New Structuralism and Evolving Policy Capacities in the Eastern

New Structuralism and Evolving
Policy Capacities in the Eastern
European EU Member States
Erkki Karo & Rainer Kattel
Ragnar Nurkse School of Innovation and
Tallinn University of Technology, Estonia
Research questions
• What are the theoretical/conceptual challenges of ‘smart
specialization’ (SS) as a policy concept in the context of EU’s
Cohesion Policy and Eastern European economies?
… how can the new structural economics (NSE) contribute
to the conceptual and theoretical clarity of SS in this
• What kind of policy capacities do both SS and NSE presume
and whether the EE economies are equipped to design and
implement policy mixes based on these rationales?
… SS as 3rd conditionality based policy reform in EE makes
institutional legacies one of the central issues to consider.
Evolution of the concept and
theoretical challenges of SS in EE
• from sectoral to regional/national concept
- in EE, there are countries (i.e. Baltic States) where smart
specialization is conducted on the national level (no regional policy)
- in other EE countries regional strategies tend to be top-down, or
centrally designed, plans for the regions (i.e. for NUTS2 regions)
• from specialization to developmental concept?
- cohesion and convergence policies aimed at structural change of EE
• Would NSE provide a more coherent framework given the
centralized realities of regional policy in EE and the specific
structural development challenges?
Policy capacities for SS and NSE
Policy bias in economics: the
‘what’ vs. the ‘how’
We can depict co-evolutionary processes
between three levels – political and policy
ideas, public management or
implementation, and private-sector
dynamism (and feedback) – and policy and
administrative capacities are essentially
functions or outcomes of these coevolutionary processes.
Do the EE economies possess the
capacities (or policy-making modes) that
support the SS & NSE policy rationales
(especially entrepreneurial selfdiscovery)?
… policy rationales of economics
(what, but also how) tend to
remain as ‘ideal-type’ outcomes of
the ‘black-box’ of policy-making
Capacity as multi-level concept
state capacity
policy capacity
administrative capacity
… capacity is not so much a
continuum of abilities (from less to
more), but rather a variety of
modes of making policy that
originate from co-evolutionary
processes in capitalist
… in essence, entrepreneurial selfdiscovery processes are also a function of
existing policy and administrative
Policy capacities in EE
Washington Consensus and the 1990s
regulatory policies of liberalization, stabilization
emulation of western markets (financial liberalization and FDI, privatization)
‘no policy innovation policy’ (except for education and science)
regulatory efficiency as capacity indicator
Europeanization and the 2000s
importing EU’s innovation policy rationales (European Paradox, high-tech bias etc)
and policy-making practices (innovation agencies)
emerging as a parallel policy rationale next to the WC legacies (in regulatory and
financial, but also science policies)
technocratic and managerial efficiency as capacity indicator
Outcome: fragmented policy space
in policy setting (between regulation and finance vs innovation; and innovation vs
in private sector (e.g. enclaves of FDI-based exporters vs domestic firms)
in public-private ties (fragmented feedback systems, low coordination)
Are there capacities for SS and NSE rationales?
Policy capacity preconditions for SS in EE
Remedying weak linkages within the economy presupposes some sort of either
sector or value-chain-specific institutional and management structure.
Such managerial specialization presupposes in turn meso level institutional
thickness in the form of industry, labor and similar associations that is not the
norm in many EE economies.
Demand-side policies such as public procurement, regulatory standards, etc,
should be considered as part and parcel of smart specialization policies. But given
the EE legacies, this will most likely firstly require building analytical and sectoral
competencies (both in economic policy-making and procurement and regulatory
agencies) of what types of instruments (e.g., procurement vs. standards) will work
given the R&D and industrial trajectories in specific regions or economies.
For the entrepreneurial discovery process and targeted policies to support
specialization, policy-making processes in general need to be less formalized and
allow for greater room for experimentation, policy reversals and shifts. SS policies
should be managed on relatively broad outcome levels and probably more flexible
strategic planning framework than allowed for in the EU’s financial frameworks
and cohesion policy.
Research for this article was partially
supported by the Estonian Science Foundation
(grants no 8418 and 9404) and by the
European Social Foundation through the
Research and Innovation Policy Monitoring
New Structuralism and Evolving
Policy Capacities in the Eastern
European EU Member States
Erkki Karo & Rainer Kattel
Ragnar Nurkse School of Innovation and
Tallinn University of Technology, Estonia

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