These years, Danish peripheral and rural areas are characterized by an outmigration and a decline in business activities and jobs. To judge from the public debate one might get the impression that enterprises located in the periphery are unable to transform and develop. However, knowledge about the innovative activity in enterprises in peripheral and rural areas is limited. The purpose of this study is to compare innovation in rural and urban areas in Denmark.
The data source is the Danish version of CIS – The Community Innovation Survey, and data from 2008 to 2012 are included with more than 4,000 enterprise respondents in each of the five years. The spatial classification is a ministerial standard and consists of four groups: 1) Urban agglomerations, 2) Urban areas in peripheral zones, 3) Rural areas in the vicinity of urban agglomerations, and 4) Rural areas in the periphery.
A main conclusion is that enterprises in rural areas in the periphery are slightly less actively involved in innovation than enterprises in other zones. Also urban areas in peripheral zones score lower that average. This indicates an importance of distance for the level of innovative activity. This conclusion seems also supported by the fact that enterprises in the vicinity of urban agglomerations are almost as innovative active as enterprises in the urban agglomerations. On the general level, these conclusions are sustained when data are controlled for business size, sector and innovation categories.
Additionally, the study reveals that even when they are actively innovating, enterprises in the periphery are not equally engaged in collaboration as enterprises in urban agglomerations and the vicinity hereof.
A positive correlation is found between innovative engagements and financial success factors, in this case turnover and exports. This indicates that innovation pays off. However, the economic crisis has led to a backlash for both innovators and non-innovators and in all four spatial groups, and it is not until 2011 and 2012 that the enterprises regain the momentum in turnover and export. Rural enterprises are quite successful in the financial recovery process.
Enterprises in the rural periphery are, as mentioned above, less innovative, but are definitely not passive in this respect. Evidence from this study supports those efforts that aim at a continual innovative development of business activities in rural areas.
In particular, the data indicate that rural enterprises seek to engage in process innovations and in developments of new sales channels, but they remain low on the efforts to develop in services. It is also a conclusion that large rural enterprises are almost on level with urban enterprises in innovation activity. Danish rural areas in the periphery have a tradition for agriculture and manufacturing, but these preconditions and particularities are not found to coincide positively with innovation.
Enterprises in the rural periphery have a lower collaboration propensity. They tend to give priority to collaboration with suppliers, consultants and technology service bodies rather than for example customers, universities, and public authorities.
The assessed newness of the product and services is examined, and enterprises in the rural periphery are in the low part of the scale, and they target their innovations mainly to existing markets. The positive result is that export markets are strongly exploited by enterprises in the rural periphery and that their recovery after the crisis is particularly rapid compared to enterprises in urban locations.
To conclude, enterprises in the rural periphery are in many ways challenged in terms of innovation, but as a group they also possess significant strengths and potentials.
Enterprises in the rural areas in the vicinity of urban agglomerations are, in terms of innovation activity, quite distinctly different from the population of enterprises in rural areas in the periphery. In particular, they are active in the development of new products and in the launching new production processes. To a considerable extent, they consider their products as new to the market. The enterprises show a very high level of innovation activity prior to the crisis, but have leveled down, with recovery just accurately recommencing in 2011-2012.
Medium and large enterprises are innovating to a considerably extent, and enterprises within agriculture, manufacturing, construction, transportation, and trade are particularly high in innovation. It is likely that some growth oriented enterprises have relocated from more space constrained locations in urban agglomerations. The data suggests that they are able to consolidate collaborative relations, for examples with partners in urban areas.
Enterprises in the vicinity of urban agglomerations are very export oriented, and in this respect they recover hastily after the crisis. This accounts for both those who are innovation active and those who are not.
Enterprises in urban areas in the periphery show an only marginally higher inclination to innovate than enterprises in the rural periphery. They are highest on innovative activities within the domains of process and organizational innovations.
Just like rural enterprises in the periphery these enterprises tend to prefer collaborative innovation alliances with suppliers and consultants, while universities, public authorities and customers are less frequent innovation collaborators than seen in and closer to the urban agglomerations. The ambitions with the innovative activity are relatively low, particularly among small enterprises and in the service sector.
The development of turnover and export is stagnating in this cohort of enterprises, and there is nothing to indicate that an innovative activity has led to an expanding development. On the total of the study, enterprises in urban areas in the periphery seem to develop fairly conservatively, possibly seeking a stability rather than innovation.
Enterprises in urban agglomerations are characterized by a higher level of innovative activity in most of the aspects covered by this study. They cultivate external innovation collaborations quite significantly more than enterprises in all locations, comprising partners among public authorities, universities, and not the least actors in other countries. In particular, enterprises seek to be innovative in “soft” and “modern” areas, such as services, organizational forms and marketing. Remarkably, urban agglomerations seem to attract and foster a population of innovative small companies.
On the other hand, urban enterprises are quite considerably less active on the export markets than enterprises in other areas in the country. From 2008 to 2012 they have increased turnover and exports, but enterprises without innovative activities have progressed faster financially than innovative enterprises. It has taken longer time for enterprises in urban agglomerations to regain lost markets than enterprises in other locations.
The analysis suggests that enterprises in city agglomerations enjoy better conditions and motivations for innovations. Nevertheless, there are barriers for them in terms of pulling together the full potential. Barriers may consist of additional costs for labour and premises. The study does not provide information on this issue.
Case studies. 12 brief case studies are conducted in order to illustrate innovation in enterprises located in the rural periphery. Enterprises interviewed cannot be claimed to be representative for the population of rural enterprises. The sample includes both small and medium enterprises and different sectors, hereunder a dairy, a manufacturer of fencing and noise barriers, a developer of new species of roses, a local caterer, an e-trade with bicycle parts, a producer of packaging machinery, a boarding school, a producer of environmentally control sensors, a manufacturer of architectural bricks, a camping site, a constructor of eco-housing, and a producer of fashion accessories.
The material illustrates the variety in ways of performing innovative activities, also very advanced types. Some innovations are deeply embedded in rural resources and foundations, but always with ingredients that ensure the inclusion of modern techniques and managerial approaches. These enterprises tend to be located in rural areas for historical reasons, but there are many examples provided that they are densely involved in national and international relationships and that such collaboration are crucial for their further development. They experience clear advantages related to a rural location, but also challenges for example in terms of distance to labour markets with better educated recruitment potentials.
Innovation policies for rural peripheries. This study is concluded with a topology of innovation policy options for national, regional and local authorities. 1) Financial support, including the application of the rural development program for innovation purposes, and assistance to enterprises to seek commercial investment opportunities. 2) Knowledge support, including the creation of alliances and collaborative partnerships. 3) Cluster policies in selected resource areas. 4) Infrastructures including broadband facilities and transportation systems. 5) Innovation platforms and innovation stimulation through public regulation.