Regional innovation systems as a facilitator for firms' absorptive capacity: Institutional compared to entrepreneurial systems

Abstract: The topic of regional innovation systems is one that has been covered extensively in prior research. It has influenced regional policy by providing context of how regional actors and firms interact and how they are affected by institutional guidance and formal structuring tools. An aspect that has not been covered to a sufficient extent is the prospect of self-sustaining or spontaneous collaborative efforts. This is an interesting area to consider because it questions the idea that regional innovation systems need institutional support to survive. Instead, it suggests that firms can collaborate simply through a mutual understanding of their situation and how an integration of their competences can prove beneficial to their system. The bottom line for well-functioning regional innovation systems are its ability to facilitate knowledge transfer for its actors. This raises the question of how firms’ knowledge transfer processes, its absorptive capacity is affected by regional innovation systems. The purpose of this study is to create a conceptual framework exploring how and why regional innovation systems facilitates firms’ absorptive capacity, as well as how they are affected by being either institutional or entrepreneurial. This has been done through an inductive multiple case study where 18 different cases of regional innovation systems were surveyed. The study resulted in a process model of how regional innovation systems evolve, its facilitating effect on firms’ absorptive capacity, and how entrepreneurial or institutional setups influence this evolution. Our findings suggest that regardless of being institutional or entrepreneurial, regional innovation systems follow a similar evolutionary process to facilitate firms’ absorptive capacity. It is rather suggested that each system has individually negative and positive effects on the process. Firms’ absorptive capacity is facilitated by regional innovation systems as they provide firms with an environment driving similar knowledge and problem sets, being a source of complementary knowledge and social integration mechanisms. The process model provides implications for regional policy makers to facilitate optimal conditions for actors in their regions, as well as for firms active in regional innovation systems.