local suppliers as 
opposed  to  the  well-established  global  value  chains,  again  with  significant  internal  industrial  relocation 
implications10.  

So  far,  the  EC  as  responsible  authority  for  the  European  Green  Deal  has  been  trying  to  orchestrate  this 
industrial  transformation  from  a  European  perspective,  but  each  individual  European  Member  State  or 
particular regions within Member States are trying to implement this transformation from the perspective of 
their own industrial policy interests. And these interests do not necessarily align. A core reason for this is that 
the  cost  of  producing  renewable  energy  differs  substantially  across  places.  Another  reason  is  the  differing 
degree of far-right political party representation in regions which has been noted to correlate with opposition 
to renewable energy (Vihma et al., 2021; Żuk and Szulecki, 2020). 

Hydropower, one of the oldest sources of renewable energy, deriving power from the flowing of water covers 
today  some  17  per  cent  of  the  EU’s  electricity  needs  (and  one  third  of  the  EU’s  total  renewable  electricity 
production). It is subject to steeply decreasing returns in location and hence limited to the few places located 
primarily in mountainous countries with low population densities such as Norway and Sweden or the European 
regions  surrounding the  Alpes and the  Balkan Peninsula.  The  Netherlands or large  parts of Belgium provide 
very limited opportunities for hydropower production.  

Similarly, there are huge locational differences across Europe in wind velocity and sun hours, the two other 
major sources of renewable energy production in Europe.11 Wind velocity is highest in offshore windfarms on 

10 The subsequent text is based on Soete and Stierna (2023). 
11 The use of deep geothermal energy for electricity generation and industrial production in Europe has a similar place-
based  characteristics.  Natural  settings  are  found  in  very  few  places  (e.g.  Iceland,  Italy,  Canary  Islands).  Advanced 

11 

 
 
 
 
 
 
                                                        
 
the  North  and  Baltic  Sea  and  onshore  windfarms  along  coastal  areas  (EEA,  2009).  Investment  costs  for 
building  offshore  windfarms  are  much  higher  than  for  onshore  windfarms.  However,  once  the  higher  wind 
velocity on open seas is taken into account, the generation cost for wind energy, particularly in the low depth 
(less than 50 meters) areas of both the  North Sea and the Baltic Sea is more or less equal to coastal area 
onshore windfarms.  

Finally, in the case of solar renewable energy, place matters again, with much more radiation and number of 
hours of sun in southern Europe than in the middle and northern parts of Europe. In the most southern parts 
of  Europe  with  an  average  of  4,000  hours  of  sun  a  year,  there  are  opportunities  for  “concentrated  solar 
power” production allowing for thermal and hydrogen storage, providing cheap power up to 24 hours a day. 
Technological  development  in  wind  and  solar  power,  however,  makes it  also  increasingly  a  more  accessible 
energy source to different European locations. 

Up  to  recently,  sun,  wind,  water  and  geothermal  energy  were  no  match  for  dominant  fossil-based  energy 
system.  However,  thanks  to  renewable  energy  technology  development  and  innovation,  today,  all  major 
renewable energy sources benefit from lower marginal lifetime costs than fossil-based energy (IRENA, 2022). 
In short, Europe’s future green energy system will be much more place-based one with substantial differences 
in the costs of renewable energy production. Places along the North and Baltic Seas near offshore windfarms 
with  possibilities  for  close-by  hydrogen  energy  production12,  or  alternatively  Southern  European  places  in 
Spain, Italy or the Balkan with up to four times more hours of sun, will become more interesting locations for 
energy-intensive industries.  

Ricardo  Hausmann  (2021)  claimed  that  the  difference  in  locational  costs  in  the  production  of  renewable 
energy is likely to remain one of the fundamental characteristics of renewable energy as opposed to energy 
based on fossil fuels. In his words, coal and oil have: “a unique feature… they are amazingly energetic per unit 
of  volume  and  weight.  This  fact,  combined  with  advances  in  transportation  technologies  in  the  twentieth 
century, meant that the world became “flat” from an energy point of view… absence of local energy sources 
was not an obstacle… Yet, as the world weans itself off coal and oil, energy flatness will become a thing of 
the past. With the exception of nuclear power, all green sources of energy – sun, wind, hydro, and geothermal 
–  are  unevenly  distributed  and  costly  to  transport.  Even  if  firms  insist  on  using  fossil  fuels  together  with 
carbon  capture and storage, they will benefit from proximity to  geological formations that can store  carbon 
dioxide  –  and  these  are  not  ubiquitous.  In  a  decarbonizing  world,  therefore,  energy-intensive  activities  will 
again have to take place near specific locations, just as in the days of waterwheels.” (Hausmann, 2021). 

As  a  result,  Europe’s  new  renewable  energy  system is  likely  to  become  more  decentralised.  In  the  previous 
“flat energy" system, the place-based nature of coal mining or oil and gas winning was accompanied both by 
heavy  local  and  infrastructural  grid  investments,  providing  more  or  less  equal  access  to  cheap  fossil-fuel 
based  energy.  In  the  new,  green  energy  system,  there  will  be  more  place-based  opportunities  emerging 
related to  relatively easily accessible  renewable energy, benefitting local creative entrepreneurs and overall 
more competitive and differentiated markets. 

Nevertheless, there are some limitations to the expansion of these energy sources in certain parts of Europe. 
For instance, wind power construction has been limited in the Eastern parts of EU countries sharing a border 
with Russia, because wind turbines have been noted to disturb the reliable operation of the defence sector’s 
air surveillance radars (Kivimaa and Sivonen, 2023). Solar power, in turn, can also lead to trade-offs, brought 
about  by  detrimental  effects  on  natural  habitats  and  land  degradation  in  certain  regions  (Lambert  et  al., 
2021). 

technological investments are being made in Germany, France and the Netherlands. See Bruhn et al. (2022) and case 
studies of the GEO ENERGY EUROPE project: https://www.geoenergyeurope.com/case-studies  
12 Such as such as Rotterdam or Delfzijl in The Netherlands or Antwerp and Zeebrugge in Belgium 

12 

 
 
 
 
 
 
                                                                                                                                                                             
 
In short, with respect to the European energy transformation challenge, the new industrial policy will now also 
have  to  pay  particular  attention  to  the  relocation  implications  of  the  renewable  energy  transformation.  The 
green transformation relocation patterns across Europe do not fit current industrial locations for example in 
landlocked areas with limited wind velocity and sun hours. Over the earlier part of the 19th century, many of 
those  regions13  became  areas  of  industrial  concentration  because  of  their  cheap  local  accessibility  of  coal, 
replaced later on by the easiness of pipeline energy transportation along the lines of Hausmann’s “flat energy 
world”. The same pattern could be observed with respect to hydropower often located in mountainous areas 
which required both huge local investments and infrastructural grid investments.  

Viewed through the glasses of the old, centralised energy systems, there will be a national policy tendency to 
prioritise  infrastructural  grid  investments,  linking  the  new  locations  of  green  energy  production  to  the  old 
industrial  concentration  areas.  In  short,  trying  to  get  back  to  the  old  “flat  energy  world”  with  European 
countries  investing  each  in  primarily  the  domestic,  new  renewable  energy  grid  infrastructure  to  enable  the 
smooth energy transformation of their own landlocked industrial zones.  However, from an overall European 
perspective,  such  national  investments  aimed  at  transforming  existing  industry’s  competitiveness  into  a 
sustainable  one  will  be  particularly  costly.  It  will  as  Hausmann  suggests,  undermine  Europe’s  overall 
“competitive sustainability” in some of the heavy, energy-intensive industrial sectors, while at the same time 
forgoing  new,  place-based  opportunities  associated  with  the  relocation  of  energy-intensive  industries. 
However, it is also important to consider the economic and social costs that would arise in those regions that 
would suffer from the relocation of their industries. 

The  energy  transition  is,  however,  likely  to  benefit  Europe’s  pursuits  in  OSA.  For  many  regions,  previously 
dependent on fossil fuel energy imports, wind and solar power (and to some degree nuclear power) will create 
new opportunities as net energy exporters. These regions will also become more attractive to new industrial 
facilities when cheap energy is abundant, and a locus of industrial eco-systems that can create solutions also 
for  the  intermittency  of  renewable  energy  sources,  for  instance,  via  battery  or  green  hydrogen  production. 
Some  of  the  concerns  that  this  development  needs  to  address,  however, include  the  justice  aspects  of  this 
transition  and  critical  materials  supply  (which  is  addressed  below).  The  energy  transition  deals  with  justice 
aspects  both  locally  –  via  the  decline  of  fossil  industries  and  the  social  and  environmental  aspects  of 
emerging  green  energy  industries  –  as  well  as  globally  by  reducing  the  injustice  effects  of  fossil  energy 
supply  chains  but  with  potential  new  injustices  via  critical  material  and  component  supply  and  end-of-life 
processes (e.g. Sovacool et al. 2019; Kivimaa et al. 2023).  

3.3  The manufacture of microchips 

With  sales  exceeding  USD  550  billion  in  2021,  the  global  semiconductor  market  holds  significant  value 
(Yeung,  2022).  Projections  indicate  that  it  will  surpass  one  trillion  US  dollars  by  2030.  Currently,  European 
production  contributes  roughly  only  10  per  cent  to  this  overall  figure.  Over  the  past  three  decades,  the 
European semiconductor industry has experienced a relative decline due to the rapid expansion of the industry 
in North America and Asia (Dornbusch, 2018), which has raised concerns about the sector’s competitiveness. 

The semiconductor industry stands out among the sectors that are receiving significant attention in ongoing 
discussions about open  strategic autonomy and technological sovereignty. The sector’s strategic importance 
stems from the fact that chips serve as vital components not only in the military and aerospace sectors, and 
in  consumer  electronics  (such  as  smartphones,  laptops,  tablets,  and  television  sets),  but  also  play  a  critical 
role  in  facilitating  energy  and  mobility  transitions.  Semiconductors  are  utilised  in  diverse  renewable  energy 
technologies, including solar panels and wind turbines. They also find applications in other areas that support 

13 Examples include among others the German Ruhr industrial region or the Dutch Southern Limburg area. 

13 

 
 
 
 
 
 
 
                                                        
 
green  transitions,  such  as  energy-efficient  lighting,  smart  homes,  and  buildings.  Moreover,  semiconductors 
play  a  key  role  in  mobility  transitions,  as  they  are  indispensable  for  the  production  of  electric  vehicles  and 
charging  stations.  At  the  same  time,  it  is  important  to  bear  in  mind  that  the  industry  has  a  substantial 
negative  environmental  impact  (Villard  et  al.,  2015;  Sharma,  2023).  The  fabrication  of  chips  entails 
substantial  water  and  energy  consumption,  contributes  to  air  pollution  and  creates  hazardous  waste 14.  A 
paradoxical relationship between semiconductors and sustainability transitions becomes apparent. This can, if 
at  all,  only  be  resolved  by  integrating  a  temporal  perspective,  meaning  that  the  environmental  costs  of 
production  are  offset  in  the  long  term  by  the  contribution  of  the  products  to  the  transition  towards 
sustainability. Regarding environmental (and social) costs,  upstream industries would  also need to be taken 
into account. Semiconductor production requires critical raw minerals/materials and rare earth elements, the 
extraction of which produces negative social consequences and environmental  damages, particularly in less-
developed regions in the Global South. We will come back to that in section 4.3. 

Recognising  the  strategic  importance  of  the  semiconductor  industry,  the  EU  is  committed  to  enhancing  its 
technological  leadership  in  that  field  while  also  fortifying  itself  against  supply  shortages  and  production 
bottlenecks caused by disrupted supply chains. In this context, the EU Chips Act (European Commission, 2022; 
see  also  Box  2)  plays  a  pivotal  role.  One  of  its  primary  goals  is  to  drive  large-scale  technological  capacity 
building  and  innovation.  Additionally,  it  aims  to  enhance  the  security  of  supply  within  the  EU  by  attracting 
investments and boosting production capacities (OECD, 2023a). 

The European Chips Act is also seen as a response to the US Chips and Science Act, which mobilises USD 52.7 
billion  for  research,  development,  manufacturing  and  talent  development  in  the  field  of  semiconductors. 
Importantly,  a  regional  dimension  appears  to  be  considered  in  policy  considerations.  The  act  has  allocated 
USD  10  billion  to  foster  regional  economic  development  by  facilitating  the  establishment  of  regional 
partnerships  between  businesses,  universities,  and  local  communities,  with  a  focus  on  nurturing  the 
technology  development,  innovation,  and  manufacturing  (OECD,  2023a,  referring  to  The  White  House, 
2022[57]).  Furthermore,  there  are  plans  to  establish  a  Chip  4  Alliance.  This  initiative  aims  to  form  a 
substantial  consortium  of  chip  manufacturers  spanning  the  United  States,  Japan, South  Korea,  and  Taiwan, 
with the purpose of collectively countering China's influence (Johnston and Huggins, 2023). Thus, it recognises 
that strategic autonomy requires trusted international partners. The US Chips and Science Act mobilises USD 
500 million over five years for an International Technology Security and Innovation Fund (U.S. Department of 
State, 2023), aiming to enhance international coordination of activities related to security and supply-chains 
(OECD 2023a).  

Box 2: European Chips Act 

With  its  Chips  Act,  the  EU  seeks to  boost  Europe’s  semiconductor ecosystem,  develop  more  resilient  supply 
chains, enhance strategic independence, and increase the EU’s  global market share in semiconductors from 
the current 10 per cent to 20 per cent by 2030 (European Commission, 2022; OECD, 2023a). The European 
Chips  Act  makes  significant  funding  available.  In  total,  around  43  billion  EUR15  (to  be  matched  by  private 
investment) should be earmarked.  

The Chips Act aims to (1) strengthen Europe’s leadership in research and technology of the next generation of 
chips; (2) enhance the innovation capacity in the design, manufacturing and packaging of advanced chips; (3) 

14  This  is  not  to  deny  that  in  recent  years,  semiconductor  companies  have  made  efforts  to  alleviate  the  environmental 
impact  of chip  manufacturing.  However, as  the  industry  is  poised  for  significant growth  in  the  coming  years, ecological 
problems will remain a pertinent concern in their host regions. 

15  The  majority  of  it  (approx.  EUR  28  billion)  is  expected  to  come  from  existing  programs  (such  as  Horizon  Europe  and 
Digital  Europe),  which  will  be  supplemented  by  an  additional  EUR  15  billion  of  public  and  private  investments 
(European Commission, 2022). 

14 

 
 
 
 
 
                                                        
 
increase production capacity from the current 10 per cent to 20 per cent of the global market by 2030; (4) 
deal  with  skills  shortages;  and,  (5)  develop  an  in-depth  understanding  of  the  global  semiconductor  supply 
chains (European Commission, 2022). 

The Chips Act proposes:  

Investments in next-generation technologies 

 
  Providing access across Europe to design tools and pilot lines for the prototyping, testing and 

experimentation of cutting-edge chips 

  Certification procedures for energy-efficient and trusted chips to guarantee quality and security for critical 

applications 

  A more investor-friendly framework for establishing manufacturing facilities in Europe 
  Support for innovative start-ups, scale-ups and SMEs in accessing equity finance 
  Fostering skills, talent and innovation in microelectronics 
  Tools for anticipating and responding to semiconductors shortages and crises to ensure security of supply 
  Building semiconductor international partnerships with like-minded countries”  

Source: European Commission (2022)16 

The EU Chip Act is also linked to IPCEIs (Important Project of Common European Interest) in microelectronics 
(European Commission, 2023)17. 

The European Chip Act has faced criticism for several reasons (Huggins et al., 2023; Johnston and Huggins, 
2023). Digital sovereignty is seen as an unviable and undesirable approach for Europe (Gropp, 2023). Given 
the  extensive  global  interdependency  of  the  semiconductor  industry,  maintaining  international  connectivity 
remains  crucial (Huggins et  al., 2023, p.  531). Furthermore,  questions arise regarding the sufficiency of the 
EUR 43 billion investment18.  

Finally,  Johnston  and  Huggins  (2023)  argue  that  the  EU  Chips  Act  is  rather  spatially  blind  in  its  efforts  to 
enhance the innovation and production capacity of the European semiconductor industry. They suggest that a 
more  effective  strategy  would  involve  embracing  a  place-based  approach  that  harnesses  the  strengths  of 
different regions. This approach is believed to amplify the Act’s impact, considering that Europe hosts several 
well-established  clusters  that  encompass  a  comprehensive  ecosystem  of  semiconductor  design  and 
manufacturing, including companies and research organisations. This would entail moving away from a one-
size-fits-all approach and implementing targeted interventions that capitalise on the strengths of individual 
clusters and their home regions while mitigating their specific weaknesses. 

3.4  Critical raw materials 

Europe  has  always  relied  heavily  on  raw  material  imports.  In  a  certain  way,  this  has  been  part  of  a 
historically-grown  specialisation  pattern  whereby  many  of  the  (Western)  European  countries  built  their 
industrialisation in the 19th and 20th centuries on the basis of the extraction of natural resources from old 
colonial  territories.  The  process  of  decolonisation  did  not  change  these  international  dependencies,  on  the 
contrary. Many of the large mineral extraction firms became global multinational companies, diversifying their 
supply sources across the developing country world in Africa, Asia and Latin America. Whereas in many areas, 
Europe had  domestic access  to raw materials including rare earth materials, the international dependencies 

16 https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/europe-fit-digital-age/european-chips-act_en  
17 https://ec.europa.eu/commission/presscorner/detail/en/IP_23_3087  
18  To  provide  context,  establishing  a  new  manufacturing  facility  requires  an  investment  ranging  from  USD  13  billion  to 

USD20 billion (Huggins et al., 2023). 

15 

 
 
 
 
 
 
                                                        
 
behind  the  dominant  global  value  chains  meant  that  the  extraction  of  such  raw  materials  in  low-income 
countries incurred a much lower economic, but at the same time often a much  higher social and ecological 
cost. 

The  discussion  on  critical  raw  materials,  and  in  particular  rare  earth  minerals,  has  increased  as  a  result  of 
advancing  energy  and  digital  transitions.  In  both  sectors,  the  new  technologies  based  on  innovative 
developments need a multitude of materials, while the material requirements differ based on the technology 
in question. “Lithium, nickel, cobalt,  manganese and  graphite are crucial to  battery  performance. Rare earth 
elements  are  essential  for  permanent  magnets  that  are  used  in  wind  turbines  and  EV  motors.  Electricity 
networks need a huge amount of copper and aluminium, with copper being a cornerstone for all electricity-
related technologies” (IEA, 2023). In its report from 2023, the European Commission differentiates between 
strategic and non-strategic critical materials (European Commission, Grohol and Veeh, 2023). China controls 
the  production  and  extraction  of  many  of  the  materials,  with  extraction  of  Chinese  ownership  placed  also 
outside China. 

Many EU Member States (or more specific regions within Member States) also hold facilities for the extraction 
and/or production of critical raw materials, but typically amounting to less than 3 per cent of global supply  – 
with the exception of Finland producing 11 per cent and Belgium 5 per cent of global supply of cobalt; France 
producing  49  per  cent  of  hafnium  and  Spain  34  per  cent  of  sprontium  (European  Commission,  Grohol  and 
Veeh, 2023). While in theory, these materials improve the EU’s OSA, many mining and production companies 
are internationally owned large players. Moreover, with the growing pressure to increase the mining of critical 
materials  located  in  the  EU’s  Arctic  member  states  and  above  the  Arctic  Circle,  there  are  concerns  with 
respect  to  the  culture,  livelihoods  and  natural  environment  of  the  Indigenous  Sami  people  in  Finland  and 
Sweden  (Koivurova  et  al.  2015;  Ramasar  et  al.  2022).  Yet,  international  mining  companies  can  be  very 
persuasive actors in particular regions, for instance, providing funding for new services such as sports halls in 
more deprived areas - increasing the attractiveness of mining despite their social or environmental costs. 

With  the  introduction  of  principles  of  sustainability  in  international  trade19  and  in  particular  the  European 
Green Deal and the Carbon Border Adjustment Mechanism (CBAM), such international processes of extraction 
of raw materials including rare earth materials, can no longer be based on such exploitative and neo-colonial 
premises but will require paradigm shift with a central focus on the implementation of economic extraction 
models enhancing  regeneration  and  circularity.  Achieving  this in  the  current  context  of  geopolitical  tensions 
and an emerging multipolar world, represents a fundamental challenge for the EU.  

The European Critical Raw Materials (CRM) Act, proposed by the EC in March 2023 and adopted by the Council 
in June 2023, is in other words part of a much broader discussion, not just of Europe’s external dependencies 
on  a  number  of  so-called  critical  materials  but  also  of  Europe’s  role  as  global  standard  and  norm  setting 
agent and as core proponent of the attainment of the UN Sustainable Development Goals.  

In a narrow sense, the CRM Act seeks to address the risk of disruption of the supply of particular critical raw 
materials “due to their concentration of sources and lack  of  good, affordable substitutes”,  striving amongst 
others  to:  “increase  and  diversify  the  EU’s  critical  raw  materials  supply;  strengthen  circularity,  including 
recycling; and support research and innovation on resource efficiency  and the development of substitutes”20. 
In  this  sense,  the  debate  about  the  need  for  the  CRM  Act  and  the  “discovery”  of  the  EU’s  raw  material 
dependency  runs  very  much  in  parallel  with  the  debate  on  technology  sovereignty.  Technology  sovereignty 

19  In  particular  the  so-called  Singapore  opinion  of  the  European  Court  of  Justice  (May  16th,  2017),  concluding  that 
sustainability  is  now  an  integral  part  of  trade  policy  and  that  the  EU  has  the  monopoly  of  negotiation  opening 
effectively  the  road  to  the  implementation  of  the  European  Green  Deal  in  trade  negotiations  including  now  the 
introduction of the Carbon Border Adjustment Mechanism (CBAM) which will be introduced in October 2023.   
Infographic 
for 
https://www.consilium.europa.eu/en/infographics/critical-raw-materials/  

raw  materials 

chains, 

critical 

supply 

future 

the 

act 

EU 

EU 

An 

of 

20 

- 

16 

 
 
 
 
 
 
                                                        
 
looks at the dependency regarding key competences for important technologies. The CRM Act highlights the 
fact that while the EU might have strong endogenous technological  competences in  particular technologies, 
including  those  linked  to  renewables,  from  a  value  upstream  position,  it  could  be  in  a  very  technology 
dependent situation, precisely because the technology requires CRM, pointing to a supply risk.  

In a broader sense, the CRM Act calls for a new perspective on the value of  material needs, the optimisation 
of production, substitution and waste reduction, and thus on future-proofing European value chains. While the 
debate about Europe’s raw material dependency appears to run closely in parallel to the debate on technology 
sovereignty reinforcing the  case for independence from foreign  countries (in particular China), it also  raises 
more  fundamental  questions  about  global  planetary  boundaries  and  the  need  to  fundamentally  change 
Europe’s cooperation patterns. As the ESIR (2023) expert group put it recently: “Simply trying to compete with 
other superpowers on access to key natural resources, often with no respect for the well-being of countries 
that  possess  them,  may  only  result  in  a  “race  to  the  bottom”,  with  the  added  risk  that  we  exchange  old 
dependencies for new ones. Rather, the EU could embed in its future industrial plans a gradual reduction in 
the use of critical raw materials, moving towards a purely regenerative, circular-economic model.21 However, 
some  studies  have  found  that  pure  reliance  on  circular  economy  based  recycling  of  materials  would  not 
suffice with the projected need for materials based on the expansion of renewable energy, electrification of 
transport,  and  digitalisation  (Michaux,  2021).  Nevertheless,  we  need  a  broadening  of  the  Circular  Economy 
Plan towards new forms of material efficiency such as sharing and life-time extension, as well as a debate 
about  the  role  of  material  consumption  for  wealth  creation.  But  we  must  also  debate  the  prerequisites  to 
open-up old or new mines in Europe, and the important environmental and social ramifications in doing so 22. 
Europe cannot be credible in its aspiration for a Green economy if at the same time it pushes an extractive 
economy  outside  of  its  borders.  Our  methodologies  for  assessing  future  raw  materials  demand  must  be 
further developed and should play a central role in Europe’s industrial decisions.”  

The strategy to import critical materials from abroad, in other words, also highlights the large impact of EU 
decision  making  on  other  countries.  As  argued  here,  many  potential  supply  countries  are  low-income 
countries, which find themselves in the new emerging geopolitical world order in a position in which they are 
confronted  with  radical  choices.  Natural  resource-based  inclusive  growth  strategies  could  be  interesting 
options for them, but have characteristically failed in the past. To make matters worse, they have been the 
basis of corruption, social exclusion and enduring poverty often carried out by European firms. Building new 
raw  material  partnerships  with  these  countries  requires  a  fundamental  paradigm  shift  in  which  the  EU  will 
have to position itself as a new attractive partner for those countries’ own social and ecological aims.  

In a certain way this is very reminiscent of Europe’s internal experience with raw materials extraction in low-
income regions within the EU, the implications of which are discussed in section 4. 

21 Currently, this seems to be hardly the case: for  example, PV, wind energy technologies and electric vehicles generally 
require  more  minerals  to  build  than  their  fossil  fuel-based  counterparts.  We  have  to  augment  the  deployment  of 
these technologies with a circular economy perspective early on. 

22 ESIR (2023) 

17 

 
 
 
 
 
                                                        
 
4 

Implications for regional development 

In  this  section,  we  delve  into  the  implications  of  the  Open  Strategic  Autonomy  agendas  for  regional 
development  in  Europe  in  a  more  systematic  manner.  We  first  start  with  a  more  conceptual  discussion, 
drawing on insights obtained from economic geography research on path development and from studies on 
regional  innovation  systems  (RIS).  These  will  be  particularly  helpful  in  discussing  some  of  the  regional 
implications of the different industrial policy areas outlined in section 3. These implications have been more 
or less absent from the policy discussion on OSA and technological sovereignty, including the Green Industrial 
Plan.  In  what  follows,  our  focus  is  on  the  opportunities  for  but  also  challenges  and  potential  trade-offs 
associated with industrial development these ambitious policy agendas create in different types of regions. 

4.1  Academic  insights  from  economic  geography  and  (regional)  innovation 

studies 

As  highlighted  in  the  previous sections,  OSA  agendas  focus  on  specific  industries  and  technologies,  but  are 
interlinked through the use of critical raw materials, energy and semiconductors in a wide range of sectors. To 
comprehend their uneven evolution across space, the diverse trajectories that can be observed and how they 
unfold  in  regions,  economic  geography  insights  into  "new  regional  industrial  path  development"  are  crucial. 
This notion covers both the formation of new industrial activities in regions and the (radical) transformation 
of mature sectors. 

The  literature  shows  that  new  industrial  paths23  can  emerge  in  various  ways  and  based  on  different 
mechanisms  in  regions  (Isaksen  and  Trippl,  2016,  2017).  These  include  (1)  the  emergence  of  new-to-the-
world industries, often rooted in radical innovations and technological breakthroughs (path  creation) as well 
as (2) the rise of new-to-the region sectors based on the influx of non-local firms, labour, and other assets 
(path importation). Moreover, new sectors can also emerge through the recombination of existing knowledge, 
technologies,  skills,  and  other  assets  present  in  the  region  (Boschma,  2017),  thereby  branching  out  from 
established industries (path diversification). 

New regional industrial path development also encompasses radical “on path” changes, that is, major renewal 
and  transformation  processes  in  existing  industries  based  on  disruptive  innovations  (path  transformation) 
(Baumgartinger-Seiringer  et  al.,  2021).  This  clearly  differs  from  path  extension,  that  is,  the  continuation  of 
existing  industrial  paths  based  on  incremental  innovation  along  well-established  technological  trajectories. 
However,  this  could  eventually  result  in  stagnation,  decline,  and  path  exhaustion  in  the  longer  run.  Regions 
might  find  themselves  locked-into  old  trajectories,  suffering  from  limited  opportunities  for  experimentation 
and constrained capacities to foster radical innovation. 

A  central  question  revolves  around  the  possibilities  for  regions  to  engage  in  new  regional  industrial  path 
development  activities  in  strategic  sectors  that  are  the  focus  of  efforts  toward  strategic  autonomy  and 
technological  sovereignty.  What  types  of  industrial  development  are  feasible  in  different  types  of  regions? 
Another  important  question  is  what  potentials  for  path  transformation  exist  in  places  that  already  host 
strategic  industries.  What  factors  influence  these  potentials?  Lastly,  does  achieving  greater  strategic 
autonomy also necessitate path extension, despite the risks of negative lock-in inherent in this form of path 
development? 

Work  at  the  intersection  of  economic  geography  and  innovation  studies  shows  that  regions  exhibit  very 
different  preconditions  for  path  formation  and  transformation  activities.  Grasping  the  manifold  regional 
impacts of OSA agendas thus requires recognition of different conditions found in Europe’s regions.  

23 A regional industrial path is defined as “a set of functionally related firms and supportive actors and institutions that 
are established and legitimised beyond emergence and facing early stages of growth, developing new processes and 
products” (Binz et al., 2016, p. 177). 

18 

 
 
 
 
 
                                                        
 
Place-based  structures,  including  historically-grown  industrial  structures,  innovation  support  configurations, 
and  institutional  set-ups  (Asheim  et  al.,  2019),  clearly  matter.  New  path  development  (i.e.,  the  rise  and 
transformation of industries) requires a rich regional asset base. Next to natural assets (resources), a broad 
set of other assets, which are seen as the product of the wider regional environment (MacKinnon et al., 2019) 
and  the  regional  innovation  system  (RIS)  (Trippl  et  al.,  2020),  matter.  These  encompass  infrastructural  and 
material  assets  (buildings,  machines,  networks  and  infrastructure),  industrial  assets  (technology  and  firm 
competencies), human assets (labour skills, costs and knowledge), financial assets, institutional endowments 
(rules,  routines,  norms,  values  and  culture)  (Maskell  and  Malmberg,  1999;  MacKinnon  et  al.,  2019). 
Furthermore,  the  external  connectedness  (in  terms  of  global  market  linkages,  production  networks,  science, 
technology, innovation and other relations) of regions, matter. Inflows and outflows of firms, knowledge and 
other assets through extra regional networks, labour mobility and activities by multinational companies have 
been found to essentially shape regional industrial development (Trippl et al., 2018). As argued in section 2, 
these non-local linkages could be subject to change as a result of OSA policy interventions.  

Many  empirical  studies  have  shown  that  regions  vary  significantly  in  terms  of  their  RIS  structures, 
endowments of assets and external connections needed for new industrial development (Asheim et al., 2019). 
Firms  and  other  actors  thus  find  different  preconditions  in  regions  for  mobilising,  attracting  and  modifying 
assets for fashioning new paths and facilitating shifts of old ones (MacKinnon et al., 2019) and for engaging 
in entrepreneurial, market formation, legitimisation and other activities that are considered vital for building 
or transforming an industry (Binz et al., 2016). 

Extant  research  (Isaksen  and  Trippl,  2016,  2017)  suggests  that  regions  with  thick  innovation  system 
structures,  a  rich  asset  base  and  strong  external  connections  (typically  found  in  metropolitan  and  urban 
places)  are  well-positioned  to  develop  new  paths.  This  statement  needs  to  be  qualified  in  relation  to  the 
strategic  sectors  under  consideration.  Regions  that  are  already  home  to  strategic  sectors  and  exhibit 
innovation  system  structures  tailored  to  their  needs  are  well-positioned  for  the  next  round  of  path 
development in those industries (path transformation). Similarly, regions  characterised by  historically grown 
structures that show relatedness to the strategic sectors may have favourable conditions for diversifying into 
them (path  diversification).  Hence,  it  is not  only  about  the  degree  of  thickness  found  in  the  region  but  also 
about  the  region  possessing  the  “right”  specialisation  (Zukauskaite  et  al,  2017).  Less-developed  regions 
(typically peripheral and rural places, but also places that are overspecialised  in declining sectors) with less 
robust  RIS  structures,  a  weak  asset  base,  poor  institutional  capacities,  and  deficiencies  in  external 
connectedness (i.e. weak connections or linkages that reflect one-sided dependencies) are said to hold fewer 
potentials for new industrial path development. In those places, path formation relies to a greater extent on a 
reconfiguration of their non-local linkages to stimulate the influx and anchoring of foreign firms, knowledge, 
talent  and  other  non-local  assets  (path  importation).  This  is  likely  to  need  a  mix  of  support  from  both 
innovation and cohesion policies to contribute to strategic autonomy.  

These  studies  suggest  that  different  types  of  regions  have  varying  opportunities  for  the  formation  and 
transformation  of  paths  in  strategic  sectors.  Policy  interventions  for  achieving  more  strategic  autonomy, 
technological  sovereignty  and  economic  security  could  spark  highly  diverse  forms  and  mechanisms  of  path 
development, depending on the region (reflecting place specific features) and the sector (reflecting industrial 
specificities)  under consideration.  In  sections  4.2  and  4.3  we  will  look  into  those  patterns  and  dynamics  for 
each of the cases discussed in section 3.   

Before  doing  so,  we  offer  a  brief  discussion  of  the  wider  economic,  social  and  environmental  effects  of 
regional  industrial  path  development.  Europe’s  OSA  inspired  new  industrial  policies  will  create  opportunities 
for path formation and transformation in several of its regions, potentially leading to direct economic gains 
such as regional economic growth and job creation in those places. However, it is vital to consider that path 
development  can  have  broader  effects,  some  of  which  point  to  trade-offs,  that  have  long  been  ignored  in 
extant research in economic geography and innovation studies as well as by policy approaches such as smart 
specialisation. 

19 

 
 
 
 
 
 
 
However, the  manifold  consequences of  path  development  within  the  region  and  beyond are  now  receiving 
more attention in economic geography analyses24 (MacKinnon et al., 2019; Breul et al., 2021; Baumgartinger-
Seiringer et al., 2023; Chlebna et al., 2023; Eadson and van Veelen, 2023) 25. This work points to a range of 
broader economic  effects  as  well  as to  potential  social  and ecological  outcomes  of  regional  industrial  path 
development. Such a perspective aligns more with the fundamental principles of the PRI, which seeks to foster 
the creation of co-benefits for the economy, society, and the environment. 

Regarding the economic impact dimension, it is important to recognise that the rise and dynamic evolution of 
paths can not only yield economic benefits such as growth and job creation (and can have positive effects on 
other  regional  industries  through  knowledge  flows  or  input-output  relations)  but  can  also  give  rise  to 
unintended  and  undesirable  economic  outcomes  in  their  host  regions.  Paths  can  adversely  affect  the 
development  of  other  paths  within  the  region,  thereby  inducing  changes  in  the  region’s  industry  mix.  One 
significant reason for this is the presence of negative inter-path relations (Frangenheim et al., 2020; Breul et 
al., 2021), which may arise, for instance, when these paths compete for scarce assets such as skilled workers 
or policy support. Consequently, the vibrancy in one path might impede the development of others. Moreover, 
the region’s innovation system and its asset base could become increasingly specialised, serving the strategic 
industry at the expense of others or impeding the built-up of more challenge-oriented RIS structures (Tödtling 
et al., 2022; Trippl et al., 2023) to tackle pressing territorial sustainability challenges. 

Furthermore,  the  extent  to  which  paths contribute  to  regional  economic  development  also  depends  on  their 
territorial  embeddedness.  Paths  that  rely  heavily  on  non-local  assets  and  linkages,  or  are  formed  and 
dominated  by  external  actors,  and  therefore  weakly  embedded  in  the  region,  can  face  the  risk  of  “path 
capture” by those external actors (Morales and Atienza, 2023). The region is then “just a platform where  the 
main  output  of  […]  economic  activity  is produced  and  grows,  but  most  of  the  value  is  captured  by  external 
agents” (Morales and Atienza, 2023, p. 2). More generally, questions around regional opportunities for value 
capture associated with path development are crucial. It is important to recognise that not all industrial paths 
promote longer-term regional economic development and benefit regional actors. 

Aside from the wider economic outcomes, path development can also yield distinct social and environmental 
effects.  Concerning  the  former,  a  crucial  question  concerns,  for  example,  the  kind  of  employment  that  is 
generated  within  paths  and  who  benefits  from  it.  Job  opportunities  and  well-paid,  safe  work  might  not  be 
equally  attainable  across  various  segments  of  the  population  (Lee,  2023).  Moreover,  there  could  also  be 
broader, indirect social ramifications that draw attention to the positive and negative effects paths may have 
on  income  inequality,  labour  conditions,  culture,  social  cohesion,  and  community  well-being  in  their  host 
regions. 

Finally,  the  ecological  impacts  of  path  development  require  consideration.  This  is  particularly  pertinent  in 
strategic sectors such as renewable energy, critical raw materials extraction and production, microchips and 
batteries,  where  path  development  generates  both  environmental  benefits  and  costs.  These  sectors  play  a 
pivotal role in driving green transitions through their products, potentially bringing environmental benefits to 

24 The subsequent discussion is based on Baumgartinger-Seiringer et al. (2023) 
25  These  contributions  by  economic  geographers  draw  on  and  are  enriched  by  research  in  fields  such  as  sustainability 
transitions  (e.g.,  Köhler  et  al.,  2019),  alternative  economics  (e.g.,  Raworth,  2017),  new  frames  of  innovative  policy 
(e.g., Schot and Steinmueller, 2018), as well as inclusive innovation (e.g., Lee, 2023). They move beyond “innovative 
regional growth models often divorced from the broader economic, social and ecological context” (Donald and Gray, 
2019)  and  seek  to  contribute  to  emerging  debates  on  an  alternative  agenda  for  regional  development,  one  that 
centres  less  on  short-term  growth  and  is  more  oriented  towards  environmental  sustainability  and  inclusive 
development (e.g., Evenhuis 2017). To capture the manifold outcomes of regional industrial path development, these 
contributions stress that it is vital to shift attention “from first order outcomes about the extent industries embed and 
grow or decline in places, to examining critical factors of human and ecological well-being: livelihoods, participation in 
economic decision-making, recognition of differential rights and needs, and environmental impacts” (Eadson and van 
Veelen, 2023, p.228). 

20 

 
 
 
 
 
                                                        
 
the  user  regions.  At  the  same  time,  the  manufacturing  process  in  these  sectors  carries  significant 
environmental  burdens  in  their host  regions, including  greenhouse  gas emissions, energy  consumption,  land 
degradation, habitat loss, and pollution. Further, environmental effects related with upstream stages of global 
value chains  need to  be acknowledged. Strategic industries like microchips and batteries that are  reliant on 
critical materials are a good example of this. Places, where the extraction and processing of those materials 
take  place,  frequently  grapple  with  substantial  environmental  and  social  costs  (Sovacool  et  al.,  2019). 
Regional  industrial  path  development  may  thus  be  associated  with  a  complex  network  of  interlinked 
environmental effects spanning various regions. 

In summary, industrial path development may come with various positive and negative economic, social, and 
environmental impacts within the host region and beyond. These impacts are place-specific, while they also 
depend  on  the  industry  under  consideration.  As  the  discussion  above  has  illustrated,  trade-offs  can  arise 
between  the  economic,  social,  and  environmental  dimensions  of  industrial  path  development,  within  the 
region or across regions and scales (see also Baumgartinger-Seiringer et al., 2023). Aligning path formation, 
extension  and  transformation  activities  in  their  territories  to  European  OSA-driven  industrial  policies  can 
position  regions  to  contribute  to  ambitious  supranational  goals  and  generate  economic  value  from  these 
efforts. However, such alignment could also contradict other regional economic priorities and territorial social 
and environmental goals. 

4.2  Potential regional development impacts of new industrial policy areas 

In this subsection we discuss the potential regional impacts of the various, new industrial policy areas outlined 
in section 3, which are part of the new Green Industrial Plan and central in the current European debate on 
OSA and technological sovereignty.  

As highlighted above, the regional effects of these policies have rarely been discussed. Yet it is clear that the 
energy transformation towards renewables, or each of the newly implemented “acts” of the Green Industrial 
Plan such as the Net-Zero Industry Act, the Chips Act, the Critical Materials Act all are likely to have significant 
regional impacts. How those regional impacts could become guiding elements in the design of OSA industrial 
policies,  how  regional  development,  research  and  innovation  policies  could  contribute  to  European 
technological sovereignty are the central issues discussed here. 

As  already  noted  above  in  section  3,  a  key  feature  of  each  of  these  sectoral  areas,  is  their  strong  spatial 
concentration. This holds for  the defence sector whereby  the current  geographical concentration of  defence 
production  and  military  facilities  within  most  European  countries  grew  out  of  a  historical  process  of  the 
allocation of defence, both training and production, in regions and places in need of economic development 
and/or  employment,  in  many  ways  a  form  of  industrial  defence  policies  with  also  as  a  side  aim  of 
representing  a  strong,  national  cohesion  tool.  It  also  holds  for  the  energy  transition  towards  renewables, 
bringing to an end from the perspective of energy costs, the “flat energy” industrial world of fossil fuels and 
reintroducing space as a crucial variable with respect to the industrial location of energy-intensive industries. 
It  is  particularly  evident  in  the  case  of  the  Chips  Act  intervention  which  is  having  major  uneven  spatial 
economic and other outcomes given the strong spatial concentration of the European semiconductor industry 
in several clusters. Finally, it goes without saying that access to critical raw materials will be heavily spatially 
determined:  access  to  such  materials  within  Europe  will  have  to  take  into  account  not  just  the  geological 
dimensions,  but  also  the  local  environmental  aspects  as  well  as  proximity  to  refinement  and  other 
downstream sectors. Production of raw materials is less spatially pre-determined, offering opportunities for a 
larger number of regions. 

In the subsequent discussion in section 4.3, emphasis will be placed on the development of regional industrial 
paths with a particular focus on the semiconductor industry. The regional industrial paths of the three other 
sectors can be analysed along similar lines. 

21 

 
 
 
 
 
 
 
In  the  case  of  the  defence  sector,  the  strong  regional  concentration  of  the  manufacturing  of  military 
equipment, of ammunition, and of military infrastructure including military sea- and airports offers not only 
opportunities for closer collaboration along the lines of single market principles, but also for complementing 
the new European Defence Fund with European cohesion funds. In so far as European Member States often 
allocated their defence budgets in the past to regions and places in border regions, and often in the periphery 
of  the  country,  they  also  focused  on  creating  new  economic  development  opportunities  in  such  peripheral 
regions. These traditional national practices could now be extended to the European level, opening up the way 
for a new role of European cohesion policies, namely contributing directly to Europe’s security. In short, fully 
exploiting now the existing “path dependent” industrial development process.  

In contrast, from a spatial perspective in the case of the energy sector, the transformation challenge is likely 
to  be  much  more  disruptive  as  we  argued  in  section  3  above.  Here  existing  large  industrial  players  will 
pressurise  national  policy  makers  to  invest  in  a  centralised  energy  infrastructure  system,  allowing  them  to 
carry  out  an  energy  transformation  without  any  disruptive  spatial  implications.  However,  such  outdated, 
centralised  national  industrial  policies  will  not  only  be  excessively  expensive,  they  might  also  prevent  new 
energy transformation opportunities to emerge at European level. As Soete and Stierna (2023) have argued, 
there is a need here for a new form of more disruptive, Schumpeterian industrial policy.  

Finally, in the case of the critical raw materials, there are again obvious regional implications. So far it has 
been the cheap and easy access to such materials which has led to Europe’s strong dependency on foreign 
and in particular Chinese supply of such materials. However, in some regions in Europe, such as the Per Geijer 
deposit in Kiruna, Sweden, large supplies of CRM have been discovered. One problem is that the time it will 
take  to  exploit  such  newly  found  reserves  will  be  dependent  on  obtaining  the  necessary  exploitation 
concessions,  investigating  further  the  deposit  and  the  conditions  for  profitably  and  sustainably  mining 
them. That 
land,  environmental  review  applications, 
compensating  measures, etc. In many other regions, such as in Spain’s Galicia region  (Monte Galineiro) and 
the Castilla y Leon region, the Matamulas site in Ciudad Real, rich in monazite -- an ore containing rare earth 
minerals  including  thorium,  lanthanum  and  cerium,  the  potential  exploitation  of  the  sites  raise  major 
environmental issues. In short, in so far as practically no rare earth elements are currently mined in Europe, 
there is a need to reassess the role of mining in Europe and its local costs.  

involves  permissions  to  use  the  surrounding 

In  each  of  those  sectors, there  will  be  a  need  to  explore  in  more  detail  the  potential  economic  effects and 
challenges in well-established centres, and the economic opportunities and potential dilemmas in regions with 
less robust structures.  

In the context of the latter, we now turn to the specific case of the semiconductor industry which is analysed 
in  more  detail  to  underscore  not  only  the  economic  but  also  the  social  and  environmental  dimensions,  and 
potential trade-offs between them, of path development. 

4.3  The semiconductor industry  

We focus here on the semiconductor industry, the sector which has probably received most attention with the 
introduction earlier this year of the European Chips Act. We zoom in on two types of regions: places that are 
already home to the microchips industry (and thus well-equipped with RIS structures and assets relevant for 
semiconductor industrial activities) and those that (could) diversify into the sector. It is worth noting from the 
outset that the expansion of existing centres and the emergence of new semiconductor regions heavily rely 
on  substantial  government  subsidies.  Chip  facilities  receive  state  aid  worldwide.  Therefore,  in  Europe,  the 
regions benefiting most from the Chips Act are likely to be those located in Member States with significant 
fiscal support power (see also Soete and Van Kerckhoven, 2023). 

22 

 
 
 
 
 
 
 
 
 
Established semiconductor hubs 

A key feature of the European semiconductor industry is its strong spatial concentration in several clusters. 
These  include  amongst  others  Leuven  (DSP  Valley, Belgium),  Dresden  (Silicon  Saxony,  Germany),  Eindhoven 
(Brainport Eindhoven, The Netherlands), and Grenoble (CEA-Leti Silicon Valley, France). Crucially, these clusters 
(i.e.,  industrial  paths)  are  distinguished  by  substantial  degrees  of  inter-firm  collaboration  and  strong 
connections between companies and research facilities. Furthermore, these clusters do not exist in isolation, 
as  cross-cluster  collaboration  has  been  identified  spanning  the  semiconductor  sector  (Huggins  et  al.,  2023; 
Johnson and Huggins, 2023). 

There are strong reasons to assume that these clusters and their host regions will benefit the most from OSA 
policies in economic terms. The European Chips Act aims at attracting further investments in semiconductor 
production  to  a  considerable  extent.  Established  clusters  are  already  profiting  from  this  policy.  In  Saxony, 
which is home to Europe’s largest semiconductor cluster (called Silicon Saxony), Infineon is currently building 
a  highly-subsidised  production  facility.  It  is  a  EUR  5  billion  investment  that  will  create  1,000  new  jobs.  In 
August  2023,  the  Taiwanese  company  TSMC,  the  world's  leading  contract  chip  manufacturer,  announced  it 
would build a fabrication plant in Saxony’s capital city Dresden to produce chips catering to the automotive 
industry and other industrial  applications26. This endeavour  constitutes a joint-venture involving the German 
companies Bosch and Infineon, and the Dutch firm NXP. It is notable that the German government will provide 
half  of  the  total  investment  amount  of  EUR  10  billion  from  its  Climate  and  Transformation  Fund.  The 
establishment of TSMC will lead to the creation of another 2,000 jobs in the cluster. This will however also 
further  exacerbate  the  tense  situation  on  the  labour  market,  as  the  cluster  is  already  struggling  with  a 
shortage of highly qualified chips specialists27. The scarcity of skilled labour is a concern the region (and other 
established  hubs)  shares  with  emerging  semiconductor  regions  (see  below).  However,  there  are  also  other 
challenges. 

The heavily subsidised establishments mentioned above strengthen existing clusters and solidify the role of 
their  home  regions  as  leading  semiconductor  hubs.  The  expansion  of  production  within  these  regions  is 
anticipated  to  help  secure  the  supply  of  semiconductors  in  Europe,  thus  contributing  to  more  strategic 
autonomy. An excessive focus on production may, however, result in the transformation of these clusters into 
industrial complexes characterised by large facilities and high-volume manufacturing (Huggins et al., 2023). 
Without a deliberate push for innovation, these regions could fall into a  path extension trap. A focus on path 
transformation and inter-regional connectedness seems crucial for Europe's established semiconductor hubs.   

Established semiconductor clusters in Europe find themselves at a pivotal juncture where they need to move 
beyond  path  extension  and  engage  in  path  transformation  activities.  This  entails  engaging  in  more  radical 
innovation  activities  by  adopting  emerging  technologies.  Given  the  systemic  and  open  nature  of  innovation 
activities  in  the  semiconductor  industry,  intra-  and  interregional  networking  will  be  crucial  (Huggins  et  al., 
2023, p. 532). 

Enhancing interregional collaboration between European chip regions is vital. Although semiconductor clusters 
in Europe are already engaging in cooperative efforts to a certain extent, particularly in terms of information 
exchange, pan-European collaboration, which is necessary for them to effectively compete against the US and 
Asia, is  underdeveloped (Huggins et al., 2023). Furthermore, are reconfiguration of relationships in terms of 
enhancing  international  connectedness  should  also  encompass  collaborative  linkages  with  non-European 
partners (see also section 2). 

26 https://www.ft.com/content/ee01aae1-06ee-43f6-ad14-caacdffab93e  
27 https://www.ft.com/content/8cb93bc0-d560-45e8-8fd3-ffd9b95cbba0 

23 

 
 
 
 
 
 
                                                        
 
In March 2023, an alliance of 13 chip regions28 from nine EU member states was formed. The alliance aims to 
facilitate  the  exchange  of  knowledge,  foster  collaborations,  encourage  joint  innovations,  and  support  the 
development  of  a  robust  and  integrated  value  chain  (Eckstein,  2023).  The  focus  of  this new  alliance  spans 
across research and innovation,  pioneering new technologies, promoting technology transfer, and  ultimately 
reaching commercialisation. Furthermore, the alliance seeks to enhance qualification and talent development 
by  promoting  educational  and  training  programs,  thus  enticing  skilled  professionals  to  contribute  to  the 
region’s  growth.  In  addition,  the  members  aspire  to  stimulate  regional  clusters  and  cross-regional 
partnerships,  culminating  in  the  creation  of  a  comprehensive  European  network  of  microelectronics regions. 
This  alliance  has  just  recently  been  established  and  it  remains  to  be  seen  in  which  ways  it  will  be  able  to 
contribute to the extent and depth of connectedness that is required. Yet, the formation of the alliance shows 
that established semiconductor regions have quickly responded to the Chips Act, positioning themselves and 
adopting EU’s OSA objectives. 

Emerging semiconductor regions 

The  Chips  Act  and  other  ambitious  OSA  policies  could  potentially  create  economic  opportunities  for  regions 
with  weaker  structures  that  are  not  yet  found  on  the  chip  map.  In  such  areas,  the  rise  of  new  economic 
activities  related  to  semiconductors  may  occur  through  path  importation,  facilitated  by  the  attraction  of 
(foreign)  direct  investment  (FDI).  Two  illustrative  instances  are  Magdeburg  (Saxony-Anhalt)  and  Saarland  in 
Germany  (see  below).  Importantly,  the  emerging  paths  are  primarily  driven  by  individual  large  companies 
enticed into the region through subsidies. This is a rather fragile form of path development. There is the risk 
that these companies stay only as long as subsidies continue to flow or they find  more lucrative incentives 
elsewhere  (Gropp,  2023).  These  places  will  face  a  significant  challenge  in  enhancing  the  territorial 
embeddedness of the emerging path and transition from a single-plant path to a dynamic cluster by either 
developing endogenously or attracting suppliers, research organisations, and other key actors and assets. 

Path formation in Saarland: from coal to semiconductors 

A  good  example  for  path  importation  is  the  municipality  of  Ensdorf  in  Saarland,  a  place  with  a  200  year 
history in the extraction, processing and burning of coal which employed up to 4,000 people in the past. With 
an  investment  of  over  two  billion  euros,  the  US  semiconductor  manufacturer  Wolfspeed  and  the  German 
automotive  supplier  ZF  Friedrichshafen  plan  to  build  a  factory  for  silicon  carbide  chips  at  the  site  of  the 
former  coal  power  plant.  These  chips  are  particularly  needed  for  electromobility,  renewable  energies  and 
telecommunications. The project is part of the IPCEI on Microelectronics and Communication Technologies. The 
project is expected to contribute to a positive economic structural  change in the region, creating an entirely 
new  semiconductor  path  in  the  region  with  up  to  new  1,000  jobs  and  it  is  assumed  to  have  substantial 
economic ripple effects (BMWK, 2023). 

However,  this  perspective  has  limitations  in  assessing  the  potential  effects  of  diversifying  into  the 
semiconductor industry. It is essential to consider broader regional development outcomes resulting from path 
formation activities in the field of chip  manufacturing. These potential effects can be exemplified by  Intel's 
investment near Magdeburg in Saxony-Anhalt. 

Path formation from scratch in Saxony-Anhalt 

In Magdeburg, Intel is constructing two wafer fabrication sites. It is a EUR 33 billion investment, supported by 
approximately EUR 10 billion in subsidies provided by the German federal government. While this could bring 

28  Members  of  the  alliance  are:  Basque  Country  (ES),  Bavaria  (DE),  Centro-Region  (PT),  Flanders  (BE),  Carinthia  (AT), 
Catalonia (ES), North Brabant (NL), Overijssel (NL), Piedmont (IT), Provence-Alpes-Côte d'Azur (FR), Saxony (DE), Styria 
(AT), South Moravia (CZ). 

24 

 
 
 
 
 
 
 
                                                        
 
economic impulses to the region and might, at least partially, contribute to ambitious OSA and technological 
sovereignty agendas, it also presents challenges. 

One concern pertains to unresolved labour market issues. Intel’s investment is expected to create 3,000 new 
jobs  for  specialists  in  chip  production  (Intel,  2023)29,  a  talent  pool  that  is  presently  lacking  in  the  regional 
labour market. It is assumed that this gap in the job market can be filled by attracting foreign specialists and 
recruiting graduates from universities located in the  region (Intel, 2023). Furthermore,  there is a belief that 
path formation will provide job opportunities for skilled workers currently employed in other industries within 
the region. Path formation could lead to higher wages throughout the region. While this is not necessarily bad, 
it may carry the potential for adverse impacts on other industries. These negative effects worsen when skilled 
labour  is  poached  from  some  of  these  industries.  Inter-path  competition  over  highly-qualified  workers  (and 
other assets) and rising wages can have crowding-out effects on other economic activities and paths located 
in the region, resulting in some existing companies and industries struggling to compete, possibly leading to 
their  downsizing  or  even  closure.  Finally,  the  increasing  alignment  of  innovation  system  configurations  and 
other support structures with chip activities could have negative consequences for other industries in Saxony-
Anhalt. 

Furthermore, path formation requires wider changes in the region. The attraction of FDI does not suffice. In 
Magdeburg, there  are  concerns  that  the  region’s  endowment  of  housing,  schools,  cultural  offerings,  streets, 
bicycle tracks, and so on is too poor to attract and accommodate a large number of specialists from around 
the world, who are supposed to flock in to complement the local labour force. Addressing this challenge would 
necessitate significant investment in both social and physical infrastructures30.  

Finally, there are environmental effects that should not be overlooked. The environmental impact of building 
and operating the factory in the region is predominantly negative. The construction of the factory will require 
the sealing off of 4.5 square kilometres of land, utilising 35,000 tons of steel, over 9 million meters of cable, 
and more than 600,000 cubic meters of concrete31. A vast area, which contains highly fertile loess soil, will be 
lost. Chip production is associated with high environmental costs (see also section 3.3). The operational phase 
of the factory will thus lead to undesirable ecological consequences, particularly due to its substantial water 
consumption  for  production.  The  sensitivity  of  the  issue  is  heightened  by  the  fact  that  Saxony-Anhalt  has 
been suffering from droughts for years32. 

Box 3: Path formation and regional distribution of skills 

Path formation and the regional development potential of new industrial policy areas, is closely related to the 
regional  distribution  of  high  digital  skills to  EU  regions.  For instance,  advanced  digital  skills are  essential  in 
various  aspects  of  semiconductor  manufacturing  and  research,  as  these  processes  have  become  highly 
automated and data-driven. Regional development potential could be boosted by targeting regions with a high 
level  of  advanced  digital  skills,  and  a  lower  rate  of  a  set  of  important  indicators,  including  foreign  direct 
investment, employment growth in ICT sectors and gross domestic product spending on R&D. Figure 1 panel A 
to D presents the above indices for the 27 EU Countries.  

29 https://download.intel.com/newsroom/2023/manufacturing/20230110_Factsheet_1_Magdeburg_EN.pdf  
30 https://www.deutschlandfunk.de/intel-chip-fabrik-magdeburg-sachsen-anhalt-100.html 
31 https://download.intel.com/newsroom/2023/manufacturing/20230110_Factsheet_1_Magdeburg_EN.pdf 
32 https://www.deutschlandfunk.de/intel-chip-fabrik-magdeburg-sachsen-anhalt-100.html 

25 

 
 
 
 
                                                        
 
Figure 1-A: High Digital Skills Index  

Figure 1-B: Foreign Direct Investment (%GDP) 

Figure 1-C: Employment Growth in ICT sectors (2009-2022) 

Figure 1-D: gross domestic product spending on R&D (%GDP) 

26 

 
 
 
 
 
 
Focusing  only  on  the  countries  with  a  high  Digital  Skills  Index  above  the  median  EU  value,  we  calculate  a 
simple  index  to  track  countries  with  a  relatively  low  FDI,  employment  growth  in  ICT  sectors  and  gross 
domestic product spending on R&D. For each country the Index is the sum of the cross sectional normalized 
(into [0,1]33) variables.  

Figure  2  can  be  used  to  identify  countries  with  a  small  index  value,  where  regional  development  could  be 
boosted by path formation in the case of semiconductor manufacturing and research.  

Figure 2: Countries with small index values  

Source: CEDEFOP (2023), OECD (2023c) 

Discussion 

The  EU's  efforts  to  enhance  its  technological  sovereignty  in  the  field  of  microchips  provides  established 
semiconductor hubs with the possibility to gain economic benefits and jobs. It also comes with new hopes for 
less advantaged regions to undergo economic restructuring. For weaker regions there might be opportunities 
for diversifying into new paths as the cases of Saxony-Anhalt and Saarland in Germany exemplify.  

However, the form of path development, as well as the economic benefits and challenges, differs significantly 
between  established  semiconductor  hubs  and  phasing-in  (emerging)  regions.  In  established  centres  it  takes 
place in the context of well-developed RIS and cluster structures and is shaped by the interplay of many firm 
actors, research bodies and intermediary organisations. These places face the challenge to move from path 
extension  to  path  transformation  and  adapt  their  structures  as  well  as  internal  and  external  connectivity 
accordingly. In phasing-in regions, path development would be based on a highly-subsidised investment by a 
single  company.  While  this  would  create  jobs  in  a  strategically  important  industry,  there  is  a  concern  that 
these  firms become  cathedrals in  the  desert,  leading  to  the  creation  of  innovation  and production  enclaves 
without  proper  embeddedness  in  the  RIS  and  the  wider  region.  Importantly,  it  is  a  fragile  form  of  path 
development since foreign investors may leave the region if other locations entice them with lower costs or 
higher subsidies. 

Potential social and environmental impacts must also be considered. As regards the latter, the further growth 
of  established  chip  clusters  and  the  rise  of  new  regional  centres  will  have  environmental  impacts  in  these 
regions, as chip production is highly energy- and water- intensive and is accompanied by air pollution and the 
release of hazardous waste (see section 3.3). Therefore, regions must find ways to address these territorial 
environmental  challenges.  This  could  be  an  opportunity  for  interregional  collaboration  between  places 
suffering from similar problems or among regions along the value chain. It is worth considering the idea of 
providing  subsidies  contingent  upon  the  companies  showcasing  tangible  sustainability  initiatives.  By 

33 For each variable, cross sectional values are normalised using a max-min transformation. 

27 

 
 
 
 
 
 
                                                        
 
implementing this criterion alongside the aforementioned interregional collaboration, OSA policies could pave 
the way for these regions to attain international leadership in sustainability efforts within the chip industry. 

28 

 
 
5  Conclusions  

In  this  paper  we  have  sought  to  shed  a  light  on  what  emerging  policy  paradigms  focussing  on  technology 
sovereignty  and  strategic  autonomy  mean  from  a  regional  perspective, and  how  national  and EU  efforts in 
this vein might affect and interact with regional industrial development. To our knowledge, very little attention 
has  been  paid  to  these  dynamics.  We  showed  that  policies seeking  to  promote  technology  sovereignty  and 
OSA  have  significant  but  highly  varying  effects  on  regions,  depending  on  the  latter’s  historically-grown 
economic structures, natural resources, science and technology capabilities, skill base, institutional capacities, 
and location. These place-specific factors condition the ways in which particular regions can benefit from OSA 
policies,  and  the  degree  to  which  they  can  pursue  new  or  continue  existing  industrial  activities  in  strategic 
sectors. There are strong grounds to argue that the policy dynamics that are currently unfolding will lead to 
uneven spatial outcomes and might not create opportunities for all regions in Europe. Regions with the “right 
conditions”, assets, and the capacity to leverage them for OSA related industrial development, will be among 
the winning places, while others may experience adverse consequences.  

These  evolving  geographies  require  close  observation  and  may  prompt  a  re-evaluation  of  established 
typologies or classification systems of territories. Traditional categories, like advanced versus lagging regions 
based  solely  on  economic  or  conventional  innovation  indicators,  may  no  longer  suffice.  Factors  such  as 
natural assets, energy costs, and a broader range of other determinants, including those related to social and 
environmental sustainability, will become increasingly important, influencing the distribution of development 
opportunities  and  welfare  across  territories.  Hence,  these  factors  should  be  incorporated  into  territorial 
typologies. 

Furthermore, we showed that the effectiveness of such policies can interact with regional development and 
cohesion  policies  in  certain  contexts.  To  illustrate  these  points,  we  presented  and  discussed  a  number  of 
concrete cases, namely the territorial dimensions of military security, energy transition, microchips and critical 
raw materials. 

We arrived at the following conclusions. Technology sovereignty and open strategic autonomy have significant 
but  varying  regional  dimensions  which  need  to  be  taken  into  consideration  in  designing  effective  policy 
approaches.  These  approaches  must  consider  not  only  regional  economic  impacts  but  also  broader 
implications on the state of the local (and global) environment, the advancement of zero-carbon transitions 
and  the  effects  on  social  justice  locally  and  globally.  In  certain  regions  and  sectors,  pursuits  of  strategic 
autonomy  may  strengthen  the  fossil  economy.  The  energy  crisis  of  2022  already  shows  signs  of  slowing 
down fossil fuel phase-out plans in regions with strong hydrocarbon economies in the past. For other places, 
such  as  more  energy  import  dependent  regions,  the  shift  towards  OSA  creates  a  further  push  for  the 
renewable  energy  expansion.  These  are  also  conditioned  by  political  and  cultural  factors  which  affect 
attitudes towards the green transition. 

Achieving  OSA  goals  without  undermining  environmental  and  social  sustainability,  and  without  simply 
offshoring  potential  negative  environmental  and  social  consequences,  requires  a  fundamental  rethink  and 
transformation  of  supply  chains,  material  sourcing  and  use,  radically  different  energy  systems,  and  a  new 
industrial policy and geography based upon the premises of renewable energy and sustainable material use. 
There  are  no  easy  solutions  to  these  questions  because,  for  instance,  the  mining  of  critical  raw  materials 
requires  balancing  between  the  EU’s  global  justice  (reducing  the  negative  effects  of  mining  in  the  Global 
South)  and  local  justice  (for  instance,  keeping  mining  efforts  reasonable  in  areas  populated  by  the  Sami 
people and/or containing valuable natural environments). 

From  the  perspective  of  regions  that  have  the  opportunity  to  reap  economic  gains  from  OSA  agendas  by 
expanding  or  diversifying  into  strategic  sectors,  the  aforementioned  social  and  environmental  effects  could 
present challenging dilemmas. Pursuing industrial development in OSA sectors could be in conflict with wider 
social  and  environmental  sustainability  goals  in  their  territories.  To  facilitate  regional  choices,  including 
considerations on how to strike a balance between economic, social, and environmental effects, it becomes 

29 

 
 
 
 
 
 
imperative to measure these impacts. Thus, the provision of appropriate  metrics to  regional stakeholders is 
crucial. 

Overall, we  find  that  acknowledging  and  addressing  the  regional  dimensions  of  technology  sovereignty  and 
open  strategic  autonomy  is  vital  to  achieving  a  secure,  resilient  and  economically,  socially  and  ecologically 
sustainable Europe. 

A more general conclusion from this and previous analyses we have done (e.g. Schwaag Serger et al., 2023), 
is that not only OSA policies, but many other policies - EU and national ones - have been spatially blind and 
we  are  now  beginning  to  understand  the  problems  with  this  general  spatial  blindness,  both  for  regional 
development and for the achievement of some of these policies. Examples of policy areas which need to pay 
more  attention  to  their  territorial  articulation  if  they  want  to  be  effective  concern  sustainability,  research, 
innovation and technology, defence, transformation, skills formation, etc. As a result, there is a need, firstly, 
for horizontal alignment of these policies, and secondly, for a vertical alignment of local/regional, national and 
EU policies. 

30 

 
 
 
 
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